Table of Contents

As filed with the Securities and Exchange Commission on May 3, 2013

Registration No. 333-187556

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 1

TO

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

SUMMIT MATERIALS, LLC

SUMMIT MATERIALS FINANCE CORP.

(Exact name of registrant issuers as specified in their respective charters)

SEE TABLE OF ADDITIONAL REGISTRANT GUARANTORS

 

 

 

 

Delaware   1400   24-4138486

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

 

2900 K Street NW, Suite 100

Harbourside North Tower Building

Washington, D.C. 20007

(202) 339-9509

(Address, including zip code, and telephone number, including area code, of registrants’ principal executive offices)

Thomas Hill

Chief Executive Officer

Summit Materials, LLC

2900 K Street NW, Suite 100

Harbourside North Tower Building

Washington, D.C. 20007

(202) 339-9509

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With a copy to:

Edward P. Tolley III, Esq.

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017-3954

(212) 455-2000

 

 

Approximate date of commencement of proposed exchange offer: As soon as practicable after this Registration Statement is declared effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.   ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨     Accelerated filer   ¨
Non-accelerated filer   x   (Do not check if a smaller reporting company)   Smaller reporting company   ¨

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross Border Issuer Tender Offer)   ¨

Exchange Act Rule 14d-1(d) (Cross Border Third Party Tender Offer)   ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be

Registered

 

Proposed

Maximum

Offering Price

Per Note

 

Proposed

Maximum

Aggregate

Offering Price(1)

 

Amount of

Registration Fee

10.5% Senior Notes due 2020

  $250,000,000   100%   $250,000,000   $34,100(2)

Guarantees of the 10.5% Senior Notes due 2020(3)

  N/A(4)   (4)   (4)   (4)

 

 

(1) Estimated solely for the purpose of calculating the registration fee under Rule 457(f) of the Securities Act of 1933, as amended (the “Securities Act”).
(2) Previously paid.
(3) See inside facing page for additional registrant guarantors.
(4) Pursuant to Rule 457(n) under the Securities Act, no separate filing fee is required for the guarantees.

 

 

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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TABLE OF ADDITIONAL REGISTRANT GUARANTORS

 

Exact Name of Registrant Guarantor

as Specified in its Charter (or Other

Organizational Document)

  State or Other
Jurisdiction of
Incorporation or
Organization
  I.R.S.
Employer
Identification
Number
    Industrial
Classification
Code Number
    Address, Including Zip  Code
and Telephone Number,
Including Area Code, of
Registrant Guarantor’s
Principal Executive Offices

Austin Materials, LLC

  Delaware     45-2840524        1400      9020 N. Capital of Texas
Highway, Suite 250, Austin,
TX 78759

Continental Cement Company, L.L.C.

  Delaware     27-2594654        3241      14755 North Outer Forth Drive
#514, Chesterfield, MO 63017

Kilgore Companies, LLC

  Delaware     27-2910651        1400      7057 West 2100 South, West
Valley, UT 84128

Norris Quarries, LLC

  Delaware     45-4506838        1400      2604 N Stadium Blvd,
Columbia, MO 65202

RK Hall, LLC

  Delaware     27-3722217        1600      2810 NW Loop 286, Paris, TX
75460

Summit Materials Companies I, LLC

  Delaware     27-1395580        1400      2900 K Street NW, Suite 100,
Harbourside North Tower
Building, Washington, DC
20007

Summit Materials Corporations I, Inc.

  Delaware     27-5206889        1400      2900 K Street NW, Suite 100,
Harbourside North Tower
Building, Washington, DC
20007

Summit Materials Holdings I, LLC

  Delaware     27-2779766        1400      2900 K Street NW, Suite 100,
Harbourside North Tower
Building, Washington, DC
20007

Summit Materials Holdings II, LLC

  Delaware     27-2606667        3241      2900 K Street NW, Suite 100,
Harbourside North Tower
Building, Washington, DC
20007

Elam Construction, Inc.

  Colorado     84-0484380        1400      556 Struthers Avenue, Grand
Junction, CO 81501

Cornejo & Sons, L.L.C.

  Kansas     27-2336713        1600      2060 E. Tulsa, Wichita, KS
67216

Hamm Asphalt, LLC

  Kansas     48-0765153        2951      609 Perry Place, Perry, KS
66073

Hamm, Inc.

  Kansas     48-1243726        1400      609 Perry Place, Perry, KS
66073

N.R. Hamm Contractor, LLC

  Kansas     48-0581200        1600      609 Perry Place, Perry, KS
66073

N.R. Hamm Quarry, LLC

  Kansas     48-0581201        1400      609 Perry Place, Perry, KS
66073

Bourbon Limestone Company

  Kentucky     61-0592947        1400      395 North Middletown Rd,
Paris, KY 40361

Glass Aggregates, LLC

  Kentucky     20-4710585        1400      395 North Middletown Rd,
Paris, KY 40361

Hinkle Contracting Company, LLC

  Kentucky     61-0725598        1400      395 North Middletown Rd,
Paris, KY 40361

Kentucky Hauling, Inc.

  Kentucky     61-0930534        4700      395 North Middletown Rd,
Paris, KY 40361


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South Central Kentucky Limestone, LLC

  Kentucky     27-3004607        1400      395 North Middletown Rd,
Paris, KY 40361

Con-Agg of MO, L.L.C.

  Missouri     43-1765061        3273      2604 N Stadium Blvd,
Columbia, MO 65202

Fischer Quarries, L.L.C.

  Missouri     43-1767807        1400      2604 N Stadium Blvd,
Columbia, MO 65202

Quarry Properties, L.L.C.

  Missouri     20-1136159        1400      2604 N Stadium Blvd,
Columbia, MO 65202

Elam Paving, Inc.

  New Mexico     85-0473651        1400      556 Struthers Avenue, Grand
Junction, CO 81501

B&H Contracting, L.P.

  Texas     26-3160017        7389      2810 NW Loop 286, Paris,
TX 75460

Industrial Asphalt, LLC

  Texas     74-2766027        1600      16409 Bratton Lane, Austin,
TX 78728

R.K. Hall Construction, Ltd.

  Texas     20-2347198        1600      2810 NW Loop 286, Paris,
TX 75460

RKH Capital, L.L.C.

  Texas     20-4632566        6799      2810 NW Loop 286, Paris,
TX 75460

SCS Materials, L.P.

  Texas     20-1932670        1600      2810 NW Loop 286, Paris,
TX 75460

Altaview Concrete, LLC

  Utah     87-0431601        1600      7057 West 2100 South, West
Valley, UT 84128

B&B Resources, Inc.

  Utah     87-0490366        1600      7057 West 2100 South, West
Valley, UT 84128

Kilgore Equipment, LLC

  Utah     81-0551726        1600      7057 West 2100 South, West
Valley, UT 84128

Kilgore Trucking, LLC

  Utah     85-0487373        1600      7057 West 2100 South, West
Valley, UT 84128

Peak Construction Materials, LLC

  Utah     20-5978846        1600      7057 West 2100 South, West
Valley, UT 84128

Peak Management, L.C.

  Utah     87-0623232        8741      7057 West 2100 South, West
Valley, UT 84128

Salt Lake Valley Sand & Gravel, Inc.

  Utah     87-0561870        1600      7057 West 2100 South, West
Valley, UT 84128

Valley Ready Mix, Inc.

  Utah     87-0506149        1600      7057 West 2100 South, West
Valley, UT 84128

Wasatch Concrete Pumping, LLC

  Utah     87-0551837        1600      7057 West 2100 South, West
Valley, UT 84128

Wind River Materials, LLC

  Wyoming     27-3823267        1600      7057 West 2100 South, West
Valley, UT 84128


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED MAY 3, 2013

PRELIMINARY PROSPECTUS

 

LOGO

SUMMIT MATERIALS, LLC

SUMMIT MATERIALS FINANCE CORP.

Offer to Exchange (the “exchange offer”)

 

 

$250,000,000 aggregate principal amount of 10.5% Senior Notes due 2020 (the “exchange notes”), which have been registered under the Securities Act of 1933, as amended (the “Securities Act”), for any and all outstanding unregistered 10.5% Senior Notes due 2020 (the “outstanding notes” and, together with the exchange notes, the “notes”).

The exchange notes will be joint and several obligations of Summit Materials, LLC and Summit Materials Finance Corp. and will be fully and unconditionally guaranteed on a joint and several senior unsecured basis by all of our existing and future wholly-owned domestic restricted subsidiaries that guarantee indebtedness under our existing senior secured credit facilities and the outstanding notes and by our non-wholly-owned subsidiary, Continental Cement Company, L.L.C. (“Continental Cement”).

 

 

We are conducting the exchange offer in order to provide you with an opportunity to exchange your unregistered outstanding notes for freely tradable exchange notes that have been registered under the Securities Act.

The Exchange Offer

 

   

We will exchange all outstanding notes that are validly tendered and not validly withdrawn for an equal principal amount of exchange notes that are freely tradable.

 

   

You may withdraw tenders of outstanding notes at any time prior to the expiration date of the exchange offer.

 

   

The exchange offer expires at 5:00 p.m., New York City time, on                     , 2013, which is the 21st business day after the date of this prospectus, unless extended. We do not currently intend to extend the expiration date.

 

   

The exchange of the outstanding notes for the exchange notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes.

 

   

The terms of the exchange notes to be issued in the exchange offer are substantially identical to the outstanding notes, except that the exchange notes will be freely tradable.

Results of the Exchange Offer

 

   

The exchange notes may be sold in the over-the-counter market, in negotiated transactions or through a combination of such methods. We do not plan to list the exchange notes on a national market.

All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the indenture. In general, the outstanding notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the outstanding notes under the Securities Act.

 

 

We are an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and will be subject to reduced public company reporting requirements.

 

 

You should carefully consider the “ Risk Factors ” beginning on page 22 of this prospectus before participating in the exchange offer.

Each broker dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market making activities or other trading activities.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the exchange notes to be distributed in the exchange offer or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                     , 2013.


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TABLE OF CONTENTS

 

     Page  

FORWARD-LOOKING STATEMENTS

     ii   

MARKET, RANKING AND OTHER INDUSTRY DATA

     ii   

EMERGING GROWTH COMPANY STATUS

     iii   

CERTAIN DEFINITIONS

     iii   

PROSPECTUS SUMMARY

     1   

RISK FACTORS

     22   

USE OF PROCEEDS

     42   

CAPITALIZATION

     43   

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

     44   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

     46   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SUMMIT MATERIALS, LLC

     47   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CONTINENTAL CEMENT COMPANY, L.L.C.

     75   

BUSINESS

     87   

MANAGEMENT

     110   

EXECUTIVE AND DIRECTOR COMPENSATION

     114   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     122   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     125   

DESCRIPTION OF OTHER INDEBTEDNESS

     128   

DESCRIPTION OF THE NOTES

     131   

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

     209   

CERTAIN ERISA CONSIDERATIONS

     210   

PLAN OF DISTRIBUTION

     212   

LEGAL MATTERS

     213   

EXPERTS

     213   

CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     214   

WHERE YOU CAN FIND MORE INFORMATION

     214   

INDEX TO FINANCIAL STATEMENTS

     F-1   

 

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FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” “projects” or “anticipates” or similar expressions that concern our strategy, plans or intentions. All statements made relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect our actual results.

Some of the important factors that could cause actual results to differ materially from our expectations are disclosed under “Risk Factors” and elsewhere in this prospectus. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

MARKET, RANKING AND OTHER INDUSTRY DATA

The data included in this prospectus regarding markets and the industry in which we operate, including the size of certain markets and our position and the position of our competitors within these markets, are based on reports of government agencies, published industry sources and estimates based on our management’s knowledge and experience in the markets in which we operate. Data regarding the industries in which we compete and our market position and market share within these industries are inherently imprecise and are subject to significant business, economic and competitive uncertainties beyond our control, but we believe that they generally indicate size and position and market share within these industries. Our own estimates have been based on information obtained from our trade and business organizations and other contacts in the markets in which we operate. We believe these estimates to be accurate as of the date of this prospectus. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for the estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. We have not independently verified any of the data from third party sources, nor have we ascertained the underlying economic assumptions relied upon therein. As a result, you should be aware that market, ranking and other similar industry data included in this prospectus, and estimates and beliefs based on that data, may not be reliable and are subject to change based on various factors, including those discussed under “Risk Factors” and “Forward-Looking Statements”.

 

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EMERGING GROWTH COMPANY STATUS

We are an “emerging growth company” as defined under the JOBS Act and are eligible to take advantage of certain exemptions from various public company reporting requirements. See “Risk Factors—Risks Related to Our Business and Our Industry—As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.”

Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act to comply with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards apply to private companies. As an “emerging growth company,” we may elect to delay adoption of new or revised accounting standards applicable to public companies until such standards are made applicable to private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies.

We will remain an “emerging growth company” until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement; (iii) the date on which we have, during the previous three year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed a “large accelerated issuer” as defined under the federal securities laws.

CERTAIN DEFINITIONS

As used in this prospectus, unless otherwise noted or the context otherwise requires,

 

   

“we,” “our,” “us,” and “the Company” refer to Summit Materials, LLC and its subsidiaries as a combined entity, including Summit Materials Finance Corp., the co-issuer of the notes;

 

   

“Summit Materials” refers only to Summit Materials, LLC and not its subsidiaries;

 

   

“Finance Corp.” refers only to Summit Materials Finance Corp., a wholly-owned subsidiary of Summit Materials;

 

   

“the Issuers” refers to Summit Materials and Finance Corp. as co-issuers of the notes but not to any of their subsidiaries;

 

   

“Hamm” and “Predecessor” refer to Hamm, Inc., our inaugural acquisition and the predecessor entity of Summit Materials;

 

   

“Hinkle Contracting” refers to Hinkle Contracting Corporation and its subsidiaries;

 

   

“Cornejo” refers collectively to Cornejo & Sons, L.L.C., C&S Group, Inc., Concrete Materials Company of Kansas, LLC and Cornejo Materials, Inc.;

 

   

“Greer” refers to certain assets of Elmo Greer & Sons, LLC;

 

   

“Harshman” refers collectively to certain assets of Harshman Construction L.L.C. and Harshman Farms, Inc.;

 

   

“Scotty’s” refers to South Central Kentucky Limestone, LLC;

 

   

“Harper Contracting” refers collectively to substantially all the assets of Harper Contracting, Inc., Harper Sand and Gravel, Inc., Harper Excavating, Inc., Harper Ready Mix Company, Inc. and Harper Investments, Inc.;

 

   

“Kilgore” refers collectively to Kilgore Pavement Maintenance, LLC and Kilgore Properties, LLC;

 

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“Con-Agg” refers to Con-Agg of MO, L.L.C.;

 

   

“Altaview Concrete” refers collectively to Altaview Concrete, LLC, Peak Construction Materials, LLC, Peak Management, L.C. and Wasatch Concrete Pumping, LLC;

 

   

“EnerCrest” refers to substantially all the assets of EnerCrest Products, Inc.;

 

   

“RK Hall” refers collectively to R.K. Hall Construction, Ltd., RHMB Capital, L.L.C., Hall Materials, Ltd., B&H Contracting, L.P. and RKH Capital, L.L.C.;

 

   

“SCS” refers to SCS Materials, L.P.;

 

   

“Triple C” refers to Triple C Concrete, Inc.;

 

   

“Elam Construction” refers to Elam Construction, Inc.;

 

   

“Bourbon” refers to Bourbon Limestone Company;

 

   

“Fischer” refers to Fischer Quarries, L.L.C.;

 

   

“B&B” refers collectively to B&B Resources, Inc., Valley Ready Mix, Inc. and Salt Lake Sand & Gravel, Inc.;

 

   

“Grand Junction Pipe” refers to Grand Junction Pipe, Inc.;

 

   

“Industrial Asphalt” refers collectively to Industrial Asphalt, LLC, Asphalt Paving Company of Austin, LLC, KBDJ, L.P. and all the assets of Apache Materials Transport, Inc.;

 

   

“Ramming Paving” refers collectively to J.D. Ramming Paving Co., LLC, RTI Hot Mix, LLC, RTI Equipment Co., LLC and Ramming Transportation Co., LLC;

 

   

“Parent” refers only to Summit Materials Holdings L.P., our indirect parent entity;

 

   

“Norris” refers to Norris Quarries, LLC;

 

   

“Kay & Kay” refers to certain assets of Kay & Kay Contracting, LLC;

 

   

“Sandco” refers to certain assets of Sandco Inc.;

 

   

“Blackstone” refers to certain investment funds affiliated with Blackstone Capital Partners V L.P.;

 

   

“Silverhawk” refers to certain investment funds affiliated with Silverhawk Summit, L.P.;

 

   

“Sponsors” refers to Blackstone and Silverhawk;

 

   

“Lafarge” refers to Lafarge North America, Inc.; and

 

   

“Westroc” refers to Westroc, LLC.

 

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PROSPECTUS SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus and may not contain all of the information that may be important to you. You should read this entire prospectus carefully, including the information set forth under the heading “Risk Factors” and our consolidated financial statements before participating in the exchange offer.

Our Company

We are a leading, vertically-integrated, geographically-diverse heavy-side building materials company; we supply aggregates, cement and related downstream products such as ready mixed concrete, asphalt paving mix, concrete products and paving and related construction services to a variety of end-uses in the U.S. construction industry, including public infrastructure projects, as well as private residential and non-residential construction. We believe we are a top 15 supplier of aggregates, a top 20 supplier of cement, a top 10 producer of asphalt paving mix and a major producer of ready mixed concrete in the United States by volume. As of December 29, 2012, we had 1.2 billion tons and 0.4 billion tons of proven and probable aggregates reserves serving our aggregates and cement businesses, respectively, and operated over 120 sites and plants. In the year ended December 29, 2012, we sold 16.4 million tons of aggregates, 1.0 million tons of cement, 4.6 million tons of asphalt paving mix and 1.1 million cubic yards of ready mixed concrete. For the year ended December 29, 2012, we generated revenue of $962.9 million.

We were formed in September 2008. Since July 2009, the Sponsors and certain of our officers, directors and employees have made $794.5 million of funding commitments to our indirect parent entity, Summit Materials Holdings L.P. We have grown rapidly as a result of our disciplined acquisition strategy, utilizing approximately $457.3 million of the $463.9 million of equity commitments funded to our parent by the Sponsors and certain other investors. Today, our nine operating companies make up our three distinct geographic regions that span 20 states and 23 metropolitan statistical areas. We believe each of our operating companies has a top three market share position in its local market area and an extensive operating history, averaging over 35 years. Our highly experienced management team, led by 30-year industry veteran CEO Tom Hill, has successfully enhanced the operations of acquired companies by focusing on scale advantages, cost efficiencies and pricing discipline to improve profitability and cash flow.

Our strategy is focused on developing a heavy-side, vertically integrated company with a strong aggregates base. We strive to be a leading supplier of all four major resource-based products—aggregates, cement, asphalt paving mix and ready mixed concrete—in the U.S. heavy-side building materials industry. We believe vertical integration across these major products strengthens our market positions and helps us achieve significant cost advantages. We believe a diversified mix of products also provides us with greater stability and insulates against local market fluctuations, competitive pricing dynamics and other individual market variances.

Our revenue is derived from multiple end-use markets, including public infrastructure construction as well as residential and non-residential construction. For the year ended December 29, 2012, approximately 62% of our revenues related to public infrastructure construction and the remaining 38% related to residential and non-residential construction. In general, our aggregates and asphalt paving mix and paving businesses are weighted towards public construction. Our cement and ready mixed concrete businesses serve both the public and private construction markets. Public construction includes spending by federal, state and local governments for roads, highways, bridges, airports and other public infrastructure construction projects. A significant portion of our construction revenues are from public construction projects, a historically more stable portion of state and federal budgets. Our acquisitions to date are primarily focused in states with constitutionally-protected transportation funding sources, which we believe serves to limit our exposure to state and local budgetary uncertainties. Private construction includes both new residential and non-residential construction and repair and remodel markets,

 

 

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which have been significantly impacted by recent and current economic conditions. We believe exposure to various geographic markets affords us greater stability through economic cycles and positions us to capitalize on upside opportunities when recoveries in residential and non-residential construction occur.

Our Regional Platforms

We currently operate across 20 states through our three regional platforms: Central, West and East. Each of our operating businesses has its own management team that, in turn, reports to a regional president who is responsible for overseeing business development opportunities and implementing best practices within the regional platform. Our first and largest platform is our Central region. Our most recent platform, the West region, was established in August 2010 with our acquisition of the Harper Contracting and Kilgore businesses in Utah. Company acquisitions are an important element of our strategy, as we seek to enhance value through increased scale and cost savings from vertical integration within local markets through the regional management.

Central Region . The Central region platform encompasses our integrated aggregates, cement, asphalt paving mix, ready mixed concrete and other operations in Kansas, Missouri, Nebraska, Iowa and Illinois. Within the region, we control proven and probable aggregates reserves serving our aggregates and cement businesses of approximately 0.5 billion tons and 0.4 billion tons, respectively, and total hard assets, which we define as the sum of our property, plant and equipment, net and inventories, with a balance sheet book value of $488.0 million as of December 29, 2012. During the year ended December 29, 2012, the Central region platform generated approximately 32% of our revenue. Approximately 52% of the Central region’s revenues were derived from public infrastructure spending, and the remaining 48% of its revenues were generated by residential and non-residential construction for the year ended December 29, 2012.

Our cement business in Missouri, Continental Cement, operates a highly efficient, technologically advanced, integrated manufacturing and distribution system strategically located near Hannibal, Missouri, 100 miles north of St. Louis along the Mississippi River. Continental Cement utilizes an on-site solid and liquid waste fuel processing facility, which can reduce our fuel costs at that facility by up to 50%. The Continental Cement plant is covered by Environmental Protection Agency (“EPA”) Hazardous Waste Combuster MACT regulations (“HWC-MACT”), rather than the Portland Cement NESHAP regulations (“PC-MACT”), due to its waste fuel processing capabilities. We believe the facility is well positioned to comply with any potential regulatory changes during the foreseeable future.

West Region . The West region platform encompasses our integrated aggregates, asphalt paving mix, ready mixed concrete, construction and other operations in Texas, Utah, Colorado, Idaho and Wyoming. Within the region, we control proven and probable aggregates reserves of approximately 0.3 billion tons and total hard assets with a balance sheet book value of $254.9 million as of December 29, 2012. During the year ended December 29, 2012, the West region platform generated approximately 50% of our revenue. Approximately 64% of its revenues were derived from public infrastructure spending, and the remaining 36% of its revenues were generated by residential and non-residential construction for the year ended December 29, 2012.

In August 2010, we acquired Kilgore and simultaneously acquired and merged assets from Harper Contracting (collectively referred to as, the “Kilgore Companies”) in Salt Lake City, Utah to establish the cornerstone of our West region platform. We expanded Kilgore Companies with the acquisitions of Altaview Concrete in Salt Lake City, B&B in Bluffdale, Utah, EnerCrest in southwest Wyoming, and Triple C in southern Idaho. Subsequently, in December 2010, we extended the West platform to the Texas market with the acquisition of RK Hall, an aggregates and asphalt paving business primarily operating in northeast Texas as well as southern Arkansas and southern Oklahoma. We also expanded to Grand Junction, Colorado with our acquisitions of Grand Junction Pipe and Elam Construction. Capitalizing on the regional presence of RK Hall, we acquired Industrial

 

 

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Asphalt and Ramming Paving in August and October 2011, respectively, which expanded our presence into the attractive Austin, Texas market. These businesses complement each other with well-positioned reserves and integrated asphalt / paving operations.

East Region . The East region platform encompasses our integrated aggregates, asphalt paving mix, construction and other operations in Kentucky, Ohio, Indiana, Tennessee and Virginia. Within the region, we control proven and probable aggregates reserves of approximately 0.4 billion tons as of December 29, 2012 and total hard assets with a balance sheet book value of $162.6 million as of December 29, 2012. During the year ended December 29, 2012, the East region platform generated approximately 18% of our revenue. Approximately 73% of the East region’s revenues were derived from public infrastructure spending, and the remaining 27% of its revenues were generated by residential and non-residential construction for the year ended December 29, 2012.

The East region platform is anchored by the Hinkle Contracting business, one of our largest acquisitions to date, which we acquired in February 2010 and strengthened with bolt-ons of select aggregates and asphalt assets from Greer, an asset swap with Scotty’s Contracting & Stone LLC where we exchanged asphalt paving mix and construction assets for a total of eight owned and leased quarry sites in southern Kentucky, the buyout of our non-controlling partner in the Bourbon Limestone aggregates business and select aggregates and asphalt assets from Kay & Kay Contracting, LLC.

Our Competitive Strengths

Leading market positions . We believe each of our operating companies has a top three market share position in its local market area. We believe we are among the top 15 suppliers of aggregates, top 20 suppliers of cement, a top 10 supplier of asphalt paving mix, and a major ready mixed concrete supplier in the United States by volume. We focus on acquiring companies that have leading local market positions, which we seek to enhance by building scale with other local aggregates and downstream businesses. The heavy-side building products industry is primarily local in nature due to transportation costs from the high weight-to-value ratio of the products. Given this dynamic, we believe achieving local market scale provides a competitive advantage that drives growth and stability for our business. We believe that our ability to prudently acquire and rapidly integrate multiple businesses enables us to become market leaders in attractive regions.

Vertically-integrated business model . We generate revenue across a spectrum of related products and services. We internally supply the majority of the aggregates used in the asphalt paving mixes and ready mixed concrete that we produce and in the construction services that we perform for our customers. Our vertically-integrated business model enables us to operate as a single source provider of materials and construction capabilities, creating cost, convenience and reliability advantages for our customers, while at the same time creating significant cross-marketing opportunities among our interrelated businesses. We believe this significantly enhances the value of our company and improves the quality and consistency of services for our customers.

Significant product and geographic scale . Our nine operating companies operate across 20 states in the central, western and eastern United States. Between 2010 and 2012, we have grown our revenue by 124%, primarily through acquisitions. This growth was the result of 17% revenue growth from 2011 to 2012, compounding 91% revenue growth from 2010 to 2011. The significant revenue growth has brought substantial additional scale to our operations in terms of purchasing and leveraging largely fixed overhead expenses. A combination of increased scale and vertical integration present opportunities to improve profitability through cost savings. We have achieved this scale without any significant customer or geographic concentration and continue to demonstrate operating earnings stability as a function of our diversification across products and regions.

 

 

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Attractive industry dynamics and structure . We operate in an industry that we believe has attractive fundamentals, characterized by high barriers to entry and a stable competitive environment in the majority of markets. Barriers to entry are created by scarcity of raw material resources, limited efficient distribution range, asset intensity of equipment, land required for quarry operations and a time-consuming and complex regulatory and permitting process. In addition, profits are relatively stable throughout the cycle as a result of favorable pricing dynamics, historically stable public infrastructure spending and a largely variable cost structure. According to the November 2012 U.S. Geological Survey (“USGS”), U.S. aggregates pricing has increased in 59 of the last 70 years, with growth accelerating since 2002 as continuing resource scarcity in the industry has led companies to focus increasingly on improved pricing strategies. Pricing growth remained strong in 2012, despite volume declines in certain key end markets.

High quality assets and coverage . As a function of our disciplined acquisition strategy and high quality asset base, hard asset values constitute a significant portion of our enterprise value and currently exceed net debt (which we define as total indebtedness less cash) as of December 29, 2012. As of December 29, 2012, the balance sheet book value of our hard assets was $905.5 million (excluding $1.1 million at corporate). The majority of our hard asset value is derived from our property, plant and equipment together with the value of our approximately 1.2 billion tons and 0.4 billion tons of proven and probable aggregates reserves serving our aggregates and cement businesses, respectively, as of December 29, 2012. Assuming production rates in future years are equal to those for the year ended December 29, 2012, we estimate that the useful life of the reserves for our construction aggregates business and our cement business is over 170 years and over 200 years, respectively.

We estimate proven and probable reserves based on the results of drilling. In determining the amount of reserves, our policy is to deduct reserves not available due to property boundaries, set-backs and plant configurations, as deemed appropriate when estimating reserves. Proven reserves are computed from dimensions revealed in outcrops, trenches, workings or drill holes; grades and/or quality are computed from the results of detailed sampling at the sites for inspection, sampling and measurement, which are spaced so closely and the geologic character of which is so well-defined that size, shape, depth and mineral content of reserves can be clearly established. Probable reserves are those for which the quantity and grade and/or quality are computed from information similar to that used for proven reserves except that the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

Our asset base includes the Continental Cement plant, a new dry process cement plant that was commissioned in 2008. We believe this plant contributes significantly to our asset value given its high replacement cost, large capacity, technologically advanced manufacturing capabilities, strategic position on the Mississippi River and favorable environmental performance versus older facilities within the industry that will require upgrades to comply with stringent EPA standards coming into effect in the near-term. We believe our sizeable quantity of reserves, paired with vertically-integrated, downstream products and services, enables us to better meet the needs of our end-use customers.

Strong operating market performance in challenging economic environment . We have demonstrated resilient financial performance despite challenging conditions in the broader economy over the last few years. This performance is largely due to our highly variable cost structure and exposure to more stable geographic markets and publicly-funded end-use segments. Many of our products, particularly aggregates and asphalt paving mix, have significant exposure to public road construction, which has demonstrated continued growth over the past 30 years, even during times of broader economic softness. In fact, through the prior three U.S. recessions (July 1990 through March 1991, March 2001 through November 2001 and December 2007 through June 2009), highway spending in real dollars grew 1.8% annually on average in years with a recession as compared to 0.9% annually on average in years without a recession, as reported in the Portland Cement Association (“PCA”) 2012 Annual Yearbook. The majority of public road construction spending is funded at the state level through the

 

 

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states’ respective departments of transportation. The five key states in which we operate (Texas, Kansas, Kentucky, Missouri and Utah) have funds whose revenue sources are constitutionally protected and may only be used for transportation purposes. These dedicated, earmarked funding sources limit the impact current state deficits may have on public spending. As a result, our business exhibits significantly less volatility in profitability than witnessed in most other building product subsectors. We believe these business characteristics have helped mitigate the impact of the depressed economic environment on our profitability.

Experienced and proven leadership implementing acquisition strategy . Our senior management team has a proven track record of creating value. This team is led by Tom Hill, a 30-year industry veteran and former CEO of Oldcastle, Inc., CRH plc’s U.S. operations. In addition to Mr. Hill, our management team consists of a number of other former Oldcastle managers, including corporate development and finance executives and other heavy side industry operators. Our management team has a track record of executing and successfully integrating acquisitions in the sector. Mr. Hill demonstrated his ability to execute on a similar consolidation strategy while at Oldcastle Materials, where he led numerous acquisitions, taking the business from less than $0.3 billion to $7.4 billion in sales from 1992 to 2008. In executing Oldcastle’s consolidation strategy, Mr. Hill and his team completed 173 acquisitions worth approximately $6.3 billion in the aggregate and $36.0 million on average. From an operational standpoint, Mr. Hill was successful at managing Oldcastle’s rapid growth through the implementation of operational improvements, creation of a world-class safety program and development of a strong leadership team.

Strong sponsor equity commitment . Since July 2009, the Sponsors, together with certain of our officers, directors and employees, have made $794.5 million of funding commitments to our indirect parent company to strategically pursue consolidation within the heavy-side building materials industry in the United States. Since then, we have made 24 acquisitions, including bolt-ons, and our Sponsors, together with certain other investors in our parent, have invested approximately $463.9 million of equity capital, excluding rollover equity invested by sellers in certain of our acquisitions, with approximately $337.2 million of commitments to our parent remaining outstanding.

Our Business Strategy

Drive profitable growth through strategic acquisitions . We were established to acquire and grow heavy-side building materials companies with the goal of becoming a top-five U.S. player within five years. Since inception, we have demonstrated significant progress toward achieving this goal. We continue to believe that the relative fragmentation of the industry subsectors in which we operate, coupled with recent economic softness, create an environment in which we acquire companies at attractive valuations and increase scale and diversity over time through both platform and bolt-on acquisitions. We believe that attractive purchase prices and high quality of assets with selective exposure to well-funded public spending provide additional downside protection. Acquisitions can also provide synergies that provide additional revenue opportunities by filling in market gaps and expanding to adjacent geographies. We believe that achieving further vertical integration and increased scale will lead to improved cost positions, benefitting our profitability and cash flow generation. Our acquisition strategy is substantially similar to the one successfully employed by CEO Tom Hill and his team, including 25 current Summit employees, at Oldcastle Materials, CRH plc’s U.S. operations. Over a 16-year period, Mr. Hill helped execute over 173 acquisitions and approximately $6.3 billion of invested capital to make Oldcastle the largest U.S. integrated heavy-side business. Over that period, Oldcastle Materials reported that it grew sales from less than $0.3 billion in 1992 to $7.4 billion in 2008, representing a compound annual growth rate of over 25%.

Enhance margins and free cash flow generation through implementation of operational improvements . Our management team’s demonstrated ability at Oldcastle Materials in improving operating margins represents a large source of value. Based on our management team’s prior acquisition experience in the heavy-side business, we believe margin improvement is achievable within 12 to 18 months of acquisition. These gains are accomplished through proven profit optimization plans, including implementing a systematic pricing strategy and

 

 

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thorough operations review, leveraging information technology and financial systems to control costs, managing working capital, and achieving scale-driven purchasing synergies, along with fixed overhead control and reduction. Our regional presidents, supported by our central operations, risk management and finance and information technology teams, drive the implementation of detailed and thorough profit optimization plans at each acquisition post close.

Leverage vertically-integrated and strategically located operations for growth . As a vertically-integrated supplier of heavy-side building materials in attractive markets, we believe we have a significant competitive advantage as we seek to grow our share in existing markets and enter new markets. The majority of raw materials used to produce our products and provide our services are internally supplied. We believe our vertically-integrated business model enables us to operate as a single source provider of materials and construction capabilities, creating cost, convenience and reliability advantages for our customers, while at the same time creating significant cross-marketing opportunities among our interrelated businesses.

Leverage our position as a preferred buyer of privately held companies in our industry . Our business model fosters entrepreneurship in local markets while reaping the benefits of best practices and economies of scale brought by the larger group. Business owners have found our model to be attractive and we believe potential sellers prefer us as an acquirer. We seek to avoid competitive auctions and have instead individually negotiated each of our acquisitions to date. The owners of the majority of the companies we have acquired have chosen to stay on with Summit Materials following the sale and have in many cases chosen to roll equity investments into our parent company as well.

Capitalize on expected recovery in U.S. economy and construction markets . In July 2012, Moving Ahead for Progress in the 21st Century Act (“MAP-21”) was enacted and took effect in October 2012. MAP-21 is a 27-month, approximately $105 billion transportation funding program that provides for $40.4 billion and $41.0 billion for highway infrastructure investments in fiscal years 2013 and 2014, respectively. The spending levels are consistent with the preceding federal transportation funding program. However, given the nation’s aging infrastructure and considering longstanding historical spending trends, we expect U.S. infrastructure investment growth to resume. We believe we are well-positioned to capitalize on any such increase in investment. In addition, we have sufficient exposure to residential and non-residential end-markets to participate in a potential recovery in these markets. Given the challenging current environment, we expect to leverage this exposure to realize significant upside in the medium term.

Our Industry

The U.S. heavy-side building materials industry is comprised of four primary sectors: (i) aggregates, (ii) cement, (iii) asphalt paving mix and (iv) ready mixed concrete, each of which is widely used in most forms of construction activity. Participants in these sectors typically range from small, privately-held companies focused on a single product to multinational corporations that offer a wide array of construction materials and services. Competition is constrained in part by the distance materials may be efficiently transported, resulting in largely local or regional operations.

Transportation infrastructure projects, driven by both state and federal funding programs, represent a significant share of the U.S. heavy-side building materials market. The current federal funding program, MAP-21, was enacted in July 2012 and took effect in October 2012. MAP-21 is a 27-month, approximately $105 billion transportation funding program that provides for $40.4 billion and $41.0 billion for highway infrastructure investments in fiscal years 2013 and 2014, respectively. In addition to federal funding, highway construction and maintenance funding is also available through state, county and local agencies. Our five largest states by revenue (Texas, Kansas, Kentucky, Missouri and Utah, which represented approximately 27%, 16%, 14%, 11% and 11% of our total revenue for the year ended December 29, 2012) each have funds whose revenue sources are constitutionally protected and may only be spent on transportation projects.

 

 

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Aggregates . Aggregates are key material components used in the production of asphalt paving mixes and concrete for the public infrastructure, highway, commercial and residential construction markets and are also widely used for various applications and products, such as road and building foundations, railroad ballast, erosion control, filtration, roofing granules and in solutions for snow and ice control. Generally extracted from the earth using surface or underground mining methods, aggregates are produced from natural deposits of various materials such as limestone, sand and gravel, granite and trap rock.

Aggregates represent an attractive market with high EBITDA margins, high barriers to entry, increasing resource scarcity and relatively stable profitability through the economic cycle. Production is moderately capital intensive and access to well-placed reserves is important given high transport costs and environmental permitting restrictions. Markets are typically local due to high transport costs and are generally fragmented, with numerous participants operating in localized markets and the top six players controlling approximately 30% of the national market in 2011. According to the February 2013 U.S. Geological Survey, the U.S. market for these products was estimated at approximately 2.2 billion tons in 2012, at a total market value of $17.75 billion. Relative to other heavy-side construction materials such as cement and ready mixed concrete, aggregates consumption is more heavily weighted towards public infrastructure construction and maintenance and repair. The mix of end-uses varies widely by geography, however, based on the nature of construction activity in each market. Typically, three to six competitors comprise the majority market share of each local market because of the constraints around the availability of natural resources and transportation. Vertically-integrated players, with integrated asphalt paving mix, ready mixed concrete, and construction businesses operating off a strong aggregates platform, can have an advantage versus smaller, non-integrated producers by leveraging their aggregates for downstream operations.

Cement . Portland cement, an industry term for the common cement in general use around the world, is the basic ingredient of concrete and is made from a combination of limestone, shale, clay, silica and iron ore. Together with water, cement creates the paste that binds the aggregates together when making concrete. Cement is an input for ready mixed concrete and concrete products and commands significantly higher prices relative to aggregates, reflecting the more intensive capital investment required. Cement is a capital-intensive business with variable costs dominated by raw materials and energy required to fuel the kiln. Building new plants is challenging given the extensive permitting that is required and significant costs. We believe new plant construction costs in the United States are estimated at $250-300 per ton. Assuming construction costs of $275 per ton, a 1.25 million ton facility, such as the one Continental Cement operates, would cost approximately $343.8 million to construct.

The domestic cement industry is regional in nature with customers purchasing material from local sources. According to the PCA 2012 North American Cement Industry Annual Yearbook, nearly 97% of cement sold in the United States was shipped to customers by truck in 2010.

Asphalt paving mix . Asphalt paving mix is the most common roadway material used today, covering 90% of the more than 2.5 million miles of paved roadways in the U.S., according to National Geographic News. Major inputs include aggregate and liquid asphalt (the refined residue from the distillation process of crude oils by refineries). Given the significant aggregates component in asphalt paving mix (up to 95% by weight), local aggregates producers often participate in the asphalt paving mix business to secure captive demand for aggregates. Asphalt and paving is also highly fragmented domestically, with end markets skewed towards public new road construction and maintenance and repair. Barriers to entry include permit hurdles, access to aggregates (asphalt plants are typically co-located at quarries wherever possible) and access to liquid asphalt.

Ready mixed concrete . Ready mixed concrete is one of the most versatile and widely used materials in construction today. Ready mixed concrete is created through the combination of coarse and fine aggregates, which make up approximately 60 to 75% of the mix by volume, with water, various chemical admixtures and

 

 

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cement making up the remainder. Given the high weight-to-value ratio, delivery of ready mixed concrete is typically limited to a one-hour haul from a production plant location and is further limited by a 90 minute window in which newly mixed concrete must be poured to maintain quality and performance. As a result of the transportation constraints, the ready mixed concrete market is highly localized, with an estimated 5,500 ready mixed concrete plants in the United States, according to the National Ready Mixed Concrete Association (the “NRMCA”). While the barriers to entry for ready mixed concrete are lower, we participate selectively in ready mixed concrete markets in which we can control underlying raw materials.

Acquisition History

The following table lists acquisitions we have completed since August 2009:

 

Company

  

Date of Acquisition

  

Region

Hamm (predecessor)

   August 25, 2009    Central

Hinkle Contracting

   February 1, 2010    East

Cornejo

   April 16, 2010    Central

Greer

   April 20, 2010    East

Continental Cement

   May 27, 2010    Central

Harshman

   June 15, 2010    Central

Scotty’s

   July 23, 2010    East

Harper Contracting

   August 2, 2010    West

Kilgore

   August 2, 2010    West

Con-Agg

   September 15, 2010    Central

Altaview Concrete

   September 15, 2010    West

EnerCrest

   September 28, 2010    West

RK Hall

   November 30, 2010    West

SCS

   November 30, 2010    West

Triple C

   January 14, 2011    West

Elam Construction

   March 31, 2011    West

Bourbon

   May 27, 2011    East

Fischer

   May 27, 2011    Central

B&B

   June 8, 2011    West

Grand Junction Pipe

   June 10, 2011    West

Industrial Asphalt

   August 2, 2011    West

Ramming Paving

   October 28, 2011    West

Norris

   February 29, 2012    Central

Kay & Kay

   October 5, 2012    East

Sandco

   November 30, 2012    West

Lafarge

   April 1, 2013    Central

Westroc

   April 1, 2013    West

 

 

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Corporate Structure

The following chart summarizes our organizational structure, equity ownership and our principal indebtedness as of the date of this prospectus. This chart is provided for illustrative purposes only and does not show all of our legal entities or all obligations of such entities.

 

LOGO

 

(1) Represents equity contributed by investment funds affiliated with the Sponsors and the contribution of equity by certain members of management and other investors (excluding rollover of equity investments made by sellers of acquired companies).
(2) Guarantor under the senior secured credit facilities, but not the senior notes.
(3) See “Description of Other Indebtedness—Senior Secured Credit Facilities.”

 

 

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(4) Summit Materials, LLC and Summit Materials Finance Corp. are the issuers of the notes and Summit Materials, LLC is the borrower under our senior secured credit facilities. Summit Materials Finance Corp. was formed in December 2011 solely to act as co-issuer of the notes, has only nominal assets and does not conduct any operations.
(5) Guarantor under the notes and guarantor under the senior secured credit facilities.
(6) Pursuant to the terms of the Amended and Restated Limited Liability Company Agreement of Continental Cement, in the absence of a dissolution or liquidation of Continental Cement, Summit Materials Holdings II, LLC (“Summit II”), which holds Class A Units of Continental Cement, and the holders of the Class B Units of Continental Cement are each entitled to receive a percentage of the distributions on a pari passu basis. The percentage received by the holders of the Class B Units relative to Summit II adjusts based on the time period that the Class A Units have been outstanding and whether Summit II has received a certain return on the capital contributions it made to purchase the Class A Units it holds. Summit II’s sharing percentage is generally between 70% to 80%. The holders of the Class B Units collectively share in the remaining distributions not allocated to Summit II. In connection with a dissolution or liquidation of Continental Cement, distributions are made either in the manner set forth above or, if it provides a greater return to Summit II with respect to the Class A Units, Summit II will receive a priority distribution ahead of the Class B Units up to an amount equal to the capital contributions made by Summit II in respect of the Class A Units, plus interest on such capital contributions of 11%, accruing daily and compounding annually from the date of issuance of the Class A Units. Any excess amount to be distributed after the priority payment to Summit II is then made to the holders of the Class B Units. Subject to certain exceptions, Summit II has the right to require Continental Cement to purchase all, but not less than all, of the Class B Units at any time after May 27, 2016 either in anticipation of an initial public offering of Parent, an indirect parent entity of Continental Cement, or if an initial public offering of Parent has already occurred. In addition, subject to certain conditions, holders of the Class B Units have the right to require Continental Cement to purchase all, but not less than all, of the Class B Units at a strike price that approximates fair value, including in the event of a change of control of Parent occurring after the earlier of the repayment of certain second lien credit agreement obligations and August 27, 2013 or at any time following May 27, 2016. Holders of Class B Units also have certain rights that allow them to rollover their interests in connection with an initial public offering.
(7) The notes are not and will not be guaranteed by any of our existing or future non-wholly owned subsidiaries other than Continental Cement or by any future foreign subsidiaries.

 

 

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Corporate Information

Summit Materials, LLC was formed under the laws of the State of Delaware in September 2008. Summit Materials Finance Corp., the co-issuer of the outstanding notes, was incorporated under the laws of the State of Delaware in December 2011. Our principal executive office is located at 2900 K Street NW, Suite 100, Harbourside North Tower Building, Washington, D.C. 20007. Our telephone number is (202) 339-9509.

Our Sponsors

Blackstone . Blackstone is one of the world’s leading investment and advisory firms. Blackstone’s alternative asset management businesses include the management of corporate private equity funds, real estate funds, hedge fund solutions, credit-oriented funds and closed-end mutual funds. Blackstone also provides various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory and fund placement services. Through its different investment businesses, as of December 31, 2012, Blackstone had total assets under management of approximately $210.0 billion.

Silverhawk . Silverhawk Capital Partners, LLC is a private equity firm with offices in Greenwich, Connecticut and Charlotte, North Carolina. The founding partners have invested as a team and operated businesses since 1989. Founded in 2005, Silverhawk’s investments are focused in the energy, manufacturing and business service sectors. Currently, Silverhawk has approximately $200.0 million under management.

Recent Developments

Amendment No. 1 to Credit Agreement

On February 5, 2013, we entered into Amendment No. 1 (“Amendment No. 1”) to our existing Credit Agreement, dated as of January 30, 2012 (the “Credit Agreement”), among Summit Materials, the guarantors party thereto, the several banks and other financial institutions or entities from time to time parties thereto and Bank of America, N.A., as administrative agent, collateral agent and swing line lender. On February 11, 2013, we entered into the Tranche A Revolving Credit Commitment Conversion Agreement (the “Conversion Agreement,” and together with Amendment No. 1, the “Amendments), among Summit Materials, the guarantors party thereto, the several banks and other financial institutions or entities party thereto and Bank of America, N.A., as administrative agent, collateral agent and swing line lender. We refer to the Credit Agreement, as amended by the Amendments, as our “senior secured credit facilities.”

Among other things, the Amendments: (i) reduced the applicable margins used to calculate interest rates for term loans under our senior secured credit facilities by 1.0%; (ii) reduced the applicable margins used to calculate interest rates for $131.0 million of tranche A revolving credit loans available under the senior secured credit facilities by 1.0% (with no reductions to the applicable margins for the remaining $19.0 million of available revolving credit loans); (iii) increased term loans borrowed under our term loan facility by $25.0 million with the same terms as the existing term loans (bringing total term loan borrowings to approximately $422.0 million); (iv) included a requirement that we pay a fee equal to 1.0% of the principal amount of term loans repaid in connection with certain repricing or refinancing transactions within six months after February 5, 2013; and (v) created additional flexibility under the financial maintenance covenants, which are tested quarterly, by increasing the applicable maximum Consolidated First Lien Net Leverage Ratio and reducing the applicable minimum Interest Coverage Ratio (each as defined in the Credit Agreement governing our senior secured credit facilities).

Lafarge Wichita Acquisition

On April 1, 2013, the Company completed its acquisition of Lafarge’s aggregates, concrete and asphalt/paving assets located in Wichita, Kansas (the “Wichita Assets”) for aggregate purchase consideration at closing

 

 

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of approximately $35 million. The Wichita Assets include two aggregates operations, three ready mix concrete plants and one asphalt plant located in metro Wichita and the broader southeast Kansas area. The Wichita Assets acquisition was financed using borrowings under the Company’s existing senior secured credit facilities.

Westroc Acquisition

On April 1, 2013, the Company completed its acquisition of Westroc, an aggregates and ready mix concrete company located in Utah for aggregate purchase consideration at closing of approximately $25 million, plus $10 million in deferred consideration payable over five years. Westroc, based in Pleasant Grove, Utah, operates two aggregates sites and seven ready mix concrete plants along Utah’s Wasatch Front. The Westroc acquisition was financed using borrowings under the Company’s existing senior secured credit facilities.

 

 

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The Exchange Offer

The following summary is provided solely for your convenience and is not intended to be complete. You should read the full text and more specific details contained elsewhere in this prospectus for a more detailed description of the notes.

 

General

On January 23, 2012, the Issuers issued an aggregate of $250.0 million principal amount of 10.5% Senior Notes due 2020 in a private offering. In connection with the private offering, the Issuers and the guarantors entered into a registration rights agreement with the initial purchasers in which they agreed, among other things, to deliver this prospectus to you and to complete the exchange offer within 540 days after the date of issuance and sale of the outstanding notes. You are entitled to exchange in the exchange offer your outstanding notes for the exchange notes which are identical in all material respects to the outstanding notes except:

 

   

the exchange notes have been registered under the Securities Act;

 

   

the exchange notes are not entitled to any registration rights which are applicable to the outstanding notes under the registration rights agreement; and

 

   

the liquidated damages provisions of the registration rights agreement are no longer applicable.

 

The Exchange Offer

The Issuers are offering to exchange $250.0 million aggregate principal amount of 10.5% Senior Notes due 2020 which have been registered under the Securities Act for any and all of their outstanding 10.5% Senior Notes due 2020.

 

  You may only exchange outstanding notes in denominations of $2,000 and integral multiples of $1,000, in excess thereof.

 

Resale

Based on an interpretation by the staff of the SEC set forth in no-action letters issued to third parties, the Issuers believe that the exchange notes issued pursuant to the exchange offer in exchange for outstanding notes may be offered for resale, resold and otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:

 

   

you are acquiring the exchange notes in the ordinary course of your business; and

 

   

you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the exchange notes.

 

  If you are a broker dealer and receive exchange notes for your own account in exchange for outstanding notes that you acquired as a result of market making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any resale of the exchange notes. See “Plan of Distribution.”

 

 

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  Any holder of outstanding notes who:

 

   

is our affiliate;

 

   

does not acquire exchange notes in the ordinary course of its business; or

 

   

tenders its outstanding notes in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of exchange notes cannot rely on the position of the staff of the SEC enunciated in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling , dated available July 2, 1993, or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes.

 

Expiration Date

The exchange offer will expire at 5:00 p.m., New York City time, on                     , 2013, which is the 21st business day after the date of this prospectus, unless extended by the Issuers. The Issuers do not currently intend to extend the expiration date.

 

Withdrawal

You may withdraw the tender of your outstanding notes at any time prior to the expiration of the exchange offer. The Issuers will return to you any of your outstanding notes that are not accepted for any reason for exchange, without expense to you, promptly after the expiration or termination of the exchange offer.

 

Interest on the Exchange Notes and the Outstanding Notes

The exchange notes will bear interest at the rate per annum set forth on the cover page of this prospectus from the most recent date to which interest has been paid on the outstanding notes. The interest will be payable semi-annually on January 31 and July 31. No interest will be paid on outstanding notes following their acceptance for exchange.

 

Conditions to the Exchange Offer

The exchange offer is subject to customary conditions, which the Issuers may waive. See “The Exchange Offer—Conditions to the Exchange Offer.”

 

Procedures for Tendering Outstanding Notes

If you wish to participate in the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of such letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the letter of transmittal, or a facsimile of such letter of transmittal, together with the outstanding notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal.

 

 

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  If you hold outstanding notes through The Depository Trust Company (“DTC”) and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC by which you will agree to be bound by the letter of transmittal. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things:

 

   

you are not our “affiliate” within the meaning of Rule 405 under the Securities Act;

 

   

you do not have an arrangement or understanding with any person or entity to participate in the distribution of the exchange notes;

 

   

you are acquiring the exchange notes in the ordinary course of your business; and

 

   

if you are a broker dealer that will receive exchange notes for your own account in exchange for outstanding notes that were acquired as a result of market making activities, that you will deliver a prospectus, as required by law, in connection with any resale of such exchange notes.

 

Special Procedures for Beneficial Owners

If you are a beneficial owner of outstanding notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender those outstanding notes in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender those outstanding notes on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date.

 

Guaranteed Delivery Procedures

If you wish to tender your outstanding notes and your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the letter of transmittal or any other required documents, or you cannot comply with the procedures under DTC’s Automated Tender Offer Program for transfer of book-entry interests, prior to the expiration date, you must tender your outstanding notes according to the guaranteed delivery procedures set forth in this prospectus under “The Exchange Offer—Guaranteed Delivery Procedures.”

 

Effect on Holders of Outstanding Notes

As a result of the making of, and upon acceptance for exchange of, all validly tendered outstanding notes pursuant to the terms of the exchange offer, the Issuers and the guarantors will have fulfilled a covenant under the registration rights agreement. Accordingly, there will be no increase in the interest rate on the outstanding notes under

 

 

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the circumstances described in the registration rights agreement. If you do not tender your outstanding notes in the exchange offer, you will continue to be entitled to all the rights and limitations applicable to the outstanding notes as set forth in the indenture; however, as a result of the making of, and upon acceptance for exchange of, all validly tendered outstanding notes pursuant to the terms of the exchange offer, the Issuers will not have any further obligation to you to provide for the exchange and registration of the outstanding notes under the registration rights agreement. To the extent that the outstanding notes are tendered and accepted in the exchange offer, the trading market for the remaining outstanding notes that are not so tendered and exchanged could be adversely affected.

 

Consequences of Failure to Exchange

All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the indenture. In general, the outstanding notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, the Issuers do not currently anticipate that they will register the outstanding notes under the Securities Act.

 

Certain U.S. Federal Income Tax Considerations

The exchange of outstanding notes for exchange notes in the exchange offer will not be a taxable event to holders for United States federal income tax purposes. See “Certain U.S. Federal Income Tax Considerations.”

 

Use of Proceeds

The Issuers will not receive any cash proceeds from the issuance of the exchange notes in the exchange offer. See “Use of Proceeds.”

 

Exchange Agent

Wilmington Trust, National Association is the exchange agent for the exchange offer. The addresses and telephone numbers of the exchange agent are set forth in the section captioned “The Exchange Offer—Exchange Agent” of this prospectus.

 

 

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Summary Historical Consolidated Financial and Other Data

The following tables set forth, for the periods and as of the dates indicated, our summary historical consolidated financial and other data. The summary historical consolidated financial information as of December 29, 2012 and December 31, 2011 and for our three fiscal years ended December 29, 2012, December 31, 2011 and December 31, 2010 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary historical consolidated balance sheet data at December 31, 2010 from our consolidated balance sheet as of December 31, 2010 which is not presented in this prospectus. In 2011, Summit Materials adopted a “4-4-5” fiscal calendar in the place of the calendar year it previously used. Under the 4-4-5 fiscal period, each year is divided into four quarters and each quarter consists of two four week “months” and one five week “month.” Historical results are not indicative of the results to be expected in the future. You should read the following information together with the more detailed information contained in “Selected Historical Consolidated Financial Data,” “Unaudited Pro Forma Condensed Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Summit Materials, LLC” and the consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.

 

(in thousands)    Year Ended
December 29,
2012
    Year Ended
December 31,
2011(1)
    Year Ended
December 31,
2010(1)
 

Statements of Operations Data:

      

Revenue

   $ 962,902      $ 822,548      $ 430,358   

Cost of revenue (exclusive of items shown separately below)

     749,363        630,944        308,297   

General and administrative expenses

     128,032        96,886        49,479   

Depreciation, depletion, amortization and accretion

     68,876        61,964        34,415   

Transaction costs

     1,988        9,120        22,268   
  

 

 

   

 

 

   

 

 

 

Operating income

     14,643        23,634        15,899   

Other expense (income)

     8,287        (21,244     11,558   

Interest expense

     58,079        47,784        25,430   
  

 

 

   

 

 

   

 

 

 

Loss from continuing operations before income tax (benefit) expense

     (51,723     (2,906     (21,089

Income tax (benefit) expense

     (3,920     3,408        2,363   
  

 

 

   

 

 

   

 

 

 

Loss from continuing operations

   $ (47,803   $ (6,314   $ (23,452
  

 

 

   

 

 

   

 

 

 

Cash Flow Data:

      

Net cash provided by (used for):

      

Operating activities

   $ 62,279      $ 23,253      $ (20,529

Investing activities

     (85,340     (192,331     (499,381

Financing activities

     7,702        146,775        575,389   

Balance Sheet Data (as of period end):

      

Cash and cash equivalents

   $ 27,431      $ 42,790      $ 65,093   

Total assets

     1,281,213        1,284,265        1,101,581   

Total debt including current portion of long-term debt

     639,843        608,981        559,980   

Capital leases

     3,092        3,158        3,217   

Total member’s interest

     382,428        436,372        345,993   

Redeemable noncontrolling interests

     22,850        21,300        21,300   

Other Financial Data (as of period end):

      

Total hard assets(2)

   $ 906,584      $ 906,166      $ 775,457   

Ratio of earnings to fixed charges(3)

     0.1        1.0        0.2   

 

 

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(in thousands)    Year Ended
December 29,
2012
     Year Ended
December 31,
2011
     Year Ended
December 31,
2010
 

Units Shipped and Consumed(4):

        

Stone, sand and gravel (tons)

     17,043         19,032         18,064   

Hot mix asphalt (tons)

     4,555         5,040         4,532   

Ready mixed concrete (cubic yards)

     1,093         1,099         1,231   

Cement (tons)

     1,003         850         854   

 

(1) Amounts are shown net of the results of operations associated with certain non-core businesses sold in 2012 and classified as discontinued operations.
(2) Defined as the balance sheet book value of the sum of (a) property, plant and equipment, net and (b) inventories.
(3) The ratio of earnings to fixed charges is determined by dividing earnings, as adjusted, by fixed charges. Fixed charges consist of interest on all indebtedness plus that portion of operating lease rentals representative of the interest factor (deemed to be 33% of operating lease rentals).
(4) Units include amounts shipped and consumed by our subsidiaries assuming that all of our subsidiaries were acquired on or before January 1, 2010.

 

 

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The Exchange Notes

The terms of the exchange notes are identical in all material respects to the terms of the outstanding notes, except that the exchange notes will not contain terms with respect to transfer restrictions or additional interest upon a failure to fulfill certain of our obligations under the registration rights agreement. The exchange notes will evidence the same debt as the outstanding notes. The exchange notes will be governed by the same indenture under which the outstanding notes were issued. The following summary is not intended to be a complete description of the terms of the exchange notes. For a more detailed description of the exchange notes, see “Description of the Notes” in this prospectus.

 

Issuers

Summit Materials, LLC and Summit Materials Finance Corp.

 

Securities Offered

$250.0 million aggregate principal amount of 10.5% Senior Notes due 2020.

 

Maturity Date

The exchange notes will mature on January 31, 2020, unless earlier redeemed or repurchased.

 

Interest

The exchange notes will accrue interest at a rate of 10.5% per annum, payable on January 31 and July 31 of each year.

 

Guarantees

The exchange notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by all of our existing and future wholly-owned domestic restricted subsidiaries that guarantee indebtedness under our senior secured credit facilities and by our non-wholly-owned subsidiary, Continental Cement. These guarantees are subject to release under specified circumstances. See “Description of the Notes—Guarantees.” The guarantee of each guarantor will be an unsecured senior obligation of that guarantor and will rank:

 

   

equal in right of payment with all existing and future senior indebtedness of that guarantor;

 

   

senior in right of payment with all existing and future subordinated indebtedness of that guarantor;

 

   

effectively subordinated to all existing and future secured obligations of that guarantor, including any such guarantor’s guarantee of indebtedness under our senior secured credit facilities, to the extent of the value of the assets securing such indebtedness; and

 

   

structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, of our non-guarantor subsidiaries, including any foreign subsidiaries.

 

  See “Description of the Notes—Guarantees.”

 

Ranking

The exchange notes are our senior unsecured obligations and will:

 

   

rank equally in right of payment with all of our existing and future senior obligations;

 

   

rank senior in right of payment to all of our existing and future subordinated obligations;

 

 

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be effectively subordinated to all of our existing and future secured obligations, including borrowings under our senior secured credit facilities, to the extent of the value of the assets securing such obligations; and

 

   

be structurally subordinated to all of our existing and future indebtedness and other liabilities of our non-guarantor subsidiaries, including any foreign subsidiaries.

 

  As of December 29, 2012, we had:

 

   

$398.0 million of indebtedness under our senior secured credit facilities, less original issue discount of $3.5 million;

 

   

$250.0 million aggregate principal amount of outstanding senior notes, less original issue discount of $4.7 million; and

 

   

$3.7 million in capital leases and other obligations.

 

  Interest began to accrue from the issue date of the exchange notes.

 

Optional Redemption

We may redeem some or all of the exchange notes at any time prior to January 31, 2016 at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date and the “applicable premium” described under the caption “Description of the Notes—Optional Redemption.” We may redeem some or all of the exchange notes at any time on or after January 31, 2016 at the redemption prices and as described under the caption “Description of the Notes—Optional Redemption.”

 

Change of Control and Asset Sale Offers

Upon the occurrence of a change of control or upon the sale of certain of our assets in which we do not apply the proceeds as required, the holders of the exchange notes will have the right to require us to make an offer to repurchase each holder’s notes at a price equal to 101% (in the case of a change control) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date. See “Description of the Notes—Repurchase at the Option of Holders—Change of Control,” and “Description of the Notes—Repurchase at the Option of Holders—Asset Sales.

 

Certain Covenants

The exchange notes will be governed by the same indenture under which the outstanding notes were issued. The indenture governing the exchange notes contains covenants that, among other things, limit the ability of the Issuers and their restricted subsidiaries to:

 

   

incur additional indebtedness or issue certain preferred shares;

 

   

pay dividends, redeem our stock or make other distributions;

 

   

make certain investments;

 

   

create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers;

 

 

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create liens;

 

   

sell or transfer certain assets;

 

   

consolidated, merge, sell or otherwise dispose of all or substantially all of our assets;

 

   

enter into certain transactions with our affiliates; and

 

   

designate subsidiaries as unrestricted subsidiaries.

 

  These covenants are subject to a number of important limitations, exceptions and qualifications. See “Description of the Notes—Certain Covenants.”

 

Use of Proceeds

We will not receive any proceeds from the exchange offer. See “Use of Proceeds.”

 

No Prior Market

The exchange notes will generally be freely transferable but will be new securities for which there will not initially be a market. Accordingly, there can be no assurance as to the development or liquidity of any market for the exchange notes. The initial purchasers in the private offering of the outstanding notes have advised us that they currently intend to make a market for the exchange notes, as permitted by applicable laws and regulations. However, they are not obligated to do so and may discontinue any such market making activities at any time without notice. We do not intend to apply for a listing of the exchange notes on any securities exchange or an automated dealer quotation system. See “Risk Factors—Risks Related to the Exchange Notes—Your ability to transfer the exchange notes may be limited by the absence of an active trading market, and an active trading market may not develop for the exchange notes.”

 

Governing Law

The exchange notes will be governed by the laws of the State of New York.

Risk Factors

You should carefully consider all the information in the prospectus prior to exchanging your outstanding notes. In particular, we urge you to carefully consider the factors set forth under the caption “Risk Factors” beginning on page 21 of this prospectus before participating in the exchange offer.

 

 

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RISK FACTORS

You should carefully consider the following risk factors and all other information contained in this prospectus before participating in the exchange offer. The risks and uncertainties described below are not the only risks facing us and your investment in the exchange notes. Additional risks and uncertainties that we are unaware of, or those we currently deem less significant, also may become important factors that affect us. The following risks could materially and adversely affect our business, financial condition, cash flows or results of operations.

Risks Related to the Exchange Offer

If you choose not to exchange your outstanding notes in the exchange offer, the transfer restrictions currently applicable to your outstanding notes will remain in force and the market price of your outstanding notes could decline.

If you do not exchange your outstanding notes for exchange notes in the exchange offer, then you will continue to be subject to the transfer restrictions on the outstanding notes as set forth in the offering memorandum distributed in connection with the private offering of the outstanding notes. In general, the outstanding notes may not be offered or sold unless they are registered or exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act. You should refer to “Prospectus Summary—The Exchange Offer” and “The Exchange Offer” for information about how to tender your outstanding notes.

The tender of outstanding notes under the exchange offer will reduce the remaining principal amount of the outstanding notes, which may have an adverse effect upon, and increase the volatility of, the market price of the outstanding notes not exchanged in the exchange offer due to a reduction in liquidity.

Your ability to transfer the exchange notes may be limited by the absence of an active trading market, and an active trading market may not develop for the exchange notes.

The exchange notes are a new issue of securities for which there is no established trading market. We do not intend to have the exchange notes listed on a national securities exchange or to arrange for quotation on any automated quotation system. The initial purchasers have advised us that they intend to make a market in the exchange notes, as permitted by applicable laws and regulations; however, the initial purchasers are not obligated to make a market in the exchange notes, and they may discontinue their market-making activities at any time without notice. Therefore, we cannot assure you as to the development or liquidity of any trading market for the exchange notes. The liquidity of any market for the exchange notes will depend on a number of factors, including:

 

   

the number of holders of exchange notes;

 

   

our operating performance and financial condition;

 

   

the market for similar securities;

 

   

the interest of securities dealers in making a market in the exchange notes; and

 

   

prevailing interest rates.

Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the exchange notes. The market, if any, for the exchange notes may face similar disruptions that may adversely affect the prices at which you may sell your exchange notes. Therefore, you may not be able to sell your exchange notes at a particular time and the price that you receive when you sell may not be favorable.

 

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Certain persons who participate in the exchange offer must deliver a prospectus in connection with resales of the exchange notes.

Based on interpretations of the staff of the SEC contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1983), we believe that you may offer for resale, resell or otherwise transfer the exchange notes without compliance with the registration and prospectus delivery requirements of the Securities Act. However, in some instances described in this prospectus under “Plan of Distribution,” certain holders of exchange notes will remain obligated to comply with the registration and prospectus delivery requirements of the Securities Act to transfer the exchange notes. If such a holder transfers any exchange notes without delivering a prospectus meeting the requirements of the Securities Act or without an applicable exemption from registration under the Securities Act, such a holder may incur liability under the Securities Act. We do not and will not assume, or indemnify such a holder against, this liability.

Risks Related to Our Indebtedness and the Exchange Notes

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under the exchange notes.

We are highly leveraged. As of December 29, 2012, (i) our total debt was approximately $648.0 million (without giving effect to original issue discount on our term loan facility), (ii) the notes and related guarantees have ranked effectively subordinated to approximately $398.0 million of senior secured indebtedness under our senior secured term loan facility to the extent of the value of the collateral securing such facility and (iii) we had an additional $150.0 million of unutilized capacity under our senior secured revolving credit facility (less $14.5 million of letters of credit outstanding).

Our high degree of leverage could have important consequences for you, including:

 

   

making it more difficult for us to make payments on the exchange notes;

 

   

increasing our vulnerability to general economic and industry conditions;

 

   

requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;

 

   

exposing us to the risk of increased interest rates as certain of our borrowings under our senior secured credit facilities will be at variable rates of interest;

 

   

restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;

 

   

limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; and

 

   

limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged.

Borrowings under our senior secured credit facilities are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Our interest expense for the year ended December 29, 2012 was $58.1 million, a portion of which was based on a floating rate index. A 0.125% increase in the floating rates on the funded amounts under our senior secured credit facility would have increased annual interest expense by approximately $0.5 million. Assuming all revolving loans are drawn under our senior secured revolving credit facility, a 0.125% change in the floating rate would result in an additional $0.2 million increase in our annual interest expense. In the future, we may enter into interest rate swaps that involve the exchange of

 

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floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.

In addition, the indenture that governs the exchange notes and the credit agreement governing our senior secured credit facilities contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debt.

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to our financial condition.

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the indenture governing the exchange notes and the credit agreement governing our senior secured credit facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. If we incur any additional indebtedness that ranks equally with the exchange notes, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company. Such additional indebtedness may have the effect of reducing the amount of proceeds paid to you. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. In February 2013, we entered into Amendments to our senior secured credit facilities. The senior secured credit facilities currently provide senior secured financing in an amount of $572.0 million, consisting of a $150.0 million five-year revolving credit facility and a $422.0 million seven-year term loan facility. Our senior secured credit facilities include an uncommitted incremental facility that will allow us the option to increase the amount available under the term loan facility and/or the revolving credit facility by (i) $135.0 million and (ii) an additional amount so long as we are in pro forma compliance with a consolidated first lien net leverage ratio. Availability of such incremental facilities will be subject to, among other conditions, the absence of an event of default and pro forma compliance with the financial covenants under our credit agreement and the receipt of commitments by existing or additional financial institutions. All of those borrowings would be secured indebtedness and, therefore, effectively senior to the exchange notes and the guarantees of the exchange notes by the guarantors to the extent of the value of the assets securing such debt. See “Description of Other Indebtedness” and “Description of the Notes.”

We may not be able to generate sufficient cash to service all of our indebtedness, including the exchange notes, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the exchange notes. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Summit Materials, LLC—Liquidity and Capital Resources.” If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, seek additional capital, restructure or refinance our indebtedness, including the exchange notes, or sell assets. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The senior secured credit facilities and the indenture governing the exchange notes restrict our ability to use the proceeds from asset sales. We may not be able to consummate those asset sales to raise capital or sell assets

 

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at prices that we believe are fair and proceeds that we do receive may not be adequate to meet any debt service obligations then due. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. See “Description of Other Indebtedness” and “Description of the Notes.”

The exchange notes will not be secured by any of our assets and are effectively subordinated to our secured debt. The senior secured credit facilities are secured and, therefore, the related lenders will have a prior claim on substantially all of our assets and those of our guarantors.

The exchange notes will not be secured by any of our or our guarantors’ assets. The senior secured credit facilities, however, are secured by (i) a perfected security interest in certain stock, other equity interests and promissory notes owned by us and the guarantors and (ii) a perfected security interest in all other tangible and intangible assets (including, without limitation, equipment, contract rights, securities, patents, trademarks, other intellectual property, cash and real estate) owned by us or any of the guarantors, subject to certain limited exceptions. The lenders under the senior secured credit facilities are entitled to accelerate all obligations thereunder if we become insolvent or are liquidated, or if we otherwise default on any of our obligations and agreements under the senior secured credit facilities. If payment under any of the instruments governing our secured debt is accelerated, the lenders under these instruments will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to instruments governing such debt. Accordingly, the lenders under the senior secured credit facilities will have a prior claim on our assets (and those of the guarantors under the senior secured credit facilities). In that event, because the exchange notes will not be secured by any of our or the guarantors’ assets, it is possible that our and the guarantors’ remaining assets might be insufficient to satisfy your claims in full. Any such exercise of the lenders’ remedies under the senior secured credit facilities could impede or preclude our ability to continue to operate as a going concern.

As of December 29, 2012, we had $648.0 million of total consolidated indebtedness (without giving effect to original issue discount on our term loan facility), of which $398.0 million was secured. Under our senior secured credit facilities, we also have available to us an uncommitted incremental loan facility in an amount not to exceed (i) $135.0 million plus (ii) an additional amount so long as we are in pro forma compliance with a consolidated first lien net leverage ratio. All of those borrowings could be secured, and as a result, would be effectively senior to the exchange notes and the guarantees of the exchange notes. We may incur additional secured indebtedness as permitted under our senior secured credit agreement and other existing instruments governing our indebtedness.

We require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.

Our ability to make scheduled payments on, or to refinance our respective obligations under, our indebtedness, including the exchange notes, and to fund planned capital expenditures and other corporate expenses will depend on our future operating performance and on economic, financial, competitive, legislative, regulatory and other factors and any legal and regulatory restrictions on the payment of distributions and dividends to which we may be subject. Many of these factors are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized or that future borrowings will be available to us in an amount sufficient to enable us to satisfy our respective obligations under our indebtedness or to fund our other needs. In order for us to satisfy our obligations under our indebtedness and fund planned capital expenditures, we must continue to execute our business strategy. If we are unable to do so, we may need to reduce or delay our planned capital expenditures or refinance all or a portion of our indebtedness on or before maturity. Significant delays in our planned capital expenditures may materially and adversely affect our future revenue prospects. In addition, we cannot assure you that we will be able to refinance any of our indebtedness, including the exchange notes and our senior secured credit facilities, on commercially reasonable terms or at all.

 

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The indenture governing the exchange notes and the credit agreement governing our senior secured credit facilities restrict our ability and the ability of most of our subsidiaries to engage in some business and financial transactions.

Indenture governing the exchange notes. The indenture governing the exchange notes contain restrictive covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:

 

   

incur additional indebtedness or issue certain preferred shares;

 

   

pay dividends, redeem our stock or make other distributions;

 

   

make investments;

 

   

create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers;

 

   

create liens;

 

   

transfer or sell assets;

 

   

merge or consolidate;

 

   

enter into certain transactions with our affiliates; and

 

   

designate subsidiaries as unrestricted subsidiaries.

Senior secured credit facilities . The credit agreement governing our senior secured credit facilities contains a number of covenants that limit our ability and the ability of our restricted subsidiaries to:

 

   

incur additional indebtedness or guarantees;

 

   

create liens on assets;

 

   

change our fiscal year;

 

   

enter into sale and leaseback transactions;

 

   

engage in mergers or consolidations;

 

   

sell assets;

 

   

incur additional liens;

 

   

sell assets;

 

   

pay dividends and make other restricted payments;

 

   

make investments, loans or advances;

 

   

repay subordinated indebtedness;

 

   

make certain acquisitions;

 

   

engage in certain transactions with affiliates; and

 

   

change our lines of business.

In addition, the senior secured credit facilities require us to maintain a quarterly maximum consolidated first lien net leverage ratio and a quarterly minimum interest coverage ratio.

The credit agreement governing our senior secured credit facilities also contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control). If an event of default occurs, the lenders under our senior secured credit facilities will be entitled to take various actions, including the acceleration of amounts due under our senior secured credit facilities and all actions permitted to be taken by a secured creditor.

 

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Our failure to comply with obligations under the indenture governing the exchange notes and the credit agreement governing our senior secured credit facilities may result in an event of default under the indenture or the credit agreement. A default, if not cured or waived, may permit acceleration of our indebtedness. We cannot be certain that we will have funds available to remedy these defaults. If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay the accelerated indebtedness or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all.

We may not have access to the cash flow and other assets of our subsidiaries that may be needed to make payment on the exchange notes.

Our ability to make payments on the exchange notes is dependent on the earnings and the distribution of funds from our subsidiaries. All of our business is conducted through our subsidiaries. The ability of our subsidiaries to make distributions, dividends or advances to us will depend on their future operating performance and on economic, financial, competitive, legislative, regulatory and other factors and any legal and regulatory restrictions on the payment of distributions and dividends to which they may be subject. Under the terms of the indenture governing the exchange notes and the credit agreement governing our senior secured credit facilities, our subsidiaries will be permitted to incur additional indebtedness that may restrict or prohibit distributions, dividends or loans from those subsidiaries to us. We cannot assure you that the agreements governing the current and future indebtedness of our subsidiaries will permit our subsidiaries to provide us with sufficient dividends, distributions or loans to fund payments on the exchange notes when due.

The exchange notes will be structurally subordinated to the liabilities of our non-guarantor subsidiaries.

Payments on the exchange notes are only required to be made by us and the guarantors. The exchange notes will only be guaranteed by our domestic subsidiaries that guarantee our obligations under the senior secured credit facilities. Accordingly, holders of the exchange notes will be structurally subordinated to the claims of creditors of non-guarantor subsidiaries, including trade creditors. All obligations of our non-guarantor subsidiaries, including trade payables, will have to be satisfied before any of the assets of such subsidiaries would be available for distribution, upon liquidation or otherwise, to us or a guarantor of the exchange notes. The non-guarantor subsidiaries will be permitted to incur additional debt in the future under the indenture governing the exchange notes.

Additional debt could reduce our ability to satisfy our obligations under the exchange notes.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing the exchange notes do not fully prohibit us or our subsidiaries from doing so, and the credit agreement governing our senior secured credit facilities permit additional borrowing.

Such debt may be secured; if that is the case, then your rights to receive payments on the exchange notes would effectively be junior to the holders of such new debt. Also, if we incur any additional indebtedness that ranks equally with the exchange notes, the holders of that debt will be entitled to share ratably with the holders of the exchange notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of the Company. This may have the effect of reducing the amount of proceeds ultimately paid to you. If new debt is added to our current debt levels, the related risks that we and our subsidiaries now face, as described further herein, could intensify and we may not be able to meet all our debt obligations, including the repayment of the exchange notes.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the exchange notes.

Any default under the agreements governing our indebtedness, including a default under the credit agreement governing our senior secured credit facilities that is not waived by the required lenders, and the

 

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remedies sought by the lenders could prevent us from paying principal, premium, if any, and interest on the exchange notes and substantially decrease the market value of the exchange notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, including covenants in the credit agreement governing our senior secured credit facilities, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness may be able to cause all of our available cash flow to be used to pay such indebtedness and, in any event could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest; the lenders under our senior secured credit facilities could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets and we could be forced into bankruptcy or liquidation. Upon any such bankruptcy filing, we would be stayed from making any ongoing payments on the exchange notes, and the holders of the exchange notes would not be entitled to receive post-petition interest or applicable fees, costs or charges, or any “adequate protection” under Title 11 of the United States Code (the “Bankruptcy Code”). Furthermore, if a bankruptcy case were to be commenced under the Bankruptcy Code, we could be subject to claims, with respect to any payments made within 90 days prior to commencement of such a case, that we were insolvent at the time any such payments were made and that all or a portion of such payments, which could include repayments of amounts due under the exchange notes, might be deemed to constitute a preference, under the Bankruptcy Code, and that such payments should be voided by the bankruptcy court and recovered from the recipients for the benefit of the entire bankruptcy estate. Also, in the event that we were to become a debtor in, a bankruptcy case seeking reorganization or other relief under the Bankruptcy Code, a delay and/or substantial reduction in payments under the exchange notes may otherwise occur. If our operating performance declines, we may in the future need to obtain waivers from the required lenders under our senior secured credit facilities to avoid being in default. If we breach our covenants under our senior secured credit facilities and seek a waiver, we may not be able to obtain a waiver from the required lenders and holders. If this occurs, we would be in default under the credit agreement governing our senior secured credit facilities, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation. See “Description of Other Indebtedness” and “Description of the Notes.”

We may not be able to repurchase the exchange notes upon a change of control.

Upon the occurrence of specific kinds of change of control events, we will be required to offer to repurchase all outstanding notes at 101% of their principal amount plus accrued and unpaid interest, unless such notes have been previously called for redemption. The source of funds for any such purchase of the exchange notes will be our available cash or cash generated from our subsidiaries’ operations or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the exchange notes upon a change of control because we may not have sufficient financial resources to purchase all of the exchange notes that are tendered upon a change of control. Further, we will be contractually restricted under the terms of the credit agreement governing our senior secured credit facilities from repurchasing all of the exchange notes tendered by holders upon a change of control. Accordingly, we may not be able to satisfy our obligations to purchase the exchange notes unless we are able to refinance or obtain waivers under the credit agreement governing our senior secured credit facilities. Our failure to repurchase the exchange notes upon a change of control would cause a default under the indenture governing the exchange notes and a cross default under the credit agreement governing our senior secured credit facilities. See “Description of the Notes—Repurchase at the Option of Holders—Change of Control.” The credit agreement governing our senior secured credit facilities also provides that a change of control will be a default that permits lenders to accelerate the maturity of borrowings thereunder. Any of our future debt agreements may contain similar provisions.

Courts interpreting change of control provisions under New York law (which is the governing law of the indenture governing the exchange notes) have not provided clear and consistent meanings of such change of control provisions which leads to subjective judicial interpretation. In addition, a court case in Delaware has questioned whether a change of control provision contained in an indenture could be unenforceable on public

 

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policy grounds. No assurances can be given that another court would enforce the change of control provisions in the indenture governing the exchange notes as written for the benefit of the holders, or as to how these change of control provisions would be impacted were we to become a debtor in a bankruptcy case.

Federal and state fraudulent transfer laws may permit a court to void the exchange notes and the guarantees, subordinate claims in respect of the exchange notes and the guarantees and require noteholders to return payments received and, if that occurs, you may not receive any payments on the exchange notes.

Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the exchange notes and the incurrence of any guarantees of the exchange notes, including the guarantee by the guarantors entered into upon issuance of the exchange notes and subsidiary guarantees (if any) that may be entered into thereafter under the terms of the indenture governing the exchange notes. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the exchange notes or guarantees could be voided as a fraudulent transfer or conveyance if (i) the Issuers or any of the guarantors, as applicable, issued the exchange notes or incurred the guarantees with the intent of hindering, delaying or defrauding creditors or (ii) the Issuers or any of the guarantors, as applicable, received less than reasonably equivalent value or fair consideration in return for either issuing the exchange notes or incurring the guarantees and, in the case of (ii) only, one of the following is also true at the time thereof:

 

   

the Issuers or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the exchange notes or the incurrence of the guarantees;

 

   

the issuance of the exchange notes or the incurrence of the guarantees left the Issuers or any of the guarantors, as applicable, with an unreasonably small amount of capital to carry on the business;

 

   

the Issuers or any of the guarantors intended to, or believed that the Issuers or such guarantor would, incur debts beyond the Issuers’ or such guarantor’s ability to pay such debts as they mature; or

 

   

the Issuers or any of the guarantors were a defendant in an action for money damages, or had a judgment for money damages docketed against it or such guarantor if, in either case, after final judgment, the judgment is unsatisfied.

A court would likely find that we or a guarantor did not receive reasonably equivalent value or fair consideration for the exchange notes or such guarantee if we or such guarantor did not substantially benefit directly or indirectly from the issuance of the exchange notes or the applicable guarantee. As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied. A debtor will generally not be considered to have received value in connection with a debt offering if the debtor uses the proceeds of that offering to make a dividend payment or otherwise retire or redeem equity securities issued by the debtor.

We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were solvent at the relevant time or, regardless of the standard that a court uses, that the issuance of the guarantees would not be further subordinated to our or any of our guarantors’ other debt. Generally, however, an entity would be considered insolvent if, at the time it incurred indebtedness:

 

   

the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all its assets;

 

   

the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

 

   

it could not pay its debts as they become due.

If a court were to find that the issuance of the exchange notes or the incurrence of the guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under the exchange notes or such guarantee or further subordinate the exchange notes or such guarantee to our or the related guarantors’ presently

 

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existing and future indebtedness, or require the holders of the exchange notes to repay any amounts received with respect to such guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the exchange notes or such guarantee, as applicable. Sufficient funds to repay the exchange notes may not be available from other sources, including any remaining guarantor, if any. In addition, the court might direct you to repay any amounts that you already received from us or the guarantor. Further, the voidance of the exchange notes could result in an event of default with respect to the Issuers’ and their subsidiaries’ other debt that could result in acceleration of such debt.

If the guarantees were legally challenged, any guarantee could also be subject to the claim that, since the guarantee was incurred for the Issuers’ benefit, and only indirectly for the benefit of the applicable guarantor, the obligations of the applicable guarantor were incurred for less than fair consideration. A court could thus void the obligations under the guarantees, subordinate them to the applicable guarantor’s other debt or take other action detrimental to the holders of the exchange notes.

Although each guarantee entered into by a subsidiary will contain a provision intended to limit that guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer, this provision may not be effective to protect those guarantees from being voided under fraudulent transfer law, or may reduce that guarantor’s obligation to an amount that effectively makes its guarantee worthless. In a recent Florida bankruptcy case, this kind of provision was found to be ineffective to prohibit the guarantees.

In addition, any payment by us pursuant to the exchange notes made at a time we were found to be insolvent could be voided and required to be returned to us or to a fund for the benefit of our creditors if such payment is made to an insider within a one-year period prior to a bankruptcy filing or within 90 days for any outside party and such payment would give such insider or outsider party more than such creditors would have received in a distribution under the Bankruptcy Code.

Finally, as a court of equity, the bankruptcy court may otherwise subordinate the claims in respect of the exchange notes to other claims against us under the principle of equitable subordination, if the court determines that: (i) the holder of the exchange notes engaged in some type of inequitable conduct; (ii) such inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holder of the exchange notes; and (iii) equitable subordination is not inconsistent with the provisions of the Bankruptcy Code.

Many of the covenants in the indenture that govern the exchange notes will not apply during any period in which the exchange notes are rated investment grade by both Moody’s and Standard & Poor’s.

Many of the covenants in the indenture that govern the exchange notes will not apply to us during any period in which the exchange notes are rated investment grade by both Moody’s Investors Service, Inc., or “Moody’s,” and Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or “S&P,” provided at such time no default or event of default has occurred and is continuing. These covenants restrict among other things, our ability to pay distributions, incur debt and to enter into certain other transactions. There can be no assurance that the exchange notes will ever be rated investment grade, or that if they are rated investment grade, that the exchange notes will maintain these ratings. However, suspension of these covenants would allow us to incur debt, pay dividends and make other distributions and engage in certain other transactions that would not be permitted while these covenants were in force. To the extent the covenants are subsequently reinstated, any such actions taken while the covenants were suspended would not result in an event of default under the indenture that governs the exchange notes. See “Description of the Notes—Certain Covenants.”

A downgrade, suspension or withdrawal of the rating assigned by a rating agency to our company or the exchange notes, if any, could cause the liquidity or market value of the exchange notes to decline.

The exchange notes have been rated by nationally recognized rating agencies and may in the future be rated by additional rating agencies. We cannot assure you that any rating assigned will remain for any given period of

 

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time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, circumstances relating to the basis of the rating, such as adverse changes in our business, so warrant. Any downgrade, suspension or withdrawal of a rating by a rating agency (or any anticipated downgrade, suspension or withdrawal) could reduce the liquidity or market value of the exchange notes. Any future lowering of our ratings may make it more difficult or more expensive for us to obtain additional debt financing. If any credit rating initially assigned to the exchange notes is subsequently lowered or withdrawn for any reason, you may lose some or all of the value of your investment.

The exchange notes are subject to prior claims of any secured creditors and the creditors of our subsidiaries, and if a default occurs we may not have sufficient funds to fulfill our obligations under the exchange notes.

The exchange notes are our unsecured general obligations, ranking equally with our other senior unsecured indebtedness but below any secured indebtedness and effectively below the debt and other liabilities of our subsidiaries. The indenture governing the exchange notes permits us and our subsidiaries to incur secured debt under specified circumstances. If we incur any secured debt, our assets and the assets of our subsidiaries will be subject to prior claims by our secured creditors. In the event of our bankruptcy, liquidation, reorganization, dissolution or other winding up, assets that secure debt will be available to pay obligations on the exchange notes only after all debt secured by those assets has been repaid in full. Holders of the exchange notes will participate in our remaining assets ratably with all of our unsecured and unsubordinated creditors, including our trade creditors.

If we incur any additional obligations that rank equally with the exchange notes, including trade payables, the holders of those obligations will be entitled to share ratably with the holders of the exchange notes in any proceeds distributed upon our bankruptcy, liquidation, reorganization, dissolution or other winding up. This may have the effect of reducing the amount of proceeds paid to you. If there are not sufficient assets remaining to pay all these creditors, all or a portion of the exchange notes then outstanding would remain unpaid.

Risks Related to Our Business and Our Industry

Our business depends on activity within the construction industry and the strength of the local economies in which we operate.

We sell most of our construction materials and provide all of our highway construction services to the construction industry, so our results depend on the strength of the construction industry. Demand for our products, particularly in the non-residential and residential construction markets, could remain weak and decline if companies and consumers cannot obtain credit for construction projects or if the slow pace of economic activity results in delays or cancellations of capital projects. In addition, state and federal budget issues may continue to hurt the funding available for infrastructure spending, particularly highway construction, which constitutes a significant portion of our business.

Our earnings depend on the strength of the local economies in which we operate because of the high cost to transport our products relative to their price. Many states have reduced their construction spending due to budget shortfalls resulting from lower tax revenues as well as uncertainty relating to long-term federal highway funding. As a result, there has been a reduction in many states’ investment in infrastructure spending. If economic and construction activity diminish in one or more areas, particularly in our top revenue-generating markets of Texas, Kansas, Kentucky, Missouri and Utah, our business and results of operations may be materially adversely affected and there is no assurance that reduced levels of construction activity will not continue to affect our business in the future.

The success of our business depends, in part, on our ability to execute on our acquisition strategy, the successful integration of acquisitions and the retention of key employees of our acquired businesses.

A significant portion of our historical growth has occurred through acquisitions and we will likely enter into acquisitions in the future. We have evaluated and expect to continue to evaluate possible acquisition transactions

 

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on an ongoing basis. At any time we may be engaged in discussions or negotiations with respect to several possible acquisitions. From time to time we enter into letters of intent to allow us to conduct due diligence on a confidential basis. Currently, we are in preliminary discussions with several potential acquisition targets. There can be no assurance that we will enter into definitive agreements with respect to such transactions or that they will be completed. Our growth has placed, and will continue to place, significant demands on our management and operational and financial resources. Acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect.

Our interest expense will increase in connection with acquisitions as a result of the assumption or incurrence of debt and contingent liabilities and to the extent we finance such acquisitions with drawdowns from our revolving credit facility. We may become liable for certain liabilities of any acquired business, whether or not known to us. These risks could include, among others, tax liabilities, product liabilities, environmental liabilities and liabilities for employment practices, and they could be significant.

Acquisitions may require integration of the acquired companies’ sales and marketing, distribution, engineering, purchasing, finance and administrative organizations. We may not be able to integrate successfully any business we acquire or acquired into our existing business and any acquired businesses may not be profitable or as profitable as we had expected. The successful integration of our acquisitions may also require substantial attention from our senior management and the management of the acquired business, which could decrease the time that they have to service and attract customers and develop new products and services. In addition, we may not effectively utilize new equipment that we acquire through acquisitions or otherwise at utilization and rental rates consistent with that of our existing equipment. Furthermore, the complete integration of companies we acquire depends, to a certain extent, on the full implementation of our financial systems and policies. Moreover, because we may actively pursue a number of opportunities simultaneously, we may encounter unforeseen expenses, complications and delays, including difficulties in employing sufficient staff and maintaining operational and management oversight. Our inability to complete the integration of new businesses in a timely and orderly manner could increase costs and lower profits.

We cannot assure you that we will achieve the cost savings and synergies identified in this prospectus or that we will achieve synergies and cost savings in connection with future acquisitions. In addition, many of the businesses that we have acquired and will acquire have unaudited financial statements that have been prepared by the management of such companies and have not been independently reviewed or audited. We cannot assure you that the financial statements of companies we have acquired or will acquire would not be materially different if such statements were audited. Finally, we cannot assure you that we will continue to acquire businesses at valuations consistent with our prior acquisitions or that we will complete future acquisitions at all.

Our business is cyclical and requires significant working capital to fund operations.

Our business is cyclical and requires that we maintain significant working capital to fund our operations. Our ability to generate sufficient cash flow depends on future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. If we are unable to generate sufficient cash to operate our business and service our outstanding debt and other obligations, we may be required, among other things, to further reduce or delay planned capital or operating expenditures, sell assets or take other measures, including the restructuring of all or a portion of our debt, which may only be available, if at all, on unsatisfactory terms.

A decline in public sector construction and reductions in governmental funding could adversely affect our operations and results.

A significant portion of our revenues are generated from publicly funded construction projects. As a result, if publicly funded construction continues to remain low due to reduced federal or state funding or otherwise, our earnings and cash flows will be negatively affected.

 

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The current federal funding program, MAP-21, was enacted in July 2012 and took effect in October 2012. MAP-21 is a 27-month, approximately $105 billion transportation funding program that provides for $40.4 billion and $41.0 billion for highway infrastructure investments in fiscal years 2013 and 2014, respectively. Additionally, in January 2011, the House passed a new rules package that repealed transportation law dating back to 1998, which protected annual funding levels from amendments that could reduce such funding. This rule change subjects funding for highways to yearly appropriation reviews. The change in the funding mechanism increases the uncertainty of many state departments of transportation regarding funds for highway projects. This uncertainty could result in states being reluctant to undertake large multi-year highway projects which could, in turn, negatively affect our sales.

As a result of the foregoing and other factors, we cannot be assured of the existence, amount and timing of appropriations for spending on federal, state or local projects. The federal support for the cost of highway maintenance and construction is dependent on congressional action. In addition, each state funds its infrastructure spending from specially allocated amounts collected from various taxes, typically gasoline taxes and vehicle fees, along with voter-approved bond programs. Shortages in state tax revenues can reduce the amounts spent on state infrastructure projects, even below amounts awarded under legislative bills. Nearly all states are now experiencing state-level funding pressures caused by lower tax revenues and an inability to finance approved projects. Delays or cancellations of state infrastructure spending have in the past, and we anticipate in the immediate future will continue to hurt our business because a significant portion of our business is dependent on state infrastructure spending.

Our business relies on private investment in infrastructure and a slower than normal recovery will adversely affect our results.

A portion of our sales are for projects with non-public owners. Construction spending is affected by developers’ ability to finance projects. The current credit environment has negatively affected the U.S. economy and demand for our products. Non-residential and residential construction could continue to decline if companies and consumers are unable to finance construction projects or if the economic slowdown continues to cause delays or cancellations of capital projects. If housing starts and non-residential projects do not begin to rise steadily with the slow economic recovery as they normally do when recessions end, our construction materials and contracting services sales may fall further and our business and results of operations may be materially adversely affected.

A decline in the funding of transportation authorities and other state agencies could adversely affect our operations and results.

A significant portion of our revenues, both through direct and indirect sales, are generated from public sources such as departments of transportation and other state agencies. The spending of these agencies is governed by an annual budget which is approved by the relevant state. To the extent that any of these entities significantly decreases its annual budget, our revenues could be adversely affected.

Difficult and volatile conditions in the credit markets could affect our financial position, results of operations and cash flows.

Demand for our products is primarily dependent on the overall health of the economy, and federal, state and local public funding levels. The stagnant, and at times declining, economy continues to put pressure on the demand for our construction materials and increases competition and aggressive pricing for private and public sector projects as companies migrate from bidding on scarce private sector work to projects in the public sector. In addition, a stagnant or declining economy tends to produce less tax revenue for public agencies, thereby decreasing a source of funds available for spending on public infrastructure improvements, which constitute a substantial part of our business.

With the slow pace of economic recovery, there is also a likelihood that we will not be able to collect on certain of our accounts receivable from our customers, many of which are still struggling. Although we are

 

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protected in part by payment bonds posted by some of our customers, we have in the past experienced payment delays from some of our customers during this economic downturn. Although such delays have not had a material impact on our business, there can be no assurance that this will be the case in the future.

We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our senior secured credit facilities or from other sources in an amount sufficient to pay our debt or to fund our other liquidity needs. If we are unable to generate sufficient cash flow to meet our debt service requirements, we may have to renegotiate the terms of our senior secured credit facilities or obtain additional financing. We cannot assure you that we will be able to refinance any of our debt or obtain additional financing on commercially reasonable terms or at all. If we were unable to meet our debt service requirements or obtain new financing under these circumstances, we would have to consider other options, such as the sales of certain assets, sales of equity, and negotiations with our lenders to restructure our debt. The terms of our then existing indebtedness may restrict, or market or business conditions may limit, our ability to do any or all of these things.

If we are unable to accurately estimate the overall risks, requirements or costs when we bid on or negotiate a contract that is ultimately awarded to us, we may achieve a lower than anticipated profit or incur a loss on the contract.

Even though the majority of our governmental contracts contain certain raw material escalators to protect us from certain price increases, a portion of the contracts are on a fixed cost basis. The fixed cost basis portion of these contracts require us to perform the contract for a fixed unit price based on approved quantities irrespective of our actual costs and lump sum contracts require that the total amount of work be performed for a single price irrespective of our actual costs. We realize a profit on our contracts only if: (i) we successfully estimate our costs and then successfully control actual costs and avoid cost overruns and (ii) our revenues exceed actual costs. If our cost estimates for a contract are inaccurate, or if we do not execute the contract within our cost estimates, then cost overruns may cause us to incur losses or cause the contract not to be as profitable as we expected. The final results under these types of contracts could negatively affect our cash flow, earnings and financial position. The costs incurred and gross profit realized, if any, on our contracts can vary, sometimes substantially, from our original projections due to a variety of factors, including, but not limited to:

 

   

failure to include materials or work in a bid, or the failure to estimate properly the quantities or costs needed to complete a lump sum contract;

 

   

delays caused by weather conditions;

 

   

contract or project modifications creating unanticipated costs not covered by change orders;

 

   

changes in availability, proximity and costs of materials, including liquid asphalt, cement, aggregates and other construction materials (such as stone, gravel, sand and oil for asphalt paving), as well as fuel and lubricants for our equipment;

 

   

to the extent not covered by contractual cost escalators, variability and inability to predict the costs of purchasing diesel, liquid asphalt and cement;

 

   

availability and skill level of workers;

 

   

failure by our suppliers, subcontractors, designers, engineers or customers to perform their obligations;

 

   

fraud, theft or other improper activities by our suppliers, subcontractors, designers, engineers, customers or our own personnel;

 

   

mechanical problems with our machinery or equipment;

 

   

citations issued by any governmental authority, including the Occupational Safety and Health Administration and Mine Safety and Health Administration;

 

   

difficulties in obtaining required governmental permits or approvals;

 

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changes in applicable laws and regulations; and

 

   

uninsured claims or demands from third parties for alleged damages arising from the design, construction or use and operation of a project of which our work is part.

Public sector customers may seek to impose contractual risk-shifting provisions more aggressively, and we could face increased risks, which may adversely affect our cash flow, earnings and financial position.

Weather can materially affect our business and we are subject to seasonality.

Nearly all of the products used by us, and by our customers, in the public or private construction industry are used outdoors. In addition, our highway operations and production and distribution facilities are located outdoors. Therefore, seasonal changes and other weather-related conditions can adversely affect our business and operations through a decline in both the use of our products and demand for our services.

Adverse weather conditions such as extended rainy and cold weather in the spring and fall can reduce demand for our products by contractors and reduce sales or render our contracting operations less efficient. Occasionally, major weather events such as hurricanes, tropical storms and heavy snows with quick rainy melts adversely affect sales in the short term.

The construction materials business production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall. Warmer and drier weather during the second and third quarters of our fiscal year typically result in higher activity and revenue levels during those quarters. The first quarter of our fiscal year has typically lower levels of activity due to the weather conditions. Our second quarter varies greatly with the spring rains and wide temperature variations. A cool wet spring increases drying time on projects, possibly delaying sales until the second quarter, while a warm dry spring may enable earlier project startup.

Within our local markets, we operate in a highly competitive industry.

The U.S. construction aggregates industry is highly fragmented with a large number of independent local producers in a number of our markets. Additionally, in most markets, we also compete against large private and public companies, some of which are as vertically-integrated as we are. Therefore, there is intense competition in a number of the markets in which we operate. This significant competition could lead to lower prices, lower sales volumes and higher costs in some markets, negatively affecting our results of operations and liquidity.

Our long-term success is dependent upon securing and permitting aggregate reserves in strategically located areas. If we are unable to secure and permit such reserves, it could negatively affect our earnings in the future.

Construction aggregates are bulky and heavy and, therefore, difficult to transport efficiently. Because of the nature of the products, the freight costs can quickly surpass the production costs. Therefore, except for geographic regions that do not possess commercially viable deposits of aggregates and are served by rail, barge or ship, the markets for our products tend to be very localized around our quarry sites and are served by truck. New quarry sites often take a number of years to develop, therefore our strategic planning and new site development must stay ahead of actual growth. Additionally, in a number of urban and suburban areas in which we operate, it is increasingly difficult to permit new sites or expand existing sites due to community resistance. Therefore, our future success is dependent, in part, on our ability to accurately forecast future areas of high growth in order to locate optimal facility sites and on our ability to either acquire existing quarries or secure operating and environmental permits to open new quarries. If we are unable to accurately forecast areas of future growth, acquire existing quarries or secure the necessary permits to open new quarries, our financial condition, results of operations and liquidity may be materially adversely affected.

 

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Our future growth may depend in part on acquiring other businesses in our industry and successfully integrating them with our existing operations.

In the past, we have made acquisitions to strengthen our existing locations, expand our operations, grow our reserves and grow our market share. We expect to continue to make selective acquisitions in contiguous locations and geographic markets or other business arrangements we believe will help our company. However, the success of our acquisition program will depend on our ability to find and buy other attractive businesses at a reasonable price, the availability of financing and our ability to successfully integrate acquired businesses into our existing operations. We cannot assure you that there will be attractive acquisition opportunities at reasonable prices, that financing will be available or that we can successfully integrate such acquired businesses into our existing operations. In addition, our results of operations from these acquisitions could in the future result in impairment charges for any of our intangible assets, goodwill or other long-lived assets.

If we fail to develop or maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results.

We have completed numerous acquisitions in the past few years and plan to continue to pursue growth through strategic acquisitions. Among the risks associated with acquisitions are the risks of control deficiencies that result from the integration of the acquired businesses.

In conjunction with the preparation of our consolidated financial statements for the year ended December 31, 2011, we identified significant deficiencies in our internal controls over financial reporting related to the preparation and review of guarantor financial statements and purchase accounting processes.

Although we believe we have remediated these control deficiencies and strengthened our internal controls over financial reporting, specifically by increasing our accounting personnel, supplementing our financial expertise with outside resources and conducting training regarding U.S. generally accepted accounting principles (“GAAP”) accounting and reporting matters during fiscal 2011 and 2012, there may still be material weaknesses or significant deficiencies in our internal controls in the future and the cost of remediating any such weaknesses or deficiencies could be significant.

If our remediation efforts are insufficient to address control deficiencies, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and, as a result, our consolidated financial statements may contain material misstatements or omissions and we could be required to restate our financial results.

Our industry is capital intensive and portions of our business have significant fixed and semi-fixed costs. Therefore, our earnings are sensitive to changes in volume.

The property and machinery needed to produce our products can be very expensive. Therefore, we need to spend a substantial amount of money to purchase and maintain the equipment necessary to operate our business. Although we believe that our current cash balance, along with our projected internal cash flows and our available financing resources, will be enough to give us the cash we need to support our currently anticipated operating and capital needs, if we are unable to generate sufficient cash to purchase and maintain the property and machinery necessary to operate our business, we may be required to reduce or delay planned capital expenditures or incur additional debt. In addition, given the level of fixed and semi-fixed costs within our business, particularly at our cement production facility, both our dollar profits and our profits as a percentage of net sales (margin) can be negatively affected by decreases in volume.

Our failure to meet schedule or performance requirements of our contracts could adversely affect us.

In most cases, our contracts require completion by a scheduled acceptance date. Failure to meet any such schedule could result in additional costs, penalties or liquidated damages being assessed against us, and these

 

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could exceed projected profit margins on the contract. Performance problems on existing and future contracts could cause actual results of operations to differ materially from those anticipated by us and could cause us to suffer damage to our reputation within the industry and among our customers, which may have a material adverse effect on our financial condition, results of operations and liquidity.

Environmental, health and safety laws and any changes to such laws may have a material adverse effect on our business, financial condition and results of operations.

We are subject to a variety of environmental, health and safety laws, and the cost of complying and other liabilities associated with such laws may have a material adverse effect on our business, financial condition and results of operations.

We are subject to a variety of federal, state and local environmental laws and regulations relating to: (i) the release or discharge of materials into the environment; (ii) the management, use, processing, handling, storage, transport or disposal of hazardous materials, including the management of hazardous waste used as a fuel substitute at our cement kiln in Hannibal, Missouri; and (iii) the protection of public and employee health, safety and the environment. These laws and regulations expose us to liability for the environmental condition of our current or formerly owned or operated facilities, and may expose us to liability for the conduct of others or for our actions that complied with all applicable laws at the time these actions were taken. In particular, we may incur remediation costs and other related expenses because our facilities were constructed and operated before the adoption of current environmental laws and the institution of compliance practices and because certain of our processes are regulated. These laws and regulations may also expose us to liability for claims of personal injury or property or natural resource damage related to alleged exposure to regulated materials. The existence of contamination at properties we own, lease or operate could also result in increased operational costs or restrictions on our ability to use those properties as intended, including for purposes of mining.

Despite our compliance efforts, there is the inherent risk of liability in the operation of our business, especially from an environmental standpoint. These potential liabilities could have an adverse impact on our operations and profitability. In many instances, we must have government approvals and certificates, permits or licenses in order to conduct our business, which often require us to make significant capital and maintenance expenditures to comply with zoning and environmental laws and regulations. Our failure to maintain required certificates, permits or licenses or to comply with applicable governmental requirements could result in substantial fines or possible revocation of our authority to conduct some of our operations. Governmental requirements that impact our operations also include those relating to air quality, waste management, water quality, mine reclamation, the operation of municipal waste and construction and demolition debris landfills, remediation of contaminated sites and worker health and safety. These requirements are complex and subject to frequent change. They impose strict liability in some cases without regard to negligence or fault and expose us to liability for the conduct of, or conditions caused by, others, or for our acts that may otherwise have complied with all applicable requirements when we performed them. Stricter laws and regulations, more stringent interpretations of existing laws or regulations or the future discovery of environmental conditions may impose new liabilities on us, reduce operating hours, require additional investment by us in pollution control equipment or impede our opening new or expanding existing plants or facilities.

Changes in legal requirements and governmental policies concerning zoning, land use, environmental and other areas of the law impact our business.

Our operations are affected by numerous federal, state and local laws and regulations related to zoning, land use and environmental matters. Despite our compliance efforts, we have an inherent risk of liability in the operation of our business, especially from an environmental standpoint. These potential liabilities could have an adverse impact on our operations and profitability. In addition, our operations require numerous governmental approvals and permits, which often require us to make significant capital and maintenance expenditures to comply with zoning and environmental laws and regulations. Stricter laws and regulations, or more stringent

 

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interpretations of existing laws or regulations, may impose new liabilities on us, reduce operating hours, require additional investment by us in pollution control equipment, or impede our opening new or expanding existing plants or facilities.

Climate change and climate change legislation or regulations may adversely impact our business.

A number of governmental bodies have introduced or are contemplating legislative and regulatory change in response to the potential impacts of climate change. Such legislation or regulation, if enacted, potentially could include provisions for a “cap and trade” system of allowances and credits, among other provisions. The EPA promulgated a mandatory reporting rule covering greenhouse gas emissions from sources considered to be large emitters. The EPA has also promulgated a greenhouse gas emissions permitting rule, referred to as the “Tailoring Rule” which requires permitting of newly constructed or significantly modified large emitters of greenhouse gases under the Federal Clean Air Act. Our Continental Cement plant and Hamm landfill each hold EPA Title V Permits and could be impacted by the Tailoring Rule. The effects on our operations and potential costs are uncertain at this time. Under the Tailoring Rule, existing permits may require changes which could require significant additional costs if there are future substantial modifications to either of these facilities that cause greenhouse gas emissions to be increased by the equivalent of 75,000 tons or more of carbon dioxide in a single year.

Other potential impacts of climate change include physical impacts such as disruption in production and product distribution due to impacts from major storm events and shifts in regional weather patterns and intensities. There is also a potential for climate change legislation and regulation to adversely impact the cost of purchased energy and electricity.

The impacts of climate change on our operations and the company overall are highly uncertain and difficult to estimate. However, because a chemical reaction inherent to the manufacture of Portland cement releases carbon dioxide, a greenhouse gas, cement kiln operations may be disproportionately impacted by future regulation of greenhouse gas emissions. Climate change and legislation and regulation concerning greenhouse gases could have a material adverse effect on our financial condition, results of operations and liquidity.

We depend on our senior management and we may be materially harmed if we lose any member of our senior management.

We are dependent upon the services of our senior management, especially CEO Tom Hill. The loss of key management personnel or our inability to attract and retain qualified management personnel could have a material adverse effect on us. A decision by any of these individuals to leave us, to compete against us or to reduce his involvement could have a material adverse effect on our financial condition, results of operations and liquidity.

We may not be able to grow our business effectively or successfully implement our growth plans if we are unable to recruit additional management and other personnel.

Our ability to continue to grow our business effectively and successfully implement our growth strategy is partially dependent upon our ability to attract and retain qualified management employees and other key employees. We believe there is a limited number of qualified people in our business and the industry in which we compete. As such, there can be no assurance that we will be able to identify and retain the key personnel that may be necessary to grow our business effectively or successfully implement our growth strategy. Our inability to attract and retain talented personnel could limit our ability to grow our business.

Labor disputes could disrupt operations of our businesses.

As of December 29, 2012, labor unions represent approximately 5% of our total hourly employees and 0.1% of our full time salaried employees. Our collective bargaining agreements for employees generally expire

 

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between 2013 and 2015. Although we have good relations with our employees and unions, disputes with our trade unions, or the inability to renew our labor agreements, could lead to strikes or other actions that could disrupt our business, raise costs, and reduce revenues and earnings from the affected locations.

Our operations are subject to special hazards that may cause personal injury or property damage, subjecting us to liabilities and possible losses which may not be covered by insurance.

Operating hazards inherent in our business can cause personal injury and loss of life, damage to or destruction of property, plant and equipment and environmental damage. We maintain insurance coverage in amounts and against the risks we believe are consistent with industry practice, but this insurance may not be adequate or available to cover all losses or liabilities we may incur in our operations. Our insurance policies are subject to varying levels of deductibles. Losses up to our deductible amounts are accrued based upon our estimates of the ultimate liability for claims incurred and an estimate of claims incurred but not reported. However, liabilities subject to insurance are difficult to assess and estimate due to unknown factors, including the severity of an injury, the determination of our liability in proportion to other parties, the number of incidents not reported and the effectiveness of our safety programs. If we were to experience insurance claims or costs above our estimates, we might also be required to use working capital to satisfy these claims rather than using working capital to maintain or expand our operations.

Unexpected factors affecting self-insurance claims and reserve estimates could adversely affect our business.

We use a combination of third-party insurance and self-insurance to provide for potential liabilities for workers’ compensation, general liability, vehicle accident, property and medical benefit claims. Although we believe we have minimized our exposure on individual claims, for the benefit of costs savings we have accepted the risk of a large amount of independent multiple material claims arising, which could have a significant impact on our earnings. We are liable for up to $500,000 per year per member for health claims. Our workers’ compensation and auto liability insurance has a $150,000 per occurrence deductible and our general liability per occurrence deductible is $100,000. Our property and excess property coverage carries a $200.0 million blanket annual limit, subject to a $50,000 deductible. Our general liability policy has a $1.0 million limit per occurrence and our auto liability policy has a $3.0 million combined single limit. We have umbrella insurance in the amount of $25.0 million to cover excess claims.

We estimate the liabilities associated with the risks retained by us, in part, by considering historical claims experience, demographic and severity factors and other actuarial assumptions which, by their nature, are subject to a high degree of variability. Any projection of losses concerning workers’ compensation and general liability is subject to a high degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, discount rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns.

We may incur material costs and losses as a result of claims that our products do not meet regulatory requirements or contractual specifications.

We provide to our customers specified product designs that meet building code or other regulatory requirements and contractual specifications for measurements such as durability, compressive strength, weight-bearing capacity and other characteristics. If we fail or are unable to provide products meeting these requirements and specifications, material claims may arise against us and our reputation could be damaged. Additionally, if a significant uninsured, non-indemnified or product-related claim is resolved against us in the future, that resolution may have a material adverse effect on our financial condition, results of operations and liquidity.

 

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The cancellation of significant contracts or our disqualification from bidding for new contracts could reduce revenues and have a material adverse effect on our results of operations.

Contracts that we enter into with governmental entities can usually be canceled at any time by them with payment only for the work already completed. In addition, we could be prohibited from bidding on certain governmental contracts if we fail to maintain qualifications required by those entities. A cancellation of an unfinished contract or our disqualification from the bidding process could cause our equipment to be idled for a significant period of time until other comparable work became available, which could have a material adverse effect on our financial condition, results of operations and liquidity.

We use large amounts of electricity, diesel fuel, liquid asphalt and other petroleum-based resources that are subject to potential supply constraints and significant price fluctuation, which could affect our operating results and profitability.

In our production and distribution processes, we consume significant amounts of electricity, diesel fuel, liquid asphalt and other petroleum-based resources. The availability and pricing of these resources are subject to market forces that are beyond our control. Our suppliers contract separately for the purchase of such resources and our sources of supply could be interrupted should our suppliers not be able to obtain these materials due to higher demand or other factors that interrupt their availability. Variability in the supply and prices of these resources could materially affect our results of operations from period to period and rising costs could erode our profitability.

Affiliates of the Sponsors indirectly own the substantial majority of the equity interests in us and may have conflicts of interest with us or the holders of the exchange notes in the future.

The Sponsors indirectly own a substantial majority of our equity interests. As a result, affiliates of the Sponsors will have control over our decisions to enter into any corporate transaction and will have the ability to prevent any transaction that requires the approval of equity holders regardless of whether holders of the exchange notes believe that any such transactions are in their own best interests. For example, affiliates of the Sponsors could collectively cause us to make acquisitions that increase the amount of our indebtedness or to sell assets, or could cause us to issue additional capital stock or declare dividends. So long as the Sponsors continue to indirectly own a significant amount of our outstanding equity interests, affiliates of the Sponsors will continue to be able to strongly influence or effectively control our decisions.

The indenture governing the exchange notes and the credit agreement governing our senior secured credit facilities permit us to pay advisory and other fees, dividends and make other restricted payments to the Sponsors under certain circumstances and the Sponsors or their respective affiliates may have an interest in our doing so. In addition, the Sponsors have no obligation to provide us with any additional debt or equity financing.

Additionally, the Sponsors are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us or that supply us with goods and services. The Sponsors may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. The holders of the exchange notes should consider that the interests of the Sponsors may differ from their interests in material respects. See “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Certain Relationships and Related Party Transactions.”

As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. We will remain an “emerging growth company” until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion or

 

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more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement; (iii) the date on which we have, during the previous three year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed a “large accelerated issuer” as defined under the federal securities laws.

For so long as we remain an “emerging growth company,” we will not be required to, among other things:

 

   

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s reporting providing additional information about the audit and the financial statements (auditor discussion and analysis);

 

   

submit certain executive compensation matters to shareholders advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and “say on golden parachute” provisions (requiring a non- binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and

 

   

include detailed compensation discussion and analysis in our filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and instead may provide a reduced level of disclosure concerning executive compensation.

We have not taken advantage of all of these reduced reporting burdens in this Registration Statement, although we may do so in future filings. Although we intend to rely on certain exemptions provided in the JOBS Act, the exact implications of the JOBS Act for us are still subject to interpretations and guidance by the SEC and other regulatory agencies. In addition, as our business grows, we may no longer satisfy the conditions of an “emerging growth company.” We are currently evaluating and monitoring developments with respect to these new rules and we cannot assure you that we will be able to take advantage of all of the benefits from the JOBS Act.

In addition, as an “emerging growth company,” we may elect to delay adoption of new or revised accounting standards applicable to public companies until such standards are made applicable to private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies.

We are dependent on information technology and our systems and infrastructure face certain risks, including cyber security risks and data leakage risks.

We are dependent on information technology systems and infrastructure. Any significant breakdown, invasion, destruction or interruption of these systems by employees, others with authorized access to our systems, or unauthorized persons could negatively impact operations. There is also a risk that we could experience a business interruption, theft of information or reputational damage as a result of a cyber attack, such as an infiltration of a data center, or data leakage of confidential information either internally or at our third-party providers. While we have invested in the protection of our data and information technology to reduce these risks and periodically test the security of our information systems network, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems that could adversely affect our financial condition, results of operations and liquidity.

 

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USE OF PROCEEDS

We will not receive any proceeds from the issuance of the exchange notes in the exchange offer. The exchange offer is intended to satisfy our obligations under the registration rights agreement that we entered into in connection with the private offering of the outstanding notes. As consideration for issuing the exchange notes as contemplated in this prospectus, we will receive in exchange a like principal amount of outstanding notes, the terms of which are identical in all material respects to the exchange notes, except that the exchange notes will not contain terms with respect to transfer restrictions or additional interest upon a failure to fulfill certain of our obligations under the registration rights agreement. The outstanding notes that are surrendered in exchange for the exchange notes will be retired and cancelled and cannot be reissued. As a result, the issuance of the exchange notes will not result in any change in our capitalization.

 

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CAPITALIZATION

The following table sets forth our consolidated cash and capitalization as of December 29, 2012.

You should read this table in conjunction with “Prospectus Summary—Summary Historical Consolidated Financial and Other Data,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Summit Materials, LLC” and our historical consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

The outstanding notes that are surrendered in exchange for the exchange notes will be retired and cancelled and cannot be reissued. As a result, the issuance of the exchange notes will not result in any change in our capitalization.

 

     As of
December 29, 2012
 
     (in millions)  

Cash

   $ 27.4   
  

 

 

 

Debt:

  

Senior secured credit facilities(1)

   $ 398.0   

10.5% senior notes due 2020(2)

     250.0   
  

 

 

 

Total debt

     648.0   

Total member’s interest

     382.4   
  

 

 

 

Total capitalization

   $ 1,030.4   
  

 

 

 

 

(1) In February 2013, we entered into amendments to our senior secured credit facilities. The senior secured credit facilities currently provide senior secured financing in an amount of $572.0 million, consisting of a $150.0 million five-year revolving credit facility and a $422.0 million seven-year term loan facility. See “Description of Other Indebtedness—Senior Secured Credit Facilities.” Represents the principal amount of loans without giving effect to original issuance discount.
(2) Represents the aggregate principal amount of the notes, without giving effect to original issuance discounts or commissions to the initial purchasers.

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial information has been prepared to give effect to our acquisitions of Norris, Kay & Kay and Sandco, which were completed on February 29, 2012, October 5, 2012 and November 30, 2012, respectively, as if they occurred on January 1, 2012. The acquisitions of Norris, Kay & Kay and Sandco are considered business combinations in accordance with Financial Accounting Standards Board Accounting Standards Codification 805, “ Business Combinations.”

The following unaudited pro forma condensed consolidated financial information has been derived from our audited consolidated financial statements for the year ended December 29, 2012 included elsewhere in this prospectus along with the pre-acquisition financial information for Norris, Kay & Kay and Sandco. The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma condensed consolidated statements of operations to give effect to pro forma events that are (i) directly attributable to the transaction, (ii) factually supportable, and (iii) expected to have a continuing impact on us. The unaudited pro forma condensed consolidated statements of operations exclude $1.7 million in non-recurring charges directly attributable to the Norris, Kay & Kay and Sandco acquisitions, including transaction-related costs such as financial advisory, accounting and legal fees.

The unaudited pro forma condensed consolidated financial information is presented for illustrative and informative purposes only and is not intended to represent or be indicative of what our results of operations would have been had the acquisitions of Norris, Kay & Kay and Sandco actually occurred on January 1, 2012. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the information contained in “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Summit Materials, LLC” and the audited consolidated financial statements for each of Summit Materials and for Norris included elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial information should not be considered representative of our future results of operations or financial position.

Unaudited Pro Forma Condensed Consolidated Statements of Operations

for the year ended December 29, 2012

 

     Summit Materials, LLC  
(in thousands)    Summit
Materials,
LLC
    Pre-
acquisition
results of
Norris,
Kay & Kay
and
Sandco
1/1/2012 –
11/30/2012
     Pro Forma
adjustments
for the
acquisition of
Norris,
Kay & Kay
and Sandco
           Pro Forma
Combined
 

Revenue

   $ 962,902      $ 13,895       $ —           $ 976,797   

Cost of revenue (exclusive of items shown separately below)

     749,363        11,502         —             760,865   

General and administrative expenses

     128,032        1,000         —             129,032   

Depreciation, depletion, amortization and accretion

     68,876        1,008         81        (a)         69,965   

Transaction costs

     1,988        —           (1,742     (b)         246   
  

 

 

   

 

 

    

 

 

      

 

 

 

Operating income (loss)

     14,643        385         1,661           16,689   
  

 

 

   

 

 

    

 

 

      

 

 

 

Other (income) expense, net.

     (1,182     15         —             (1,167

Loss on debt refinancing.

     9,469        —           —             9,469   

Interest expense

     58,079        2         200        (c)         58,281   
  

 

 

   

 

 

    

 

 

      

 

 

 

(Loss) income from continuing operations before income tax (benefit) expense

   $ (51,723   $ 368         1,461           (49,894
  

 

 

   

 

 

    

 

 

      

 

 

 

 

See accompanying notes to unaudited pro forma condensed consolidated financial information, which are an integral part of this information.

 

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Notes to Unaudited Pro Forma Condensed Consolidated Financial information

 

  (a) The depreciation expense adjustment relates to the step up in fair value of fixed assets acquired in the Norris, Kay & Kay and Sandco acquisitions. A summary of the effects of the adjustment to depreciation expense for the year ended December 29, 2012 is as follows (dollars in thousands):

 

Estimated depreciation expense

   $ 330   

Elimination of historical depreciation expense

     (249
  

 

 

 

Depreciation expense adjustment

   $ 81   
  

 

 

 

 

  (b) This adjustment is to eliminate historical transaction costs incurred in connection with the Norris acquisition, principally legal and financial advisory fees due to the non-recurring nature of these expenses. There was no income tax benefit recorded on the transaction costs in the historical consolidated results of operations, accordingly, no pro forma tax adjustment has been recorded for this adjustment. The transaction costs removed for the year ended December 29, 2012 is $1.7 million.

 

  (c) A summary of the effects of the adjustment to interest expense for the year ended December 29, 2012 is as follows (dollars in thousands):

 

Estimated interest expense on debt from Norris acquisition(i)

   $ 196   

Elimination of historical interest expense(ii)

     (2

Estimated interest associated with acquisition liabilities(iii)

     6   
  

 

 

 

Interest expense adjustment

   $ 200   
  

 

 

 

 

  (i) This adjustment is to reflect the estimated incremental interest expense based on the average interest rate between January 1, 2012 and February 29, 2012, the acquisition date, of approximately 4.75% on the debt incurred for the Norris acquisition as if incurred on January 1, 2012.

 

  (ii) This adjustment is to eliminate the interest expense in the historical statements of operations.

 

  (iii) We recorded certain acquisition-related liabilities at present value; accordingly, we began to record interest expense on the accretion of those liabilities. This adjustment is to record additional interest expense for the pre-acquisition period, assuming we had acquired Norris and recorded the acquisition-related liabilities at present value on January 1, 2012.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables set forth, for the periods and as of the dates indicated, our selected predecessor and successor consolidated financial data. For financial statement presentation purposes, Hamm, which had a fiscal year end of March 31 prior to its acquisition by Summit Materials on August 26, 2009, has been identified as the predecessor. The selected predecessor statements of operations data for the period from April 1, 2009 to August 25, 2009 and for the year ended March 31, 2009 are derived from the audited consolidated financial statements not included in this prospectus. Summit Materials is the successor company. The selected successor statements of operations data for the three years ended December 29, 2012, December 31, 2011 and December 31, 2010 and the selected balance sheet data as of December 29, 2012 and December 31, 2011 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected successor statements of operations data for the period from August 26, 2009 to December 31, 2009 and the selected balance sheet data as of December 31, 2010 and December 31, 2009 are derived from our audited consolidated financial statements not included in this prospectus. The predecessor selected balance sheet data as of March 31, 2009 is derived from Hamm’s audited financial statements not included in this prospectus. In 2011, Summit Materials adopted a “4-4-5” fiscal calendar in place of the calendar year it previously used. Under the 4-4-5 fiscal period, each year is divided into four quarters and each quarter consists of two four week “months” and one five week “month.” Historical results are not indicative of the results to be expected in the future.

You should read the following information together with the more detailed information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Summit Materials, LLC” and the consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.

 

    Summit Materials, LLC (Successor)             Hamm, Inc. (Predecessor)    
(in thousands)   Year Ended
December
29, 2012
    Year Ended
December 31,
2011(1)
    Year Ended
December 31,
2010(1)
    Period from
August 26,
2009 to
December 31,
2009
          Period From
April 1, 2009
to August 25,
2009
    Year Ended
March 31,
2009
 

Statements of Operations Data:

               

Revenue

  $ 962,902      $ 822,548      $ 430,358      $ 29,348          $ 36,195      $ 104,407   

Cost of revenue (exclusive of items shown separately below)

    749,363        630,944        308,297        21,582            24,940        83,152   

General and administrative expenses

    128,032        96,886        49,479        4,210            1,639        2,993   

Depreciation, depletion, amortization and accretion

    68,876        61,964        34,415        3,148            3,187        8,101   

Transaction costs

    1,988        9,120        22,268        4,682           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   

 

 

 

Operating income (loss)

    14,643        23,634        15,899        (4,274         6,429        10,161   
               

Other (income) expense, net

    (1,182     (21,244     1,583        192            484        (1,220

Loss on debt refinancing

    9,469        —          9,975        —              —          —     

Interest expense

    58,079        47,784        25,430        574            —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   

 

 

 

(Loss) income from continuing operations before income tax (benefit) expense

    (51,723     (2,906     (21,089     (5,040         5,945        11,381   

Income tax (benefit) expense

    (3,920     3,408        2,363        216            2,303        4,152   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

(Loss) income from continuing operations

  $ (47,803   $ (6,314   $ (23,452   $ (5,256       $ 3,642      $ 7,229   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Cash Flow Data:

               

Net cash provided by (used for):

               

Operating activities

  $ 62,279      $ 23,253      $ (20,529   $ 3,897          $ 6,320      $ 17,430   

Investing activities

    (85,340     (192,331     (499,381     (46,669         31,255        (18,492

Financing activities

    7,702        146,775        575,389        52,379            (44,649     (2,045

Balance Sheet Data (as of period end):

               

Cash and cash equivalents

  $ 27,431      $ 42,790      $ 65,093      $ 9,614            $ 10,419   

Total assets

    1,281,213        1,284,265        1,101,581        111,775              100,719   

Total debt (including current portion of long-term debt)

    639,843        608,981        559,980        28,750              —     

Capital leases

    3,092        3,158        3,217        —                —     

Total member’s interest

    382,428        436,372        345,993        —                —     

Redeemable Noncontrolling interests

    22,850        21,300        21,300        —                —     

Other Financial Data (as of period end):

               

Total hard assets(2)

  $ 906,584      $ 906,166      $ 775,457      $ 92,309            $ 32,571   

Ratio of earnings to fixed charges(3)

    0.1        1.0        0.2        N/A            364.0        341.4   

 

(1) Amounts are shown net of results of operations associated with certain non-core businesses sold in 2012 and classified as discontinued operations.
(2) Defined as the balance sheet book value of the sum of (a) property, plant and equipment, net and (b) inventories.
(3) The ratio of earnings to fixed charges is determined by dividing earnings, as adjusted, by fixed charges. Fixed charges consist of interest on all indebtedness plus that portion of operating lease rentals representative of the interest factor (deemed to be 33% of operating lease rentals). Earnings were insufficient to cover fixed charges for the period from August 26, 2009 to December 31, 2009 by $5.8 million.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS OF SUMMIT MATERIALS, LLC

You should read the following discussion of our results of operations and financial condition with the “Unaudited Pro Forma Condensed Consolidated Financial Statements” and the “Selected Historical Consolidated Financial Data” sections of this prospectus and our audited consolidated financial statements and the related notes thereto included elsewhere in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this prospectus. Our actual results may differ materially from those contained in any forward-looking statements.

Overview

We are a leading, vertically-integrated, geographically-diverse heavy-side building materials company. We supply aggregates, cement and related downstream products such as asphalt paving mix, ready mixed concrete, concrete products and paving and related construction services to a variety of end-uses in the U.S. construction industry, including public infrastructure projects, as well as private residential and non-residential construction. We have organized the business by geographic region and have three operating segments, which are also our reporting segments: Central, West and East regions. Across the three regions, we believe we are a top 15 supplier of aggregates, a top 20 supplier of cement, a top 10 producer of asphalt paving mix and a major producer of ready mixed concrete in the United States by volume. As of December 29, 2012, we had 1.2 billion tons and 0.4 billion tons of proven and probable aggregates reserves serving our aggregates and cement businesses, respectively, and operated over 120 sites and plants. We believe that we have adequate road, barge and/or railroad access to all of our sites and plants. We do not perform annual reserve audits. From time to time, in connection with certain acquisitions, we engage a third party engineering firm to perform a reserve audit.

Our production volumes and average selling prices for our primary products in 2012, 2011 and 2010 are as follows:

 

    2012      2011      2010  
    Volume (1)      Average
Selling  Price (2)
     Volume (1)      Average
Selling  Price (2)
     Volume (1)      Average
Selling  Price (2)
 

Aggregate

    16,728       $ 8.49         13,844       $ 8.17         7,972       $ 8.82   

Asphalt

    4,553         53.31         4,074         48.17         1,590         50.29   

Ready mix

    1,210         88.29         1,053         89.48         352         77.63   

Cement

    1,003         81.17         850         83.00         595         85.30   

 

  (1) Volumes are shown in tons for aggregates, asphalt and cement and in cubic yards for ready mix.
  (2) Average selling prices are shown on a per ton basis for aggregates, asphalt and cement and on a per cubic yard basis for ready mix.

The growth in our volumes is primarily a result of our acquisitions, which have also impacted our average selling prices, as we enter into new markets with different pricing structures. Our cement volume has increased and pricing has decreased as a result of increased volume to large customers, which have lower average selling prices.

 

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Our estimate of proven and probable reserves for which we have permits for extraction and that we consider to be recoverable aggregates of suitable quality for economic extraction by segment are shown in the table below along with average annual production over the past three years. The number of producing quarries shown on the table below includes the underground mine supporting our cement plant, which is currently in development.

 

     Number of
producing
quarries
   Tonnage of reserves for
each general type of
aggregate
   Annual
production
(tons)
   Average years
till depletion
at current
production
   Percent of
reserves owned and

percent leased
        Hard Rock    Sand &
Gravel
        

Segment

                  Owned   Leased*
     (in thousands)

Central

       53          865,142          18,672          9,902          89          17 %       83 %

West

       38          148,905          170,756          4,586          70          37 %       63 %

East

       21          419,519          5,614          4,194          101          33 %       67 %

Total

       112          1,433,566          195,042          18,682                

 

* Lease terms range from monthly to on-going with an average lease expiry in 2020.

We were formed in September 2008. Since July 2009, the Sponsors and certain of our officers, directors and employees have made $794.5 million of funding commitments to our indirect parent entity, Summit Materials Holdings L.P. We have grown rapidly as a result of our disciplined acquisition strategy, utilizing approximately $457.3 million of the $463.9 million of equity commitments funded to Parent by the Sponsors and certain other investors. Today, our nine operating companies make up our three distinct geographic segments that span 20 states and 23 metropolitan areas. We believe each of our operating companies has a top three market share position in its local market area and an extensive operating history, averaging over 35 years. Our highly experienced management team, led by 30-year industry veteran, CEO Tom Hill has successfully enhanced the operations of acquired companies by focusing on scale advantages, cost efficiencies and pricing discipline to improve profitability and cash flow.

 

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Of the 20 states in which we operate, we currently have assets in 13 states across our three geographic regions. The map below illustrates our geographic footprint:

 

LOGO

Our revenue is derived from multiple end-use markets, including public infrastructure construction as well as private residential and non-residential construction. For the year ended December 29, 2012, approximately 62% of our revenue related to public infrastructure construction and the remaining 38% related to residential and non-residential construction. Our aggregates and asphalt paving mix and paving businesses serve both the public and private construction markets. Public construction includes spending by federal, state and local governments for roads, highways, bridges, airports and other public infrastructure construction projects. A significant portion of our construction revenues are from public construction projects, a historically more stable portion of state and federal budgets. Our acquisitions to date are focused in states with constitutionally-protected transportation funding sources, which we believe serves to limit our exposure to state and local budgetary uncertainties. Private construction includes both new residential and non-residential construction and repair and remodel markets, which have been significantly impacted by the downturn in the overall economy and the construction industry, in particular. We believe exposure to various markets affords us greater stability through economic cycles and positions us to capitalize on upside opportunities when recoveries in residential and non-residential construction occur.

Business Trends and Conditions

The U.S. heavy-side building materials industry is comprised of four primary sectors: (i) aggregates, (ii) cement, (iii) asphalt paving mix and (iv) ready mixed concrete, each of which is widely used in most forms of construction activity. Participants in these sectors typically range from small, privately-held companies

 

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focused on a single product to multinational corporations that offer a wide array of construction materials and services. Markets are defined in part by the distance materials may be efficiently transported, resulting in largely local or regional operations.

Transportation infrastructure projects, driven by both state and federal funding programs, represent a significant share of the U.S. heavy-side building materials market. In July 2012, Moving Ahead for Progress in the 21st Century (MAP-21) was enacted and took effect in October 2012. MAP-21 is a 27-month, approximately $105 billion transportation funding program that provides for $40.4 billion and $41.0 billion in highway infrastructure investments in fiscal years 2013 and 2014, respectively. The spending levels are consistent with the preceding federal transportation funding program. In addition to federal funding, highway construction and maintenance funding is also available through state, county and local agencies. Our five largest states by revenue (Texas, Kansas, Kentucky, Missouri and Utah, which represented approximately 27%, 16%, 14%, 11% and 11%, respectively, of our total revenue for the year ended December 29, 2012) each have funds whose revenue sources are constitutionally protected and may only be spent on transportation projects:

 

   

Texas’ 2012 - 2013 Department of Transportation budget is $19.8 billion, a $3.9 billion increase from the previous 2010-2011 biennium budget

 

   

Kansas has a 10-year $8.2 billion highway bill that was passed in May 2010

 

   

Kentucky has a two-year $4.5 billion highway bill that was passed in April 2012

 

   

Missouri has an estimated $700.0 million in annual construction funding committed to essential road and bridge programs

 

   

Utah’s fiscal year 2012 transportation fund increased to $1.1 billion

Despite the economic challenges of recent years, we believe that the enacted federal transportation funding program extending through fiscal 2014 is a positive development, reducing the uncertainty that existed with the previous funding program that had been subject to 10 short-term extensions. Within many of our markets, the federal, state and local governments have taken actions to maintain or grow highway funding during a time in which many areas of spending are facing significant cuts. However, we could still be impacted by any economic improvement or slowdown, which could vary by local region and market. Our sales and earnings are sensitive to national, regional and local economic conditions and particularly to cyclical swings in construction spending, especially in the private sector.

In addition to being subject to cyclical swings in the economy, our business is seasonal in nature. Almost all of our products are produced and consumed outdoors. Severe weather, seasonal changes and other weather-related conditions can significantly affect the production and sales volumes of our products. Normally, the highest sales and earnings are in the second and third quarters and the lowest are in the first and fourth quarters. Winter weather months are generally periods of lower sales as we normally cannot cost-effectively mobilize and demobilize equipment and manpower during this period under adverse weather conditions. Periods of heavy rainfall also adversely affect our work patterns and therefore demand for our products. Our working capital may vary greatly during these peak periods, but generally return to comparable levels as our operating cycle is completed each fiscal year.

 

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2012 Results

The principal factors in evaluating our financial condition and operating results for fiscal year 2012 compared to 2011 are:

 

   

Total revenue of $962.9 million in 2012, increased 17% or $140.4 million, from 2011, primarily as a result of acquisitions. Approximately 61% of our revenue is from product sales, which is the result of sales volume and pricing across our product lines. As illustrated in the table below, our volumes increased from 2011 to 2012, primarily from acquisitions, across all of our products. The 18.0% increase in cement volumes was organic, as we had no acquisitions in 2012 or 2011 impacting our cement capacity.

 

     Volume in 2012
Compared to 2011
 

Aggregates

     20.8

Asphalt

     11.8

Readymix

     14.9

Cement

     18.0

In 2012, we experienced modest growth to flat pricing changes across our product lines. We experienced increases in aggregates and asphalt average selling prices across the Company and a decrease in ready mix due to a shift in product mix, despite increased prices across the ready mix concrete products on a like-for-like basis. The average selling price for cement decreased $0.70 per ton from 2011 to 2012 due to a change in the customer mix. In 2012, tons sold to peers and large volume customers increased, which are sold at a lower price per ton than retail sales, impacting average selling price for the year.

 

     Average Selling
Prices in 2012
compared to 2011
 

Aggregates

     3.8  % 

Asphalt

     10.7  % 

Readymix

     (1.3 )% 

Cement

     (2.2 )% 

 

   

Operating income of $14.6 million compared to $23.6 million in 2011. The decrease in operating income is primarily attributable to $8.0 million of charges recorded in 2012 on an indemnification agreement in the West region, compared to $1.9 million in 2011, and low margin legacy contracts and cost overruns in our construction business. These losses were offset by increased operating income from 2012 and 2011 acquisitions.

 

   

Cash provided by operations of $62.3 million improved from $23.3 million in 2011 due primarily to improved cash management.

 

   

Cash paid for acquisitions of $48.8 million decreased from $161.1 million in 2011. We acquired three companies in 2012 compared to eight companies in 2011.

Acquisitions

On February 29, 2012, we acquired certain assets of Norris Quarries, LLC in Missouri. The Norris acquisition expanded our market position in the Central region. It is a 100% aggregates company geographically situated between existing businesses in Missouri and Kansas.

On October 5, 2012, we acquired certain assets of Kay & Kay Contracting, LLC in Kentucky. The Kay & Kay acquisition expands our market presence in the southeastern region of Kentucky producing both aggregates and asphalts.

On November 30, 2012, we acquired the stock of Sandco Inc. in Colorado. The Sandco acquisition expands our market presence in the western region of Colorado producing both aggregates and ready mixed concrete.

 

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Discontinued Operations

As part of our strategy to focus on our core business as a heavy-side building materials company, we sold, through separate transactions, our railroad construction and maintenance business (referred to herein as railroad business) and our environmental business, which is primarily associated with building retaining walls and removal and remediation of underground fuel storage tanks, in 2012 for $3.1 million in aggregate. Prior to recognition as discontinued operations, the railroad and environmental businesses were included as components of the East region’s operations. The railroad and environmental businesses’ revenue in fiscal 2012, 2011 and 2010 was $13.5 million, $16.1 million and $20.5 million, respectively, and loss before income tax expense was $2.8 million, $3.7 million and $0.4 million, respectively.

Aggregates

According to the February 2013 U.S. Geological Survey, approximately 1.28 billion tons of crushed stone with a value of approximately $11.5 billion was produced in the United States in 2012, in line with 1.28 billion tons in 2011. Sand and gravel production was approximately 907 million tons in 2012 valued at approximately $6.25 billion, up from 894 million tons in 2011. The U.S. aggregate industry is highly fragmented relative to other building product markets, with numerous participants operating in localized markets and the top six players controlling approximately 30% of the national market in 2011. The January 2013 U.S. Geological Survey reported that a total of 1,550 companies operating 4,000 quarries and 91 underground mines produced or sold crushed stone in 2012 in the United States.

We believe that the long-term growth of the market for aggregates is largely driven by growth in population, jobs and households, which impact transportation infrastructure spending and changes in population density. In the past few years, the recession in the United States has led to a decrease in overall private construction activity. Despite the increase in Federal stimulus spending, public construction activity has also declined over this period, albeit less than private construction markets. In fact, through the prior three U.S. recessions (July 1990 through March 1991, March 2001 through November 2001 and December 2007 through June 2009), highway spending in real dollars grew 1.8% annually on average in years with a recession as compared to 0.9% annually on average in years without a recession. While short-term demand for aggregates fluctuates with economic cycles, the declines have historically been followed by strong recovery, with each peak establishing a new historical high.

Cement

Cement production is a capital-intensive business with variable costs dominated by raw materials and energy required to fuel the kiln. Building new plants is challenging given the extensive permitting that is required and significant costs. We believe new plant construction costs in the United States are estimated at $250-300 per ton. Assuming construction costs of $275 per ton, a 1.25 million ton facility, such as the one Continental Cement operates, would cost approximately $343.8 million to construct.

As reported by the PCA in the 2012 North American Cement Industry Annual Yearbook, consumption is down significantly from the industry peak of 141 million tons in 2005 to 79 million tons in 2011 because of the decline in U.S. construction sector activity. Domestic cement consumption has at times outpaced domestic production capacity with the shortfall being supplied with imports, primarily from China, Canada, Columbia, Mexico and South Korea. The PCA reports that cement imports have declined since their peak of 39 million tons in 2006 to 7 million tons in 2011, in a manner indicative of the industry’s general response to the current demand downturn. Despite the reduction in imports, capacity utilization declined from 95% in 2006 to 59% in 2011 according to the PCA. Continental Cement operated at 75% capacity utilization in 2011 and 81% in 2012, which is above the 2011 industry mean of 68% capacity utilization as its markets did not suffer the pronounced demand declines seen in states like Florida, California and Arizona. Demand is seasonal in nature with nearly two-thirds of U.S. consumption occurring between May and October, coinciding with end-market construction activity.

 

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In the cement industry, calcium oxide (“CaO”) content is the traditional measurement of limestone quality and purity. Limestone of 100% purity as measured by calcium carbonate (“CaCO 3 ”) contains 56% CaO. Continental Cement’s mineable reserves have an average grade of 51.9% CaO, or 92.7% CaCO 3 . The mineable reserve calculation is based on a 70-foot mining height and a recovery ratio of 71.3% over the approximately 3,000 acre plant site.

Cement production in the United States is distributed among 101 production facilities located across 36 states. The EPA has new emission standards for Portland cement plants (“NESHAP”) that are due to come into effect in 2015. On December 20, 2012, the EPA signed the NESHAP final rule, which was less stringent than previous draft. The PCA had estimated based on the draft rule that 18 plants could be forced to close due to the inability to meet NESHAP standards or because the compliance investment required may not be justified on a financial basis. These potential closures represent approximately 20 million tons of clinker capacity, or 20% of current capacity in the United States.

Continental Cement’s plant utilizes alternative fuel (hazardous and non-hazardous) as well as coal and petroleum coke and, as a result, is subject to HWC-MACT standards, rather than NESHAP. We expect HWC-MACT standards to generally conform to NESHAP, for which we are mostly in compliance, ahead of the effective date of the NESHAP standards. Any additional costs to comply with the NESHAP standards are not expected to have a material adverse impact on our financial position, results of operations or liquidity.

Asphalt Paving Mix

Asphalt paving mix is produced by mixing aggregates and asphalt cement, a petroleum based product that serves as the binder, at elevated temperatures. These high production temperatures are needed to allow the asphalt binder to become viscous enough to completely coat the aggregates in the paving mix, have good workability during laying and compaction, and provide durability during traffic exposure. A high weight-to-value ratio and the need to maintain the asphalt paving mix at a sufficiently high temperature during the paving process typically limits the delivery time to a one-hour haul from production plant to the paving location. Consequently, the asphalt paving mix market is highly localized with a fragmented ownership base.

According to the National Asphalt Pavement Association, there are approximately 4,000 asphalt paving mix plants in the United States. As reported by the National Asphalt Pavement Association, an estimated 366 million tons of asphalt paving mix was produced in 2011 which was broadly in line with the estimated 360 million tons produced in 2010.

The use of Warm Mix Asphalt (“WMA”) or “green” asphalt is gaining popularity. The immediate benefit to producing WMA is the reduction in energy consumption required by burning fuels to heat traditional hot mix asphalt (“HMA”) to temperatures in excess of 300°F at the production plant. WMA can reduce the temperature by 50 to 70°F, resulting in lower emissions, fumes and odors generated at the plant and the paving site.

The asphalt paving mix sector is heavily exposed to public infrastructure spending as the vast majority of public roads and highways are paved with asphalt. Demand is seasonal in nature and focused on the April to November period in most states as asphalt paving requires a certain minimum ambient temperature to achieve the desired performance. Asphalt cement or liquid asphalt is a major input material. As a petroleum product, its price is driven by many factors and a fluctuation in the price of inputs, such as asphalt cement and burner fuel, which is typically either natural gas or recycled oil, may not be immediately recovered from the end customer.

Ready Mixed Concrete

As a result of the transportation constraints, the ready mixed concrete market is highly localized, with an estimated 5,500 ready mixed concrete plants in the United States, per the NRMCA. According to the NRMCA, 291 million cubic yards of ready mixed concrete was produced in 2012, which is a 9% increase from the 266 million cubic yards in 2011, but a 36% decrease from the industry peak of 458 million cubic yards in 2005.

 

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Ready mixed concrete demand is driven in large part by private residential and non-residential building demand and the decline of demand since 2005 is strongly correlated with the decline in construction spending in these end-use markets during this period.

The major raw material inputs for ready mixed concrete are aggregates and cement, the price of which has generally tended to increase over time in a predictable manner. Ready mixed concrete is almost always delivered to the end-user by the supplier via purposely designed vehicles. Consequently, fuel prices are also an important cost component. Many suppliers reduce their exposure to changes in fuel costs by including sales price adjustment provisions for changes in fuel prices.

Components of Operating Results

Revenue

We derive our revenue predominantly by selling construction materials and providing construction services. Construction materials consist of aggregates and related downstream products, including asphalt, ready mixed concrete, cement and concrete products. Construction services primarily relate to asphalt paving and other highway construction services.

The following summarizes our revenue recognition policy with respect to construction materials and services:

 

   

Revenue derived from construction material sales are recognized when risks associated with ownership have passed to unaffiliated customers. Typically this occurs when products are shipped. Product revenue generally includes sales of aggregates and related downstream products, cement and other materials to customers, net of discounts or allowances and taxes, if any.

 

   

Revenue derived from construction service contracts are recognized on the percentage-of-completion method, measured by the cost incurred to date compared to estimated total cost of each project. This method is used because management considers cost incurred to be the best available measure of progress on these contracts. Due to the inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change over the life of the contract.

Operating costs and expenses

The key components of our operating costs and expenses consist of the following:

Cost of revenue (exclusive of items shown separately below)

Cost of revenue consists of all production and delivery costs and primarily includes labor, repair and maintenance, utilities, raw materials, fuel, transportation, subcontractor costs and manufacturing overhead. Our cost of revenue is directly impacted by fluctuations in commodity energy prices, primarily diesel fuel, liquid asphalt and other petroleum-based resources. As a result, our operating profit margins can be significantly impacted by changes in the underlying cost of certain raw materials if they are not recovered through corresponding changes in revenue. We attempt to limit our exposure to changes in commodity energy prices by entering into forward purchase commitments when appropriate. In addition, we have sales price adjustment provisions that provide for adjustments based on fluctuations outside a limited range in certain energy-related production costs. These provisions are in place for most of our public contracts and we aggressively seek to include similar price adjustment provisions in our private contracts.

General and administrative expenses

General and administrative expenses consist primarily of salaries and personnel costs for our sales and marketing, administration, finance and accounting, legal, information systems and human resources employees. Additional expenses include audit, consulting and professional fees, travel, insurance and other corporate expenses.

 

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Transaction costs

Transaction costs consist primarily of third party accounting, legal, valuation and financial advisory fees incurred in connection with acquisitions.

Depreciation, depletion, amortization and accretion

Our business is relatively capital-intensive. We carry property, plant and equipment at cost, net of applicable depreciation, depletion and amortization on our balance sheet. Depreciation on property, plant and equipment is computed on a straight-line basis or based on the economic usage over the estimated useful life of the asset. The general range of depreciable lives by fixed asset category, excluding mineral reserves which are depleted based on the units of production method on a quarry-by-quarry basis, is as follows:

 

Buildings and improvements

     7 - 40 years   

Plant, machinery and equipment

     3 - 40 years   

Truck and auto fleet

     3 - 10 years   

Mobile equipment and barges

     3 - 20 years   

Landfill airspace and improvements

     5 - 60 years   

Other

     2 - 10 years   

Amortization expense is the periodic expense related to our intangible assets, which were acquired as part of certain of our acquisitions. The intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets.

Accretion expense is recorded using the effective interest method and is related to the accrued mining reclamation liabilities and landfill closure and post-closure liabilities.

Results of Operations

The following discussion of our results of operations is focused on the material financial measures we use to evaluate the performance of our business from both a consolidated and operating segment perspective. We have three operating segments, which are also our reporting segments: Central, West and East regions. Operating income and margins are discussed in terms of changes in volume, pricing and mix of revenue source (e.g., type of product sales or service revenue). The majority of our service revenue is generated by long-term contracts. As discussed further under “—Components of Operating Results” above, we generally account for revenue under these contracts using the percentage of completion method of accounting. Under this method, revenue is recognized as work progresses. Performance on service contracts refers to changes in contract earnings rates during the term of the contract based on revisions to estimates of profit at completion on individual contracts. These revisions result from increases or decreases to the estimated value of the contract and/or the estimated costs required to complete the contract. The following discussion of results of operations provides additional disclosure to the extent that a significant or unusual event causes a material change in the profitability of a contract.

The following table includes revenue and operating income by segment for the indicated fiscal years. Operating income by segment is computed as earnings before interest, taxes and other income / expense.

 

     2012     2011     2010  

(in thousands)

   Revenue      Operating
income (loss)
    Revenue      Operating
income (loss)
    Revenue      Operating
income (loss)
 

Central

   $ 302,113       $ 37,560      $ 264,008       $ 38,105      $ 211,238       $ 27,178   

West

     484,922         (6,625     362,577         (455     59,337         (4,691

East

     175,867         (1,017     195,963         1,222        159,783         3,920   

Corporate(1)

     —           (15,275     —           (15,238     —           (10,508
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 962,902       $ 14,643      $ 822,548       $ 23,634      $ 430,358       $ 15,899   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) Corporate results primarily consist of compensation expense for employees included in our headquarters.

 

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Non-GAAP Performance Measures

Our chief operating decision maker evaluates the performance of our segments and allocates resources to them based on several factors, including a measure we call segment profit, or Adjusted EBITDA by segment. We define Adjusted EBITDA as earnings (loss) before loss from discontinued operations, income tax (benefit) expense, interest expense and depletion, amortization and accretion. Accretion is recognized on our asset retirement obligations and reflects the time value of money. Given that accretion is similar in nature to interest expense, it is treated consistently with interest expense in determining Adjusted EBITDA. Adjusted EBITDA is determined before considering the loss from discontinued operations as results from discontinued operations are not viewed by management as part of our core business. When management assesses the performance of our segments and the allocation of resources, it is not included in Adjusted EBITDA. Adjusted EBITDA reflects an additional way of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to GAAP financial measures included in the tables below, may provide a more complete understanding of factors and trends affecting our business. However, it should not be construed as being more important than other comparable GAAP measures and must be considered in conjunction with GAAP measures. In addition, non-GAAP financial measures are not standardized; therefore it may not be possible to compare such financial measures with other companies’ non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements in their entirety and not rely on any single financial measure.

Reconciliation of Net Loss to Adjusted EBITDA

 

(in thousands)

  2012     2011     2010  

Net loss

  $ (50,577   $ (10,050   $ (23,863

Income tax (benefit) expense

    (3,920     3,408        2,363   

Interest expense

    58,079        47,784        25,430   

Depreciation, depletion and amortization

    68,250        61,274        33,890   

Accretion

    626        690        525   

Loss from discontinued operations

    2,774        3,736        411   
 

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 75,232      $ 106,842      $ 38,756   
 

 

 

   

 

 

   

 

 

 

 

Adjusted EBITDA by Segment

(in thousands)

   2012     2011     2010  

Central

   $ 65,767      $ 65,651      $ 40,790   

West

     14,429        36,442        (1,710

East

     10,596        14,626        5,474   

Corporate

     (15,560     (9,877     (5,798
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 75,232      $ 106,842      $ 38,756   
  

 

 

   

 

 

   

 

 

 

In 2011, we adopted a “4-4-5” fiscal calendar in the place of the calendar year we previously used.

 

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Consolidated Results of Operations

The tables below set forth our historical consolidated results from continuing operations for the fiscal years indicated.

 

(in thousands)

   2012     2011     2010  

Revenue

   $ 962,902      $ 822,548      $ 430,358   

Cost of revenue (exclusive of items shown separately below)

     749,363        630,944        308,297   

General and administrative expenses

     128,032        96,886        49,479   

Depreciation, depletion, amortization and accretion

     68,876        61,964        34,415   

Transaction costs

     1,988        9,120        22,268   
  

 

 

   

 

 

   

 

 

 

Operating income

     14,643        23,634        15,899   

Other (income) expense, net

     (1,182     (21,244     1,583   

Loss on debt refinancing

     9,469        —          9,975   

Interest expense

     58,079        47,784        25,430   
  

 

 

   

 

 

   

 

 

 

Loss from continuing operations before income tax (benefit) expense

     (51,723     (2,906     (21,089

Income tax (benefit) expense

     (3,920     3,408        2,363   
  

 

 

   

 

 

   

 

 

 

Loss from continuing operations

     (47,803     (6,314     (23,452

Loss from discontinued operations

     (2,774     (3,736     (411
  

 

 

   

 

 

   

 

 

 

Net loss

     (50,577     (10,050     (23,863

Net loss attributable to noncontrolling interests

     1,919        695        86   
  

 

 

   

 

 

   

 

 

 

Net loss attributable to member of Summit Materials, LLC

   $ (52,496   $ (10,745   $ (23,949
  

 

 

   

 

 

   

 

 

 

Fiscal year 2012 compared to 2011

 

(in thousands)

   2012     2011    

 

   Variance  

Revenue

   $ 962,902      $ 822,548           $ 140,354        17.1

Operating income

   $ 14,643      $ 23,634           $ (8,991     (38.0 %) 

Operating margin

     1.5     2.9         

Adjusted EBITDA

   $ 75,232      $ 106,842           $ (31,610     (29.6 %) 

 

LOGO   

Revenue in 2012 increased to $962.9 million compared to $822.5 million in 2011. The $140.4 million increase was driven by acquisitions and $17.7 million from net pricing increases. Revenue from business acquired in 2012 totaled $24.7 million and the incremental revenue in 2012 from business acquired in 2011 was $149.7 million. Revenue growth from price increases and acquisitions was partially offset by $16.3 million of volume decreases across our product lines, excluding our cement business where we had a 18% increase from 2011 and from a decline in construction services revenue.

 

The West region experienced the most revenue growth in 2012 as compared to 2011. It was established in the second half of 2010 and grew significantly in 2011 through acquisitions. As a result, 2012 was the first year with a full twelve

 

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months of results from these acquisitions. The West region comprised 50% of consolidated revenue in 2012 compared to 44% in 2011 and the East region revenue declined from 24% to 18% of consolidated revenue. Revenue, as a percentage of consolidated revenue, remained constant in the Central region in 2012 as compared to 2011.

Operating income decreased $9.0 million from $23.6 million in 2011 to $14.6 million in 2012. Operating income reflects our profit after taking into consideration cost of revenue, general and administrative expenses, depreciation, depletion, amortization and accretion and transaction costs. The components of cost of revenue generally increase ratably with revenue as labor, transportation costs and subcontractor costs are recorded in cost of revenue. As a result of our revenue growth occurring primarily through acquisitions, our general and administrative costs and depreciation, depletion, amortization and accretion generally have grown ratably with revenue. Our transaction costs fluctuate with the number and size of acquisitions consummated each year.

We are subject to commodity price risk with respect to price changes in liquid asphalt and energy, including fossil fuels and electricity for aggregates, cement, asphalt paving mix and ready mixed concrete production, natural gas for hot mix asphalt production and diesel fuel for distribution vehicles and production related mobile equipment. Liquid asphalt escalators in most of our public contracts, other than those in Texas, limit our exposure to price fluctuations in this commodity. We often obtain similar escalators on private and commercial contracts. In addition, we enter into various firm purchase commitments with terms generally less than one year for certain raw materials, including commodities, in the ordinary course of business. As a result of the contract escalation clauses and effective use of the firm purchase commitments, commodity prices did not have a material effect on our results of operations in 2012 as compared to 2011.

As a percentage of revenue, the individual components of operating income remained relatively consistent from 2011 to 2012 with the exception of $8.0 million of costs recognized in connection with an indemnification agreement in the West region in 2012, compared to $1.9 million of costs recognized in 2011. The costs were primarily responsible for the decline in operating margin, which we define as operating income as a percentage of revenue, from 2.9% in 2011 to 1.5% in 2012. Operating margin was also impacted by low margin contracts and higher costs on certain construction projects, primarily in the West region.

We experienced a decline in Adjusted EBITDA from $106.8 million in 2011 to $75.2 million in 2012 related to the following:

 

   

In 2012, we recognized $8.0 million in losses on an indemnification agreement, compared to $1.9 million in 2011.

 

   

In 2012, a $9.5 million loss associated with a debt refinancing was recognized.

 

   

In 2011, we recognized $12.1 million of bargain purchase gains on certain acquisitions in the West region. The amount of the bargain purchase gain is equal to the amount by which the fair value of net assets acquired exceeded the consideration transferred. We believe that the resulting bargain purchase gain is reasonable as the sellers were highly motivated. For a further discussion of the bargain purchase gain, see note 2 to our audited consolidated financial statements included elsewhere in this prospectus.

 

   

In 2011 we recognized a $10.3 million favorable fair value adjustment on contingent consideration, compared to $0.4 million in 2012. The $10.3 million adjustment in 2011 was due primarily to revised estimates of the probability of achieving the specified targets related to certain acquisitions.

 

   

Transaction fees decreased $7.1 million in 2012 due to a decrease in acquisition activity. We closed eight acquisitions in 2011 with an average purchase price of $23.6 million compared to three in 2012 for an average purchase price of $19.8 million.

 

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Other Financial Information

Other income, net

Other income decreased to $1.2 million in 2012 from $21.2 million in 2011. Included in other income in 2011 were $12.1 million of bargain purchase gains on certain acquisitions in the West region and a $10.3 million gain from fair value adjustments to contingent consideration, compared to a $0.4 million fair value adjustment in 2012.

Loss on debt refinancing

We refinanced our long-term debt and accrued interest in January 2012 resulting in a $9.5 million charge. We did not refinance our long-term debt in 2011.

Interest expense

Interest expense increased $10.3 million, or 21.5%, to $58.1 million in 2012 compared to $47.8 million in 2011. The increase in our interest expense reflects an increase in our average debt. Our debt, without giving effect to original issuance discount, increased to $648.0 million at December 29, 2012 from $609.0 million at December 31, 2012. In addition, although our outstanding borrowings on our revolver were zero at year-end 2012, we carried an average balance of $36.7 million during 2012. The additional borrowings were primarily used to fund acquisitions ($48.8 million) and seasonal working capital requirements.

Income tax expense

Summit is a limited liability company and passes its tax attributes for federal and state tax purposes to its parent entities and is generally not subject to Federal or state income tax. However, the consolidated financial statements of the Company include Federal and state income tax provisions for subsidiaries organized as taxable entities. In 2012, we recorded income tax benefit of $3.9 million compared to an expense of $3.4 million in 2011. The decrease in the income tax expense is due to taxable losses incurred by taxable entities in 2012.

Discontinued operations

In 2012, as part of our strategy to focus on our core business as a heavy-side building materials company, we sold, through separate transactions, our railroad construction and maintenance business (referred to herein as railroad business) and our environmental business, which is primarily associated with building retaining walls and removal and remediation of underground fuel storage tanks, for $3.1 million. Prior to recognition as discontinued operations, the railroad and environmental businesses were included as components of the East region’s operations. The railroad and environmental businesses’ revenue in 2012 and 2011 was $13.5 million and $16.1 million, respectively, and the net loss, inclusive of the immaterial gain on the sale, was $2.8 million and $3.7 million, respectively.

Fiscal year 2011 compared to 2010

 

(in thousands)

   2011     2010            Variance  

Revenue

   $ 822,548      $ 430,358           $ 392,190         91.1

Operating income

   $ 23,634      $ 15,899           $ 7,735         48.7

Operating margin

     2.9     3.7          

Adjusted EBITDA

   $ 106,842      $ 38,756           $ 68,086         175.7

 

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Our revenue increased significantly in 2011 to $822.5 million compared to $430.4 million in 2010. The $392.2 million increase was almost entirely driven by acquisitions. Revenue from business acquired in 2011 totaled $117.0 million and the incremental revenue in 2011 from business acquired in 2010 was $248.1 million.

 

LOGO   

The West region saw the most revenue growth in 2011 as compared to 2010. It was established in the second half of 2010 and grew significantly in 2011 through acquisitions. As a result of this growth, the West region comprised 44% of consolidated revenue in 2011 compared to 14% in 2010, thereby reducing the percentage of consolidated revenue contributed by the Central and East regions. Revenue, as a percentage of consolidated revenue, decreased 17% and 13% in the Central and East regions, respectively, in 2011 as compared to 2010.

Operating income increased $7.7 million from $15.9 million in 2010 to $23.6 million in 2011. Operating income reflects our profit after taking into consideration cost of revenue, general and administrative expenses, depreciation, depletion, amortization and accretion and transaction costs. The components of cost of revenue generally increase ratably with revenue as labor, transportation costs and subcontractor costs are recorded in cost of revenue. As a result of our revenue growth occurring primarily through acquisitions, our general and administrative costs and depreciation, depletion, amortization and accretion generally have grown ratably with revenue. Our transaction costs fluctuate with the number and size of acquisitions consummated each year.

We are subject to commodity price risk with respect to price changes in liquid asphalt and energy, including fossil fuels and electricity for aggregates, cement, asphalt paving mix and ready mixed concrete production, natural gas for hot mix asphalt production and diesel fuel for distribution vehicles and production related mobile equipment. Liquid asphalt escalators in most of our public contracts, other than those in Texas, limit our exposure to price fluctuations in this commodity. We often obtain similar escalators on private and commercial contracts. In addition, we enter into various firm purchase commitments with terms generally less than one year for certain raw materials, including commodities, in the ordinary course of business. As a result of the contract escalation clauses and effective use of the firm purchase commitments, commodity prices did not have a material effect on our results of operations in 2011 as compared to 2010.

As a percentage of revenue, the individual components of operating income remained relatively consistent from 2010 to 2011 with the exception of the West region, the impact of which led to a decline in operating margin, from 3.7% in 2010 to 2.9% in 2011. The West region’s operating margin is the lowest of our three regions and with their operations representing a higher proportion of the consolidated company, operating margins contracted in 2011. The West region’s operating margins, as compared to the other regions, have been impacted by the timing of the acquisitions. We acquired two businesses in Austin, Texas in August and October 2011. Our business is seasonal with our peak earnings occurring between April and November of each year. With these acquisitions occurring late in the season, coupled with transaction fees associated with the acquisitions, an operating loss was recognized in 2011 in the West region. West region acquisitions were similarly timed in 2010 (August and November 2010) resulting in operating losses in 2010 as well. Underperformance on certain construction and paving contracts also impacted operating margins in the West region.

 

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We experienced significant Adjusted EBITDA growth in 2011 from $38.8 million in 2010 to $106.8 million in 2011 primarily related to the following:

 

   

Adjusted EBITDA from 2011 acquisitions was $21.2 million, which includes a $12.1 million bargain purchase gain recognized with certain acquisitions in the West region

 

   

Incremental Adjusted EBITDA in 2011 from 2010 acquisitions was $26.7 million, which includes a $10.3 million favorable fair value adjustment recognized on contingent consideration in the West and East regions

 

   

Transaction fees decreased $13.1 million in 2011 due to a decrease in acquisition activity. We closed eight acquisitions in 2011 with an average purchase price of $20.1 million compared to twelve acquisitions in 2010 with an average purchase price of $40.2 million

 

   

In 2010, a $10.0 million loss associated with two debt refinancings was recognized

Other Financial Information

Other (income) expense, net

Other income increased to $21.2 million in 2011 from expense of $1.6 million in 2010. Included in other income in 2011 were $12.1 million of bargain purchase gains on certain acquisitions in the West region and a $10.3 million gain from fair value adjustments to contingent consideration.

Loss on debt refinancing

We refinanced our term debt in February 2010 and again in December 2010 resulting in a $10.0 million charge for financing fees. We did not refinance our long-term debt in 2011.

Interest expense

Interest expense increased $22.4 million, or 87.9%, to $47.8 million in 2011 compared to $25.4 million in 2010. The increase in our interest expense reflects an increase in our term loan in December 2010 from $136.4 million to $400.0 million, and the increase in borrowings under our revolver facility associated with our 2011 acquisition activity. We amended one of our credit facilities in December 2010 to fund future acquisitions and take advantage of more favorable interest rates.

Income tax expense

Summit is a limited liability company and passes its tax attributes for Federal and state tax purposes to its parent entities and is generally not subject to Federal or state income tax. However, the consolidated financial statements of the Company include Federal and state income tax provisions for subsidiaries organized as taxable entities. In 2011, we recorded income tax expense of $3.4 million compared to $2.4 million in 2010. The increase in the income tax expense is due to an increase in taxable income from the taxable entities.

Discontinued operations

In 2012, as part of our strategy to focus on our core business as a heavy-side building materials company, we sold, through separate transactions, our railroad construction and maintenance business (referred to herein as railroad business) and our environmental business, which is primarily associated with building retaining walls and removal and remediation of underground fuel storage tanks for $3.1 million. Prior to recognition as discontinued operations, the railroad and environmental businesses were included as components of the East region’s operations. The railroad and environmental businesses’ revenue in 2011 and 2010 was $16.1 million and $20.5 million, respectively, and the net loss was $3.7 million and $0.4 million, respectively.

 

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Segment results of operations

Central region fiscal year 2012 compared to 2011

 

(in thousands)

   2012     2011            Variance  

Revenue

   $ 302,113      $ 264,008           $ 38,105        14.4

Operating income

   $ 37,560      $ 38,105           $ (545     (1.4 )% 

Operating margin

     12.4     14.4         

Adjusted EBITDA

   $ 65,767      $ 65,651           $ 116        0.2

Revenue in the Central region increased $38.1 million, or 14.4%, in 2012 to $302.1 million compared to $264.0 million in 2011 due to acquisitions and a $15.4 million increase in cement sales, driven by a 17% increase in cement volumes. Revenue from business acquired in 2012 totaled $23.3 million and the incremental revenue in 2012 from business acquired in 2011 was $1.5 million.

Operating margin declined in 2012 to 12.4% from 14.4% in 2011 primarily due to a $3.4 million gain on landfill closure obligations in 2011, as a result of revisions to landfill closure plans. After adjusting for this non-recurring gain, operating margin in 2012 was generally consistent with 2011.

Adjusted EBITDA remained relatively consistent from $65.7 million in 2011 to $65.8 million in 2012.

Central region fiscal year 2011 compared to 2010

 

(in thousands)

   2011     2010            Variance  

Revenue

   $ 264,008      $ 211,238           $ 52,770         25.0

Operating income

   $ 38,105      $ 27,178           $ 10,927         40.2

Operating margin

     14.4     12.9          

Adjusted EBITDA

   $ 65,651      $ 40,790           $ 24,861         60.9

Revenue in the Central region increased $52.8 million, or 25.0%, in 2011 to $264.0 million compared to $211.2 million in 2010 due primarily to acquisitions. Revenue from business acquired in 2011 totaled $2.4 million and the incremental revenue in 2011 from business acquired in 2010 was $57.5 million. These revenue increases were partially offset by completion of a significant construction project with the Kansas Turnpike Authority in northeast Kansas which contributed approximately $10.9 million of additional revenue in 2010 than in 2011.

Operating margin improved in 2011 to 14.4% from 12.9% in 2010 primarily due to a $3.4 million gain on landfill closure obligations, as a result of revisions to landfill closure plans. After adjusting for this non-recurring gain, operating margin in 2011 was generally consistent with 2010.

The Adjusted EBITDA growth of $24.9 million from $40.8 million in 2010 to $65.7 million in 2011 was primarily due to the following:

 

   

Adjusted EBITDA from 2011 acquisitions was $0.9 million

 

   

Incremental Adjusted EBITDA in 2011 from 2010 acquisitions was $12.4 million

 

   

$3.4 million gain on landfill closure obligations as a result of revisions to landfill closure plans

 

   

$8.7 million decrease in transactions costs. In 2010, we acquired four entities for an average purchase price of $66.0 million compared to one acquisition in 2011 for $8.7 million.

 

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West region fiscal year 2012 compared to 2011

 

(in thousands)

   2012     2011            Variance  

Revenue

   $ 484,922      $ 362,577           $ 122,345        33.7

Operating income

   $ (6,625   $ (455        $ (6,170     (1,356.0 )% 

Operating margin

     (1.4 )%      (0.1 )%          

Adjusted EBITDA

   $ 14,429      $ 36,442           $ (22,013     (60.4 )% 

Revenue in the West region increased $122.3 million, or 33.7%, in 2012 to $484.9 million compared to $362.6 million in 2011. The majority of the increase is due to a full year of revenue from the six acquisitions that expanded our presence in Utah, Texas and Colorado in 2011. Incremental revenue from businesses acquired in 2011 totaled $147.4 million. These increases were partially offset by volume declines in the Utah market.

Operating margin remained relatively consistent at (0.1)% in 2011 and (1.4)% in 2012. The negative margin in 2011 was impacted by $6.0 million of transaction costs related to the acquisitions, while 2012 was impacted by $8.0 million in losses on an indemnification agreement, compared to $1.9 million in 2011, and lower margins on legacy construction projects due to cost overruns.

Adjusted EBITDA declined $22.0 million from $36.4 million in 2011 to $14.4 million in 2012 primarily due the following:

 

   

In 2012, we recognized $8.0 million in losses on an indemnification agreement, compared to $1.9 million in 2011

 

   

In 2011, we recognized $12.1 million of bargain purchase gains on our acquisitions in Colorado

 

   

In 2011, we recognized a $4.8 million gain from a fair value adjustment to contingent consideration, compared to $0.4 million in 2012

West region fiscal year 2011 compared to 2010

 

(in thousands)

   2011     2010            Variance  

Revenue

   $ 362,577      $ 59,337           $ 303,240         511.0

Operating income

   $ (455   $ (4,691        $ 4,236         90.3

Operating margin

     (0.1 )%      (7.9 )%           
 

Adjusted EBITDA

   $ 36,442      $ (1,710        $ 38,152         2,231.1

Our West region was established in 2010 with five acquisitions in Utah and in northeast Texas and expanded in 2011 with an additional six acquisitions expanding our presence in Utah, and into Austin, Texas and Colorado. The revenue growth in 2011 from 2010 was primarily due to these acquisitions. Revenue from businesses acquired in 2011 totaled $110.5 million and the incremental revenue in 2011 from businesses acquired in 2010 was $183.8 million.

Operating margin improved from (7.9)% in 2010 to (0.1)% in 2011. The negative margin in 2011 and 2010 was impacted by $4.1 million and $6.0 million, respectively, of transaction costs related to the acquisitions. The reduction in these transaction costs attributed to the improved operating margin in 2011.

The Adjusted EBITDA growth of $38.2 million from a loss of $1.7 million in 2010 to $36.4 million in 2011 is primarily due the following:

 

   

Adjusted EBITDA from 2011 acquisitions was $18.6 million, including $12.1 million bargain purchase gains related to the Colorado acquisitions

 

   

Incremental Adjusted EBITDA in 2011 from 2010 acquisitions was $16.9 million

 

   

In 2011, we recognized a $4.8 million gain from a fair value adjustment to contingent consideration

 

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East region fiscal year 2012 compared to 2011

 

(in thousands)

   2012     2011            Variance  

Revenue

   $ 175,867      $ 195,963           $ (20,096     (10.3 )% 

Operating (loss) income

   $ (1,017   $ 1,222           $ (2,239     (183.2 )% 

Operating margin

     (0.6 )%      0.6         
 

Adjusted EBITDA

   $ 10,596      $ 14,626           $ (4,030     (27.6 )% 

Our East region’s revenue decreased $20.1 million from $196.0 million in 2011 to $175.9 million in 2012 due to a decline in construction and paving activities in Kentucky.

Operating margin in the East region decreased from 0.6% in 2011 to (0.6)% in 2012 due primarily to cost overruns on certain construction projects.

Adjusted EBITDA declined $4.0 million from $14.6 million in 2011 to $10.6 million in 2012 due primarily to a $3.7 million charge associated with the January 2012 debt refinancing and cost overruns of certain legacy construction projects.

East region fiscal year 2011 compared to 2010

 

(in thousands)

   2011     2010            Variance  

Revenue

   $ 195,963      $ 159,783           $ 36,180        22.6

Operating income

   $ 1,222      $ 3,920           $ (2,698     (68.8 )% 

Operating margin

     0.6     2.5         
 

Adjusted EBITDA

   $ 14,626      $ 5,474           $ 9,152        167.2

Our East region’s revenue increased $36.2 million from 2010 as a result of revenue from business acquired in 2011 ($4.0 million), incremental revenue in 2011 from business acquired in 2010 ($6.8 million) and $8.4 million of additional revenue on two large concrete paving projects that began in 2009 and increased volume in the construction business.

Operating margin in the East region decreased from 2.5% in 2010 to 0.6% in 2011 due primarily to the two large concrete paving projects, which earned lower margins in 2011 due to cost overruns.

The Adjusted EBITDA growth of $9.2 million from $5.5 million in 2010 to $14.6 million in 2011 was primarily due to the following:

 

   

Adjusted EBITDA from 2011 acquisitions was $1.7 million

 

   

Incremental Adjusted EBITDA in 2011 from 2010 acquisitions was a loss of $2.7 million

 

   

Transaction costs from acquisitions decreased $4.9 million

 

   

In 2010, we recognized $5.5 million of finance charge associated with two debt refinancings

Liquidity and Capital Resources

Our primary sources of liquidity include cash on-hand, cash provided by our operations and amounts available for borrowing under our credit facilities ($135.5 million at December 29, 2012). As of December 29, 2012 we had $27.4 million in cash and working capital of $114.4 million as compared to $42.8 million in cash and working capital of $146.7 million as of December 31, 2011. Working capital is calculated as current assets less current liabilities, excluding the current portion of long term debt.

 

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Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances during our peak summer season; these amounts are converted to cash over the course of our normal operating cycle. We believe we have sufficient financial resources from our liquidity sources to fund our business and operations for at least the next twelve months, including contractual obligations, capital expenditures, debt service obligations and potential future acquisitions. Our growth strategy contemplates future acquisitions for which we believe we have sufficient capital through committed funds from our Sponsors and our borrowing capacity. There were no restricted cash balances as of December 29, 2012 or December 31, 2011.

Our Credit Facilities

Refer to “Description of Other Indebtedness” and to the notes to the consolidated financial statements included elsewhere in this prospectus for detailed information on our long-term debt and revolving credit facility, scheduled maturities of long-term debt and affirmative and negative covenants, including the maximum allowable consolidated leverage ratios.

At December 29, 2012 and December 31, 2011, $648.0 million, without giving effect to original issuance discount, and $609.0 million, respectively was outstanding under the respective debt agreements, including the revolving credit facility, and the Company was in compliance with all debt covenants. At December 29, 2012, we had no outstanding borrowings on the revolving credit facility, but did carry an average balance of $36.7 million during 2012. The revolver borrowings were primarily used to fund acquisitions ($48.8 million) and seasonal working capital requirements.

January 2012 Financing Transactions

On January 30, 2012 Summit and its wholly-owned subsidiary, Summit Materials Finance Corp. (collectively, the “Issuers”), issued $250.0 million aggregate principal amount of 10.5% Senior Notes due January 31, 2020 (“Senior Notes”) under an indenture dated as of January 30, 2012 (as amended and supplemented, the “Indenture”) among the Issuers, the guarantors party thereto and Wilmington Trust, National Association, as trustee. The Senior Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by all of our existing and future wholly-owned domestic restricted subsidiaries that guarantee indebtedness under our senior secured credit facilities and by our non wholly-owned subsidiary Continental Cement. Concurrently with the issuance of the Senior Notes, on January 30, 2012, Summit entered into a senior secured credit facility which provided for term loans in an initial aggregate amount of $400.0 million and revolving credit commitments in an initial aggregate amount of $150.0 million (the “Senior Secured Credit Facility”). The borrowings under the Senior Secured Credit Facility and net proceeds from the issuance of the Notes were used to refinance Summit’s pre-existing credit facility and the Continental Cement debt.

Proceeds from the Senior Secured Credit Facility and the Senior Notes were used primarily for (i) repayment of $451.0 million of borrowings under the existing credit facility, consisting of $396.0 million of term debt and $55.0 million of revolving credit facility debt, (ii) repayment of $142.7 million of secured debt of Continental Cement consisting of $39.0 million of first lien debt, $3.7 million of first lien revolving credit facility debt and $100.0 million of second lien debt, (iii) repayment of $13.0 million due under a promissory note by and between Continental Cement and a related party, (iv) payment of $4.5 million of accrued interest related to the pre-existing credit facility and the Continental Cement debt, (v) payment of $12.9 million of fees and (vi) $16.5 million of cash on hand. The refinancing of the existing credit facility was partially accounted for as an extinguishment. As a result of this transaction, $9.5 million was charged to earnings in January 2012 and $15.0 million in deferred financing fees will be amortized over the term of the debt using the effective interest method. The original issuance discounts of $9.5 million were recorded as a reduction to debt in January 2012 and will be accreted with a charge to earnings over the term of the debt.

The Indenture contains covenants limiting, among other things, Summit and its restricted subsidiaries’ ability to incur additional indebtedness or issue certain preferred shares, pay dividends, redeem stock or make

 

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other distributions, make certain investments, sell or transfer certain assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of Summit’s assets, enter into certain transactions with affiliates, and designate subsidiaries as unrestricted subsidiaries. The Indenture also contains customary events of default. We entered into a registration rights agreement with the initial purchasers of the Senior Notes pursuant to which we have filed the registration statement on Form S-4 of which this prospectus forms a part. In the event that the exchange offer has not been consummated or a shelf registration statement covering resales of the notes has not been declared effective by the SEC, then the interest rate on the notes eligible for inclusion in such registration statement will be increased by certain specified rates pursuant to the registration rights agreement.

In February 2013, we entered into amendments to our Senior Secured Credit Facility that, among other things: (i) reduced the applicable margins used to calculate interest rates for term loans under our Senior Secured Credit Facility by 1.0%; (ii) reduced the applicable margins used to calculate interest rates for $131.0 million of tranche A revolving credit loans available under the Senior Secured Credit Facility by 1.0% (with no reductions to the applicable margins for the remaining $19.0 million of available revolving credit loans); (iii) increased term loans borrowed under our term loan facility by $25.0 million with the same terms as the existing term loans (bringing total term loan borrowings to approximately $422.0 million); (iv) included a requirement that we pay a fee equal to 1.0% of the principal amount of term loans repaid in connection with certain repricing or refinancing transactions within six months after February 5, 2013; and (v) created additional flexibility under the financial maintenance covenants, which are tested quarterly, by increasing the applicable maximum Consolidated First Lien Net Leverage Ratio and reducing the applicable minimum Interest Coverage Ratio (each as defined in the credit agreement governing our Senior Secured Credit Facility).

Cash Flows

The following table summarizes our net cash provided by or used for operating activities, investing activities and financing activities and our capital expenditures for the periods indicated (in thousands):

 

     Year Ended  
     December 29,
2012
    December 31,
2011
    December 31,
2010
 

Net cash provided by (used for):

      

Operating activities

   $ 62,279      $ 23,253      $ (20,529

Investing activities

     (85,340     (192,331     (499,381

Financing activities

     7,702        146,775        575,389   

Cash paid for capital expenditures

   $ (45,488   $ (38,656   $ (21,145

Operating activities

For the year ended 2012, cash provided by operating activities was $62.3 million primarily as a result of:

 

   

Non-cash expenses, including $72.2 million of depreciation, depletion, amortization and accretion, which increased in 2012 in connection with our 2011 and 2012 acquisitions, and a $9.5 million loss on our January 2012 debt refinancing;

 

   

Accounts receivable and costs and estimated earnings in excess of billings provided $12.1 million of additional cash from December 31, 2011 to December 29, 2012 due to an increased focus on processing billings and collecting on outstanding receivables in a more timely manner during 2012 as compared to 2011; and

 

   

Accounts payable and accrued expenses provided additional cash from operations, on a net basis, of $11.1 million from December 31, 2011 to December 29, 2012 due primarily to a $16.0 million increase in accrued interest. The interest on our Senior Notes, issued in January 2012, are payable in January and July of each year and the interest on our Senor Secured Credit Facilities is payable on the last

 

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business day of each calendar quarter, which resulted in our December 2012 payment being accrued at year-end 2012 and paid in the first quarter of 2013. The increase in accrued interest was partially offset by improvement in our cash management policy with respect to accounts payable.

For the year ended 2011, cash provided by operating activities was $23.3 million primarily as a result of:

 

   

Non-cash expenses, including $65.0 million of depreciation, depletion, amortization and accretion, a $12.1 million bargain purchase gain and $10.3 million gain on the revaluation of contingent consideration;

 

   

Accounts receivable and costs and estimated earnings in excess of billings provided $13.3 million of additional cash from December 31, 2010 to December 31, 2011 due to an increased focus on timely billings and cash collections as compared to the legacy processes of the businesses acquired in 2010;

 

   

Inventory utilizing $12.6 million of cash from December 31, 2010 to December 31, 2011 as we increased our inventory balances to support the growth in business activities (revenue grew 91.1% from 2010 to 2011); and

 

   

Billings in excess of costs and estimated earnings utilizing $8.2 million of cash from December 31, 2010 to December 31, 2011 due to certain contracts that were completed in 2011.

For the year ended 2010, cash used for operating activities was $20.5 million. The $23.9 million net loss was adjusted for $35.5 million of depreciation, depletion, amortization and accretion and the $10.0 million loss on the 2010 debt refinancings. Operating cash flows in 2010 were reduced by $25.3 million of primarily interest charges incurred with the payment of legacy debt owed by Continental Cement. The interest was paid from the cash used to acquire an approximately 70% interest in Continental Cement.

Investing activities

For the year ended 2012, cash used for investing activities was $85.3 million. We paid $48.8 million for three acquisitions and $45.5 million for capital expenditures. The 2012 acquisitions expanded our presence in certain of our existing markets. Approximately half of our 2012 capital expenditures were to replace or maintain equipment and the remaining portion reflects capital investments in the business, the most significant of which is the development of an underground mine at our cement plant. We spent $5.0 million on the underground mine development in 2012.

For the year ended 2011, cash used for investing activities was $192.3 million. The company paid $161.1 million for eight acquisitions and $38.7 million for capital expenditures. Six of the eight acquisitions were in the West region through which we entered the western Colorado and Austin, Texas markets as well as expanded our presence in Utah and Idaho.

For the year ended 2010, cash used for investing activities was $499.4 million. Investing activity was primarily driven by several large acquisitions totaling $482.3 million. In 2010, we established the West region in Utah and Texas and the East region in Kentucky, as well as expanded the Central region’s presence in Kansas and into Missouri.

Financing activities

For the year ended 2012, cash provided by financing activities was $7.7 million, which is primarily comprised of $16.5 million of proceeds from the January 2012 financing transactions, offset by the use of cash for $7.5 million of payments under deferred consideration, and noncompete and contingent consideration arrangements entered into with various acquisitions. In 2012, all acquisitions were funded with cash-on-hand and debt. Accordingly, we had no proceeds from investments from our member in 2012.

 

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For the year ended 2011, cash provided by financing activities was $146.8 million. The $103.6 million capital contributions from our member were used to fund certain acquisitions. The remaining cash provided by financing activities primarily reflects the $47.7 million of proceeds from new debt issuances, which were also used to fund acquisitions, and $4.6 million of payments under deferred consideration and noncompete arrangements entered into with various acquisitions.

For the year ended 2010, cash provided by financing activities was $575.4 million, primarily driven by $338.6 million of capital contributions from our member, and $239.5 million of borrowings used to fund $499.4 million of acquisitions and working capital needs.

Cash paid for capital expenditures

We expended approximately $45.5 million in capital expenditures in 2012 compared to $38.7 million in 2011. A significant portion of the increase in capital expenditures in 2012 relates to development of an underground mine to extract limestone on our Hannibal, Missouri property where our cement plant is located. We spent an additional $4.8 million on the underground mine development in 2012 as compared to 2011.

We estimate that we will incur between $54.0 million and $62.0 million in capital expenditures in 2013, which we expect to fund through cash on hand, cash from operations, outside financing and available borrowings under our credit facilities. A significant portion of our anticipated future capital expenditures relates to development of the underground mine referred to above. We expect to spend approximately $12.0 million in total during 2013 and 2014 on this project. We believe this project will eliminate the need to strip away overburden that covers the limestone and ultimately save about $1.50 to $2.00 per ton of limestone costs off our average historical mining cost.

Contractual Obligations

The following table presents, as of December 29, 2012, our obligations and commitments to make future payments under contracts and contingent commitments:

 

     Total      2013      2014-2015      2016-2017      Thereafter  

Contractual Obligations

              

Short term borrowings and long-term debt, including current portion

   $ 648,000       $ 4,000       $ 8,000       $ 9,000       $ 627,000   

Capital lease obligations

     6,330         360         720         720         4,530   

Operating lease obligations

     13,391         3,614         5,193         3,095         1,489   

Interest payments(1)

     345,287         50,305         99,881         98,911         96,190   

Acquisition-related liabilities

     46,430         9,525         13,998         9,654         13,253   

Royalty payments

     17,554         1,593         3,207         3,245         9,509   

Defined benefit plans(2)

     27,308         2,773         5,557         5,516         13,462   

Asset retirement obligation payments

     28,191         356         6,059         1,258         20,518   

Other

     708         164         330         214         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total contractual obligations(3)

   $ 1,133,199       $ 72,690       $ 142,945       $ 131,613       $ 785,951   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Future interest payments were calculated using the applicable fixed and floating rates charged by our lenders in effect as of December 29, 2012 and may differ from actual results.
(2) Amounts represent estimated future payments to fund our defined benefit plans.
(3) Any future payouts on the redeemable noncontrolling interest are excluded from total contractual obligations as the expected timing of settlement is not estimable.

 

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Commitments and contingencies

In the normal course of business, we have commitments, lawsuits, claims, and contingent liabilities. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position or liquidity.

We are obligated under an indemnification agreement entered into with the sellers of Harper Contracting, Inc., Harper Sand and Gravel, Inc., Harper Ready Mix Company, Inc. and Harper Investments, Inc. (collectively, “Harper”) for the seller’s ownership interests in a joint venture agreement. Summit has the rights to any benefits under the joint venture as well as the assumption of any obligations, but does not own equity interests in the joint venture. The joint venture has incurred significant losses on a highway project in Utah, which have resulted in funding requirements for the joint venture partners and ultimately for us. Through year-end 2012, we have funded $8.8 million into the investment, $4.0 million in 2012 and $4.8 million in 2011. In 2012 and 2011, we recognized losses on the indemnification agreement of $8.0 million and $1.9 million, respectively, which are included in general and administrative expenses on the consolidated statements of operations.

Off-Balance sheet arrangements

As of December 29, 2012 we had no material off-balance sheet arrangements, such as financing or unconsolidated variable interest entities, that either have or are reasonably likely to have a current or future material effect on our results of operations, financial position, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

We are an “emerging growth company” under the JOBS Act and are eligible to take advantage of certain exemptions from various public company reporting requirements. Section 107 of the JOBS Act provides that an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act to comply with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. As an “emerging growth company,” we may elect to delay adoption of new or revised accounting standards applicable to public companies until such standards are made applicable to private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. We may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act until we (i) are no longer an “emerging growth company” or (ii) affirmatively and irrevocably “opt-out” of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act. Accordingly, until the date we are no longer an “emerging growth company,” or affirmatively and irrevocably “opt-out” of the exemption provided by Section 7(a)(2)(B) of the Securities Act, upon the issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we may choose to rely on certain exemptions. See “Risk Factors—Risks Related to Our Business and Our Industry—As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.”

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period.

 

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On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance for doubtful accounts, inventories, asset retirement obligations, taxes and goodwill. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Acquisitions—Purchase price allocation

We regularly review strategic long-term plans, including potential investments in value-added acquisitions of related or similar businesses, which would increase our market share and/or are related to our existing markets. When an acquisition is completed, our consolidated statement of operations includes the operating results of the acquired business starting from the date of acquisition, which is the date that control is obtained. The purchase price is determined based on the fair value of assets given to and liabilities assumed from the seller as of the date of acquisition. We allocate the purchase price to the fair values of the tangible and intangible assets acquired and liabilities assumed as valued at the date of acquisition. Goodwill is recorded for the excess of the purchase price over the net of the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date. The purchase price allocation is a critical accounting policy because the estimation of fair values of acquired assets and assumed liabilities is judgmental and requires various assumptions. Further, the amounts and useful lives assigned to depreciable and amortizable assets versus amounts assigned to goodwill, which is not amortized, can significantly affect the results of operations in the period of and in periods subsequent to a business combination.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction, and, therefore, represents an exit price. A fair value measurement assumes the highest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible at the measurement date. We assign the highest level of fair value available to assets acquired and liabilities assumed based on the following options:

 

   

Level 1—Quoted prices in active markets for identical assets and liabilities

 

   

Level 2—Observable inputs, other than quoted prices, for similar assets or liabilities in active markets

 

   

Level 3—Unobservable inputs, which includes the use of valuation models

Level 2 fair values are typically used to value acquired machinery, equipment and land and assumed liabilities for asset retirement obligations, environmental remediation and compliance obligations and contingencies.

Level 3 fair values are used to value acquired mineral reserves, mineral interests and separately-identifiable intangible assets.

There is a measurement period after the acquisition date during which we may adjust the amounts recognized for a business combination. Any such adjustments are based on us obtaining additional information that existed at the acquisition date regarding the assets acquired or the liabilities assumed. Measurement period adjustments are generally recorded as increases or decreases to the goodwill recognized in the transaction. Material adjustments are applied retroactively to the date of acquisition and reported retrospectively. The measurement period ends once we have obtained all necessary information that existed as of the acquisition date, but does not extend beyond one year from the date of acquisition. Any adjustments to assets acquired or liabilities assumed beyond the measurement period are recorded in earnings.

We have invested $48.8 million and $161.1 million in business combinations and allocated this amount to assets acquired and liabilities assumed during the years ended December 29, 2012 and December 31, 2011, respectively.

 

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Goodwill and goodwill impairment

Goodwill is tested annually for impairment and in interim periods if certain events occur indicating that the carrying amounts may be impaired. The impairment evaluation is a critical accounting policy because the evaluation involves the use of significant estimates and assumptions and considerable management judgment. Our judgments regarding the existence of impairment indicators and future cash flows are based on operational performance of our businesses, market conditions and other factors. Although there are inherent uncertainties in this assessment process, the estimates and assumptions we use, including estimates of future cash flows, volumes, market penetration and discount rates, are consistent with our internal planning. The estimated future cash flows are derived from internal operating budgets and forecasts for long-term demand and pricing in our industry and markets. If these estimates or their related assumptions change in the future, we may be required to record an impairment charge on all or a portion of our goodwill. Furthermore, we cannot predict the occurrence of future impairment-triggering events nor the impact such events might have on our reported values. Future events could cause us to conclude that impairment indicators exist and that goodwill associated with our acquired businesses are impaired. Any resulting impairment loss could have an adverse impact on our financial position and results of operations.

Under the two-step quantitative impairment test, the evaluation of impairment involves comparing the current fair value of each reporting unit to its carrying value, including goodwill. We use a discounted cash flow (“DCF”) model to estimate the current fair value of our reporting units when testing for impairment, as management believes forecasted cash flows are the best indicator of such fair value. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including macroeconomic trends in the public and private construction industry, the timing of work embedded in our backlog, our performance and profitability under our contracts, our success in securing future sales and the appropriate interest rate used to discount the projected cash flows. Most of these assumptions vary significantly among the reporting units. This discounted cash flow analysis is corroborated by “top-down” analyses, including a market assessment of our enterprise value.

We assessed the fair value of our reporting units in relation to their carrying values, which resulted in the estimated fair values of these reporting units being substantially in excess of their carrying values by a range of 26% to 133%. We have recorded no goodwill impairment charges in the current year or in previous years.

Impairment of long-lived assets, excluding goodwill

We evaluate the carrying value of long-lived assets, including intangible assets subject to amortization, when events and circumstances indicate that the carrying value may not be recoverable. The impairment evaluation is a critical accounting policy because long-lived assets are material to our total assets (as of December 29, 2012, property, plant and equipment, net represents 63.5% of total assets) and the evaluation involves the use of significant estimates and assumptions and considerable management judgment. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others. A one year increase or decrease in the average useful lives of our property, plant and equipment would have affected depreciation expense by ($5.2) million or $6.1 million, respectively, in 2012. An impairment charge could be material to our financial condition and results of operations. The carrying value of long-lived assets is considered impaired when the estimated undiscounted cash flows from such assets are less than their carrying value. In that event, we recognize a loss equal to the amount by which the carrying value exceeds the fair value of the long-lived assets.

Fair value is determined by primarily using a discounted cash flow methodology that requires considerable management judgment and long-term assumptions. Our estimate of net future cash flows is based on historical experience and assumptions of future trends, which may be different from actual results. There were no material

 

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long-lived asset impairments during the years ended December 29, 2012 or December 31, 2011, nor were there any changes to the useful lives of assets having a material impact on our results of operations or financial position.

Revenue recognition

We account for revenue and earnings on our long-term construction contracts as service revenue using the percentage-of-completion method of accounting. Under the percentage-of-completion method, we recognize contract revenue as services are rendered. We estimate profit as the difference between total estimated revenue and total estimated cost of a contract and recognize that profit over the remaining life of the contract based on input measures (e.g., costs incurred). We generally measure progress toward completion on long-term construction contracts based on the proportion of costs incurred to date relative to total estimated costs at completion. We include revisions of estimated profits on contracts in earnings under the cumulative catch-up method, under which the impact of revisions in estimates is recognized immediately. If a revised estimate of contract profitability reveals an anticipated loss on the contract, we recognize the loss in the period it is identified.

The percentage-of-completion method of accounting involves the use of various estimating techniques to project costs at completion, and in some cases includes estimates of recoveries asserted against the customer for changes in specifications or other disputes. Contract estimates involve various assumptions and projections relative to the outcome of future events over a period of multiple years, including future labor productivity and availability, the nature and complexity of the work to be performed, the cost and availability of materials, the impact of delayed performance, and the availability and timing of funding from the customer. These estimates are based on our best judgment. A significant change in one or more of these estimates could affect the profitability of one or more of our contracts. We review our contract estimates regularly to assess revisions in contract values and estimated costs at completion. No material contract adjustments were recognized in 2012 or 2011.

We recognize revenue arising from claims either as income or as an offset against a potential loss only when the amount of the claim can be estimated reliably and its realization is probable. In evaluating these criteria, we consider the contractual/legal basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs and the objective evidence available to support the claim.

Revenue for product sales is recognized when evidence of an arrangement exists, the fee is fixed or determinable, title passes, which generally is when the product is shipped, and collection is reasonably assured. Revenue from the receipt of waste fuels are based on fees charged for waste transfer and disposal and are recognized upon acceptance of the waste. Product revenue generally include sales of aggregates, cement and other materials to customers, net of discounts or allowances, if any, and generally include freight and delivery charges billed to customers. Freight and delivery charges associated with cement sales are recorded on a net basis.

Mining reclamation obligations

We incur reclamation obligations as part of our mining activities. Our quarry activities require the removal and relocation of significant levels of overburden to access stone of usable quantity and quality. The same overburden material is used to reclaim depleted mine areas, which must be sloped to a certain gradient and seeded to prevent erosion in the future. Reclamation methods and requirements can differ depending on the quarry and state rules and regulations in existence for certain locations. This differentiation impacts the potential obligation required at each individual subsidiary. As of December 29, 2012, our undiscounted reclamation obligations totaled $17.7 million, of which 18.2% is expected to be settled within the next five years and the remaining 81.8% thereafter.

 

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Reclamation costs resulting from the normal use of long-lived assets, either owned or leased, are recognized over the period the asset is in use only if there is a legal obligation to incur these costs upon retirement of the assets. The obligation, which cannot be reduced by estimated offsetting cash flows, is recorded at fair value as a liability at the obligating event date and is accreted through charges to operating expenses. The fair value is based on our estimate for a third party to perform the legally required reclamation tasks including a reasonable profit margin. This fair value is also capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset.

The mining reclamation reserve is based on management’s estimate of future cost requirements to reclaim property at both currently operating and closed quarry sites. Costs are estimated in current dollars and inflated until the expected time of payment using a future estimated inflation rate and then discounted back to present value using a credit-adjusted, risk-free rate on obligations of similar maturity adjusted to reflect the Company’s credit rating. We review reclamation obligations at least every three years for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation obligations are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date. Examples of events that would trigger a change in the cost include a new reclamation law or amendment to an existing mineral lease. Examples of events that would cause a change in the estimated settlement date include the acquisition of additional reserves or the closure of a facility. Any impact to earnings from cost revisions is included in cost of revenue.

New Accounting Standards

For a discussion of accounting standards recently adopted and the effect such accounting changes will have on our results of operations, financial position or liquidity, see note 1 to our audited consolidated financial statements included elsewhere in this prospectus.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks arising from transactions that are entered into in the normal course of business. Our operations are highly dependent upon the interest rate-sensitive construction industry as well as the general economic environment. Consequently, these marketplaces could experience lower levels of economic activity in an environment of rising interest rates or escalating costs.

Management has considered the current economic environment and its potential impact to our business. Demand for aggregates products, particularly in the nonresidential and residential construction markets, could decline if companies and consumers are unable to obtain financing for construction projects or if the economic recession causes delays or cancellations to capital projects. Additionally, declining tax revenue and state budget deficits have negatively affected states’ abilities to finance infrastructure construction projects.

Pension expense

Our subsidiary, Continental Cement, sponsors two non-contributory defined benefit pension plans for hourly and salaried employees, as well as healthcare and life insurance benefits for certain eligible retired employees. As of January 1, 2012, the pension and postretirement plans have been frozen to new entrants. Our results of operations are affected by our net periodic benefit cost from these plans, which totaled $1.2 million in 2012. Assumptions that affect this expense include the discount rate and, for the pension plans only, the expected long-term rate of return on assets. Therefore, we have interest rate risk associated with these factors. A one percentage-point increase or decrease in assumed health care cost trend rates would have affected estimated accumulated postretirement benefit obligation by $1.6 million or ($1.3) million, respectively, in 2012.

Commodity and energy price risk

We are subject to commodity price risk with respect to price changes in liquid asphalt and energy, including fossil fuels and electricity for aggregates, cement, asphalt paving mix and ready mix concrete production, natural

 

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gas for hot mix asphalt production and diesel fuel for distribution vehicles and production related mobile equipment. Liquid asphalt escalators in most of our public contracts, other than those in Texas, limit our exposure to price fluctuations in this commodity and we seek to obtain escalators on private and commercial contracts.

Inflation risk

Overall inflation rates in recent years have not been a significant factor in our revenue or earnings due to our ability to recover increasing costs by obtaining higher prices for our products through sale price escalators in place for most public sector contracts. Inflation risk varies with the level of activity in the construction industry, the number, size and strength of competitors and the availability of products to supply a local market.

Variable-Rate Borrowing Facilities

We have $150.0 million revolving credit commitments under the Senior Secured Credit Facility, which bear interest at a variable rate. A hypothetical 100-basis-point increase in interest rates on borrowings of $36.7 million, which represents our average outstanding balance throughout 2012, would increase interest expense by $0.4 million on an annual basis.

In February 2013, we entered into amendments to our Senior Secured Credit Facility that, among other things reduced the applicable margins used to calculate interest rates for term loans under our Credit Facility by 1.0% and reduced the applicable margins used to calculate interest rates for $131.0 million of $150.0 million Tranche A revolving credit loans available under the Senior Secured Credit Facility by 1.0%. Had this reduction been in place throughout 2012, our interest expense would have been reduced by $4.4 million.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS OF CONTINENTAL CEMENT COMPANY, L.L.C.

You should read the following discussion of Continental Cement’s results of operations and financial condition with Continental Cement’s audited consolidated financial statements and related notes thereto included elsewhere in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this prospectus. Continental Cement’s actual results may differ materially from those contained in any forward-looking statements.

Overview

Continental Cement produces Portland cement (“cement”) at its highly efficient, state-of-the-art, dry cement manufacturing plant located in Hannibal, Missouri and has distribution terminals in Hannibal and St. Louis, Missouri and Bettendorf, Iowa. Continental Cement’s primary cement operation customers are ready-mix operators and contractors located in the Midwestern United States. In addition to producing cement, Continental Cement secures, processes and blends hazardous and nonhazardous waste materials primarily for use as supplemental fuels in the cement manufacturing process. Continental Cement’s primary customers for this service are commercial transportation disposal facilities and petroleum and chemical manufacturers located in the continental United States.

Continental Cement’s cement serves a variety of end-uses in its market, including residential and non-residential, agricultural and public infrastructure projects. For the year ended December 31, 2012, approximately 35% of Continental Cement’s revenue related to public infrastructure construction and the remaining approximately 65% related to agricultural, residential and non-residential construction. Continental Cement believes exposure to various markets affords greater stability through economic cycles and positions it to capitalize on upside opportunities when recoveries in residential and non-residential construction occur. Continental Cement believes it is a top 20 supplier of cement in the United States by volume and the primary supplier within its local market.

In the cement industry, CaO content is the traditional measurement of limestone quality and purity. Limestone of 100% purity as measured by CaCO 3 contains 56% CaO. Continental Cement’s mineable reserves have an average grade of 51.9% CaO, or 92.7% CaCO 3 . The mineable reserve calculation is based on a 70-foot mining height and a recovery ratio of 71.3% over the approximately 3,000 acre plant site.

Business Trends and Conditions

Cement is used in most forms of construction activity. Participants in the cement sector typically are large multinational corporations that offer a wide array of construction materials and services. Markets are defined in part by the distance materials may be efficiently transported from a cement distribution facility.

Transportation infrastructure projects, driven by both state and federal funding programs, represent a significant share of the U.S. heavy-side building materials market. In July 2012, MAP-21 was enacted and took effect in October 2012. MAP-21 is a 27-month, approximately $105 billion transportation funding program that provides for $40.4 billion and $41.0 billion in highway infrastructure investments in fiscal years 2013 and 2014, respectively. The spending levels are consistent with the preceding federal transportation funding program. In addition to federal funding, highway construction and maintenance funding is also available through state, county and local agencies. Missouri, which represented 52% of Continental Cement’s total revenue for the year ended December 31, 2012, has funds whose revenue sources are constitutionally protected and may only be spent on transportation projects. Missouri has approximately $700.0 million in annual construction funding committed to essential road and bridge programs.

 

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Despite the economic challenges of recent years, Continental Cement believes that the enacted federal transportation funding program extending through fiscal 2014 is a positive development, reducing the uncertainty that existed with the previous funding program that had been subject to 10 short-term extensions. Within many of Continental Cement’s markets, the federal, state and local governments have taken actions to maintain or grow highway funding during a time in which many areas of spending are facing significant cuts. However, Continental Cement could still be impacted by any economic improvement or slowdown, which could vary by local region and market. Continental Cement’s sales and earnings are sensitive to national, regional and local economic conditions and particularly to cyclical swings in construction spending, especially in the private sector.

In addition to being subject to cyclical swings, Continental Cement’s business is also seasonal in nature. Almost all of its products are consumed outdoors. Severe weather, seasonal changes and other weather-related conditions can significantly affect the sales volumes of Continental Cement’s products. Normally, the highest sales and earnings are in the second and third quarters and the lowest are in the first and fourth quarters. Winter weather months are generally periods of lower sales as Continental Cement’s customers have fewer active projects. Periods of heavy rainfall also adversely affect Continental Cement’s customers’ work patterns and therefore demand for its products. Continental Cement’s working capital may vary greatly during these peak periods, but generally return to comparable levels as its operating cycle is completed each fiscal year.

Cement production is a capital-intensive business with variable costs dominated by raw materials and energy required to fuel the kiln. Building new plants is challenging given the extensive permitting that is required and significant costs. We believe new plant construction costs in the United States are estimated at $250-300 per ton. Assuming construction costs of $275 per ton, a 1.25 million ton facility, such as the one Continental Cement operates, would cost approximately $343.8 million to construct.

As reported by the PCA, consumption is down significantly from the industry peak of 141 million tons in 2005 to 79 million tons in 2011 because of the decline in U.S. construction sector activity. Domestic cement consumption has at times outpaced domestic production capacity with the shortfall supplied with imports primarily from China, Canada, Colombia, Mexico and South Korea. The PCA reports that cement imports have declined since their peak of 39 million tons in 2006 to 7 million tons in 2011, in a manner indicative of the industry’s general response to the current demand downturn. Despite the reduction in imports, capacity utilization declined from 95% in 2006 to 59% in 2011 according to the PCA. Continental Cement operated at 75% capacity utilization in 2011 and 81% in 2012, which is above the industry mean of 68% capacity utilization in 2011 as its markets did not suffer the pronounced demand declines seen in states like Florida, California and Arizona. Demand is seasonal in nature with nearly two-thirds of U.S. consumption occurring between May and October, coinciding with end-market construction activity.

Cement production in the United States is distributed among 101 production facilities located across 36 states. The EPA has new emission standards for Portland cement plants (“NESHAP”) that are due to come into effect in 2015. On December 20, 2012, the EPA signed the NESHAP final rule, which was less stringent than previous drafts. The PCA had estimated based on the draft rule that 18 plants could be forced to close due to the inability to meet NESHAP standards or because the compliance investment required may not be justified on a financial basis. These potential closures represent approximately 20 million tons of clinker capacity, or 20% of current capacity in the United States.

Continental Cement’s plant utilizes alternative fuel (hazardous and non-hazardous) as well as coal and petroleum coke and, as a result, is subject to HWC-MACT standards, rather than NESHAP. Continental Cement expects HWC-MACT standards to generally conform to NESHAP, for which Continental Cement is substantially in compliance, in advance of the effective date of the NESHAP standards. Any additional costs to comply with the NESHAP standards are not expected to be material.

 

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Components of Operating Results

Revenue

Continental Cement derives its revenue predominantly by selling cement and from the receipt of waste fuels, which are converted into fuel and used in the manufacturing of cement. Revenue derived from cement sales is recognized when risks associated with ownership have passed to customers. Typically this occurs when customers haul product from Continental Cement’s locations or when products are shipped. Product revenue includes sales of cement to customers, net of discounts, allowances and taxes, as applicable. Revenue from the receipt of waste fuels is classified as service revenue and is based on fees charged for the waste disposal, which are recognized when the waste is accepted.

Operating costs and expenses

The key components of Continental Cement’s operating costs and expenses consist of the following:

Cost of revenue (exclusive of items shown separately below)

Cost of revenue consists of all production and delivery costs as well as costs to dispose of waste fuels. Such costs primarily include labor, repair and maintenance, utilities, raw materials, fuel, transportation and manufacturing overhead. Continental Cement’s cost of revenue is directly impacted by fluctuations in commodity energy prices, primarily coal and natural gas. Continental Cement’s attempt to limit its exposure to changes in commodity energy prices by entering into annual forward purchase commitments when appropriate.

General and administrative expenses

General and administrative expenses consist primarily of salaries and personnel costs for Continental Cement’s sales and marketing, administration, finance and accounting, legal, information systems and human resources employees. Additional expenses include audit, consulting and professional fees, travel, insurance and other corporate expenses.

Transaction costs

Transaction costs consist primarily of third party accounting, legal, valuation and financial advisory fees incurred in connection with the May 2010 transaction through which Summit Materials II, LLC became Continental Cement’s majority shareholder and certain indebtedness was prepaid or refinanced.

Depreciation, depletion, amortization and accretion

Continental Cement’s business is relatively capital-intensive. Continental Cement carries property, plant and equipment at cost, net of applicable depreciation, depletion and amortization on its balance sheet. Depreciation on property, plant and equipment is computed on a straight-line basis or based on the economic usage over the estimated useful life of the asset.

The general range of depreciable lives by fixed asset category, excluding mineral reserves which are depleted based on the units of production method on a quarry-by-quarry basis, is as follows:

 

Buildings and improvements

     30 - 40 years     

Plant, machinery and equipment

     3 - 40 years     

Mobile equipment and barges

     3 - 20 years     

Other

     3 - 7 years       

Amortization expense is the periodic expense related to Continental Cement’s environmental permits and trade name, which was recognized as part of the May 2010 recapitalization. The environmental permits are generally amortized on a straight-line basis over three years. The trade name asset is amortized on a straight-line basis over its ten year estimated useful life.

 

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Accretion expense is recorded using the effective interest method and is related to the accrued mining reclamation liabilities.

Results of Operations

The following discussion of Continental Cement’s results of operations is focused on the material financial measures Continental Cement uses to evaluate the performance of its business. Operating income and margins are discussed in terms of changes in volume, pricing and mix of revenue source (e.g., wholesale or retail sales). Continental Cement’s product revenue reflects cement sales and service revenue reflects revenues from the acceptance of waste fuels.

To supplement the discussion of Continental Cement’s historical results of operations, Continental Cement has included a discussion of the aggregated information for the twelve months ended December 31, 2010, which represents only the mathematical sums of the information presented in the periods from (i) January 1, 2010 through May 26, 2010 (predecessor) and (ii) May 27, 2010 through December 31, 2010 (successor). The successor period represents the results of Continental Cement subsequent to Summit Materials’ acquisition of a controlling share of Continental Cement’s members’ interest. Continental Cement refers to the aggregated period as “aggregated twelve months ended December 31, 2010”. Although this presentation is not in accordance with GAAP, under which these periods would not be aggregated, Continental Cement believes the aggregated information for the year ended December 31, 2010 provides a meaningful comparison of its results for 2010 to its results for the year ended December 31, 2011.

Non-GAAP Performance Measures

Continental Cement evaluates the performance of its business and allocates its resources based on a measure it calls Adjusted EBITDA. Continental Cement defines Adjusted EBITDA as net income (loss) before interest expense, and depreciation, depletion, amortization and accretion. Accretion is recognized on asset retirement obligations and reflects the time value of money. Since accretion is similar in nature to interest expense, it is treated consistently with interest expense in determining Adjusted EBITDA. Adjusted EBITDA reflects an additional way of viewing aspects of Continental Cement’s business that, when viewed with Continental Cement’s GAAP results and the accompanying reconciliations to GAAP financial measures included in the tables below, may provide a more complete understanding of factors and trends affecting Continental Cement’s business. However, it should not be construed as being more important than other comparable GAAP measures and must be considered in conjunction with GAAP measures. In addition, non-GAAP financial measures are not standardized; therefore it may not be possible to compare such financial measures with other companies’ non-GAAP financial measures having the same or similar names. Continental Cement strongly encourages investors to review its consolidated financial statements in their entirety and not rely on any single financial measure.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

 

(in thousands)

   Year ended
December 31,
2012
     Year ended
December 31,
2011
     Aggregated
twelve months ended
December 31, 2010
    May 27, 2010 to
December 31,
2010
(Successor)
            January 1, 2010
to May 26, 2010
(Predecessor)
 

Net income (loss)

   $ 6,625       $ 2,462       $ (36,330   $ 227            $ (36,557

Interest expense

     12,622         14,621         26,686        8,150              18,536   

Depreciation, depletion and amortization

     10,449         9,956         9,680        5,363              4,317   

Accretion

     30         28         27        27              —     
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 

Adjusted EBITDA

   $ 29,726       $ 27,067       $ 63      $ 13,767            $ (13,704
  

 

 

    

 

 

    

 

 

   

 

 

         

 

 

 

 

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Consolidated Results of Operations

The tables below set forth Continental Cement’s historical consolidated results for each of the periods indicated.

 

(in thousands)

  Year ended
December 31,
2012
    Year ended
December 31,
2011
    Aggregated
twelve months ended
December 31, 2010
    May 27, 2010 to
December 31, 2010
(Successor)
          January 1, 2010
to May 26, 2010
(Predecessor)
 

Revenue

  $ 94,882      $ 79,488      $ 79,780      $ 55,505          $ 24,275   

Cost of revenue (exclusive of items shown separately below)

    58,319        47,721        60,129        33,661            26,468   

General and administrative expenses

    6,706        4,761        6,096        2,547            3,549   

Depreciation, depletion, amortization and accretion

    10,479        9,984        9,707        5,390            4,317   

Transaction costs

    —          —          13,660        5,671            7,989   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Operating income (loss)

    19,378        17,022        (9,812     8,236            (18,048

Other (income) expense, net

    131        (61     (168     (141         (27

Interest expense

    12,622        14,621        26,686        8,150            18,536   
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Net income (loss)

  $ 6,625      $ 2,462      $ (36,330   $ 227          $ (36,557
 

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Year ended December 31, 2012 compared to the year ended December 31, 2011

 

(in thousands)

   Year ended
December 31,
2012
    Year ended
December 31,
2011
           Variance  

Revenue

   $ 94,882      $ 79,488           $ 15,394         19.4

Operating income

   $ 19,378      $ 17,022           $ 2,356         13.8

Operating margin

     20.4     21.4          

Adjusted EBITDA

   $ 29,726      $ 27,067           $ 2,659         9.8

Continental Cement’s revenue increased from $79.5 million in the twelve months ended December 31, 2011 to $94.9 million in the year ended December 31, 2012. The increase in revenue is a result of selling approximately 1.0 million tons of cement in 2012 as compared to 0.9 million tons in 2011, an increase of 11.1%. However, a significant portion of the increased volume represented tons sold wholesale as an entrant into a new market and to other cement producers, which resulted in a decrease in the average selling price from $83 per ton in 2011 to $81 per ton in 2012.

Operating margin, which Continental Cement defines as operating income as a percentage of revenue, declined from 21.4% in 2011 to 20.4% in 2012 due to the decrease in average selling price discussed above.

Adjusted EBITDA improved $2.7 million, or 9.8%, in the twelve months ended December 31, 2012 to $29.7 million. The increase in Adjusted EBITDA was a result of the increased sales to higher volume customers at lower prices and, to a lesser extent, increased waste fuel volumes.

Other Financial Information

Interest expense

Interest expense decreased $2.0 million to $12.6 million in the year ended December 31, 2012 compared to $14.6 million in the year ended December 31, 2011. The decrease in Continental Cement’s interest expense was primarily due to a decrease in the weighted-average interest rate from 9.0% in 2011 to 7.7% in 2012. The decreased interest rate was a result of Summit Material’s refinancing in January 2012; see additional discussion below.

 

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Year ended December 31, 2011 compared to the aggregated twelve months ended December 31, 2010

 

(in thousands)

   Year ended
December 31,
2011
    Aggregated
twelve months ended
December 31, 2010
           Variance  

Revenue

   $ 79,488      $ 79,780           $ (292     (0.4 )% 

Operating income (loss)

   $ 17,022      $ (9,812        $ 26,834        273.5

Operating margin

     21.4     (12.3 )%          

Adjusted EBITDA

   $ 27,067      $ 63           $ 27,004        42,863.5

Continental Cement’s revenue remained relatively flat from $79.8 million in the aggregated twelve months ended December 31, 2010 to $79.5 million in the year ended December 31, 2011. However, operating margin and Adjusted EBITDA improved significantly from (12.3)% and $0.1 million, respectively, in the aggregated twelve months ended December 31, 2010 to 21.4% and $27.1 million, respectively, in the year ended December 31, 2011. This improvement was a result of the following:

 

   

$13.7 million of transaction costs were incurred in the aggregated twelve months ended December 31, 2010 related to the transaction through which Summit Materials became the majority shareholder of Continental Cement

 

   

Cost of revenue decreased $12.4 million from $60.1 million in the aggregated twelve months ended December 31, 2010 to $47.7 million in the year ended December 31, 2011 due primarily to a $1.7 million charge for stripping in 2010, compared to no stripping charges in 2011 and a $7.2 million write-down of clinker inventory in 2010 to its market value, which was less than its cost basis.

Other Financial Information

Interest expense

Interest expense decreased $12.1 million, or 45.3%, to $14.6 million in the year ended December 31, 2011 compared to $26.7 million in the aggregated twelve months ended December 31, 2010. The decrease in Continental Cement’s interest expense was due to $3.5 million of interest expense in the period from January 1, 2010 to May 26, 2010 associated with the grant of redeemable members’ units and due to a $110.3 million payment on the long-term debt on May 27, 2010.

Liquidity and Capital Resources

Continental Cement’s primary sources of liquidity include cash, cash provided by its operations and amounts available for borrowing from Continental Cement’s parent company, Summit Materials. As of December 31, 2012, Continental Cement had $0.6 million in cash and working capital of $9.9 million as compared to $0.1 million in cash and working capital of $3.8 million as of December 31, 2011. Working capital is calculated as current assets less current liabilities, excluding the current portion of long term debt. In 2012, Continental Cement began participating in Summit Material’s centralized banking system, through which excess funds are swept to Summit Materials at the end of each day and Continental Cement’s accounts are funded each day from the sweep account for amounts presented to Continental Cement’s accounts for payment. Continental Cement expects the cash balance held at Continental Cement to be nominal going forward.

Given the seasonality of its business, Continental Cement typically experiences significant fluctuations in working capital needs and balances throughout the year with sales peaking in the summer and fall months. Despite the seasonality of its sales, Continental Cement produces cement throughout the year with the exception of scheduled plant maintenance during non-peak months. Continental Cement believes it has sufficient financial resources from its liquidity sources to fund its business and operations, including contractual obligations, capital expenditures and debt service obligations for at least the next twelve months. There were no restricted cash balances as of December 31, 2012 or 2011.

 

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Continental Cement’s Long-term Debt

Refer to “Description of Other Indebtedness” and to the notes to the consolidated financial statements included elsewhere in this prospectus for detailed information on Continental Cement’s indebtedness and scheduled maturities of long-term debt. At December 31, 2012 and December 31, 2011, there was $156.4 million and $154.0 million debt outstanding, respectively, including the revolving credit facility at year-end 2011.

January 2012 Financing Transactions

On January 30, 2012, Continental Cement’s parent company, Summit Materials, refinanced its consolidated outstanding indebtedness. The refinancing of the pre-existing long-term debt was partially accounted for as an extinguishment. As a result of the January 2012 financing transactions, Continental Cement’s existing debt was repaid by Summit Materials and was replaced by $156.8 million of long-term debt due to Summit Materials. In addition, Continental Cement recognized a charge to earnings of $0.3 million related to financing fees on the debt repaid.

The terms of Summit Materials’ debt limit certain transactions of its subsidiaries, including those of Continental Cement. Continental Cement’s ability to incur additional indebtedness or issue certain preferred shares, pay dividends to its noncontrolling members, redeem stock or make other distributions, make certain investments, sell or transfer certain assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into certain transactions with affiliates are limited.

Cash Flows

The following tables summarize Continental Cement’s net cash provided by or used for operating activities, investing activities and financing activities and Continental Cement’s capital expenditures for the periods indicated (in thousands):

 

    Year ended
December 31,
2012
    Year ended
December 31,
2011
    Aggregated
twelve months ended
December 31, 2010
    May 27, 2010
to December 31,
2010

(Successor)
          January 1, 2010
to May 26, 2010

(Predecessor)
 

Net cash provided by (used for):

             

Operating activities

  $ 22,379      $ 5,031      $ (19,560   $ (13,172       $ (6,388

Investing activities

    (23,035     (6,942     (7,487     (6,251         (1,236

Financing activities

    1,200        1,957        27,047        17,247            9,800   

Cash paid for capital expenditures

    (12,805     (7,110     (11,067     (6,726         (4,341

Operating activities

For the year ended 2012, cash provided by operating activities was $22.4 million, driven by net income of $17.1 million, net of $10.5 million of depreciation, depletion, amortization and accretion expense, as well as a $2.8 million reduction in inventory. The reduction in inventory was a result of an improvement in inventory management as compared to a $3.2 million increase in inventory in 2011.

For the year ended 2011, cash provided by operating activities was $5.0 million, driven by net income of $12.4 million, net of $10.0 million of depreciation, depletion, amortization and accretion expense, offset by a $3.2 million increase in inventory and a $4.1 million increase in accounts receivable and other assets.

For the aggregated twelve months ended December 31, 2010, cash used for operating activities was $19.6 million. Operating cash flow was impacted by $13.7 million of transaction costs paid in association with Summit’s purchase of a 70% interest in Continental Cement and a concurrent refinancing of and payment on Continental Cement’s long-term debt. The proceeds from the sale of the 70% interest to Summit were also used to pay accrued interest, resulting in total interest payments in the aggregated twelve months ended December 31, 2010 of $30.7 million.

 

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Investing activities

For the year ended 2012, cash used for investing activities was $23.0 million. Cash used for investing activities was impacted by $10.2 million of net loans to Continental Cement’s sister companies. Due to strong cash flow provided by operations, Continental Cement was a net lender to Continental Cement’s sister companies in 2012. Continental Cement also invested $5.0 million in the development of an underground aggregates mine on Continental Cement’s Hannibal, Missouri property where its cement plant is located.

For the year ended 2011, cash used for investing activities was $6.9 million, $7.1 million of which was on capital expenditures, primarily replacement and maintenance parts.

For the aggregated twelve months ended 2010, cash used for investing activities was $7.5 million, which primarily related to $11.1 million of capital expenditures. The largest capital investment in 2010 was for a dock relocation project in St. Louis, Missouri for $6.3 million. The capital expenditures were offset by the receipt of $3.1 million in funds restricted to use for investment on the dock relocation project.

Financing activities

For the year ended 2012, cash provided by financing activities was $1.2 million. Continental Cement’s financing cash flows in 2012 reflect Continental Cement’s net borrowings and repayments on long-term debt financed with Summit.

For the year ended 2011, cash provided by financing activities was $2.0 million, primarily driven by net borrowings and repayments on long-term debt.

For the aggregated twelve months ended 2010, cash provided by financing activities was $27.0 million. Included in financing activities in the aggregated twelve months ended December 31, 2010 was Summit’s $135.0 million purchase of Class A Units, $29.2 million of new borrowings, offset by $137.2 million of debt payments. Funds from the $135.0 million purchase of Class A Units were used to pay $110.3 million of outstanding indebtedness, as well as accrued interest and transaction fees.

Cash paid for capital expenditures

Continental Cement expended approximately $12.8 million in capital expenditures in 2012 compared to $7.1 million in 2011. A significant portion of the increase in capital expenditures in 2012 relates to developing an underground mine to extract limestone on Continental Cement’s Hannibal, MO property where its cement plant is located. Continental Cement spent an additional $4.8 million on the underground mine development in 2012, as compared to $0.2 million in 2011.

In the year ended December 31, 2011, Continental Cement invested $7.1 million in capital expenditures compared to $11.1 million in the aggregated twelve months ended December 31, 2010. In 2010, $6.3 million was spent on a dock relocation project in St. Louis, Missouri.

Continental Cement estimates that it will incur between $16.0 million and $20.0 million in capital expenditures in 2013, which it has funded or expects to fund through cash on hand, cash from operations and available borrowings under Summit’s credit facilities. A significant portion of Continental Cement’s anticipated future capital expenditures relates to development of the underground mine. Continental Cement expects to spend approximately $12.5 million in aggregate during 2013 and 2014 on this project. Continental Cement believes this project will eliminate the need to strip away overburden that covers the limestone and ultimately save about $1.50 to $2.00 per ton of limestone off Continental Cement’s average historical mining cost.

 

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Contractual Obligations

The following table presents, as of December 31, 2012, Continental Cement’s obligations and commitments to make future payments under contracts and contingent commitments:

 

     Total      2013      2014 - 2015      2016 - 2017      Thereafter  

Contractual Obligations

              

Short term borrowings and long-term debt, including current portion

   $ 156,358       $ 965       $ 1,930       $ 1,930       $ 151,533   

Operating lease obligations

     1,367         377         386         343         261   

Interest payments(1)

     83,316         12,138         24,101         23,867         23,210   

Pensions and other postretirement plans(2)

     27,308         2,773         5,557         5,516         13,462   

Asset retirement obligation payments

     1,830         —           1,470         —           360   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total contractual obligations(3)

   $ 270,179       $ 16,253       $ 33,444       $ 31,656       $ 188,826   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Future interest payments were calculated using the applicable fixed and floating rates charged by Summit Materials in effect as of December 31, 2012 and may differ from actual results.
(2) Amounts represent estimated future payments to fund Continental Cement’s defined benefit retirement plans.
(3) Any future payouts on the redeemable members’ interest are excluded from total contractual obligations as the expected timing of settlement is not estimable.

Commitments and contingencies

In the normal course of business, Continental Cement has commitments, lawsuits, claims and contingent liabilities. In the opinion of Continental Cement’s management, the ultimate disposition of these matters will not have a material adverse effect on its consolidated financial position, results of operations or liquidity.

Approximately 64% of Continental Cement’s employees are represented by labor organizations under collective bargaining agreements. The collective bargaining agreements expire between 2013 and 2015. Historically, the Company has been successful at negotiating successor agreements without any material disruption to operating activities. Management does not expect 2013 negotiations to have a material impact on results of operations, financial condition or liquidity.

Off-Balance sheet arrangements

As of December 31, 2012, Continental Cement had no material off-balance sheet arrangements, such as financing or unconsolidated variable interest entities, that either have or are reasonably likely to have a current or future material effect on Continental Cement’s results of operations, financial position, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

Continental Cement’s management’s discussion and analysis of its financial condition and results of operations is based on its consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires Continental Cement’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period.

On an ongoing basis, Continental Cement’s management evaluates its estimates, including those related to the allowance for doubtful accounts, inventories, asset retirement obligations, the noncontrolling interest and goodwill.

 

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Continental Cement bases its estimates and judgments on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue recognition

Revenue for cement sales is recognized when evidence of an arrangement exists, the fee is fixed or determinable, title passes, which is generally when the product is shipped, and collection is reasonably assured. Revenue from the receipt of waste fuels are recognized when the waste is accepted and a corresponding liability is recognized for the costs to burn the waste for the manufacturing of cement or to ship the waste offsite for disposal in accordance with regulations. Cement sales are recorded net of discounts, allowances and sales taxes, as applicable.

Mining reclamation obligations

Continental Cement incurs reclamation obligations as part of its mining activities. Continental Cement mines aggregates and clay at its Hannibal and Owensville, Missouri locations, respectively, which are a key material used in the production of cement. Continental Cement’s quarry activities require the removal and relocation of significant levels of overburden to access stone of usable quantity and quality. The same overburden material is used to reclaim depleted mine areas, which must be sloped to a certain gradient and seeded to prevent erosion in the future. Reclamation methods and requirements can differ depending on the quarry and regulations in existence for certain locations. As of December 31, 2012, Continental Cement’s undiscounted reclamation obligations totaled $1.8 million, of which 80.3% is expected to be settled within the next five years and the remaining 19.7% thereafter. Continental Cement’s above-ground aggregate reserves are nearing depletion and, as a result, Continental Cement is developing an underground mine, which holds over 200 years of proven and probable aggregate reserves.

Reclamation costs resulting from the normal use of long-lived assets are recognized over the period the asset is in use only if there is a legal obligation to incur these costs upon retirement of the assets. The obligation, which cannot be reduced by estimated offsetting cash flows, is recorded at fair value as a liability at the obligating event date and is accreted through charges to operating expenses. The fair value is based on Continental Cement’s estimate for a third party to perform the legally required reclamation tasks including a reasonable profit margin. This fair value is also capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset.

The mining reclamation reserve is based on Continental Cement’s management’s estimate of future cost requirements to reclaim property at the above ground quarry site. Costs are estimated in current dollars and inflated until the expected time of payment using a future estimated inflation rate and then discounted back to present value using a risk-free rate on obligations of similar maturity adjusted to reflect Continental Cement’s credit rating. Continental Cement reviews reclamation obligations at least every three years for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation obligations are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date. Examples of events that would trigger a change in the cost include a new reclamation law or amendment to an existing mineral lease. Examples of events that would cause a change in the estimated settlement date include the acquisition of additional reserves or the closure of a facility. Any impact to earnings from cost revisions is included in cost of revenue.

Goodwill and goodwill impairment

Goodwill is tested annually for impairment and in interim periods if certain events occur indicating that the carrying amounts may be impaired. The impairment evaluation is a critical accounting policy because the

 

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evaluation involves the use of significant estimates and assumptions and considerable management judgment. Continental Cement’s judgments regarding the existence of impairment indicators and future cash flows related to goodwill are based on operational performance of its businesses, market conditions and other factors. Although there are inherent uncertainties in this assessment process, the estimates and assumptions Continental Cement uses, including estimates of future cash flows, volumes, market penetration and discount rates, are consistent with its internal planning. The estimated future cash flows are derived from internal operating budgets and forecasts for long-term demand and pricing in Continental Cement’s industry and market. If these estimates or their related assumptions change in the future, Continental Cement may be required to record an impairment charge on all or a portion of its goodwill. Furthermore, Continental Cement cannot predict the occurrence of future impairment-triggering events nor the impact such events might have on its reported values. Future events could cause Continental Cement to conclude that impairment indicators exist and that goodwill associated with its acquired businesses are impaired. Any resulting impairment loss could have an adverse impact on Continental Cement’s financial position and results of operations.

Continental Cement performed its annual assessment of goodwill in the fourth quarter of 2012 for its reporting unit for which Continental Cement’s senior management regularly reviews the operating results. Under the two-step quantitative impairment test, the evaluation of impairment involves comparing the current fair value of the reporting unit to its carrying value, including goodwill. Continental Cement uses a discounted cash flow (“DCF”) model to estimate the current fair value of its reporting unit when testing for impairment, as Continental Cement’s management believes forecasted cash flows are the best indicator of such fair value. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including macroeconomic trends in the public and private construction industry, the timing of work embedded in Continental Cement’s backlog, its performance and profitability under its contracts, its success in securing future sales and the appropriate interest rate used to discount the projected cash flows. This discounted cash flow analysis is corroborated by “top-down” analyses, including a market assessment of Continental Cement’s enterprise value.

As of the first day of the fourth quarter, Continental Cement’s fair value was assessed in relation to its carrying value. As a result of this analysis, Continental Cement determined that the estimated fair value is substantially in excess of its carrying values (greater than 40%). Continental Cement recorded no goodwill impairment charges in the current year or in previous years.

Impairment of long-lived assets, excluding goodwill

Continental Cement evaluates the carrying value of long-lived assets, including intangible assets subject to amortization, when events and circumstances indicate that the carrying value may not be recoverable. The impairment evaluation is a critical accounting policy because long-lived assets are material to Continental Cement’s total assets (as of December 31, 2012, property, plant and equipment, net represented 82% of total assets) and the evaluation involves the use of estimates and assumptions and considerable management judgment. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows or a trend of negative or declining cash flows over multiple periods, among others. A one year increase or decrease in average useful lives of plant and equipment would have affected depreciation expense by ($0.4) million or $0.4 million, respectively, in 2012. An impairment charge could be material to Continental Cement’s financial condition and results of operations. The carrying value of long-lived assets is considered impaired when the estimated undiscounted cash flows from such assets are less than their carrying value. In that event, Continental Cement recognizes a loss equal to the amount by which the carrying value exceeds the fair value of the long-lived assets.

Fair value is determined by primarily using a discounted cash flow methodology that requires considerable management judgment and long-term assumptions. Continental Cement’s estimate of net future cash flows is based on historical experience and assumptions of future trends, which may be different from actual results.

 

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There were no material long-lived asset impairments during the years ended December 31, 2012 or December 31, 2011 nor were there any changes to the useful lives of assets having a material impact on Continental Cement’s financial condition and results of operations.

New Accounting Standards

For a discussion of accounting standards recently adopted and the effect such accounting changes will have on Continental Cement’s results of operations, financial position or liquidity, see note 1 to the audited Continental Cement consolidated financial statements included elsewhere in this prospectus.

Quantitative and Qualitative Disclosures About Market Risk

Continental Cement is exposed to certain market risks arising from transactions that are entered into in the normal course of business. Continental Cement’s operations are highly dependent upon the interest rate-sensitive construction industry as well as the general economic environment. Consequently, these marketplaces could experience lower levels of economic activity in an environment of rising interest rates or escalating costs.

Continental Cement’s management has considered the current economic environment and its potential impact to Continental Cement’s business. Demand for aggregates products, particularly in the nonresidential and residential construction markets, could decline if companies and consumers are unable to obtain financing for construction projects or if the economic recession causes delays or cancellations to capital projects. Additionally, declining tax revenue and state budget deficits have negatively affected states’ abilities to finance infrastructure construction projects.

Pension and other postretirement benefit plans

Continental Cement sponsors two non-contributory defined benefit pension plans for hourly and salaried employees, as well as healthcare and life insurance benefits for certain eligible retired employees. As of January 1, 2012, the pension and postretirement plans have been frozen to new entrants. Continental Cement’s results of operations are affected by its net periodic benefit cost from these plans, which totaled $1.2 million in 2012. Assumptions that affect this expense include the discount rate and, for the pension plans only, the expected long-term rate of return on assets. Therefore, Continental Cement has interest rate risk associated with these factors. A one percentage-point increase or decrease in assumed health care cost trend rates would have affected the accumulated postretirement benefit obligations by $1.6 million or ($1.3) million, respectively, in 2012.

Commodity and energy price risk

Continental Cement is subject to commodity price risk with respect to price changes in energy, including fossil fuels natural gas and diesel for cement production activities.

Inflation risk

Overall inflation rates in recent years have not been a significant factor in Continental Cement’s revenue or earnings due to Continental Cement’s ability to recover increasing costs by obtaining higher prices for its products through sale price escalators in place for most public sector contracts. Inflation risk varies with the level of activity in the construction industry, the number, size and strength of competitors and the availability of products to supply a local market.

 

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BUSINESS

Overview

We are a leading, vertically-integrated, geographically-diverse heavy-side building materials company; we supply aggregates, cement and related downstream products such as ready mixed concrete, asphalt paving mix, concrete products and paving and related construction services to a variety of end-uses in the U.S. construction industry, including public infrastructure projects, as well as private residential and non-residential construction. We believe we are a top 15 supplier of aggregates, a top 20 supplier of cement, a top 10 producer of asphalt paving mix and a major producer of ready mixed concrete in the United States by volume. As of December 29, 2012, we had 1.2 billion tons and 0.4 billion tons of proven and probable aggregates reserves serving our aggregates and cement businesses, respectively, and operated over 120 sites and plants. We believe that we have adequate road, barge and/or railroad access to all of our sites and plants. In the year ended December 29, 2012, we sold 16.4 million tons of aggregates, 1.0 million tons of cement, 4.6 million tons of asphalt paving mix and 1.1 million cubic yards of ready mixed concrete. For the year ended December 29, 2012, we generated revenue of $962.9 million.

We were formed in September 2008. Since July 2009, the Sponsors and certain of our officers, directors and employees have made $794.5 million of funding commitments to our indirect parent entity, Summit Materials Holdings L.P. We have grown rapidly as a result of our disciplined acquisition strategy, utilizing approximately $457.3 million of the $463.9 million of equity commitments funded to Parent by the Sponsors and certain other investors. Today, our nine operating companies make up our three distinct geographic regions that span 20 states and 23 metropolitan statistical areas. We believe each of our operating companies has a top three market share position in its local market area and an extensive operating history, averaging over 35 years. Our highly experienced management team, led by 30-year industry veteran CEO Tom Hill, has successfully enhanced the operations of acquired companies by focusing on scale advantages, cost efficiencies and pricing discipline to improve profitability and cash flow.

Our strategy is focused on developing a heavy-side, vertically integrated company with a strong aggregates base. We strive to be a leading supplier of all four major resource-based products—aggregates, cement, asphalt paving mix and ready mixed concrete—in the U.S. heavy-side building materials industry. We believe vertical integration across these major products strengthens our market positions and helps us achieve significant cost advantages. We believe a diversified mix of products also provides us with greater stability and insulates against local market fluctuations, competitive pricing dynamics and other individual market variances.

Our revenue is derived from multiple end-use markets, including public infrastructure construction as well as residential and non-residential construction. For the year ended December 29, 2012, approximately 62% of our revenues related to public infrastructure construction and the remaining 38% related to residential and non-residential construction. In general, our aggregates and asphalt paving mix and paving businesses are weighted towards public construction. Our cement and ready mixed concrete businesses serve both the public and private construction markets. Public construction includes spending by federal, state and local governments for roads, highways, bridges, airports and other public infrastructure construction projects. A significant portion of our construction revenues are from public construction projects, a historically more stable portion of state and federal budgets. Our acquisitions to date are primarily focused in states with constitutionally-protected transportation funding sources, which we believe serves to limit our exposure to state and local budgetary uncertainties. Private construction includes both new residential and non-residential construction and repair and remodel markets, which have been significantly impacted by the recent and current economic conditions. We believe exposure to various geographic markets affords us greater stability through economic cycles and positions us to capitalize on upside opportunities when recoveries in residential and non-residential construction occur.

Our products sold externally are generally delivered upon receipt of orders or requests from customers. Accordingly, the backlog associated with external product sales is converted into revenue within a relatively short period of time. Inventory for products is generally maintained in sufficient quantities to meet rapid delivery requirements of customers.

 

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Our construction services backlog represents our estimate of the revenues that will be realized under the portion of the construction contracts remaining to be performed. We generally include a project in our contract backlog at the time a contract is awarded and funding is in place. Substantially all of the contracts in our contract backlog may be canceled or modified at the election of the customer. However, we have not been materially adversely affected by contract cancellations or modifications in the past. Many of our construction services are awarded and completed within one year and therefore may not be reflected in our beginning or year-end contract backlog.

As a vertically-integrated business, approximately 26% of our aggregates production is further processed and sold as a downstream product, such as asphalt paving mix or ready mixed concrete, or used in our construction services business. Approximately 75% of the asphalt paving mix we produce is installed by our own paving crews. A quarterly increase or decrease of backlog does not necessarily result in an improvement or a deterioration of our business. Our backlog includes only those products and projects for which we have obtained a purchase order or a signed contract with the customer. The following table sets forth, by product, our backlog as of the indicated dates:

 

(in thousands)

   March 30,
2013
   December 29,
2012
   December  31,
2011

Aggregate (in tons)

       5,794          3,908          2,905  

Asphalt (in tons)

       2,764          2,614          2,267  

Ready mixed concrete (in cubic yards)

       168          155          259  

Construction services

     $ 393,559        $ 288,673        $ 329,802  

Approximately 95%, 79%, 97% and 69% of our aggregate, asphalt, ready mixed concrete and construction backlog, respectively, are expected to be completed and converted into revenue in 2013.

Markets by Region

We currently operate across 20 states through our three regional platforms: Central, West and East. Each of our operating businesses has its own management team that, in turn, reports to a regional president who is responsible for overseeing business development opportunities and implementing best practices within the regional platform. Our first and largest platform is our Central region. Our most recent platform, the West region, was established in August 2010 with our acquisition of the Harper Contracting and Kilgore businesses in Utah. Company acquisitions are an important element of our strategy, as we seek to enhance value through increased scale and cost savings from vertical integration within local markets and through the regional management.

Central Region . The Central region platform encompasses our integrated aggregates, cement, asphalt paving mix, ready mixed concrete and other operations in Kansas, Missouri, Nebraska, Iowa and Illinois. Within the region, we control proven and probable aggregates reserves serving our aggregates and cement businesses of approximately 0.5 billion tons and 0.4 billion tons, respectively, and total hard assets, which we define as the sum of our property, plant and equipment, net and inventories, with a balance sheet book value of $488.0 million as of December 29, 2012. During the year ended December 29, 2012, the Central region platform generated approximately 32% of our revenue. Approximately 52% of the Central region’s revenues were derived from public infrastructure spending, and the remaining 48% of its revenues were generated by residential and non-residential construction for the year ended December 29, 2012.

Our cement business in Missouri, Continental Cement, operates a highly efficient, technologically advanced, integrated manufacturing and distribution system strategically located near Hannibal, Missouri, 100 miles north of St. Louis along the Mississippi River. Continental Cement utilizes an on-site solid and liquid waste fuel processing facility, which can reduce our fuel costs at that facility by up to 50%. The Continental Cement plant is covered by HWC-MACT, rather than PC-MACT, due to its waste fuel processing capabilities. We believe the facility is well positioned to comply with any potential regulatory changes during the foreseeable future.

 

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West Region . The West region platform encompasses our integrated aggregates, asphalt paving mix, ready mixed concrete, construction, and other operations in Texas, Utah, Colorado, Idaho and Wyoming. Within the region, we control proven and probable aggregates reserves of approximately 0.3 billion tons and total hard assets with a balance sheet book value of $254.9 million as of December 29, 2012. During the year ended December 29, 2012, the West region platform generated approximately 50% of our revenue. Approximately 64% of its revenues were derived from public infrastructure spending, and the remaining 36% of its revenues were generated by residential and non-residential construction for the year ended December 29, 2012.

In August 2010, we acquired Kilgore and simultaneously acquired and merged assets from Harper Contracting (collectively referred to as the “Kilgore Companies”) in Salt Lake City, Utah to establish the cornerstone of our West region platform. We expanded Kilgore Companies with the acquisitions of Altaview Concrete in Salt Lake City, B&B in Bluffdale, Utah, EnerCrest in southwest Wyoming, and Triple C in southern Idaho. Subsequently, in December 2010, we extended the West platform to the Texas market with the acquisition of RK Hall, an aggregates and asphalt paving business primarily operating in northeast Texas as well as southern Arkansas and southern Oklahoma. We also expanded to Grand Junction, Colorado with our acquisitions of Grand Junction Pipe and Elam Construction. Capitalizing on the regional presence of RK Hall, we acquired Industrial Asphalt and Ramming Paving in August and October 2011, respectively, which expanded our presence into the attractive Austin, Texas market. These businesses complement each other with well-positioned reserves and integrated asphalt / paving operations.

East Region . The East region platform encompasses our integrated aggregates, asphalt paving mix, construction and other operations in Kentucky, Indiana, Ohio, Tennessee and Virginia. Within the region, we control proven and probable aggregates reserves of approximately 0.4 billion tons as of December 29, 2012 and total hard assets with a balance sheet book value of $162.6 million as of December 29, 2012. During the year ended December 29, 2012, the East region platform generated approximately 18% of our revenue. Approximately 73% of the East region’s revenues were derived from public infrastructure spending, and the remaining 27% of its revenues were generated by residential and non-residential construction for the year ended December 29, 2012.

The East region platform is anchored by the Hinkle Contracting business, one of our largest acquisitions to date, which we acquired in February 2010 and strengthened with bolt-ons of select aggregates and asphalt assets from Greer, an asset swap with Scotty’s Contracting & Stone LLC where we exchanged asphalt paving mix and construction assets for a total of eight owned and leased quarry sites in southern Kentucky, the buyout of our non-controlling partner in the Bourbon Limestone aggregates business and select aggregates and asphalt assets from Kay & Kay.

 

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Acquisition History

The following table lists acquisitions we have completed since August 2009:

 

Company

  

Date of Acquisition

           Region        

Hamm (predecessor)

   August 25, 2009    Central

Hinkle Contracting

   February 1, 2010    East

Cornejo

   April 16, 2010    Central

Greer

   April 20, 2010    East

Continental Cement

   May 27, 2010    Central

Harshman

   June 15, 2010    Central

Scotty’s

   July 23, 2010    East

Harper Contracting

   August 2, 2010    West

Kilgore

   August 2, 2010    West

Con-Agg

   September 15, 2010    Central

Altaview Concrete

   September 15, 2010    West

EnerCrest

   September 28, 2010    West

RK Hall

   November 30, 2010    West

SCS

   November 30, 2010    West

Triple C

   January 14, 2011    West

Elam Construction

   March 31, 2011    West

Bourbon

   May 27, 2011    East

Fischer

   May 27, 2011    Central

B&B

   June 8, 2011    West

Grand Junction Pipe

   June 10, 2011    West

Industrial Asphalt

   August 2, 2011    West

Ramming Paving

   October 28, 2011    West

Norris

   February 29, 2012    Central

Kay & Kay

   October 5, 2012    East

Sandco

   November 30, 2012    West

Lafarge

   April 1, 2013    Central

Westroc

   April 1, 2013    West

Our End Markets

Public Sector Construction . Public sector construction includes spending by federal, state and local governments for highways, bridges, airports and other public infrastructure construction projects. Generally, public sector construction spending is more stable than private sector construction. We believe that public sector spending is less sensitive to interest rates and often is supported by multi-year federal and state legislation and programs. A significant portion of our revenue is from public construction projects. As a result, the supply of funding for public highway construction significantly affects our public sector construction business.

Historically, public sector funding has been underpinned by a series of six-year federal highway authorization bills. Federal funds are allocated to the states which are required to match a portion of the federal funds they receive. Federal highway spending uses funds largely from the Federal Highway Trust Fund which derives its revenue from taxes on diesel fuel, gasoline and other user fees. The dependability of federal funding allows the state departments of transportation to plan for their long term highway construction and maintenance needs.

In July 2012, MAP-21 was enacted and took effect in October 2012. MAP-21 is a 27-month, approximately $105 billion transportation funding program that provides for $40.4 billion and $41.0 billion for highway infrastructure investments in fiscal years 2013 and 2014, respectively. The spending levels are consistent with the preceding federal transportation funding program. However, given the nation’s aging infrastructure and considering longstanding historical spending trends, we expect U.S. infrastructure investment growth to resume.

 

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Non-Residential Construction . Non-residential construction encompasses all privately financed construction other than residential structures. Demand for nonresidential construction is driven by population and job growth. Job growth creates demand for projects such as hotels, office buildings, warehouses and factories. Population growth spurs demand for stores, shopping centers, schools and restaurants. The supply of non-residential construction projects is affected by interest rates and the availability of credit to finance these projects.

Residential Construction . Residential construction includes single family houses and multi-family units such as apartments and condominiums. Demand for residential construction is influenced by new household formation, employment prospects and mortgage interest rates. In recent years, foreclosures have resulted in an oversupply of available houses which has dampened the demand for new residential construction in many markets in the United States.

Our Competitive Strengths

Leading market positions . We believe each of our operating companies has a top three market share position in its local market area. We believe we are among the top 15 suppliers of aggregates, top 20 suppliers of cement, a top 10 supplier of asphalt paving mix, and a major ready mixed concrete supplier in the United States by volume. We focus on acquiring companies that have leading local market positions, which we seek to enhance by building scale with other local aggregates and downstream businesses. The heavy-side building products industry is primarily local in nature due to transportation costs from the high weight-to-value ratio of the products. Given this dynamic, we believe achieving local market scale provides a competitive advantage that drives growth and stability for our business. We believe that our ability to prudently acquire and rapidly integrate multiple businesses enables us to become market leaders in attractive regions.

Vertically-integrated business model . We generate revenue across a spectrum of related products and services. We internally supply the majority of the aggregates used in the asphalt paving mixes and ready mixed concrete that we produce and in the construction services that we perform for our customers. Our vertically-integrated business model enables us to operate as a single source provider of materials and construction capabilities, creating cost, convenience and reliability advantages for our customers, while at the same time creating significant cross-marketing opportunities among our interrelated businesses. We believe this significantly enhances the value of our company and improves the quality and consistency of services for our customers.

Significant product and geographic scale . Our nine operating companies operate across 20 states in the central, western and eastern United States. Between 2010 and 2012, we have grown our revenue by 124%, primarily through acquisitions. This growth was the result of 17% revenue growth from 2011 to 2012, compounding 91% revenue growth from 2010 to 2011. The significant revenue growth has brought substantial additional scale to our operations in terms of purchasing and leveraging largely fixed overhead expenses. A combination of increased scale and vertical integration present opportunities to improve profitability through cost savings. We have achieved this scale without any significant customer or geographic concentration and continue to demonstrate operating earnings stability as a function of our diversification across products and regions.

Attractive industry dynamics and structure . We operate in an industry that we believe has attractive fundamentals, characterized by high barriers to entry and a stable competitive environment in the majority of markets. Barriers to entry are created by scarcity of raw material resources, limited efficient distribution range, asset intensity of equipment, land required for quarry operations and a time-consuming and complex regulatory and permitting process. In addition, profits are relatively stable throughout the cycle as a result of favorable pricing dynamics, historically stable public infrastructure spending and a largely variable cost structure. U.S. aggregates pricing has increased in 59 of the last 70 years, with growth accelerating since 2002 as continuing resource scarcity in the industry has led companies to focus increasingly on improved pricing strategies. Pricing growth remained strong in 2012, despite volume declines in certain key end markets.

 

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High quality assets and coverage . As a function of our disciplined acquisition strategy and high quality asset base, hard asset values constitute a significant portion of our enterprise value and currently exceed net debt (which we define as total indebtedness less cash) as of December 29, 2012. As of December 29, 2012, the balance sheet book value of our hard assets was $905.5 million (excluding $1.1 million at corporate). The majority of our hard asset value is derived from our property, plant and equipment together with the value of our approximately 1.2 billion tons and 0.4 billion tons of proven and probable aggregates reserves serving our aggregates and cement businesses, respectively, as of December 29, 2012. Assuming production rates in future years are equal to those for the year ended December 29, 2012, we estimate that the useful life of the reserves for our construction aggregates business and our cement business is over 170 years and over 200 years, respectively.

We estimate proven and probable reserves based on the results of drilling. In determining the amount of reserves, our policy is to deduct reserves not available due to property boundaries, set-backs and plant configurations, as deemed appropriate when estimating reserves. Proven reserves are computed from dimensions revealed in outcrops, trenches, workings or drill holes; grades and/or quality are computed from the results of detailed sampling at the sites for inspection, sampling and measurement, which are spaced so closely and the geologic character of which is so well-defined that size, shape, depth and mineral content of reserves can be clearly established. Probable reserves are those for which the quantity and grade and/or quality are computed from information similar to that used for proven reserves except that the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

Our asset base includes the Continental Cement plant, a new dry process cement plant that was commissioned in 2008. We believe this plant contributes significantly to our asset value given its high replacement cost, large capacity, technologically advanced manufacturing capabilities, strategic position on the Mississippi River and favorable environmental performance versus older facilities within the industry that face upgrades to comply with stringent EPA standards coming into effect in the near-term. We believe our sizeable quantity of reserves, paired with vertically-integrated, downstream products and services, enables us to better meet the needs of our end-use customers.

Strong operating market performance in challenging economic environment . We have demonstrated resilient financial performance despite challenging conditions in the broader economy over the last few years. This performance is largely due to our highly variable cost structure and exposure to more stable geographic markets and publicly-funded end-use segments. Many of our products, particularly aggregates and asphalt paving mix, have significant exposure to public road construction, which has demonstrated continued growth over the past 30 years, even during times of broader economic softness. In fact, through the prior three U.S. recessions (July 1990 through March 1991, March 2001 through November 2001 and December 2007 through June 2009), highway spending in real dollars grew 1.8% annually on average in years with a recession as compared to 0.9% annually on average in years without a recession. The majority of public road construction spending is funded at the state level through the states’ respective departments of transportation. The five key states in which we operate (Texas, Kansas, Kentucky, Missouri and Utah) have funds whose revenue sources are constitutionally protected and may only be used for transportation purposes. These dedicated, earmarked funding sources limit the impact current state deficits may have on public spending. As a result, our business exhibits significantly less volatility in profitability than witnessed in most other building product subsectors. We believe these business characteristics have helped mitigate the impact of the depressed economic environment on our profitability.

Experienced and proven leadership implementing acquisition strategy . Our senior management team has a proven track record of creating value. This team is led by Tom Hill, a 30-year industry veteran and former CEO of Oldcastle, Inc., CRH plc’s U.S. operations. In addition to Mr. Hill, our management team consists of a number of other former Oldcastle managers, including corporate development and finance executives and other heavy side industry operators. Our management team has a track record of executing and successfully integrating acquisitions in the sector. Mr. Hill demonstrated his ability to execute on a similar consolidation strategy while at Oldcastle Materials, where he led numerous acquisitions, taking the business from less than $0.3 billion to

 

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$7.4 billion in sales from 1992 to 2008. In executing Oldcastle’s consolidation strategy, Mr. Hill and his team completed 173 acquisitions worth approximately $6.3 billion in the aggregate and $36.0 million on average. From an operational standpoint, Mr. Hill was successful at managing Oldcastle’s rapid growth through the implementation of operational improvements, creation of a world-class safety program and development of a strong leadership team.

Strong sponsor equity commitment . Since July 2009, the Sponsors, together with certain of our officers, directors and employees have made $794.5 million of funding commitments to our indirect parent company to strategically pursue consolidation within the heavy-side building materials industry in the United States. Since then, we have made 24 acquisitions, including bolt-ons, and our Sponsors, together with certain other investors in our parent, have invested approximately $463.9 million of equity capital, excluding rollover equity invested by sellers in certain of our acquisitions, with approximately $337.2 million of commitments from our parent remaining outstanding.

Our Business Strategy

Key elements of our business strategy include:

Drive profitable growth through strategic acquisitions . We were established to acquire and grow heavy-side building materials companies with the goal of becoming a top-five U.S. player within five years. Since inception, we have demonstrated significant progress toward achieving this goal. We continue to believe that the relative fragmentation of the industry subsectors in which we operate, coupled with recent economic softness, create an environment in which we acquire companies at attractive valuations and increase scale and diversity over time through both platform and bolt-on acquisitions. We believe that attractive purchase prices and high quality of assets with selective exposure to well-funded public spending provide additional downside protection. Acquisitions can also provide synergies that provide additional revenue opportunities by filling in market gaps and expanding to adjacent geographies. We believe that achieving further vertical integration and increased scale will lead to improved cost positions, benefitting our profitability and cash flow generation. Our acquisition strategy is substantially similar to the one successfully employed by CEO Tom Hill and his team, including 25 current Summit employees, at Oldcastle Materials, CRH plc’s U.S. operations. Over a 16-year period, Mr. Hill helped execute over 173 acquisitions and approximately $6.3 billion of invested capital to make Oldcastle the largest U.S. integrated heavy-side business. Over that period, Oldcastle Materials reported that it grew sales from less than $0.3 billion in 1992 to $7.4 billion in 2008, representing a compound annual growth rate of over 25%.

Enhance margins and free cash flow generation through implementation of operational improvements . Our management team’s demonstrated ability at Oldcastle Materials in improving operating margins represents a large source of value. Based on our management team’s prior acquisition experience in the heavy-side business, we believe margin improvement is achievable within 12 to 18 months of acquisition. These gains are accomplished through proven profit optimization plans, including implementing a systematic pricing strategy and thorough operations review, leveraging information technology and financial systems to control costs, managing working capital, and achieving scale-driven purchasing synergies, along with fixed overhead control and reduction. Our regional presidents, supported by our central operations, risk management and finance and information technology teams, drive the implementation of detailed and thorough profit optimization plans at each acquisition post close.

Leverage vertically-integrated and strategically located operations for growth . As a vertically-integrated supplier of heavy-side building materials in attractive markets, we believe we have a significant competitive advantage as we seek to grow our share in existing markets and enter new markets. The majority of raw materials used to produce our products and provide our services are internally supplied. We believe our vertically-integrated business model enables us to operate as a single source provider of materials and construction capabilities, creating cost, convenience and reliability advantages for our customers, while at the same time creating significant cross-marketing opportunities among our interrelated businesses.

 

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Leverage our position as a preferred buyer of privately held companies in our industry . Our business model fosters entrepreneurship in local markets while reaping the benefits of best practices and economies of scale brought by the larger group. Business owners have found our model to be attractive and we believe potential sellers prefer us as an acquirer. We seek to avoid competitive auctions and have instead individually negotiated each of our acquisitions to date. The owners of the majority of the companies we have acquired have chosen to stay on with Summit Materials following the sale and have in many cases chosen to roll equity investments into our parent company as well.

Capitalize on expected recovery in U.S. economy and construction markets . In July 2012, MAP-21 was enacted and took effect in October 2012. MAP-21 is a 27-month, approximately $105 billion transportation funding program that provides for $40.4 billion and $41.0 billion for highway infrastructure investments in fiscal years 2013 and 2014, respectively. The spending levels are consistent with the preceding federal transportation funding program. However, given the nation’s aging infrastructure and considering longstanding historical spending trends, we expect U.S. infrastructure investment growth to resume. We believe we are well-positioned to capitalize on any such increase in investment. In addition, we have sufficient exposure to residential and non-residential end-markets to participate in a potential recovery in these markets. Given the challenging current environment, we expect to leverage this exposure to realize significant upside in the medium term.

Our Industry

The U.S. heavy-side building materials industry is comprised of four primary sectors: (i) aggregates, (ii) cement, (iii) asphalt paving mix and (iv) ready mixed concrete, each of which is widely used in most forms of construction activity. Participants in these sectors typically range from small, privately-held companies focused on a single product to multinational corporations that offer a wide array of construction materials and services. Competition is constrained in part by the distance materials may be efficiently transported, resulting in largely local or regional operations.

Transportation infrastructure projects, driven by both state and federal funding programs, represent a significant share of the U.S. heavy-side building materials market. The current federal funding program, MAP-21, was enacted in July 2012 and took effect in October 2012. MAP-21 is a 27-month, approximately $105 billion transportation funding program that provides for $40.4 billion and $41.0 billion for highway infrastructure investments in fiscal years 2013 and 2014, respectively. In addition to federal funding, highway construction and maintenance funding is also available through state, county and local agencies. Our five largest states by revenue (Texas, Kansas, Kentucky, Missouri and Utah, which represented approximately 27%, 16%, 14%, 11% and 11% of our total revenue for the year ended December 29, 2012) each have funds whose revenue sources are constitutionally protected and may only be spent on transportation projects:

 

   

Texas’ 2012—2013 Department of Transportation budget is $19.8 billion, a $3.9 billion increase from the previous 2010-2011 biennium budget.

 

   

Kansas has a 10 year $8.2 billion highway bill that was passed in May 2010.

 

   

Kentucky has a two year $4.5 billion highway bill that was passed in April 2012.

 

   

Missouri has an estimated $700.0 million in annual construction funding committed to essential road and bridge programs.

 

   

Utah’s fiscal year 2012 transportation fund increased in 2012 to $1.1 billion.

Construction Materials

Aggregates

Aggregates are key material components used in the production of asphalt paving mixes and concrete for the public infrastructure, highway, commercial and residential construction markets and are also widely used for various applications and products, such as road and building foundations, railroad ballast, erosion control,

 

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filtration, roofing granules and in solutions for snow and ice control. Generally extracted from the earth using surface or underground mining methods, aggregates are produced from natural deposits of various materials such as limestone, sand and gravel, granite and trap rock. Once extracted, processed and graded, aggregates are supplied directly to their end use or incorporated for further processing into construction materials, such as cement, asphalt paving mix, and ready mixed concrete.

According to the February 2013 U.S. Geological Survey, approximately 1.28 billion tons of crushed stone with a value of approximately $11.5 billion was produced in the United States in 2012, in line with 1.28 billion tons in 2011. Sand and gravel production was approximately 907 million tons in 2012 valued at approximately $6.25 billion, up from 894 million tons in 2011. The U.S. aggregate industry is highly fragmented relative to other building product markets, with numerous participants operating in localized markets and the top six players controlling approximately 30% of the national market in 2011. In January 2013, the USGS reported that a total of 1,550 companies operating 4,000 quarries and 91 underground mines produced or sold crushed stone in 2012 in the United States.

Transportation cost is a major variable in determining aggregate pricing and marketing radius. The cost of transporting aggregate products from the plant to the market often equates to or exceeds the sale price of the product at the plant. As a result of the high transportation costs and the large quantities of bulk material that have to be shipped, finished products are typically marketed locally. High transportation costs are responsible for the wide dispersion of production sites. Where possible, construction material producers maintain operations adjacent to highly populated areas to reduce transportation costs and enhance margins.

We believe that the long-term growth of the market for aggregates is largely driven by growth in population, jobs and households, which impact transportation infrastructure spending and changes in population density. In the past few years, the recession in the United States has led to a decrease in overall private construction activity. Despite the increase in federal stimulus spending, public construction activity has also declined over this period, albeit less than private construction markets. In fact, through the prior three U.S. recessions (July 1990 through March 1991, March 2001 through November 2001 and December 2007 through June 2009), highway spending in real dollars grew 1.8% annually on average in years with a recession as compared to 0.9% annually on average in years without a recession. While short-term demand for aggregates fluctuates with economic cycles, the declines have historically been followed by strong recovery, with each peak establishing a new historical high.

A significant portion of annual demand for aggregates is derived from large public infrastructure and highway construction projects. According to the Montana Contractors’ Association, approximately 38,000 tons of aggregate are required to construct a one mile stretch of a typical four-lane interstate highway. Highways located in markets with significant seasonal temperature variances are particularly vulnerable to freeze-thaw conditions that exert excessive stress on pavement and leads to more rapid surface degradation. Surface maintenance repairs, as well as general highway construction, occur in the warmer months, resulting in a majority of aggregates production and sales in the eight months from April through November in these markets.

Cement

Portland cement, an industry term for the common cement in general use around the world, is the basic ingredient of concrete and is made from a combination of limestone, shale, clay, silica and iron ore. Together with water, cement creates the paste that binds the aggregates together when making concrete. Few construction projects can take place without utilizing Portland cement somewhere in the design, making it a key ingredient used in the nation’s construction industry. The majority of all cement shipments are sent to ready mixed concrete operators. The remainder are directed to manufacturers of concrete related products such as block and precast, oil well service companies, contractors and government entities.

Portland cement is made from common materials such as limestone, shale, clay, silica, and iron ore. The principle raw materials are a blend of 88% limestone, 6% shale, with the remaining raw materials being clay and iron ore. Generally, the limestone and shale are mined from quarries located on site with the production plant.

 

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These core ingredients are blended and crushed into a fine grind and then preheated and ultimately introduced into a kiln heated to about 2,700°F. Under this extreme heat, a chemical transformation occurs uniting the elements to form a new substance with new physical and chemical characteristics. This new substance is called clinker and it is formed into pieces about the size of marbles. The clinker is then cooled and later ground into a fine powder that then is classified as Portland cement.

Cement production is a capital-intensive business with variable costs dominated by raw materials and energy required to fuel the kiln. Building new plants is challenging given the extensive permitting that is required and significant costs. We believe new plant construction costs in the United States are estimated at $250-300 per ton. Assuming construction costs of $275 per ton, a 1.25 million ton facility, such as the one Continental Cement operates, would cost approximately $343.8 million to construct.

As reported by the PCA in the 2012 North American Cement Industry Annual Yearbook, consumption is down significantly from the industry peak of 141 million tons in 2005 to 79 million tons in 2011 because of the decline in U.S. construction sector activity. Domestic cement consumption has at times outpaced domestic production capacity with the shortfall being supplied with imports, primarily from China, Canada, Columbia, Mexico and South Korea. The PCA reports that cement imports have declined since their peak of 39 million tons in 2006 to 7 million tons in 2011, in a manner indicative of the industry’s general response to the current demand downturn. Despite the reduction in imports, capacity utilization declined from 95% in 2006 to 59% in 2011 according to the PCA. Continental Cement operated above the industry mean at 68% capacity utilization in 2011 as its markets did not suffer the pronounced demand declines seen in states like Florida, California and Arizona. Demand is seasonal in nature with nearly two-thirds of U.S. consumption occurring between May and October, coinciding with end-market construction activity.

Cement production in the United States is distributed among 101 production facilities located across 36 states. The EPA has new emission standards for Portland cement plants (“NESHAP”) that are due to come into effect in 2015. On December 20, 2012, the EPA signed the final NESHAP rule, which was less stringent than previous drafts. The PCA had estimated based on the draft rule that 18 plants could be forced to close due to the inability to meet NESHAP standards or because the compliance investment required may not be justified on a financial basis. These potential closures represent approximately 20 million tons of clinker capacity, or 20% of current capacity in the United States.

Continental Cement’s plant utilizes alternative fuel (hazardous and non-hazardous) as well as coal and petroleum coke and, as a result, is subject to HWC-MACT standards, rather than NESHAP. We expect HWC-MACT standards to generally conform to NESHAP, for which we are mostly in compliance, ahead of the effective date of the NESHAP standards. Any additional costs to comply with the NESHAP standards are not expected to be material.

Asphalt Paving Mix

Asphalt paving mix is the most common roadway material used today. It is a versatile and essential building material that has been used to surface 94% of the more than 2.0 million miles of paved roadways in the U.S., according to the National Asphalt Pavement Association.

Typically, asphalt paving mix is placed in three distinct layers to create a flexible pavement structure. These layers consist of a base course, an intermediate or binder course, and a surface or wearing course. These layers vary in thicknesses of three to six inches for base mix, two to four inches for intermediate mix and one to two inches for surface mix.

According to the National Asphalt Pavement Association, the components of asphalt paving mix by weight are approximately 95% aggregates and 5% asphalt cement, a petroleum based product that serves as the binder. The ingredients are then metered, mixed and heated to a temperature in excess of 300° F before being placed in a truck and delivered to the jobsite for final placement.

 

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Asphalt pavement is generally 100% recyclable and reusable and is the most reused and recycled pavement material in the United States. Reclaimed asphalt pavement can be incorporated into new pavement at replacement rates in excess of 30% depending upon the mix and the application of the product.

The use of Warm Mix Asphalt (“WMA”) or “green” asphalt is gaining popularity. The immediate benefit to producing WMA is the reduction in energy consumption required by burning fuels to heat traditional hot mix asphalt (“HMA”) to temperatures in excess of 300°F at the production plant. These high production temperatures are needed to allow the asphalt binder to become viscous enough to completely coat the aggregate in the HMA, have good workability during laying and compaction, and durability during traffic exposure. According to the Federal Highway Administration, WMA can reduce the temperature by 50 to 70°F, resulting in lower emissions, fumes and odors generated at the plant and the paving site.

According to the National Asphalt Pavement Association, there are approximately 4,000 asphalt paving mix plants in the United States. As reported by the National Asphalt Pavement Association, an estimated 366 million tons of asphalt paving mix was produced in 2011 which was broadly in line with the estimated 360 million tons produced in 2010.

Ready Mixed Concrete

Ready mixed concrete is one of the most versatile and widely used materials in construction today. Its flexible recipe characteristics allow for an end product that can assume almost any color, shape, texture and strength to meet the many requirements of end users that range from bridges, foundations, skyscrapers, pavements, dams, houses, parking garages, water treatment facilities, airports, tunnels, power plants, hospitals and schools. The versatility of ready mixed concrete gives engineers significant flexibility when designing these projects.

There are five primary ingredients that constitute a basic ready mixed concrete:

 

   

cement;

 

   

coarse aggregate;

 

   

fine aggregate;

 

   

water; and

 

   

admixtures.

The water and cement are combined and a chemical reaction is produced called hydration. This paste or binder represents between 25 to 35% of the volume of the mix that coats each particle of aggregate and serves as the agent that binds the aggregates together, according to the NRMCA. The aggregates represent 60 to 75% of the mix by volume, with a small portion of volume (5 to 8%) consisting of entrapped air that was generated by using air entraining admixtures. Once fully hydrated, the workable concrete will then harden and take on the shape of the form in which it was placed.

The quality of a concrete mix is generally determined by ratio, by weight of water to cement. Higher quality concrete is produced by lowering the water-cement ratio as much as possible without sacrificing the workability of the fresh concrete. Specialty admixtures such as high range water reducers can aid in achieving this condition without sacrificing quality.

Other materials commonly used in the production of ready mixed concrete include fly-ash, a waste by-product from coal burning power plants, silica fume, a waste by-product generated from the manufacture of silicon and ferro-silicon metals, and ground granulated blast furnace slag, a by-product of the iron and steel manufacturing process. All of these products have cemetitious properties that enhance the strength, durability and permeability of the concrete. These materials are available directly from the producer or via specialist distributors who intermediate between the source producers and the ready mix concrete user.

 

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Given the high weight-to-value ratio, delivery of ready mixed concrete is typically limited to a one-hour haul from a production plant location and is further limited by a 90 minute window in which newly mixed concrete must be poured to maintain quality and performance. As a result of the transportation constraints, the ready mixed concrete market is highly localized, with an estimated 5,500 ready mixed concrete plants in the United States according to the NRMCA. According to the NRMCA, 291 million cubic yards of ready mixed concrete was produced in 2012, which is a 9% increase from the 266 million cubic yards produced in 2011 but a 36% decrease from the industry peak of 458 million cubic yards in 2005.

Our Operations

We operate our construction materials and highway construction businesses through local operations and marketing teams, which work closely with our end customers to deliver the products and services that meet each customer’s specific needs for a project. We believe that this strong local presence gives us a competitive advantage by keeping our costs low and allowing us to obtain a unique understanding for the evolving needs of our customers.

We have construction materials operations in 18 states across the Central, West and East regions. Each region is vertically-integrated in the aggregates, asphalt paving mix, and paving and related construction services businesses. Our Central region also manufactures cement, produces ready mixed concrete, and operates municipal landfill. Our East region has liquid asphalt terminal operations and provides concrete paving services.

As a result of our vertically-integrated operations, our end products are generally sold downstream to contractors and shipped directly to the job site. Approximately 74% of our aggregates production is sold directly to outside customers with the remaining amount being further processed by us and sold as a downstream product.

Additionally, approximately 75% of our asphalt paving mix products are installed by our paving and related construction services businesses. We charge a market price and competitive margin at each stage of the production process in order to optimize profitability across our operations.

Production Value Chain

Customer

 

LOGO

 

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Construction Materials

We are a leading provider of construction materials in the markets we serve across the Central, West and East regions. Our construction materials operations are comprised of aggregate production, including: crushed stone and construction sand and gravel; hot mix asphalt production; ready mixed concrete production; and the production of cement.

Our Aggregate Operations

Aggregate Products

We mine limestone, gravel, and other natural resources from 76 crushed stone quarries and 36 sand and gravel deposits throughout the United States. Aggregates are produced mainly from blasting hard rock from quarries and then crushing and screening it to various sizes to meet our customers’ needs. The production of aggregates also involves the extraction of sand and gravel, which requires less crushing, but still requires screening for different sizes. Aggregate production utilizes capital intensive heavy equipment which includes the use of loaders, large haul trucks, crushers, screens and other heavy equipment at quarries.

Once extracted, the minerals are processed and/or crushed on site into crushed stone, concrete and masonry sand, specialized sand, pulverized lime or agricultural lime. The minerals are processed to meet customer specifications or to meet industry standard sizes. Crushed stone is used primarily in ready mixed concrete, asphalt paving mix, and the construction of road base for highways.

Transportation costs are a major variable in determining aggregate pricing and marketing radius. The cost of transporting aggregate products from the plant to the market often equates to or exceeds the sale price of the products at the plant. As a result of high transportation costs and the large quantities of bulk material that have to be shipped, finished products are typically marketed locally. High transportation costs are responsible for the wide dispersion of production sites. Where possible, construction material producers maintain operations adjacent to highly populated areas to reduce transportation costs and enhance margins.

However, more recently, rising land values combined with local environmental concerns are forcing production sites to move further away from the end-use locations. Our extensive network of quarries, plants and facilities, located throughout our three regions ensures that we have a nearby operation to meet the needs of customers in each of our markets.

Aggregate Markets

The shipping distance from each quarry and the proximity to competitors are key factors that determine the geographic market area for each quarry. Each quarry location is unique with regards to demand for each product, proximity to competition and truck availability.

Aggregate Reserves

Our current estimate of 1.2 billion tons of proven and probable reserves of recoverable stone, and sand and gravel of suitable quality for economic extraction is based on drilling and studies by geologists and engineers, recognizing reasonable economic and operating restraints as to maximum depth of extraction and permit or other restrictions.

Reported proven and probable reserves include only quantities that are owned in fee or under lease, and for which all required zoning and permitting have been obtained. Of the 1.2 billion tons of aggregate reserves, 0.6 billion, or 50%, are located on owned land and 0.6 billion are located on leased land.

 

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Aggregate Sales and Marketing

Each of our aggregate operations is responsible for the sale and marketing of its aggregate products. Approximately 74% of our aggregates production is sold directly to outside customers and the remaining amount is further processed by Summit and sold as a downstream product. Even though aggregate is a commodity product, we optimize pricing depending on the site location, availability of particular product, customer type, project type and haul cost. We sell aggregate to internal downstream operations at market prices.

Aggregate Competition

The U.S. aggregate industry is highly fragmented with numerous participants operating in localized markets. The January 2013 USGS reported that a total of 1,550 companies operating 4,000 quarries and 91 underground mines produced or sold crushed stone in 2012 in the United States. This fragmentation is a result of the cost of transporting aggregates, which typically limits producers to a market area within approximately 40 miles of their production facilities.

The primary national players include Vulcan Materials Company, Martin Marietta Materials, Inc., CRH plc and Heidelberg with a combined estimated market share of approximately 30%.

Competitors by region include:

Central—Martin Marietta, CRH plc, Lafarge and various local suppliers.

West—CRH plc, Heidelberg Cement plc, Martin Marietta and various local suppliers.

East—CRH plc, Heidelberg Cement plc, Vulcan and various local suppliers.

We believe we have a strong competitive advantage in aggregates through our well located reserves, high quality in key markets and our logistic networks. We further share and implement best practices relating to strategy, sales and marketing, production, safety, and environmental and land management. As a result of our vertical integration and local market knowledge, we have a strong understanding of the needs of most of our aggregates customers. Finally, our companies have reputation for responsible environmental stewardship and land restoration, which assists us in obtaining new permits and new reserves more easily.

Our Cement Operations

Cement Products

We operate a highly efficient, technologically advanced integrated cement manufacturing and distribution system located near Hannibal, Missouri, 100 miles north of St. Louis along the Mississippi River. We also operate an on-site waste fuel processing facility, which can reduce fuel costs for the plant by up to 50%. Our cement plant is one of only 11 with hazardous waste fuel facilities permitted and operating out of 113 total cement plants in the United States. The recently completed cement plant upgrade, which effectively doubled cement capacity to 1.25 million tons per annum, positions us ahead of the majority of U.S. plants in complying with 2013 NESHAP pollution limits for cement plants as Continental Cement is covered by the EPA’s HWC-MACT regulations, rather than the PC-MACT regulations, due to its waste fuel processing capabilities.

Continental Cement’s plant utilizes alternative fuel (hazardous and non-hazardous) as well as coal and petroleum coke and, as a result, is subject to HWC-MACT standards, rather than NESHAP. We expect HWC-MACT standards to generally conform to NESHAP, for which we are mostly in compliance, ahead of the effective date of the NESHAP standards. Any additional costs to comply with the NESHAP standards are not expected to be material.

 

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Cement Markets

Cement is a product that is costly to transport over land. Consequently, the radius within which a typical cement plant is competitive extends for no more than 150 miles for the most common types of cement. Continental Cement’s served markets are eastern Missouri, southeastern Iowa, and central/northwestern Illinois. Cement is distributed to local customers primarily by truck from our plant. We also transport cement by inland barges on the Mississippi River to our storage and distribution terminals in St. Louis, Missouri and Bettendorf, Iowa.

Cement Sales and Marketing

Continental Cement’s customers are ready mixed concrete and concrete product producers in eastern Missouri, central Illinois, and eastern Iowa. Cement is distributed to local customers primarily by truck from our cement plant in Hannibal, Missouri. We also transport cement by inland barges to our storage and distribution terminals in St. Louis, Missouri and Bettendorf, Iowa. Sales are made on the basis of competitive prices in each market and, as is customary in the industry, we do not typically enter into long-term sales contracts.

Cement Competition

Continental Cement’s largest competitors are Holcim, Lafarge, Buzzi Unicem and Eagle Materials. Competitive factors include price, reliability of deliveries, location, quality of cement and support services. With a new low-cost cement plant, on-site raw material aggregate supply, a network of cement terminals, and longstanding customer relationships, we believe we are well positioned to serve our customers vis-à-vis our competitors.

Our Asphalt Paving Mix Operations

Asphalt Paving Mix Products

Our asphalt paving mix products are produced by first heating carefully measured amounts of aggregates at high temperatures to remove the moisture from the materials in an asphalt paving mix plant. As the aggregates are heated, liquid asphalt is then introduced to coat the aggregates. Depending on the specifications of a particular mix, recycled asphalt may be added to the mix which lowers the production costs. The aggregates used for our production of these products are generally supplied from our quarries or sand and gravel plants. The ingredients are metered, mixed and brought up to a temperature in excess of 300°F before being placed in a truck and delivered to the jobsite for final placement.

We operate two asphalt paving mix plants in the Central region, 23 plants in the West region and 15 plants in the East region. 93% of our plants can utilize recycled asphalt pavement.

Asphalt Paving Mix Markets

Asphalt paving mix is generally applied at high temperatures and prolonged exposure to air causes the mix to lose temperature and harden. Therefore delivery is typically within close proximity to the asphalt paving mix plant. Each asphalt paving mix plant is unique in that local market demand, proximity to competition, transportation costs and supply of aggregates and liquid asphalt vary widely from market to market. Most of our hot mix asphalt operations use a combination of company-owned and hired haulers to deliver materials to job sites.

Asphalt Paving Mix Sales and Marketing

Approximately 75% of the asphalt paving mix we produce is installed by our own paving crews. To optimize profitability, we sell asphalt paving mix internally at market prices. The rest is sold on a per ton basis to road contractors for the construction of roads, driveways, and parking lots, as well as directly to state departments of transportation and local authorities.

 

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Asphalt Paving Mix Competition

According to the National Asphalt Pavement Association, there are approximately 4,000 asphalt paving mix plants in the United States. As reported by the National Asphalt Pavement Association, an estimated 366 million tons of asphalt paving mix was produced in 2011.

Our asphalt paving mix operations compete with CRH plc and other local suppliers in each of our three regions.

Based on availability of internal aggregate supply, quality, operating efficiencies, and location advantages, we believe we are well-positioned vis-à-vis our competitors.

Our Ready Mixed Concrete Operations

Ready Mixed Concrete Products

We believe our Central and West regions are leaders in the supply of ready mixed concrete. Our Central region supplies concrete to the Wichita, Kansas and Columbia, Missouri markets and surrounding areas. The West region has ready mixed concrete operations in the Salt Lake Valley, Utah, Twin Falls, Idaho and Grand Junction, Colorado markets. We produce ready mixed concrete by blending aggregates, cement, chemical admixtures in various ratios and water at our concrete production plants and placing the resulting product in ready mixed concrete trucks where it is then delivered to our customers.

Our aggregates business serves as the primary source of the raw materials for our concrete production, functioning essentially as a supplier to our ready mixed concrete operations. Different types of concrete include Lightweight Concrete, High Performance Concrete, Self Compacting/Consolidating Concrete and Architectural Concrete and are used in a variety of activities ranging from building construction to highway paving.

We operate 11 ready mixed concrete plants in the Central region and approximately 113 concrete delivery trucks. We also operate 16 ready mixed concrete plants and 182 delivery trucks in the West region. We currently do not have any ready mixed concrete plants in the East region.

Ready Mixed Concrete Competition

There are approximately 5,500 ready mixed concrete plants in the United States, and in 2012 the United States ready mixed industry produced approximately 291 million cubic yards of ready mixed concrete according to the NRMCA.

Our ready mixed concrete operations compete with CRH plc in Utah and Colorado, Lafarge in Kansas and various other privately owned competitors in other parts of the Central and Western regions.

Competition among ready mixed concrete suppliers is generally based on product characteristics, delivery times, customer service and price. Product characteristics such as tensile strength, resistance to pressure, durability, set times, ease of placing, aesthetics, workability under various weather and construction conditions as well as environmental impact are the main criteria that our customers consider for selecting their product. Our quality assurance program continually produces results in excess of design strengths while economizing on material costs. Additionally, we believe our strategic network of locations and superior customer service gives us a competitive advantage relative to other producers.

Asphalt Paving and Related Construction Services

As part of our vertical integration strategy, we provide asphalt and concrete paving and related construction services to both the public and private sectors as either a prime or sub-contractor. These services complement our heavy construction materials business by providing a reliable downstream outlet through which to distribute these products, in addition to the normal external distribution channels.

 

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Our asphalt paving and construction services businesses bid on both public and private construction projects in each of their respective local markets. We only provide construction services operations as a complement to our heavy construction materials operation, which we believe is a major competitive strength. Other factors impacting competitiveness in this business segment include price, estimating abilities, knowledge of local markets and conditions, project management, financial strength, reputation for quality, and the availability of machinery and equipment.

Our contracts with our customers are primarily “fixed unit price” or “fixed price.” Under fixed unit price contracts, we provide materials or services at fixed unit prices (for example, dollars per ton of asphalt placed). While the fixed unit price contract shifts the risk of estimating the quantity of units required for a particular project to the customer, any increase in our unit cost over the expected unit cost in the bid, whether due to inflation, inefficiency, errors in our estimates or other factors, is borne by us unless otherwise provided in the contract. Most of our contracts contain escalators for increases in liquid asphalt prices.

Customers

Our business is not dependent on any single customer or a few customers, the loss of which would have a material adverse effect on the respective market or on us as a whole. No individual customer accounted for more than 10% of our consolidated 2012 revenue.

Seasonality

Use and consumption of our products fluctuate due to seasonality. Nearly all of the products used by us, and by our customers, in the public or private construction industry are used outdoors. Our highway operations and production and distribution facilities are also located outdoors. Therefore, season changes and other weather-related conditions, in particular extended rainy and cold weather in the spring and fall and major weather events, such as hurricanes, tropical storms and heavy snows, can adversely affect our business and operations through a decline in both the use of our products and demand for our services. In addition, the construction materials business production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall. Warmer and drier weather during the second and third quarters of our fiscal year typically result in higher activity and revenue levels during those quarters. The first quarter of our fiscal year has typically lower levels of activity due to weather conditions.

Intellectual Property

We do not own or have a license or other rights under any patents that are material to any of our businesses.

Employment

We had approximately 3,100 employees of which approximately 80% are hourly workers and the remainder are full time salaried employees, as of December 29, 2012. Because of the seasonal nature of our industry, many of our hourly and certain of our full time employees are subject to seasonal layoffs. The scope of layoffs vary greatly from season to season as they are largely a function of the type of projects in process and the weather in the late fall through early spring.

Approximately 5% of our hourly employees are union members and approximately 0.1% of our full time salaried employees are union members. We believe we enjoy a satisfactory working relationship with our employees and their unions.

Properties

Our headquarters are located in a 7,000 square foot office space, which we lease in Washington, D.C., under a lease expiring on August 31, 2017.

We also operate 112 quarries and sand deposits, 40 asphalt paving mix plants, 27 fixed and portable ready mixed concrete plants.

 

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The following chart sets forth specifics of our production and distribution facilities:

 

Property

 

Owned / Leased

  Aggregates   Asphalt
Plant
  Ready
Mixed
Concrete
  Cement   Landfill   Other

Amity, AR

  Leased     X        

DeQueen, AR

  Leased     X        

Kirby, AR

  Leased   Sandstone          

Texarkana, AR

  Leased     X        

Clark, CO

  Leased   Sand and Gravel          

Craig, CO

  Owned   Sand and Gravel   X        

Craig, CO

  Leased   Sand and Gravel          

Craig, CO

  Leased   Sand and Gravel          

Delta, CO

  Owned/Leased   Sand and Gravel          

Delta, CO

  Leased   Sand and Gravel          

Durango, CO

  Leased   Sand and Gravel   X        

Durango, CO

  Leased   Sand and Gravel     X      

Eagle, CO

  Leased     X(1)        

Fruita, CO

  Leased   Sand and Gravel          

Grand Junction, CO

  Owned   Sand and Gravel          

Grand Junction, CO

  Owned   Sand and Gravel          

Grand Junction, CO

  Owned     X        

Grand Junction, CO

  Owned/Leased   Sand and Gravel     X      

Grand Junction, CO

  Leased   Sand and Gravel          

Grand Junction, CO

  Owned       X      

Silverton, CO

  Leased       X      

Parachute, CO

  Leased   Sand and Gravel          

Parachute, CO

 

Leased

  Sand and Gravel          

Whitewater, CO

  Leased   Sand and Gravel          

Whitewater, CO

  Owned/Leased   Sand and Gravel          

Whitewater, CO

  Leased   Sand and Gravel          

Woody Creek, CO

  Owned   Sand and Gravel   X        

Bettendorf, IA

  Owned         X    

Bliss, ID

  Owned   Sand and Gravel          

Burley, ID

  Owned   Sand and Gravel          

Jerome, ID

  Owned       X       X

Rupert, ID

  Owned       X      

Rupert, ID

  Leased   Sand and Gravel          

Rupert, ID

  Owned   Sand and Gravel          

Rupert, ID

  Owned   Sand and Gravel          

Twin Falls, ID

  Owned       X       X

Chapman, KS

  Leased   Limestone          

Easton, KS

  Leased   Limestone          

El Dorado, KS

  Leased       X      

Eudora, KS

  Owned   Limestone   X        

Eudora, KS

  Leased   Limestone          

Eureka, KS

  Owned       X      

Grantville, KS

  Leased   Limestone          

Herington, KS

  Leased   Limestone          

Highland, KS

  Leased   Limestone          

Holton, KS

  Leased   Limestone          

Howard, KS

  Owned       X      

Lawrence, KS

  Owned           X  

 

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Property

 

Owned / Leased

  Aggregates   Asphalt
Plant
  Ready
Mixed
Concrete
  Cement   Landfill   Other

Lawrence, KS

  Owned   Limestone          

Lawrence, KS

  Owned   Limestone          

Lawrence, KS

  Leased   Limestone          

Leavenworth, KS

  Leased   Limestone          

Linwood, KS

  Owned   Limestone          

Moline, KS

  Leased   Limestone          

Olsburg, KS

  Leased   Limestone          

Onaga, KS

  Leased   Limestone          

Osage City, KS

  Leased   Limestone          

Perry, KS

  Owned             X

Perry, KS

  Leased   Limestone          

St. Mary’s, KS

  Leased   Limestone          

Tonganoxie, KS

  Leased   Limestone          

Topeka, KS

  Leased     X        

Troy, KS

  Leased   Limestone          

Washington, KS

  Leased   Limestone          

White City, KS

  Leased   Limestone          

Wichita, KS

  Owned           X  

Wichita, KS

  Owned       X      

Wichita, KS

  Owned       X      

Wichita, KS

  Leased       X      

Wichita, KS

  Owned             X

Wichita, KS

  Owned   Sand and Gravel          

Wichita, KS

  Leased   Sand and Gravel          

Wichita, KS

  Owned             X

Wichita, KS

  Owned             X

Winchester, KS

  Leased   Limestone          

Woodbine, KS

  Leased   Limestone          

Woodbine, KS

  Owned   Limestone          

Perry, KS

  Owned             X

Avon, KY

  Leased             X

Beattyville, KY

  Leased   Limestone   X        

Bethelridge, KY

  Owned   Limestone   X        

Burnside, KY

  Owned/Leased   Limestone   X        

Carrollton, KY

  Leased     X        

Carrollton, KY

  Leased             X

Carrollton, KY

  Owned             X

Cave City, KY

  Owned   Limestone          

Cave City, KY

  Owned   Limestone          

Crestwood, KY

  Leased     X        

Flat Lick, KY

  Owned     X        

Glasgow, KY

  Leased             X

Glasgow, KY

  Leased   Limestone          

Glasgow, KY

  Leased   Limestone          

Horsecave, KY

  Owned/Leased   Limestone          

Jackson, KY

  Owned     X        

Lexington, KY

  Owned             X

London, KY

  Leased     X        

Magnolia, KY

  Owned   Sand and Gravel          

 

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Property

 

Owned / Leased

  Aggregates   Asphalt
Plant
  Ready
Mixed
Concrete
  Cement   Landfill   Other

Middlesboro, KY

  Owned     X        

Monticello, KY

  Owned   Limestone          

Morehead, KY

  Leased     X         X

Paris, KY

  Leased/Owned   Limestone   X         X

Pineville, KY

  Leased   Limestone          

Ravenna, KY

  Leased   Limestone   X        

Richmond, KY

  Owned             X

Salyersville, KY

  Leased             X

Scottsville, KY

  Leased   Limestone          

Somerset, KY

  Leased   Limestone          

Somerset, KY

  Owned/Leased   Limestone   X         X

Stanton, KY

  Owned/Leased   Limestone   X        

Tompkinsville, KY

  Owned   Limestone          

West Liberty, KY

  Owned   Limestone   X        

Amazonia, MO

  Owned   Limestone          

Barnard, MO

  Leased   Limestone          

Bethany, MO

  Leased   Limestone          

Blythedale, MO

  Leased   Limestone          

Cameron, MO

  Owned             X

Cowgil, MO

  Leased   Limestone          

Dawn, MO

  Leased   Limestone          

Edinburg, MO

  Leased   Limestone          

Gallatin, MO

  Leased   Limestone          

Huntsville, MO

  Owned/Leased   Limestone          

Maitland, MO

  Owned/Leased   Limestone          

Mercer, MO

  Leased   Limestone          

Oregon, MO

  Leased   Limestone          

Pattonsburg, MO

  Leased   Limestone          

Pattonsburg, MO

  Leased   Limestone          

Princeton, MO

  Leased   Limestone          

Ravenwood, MO

  Leased   Limestone          

Savannah, MO

  Owned/Leased   Limestone          

Stet, MO

  Leased   Limestone          

Trenton, MO

  Leased   Limestone          

Chesterfield, MO

  Leased         X    

Columbia, MO

  Leased   Limestone          

Columbia, MO

  Leased   Limestone          

Columbia, MO

  Owned   Limestone     X      

Columbia, MO

  Owned             X

Columbia, MO

  Owned       X      

Columbia, MO

  Owned       X      

Columbia, MO

  Owned       X      

Hannibal, MO

  Owned   Limestone       X     X

Moberly, MO

  Owned       X      

Ownesville, MO

  Owned         X    

Sedalia, MO

  Leased   Limestone          

St. Louis, MO

  Owned         X    

Pawnee City, NE

  Leased   Limestone          

Sawyer, OK

  Owned/Leased   Sandstone          

 

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Property

 

Owned / Leased

  Aggregates   Asphalt
Plant
  Ready
Mixed
Concrete
  Cement   Landfill   Other

Stringtown, OK

  Leased     X        

Florence, SC

  Leased             X

Jellico, TN

  Leased   Limestone          

Amarillo, TX

  Leased     X        

Austin, TX

  Owned     X        

Florence, TX

  Leased     X        

Buda, TX

  Owned     X        

Buda, TX

  Leased   Limestone           X

Buda, TX

  Leased     X        

Bullard, TX

  Leased             X

Corsicana, TX

  Leased     X        

Denison, TX

  Owned     X        

Denison, TX

  Owned             X

Florence, TX

  Owned   Limestone           X

Greenville, TX

  Owned     X        

Luling, TX

  Leased   Sand           X

Greenville, TX

  Owned     X        

Holiday, TX

  Leased             X

Mount Pleasant, TX

  Leased     X        

Paris, TX

  Owned             X

Paris, TX

  Owned     X        

Paris, TX

  Leased             X

Royce City, TX

  Leased     X        

Sulphur Springs, TX

  Owned             X

Texarkana, TX

  Leased             X

Bluffdale, UT

  Owned   Sand and Gravel     X      

Midvale, UT

  Owned       X      

Mona, UT

  Owned   Sand and Gravel          

Parley’s Canyon, UT

  Leased   Limestone          

Salt Lake City, UT

  Owned       X      

Sandy, UT

  Owned             X

Saratoga Springs, UT

  Leased   Sand and Gravel          

Stockton, UT

  Owned   Sand and Gravel          

Tooele, UT

  Owned   Sand and Gravel          

Tooele, UT

  Leased   Sand and Gravel          

Tooele, UT

  Owned   Sand and Gravel          

West Haven, UT

  Owned       X      

West Jordan, UT

  Owned       X       X

West Valley City, UT

  Leased             X

West Valley City, UT

  Owned   Sand and Gravel   X   X      

Ewing, VA

  Leased   Limestone          

Big Piney, WY

  Leased       X      

Evanston, WY

  Owned       X      

Kemmerer, WY

  Leased       X      

 

(1) Two asphalt plants are located at this location.

 

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Legal Proceedings

We are a party from time to time to legal proceedings relating to our operations. Our ultimate legal and financial liability in respect to all legal proceeding in which we are involved at any given time cannot be estimated with any certainty. However, based upon examination of such matters and consultation with counsel, management currently believes that the ultimate outcome of these contingencies, net of liabilities already accrued on our consolidated balance sheet, will not have a material adverse effect on our consolidated financial position, although the resolution in any reporting period of one or more of these matters could have a significant impact on our results of operations and/or cash flows for that period.

Environmental and Government Regulation

Our operations are subject to federal, state and local laws and regulations relating to the environment and to health and safety, including noise, discharges to air and water, waste management including the management of hazardous waste used as a fuel substitute at our Hannibal, Missouri cement kiln, remediation of contaminated sites, mine reclamation, operation of landfills, dust control, zoning and permitting. While we believe our operations are in substantial compliance with applicable requirements, there can be no assurance that compliance costs will not be significant.

In addition, our operations are subject to environmental, zoning and land use regulations and require numerous governmental approvals and permits. Environmental operating permits are subject to modification, renewal and revocation and can require us to make capital, maintenance and operation expenditures to comply with the applicable requirements. Although not expected to be a significant impediment, stricter laws and regulations, or more stringent interpretations of existing laws or regulations, may impose new liabilities on us, reduce operation hours, require additional investment by us in pollution control equipment or impede our opening new or expanding existing plants or facilities.

For our operations, we are subject to zoning requirements and permit limitations. Applicable permits may include conditions use permits to allow us to operate in certain areas absent zoning approval and operational permits governing particulate matter and storm water management and control. In addition, we are often required to obtain bonding for future reclamation costs, most commonly specific to restorative grading and seeding of disturbed surface areas.

Multiple permits are required to operate our cement plant, including the following:

 

   

Pursuant to the Federal Water Pollution Control Act, under the authority granted to the State of Missouri and in compliance with the Missouri Clean Water Law, the Missouri Department of Natural Resources (“MDNR”) issued Continental Cement two state operating permits to discharge water.

 

   

We received a Title V Air Operating Permit that allows us to operate the cement plant and fuels operation as required by Title V of the Clean Air Act, as amended in 1990 and codified in 40 CFR Part 70. The permitting process, including air monitoring, typically takes three years to complete.

 

   

Continental Cement’s waste management program was developed and began operations in November 1986. At that time, Continental Cement applied for an interim status permit under the Resource Conservation & Recovery Act (“RCRA”) to operate a waste management facility where hazardous wastes were stored and prepared for use as fuel for the cement kiln. In 1989, Continental Cement filed a RCRA Part B Permit Application for treatment and storage. A compliance test and trial burn was conducted in accordance with the Boiler and Industrial Furnace (“BIF”) regulations, finalized in August 1992. The results of these tests were filed along with an amended and updated Part B Application in July 1992. The final Part B Permit was issued on October 14, 1999 for a ten year period. The Permit Renewal Application was submitted to the MDNR on October 13, 2009. We have been operating with a continued Missouri Hazardous Waste Management Facility Part I Permit since October 14, 2009. This continued status was the result of the MDNR not being able to reissue the permit before it expired.

 

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Like others in the cement business, we expend substantial amounts to comply with these environmental laws and regulations and permit limitations, which include amounts for pollution control equipment required to monitor and regulate air emissions. Since many of these requirements are likely to be affected by future legislation or rule making by government agencies, and are therefore not quantifiable, it is not possible to accurately predict the aggregate future costs of compliance and their effect on our future results of operations, financial condition or liquidity.

We regularly monitor and review our operations, procedures and policies for compliance with existing environmental laws and regulations, changes in interpretations of existing laws and enforcement policies, new laws that are adopted, and new requirements that we anticipate will be adopted that could affect our operations. Our operations in Kansas include one municipal waste landfill and two construction and demolition debris landfills. Among other environmental, health and safety requirements, we are subject to obligations to appropriately close those landfills at the end of their useful lives and provide for appropriate post-closure care. Asset retirement obligations relating to these landfills are recorded in our consolidated financial statements.

We incur reclamation obligations as part of our mining activities. Reclamation methods and requirements can vary depending on the individual site and state regulations. Generally, we are required to grade the mined properties to a certain slope and seed the property to prevent erosion. We record a mining reclamation liability in our consolidated financial statements to reflect the estimated fair value of the cost to reclaim each property including active and closed sites.

Health and Safety

Our facilities and operations are subject to a variety of worker health and safety requirements, particularly those administered by the federal Mine Safety and Health Administration and the Occupational Safety and Health Administration, which are likely to become more strict in the future. Throughout our organization, we strive for a zero-incident safety culture, and compliance with safety regulations. However, failure to comply with these requirements can result in fines and penalties and claims for personal injury and property damage. These requirements may also result in increased operating and capital costs in the future. We believe we are in substantial compliance with such requirements, but we cannot guarantee that violations will not occur, which could result in additional costs.

At Summit Materials and our operating companies, worker safety and health matters are overseen by our corporate Risk Management and Safety department as well as company level safety managers. We provide leadership and support, comprehensive training, and the other tools to accomplish health and safety goals, reduce risk, eliminate hazards, and ultimately make our work places safer.

We believe that the continuous support and leadership of our management team, along with the commitment and desire of all our employees to eliminate injuries and other incidents, will aid our journey towards our goal of zero incidents.

Insurance

Our insurance program is structured using multiple “A” rated insurance carriers, and a variety of deductible amounts. In particular, our workers compensation and auto liability policies are subject to a $150,000 per occurrence deductible, and the general liability policy has a $100,000 deductible. Losses within these deductibles are accrued for using projections based on past loss history.

We also purchase $25.0 million in umbrella insurance limits. Other policies have smaller deductibles and include property, contractors equipment, contractors pollution and professional, directors and officers, employment practices liability and fiduciary and crime. We also have a separate marine insurance policy for our Continental Cement business.

 

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MANAGEMENT

Composition

The following table sets forth, as of March 1, 2013, certain information regarding the directors and executive officers of Summit Materials who are responsible for overseeing the management of our business, as well as certain information regarding the members of the board of directors of the general partner of Parent.

 

Name

   Age   

Position

Thomas Hill

   57    President and Chief Executive Officer; Chairman of the Board of Directors

John Murphy

   62    Interim Chief Financial Officer; Director

Douglas Rauh

   52    Chief Operating Officer

Damian Murphy

   43    Regional President—Central Region

Shane Evans

   42    Regional President—West Region

Michael Brady

   45    Executive Vice President

Howard Lance

   57    Director; Non-Executive Chairman of the Board of Directors

Neil Simpkins

   46    Director

Ted Gardner

   55    Director

Julia Kahr

   34    Director

Thomas Hill is the founder of the Company and has been Chief Executive Officer since the Company’s inception in September 2008. He was appointed Chairman of the Board of Directors of Parent in August 2009. From 2006 to 2008, he was the Chief Executive Officer of Oldcastle, Inc., the North American arm of CRH plc, one of the world’s leading building materials companies. Mr. Hill served on the CRH plc Board of Directors from 2002 to 2008 and, from 1992 to 2006, ran the Materials division of Oldcastle. Mr. Hill served as Chairman of the American Road and Transportation Builders Association (“ARTBA”) from 2002 to 2004, during congressional consideration of the multi-year transportation bill “SAFETEA-LU”. Mr. Hill has been Treasurer of both the National Asphalt Pavement Association and the National Stone Association, and he remains active with ARTBA’s Executive Committee. Mr. Hill received a B.A. in Economics and History from Duke University and an M.B.A. from Trinity College in Dublin, Ireland.

John Murphy was elected as a director of Parent and Chairman of the Audit Committee in February 2012. Effective December 18, 2012, Mr. Murphy was appointed Interim Chief Financial Officer. He was Senior Vice President and Chief Financial Officer of Smurfit-Stone Container Corporation from 2009 to 2010 and served in various senior management roles from 1998 to 2008, including Chief Financial Officer and Chief Operating Officer and as President and Chief Executive Officer of Accuride Corporation. Accuride Corporation filed for Chapter 11 bankruptcy protection in October 2009, and emerged in 2010. Since 2003, Mr. Murphy has served on the Board of Directors, the Governance Committee and as Chairman of the Audit Committee of O’Reilly Automotive, Inc. He has also served as a director and Audit Committee Chairman of DJ Orthopedics since January 2012. Mr. Murphy was elected as a director and Audit Committee member of Graham Packaging in February 2011. Graham Packaging was subsequently sold in September 2011.

Douglas Rauh joined the Company as the Regional President of the East Region in January 2012 with over 29 years of experience in the construction materials industry. Effective March 1, 2013, Mr. Rauh, became the Company’s Chief Operating Officer. Mr. Rauh started his career working for his family’s business, Northern Ohio Paving Company (“NOPCO”). He had roles of increasing responsibility from 1983 to 2000, concluding as Vice President. In April 2000, NOPCO was acquired by Oldcastle. Upon acquisition, NOPCO merged with The Shelly Co. (“Shelly”), which was also acquired by Oldcastle in early 2000. From 2000 through 2006, Mr. Rauh was the Vice President/General Manager of the Northeast Division of Shelly. During this period, several companies were acquired which tripled the division’s revenue. In 2007, Mr. Rauh was named Senior Vice President responsible for the Northeast and Northwest Divisions of Shelly. In 2008, Mr. Rauh was also given responsibility for Shelly’s ready mix concrete business in Northwest Ohio. Additionally, Mr. Rauh became responsible for all of Shelly’s hot mix asphalt plants. In 2009, Mr. Rauh was named the President and CEO of

 

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Shelly. During Mr. Rauh’s tenure with Shelly, he was an integral part of the team that completed over thirty acquisitions. He attended The Ohio State University and graduated in 1983 with a Bachelor of Science degree in Business Administration.

Damian Murphy joined the Company as Regional President of the Central Region in August 2009 with over 20 years of experience in the construction materials and mining industries, working with both public and privately held companies. Prior to joining the Company, Mr. Murphy served as Regional President of Oldcastle starting in 2007, Mr. Murphy also worked in the Rocky Mountain region as a Vice President, responsible for aggregates and hot mix asphalt production and sales. Before heading to Colorado, Mr. Murphy worked in the mid-Atlantic for a top 10 privately held aggregate supplier. He began his career in the mining industry in Europe. Mr. Murphy holds a Bachelor of Engineering (“B.E.”) degree with a concentration in Minerals Engineering from the Camborne School of Mines/ Exeter University in the United Kingdom.

Shane Evans joined the Company as Regional President of the West Region in August 2010 with 22 years of experience in the construction materials industry. He started his career working in his family’s construction and materials business where he held various operational and executive positions. Prior to joining the Company, Mr. Evans was part of Oldcastle Materials where he worked for 12 years, most recently as a Division President. Mr. Evans has a Bachelor of Science degree from Montana State University.

Michael Brady joined the Company in April 2009 as Executive Vice President. Before joining the Company, Mr. Brady was a Senior Vice President at Oldcastle Materials with overall responsibility for acquisitions and business development, having joined the company in 2000. Prior to that, Mr. Brady worked in several operational and general management positions in the paper and packaging industry in Ireland, the United Kingdom and Asia Pacific with the Jefferson Smurfit Group, plc (now Smurfit Kappa Group plc). Mr. Brady has a B.E. (Electrical) and a Master of Engineering and Science. (Microelectronics) from University College, Cork in Ireland. He earned his M.B.A. degree from INSEAD in Fontainebleau, France.

Howard Lance began to serve on the Board of Parent starting in October 2012. However, he was formally elected as a director of Parent and Non-Executive Chairman of the Board of Directors in February 2013. He was Chairman of the Board of Directors, President and Chief Executive Officer of Harris Corporation through 2011. Mr. Lance was appointed president and Chief Executive Officer of Harris Corporation and elected to its Board of Directors in January 2003. He was elected chairman of the Board of Directors in June 2003. Before joining Harris Corporation, Mr. Lance was president of NCR Corporation and Chief Operating Officer of its Retail and Financial Group. Previously, he spent 17 years with Emerson Electric Co., where he held senior management positions including Executive Vice President of its Electronics and Telecommunications segment, Chief Executive Officer and director of its Astec electronics subsidiary in Hong Kong, Group Vice President of its Climate Technologies segment and President of its Copeland Refrigeration division.

Neil Simpkins was elected as a director of Parent in August 2009. He is a Senior Managing Director of Blackstone in the Private Equity Group and is based in New York. He currently has global responsibility for portfolio management activities and investments in the healthcare services and industrial sectors. Since joining Blackstone in 1998, Mr. Simpkins has led the acquisitions of TRW Automotive, Vanguard Health Systems, Team Health, LLC, Apria Healthcare Group, Summit Materials and Emdeon, Inc. Before joining Blackstone, Mr. Simpkins was a Principal at Bain Capital. While at Bain Capital, Mr. Simpkins was involved in the execution of investments in the consumer products, industrial, healthcare and information industries. Prior to joining Bain Capital, Mr. Simpkins was a consultant at Bain & Company in the Asia Pacific region and in London. Mr. Simpkins graduated with honors from Oxford University and received an M.B.A. from Harvard Business School. He currently serves as Lead Director of TRW Automotive and Vanguard Health Systems and as a Director of Team Health, LLC, Apria Healthcare Group and Emdeon, Inc.

Ted Gardner was elected as a director of Parent in August 2009. He is a Managing Partner of Silverhawk. Prior to co-founding Silverhawk in 2005, Mr. Gardner was a Managing Partner of Wachovia Capital Partners

 

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(formerly, First Union Capital Partners) from 1989 until 2002. He was a director and Chairman of the Compensation Committee of Kinder Morgan, Inc. from 1999 to 2007 and was a director and the Chairman of Audit Committee of Encore Acquisition Company from 2001 to 2010. He is currently a director of Kinder Morgan Energy Partners and Spartan Energy Partners. Mr. Gardner received a B.A. degree in Economics from Duke University and a J.D. and M.B.A. from the University of Virginia.

Julia Kahr was elected as a director of Parent in August 2009. She is a Managing Director in Blackstone’s Corporate Private Equity group. Since joining Blackstone in 2004, she has been involved in the execution of Blackstone’s investments in SunGard, Encore Medical, DJ Orthopedics and Summit Materials. Before joining Blackstone, she was a Project Leader at the Boston Consulting Group, where she worked with companies in a variety of industries, including health care, financial services, media and entertainment and consumer goods. She is also the sole author of Working Knowledge, a book published by Simon & Schuster in 1998. She currently serves on the Board of Directors of DJ Orthopedics and is also a member of the Board of Directors of Episcopal Social Services. Ms. Kahr received a B.A. in Classical Civilization from Yale University where she graduated summa cum laude . She received an M.B.A. from Harvard Business School.

Corporate Governance Matters

Background and Experience of Directors

When considering whether directors and nominees have the experiences, qualifications, attributes or skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Board focused on, among other things, each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. We believe that our Parent’s directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. The members of the Board considered, among other things, the following important characteristics which make each director a valuable member of the Board:

 

   

Mr. Hill’s extensive knowledge of our industry and significant experience in leading companies.

 

   

Mr. Murphy’s extensive financial knowledge, including from his service as Chief Financial Officer of Smurfit-Stone Container Corporation and Accuride Corporation.

 

   

Mr. Lance’s significant management and operational experience from his service in various senior management roles, including as President and Chief Executive Officer of Harris Corporation and President of NCR Corporation.

 

   

Mr. Simpkins’s significant financial expertise and business experience, including as a Senior Managing Director in the Private Equity Group at Blackstone and Principal at Bain Capital.

 

   

Mr. Gardner’s extensive business and leadership experience, including as a Managing Partner of Silverhawk and Managing Partner of Wachovia Capital Partners (formerly, First Union Capital Partners).

 

   

Ms. Kahr’s extensive knowledge of a variety of different industries and her significant financial and investment experience from her involvement in Blackstone, including as Managing Director.

Independence of Directors

We are not a listed issuer whose securities are listed on a national securities exchange or in an inter-dealer quotation system which has requirements that a majority of the board of directors be independent. However, if we were a listed issuer whose securities were traded on the New York Stock Exchange and subject to such requirements, we would be entitled to rely on the controlled company exception contained in Section 303A of the NYSE Listed Company Manual for exception from the independence requirements related to the majority of our Board of Directors. Pursuant to Section 303A of the NYSE Listed Company Manual, a company of which more

 

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than 50% of the voting power is held by an individual, a group of another company is exempt from the requirements that its board of directors consist of a majority of independent directors. At December 29, 2012, Blackstone beneficially owns greater than 50% of the voting power of the Company which would qualify the Company as a controlled company eligible for exemption under the rule.

Board Committees

The board of directors of the general partner of Parent (the “Board”) currently consists of six directors. The Board has determined that Mr. Murphy, Board member and Audit Committee Chairman and our Interim Chief Financial Officer since December 18, 2012, qualifies as an “audit committee financial expert” as defined in the federal securities laws and regulations. In light of Mr. Murphy’s role as Interim Chief Financial Officer, he is not considered “independent.”

Audit Committee

The audit committee assists our board of directors with its oversight of the quality and integrity of our accounting, auditing and reporting practices. Pursuant to its charter, the audit committee makes recommendations to our board of directors for the appointment, compensation and retention of the independent auditor. The audit committee’s primary responsibilities include the following:

 

   

Reviewing and discussing our consolidated financial statements and management’s discussion and analysis of financial condition and results of operations disclosure with management and the independent registered public accountants;

 

   

Reviewing and discussing our earnings releases and any financial information or earnings guidance given, if any, to investors, creditors, financial analysts and credit rating agencies; and

 

   

Reviewing and discussing the Company’s risk assessment and risk management policies.

Code of Conduct

Summit Materials’ Code of Conduct applies to all employees, including its board of directors, chief executive officer and chief financial officer. The Code of Conduct sets forth the Company’s conflict of interest policy, records retention policy, insider trading policy and policies for protection of Summit Material’s property, business opportunities and proprietary information. Summit Materials’ Code of Conduct is available free of charge on its website at summit-materials.com under the tab “Investor Relations.” Summit Materials intends to post on its website any amendments to, or waivers from, the Code of Conduct applicable to senior financial executives.

 

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EXECUTIVE AND DIRECTOR COMPENSATION

Executive Compensation

Summary Compensation Table

The following table sets forth all compensation paid to our named executive officers for the year ended December 29, 2012, and their respective titles at December 29, 2012.

 

Name and Principal Position

   Salary
($)
     Bonus
($)(1)
     Stock
Awards
($)(2)
     All Other
Compensation
($)(3)
     Total
($)
 

Thomas Hill

     510,000         267,750         —           25,594         803,344   

Chief Executive Officer

              

Douglas Rauh

     450,000         550,000         838,853         468,548         2,307,401   

Regional President—East Region(4)

              

Shane Evans

     357,000         32,130         —           31,854         420,984   

Regional President—West Region

              

Glenn Culpepper(5)

     446,505         —           —           31,854         478,359   

Former Chief Financial Officer

              

 

(1) Reflects the cash bonuses paid to the named executive officers in 2013 in respect of their services during 2012. The amounts of the bonus payments were determined by the Board of Directors in its discretion. For more information, see “—Bonus and Non-Equity Incentive Plan Compensation.” The amount for Mr. Rauh includes a starting bonus of $400,000 paid in a lump sum and a $150,000 discretionary bonus. For more details, see “—Employment Agreements—Douglas Rauh.”
(2) The amount reported in the Stock Awards column reflects the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board ASC Topic 718. The assumptions applied in determining the fair value of the stock awards are discussed in Note 19, Employee Long-Term Incentive Plan, to our December 29, 2012 audited consolidated financial statements included elsewhere in this prospectus. This amount reflects our calculation of the value of the awards at the grant date and do not necessarily correspond to the actual value that may ultimately be recognized by the named executive officer. A portion of the shares granted in 2012 vest under certain performance conditions, which are not currently deemed probable of occurring, and, therefore, have not been included in the table above. The unrecognized value of these awards assuming the highest level of performance conditions would be achieved was $176,883 for Mr. Rauh.
(3) All Other Compensation includes the following items: (a) amounts contributed by Summit Materials under the Summit Materials, LLC Retirement Plan, (b) payments for term life insurance, (c) payments for health insurance, (d) car allowances and (e) relocation costs. Amounts contributed to the Summit Materials, LLC Retirement Plan are matching contributions up to 4% of eligible compensation subject to IRS limits and totaled $9,800 for each of Mr. Hill, Mr. Rauh, Mr. Evans and Mr. Culpepper. Matching contributions are immediately vested. For more information, see “—Summit Materials, LLC Retirement Plan”. Payments for term life insurance were as follows: Mr. Hill—$6,719; Mr. Rauh—$979; Mr. Evans—$979 and Mr. Culpepper—$979. Payments for health insurance were $9,075 for each named executive officer. Payments made by Summit Materials for car allowances were as follows: Mr. Rauh—$20,844; Mr. Evans—$12,000 and Mr. Culpepper—$12,000. Payments made by Summit Materials associated with Mr. Rauh’s relocation were $427,850. For more details about the payments made to Mr. Rauh, see “—Employment Agreements—Douglas Rauh.”
(4) Effective March 1, 2013, Mr. Rauh has become our Chief Operating Officer.
(5) Mr. Culpepper resigned effective December 19, 2012.

 

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Employment Agreements

Thomas Hill

Parent entered into an employment agreement with Thomas Hill, dated as of July 30, 2009, whereby Mr. Hill serves as the Chief Executive Officer of the Parent and the Chief Executive Officer of the general partner of Parent (“Parent GP”). Mr. Hill also will continue to serve as a member of the Board so long as he serves in the foregoing capacities. Mr. Hill’s employment agreement had an initial term equal to three years commencing on July 30, 2009, which is automatically extended for additional one-year periods, unless Parent or Mr. Hill provides the other party 60 days prior written notice before the next extension date that the employment term will not be so extended. However, if Parent is dissolved pursuant to the terms of its exempted limited partnership agreement (a “Dissolution”), then the employment term shall automatically and immediately be terminated. On July 30, 2012, Mr. Hill’s employment agreement was automatically extended for an additional year.

Pursuant to the terms of his employment agreement, Mr. Hill’s annual base salary is $500,000, which amount is reviewed annually by the Board, and may be increased (but not decreased). Mr. Hill is also eligible to earn an annual bonus of up to 100% of his base salary based upon the achievement of performance targets established by the Board within the first three months of each fiscal year during the employment term. The Board, in its sole discretion, may appropriately adjust such performance targets in any fiscal year to reflect any merger, acquisition or divestiture affected by the Parent during such fiscal year. Mr. Hill is also entitled to participate in the Parent’s employee benefit plans, as in effect from time to time, on the same basis as those benefits are generally made available to other senior executives of Parent.

If Mr. Hill’s employment is terminated (i) by Parent with Cause or (ii) by him other than as a result of a “Constructive Termination,” he will be entitled to certain accrued amounts. If Mr. Hill’s employment is terminated as a result of his death or “Disability” (as defined in the employment agreement), he will be entitled to, in addition to certain accrued amounts, a pro rata portion of the annual bonus, if any, that Mr. Hill would have been entitled to receive, payable when such annual bonus would have otherwise been payable to him had his employment not been terminated. If Mr. Hill’s employment is terminated (i) by Parent without Cause or (ii) by him as a result of a “Constructive Termination” (as defined in the employment agreement), subject to his continued compliance with certain restrictive covenants and his non-revocation of a general release of claims, he will be entitled to receive, in addition to certain accrued amounts, (i) continued payment of his base salary in accordance with the Parent’s normal payroll practices, as in effect on the date of termination of his employment, until 18 months after the date of such termination and (ii) an amount equal to one and one-half times his annual bonus in respect of the fiscal year immediately preceding the applicable year of his termination of employment; provided that the aggregate amounts shall be reduced by the present value of any other cash severance or termination benefits payable to him under any other plans, programs or arrangements of the Parent or its affiliates.

In the event (i) Mr. Hill elects not to extend the employment term or (ii) of a “Dissolution” with a “Negative Return” (as such terms are defined in the employment agreement), unless Mr. Hill’s employment is earlier terminated, Mr. Hill’s termination of employment shall be deemed to occur on the close of business on the earlier of the effective date of “Dissolution” or the day immediately preceding the next scheduled extension date, and Mr. Hill shall be entitled to receive certain accrued amounts. In the event (i) that Parent elects not to extend the employment term or (ii) of a “Dissolution” with a “Positive Return” (as such terms are defined in his employment agreement), Mr. Hill shall be treated as terminated without Cause effective as of the close of business on the day immediately preceding the next scheduled extension date or the effective date of the “Dissolution,” and shall be entitled to receive the amounts and benefits described above.

Pursuant to the terms of his employment agreement, Mr. Hill is subject to the following covenants: (i) a covenant not to disclose confidential information while employed and at all times thereafter; (ii) a covenant not

 

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to compete for a period of 18 months following his termination of employment for any reason; and (iii) a covenant not to solicit employees or customers for a period of 18 months following his termination of employment for any reason.

Douglas Rauh

Parent entered into an employment agreement with Douglas Rauh, dated as of December 29, 2011, whereby Mr. Rauh serves as our Regional President, Eastern Division. Mr. Rauh’s employment agreement has an initial term equal to three years commencing on January 1, 2012 which will be automatically extended for additional one-year periods, unless Parent or Mr. Rauh provides the other party 60 days prior written notice before the next extension date that the employment term will not be so extended. The employment term will automatically and immediately be terminated upon a “Dissolution” (as defined in the employment agreement).

Pursuant to the terms of his employment agreement, Mr. Rauh’s annual base salary is $450,000, which amount is reviewed annually by the Board, and may be increased (but not decreased). Mr. Rauh is also eligible to earn an annual bonus of up to 60% of his base salary based upon the achievement of performance targets established by the Board within the first three months of each fiscal year during the employment term, with a potential bonus of up to 90% of his base salary for extraordinary performance. The Board, in its sole discretion, may appropriately adjust such performance targets in any fiscal year to reflect any merger, acquisition or divestiture affected by the Parent during such fiscal year. Notwithstanding the foregoing, Mr. Rauh’s minimum annual bonus for 2012 (payable in 2013) was $150,000. In addition, after Mr. Rauh commenced his employment, Parent paid Mr. Rauh a starting bonus of $400,000 in a lump sum. Mr. Rauh is entitled to a car allowance in the amount of $1,000 per month for car expenses, in addition to reimbursement from the Parent for Mr. Rauh’s actual expenditures for gasoline, upon submission of appropriate documentation.

The employment agreement provides that Parent reimburse Mr. Rauh for any loss suffered by Mr. Rauh in connection with the sale of his residence in Ohio, the actual out of pocket loss incurred by Mr. Rauh on the sale of his residence in Ohio, a gross-up of all income taxes imposed on Mr. Rauh in connection with the reimbursement payment, the cost of up to three visits by Mr. Rauh and his family to the Washington, D.C. area in connection with the search for a new residence, three months of the reasonable rental of a house in the Washington, D.C. area, and reasonable moving expenses incurred by Mr. Rauh in connection with his relocation. These obligations were satisfied by Parent in 2012 and are included in the “All Other Compensation” column of the Summary Compensation Table. In addition, the agreement provides that Parent reimburse Mr. Rauh for his out of pocket costs for payment of COBRA continuation premiums in connection with health care insurance covering Mr. Rauh and his family, until such time as Mr. Rauh and his family obtain coverage under the Parent’s health care insurance plan. These obligations were satisfied by Parent in 2012 and are included in the “All Other Compensation” column of the Summary Compensation Table. Mr. Rauh is also entitled to participate in the Parent’s employee benefit plans as in effect from time to time, on the same basis as those benefits are generally made available to other senior executives of Parent.

If Mr. Rauh’s employment is terminated (i) by Parent with “Cause” (as defined in the employment agreement) or (ii) by him other than as a result of a “Constructive Termination” (as defined in the employment agreement), he will be entitled to certain accrued amounts, and if Mr. Rauh’s employment is terminated as a result of his death or “Disability” (as defined in his employment agreement), he will be entitled to (a) certain accrued amounts, (b) a pro rata portion of the annual bonus, if any, that Mr. Rauh would have been entitled to receive, payable when such annual bonus would have otherwise been payable to him had his employment not terminated, and (c) the costs of COBRA health continuation coverage for 18 months (or, if shorter, until COBRA coverage ends under Parent’s group health plan). If Mr. Rauh’s employment is terminated (i) by Parent without Cause or (ii) by him as a result of a “Constructive Termination” (as defined in the employment agreement), subject to his continued compliance with certain restrictive covenants and his non-revocation of a general release of claims, he will be entitled to receive, in addition to certain accrued amounts, (i) continued payment of his base salary in accordance with the Parent’s normal payroll practices, as in effect on the date of termination of his

 

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employment, until 24 months after the date of such termination (or 12 months if the termination occurs on or after January 1, 2014) (the “Severance Period”), (ii) an amount equal to one and two times (or only one time if the termination occurs on or after January 1, 2014) Mr. Rauh’s annual bonus in respect of the fiscal year immediately preceding the applicable year of Mr. Rauh’s termination of employment, payable in equal monthly installments for 18 months after the date of such termination, and (iii) the costs of COBRA health continuation coverage for the lesser of the Severance Period or 18 months (or, if shorter, until COBRA coverage ends under Parent’s group health plan); provided that the aggregate amounts shall be reduced by the present value of any other cash severance or termination benefits payable to Mr. Rauh under any other plans, programs or arrangements of the Parent or its affiliates.

In the event (i) Mr. Rauh elects not to extend the employment term or (ii) of a “Dissolution” (as such term is defined in his employment agreement) in connection with which the Sponsors do not receive a return on their investment, unless Mr. Rauh’s employment is earlier terminated, Mr. Rauh’s termination of employment shall be deemed to occur on the close of business on the earlier of the effective date of “Dissolution” or the day immediately preceding the next scheduled extension date, and Mr. Rauh shall be entitled to receive certain accrued amounts. In the event (i) that Parent elects not to extend the employment term or (ii) of a “Dissolution” (as such term is defined in his employment agreement) in connection with which the Sponsors receive a return on their investment, Mr. Rauh shall be treated as terminated without Cause effective as of the close of business on the day immediately preceding the next scheduled extension date or the effective date of the “Dissolution,” and shall be entitled to receive the amounts and benefits described above.

Pursuant to the terms of his employment agreement, Mr. Rauh is subject to the following covenants: (i) a covenant not to disclose confidential information while employed and at all times thereafter; (ii) a covenant not to compete for a period of 12 months (24 months if the Severance Period is 24 months) following his termination of employment for any reason; and (iii) a covenant not to solicit employees or customers for a period of 12 months (24 months if the Severance Period is 24 months) following his termination of employment for any reason.

Shane Evans

Under the employment arrangement between Summit Materials and Shane Evans, Mr. Evans serves as our Regional President Western Division. Mr. Evans’s annual base salary is $350,000. In addition, Mr. Evans is also eligible to earn an annual bonus of up to 60% of his base salary based upon the achievement of performance targets established by the Board within the first three months of each fiscal year during the employment term, and the Board, in its sole discretion, may appropriately adjust such performance targets in any fiscal year to reflect any merger, acquisition or divestiture affected by the Parent during such fiscal year. Mr. Evans received a signing bonus of $150,000 upon commencing employment. Mr. Evans is entitled to a car allowance in the amount of $1,000 per month. Mr. Evans is also entitled to participate in employee benefit plans as in effect from time to time.

Glenn Culpepper

Glenn Culpepper, our former Chief Financial Officer, received a salary and benefits substantially consistent with a draft employment agreement delivered to him in June 2010 prior to the commencement of his employment. Mr. Culpepper’s draft employment agreement contemplated an initial term equal to three years commencing in June 2010, which was to be automatically extended for additional one-year periods, unless Parent or Mr. Culpepper provided the other party 60 days prior written notice before the next extension date that the employment term will not be so extended.

The draft employment agreement contemplated an annual base salary of $425,000, such amount to be reviewed annually by the Board, and subject to increase (but not decrease). It also contemplated that Mr. Culpepper would be eligible to earn an annual bonus of up to 70% of his base salary (the “Target”), as

 

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defined in the draft employment agreement, based upon the achievement of performance targets established by the Board within the first three months of each fiscal year during the employment term, with a potential bonus of up to 150% of the Target for extraordinary performance; provided, however, the Board, in its sole discretion, could appropriately adjust such performance targets in any fiscal year to reflect any merger, acquisition or divestiture affected by the Parent during such fiscal year. Notwithstanding the foregoing, the draft employment agreement provided that Mr. Culpepper’s minimum annual bonus for 2010 was $212,500. Promptly after Mr. Culpepper commenced his employment, Parent paid Mr. Culpepper a starting bonus of $700,000 in a lump sum minus applicable deductions. The draft employment agreement also contemplated that Mr. Culpepper would be entitled to a car allowance for rental or lease in the amount of $1,000 per month and that he would be entitled to participate in the Parent’s employee benefit plans as in effect from time to time, on the same basis as those benefits are generally made available to other senior executives of Parent.

Bonus and Non-Equity Incentive Plan Compensation

Pursuant to their employment arrangements as discussed above, each named executive officer is eligible to earn an annual bonus of up to a specified percentage of such named executive officer’s base salary based upon the achievement of performance targets established by the Board within the first three months of each fiscal year during such named executive officer’s employment term. The performance targets may be based on Adjusted EBITDA and/or free cash flow targets; however, the Board, in its discretion, may adjust such performance targets in any fiscal year to reflect any merger, acquisition or divestiture affected by the Company during such fiscal year. In fiscal 2012, the performance targets were primarily based on Adjusted EBITDA. During fiscal 2012, although the Company’s actual Adjusted EBITDA result did not meet the target Adjusted EBITDA and thus the named executive officers were not entitled to their cash payments under the non-equity compensation plan awards, the Board in its discretion determined to make cash bonus payments to Mr. Hill, Mr. Rauh and Mr. Evans, as disclosed in the footnote to the bonus column of the Summary Compensation Table above.

In determining the discretionary cash bonus payment for each named executive officer, the Board considered all of the following measures: safety, customer satisfaction, product quality and the successful integration of acquired businesses into Summit Materials. In addition, the Board considered each named executive officer’s effectiveness and contribution to Summit Materials.

Employee Long-Term Incentive Plan

Certain of our employees, including our named executive officers, received Class D unit interests in the Parent between the fiscal years of 2009 and 2012. On January 1, 2012, Mr. Rauh was granted 404.4 Class D units consistent with the terms described below. There were no other Class D units awarded to the named executive officers in 2012. The Class D units provide rights to cash distributions based on a predetermined distribution formula (as provided for in the Second Amended and Restated Agreement of Exempted Limited Partnership dated January 29, 2010) upon the Parent’s general partner declaring a distribution. There are four categories of Class D units: Class D-1 U.S. Interests; Class D-1 Non-U.S. Interests; Class D-2 U.S. Interests and Class D-2 Non-U.S. Interests. Under the exempted limited partnership agreement, these units would be entitled to distributions as determined by the Board on a pro rata basis with the Class B and Class C Units after returns of capital to Class A and Class B Holders (Blackstone and other Sponsors) and a preferential distribution to Class C Holders.

Generally, 50% of each category of Class D-1 units vest with the passage of time (“time-vesting interests”) and the remaining 50% of the Class D-1 units and all Class D-2 units vest when certain investment returns are achieved by the Parent’s investors (“performance-vesting interests”). Of the time-vesting-interests, subject to the holder’s continued employment through the applicable vesting date, 20% vest on the first anniversary of the grant date and the remaining 80% vest monthly over the four-year period beginning on the first anniversary thereof. The time-vesting interests will become fully vested on an accelerated basis upon a change in control while the employee continues to provide services to the Company. Any of the time-vesting interests that are unvested on termination of the employee’s services will be forfeited by the employee.

 

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The performance-vesting interests vest when certain investment returns are achieved by the Parent’s investors while the employee continues to provide services to the Company or its subsidiaries. There are two performance levels at which performance-vesting interests generally vest, with performance-vesting interests that are Class D-1 units vesting if the Parent’s investors receive a return on invested capital of 1.75 times their initial investment, and performance-vesting interests that are Class D-2 units vesting if the Parent’s investors receive a return on invested capital of 3.00 times their initial investment.

Unvested interests are generally forfeited upon any termination of employment by the holder However, if the employee is terminated without “Cause” or resigns due to a “Constructive Termination” (each as defined in such employee’s employment agreement with the Company) within 12 months preceding a “Change of Control” or a “Public Offering” (each as defined in the Parent’s agreement of exempted limited partnership) any performance-vesting interests that would have been eligible to vest in connection with such transaction shall be restored and shall be eligible to vest based on the proceeds of such transaction.

If a holder’s employment is terminated by us for “Cause”, or the holder violates a restrictive covenant, any vested Class D units are automatically forfeited. If a holder’s employment is terminated by us without “Cause”, we may, under specified circumstances, repurchase the holder’s vested Class D units at a price per unit equal to the fair market value of such Class D units, minus any amounts already distributed to the holder in respect of such Class D units.

If a holder’s employment terminates as a result of the voluntary resignation of the holder, we may elect to convert all of the employee’s Class D units into a right to a fixed cash payment capped at a specified amount determined at the time of termination. The fixed cash payment calculated for this purpose is an amount equal to the fair market value of the holder’s vested Class D units minus any amounts already distributed to the holder in respect of such Class D units.

On January 1, 2012, Mr. Rauh was granted approximately 175.8 Class D-1 time-vesting units, 175.8 Class D-1 performance-vesting units and 52.8 Class D-2 performance-vesting units consistent with the terms described above. There were no other Class D units awarded to the named executive officers in 2012.

Summit Materials, LLC Retirement Plan

We have a qualified contributory retirement plan established to qualify as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended. The plan covers all employees, including our named executive officers, who are limited to their annual tax deferred contribution limit as allowed by the Internal Revenue Service and may contribute up to 75% of their gross wages. We provide for matching contributions to the plan, including 100% of pre-tax employee contributions and up to 4% of eligible compensation. Employer contributions vest immediately.

Potential Payments upon Termination or Change of Control

In the event of a termination of employment or change of control, Class D units are subject to acceleration or extended periods during which the Class D units have an opportunity to vest, as described in “—Employee Long-Term Incentive Plan” above, and the named executive officers are entitled to the cash and non-cash severance benefits in accordance with the terms of their employment agreements, as described in “—Employment Agreements.”

Compensation Committee Interlocks and Insider Participation

Presently, the Board does not have a compensation committee. All decisions about our executive compensation in fiscal 2012 were made by the Board. Mr. Hill, who is the Chairman of the Board and our President and Chief Executive Officer, generally participates in discussions and deliberations of the Board

 

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regarding executive compensation. Other than Mr. Hill and Mr. Murphy, who has served as our Interim Chief Financial Officer since December 18, 2012, no other member of the Board was at any time during fiscal 2012, or at any other time, one of our officers or employees. We are parties to certain transactions with our Sponsors described in “Certain Relationships and Related Party Transactions.” None of our executive officers has served as a director or member of a compensation committee (or other committee serving an equivalent function) of any entity, one of whose executive officers served as a director of Parent GP.

Outstanding Equity Awards at 2012 Fiscal Year End

A summary of the outstanding equity awards for each named executive officer as of December 29, 2012 is as follows:

 

     Stock Awards  

Name

   Grant Date    Number of
shares or units
of stock that
have not vested
(#)(1)
     Market value of
shares or units of
stock that have  not
vested ($)(2)
     Equity incentive
plan awards:
Number of
unearned shares,
units or other
rights that have
not vested (#)(3)
     Equity incentive
plan awards:
Market or
payout value of
unearned shares,
units or other
rights that have
not vested ($)(2)
 

Thomas Hill

   08/25/2009      50         189,175         195         596,277   
   02/17/2010      100         377,282         312         953,005   
   04/16/2010      20         75,561         58         178,320   
   05/27/2010      151         568,757         407         1,241,226   
   08/02/2010      86         324,024         218         665,832   
   09/15/2010      52         195,409         123         376,527   
   11/30/2010      9         32,000         20         61,608   
   05/27/2011      73         275,181         140         425,522   
   08/02/2011      59         223,101         107         327,145   
   10/28/2011      36         135,153         61         186,193   

Douglas Rauh

   01/01/2012      223         838,853         290         884,416   

Shane Evans

   09/15/2010      105         394,370         249         759,897   
   11/30/2010      2         5,647         4         10,872   
   05/27/2011      13         48,561         25         75,092   
   08/02/2011      10         39,371         19         57,732   
   10/28/2011      6         23,851         11         32,858   

Glenn Culpepper(4)

        —           —           —           —     

 

(1) Reflects time-vesting Class D Units, which vest 20% on the first anniversary of the grant date and the remaining 80% vest monthly over the four-year period beginning on the first anniversary thereof.
(2) Reflects the aggregated market values at December 29, 2012 based on the most recent valuation of the Class D Units.
(3) Reflects performance-vesting interests that vest when certain investment returns are achieved by the Parent’s investors while the employee continues to provide services to the Company or its subsidiaries.
(4) Mr. Culpepper forfeited his unvested Class D units upon his resignation on December 19, 2012.

 

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Director Compensation

We do not currently pay our Directors who are either employed by us, Blackstone or Silverhawk any compensation for their services as directors. Our other Directors receive compensation for each quarter serving as a Director. We may also reimburse our other directors for any reasonable expenses incurred by them in connection with services provided in such capacity. Our other directors may also receive equity incentive awards under our incentive plans.

Howard Lance

Howard Lance began to serve on the Board of Parent starting in October 2012. However, he was formally elected as a director of Parent in February 2013. Mr. Lance is entitled to an annual cash retainer of $250,000 for his service as director. In connection with joining the Board, Mr. Lance received an equity-based incentive arrangement that will provide him with the economic equivalent of stock options over $2,500,000 of Parent’s equity securities. The structure of the equity incentive will be consistent with those applicable generally to Parent’s existing management team, except that Mr. Lance’s equity award will be subject to vesting based solely on his continued service on the Board.

2012 Director Compensation

The table below summarizes the compensation paid to non-employee Directors for the year ended December 29, 2012.

 

Name

   Fees Earned or
Paid in Cash ($)
  Stock
Awards ($)
  Total
Compensation ($)

John Murphy

       100,000 (1)       9,606 (2)       109,606  

Neil Simpkins

       —           —           —    

Ted Gardner

       —           —           —    

Julia Kahr

       —           —           —    

Howard Lance(3)

       62,500         —           62,500  

 

(1) Mr. Murphy received $25,000 for each fiscal quarter serving as a director.
(2) The amount reported in the Stock Awards column reflects the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board ASC Topic 718. The assumptions applied in determining the fair value of the stock awards are discussed in Note 19, Employee Long-Term Incentive Plan, to our December 29, 2012 audited consolidated financial statements included elsewhere in this prospectus. This amount reflects our calculation of the value of the awards at the grant date and does not necessarily correspond to the actual value that may ultimately be recognized by the director. Of the approximately 6.0 units granted to Mr. Murphy, 2.6 are Class D-1 time-vesting units, approximately 2.6 are Class D-1 performance-vesting units and approximately 0.8 is a Class D-2 performance-vesting unit. The performance conditions for the performance-vesting units are described above in “Executive Compensation—Employee Long-Term Incentive Plan” in this prospectus. The performance-vesting units granted in 2012 vest under performance conditions which are not currently deemed probable of occurring, and, therefore, have not been included in the table above. The unrecognized value of these awards assuming the highest level of performance conditions would be achieved was $10,127 for Mr. Murphy. At fiscal year end, the aggregate number of stock awards outstanding for each director was 6.0 Class D Units outstanding for Mr. Murphy.
(3) Mr. Lance began to serve on the Board starting in October 2012. However, he was formally elected as director in February 2013.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Parent owns 100% of the limited liability company interests of Summit Materials Holdings, LLC, which owns 100% of the limited liability company interests of Summit Materials Intermediate Holdings, LLC, which owns 100% of the limited liability company interests of Summit Materials, which owns 100% of the issued and outstanding common stock of Summit Materials Finance Corp. The limited partnership interests of Parent consist of Class A-1 Units, Class A-2 Units, Class B-1 Units, Class C Units and Class D-1 Units and Class D-2 Units. Class A-1 Units are equity interests in Parent and have economic characteristics that are similar to those of shares of preferred stock in a corporation. Class A-2 Units are equity interests in Parent that are issuable only upon the exchange of Class B-1 Units, Class C Units and Class D-1 Units or Class D-1 Units for Class A-2 Units following any transfer of any such units (other than transfers to certain permitted transferees) and have similar economic rights as Class A-1 Units. Class B Units are equity interests in Parent and have similar economic rights as Class A-1 Units. Class C Units are equity interests in Parent that have been issued to certain start-up partners of Parent and have economic characteristics similar to those of shares of junior preferred stock in a corporation. Class D-1 Units and Class D-2 Units are partnership profits interests having economic characteristics similar to stock appreciation rights and are subject to different vesting schedules and other conditions including certain transfer restrictions and put and call rights applicable only to employees or the other holders thereof. For additional information, see “Management—Executive and Director Compensation” and “Certain Relationships and Related Party Transactions.”

The following table sets forth information with respect to the beneficial ownership of the Class A-1 Units and Class A-2 Units of Parent taken together as a single class, the Class B-1, the Class C Units of Parent, the Class D-1 and Class D-2 Units taken together as a single class and the aggregate Class A-1 Units, Class A-2 Units, Class B-1 Units, Class C Units, Class D-1 Units and Class D-2 Units taken together as a single class, in each case, as of December 29, 2012 for (i) each individual or entity known by us to own beneficially more than 5% of the aggregate units, (ii) each of our named executive officers, (iii) each of our directors and (iv) all of our directors and our executive officers as a group.

The amounts and percentages of units beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person’s ownership percentage, but not for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

 

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Except as otherwise indicated in the footnotes below, each of the beneficial owners has, to our knowledge, sole voting and investment power with respect to the indicated Class A-1 Units, Class A-2 Units, Class B-1 Units, Class C Units, Class D-1 Units and Class D-2 Units. Unless otherwise noted, the address of each beneficial owner of is c/o Summit Materials, LLC, 2900 K Street NW, Suite 100, Harbourside North Tower Building, Washington, D.C. 20007.

 

Name and
Address of Beneficial
Owner
  Class A Units     Class B-1 Units     Class C Units     Class D Units     Aggregate  
  Amount
and
Nature of
Beneficial
Ownership
    Percent     Amount
and
Nature of
Beneficial
Ownership
    Percent     Amount
and
Nature of
Beneficial
Ownership
    Percent     Amount
and
Nature of
Beneficial
Ownership
    Percent     Amount
and
Nature of
Beneficial
Ownership
    Percent  

Blackstone Funds(1)

    29,173        91.60     —          —          —          —          —          —          29,173 (2)      69.86

Silverhawk Summit, L.P.(3)

    1,572        5.03     —          —          260        35.91     —          —          1,832        4.39

Thomas Hill

    108              —          —          133        18.37     —          —          241        *   

John Murphy

    —          —          —          —          —          —          —          —          —          —     

Douglas Rauh

    —          —          —          —          —          —          —          —          —          —     

Damian Murphy

    —          —          —          —          —          —          —          —          —          —     

Shane Evans

    —          —          —          —          —          —          —          —          —          —     

Michael Brady

    25              —          —          31        4.28     —          —          56        *   

Howard Lance

    —          —          —          —          —          —          —          —          —          —     

Neil Simpkins(4)

    —          —          —          —          —          —          —          —          —          —     

Ted Gardner(5)

    100              —          —          124        17.13     —          —          224        *   

Julia Kahr(6)

    —          —          —          —          —          —          —          —          —          —     

Glenn Culpepper

    —          —          —          —          —          —          —          —          —          —     

All Directors and Executive Officers as a Group (10 persons)

    233              —          —          288        39.78     —          —          521        1.25

 

 

* Less than 1%.
(1) Units of Parent shown as beneficially owned by the Blackstone Funds (as hereinafter defined) are held by the following entities: (i) Blackstone Capital Partners (Cayman) V-NQ L.P. (“BCP Cayman V”) owns 23,602 Class A-1 Units representing 75.49% of the outstanding Class A Units of Parent; (ii) Blackstone Capital Partners (Cayman) NQ V-AC L.P. (“BCP Cayman NQ”) owns 4,975 Class A-1 Units representing 15.91% of the outstanding Class A Units of Parent; (iii) Summit BCP Intermediate Holdings L.P. (“Summit BCP”) owns 536 Class A-1 Units representing 1.71% of the outstanding Class A Units of Parent; (iv) Blackstone Participation Partnership (Cayman) V-NQ L.P. (“BPP”) owns 22 Class A-1 Units representing 0.07% of the outstanding Class A-1 Units of Parent; and (v) Blackstone Family Investment Partnership (Cayman) V-NQ L.P. (“BFIP”) owns 38 Class A-1 Units representing 0.12% of the outstanding Class A Units of Parent (BCP Cayman V, BCP Cayman NQ, Summit BCP, BPP and BFIP are collectively referred to as the “Blackstone Funds”). The general partner of BCP Cayman V and BCP Cayman NQ is Blackstone Management Associates (Cayman) V-NQ L.P. The general partner of Summit BCP is Summit BCP Intermediate Holdings GP, Ltd., and BFIP is the sole member and controlling entity of Summit BCP. The general partner and controlling entity of BFIP, BPP and Blackstone Management Associates (Cayman) V-NQ L.P. is BCP V-NQ GP L.L.C. Blackstone Holdings III L.P. is the managing member and majority interest owner of BCP V-NQ GP L.L.C. Blackstone Holdings III L.P. is indirectly controlled by The Blackstone Group L.P. and is owned, directly or indirectly, by Blackstone professionals and The Blackstone Group L.P. The Blackstone Group L.P. is controlled by its general partner, Blackstone Group Management L.L.C., which is in turn wholly owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman. Each of such Blackstone entities and Mr. Schwarzman may be deemed to beneficially own the securities beneficially owned by the Blackstone Funds directly or indirectly controlled by it or him, but each disclaims beneficial ownership of such securities except to the extent of its or his indirect pecuniary interest therein. The address of each of the Blackstone entities listed in this note is c/o The Blackstone Group L.P., 345 Park Avenue, New York, NY 10154.
(2) The limited partnership agreement of Parent Holdings (i) provides that, prior to an initial public offering, the Blackstone Funds have the right to require each unit owned by an employee to participate in any transaction constituting a change of control or the sale of all or substantially all of the assets of Parent to a third-party (in either case, with respect to U.S. investments only, non-U.S. investments only or both) and (ii) generally restricts the transfer of each unit owned by an employee until twelve months following an initial public offering. As a result, the Blackstone Funds may be deemed to beneficially own 95.60% of outstanding units of Parent. The units of Parent held by employees that may be so deemed beneficially owned by the Blackstone Funds are not reported in the table above. For additional information, see “Management—Executive and Director Compensation” and “Certain Relationships and Related Party Transactions.”
(3) Silverhawk Summit, L.P.is controlled by Silverhawk Capital Partners GP II, L.P. and is owned, directly or indirectly, by Silverhawk Capital Partners, LLC. The address of each of the Silverhawk entities listed in this note is c/o Silverhawk Capital Partners, LLC, 140 Greenwich Ave, 2nd Floor, Greenwich, CT 06830.
(4) Mr. Simpkins is a Senior Managing Director of The Blackstone Group. Mr. Simpkins disclaims beneficial ownership of any shares owned directly or indirectly by the Blackstone Funds, except to the extent of his indirect pecuniary interest therein. Mr. Simpkins’ address is c/o The Blackstone Group, L.P., 345 Park Avenue, New York, NY 10017.

 

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(5) Mr. Gardner is a Managing Partner of Silverhawk Capital Partners, LLC. Mr. Gardner disclaims beneficial ownership of any shares owned directly or indirectly by Silverhawk, except to the extent of his indirect pecuniary interest therein. Mr. Gardner’s address is c/o Silverhawk Capital Partners, LLC, 140 Greenwich Ave, 2nd Floor, Greenwich, CT 06830.
(6) Ms. Kahr is a Managing Director of The Blackstone Group. Ms. Kahr disclaims beneficial ownership of any shares owned directly or indirectly by the Blackstone Funds, except to the extent of his indirect pecuniary interest therein. Ms. Kahr’s address is c/o The Blackstone Group L.P., 345 Park Avenue, New York, NY 10017.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Transaction and Management Fee Agreement

In connection with the formation of Parent, Parent entered into a transaction and management fee agreement with Blackstone Management Partners L.L.C. (“BMP”). Under this agreement, BMP (including through its affiliates) agreed to provide monitoring, advisory and consulting services relating to Parent and its subsidiaries. In consideration for the services, Parent will pay, or cause to be paid, to BMP a management fee which, for the year ended December 31, 2010 and subsequent years, is equal to the greater of $300,000 or 2.0% of Parent’s consolidated profit, as defined in the transaction and management fee agreement, for the immediately preceding fiscal year. BMP shall have no obligation to provide any other services to Parent absent express agreement. In addition, in consideration of BMP undertaking financial and structural analysis, due diligence investigations, corporate strategy and other advice and negotiation assistance necessary to enable Parent and its subsidiaries to undertake acquisitions, the Partnership will pay to BMP a transaction fee equal to (x) 1.0% of the aggregate enterprise value of any acquired entity or (y) if such transaction is structured as an asset purchase or sale, 1.0% of the consideration paid for or received in respect of the assets acquired or disposed of. In addition, Parent has agreed to indemnify BMP and its affiliates against liabilities relating to the services contemplated by the transaction and management fee agreement and will reimburse BMP and its affiliates for out-of-pocket expenses incurred in connection with providing such services.

At any time in connection with or in anticipation of a change of control of Parent, a sale of all or substantially all of Parent’s assets or an initial public offering of common equity of Parent or its successor (including any other entity used as a vehicle for an initial public offering), BMP may elect to receive, subject to the achievement of certain thresholds, in consideration of BMP’s role in facilitating such transaction and in settlement of the termination of the services provided under the transaction and management fee agreement, a single lump sum cash payment equal to the then-present value of all then-current and future annual management fees payable under the transaction and management fee agreement, assuming a hypothetical organic consolidated EBITDA growth rate equal to the growth rate over the prior twelve months and a termination date of the agreement to be the tenth anniversary of the date of the agreement. The transaction and management fee agreement will continue until the earlier of (x) the tenth anniversary of the date of the agreement, (y) the date BMP ceases to perform services and provides written notice thereof to Parent, or (z) such earlier date as Parent and BMP may mutually agree in writing.

Under the transaction and management fee agreement, BMP is permitted to, and has, assigned a portion of the fees to which it is entitled to receive from Parent thereunder to Silverhawk Summit, L.P. and to certain members of management.

Under the transaction and management fee agreement, during the years ended December 29, 2012, December 31, 2011 and December 31, 2010, Summit Materials paid BMP transaction fees of $0.0, $0.8 million, $7.7 million, respectively, and management fees of $2.1 million, $4.3 million and $1.1 million, respectively.

Exempted Limited Partnership Agreement of Parent

The Sponsors and certain of our current and former officers, directors, employees and certain investors who rolled over equity in companies we acquired, indirectly beneficially own our equity interests through their respective ownership of partnership interests in Parent. Certain members of management indirectly beneficially own equity interests in Summit Materials through their respective ownership of certain classes of incentive partnership interests in Parent issued as part of an equity incentive program. Summit Materials is indirectly wholly-owned and controlled by Parent.

The exempted limited partnership agreement of Parent provides that, except as otherwise set forth in the agreement, Parent GP has the exclusive right to manage, conduct and control the business of Parent. The agreement also includes provisions with respect to restrictions on transfer of partnership interests, rights of first offer, tag-along rights, drag-along rights and the right of Blackstone to cause an initial public offering, as well as certain other provisions, including with respect to registration rights and certain approval rights.

 

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Shareholders Agreement of Parent GP

Parent GP is party to a shareholders agreement with Blackstone, Silverhawk, our chief executive officer, Tom Hill, Ted Gardner, Michael Brady and certain other shareholders, which governs certain matters relating to ownership of Parent GP, including with respect to restrictions on the issuance or transfer of shares, affiliate transactions and various corporate governance matters. Pursuant to the terms of the shareholders agreement, Parent GP is managed by a board of directors, currently consisting of four individuals, two of whom are nominees of Blackstone, one of whom is a nominee of Silverhawk and one of whom is our chief executive officer. Under the shareholders agreement, owners of Class A interests of Parent are required to own shares of Parent GP. The majority of Parent GP is owned by Blackstone.

Management Equity Purchase Plan

Parent maintains equity incentive arrangements for executives and other senior management employees. Consistent with these arrangements, certain members of our management team have purchased and/or received, and may, from time to time, purchase and/or receive, equity interests or profit interests in Parent. Such purchases or awards of equity interests or profit interests may represent a substantial portion of the equity or profits of Parent.

Temporary Acquisition Financing from Blackstone

During the second half of 2010, we received an aggregate of $77.5 million in temporary acquisition financing, at an interest rate of 1.01% per annum, from Blackstone that we used as temporary financing for our acquisitions of RK Hall and Con-Agg. We repaid the temporary acquisition financing in full, including approximately $0.1 million in interest on December 17, 2010 with proceeds from Summit Materials Companies I, LLC’s amended and restated credit agreement.

Commercial Transactions with Sponsor Portfolio Companies

Our Sponsors and their respective affiliates have ownership interests in a broad range of companies. We have entered and may in the future enter into commercial transactions in the ordinary course of our business with some of these companies, including the sale of goods and services and the purchase of goods and services. None of these transactions or arrangements is expected to be material to us.

Procedures with Respect to Review and Approval of Related Person Transactions

Parent GP has not adopted a formal written policy for the review and approval of transactions with related persons. However, the exempted limited partnership agreement of Parent provides that the members of the board of directors of Parent GP shall review and approve transactions with related persons in certain circumstances.

Interim Chief Financial Officer

Mr. Murphy was appointed our Interim Chief Financial Officer effective as of December 18, 2012. In connection with his service as our Interim Chief Financial Officer, we pay Mr. Murphy a retainer equal to $446,500 per annum (or $37,208 per month). For the period from December 18, 2012 through December 29, 2012, Mr. Murphy did not receive any compensation.

Other

The Company purchased equipment from a noncontrolling member of Continental Cement for approximately $2.3 million, inclusive of $0.1 million of interest, in 2011, which was paid for in 2012.

The Company earned revenue of $7.9 million, $8.6 million and $8.5 million and incurred costs of $0.2 million, $0.7 million and $1.1 million in connection with several transactions with unconsolidated affiliates for

 

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the years ended December 29, 2012, December 31, 2011 and December 31, 2010, respectively. As of December 29, 2012 and December 31, 2011, accounts receivable from affiliates was $1.9 million and $1.1 million, respectively, and accounts payable to affiliates was $0.2 million and $2.2 million, respectively.

Cement sales to companies owned by certain noncontrolling members of Continental Cement were approximately $12.5 million, $9.5 million and $9.0 million for the years ended December 29, 2012, December 2011 and December 31, 2010, respectively, and accounts receivables due from these parties were approximately $1.0 million and $1.3 million as of December 29, 2012 and December 31, 2011, respectively.

The Company owes $2.1 million to a noncontrolling member of Continental Cement for accrued interest on a related party note, which is expected to be fully settled by 2014. The principal balance on the note was repaid as part of the January 2012 financing transactions.

Lease payments of $1.0 million, $0.4 million and $0.2 million were made to related parties for the years ended December 29, 2012, December 31, 2011 and December 31, 2010, respectively.

 

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DESCRIPTION OF OTHER INDEBTEDNESS

Senior Secured Credit Facilities

Overview

On January 30, 2012, we entered into a senior secured credit facility with Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc., as joint lead arrangers, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Barclays Capital, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as joint bookrunners, Bank of America, N.A., as administrative agent, collateral agent and swing line lender, Bank of America, N.A., as letter of credit issuer, and Citigroup Global Markets Inc., as syndication agent.

The senior secured credit facilities currently provide senior secured financing in an amount of $572.0 million, consisting of a $150.0 million five-year revolving credit facility and a $422.0 million seven-year term loan facility. The revolving credit facility includes capacity available for letters of credit and for borrowings on same-day notice referred to as the swingline loans.

Our senior secured credit facilities include an uncommitted incremental facility that allow us the option to increase the amount available under the term loan facility and/or the revolving credit facility by (i) $135.0 million and (ii) an additional amount so long as we are in pro forma compliance with a consolidated first lien net leverage ratio. Availability of such incremental facilities will be subject to, among other conditions, the absence of an event of default and pro forma compliance with the financial covenants under our credit agreement and the receipt of commitments by existing or additional financial institutions.

In February 2013, we entered into Amendments to our senior secured credit facilities that, among other things: (i) reduced the applicable margins used to calculate interest rates for term loans under our senior secured credit facilities by 1.0%; (ii) reduced the applicable margins used to calculate interest rates for $131.0 million of tranche A revolving credit loans available under the senior secured credit facilities by 1.0% (with no reductions to the applicable margins for the remaining $19.0 million of available revolving credit loans); (iii) increased term loans borrowed under our term loan facility by $25.0 million with the same terms as the existing term loans (bringing total term loan borrowings to approximately $422.0 million); (iv) included a requirement that we pay a fee equal to 1.0% of the principal amount of term loans repaid in connection with certain repricing or refinancing transactions within six months after February 5, 2013; and (v) created additional flexibility under the financial maintenance covenants, which are tested quarterly, by increasing the applicable maximum Consolidated First Lien Net Leverage Ratio and reducing the applicable minimum Interest Coverage Ratio (each as defined in the Credit Agreement governing our senior secured credit facilities).

Interest Rate and Fees

Borrowings under our senior secured credit facilities will bear interest at a rate per annum equal to an applicable margin plus, at our option, either (i) a base rate determined by reference to the highest of (a) the Federal Funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A. and (c) the British Bankers Association LIBOR Rate (subject to a LIBOR floor in the case of the term loan facility) plus 1.00% or (ii) a British Bankers Association LIBOR rate (subject to a LIBOR floor in the case of the term loan facility) determined by reference to Reuters two business days prior to the interest period relevant to such borrowing adjusted for certain additional costs. The applicable margin on our revolving credit facility will be subject to a step-down upon our attaining certain consolidated first lien net leverage ratios.

In addition to paying interest on outstanding principal under our senior secured credit facility, we will be required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. We will also pay customary letter of credit and agency fees.

 

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Mandatory Prepayments

The credit agreement governing our senior secured credit facilities will require us to prepay outstanding term loans, subject to certain exceptions, with:

 

   

commencing with the fiscal year ended December 29, 2012, 50% (which percentage will be reduced to 25% and 0% upon our attaining certain consolidated first lien net leverage ratios) of our annual excess cash flow less the principal amount of certain debt prepayments;

 

   

100% of the net proceeds from certain asset sales and casualty and condemnation proceeds, subject to certain threshold amounts of net proceeds and, if no default exists, to a 100% reinvestment right if reinvested or committed to be reinvested within 12 months of receipt so long as any committed reinvestment is actively reinvested within 18 months of receipt; and

 

   

100% of the net proceeds from issuances or incurrence of certain debt, other than proceeds from debt permitted to be incurred under the credit agreement governing the senior secured credit facilities.

We will apply the foregoing mandatory prepayments to the term loan in direct order of maturity.

Voluntary Prepayments

We may voluntarily repay outstanding loans under the senior secured credit facilities at any time without premium or penalty; provided that voluntary prepayments of eurocurrency rate loans made on a date other than the last day of an interest period applicable thereto shall be subject to customary breakage costs.

In addition, with respect to certain repricings or refinancings of the term loan facility within six months after February 5, 2013, we will be required to pay a fee equal to 1.0% of the principal amount of loans under the term loan facility that are repriced or refinanced.

Amortization and Final Maturity

We will be required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the term loans made on the closing date, with the balance expected to be due on the seventh anniversary of the closing date. We will not be required to make any scheduled payments under our revolving credit facility. The principal amounts outstanding under the revolving credit facility will be due and payable on the fifth anniversary of the closing date.

Guarantee and Security

All obligations under the senior secured credit facilities will be unconditionally guaranteed by Summit Materials Intermediate Holdings, LLC, and each existing and future direct or indirect wholly-owned domestic restricted subsidiary of the Company (other than certain immaterial subsidiaries, subsidiaries that are precluded by law, regulation or contractual obligation from guaranteeing the obligations and certain subsidiaries excluded via customary exceptions) and by the Company’s non-wholly owned Subsidiary Continental Cement (collectively, the “Credit Agreement Guarantors”).

All obligations under the senior secured credit facilities, and the guarantees of those obligations, will be secured by substantially all of the following assets of the Company and each subsidiary that is a Credit Agreement Guarantor, subject to certain exceptions:

 

   

a pledge of 100% of the capital stock of Summit Materials and 100% of the capital stock of each domestic subsidiary that is directly owned by Summit Materials or one of the subsidiary Credit Agreement Guarantors, promissory notes and any other instruments evidencing indebtedness owned by the Company or one of the subsidiary Credit Agreement Guarantors and 65% of the capital stock of each wholly owned foreign subsidiary that is, in each case, directly owned by Summit Materials or one of the subsidiary Credit Agreement Guarantors; and

 

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a security interest in, and mortgages on, substantially all tangible and intangible assets (above a materiality threshold in the case of mortgages) of Summit Materials and each subsidiary Credit Agreement Guarantor.

Certain Covenants and Events of Default

Our senior secured credit facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions, our and our restricted subsidiaries’ ability to:

 

   

incur additional indebtedness or guarantees;

 

   

create liens on assets;

 

   

change our fiscal year;

 

   

enter into sale and leaseback transactions;

 

   

engage in mergers or consolidations;

 

   

sell assets;

 

   

pay dividends and make other restricted payments;

 

   

make investments, loans or advances;

 

   

repay subordinated indebtedness;

 

   

make certain acquisitions;

 

   

engage in certain transactions with affiliates; and

 

   

change our lines of business.

In addition, the senior secured credit facilities require us to maintain a quarterly maximum consolidated first lien net leverage ratio and a quarterly minimum interest coverage ratio.

The credit agreement governing our senior secured credit facilities also contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control). If an event of default occurs, the lenders under our senior secured credit facilities will be entitled to take various actions, including the acceleration of amounts due under our senior secured credit facilities and all actions permitted to be taken by a secured creditor.

 

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DESCRIPTION OF THE NOTES

General

Certain terms used in this description are defined below under the subheading “—Certain Definitions.” In this description, (1) the terms “ we ,” “ our ,” “ us ” and “ Company ” each refer to Summit Materials, LLC, and not to any of its Subsidiaries, (2) the term “ Co-Issuer ” refers to Summit Materials Finance Corp. and (3) the term “ Issuers ” refers to the Company and the Co-Issuer.

The Issuers are jointly and severally liable for all obligations under the Notes. The Co-Issuer is a Wholly-Owned Subsidiary of the Company that has been incorporated in Delaware as a special purpose finance subsidiary to facilitate the offering of the Notes and other debt securities of the Company. The Company believes that some prospective purchasers of the Notes may be restricted in their ability to purchase debt securities of partnerships or limited liability companies, such as the Company, unless the securities are jointly issued by a corporation. The Co-Issuer will not have any substantial operations or assets and will not have any revenues. Accordingly, you should not expect the Co-Issuer to participate in servicing the principal and interest obligations on the Notes.

The Issuers issued $250.0 million aggregate principal amount of 10.5% senior notes due 2020 (the “ Outstanding Notes ”) under an indenture dated January 30, 2012 (the “ Indenture ”) among the Issuers, the Guarantors and Wilmington Trust, National Association, as trustee (the “ Trustee ”). The Outstanding Notes were issued in a private transaction that was not subject to the registration requirements of the Securities Act. The terms of the exchange notes to be issued in the exchange offer for such notes are substantially identical to the Outstanding Notes, except that the transfer restrictions, registration rights and additional interest provision relating to the Outstanding Notes will not apply to the exchange notes. In this section, we refer to the Outstanding Notes, together with the exchange notes offered hereby that are to be exchanged for the Outstanding Notes, as the “ Notes ”. Except as set forth herein, the terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act.

The following description is only a summary of the material provisions of the Indenture. It does not purport to be complete and is qualified in its entirety by reference to the provisions of the Indenture, including the definitions therein of certain terms used below. We urge you to read the Indenture because it, and not this description, defines your rights as Holders of the Notes. You may request copies of the Indenture at our address set forth under “Prospectus Summary—Corporate Information.”

Brief Description of the Notes

The Notes:

 

   

are general unsecured senior obligations of the Issuers;

 

   

rank equally in right of payment with all existing and future Senior Indebtedness of the Issuers (including borrowings under the Senior Secured Credit Facilities);

 

   

are effectively subordinated to all Secured Indebtedness of the Issuers (including borrowings under the Senior Secured Credit Facilities), to the extent of the value of the collateral securing such Secured Indebtedness;

 

   

are structurally subordinated to all existing and future Indebtedness, claims of holders of Preferred Stock and other liabilities of the Company’s Subsidiaries that are not guaranteeing the Notes;

 

   

are senior in right of payment to all future Subordinated Indebtedness of the Issuers; and

 

   

are initially guaranteed on a senior unsecured basis by the Guarantors and also will be guaranteed in the future by each U.S. Wholly-Owned Subsidiary that is a Restricted Subsidiary, if any, subject to certain exceptions, that guarantees Indebtedness of the Issuers under the Senior Secured Credit Facilities.

 

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Guarantees

The Guarantors, as primary obligors and not merely as sureties, have jointly and severally guaranteed, irrevocably and unconditionally, on an unsecured senior basis, the performance and full and punctual payment when due, whether at maturity, by acceleration or otherwise, of all obligations of the Issuers under the Indenture and the Notes, whether for payment of principal of, any premium, interest in respect of Notes or expenses, indemnification or otherwise, on the terms set forth in the Indenture by executing the Indenture.

The Guarantors guarantee the Notes and, in the future, subject to exceptions set forth under the caption “—Certain Covenants—Limitation on Guarantees of Indebtedness by Restricted Subsidiaries,” each direct and indirect U.S. Wholly-Owned Subsidiary that is a Restricted Subsidiary of the Company that guarantees certain Indebtedness of the Issuers or any other Guarantor will, guarantee the Notes, subject to certain exceptions and to release as provided below or elsewhere in this “Description of the Notes.” Each of the Guarantees of the Notes are a general unsecured senior obligation of each Guarantor, rank equally in right of payment with all existing and future Senior Indebtedness of such Guarantor (including such Guarantor’s guarantee of the Senior Secured Credit Facilities), are effectively subordinated to all Secured Indebtedness of such Guarantor (including such Guarantor’s guarantee of the Senior Secured Credit Facilities), to the extent of the value of the collateral of such Guarantor securing such Secured Indebtedness, and rank senior in right of payment to all future Subordinated Indebtedness of such Guarantor. Each of the Guarantees of the Notes are structurally subordinated to all existing and future Indebtedness, claims of holders of Preferred Stock and other liabilities of Subsidiaries of each Guarantor that do not Guarantee the Notes.

Not all of the Company’s Subsidiaries guarantee the Notes. In the event of a bankruptcy, liquidation, reorganization or similar proceeding of any of these non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Issuers or a Guarantor. As a result, all of the existing and future liabilities of our non-guarantor Subsidiaries, including any claims of trade creditors, are effectively senior to the Notes. The Indenture does not limit the amount of liabilities that are not considered Indebtedness which may be incurred by the Company or its Restricted Subsidiaries, including the non-Guarantors.

The obligations of each Guarantor under its Guarantee are limited as necessary to prevent the Guarantee from constituting a fraudulent conveyance under applicable law. This provision may not, however, be effective to protect a Guarantee from being voided under fraudulent transfer law, or may reduce the applicable Guarantor’s obligation to an amount that effectively makes its Guarantee worthless. If a Guarantee were rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the Guarantor, and, depending on the amount of such indebtedness, a Guarantor’s liability on its Guarantee could be reduced to zero. See “Risk Factors—Risks Related to Our Indebtedness and the Notes—Federal and state fraudulent transfer laws may permit a court to void the notes and the guarantees, subordinate claims in respect of the notes and the guarantees and require noteholders to return payments received and, if that occurs, you may not receive any payments on the notes.”

Any Guarantor that makes a payment under its Guarantee is entitled upon payment in full of all guaranteed obligations under the Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.

Each Guarantor may consolidate with, amalgamate or merge with or into or sell all or substantially all its assets to the Company, the Co-Issuer or another Guarantor without limitation or any other Person upon the terms and conditions set forth in the Indenture. See “—Certain Covenants—Merger, Consolidation or Sale of All or Substantially All Assets.”

 

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Each Guarantee by a Guarantor provides by its terms that it will be automatically and unconditionally released and discharged upon:

(1) (a) any sale, exchange, disposition or transfer (by merger, amalgamation, consolidation or otherwise) of (i) the Capital Stock of such Guarantor, after which the applicable Guarantor is no longer a Restricted Subsidiary or (ii) all or substantially all the assets of such Guarantor, in each case if such sale, exchange, disposition or transfer is made in compliance with the applicable provisions of the Indenture;

(b) the release or discharge of the Guarantee by such Guarantor of Indebtedness under the Senior Secured Credit Facilities, or the release or discharge of such other guarantee that resulted in the creation of such Guarantee, except a discharge or release by or as a result of payment under such Guarantee (it being understood that a release subject to a contingent reinstatement is still a release, and that if any such Guarantee is so reinstated, such Guarantee shall also be reinstated to the extent that such Guarantor would then be required to provide a Guarantee pursuant to the covenant described under “—Certain Covenants—Limitation on Guarantees of Indebtedness by Restricted Subsidiaries”);

(c) the designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in compliance with the applicable provisions of the Indenture; or

(d) the exercise by the Issuers of their legal defeasance option or covenant defeasance option as described under “—Legal Defeasance and Covenant Defeasance” or the discharge of the Issuers’ obligations under the Indenture in accordance with the terms of the Indenture; and

(2) such Guarantor delivering to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.

Ranking

The payment of the principal of, premium, if any, and interest on the Notes and the payment of any Guarantee rank equally in right of payment to all existing and future Senior Indebtedness of the Issuers or the relevant Guarantor, as the case may be, including the obligations of the Issuers and such Guarantor under the Senior Secured Credit Facilities.

The Notes and the Guarantees are effectively subordinated in right of payment to all of the Issuers’ and each Guarantor’s existing and future Secured Indebtedness to the extent of the value of the collateral securing such Secured Indebtedness. $401.1 million of Secured Indebtedness outstanding, including $398.0 million in borrowings under the Senior Secured Credit Facilities (without giving effect to OID on our term loan facility) and $3.1 million of obligations related to capital leases. As of December 29, 2012, the Company also had (1) an additional approximately $135.5 million of borrowing capacity under the revolving credit facility under the Senior Secured Credit Facilities (after giving effect to $14.5 million of issued but undrawn letters of credit), which, if borrowed, would be Secured Indebtedness and (2) the option to increase the amount available under the term loan facility and/or the revolving credit facility by (x) $135.0 million and (y) an additional amount so long as the Company is in pro forma compliance with a consolidated first lien net leverage ratio, which in each case, if borrowed, would be Secured Indebtedness.

Although the Indenture contains limitations on the amount of additional Indebtedness that the Issuers and the Restricted Subsidiaries (including the Guarantors) may incur, under certain circumstances the amount of such additional Indebtedness could be substantial and under certain circumstances such additional Indebtedness may be secured. The Indenture also does not limit the amount of additional Indebtedness that any direct or indirect parent company of the Company may incur. See “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.”

 

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Paying Agent and Registrar for the Notes

The Issuers will maintain one or more paying agents for the Notes. The initial paying agent for the Notes is the Trustee.

The Issuers will also maintain one or more registrars and a transfer agent. The initial registrar and transfer agent with respect to the Notes is the Trustee. The registrar will maintain a register reflecting ownership of the Notes outstanding from time to time. The paying agent will make payments on, and the transfer agent will facilitate transfer of, the Notes on behalf of the Issuers.

The Issuers may change the paying agent, the registrar or the transfer agent without prior notice to the Holders. The Company or any of its Subsidiaries may act as a paying agent, registrar or transfer agent.

If any Notes are listed on an exchange and the rules of such exchange so require, the Issuers will satisfy any requirement of such exchange as to paying agents, registrars and transfer agents and will comply with any notice requirements required under such exchange in connection with any change of paying agent, registrar or transfer agent.

Transfer and Exchange

A Holder may transfer or exchange Notes in accordance with the Indenture. The registrar and the Trustee may require a Holder to furnish appropriate endorsements and transfer documents in connection with a transfer of Notes. Holders will be required to pay all taxes due on transfer. The Issuers are not required to transfer or exchange any Note selected for redemption or tendered (and not withdrawn) for repurchase in connection with a Change of Control Offer or an Asset Sale Offer. Also, the Issuers are not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of the Note for all purposes.

Principal, Maturity and Interest

The Issuers issued an aggregate principal amount of $250.0 million of Outstanding Notes in a private transaction that was not subject to the registration requirements of the Securities Act. The Notes will mature on January 31, 2020. Subject to compliance with the covenant described below under the caption “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock,” the Issuers may issue additional Notes under the Indenture from time to time (“ Additional Notes ”). All Notes including any Additional Notes subsequently issued under the Indenture will be treated as a single class for all purposes under the Indenture, including waivers, amendments, redemptions and offers to purchase, except for certain waivers and amendments as set forth herein. Unless the context requires otherwise, references to “ Notes ” for all purposes of the Indenture and this “Description of the Notes” include any Additional Notes that are actually issued. The Notes will be issued in minimum denominations of $2,000 and any integral multiples of $1,000 in excess of $2,000.

Interest on the Notes accrues at the rate of 10.5% per annum. Interest on the Notes is payable semi-annually in arrears on each January 31 and July 31, commencing July 31, 2012 to the Holders of Notes of record on the immediately preceding January 15 and July 15, respectively. Interest on the Notes accrues from the most recent date to which interest has been paid or, if no interest has been paid, from and including the Issue Date. Interest on the Notes is computed on the basis of a 360-day year comprised of twelve 30-day months.

Payment of Principal, Premium and Interest

Cash payments of principal of, premium, if any, and interest on the Notes are payable at the office or agency of the Issuers maintained for such purpose or, at the option of the Issuers, cash payment of interest may be made through the paying agent by check mailed to the Holders of the Notes at their respective addresses set forth in the

 

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register of Holders; provided , that (a) all cash payments of principal, premium, if any, and interest with respect to the Notes represented by one or more global notes registered in the name of or held by The Depository Trust Company (“ DTC ”) or its nominee are made through the paying agent by wire transfer of immediately available funds to the accounts specified by the registered Holder or Holders thereof and (b) all cash payments of principal, premium, if any, and interest with respect to certificated Notes are made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the paying agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). Until otherwise designated by the Issuers, the Issuers’ office or agency will be the office of the Trustee maintained for such purpose.

Mandatory Redemption; Offers to Purchase; Open Market Purchases

The Issuers are not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, the Issuers may be required to make an offer to purchase Notes as described under the caption “—Repurchase at the Option of Holders.” The Issuers, the Investors and their respective Affiliates may at any time and from time to time purchase Notes in the open market or otherwise.

Optional Redemption

Except as set forth below, the Issuers are not entitled to redeem the Notes at their option prior to January 31, 2016. At any time prior to January 31, 2016, the Issuers may on one or more occasions redeem all or a part of the Notes, upon notice as described under “—Selection and Notice,” at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, plus accrued and unpaid interest, if any, to the date of redemption (the “ Redemption Date ”), subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date.

On and after January 31, 2016, the Issuers may redeem the Notes, in whole or in part, upon notice as described under the heading “—Selection and Notice,” at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on January 31 of each of the years indicated below:

 

Year

   Senior
Notes
Percentage
 

2016

     105.250

2017

     102.625

2018 and thereafter

     100.000

In addition, until January 31, 2015, the Issuers may, at their option, and on one or more occasions, redeem up to 35.0% of the aggregate principal amount of Notes issued by them at a redemption price equal to the sum of (a) 100% of the aggregate principal amount thereof, plus (b) a premium equal to the stated interest rate per annum on the Notes, plus (c) accrued and unpaid interest, if any, to the applicable Redemption Date, subject to the right of Holders of Notes of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds received by the Company from one or more Equity Offerings or a contribution to the Company’s common equity capital made with the net cash proceeds of a concurrent Equity Offering; provided, that (a) at least 50% of the aggregate principal amount of Notes originally issued under the Indenture on the Issue Date and any Additional Notes issued under the Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; and (b) each such redemption occurs within 180 days of the date of closing of each such Equity Offering.

 

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Notice of any redemption, whether in connection with an Equity Offering or otherwise, may be given prior to the completion thereof, and any such redemption or notice may, at the Issuers’ discretion, be subject to one or more conditions precedent, including, but not limited to, the completion of the related Equity Offering or other corporate transaction. If such redemption is subject to the satisfaction of one or more conditions precedent, in the Issuers’ discretion the Redemption Date may be delayed or the redemption may be rescinded in the event that any such conditions shall not have been satisfied by the original Redemption Date. If any Notes are listed on an exchange, and the rules of such exchange so require, the Issuers will notify the exchange of any such notice of redemption. In addition, the Issuers will notify the exchange of the principal amount of any Notes outstanding following any partial redemption of such Notes.

Selection and Notice

If the Issuers are redeeming less than all of the Notes issued under the Indenture at any time, the Trustee will select the Notes to be redeemed (a) if the Notes are listed on an exchange, in compliance with the requirements of such exchange or (b) on a pro rata basis to the extent practicable, or, if the pro rata basis is not practicable for any reason by lot or by such other method as the Trustee shall deem fair and appropriate. No Notes of $2,000 or less can be redeemed in part.

Notices of redemption shall be delivered electronically or mailed by first-class mail, postage prepaid, at least 30 but not more than 60 days before the redemption date to each Holder of Notes at such Holder’s registered address or otherwise in accordance with the procedures of DTC, except that redemption notices may be delivered more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture. If any Note is to be redeemed in part only, any notice of redemption that relates to such Note shall state the portion of the principal amount thereof that has been or is to be redeemed.

With respect to Notes represented by certificated notes, the Issuers will issue a new Note in a principal amount equal to the unredeemed portion of the original Note in the name of the Holder upon cancellation of the original Note; provided , that new Notes will only be issued in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000. Notes called for redemption become due on the date fixed for redemption. On and after the Redemption Date, interest ceases to accrue on Notes or portions of them called for redemption.

Repurchase at the Option of Holders

Change of Control

The Indenture provides that if a Change of Control occurs after the Issue Date, unless the Issuers have previously or concurrently delivered a redemption notice with respect to all the outstanding Notes as described under “—Optional Redemption,” the Issuers will make an offer to purchase all of the Notes pursuant to the offer described below (the “ Change of Control Offer ”) at a price in cash (the “ Change of Control Payment ”) equal to 101.0% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of Holders of the Notes of record on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control except to the extent that the Issuers have exercised the right to redeem the Notes as described under “—Optional Redemption” above, the Issuers will send notice of such Change of Control Offer electronically or by first-class mail, with a copy to the Trustee, to each Holder of Notes to the address of such Holder appearing in the security register or otherwise in accordance with the procedures of DTC with the following information:

(1) that a Change of Control Offer is being made pursuant to the covenant entitled “Change of Control,” and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuers;

(2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is delivered (the “ Change of Control Payment Date ”);

 

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(3) that any Note not properly tendered will remain outstanding and continue to accrue interest;

(4) that unless the Issuers default in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;

(5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of such Notes completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(6) that Holders will be entitled to withdraw their tendered Notes and their election to require the Issuers to purchase such Notes, provided that the paying agent receives, not later than the close of business on the second Business Day prior to the expiration date of the Change of Control Offer, a facsimile transmission or letter setting forth the name of the Holder of the Notes, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes, or a specified portion thereof, and its election to have such Notes purchased;

(7) that if the Issuers are redeeming less than all of the Notes, the Holders of the remaining Notes will be issued new Notes and such new Notes will be equal in principal amount to the unpurchased portion of the Notes surrendered. The unpurchased portion of the Notes must be equal to at least $2,000 or any integral multiple of $1,000 in excess of $2,000;

(8) if such notice is delivered prior to the occurrence of a Change of Control, stating that the Change of Control Offer is conditional on the occurrence of such Change of Control; and

(9) the other instructions, as determined by the Issuers, consistent with the covenant described hereunder, that a Holder must follow.

The Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Issuers will comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations described in the Indenture by virtue thereof.

On the Change of Control Payment Date, the Issuers will, to the extent permitted by law:

(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;

(2) deposit with the paying agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered; and

(3) deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officer’s Certificate to the Trustee stating that such Notes or portions thereof have been tendered to, and purchased by, the Issuers.

The Senior Secured Credit Facilities provide, and future credit agreements or other agreements relating to Indebtedness to which the Issuers become a party may provide, that certain change of control events with respect to the Issuers would constitute a default thereunder (including a Change of Control under the Indenture). If we experience a change of control that triggers a default under the Senior Secured Credit Facilities or any such future Indebtedness, we could seek a waiver of such default or seek to refinance the Senior Secured Credit Facilities or such future Indebtedness. In the event we do not obtain such a waiver or do not refinance the Senior Secured Credit Facilities or such future Indebtedness, such default could result in amounts outstanding under the Senior Secured Credit Facilities or such future Indebtedness being declared due and payable.

 

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Our ability to pay cash to the Holders of Notes following the occurrence of a Change of Control may be limited by our then-existing financial resources. Therefore, sufficient funds may not be available when necessary to make any required repurchases.

The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of us and, thus, the removal of incumbent management. After the Issue Date, we have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to incur additional Indebtedness are contained in the covenants described under “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and “—Certain Covenants—Liens.” Such restrictions in the Indenture can be waived only with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture does not contain any covenants or provisions that may afford Holders of the Notes protection in the event of a highly leveraged transaction.

The Issuers will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Issuers and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

The definition of “ Change of Control ” includes a disposition of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to certain Persons. Although there is a limited body of case law interpreting the phrase “ substantially all ,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “ all or substantially all ” of the assets of the Company and its Subsidiaries, taken as a whole. As a result, it may be unclear as to whether a Change of Control has occurred and whether a Holder of Notes may require the Issuers to make an offer to repurchase the Notes as described above.

The provisions under the Indenture relating to the Issuers’ obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes then outstanding.

Asset Sales

The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale, unless:

(1) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of; and

(2) except in the case of a Permitted Asset Swap, at least 75.0% of the consideration therefor received by the Company or such Restricted Subsidiary, as the case may be, is in the form of Cash Equivalents; provided, that the amount of:

(a) any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet or in the footnotes thereto) of the Company or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the Notes, that are assumed by the transferee of any such assets and for which the Company and all of its Restricted Subsidiaries have been validly released by all applicable creditors in writing;

 

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(b) any securities, notes or other obligations or assets received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into Cash Equivalents (to the extent of the Cash Equivalents received) within 180 days following the closing of such Asset Sale; and

(c) any Designated Non-cash Consideration received by the Company or such Restricted Subsidiary in such Asset Sale having an aggregate fair market value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed the greater of (i) $30.0 million and (ii) 2.25% of Total Assets at the time of the receipt of such Designated Non-cash Consideration, with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value,

shall be deemed to be Cash Equivalents for purposes of this provision and for no other purpose.

Within 365 days after the receipt of any Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale,

(1) to permanently reduce:

(a) Obligations under the Senior Secured Credit Facilities, and to correspondingly reduce commitments with respect thereto;

(b) Obligations under Secured Indebtedness, which is secured by a Lien that is permitted by the Indenture, and to correspondingly reduce commitments with respect thereto;

(c) Obligations under other Senior Indebtedness (and to correspondingly reduce commitments with respect thereto), provided that the Issuers shall equally and ratably reduce Obligations under the Notes as provided under “—Optional Redemption” or through open-market purchases (to the extent such purchases are at or above 100.0% of the principal amount thereof) or by making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders to purchase their Notes at 100.0% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, on the amount of Notes to be repurchased, to the date of repurchase; or

(d) Indebtedness of a Restricted Subsidiary that is not a Guarantor, other than Indebtedness owed to the Issuers or another Restricted Subsidiary; or

(2) to make (a) an Investment in any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Company or any of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) capital expenditures or (c) acquisitions of other assets, in each of (a), (b) and (c), used or useful in a Similar Business; or

(3) to make an Investment in (a) any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Company or any of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) properties or (c) acquisitions of other assets that, in each of (a), (b) and (c), replace the businesses, properties and/or assets that are the subject of such Asset Sale.

provided , that in the case of clauses (2) and (3) above, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment so long as the Company, or such Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Proceeds will be applied to satisfy such commitment within 180 days of such commitment (an “ Acceptable Commitment ”) and, in the event any Acceptable Commitment is later cancelled or terminated for any reason before the Net Proceeds are applied in connection therewith, the Company or such Restricted Subsidiary enters into another Acceptable Commitment (a “ Second Commitment ”) within 180 days of such cancellation or termination; provided further that if any Second Commitment is later cancelled or terminated for any reason before such Net Proceeds are applied, then such Net Proceeds shall constitute Excess Proceeds.

 

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Any Net Proceeds from the Asset Sale that are not invested or applied as provided and within the time period set forth in the preceding paragraph will be deemed to constitute “ Excess Proceeds .” When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuers shall make an offer to all Holders of the Notes and, if required by the terms of any Indebtedness that is pari passu with the Notes (“ Pari Passu Indebtedness ”), to the holders of such Pari Passu Indebtedness (an “ Asset Sale Offer ”), to purchase the maximum aggregate principal amount of the Notes and such Pari Passu Indebtedness that is in an amount equal to at least $2,000, or an integral multiple of $1,000 thereafter, that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100.0% of the principal amount thereof (or accreted value thereof, if less), plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. The Issuers will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $25.0 million by delivering the notice required pursuant to the terms of the Indenture, with a copy to the Trustee. The Issuers may satisfy the foregoing obligations with respect to any Net Proceeds from an Asset Sale by making an Asset Sale Offer with respect to such Net Proceeds prior to the expiration of the relevant 365 days (or such longer period provided above) or with respect to Excess Proceeds of $25.0 million or less.

To the extent that the aggregate amount of Notes and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes or the Pari Passu Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and the Company shall select such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered with adjustments as necessary so that no Notes or Pari Passu Indebtedness will be repurchased in part in an unauthorized denomination. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds that resulted in the Asset Sale Offer shall be reset to zero (regardless of whether there are any remaining Excess Proceeds upon such completion).

Pending the final application of any Net Proceeds pursuant to this covenant, the holder of such Net Proceeds may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility, including under the Senior Secured Credit Facilities, or otherwise invest such Net Proceeds in any manner not prohibited by the Indenture.

The Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Issuers will comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations described in the Indenture by virtue thereof.

The provisions under the Indenture relating to the Issuers’ obligation to make an offer to repurchase the Notes as a result of an Asset Sale may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes then outstanding.

Future credit agreements or other similar agreements to which the Issuers become a party may contain restrictions on the Issuers’ ability to repurchase Notes. In the event an Asset Sale occurs at a time when the Issuers are prohibited from purchasing Notes, the Issuers could seek the consent of their lenders to the repurchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Issuers do not obtain such consent or repay such borrowings, the Issuers will remain prohibited from repurchasing Notes. In such a case, the Issuers’ failure to repurchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, likely constitute a default under such other agreements.

 

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Certain Covenants

Set forth below are summaries of certain covenants that are contained in the Indenture.

During any period of time that (i) the Notes have Investment Grade Ratings from both Rating Agencies and (ii) no Default has occurred and is continuing under the Indenture (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “ Covenant Suspension Event ” and the date thereof being referred to as the “Suspension Date”) then, the covenants specifically listed under the following captions in this “Description of the Notes” section of this prospectus will not be applicable to the Notes (collectively, the “ Suspended Covenants ”):

(1) “—Repurchase at the Option of Holders—Asset Sales”;

(2) “—Limitation on Restricted Payments”;

(3) “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(4) clause (4) of the first paragraph of “—Merger, Consolidation or Sale of All or Substantially All Assets”;

(5) “—Transactions with Affiliates”;

(6) “—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”; and

(7) “—Limitation on Guarantees of Indebtedness by Restricted Subsidiaries”

During any period that the foregoing covenants have been suspended, the Company may not designate any of its Subsidiaries as Unrestricted Subsidiaries pursuant to the second sentence of the definition of “Unrestricted Subsidiary.”

If and while the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants, the Notes will be entitled to substantially less covenant protection. In the event that the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants under the Indenture for any period of time as a result of the foregoing, and on any subsequent date (the “ Reversion Date ”) one or both of the Rating Agencies withdraw their Investment Grade Rating or downgrade the rating assigned to the Notes below an Investment Grade Rating, then the Company and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants under the Indenture with respect to future events. The period of time between the Suspension Date and the Reversion Date is referred to in this description as the “ Suspension Period ”. Additionally, upon the occurrence of a Covenant Suspension Event, the amount of Excess Proceeds from Net Proceeds shall be reset to zero.

Notwithstanding the foregoing, in the event of any such reinstatement, no action taken or omitted to be taken by the Company or any of its Restricted Subsidiaries prior to such reinstatement will give rise to a Default or Event of Default under the Indenture with respect to the Notes; provided, that (1) with respect to Restricted Payments made after such reinstatement, the amount available to be made as Restricted Payments will be calculated as though the covenant described above under the caption “—Limitation on Restricted Payments” had been in effect prior to, but not during, the Suspension Period; and (2) all Indebtedness incurred, or Disqualified Stock issued, during the Suspension Period will be classified to have been incurred or issued pursuant to clause (3) of the second paragraph of “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;” (3) any Affiliate Transaction entered into after such reinstatement pursuant to an agreement entered into during any Suspension Period shall be deemed to be permitted pursuant to clause (6) of the second paragraph of the covenant described under “—Affiliate Transactions;” (4) any encumbrance or restriction on the ability of any Restricted Subsidiary that is not a Guarantor to take any action described in clauses (1) through (3) of the first paragraph of the covenant described under “—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries” that becomes effective during any Suspension Period shall be

 

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deemed to be permitted pursuant to clause (a) of the second paragraph of the covenant described under “—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries;” and (5) no Subsidiary of the Company shall be required to comply with the covenant described under “—Limitation on Guarantees of Indebtedness by Restricted Subsidiaries” after such reinstatement with respect to any guarantee entered into by such Subsidiary during any Suspension Period.

There can be no assurance that the Notes will ever achieve or maintain Investment Grade Ratings.

Limitation on Restricted Payments

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:

(I) declare or pay any dividend or make any payment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (in each case, solely in such Person’s capacity as holder of such Equity Interests), including any dividend, payment or distribution payable in connection with any merger, amalgamation or consolidation, other than:

(a) dividends and distributions by the Company payable solely in Equity Interests (other than Disqualified Stock) of the Company; or

(b) dividends and distributions by a Restricted Subsidiary so long as, in the case of any dividend, payment or distribution payable on or in respect of any class or series of securities (including Equity Interests) issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend, payment or distribution in accordance with its Equity Interests in such class or series of securities (including Equity Interests);

(II) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Company or any direct or indirect parent company of the Company, including in connection with any merger, amalgamation or consolidation;

(III) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness, other than:

(a) Indebtedness permitted under clauses (7), (8) and (9) of the second paragraph of the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; or

(b) the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or

(IV) make any Restricted Investment (all such payments and other actions set forth in clauses (I) through (IV) above being collectively referred to as “ Restricted Payments ”), unless, at the time of such Restricted Payment:

(1) no Default shall have occurred and be continuing or would occur as a consequence thereof;

(2) immediately after giving effect to such transaction on a pro forma basis, (x) the Company could incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” (the “ Fixed Charge Coverage Test ”) and (y) the Consolidated Leverage Ratio of the Company is less than 5.00 to 1.00; and

(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issue Date (including Restricted Payments permitted by clauses (1), 6(c), (9) and (14) of the next succeeding paragraph, but excluding all other

 

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Restricted Payments permitted by the next succeeding paragraph), is less than the sum of (without duplication):

(a) 50.0% of the Consolidated Net Income of the Company for the period (taken as one accounting period and including the predecessor) beginning on the first day of the fiscal quarter during which the Issue Date occurs to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100.0% of such deficit; plus

(b) 100.0% of the aggregate net cash proceeds and the fair market value of marketable securities or other property received by the Company since immediately after the Issue Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness or issue Disqualified Stock or Preferred Stock pursuant to clause (12)(a) of the second paragraph of “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”) from the issue or sale of:

(i) (A) Equity Interests of the Company, including Treasury Capital Stock (as defined below), but excluding cash proceeds and the fair market value of marketable securities or other property received from the sale of:

(x) Equity Interests to any future, present or former employees, directors, officers, managers or consultants (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Company, any direct or indirect parent company of the Company or any of the Company’s Subsidiaries after the Issue Date to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph; and

(y) Designated Preferred Stock;

and (B) to the extent such net cash proceeds are actually contributed to the Company, Equity Interests of the Company’s direct or indirect parent companies (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such companies or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph); or

(ii) debt securities of the Company that have been converted into or exchanged for such Equity Interests of the Company;

provided , that this clause (b) shall not include the proceeds from (W) Refunding Capital Stock (as defined below) applied in accordance with clause (2) of the next succeeding paragraph, (X) Equity Interests or convertible debt securities of the Company sold to a Restricted Subsidiary, (Y) Disqualified Stock or debt securities that have been converted into Disqualified Stock or (Z) Excluded Contributions; plus

(c) 100.0% of the aggregate amount of cash and the fair market value of marketable securities or other property contributed to the capital of the Company following the Issue Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness or issue Disqualified Stock or Preferred Stock pursuant to clause (12)(a) of the second paragraph of “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”) (other than by a Restricted Subsidiary and other than any Excluded Contributions); plus

(d) 100.0% of the aggregate amount received in cash and the fair market value of marketable securities or other property received by means of:

(i) the sale or other disposition (other than to the Company or a Restricted Subsidiary) of, or other returns on Investments from, Restricted Investments made by the Company or its Restricted

 

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Subsidiaries and repurchases and redemptions of such Restricted Investments from the Company or its Restricted Subsidiaries and repayments of loans or advances, and releases of guarantees, which constitute Restricted Investments made by the Company or its Restricted Subsidiaries, in each case after the Issue Date; or

(ii) the sale (other than to the Company, the Co-Issuer or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary or a dividend or distribution from an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Company or a Restricted Subsidiary pursuant to clause (7) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary after the Issue Date; plus

(e) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary or the merger, amalgamation or consolidation of an Unrestricted Subsidiary into the Company or a Restricted Subsidiary or the transfer of all or substantially all of the assets of an Unrestricted Subsidiary to the Company or a Restricted Subsidiary after the Issue Date, the fair market value of the Investment in such Unrestricted Subsidiary (or the assets transferred) at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary or at the time of such merger, amalgamation, consolidation or transfer of assets, other than to the extent the Investment in such Unrestricted Subsidiary constituted a Permitted Investment; provided that, in the case of this clause (e), if the fair market value of such Investment shall exceed $40.0 million, such fair market value shall be determined by the board of directors of the Company, whose resolution with respect thereto will be delivered to the Trustee), at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary, other than to the extent the Investment in such Unrestricted Subsidiary was made by the Company, the Co-Issuer or a Restricted Subsidiary pursuant to clause (7) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment.

The foregoing provisions will not prohibit:

(1) the payment of any dividend or other distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or other distribution or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or other distribution or redemption payment would have complied with the provisions of the Indenture;

(2) (a) the redemption, repurchase, retirement or other acquisition of any Equity Interests, including any accrued and unpaid dividends thereon (“ Treasury Capital Stock ”) or Subordinated Indebtedness of the Company or any Restricted Subsidiary or any Equity Interests of any direct or indirect parent company of the Company, in exchange for, or out of the proceeds of the substantially concurrent sale or issuance (other than to a Restricted Subsidiary) of, Equity Interests of the Company or any direct or indirect parent company of the Company to the extent contributed to the Company (in each case, other than any Disqualified Stock) (“ Refunding Capital Stock ”), (b) the declaration and payment of dividends on Treasury Capital Stock out of the proceeds of the substantially concurrent sale or issuance (other than to a Subsidiary of the Company or to an employee stock ownership plan or any trust established by the Company or any of its Subsidiaries) of Refunding Capital Stock, and (c) if, immediately prior to the retirement of Treasury Capital Stock, the declaration and payment of dividends thereon was permitted under clauses (6) (a) or (b) of this paragraph, the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect parent company of the Company) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that were declarable and payable on such Treasury Capital Stock immediately prior to such retirement;

(3) the defeasance, redemption, repurchase, exchange or other acquisition or retirement (a) of Subordinated Indebtedness of the Issuers or a Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Issuers or a Guarantor or Disqualified Stock of the

 

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Company, the Co-Issuer or a Guarantor or (b) Disqualified Stock of the Issuers or a Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of the Issuers or a Guarantor, that, in each case, is incurred or issued, as applicable, in compliance with “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” so long as:

(a) the principal amount (or accreted value, if applicable) of such new Indebtedness or the liquidation preference of such new Disqualified Stock does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Subordinated Indebtedness or the liquidation preference of, plus any accrued and unpaid dividends on, the Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired for value, plus the amount of any premium (including tender premium) required to be paid under the terms of the instrument governing the Subordinated Indebtedness or Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired, defeasance costs and any fees and expenses incurred in connection with the issuance of such new Indebtedness or Disqualified Stock;

(b) such new Indebtedness is subordinated to the Notes or the applicable Guarantee at least to the same extent as such Subordinated Indebtedness so defeased, redeemed, repurchased, exchanged, acquired or retired;

(c) such new Indebtedness or Disqualified Stock has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness or Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired (or, if earlier, the date that is 91 days after the maturity date of the Notes); and

(d) such new Indebtedness or Disqualified Stock has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness or Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired (or requires no or nominal payments in cash prior to the date that is 91 days after the maturity date of the Notes);

(4) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of the Company or any direct or indirect parent company of the Company held by any future, present or former employee, director, officer, member of management or consultant (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Company, any of its Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement, or any stock subscription or shareholder agreement (including, for the avoidance of doubt, any principal and interest payable on any notes issued by the Company or any direct or indirect parent company of the Company in connection with such repurchase, retirement or other acquisition), including any Equity Interest rolled over by management of the Company or any direct or indirect parent company of the Company in connection with the Transactions; provided, that the aggregate amount of Restricted Payments made under this clause (4) do not exceed in any calendar year $15.0 million (which shall increase to $25.0 million subsequent to the consummation of an underwritten public Equity Offering by the Company or any direct or indirect parent entity of the Company) (with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $30.0 million in any calendar year (which shall increase to $50.0 million subsequent to the consummation of an underwritten public Equity Offering by the Company or any direct or indirect parent corporation of the Company)); provided , further , that such amount in any calendar year under this clause may be increased by an amount not to exceed:

(a) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Company and, to the extent contributed to the Company, the cash proceeds from the sale of Equity Interests of any of the Company’s direct or indirect parent companies, in each case to any future, present or former employees, directors, officers, members of management, or consultants (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Company, any of its

 

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Subsidiaries or any of its direct or indirect parent companies that occurs after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of the preceding paragraph; plus

(b) the cash proceeds of key man life insurance policies received by the Company or its Restricted Subsidiaries (or any direct or indirect parent company to the extent contributed to the Company) after the Issue Date; less

(c) the amount of any Restricted Payments previously made with the cash proceeds described in clauses (a) and (b) of this clause (4);

and provided , further , that cancellation of Indebtedness owing to the Company from any future, present or former employees, directors, officers, members of management or consultants of the Company (or their respective Controlled Investment Affiliates or Immediate Family Members), any of the Company’s direct or indirect parent companies or any of the Company’s Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Company or any of its direct or indirect parent companies will not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of the Indenture;

(5) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Company or any of its Restricted Subsidiaries or any class or series of Preferred Stock of any Restricted Subsidiary issued in accordance with the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” to the extent such dividends are included in the definition of “ Fixed Charges ”;

(6) (a) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Company or any of its Restricted Subsidiaries after the Issue Date;

(b) the declaration and payment of dividends to any direct or indirect parent company of the Company, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by such parent company after the Issue Date, provided that the amount of dividends paid pursuant to this clause (b) shall not exceed the aggregate amount of cash actually contributed to the Company from the sale of such Designated Preferred Stock; or

(c) the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to clause (2) of this paragraph;

provided , in the case of each of (a), (b) and (c) of this clause (6), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock that is Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, the Company and its Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;

(7) if the Consolidated Leverage Ratio of the Company is less than 5.00 to 1.00 on a pro forma basis after giving effect to such transaction, Investments in Unrestricted Subsidiaries having an aggregate fair market value taken together with all other Investments made pursuant to this clause (7) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities (until such proceeds are converted to Cash Equivalents), not to exceed the greater of (a) $15.0 million and (b) 1.0% of Total Assets at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(8) payments made or expected to be made by the Company or any Restricted Subsidiary in respect of withholding or similar taxes payable upon exercise of Equity Interests by any future, present or former employee, director, officer, member of management or consultant (or their respective Controlled Investment

 

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Affiliates or Immediate Family Members) of the Company or any Restricted Subsidiary or any direct or indirect parent company of the Company and any repurchases of Equity Interests deemed to occur upon exercise of stock options, warrants or similar rights if such Equity Interests represent a portion of the exercise price of such options, warrants or similar rights;

(9) the declaration and payment of dividends on the Company’s common stock (or the payment of dividends to any direct or indirect parent company of the Company to fund a payment of dividends on such company’s common stock), following the first public offering of the Company’s common stock or the common stock of any direct or indirect parent company of the Company after the Issue Date, of up to 6% per annum of the net cash proceeds received by or contributed to the Company in or from any such public offering, other than public offerings with respect to the Company’s common stock registered on Form S-4 or Form S-8 and other than any public sale constituting an Excluded Contribution;

(10) Restricted Payments in an amount that does not exceed the amount of Excluded Contributions received since the Issue Date;

(11) if the Consolidated Leverage Ratio of the Company is less than 5.00 to 1.00 on a pro forma basis after giving effect to such transaction, Restricted Payments in an aggregate amount taken together with all other Restricted Payments made pursuant to this clause (11) (in the case of Restricted Investments, at the time outstanding (without giving effect to the sale of an Investment to the extent the proceeds of such sale do not consist of, or have not be subsequently sold or transferred for, Cash Equivalents)) not to exceed the greater of (a) $25.0 million and (b) 1.75% of Total Assets at such time;

(12) distributions or payments of Securitization Fees;

(13) any Restricted Payment made in connection with the Transactions and the fees and expenses related thereto or owed to Affiliates, in each case to the extent permitted by the covenant described under “—Transactions with Affiliates”;

(14) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to the provisions similar to those described under the captions “—Repurchase at the Option of Holders—Change of Control” and “—Repurchase at the Option of Holders—Asset Sales”; provided , that if the Issuers shall have been required to make a Change of Control Offer or Asset Sale Offer, as applicable, to purchase the Notes on the terms provided in the Indenture applicable to Change of Control Offers or Asset Sale Offers, respectively, all Notes validly tendered by Holders of such Notes in connection with a Change of Control Offer or Asset Sale Offer, as applicable, have been repurchased, redeemed, acquired or retired for value;

(15) the declaration and payment of dividends or distributions by the Company to, or the making of loans to, any direct or indirect parent company of the Company in amounts required for any direct or indirect parent company of the Company to pay, in each case without duplication,

(a) franchise and similar taxes, and other fees and expenses, required to maintain their corporate or other entity existence;

(b) foreign, federal, state or local income or similar taxes, to the extent such income or similar taxes are attributable to the income of the Company and its Restricted Subsidiaries or, to the extent of any cash amounts actually received from its Unrestricted Subsidiaries for such purpose, to the income of such Unrestricted Subsidiaries; provided , that in each case the amount of such payments in respect of any fiscal year does not exceed the amount that the Company and/or its Restricted Subsidiaries (and, to the extent permitted above, its Unrestricted Subsidiaries), as applicable, would have been required to pay in respect of the relevant foreign, federal, state or local income or similar taxes for such fiscal year had the Company, its Restricted Subsidiaries and/or its Unrestricted Subsidiaries (to the extent described above), as applicable, paid such taxes separately from any such parent company;

(c) customary salary, bonus and other benefits payable to employees, directors, officers and managers of any direct or indirect parent company of the Company to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Company and its Restricted Subsidiaries;

 

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(d) general corporate operating and overhead costs and expenses of any direct or indirect parent company of the Company to the extent such costs and expenses are attributable to the ownership or operation of the Company and its Restricted Subsidiaries;

(e) fees and expenses other than to Affiliates of the Company related to any unsuccessful equity or debt offering of such parent entity;

(f) amounts payable pursuant to the Management Fee Agreement, (including any amendment thereto or replacement thereof so long as any such amendment or replacement is not materially disadvantageous in the good faith judgment of the board of directors of the Company to the Holders when taken as a whole, as compared to the Management Fee Agreement as in effect on the Issue Date (it being understood that any amendment thereto or replacement thereof to increase the fees payable pursuant to the Management Fee Agreement would be deemed to be materially disadvantageous to the Holders)), solely to the extent such amounts are not paid directly by the Company or its Subsidiaries;

(g) cash payments in lieu of issuing fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Equity Interests of the Company or any direct or indirect parent company of the Company;

(h) to finance Investments that would otherwise be permitted to be made pursuant to this covenant if made by the Company; provided, that (A) such Restricted Payment shall be made substantially concurrently with the closing of such Investment, (B) such direct or indirect parent company shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the capital of the Company or one of its Restricted Subsidiaries or (2) the merger or amalgamation of the Person formed or acquired into the Company or one of its Restricted Subsidiaries (to the extent not prohibited by the covenant “—Merger, Consolidation or Sale of All or Substantially All Assets” below) in order to consummate such Investment, (C) such direct or indirect parent company and its Affiliates (other than the Company or a Restricted Subsidiary) receives no consideration or other payment in connection with such transaction except to the extent the Company or a Restricted Subsidiary could have given such consideration or made such payment in compliance with the Indenture, (D) any property received by the Company shall not increase amounts available for Restricted Payments pursuant to clause (3) of the preceding paragraph and (E) such Investment shall be deemed to be made by the Company or such Restricted Subsidiary pursuant to another provision of this covenant (other than pursuant to clause (10) hereof) or pursuant to the definition of “ Permitted Investments ” (other than clause (9) thereof);

(i) amounts that would be permitted to be paid by the Company under clauses (3), (4), (7), (8), (12), (13), (16) and (20) of the covenant described under “—Transactions with Affiliates”; provided , that the amount of any Restricted Payment made under this clause (15)(i) as permitted to be paid by clause (13) of the covenant described under “—Transactions with Affiliates” shall not exceed the amount permitted under clause (4) hereof; provided, further , that the amount of any dividend or distribution under this clause (15)(i) to permit such payment shall reduce, without duplication, Consolidated Net Income of the Company to the extent, if any, that such payment would have reduced Consolidated Net Income of the Company if such payment had been made directly by the Company and increase (or, without duplication of any reduction of Consolidated Net Income, decrease) EBITDA to the extent, if any, that Consolidated Net Income is reduced under this clause (15)(i) and such payment would have been added back to (or, to the extent excluded from Consolidated Net Income, would have been deducted from) EBITDA if such payment had been made directly by the Company, in each case, in the period such payment is made;

(16) the redemption, repurchase, retirement or other acquisition of any Equity Interests of any Restricted Subsidiary by the Company or any Restricted Subsidiary; and

(17) the distribution, by dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Company or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are cash and/or Cash Equivalents);

 

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provided , that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (11) and (17), no Default shall have occurred and be continuing or would occur as a consequence thereof.

As of the Issue Date, all of the Company’s Subsidiaries were Restricted Subsidiaries. The Company will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the penultimate sentence of the definition of “ Unrestricted Subsidiary .” For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the penultimate sentence of the definition of “ Investments .” Such designation will be permitted only if a Restricted Payment in such amount would be permitted at such time, pursuant to this covenant or pursuant to the definition of “ Permitted Investments ,” and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the Indenture. For the avoidance of doubt, this covenant shall not restrict the making of any “ AHYDO catch up payment ” with respect to, and required by the terms of, any Indebtedness of the Company or any of its Restricted Subsidiaries permitted to be incurred under the terms of the Indenture.

Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise (collectively, “ incur ” and collectively, an “ incurrence ”) with respect to any Indebtedness (including Acquired Indebtedness) and the Company will not issue any shares of Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or Preferred Stock; provided , that the Company may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any Restricted Subsidiary may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio of the Company and its Restricted Subsidiaries’ for the most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period; provided that the then outstanding aggregate principal amount of Indebtedness (including Acquired Indebtedness), Disqualified Stock and Preferred Stock that may be incurred or issued, as applicable, pursuant to the foregoing, together with any amounts incurred under clauses (12) and (23) of the following paragraph, by Restricted Subsidiaries that are not Guarantors (other than the Co-Issuer) shall not exceed $75.0 million.

The foregoing limitations will not apply to:

(1) Indebtedness incurred pursuant to any Credit Facilities by the Company or any Restricted Subsidiary and the issuance and creation of letters of credit and bankers’ acceptances thereunder (with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof); provided that immediately after giving effect to any such incurrence or issuance, the then outstanding aggregate principal amount of all Indebtedness incurred or issued under this clause (1) does not exceed $660.0 million;

(2) the incurrence by the Company and any Guarantor of Indebtedness represented by the Notes (including any guarantee thereof, but excluding any Additional Notes);

(3) Indebtedness of the Company and its Subsidiaries in existence on the Issue Date (other than Indebtedness described in clauses (1) and (2));

(4) Indebtedness (including Capitalized Lease Obligations), Disqualified Stock incurred or issued by the Company or any Restricted Subsidiary and Preferred Stock incurred or issued by the Company or any

 

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Restricted Subsidiary, to finance the purchase, lease or improvement of property (real or personal), equipment or other assets used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets in an aggregate principal amount not to exceed the greater of (a) $40.0 million and (b) 3.0% of Total Assets (in each case, determined at the date of incurrence or issuance), so long as such Indebtedness, Disqualified Stock or Preferred Stock is incurred or issued at the date of such purchase, lease or improvement or within 270 days thereafter;

(5) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit, bank guarantees, banker’s acceptances, warehouse receipts, or similar instruments issued or created in the ordinary course of business, including letters of credit in respect of workers’ compensation claims, performance or surety bonds, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims, performance or surety bonds, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance; provided , that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 Business Days following such drawing or incurrence;

(6) Indebtedness arising from agreements of the Company or its Restricted Subsidiaries providing for indemnification, adjustment of purchase price, earnouts or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided , that such Indebtedness is not reflected on the balance sheet of the Company, or any of its Restricted Subsidiaries (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (6));

(7) Indebtedness of the Company to a Restricted Subsidiary; provided , that any such Indebtedness owing to a Restricted Subsidiary that is not the Co-Issuer or a Guarantor is expressly subordinated in right of payment to the Notes; provided , further , that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness (to the extent such Indebtedness is then outstanding) not permitted by this clause (7);

(8) Indebtedness of a Restricted Subsidiary to the Company or another Restricted Subsidiary; provided , that if a Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not the Co-Issuer or a Guarantor, such Indebtedness is expressly subordinated in right of payment to the Guarantee of the Notes of such Guarantor; provided , further , that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness (to the extent such Indebtedness is then outstanding) not permitted by this clause (8);

(9) shares of Preferred Stock of a Restricted Subsidiary issued to the Company or another Restricted Subsidiary; provided , that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Company or another of its Restricted Subsidiaries or any pledge of such Capital Stock constituting a Permitted Lien) shall be deemed in each case to be an issuance of such shares of Preferred Stock (to the extent such Preferred Stock is then outstanding) not permitted by this clause (9);

 

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(10) Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of limiting interest rate risk with respect to any Indebtedness permitted to be incurred under the Indenture, exchange rate risk or commodity pricing risk;

(11) obligations in respect of self-insurance and obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Company or any of its Restricted Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business;

(12) (a) Indebtedness or Disqualified Stock of the Company and Indebtedness, Disqualified Stock or Preferred Stock of the Company or any Restricted Subsidiary in an aggregate principal amount or liquidation preference up to 100% of the net cash proceeds received by the Company since immediately after the Issue Date from the issue or sale of Equity Interests of the Company or cash contributed to the capital of the Company (in each case, other than proceeds of Disqualified Stock or sales of Equity Interests to the Company or any of its Subsidiaries) as determined in accordance with clauses (3)(b) and (3)(c) of the first paragraph of “—Limitation on Restricted Payments” to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments pursuant to the second paragraph of “—Limitation on Restricted Payments” or to make Permitted Investments (other than Permitted Investments specified in clauses (1), (2) or (3) of the definition thereof) and,

(b) Indebtedness or Disqualified Stock of the Company and Indebtedness, Disqualified Stock or Preferred Stock of the Company or any Restricted Subsidiary in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock then outstanding and incurred pursuant to this clause (12)(b), does not exceed the greater of (i) $75.0 million and (ii) 5.5% of Total Assets (in each case, determined on the date of such incurrence); it being understood that any Indebtedness, Disqualified Stock or Preferred Stock incurred pursuant to this clause (12)(b) shall cease to be deemed incurred or outstanding for purposes of this clause (12)(b) but shall be deemed incurred for the purposes of the first paragraph of this covenant from and after the first date on which the Company or such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock under the first paragraph of this covenant without reliance on this clause (12)(b)); provided, that the amount of Indebtedness, Disqualified Stock and Preferred Stock that may be incurred pursuant to this clause (12), together with amounts incurred under clause (23) and the immediately preceding paragraph, by Restricted Subsidiaries that are not Guarantors (other than the Co-Issuer) shall not exceed $75.0 million at any one time outstanding;

(13) the incurrence or issuance by the Company or any Restricted Subsidiary of Indebtedness, Disqualified Stock or Preferred Stock which serves to extend, replace, refund, refinance, renew or defease any Indebtedness, Disqualified Stock or Preferred Stock incurred or issued as permitted under the first paragraph of this covenant and clauses (2), (3), (4) and (12)(a) above, this clause (13) and clause (14) below or any Indebtedness, Disqualified Stock or Preferred Stock incurred or issued to so extend, replace, refund, refinance, renew or defease such Indebtedness, Disqualified Stock or Preferred Stock including additional Indebtedness, Disqualified Stock or Preferred Stock incurred to pay premiums (including tender premiums), defeasance costs, and accrued interest, fees and expenses in connection therewith (the “ Refinancing Indebtedness ”) prior to its respective maturity; provided , that such Refinancing Indebtedness:

(a) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred which is not less than the remaining Weighted Average Life to Maturity of, the Indebtedness, Disqualified Stock or Preferred Stock being extended, replaced, refunded, refinanced, renewed or defeased (or requires no or nominal payments in cash prior to the date that is 91 days after the maturity date of the Notes);

(b) to the extent such Refinancing Indebtedness extends, replaces, refunds, refinances, renews or defeases (i) Indebtedness subordinated in right of payment to the Notes or any Guarantee thereof, such Refinancing Indebtedness is subordinated in right of payment to the Notes or the Guarantee thereof at

 

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least to the same extent as the Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively; and

(c) shall not include:

(i) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Company that is not the Co-Issuer or a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Company, the Co-Issuer or a Guarantor;

(ii) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Company that is not a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of a Guarantor; or

(iii) Indebtedness or Disqualified Stock of the Company or Indebtedness, Disqualified Stock or Preferred Stock of a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;

and, provided , further , that subclause (a) of this clause (13) will not apply to any extension, replacement, refunding, refinancing, renewal or defeasance of any Credit Facilities or Secured Indebtedness;

(14) (a) Indebtedness, Disqualified Stock or Preferred Stock of the Company or a Restricted Subsidiary, incurred or issued to finance an acquisition (or other purchase of assets) or (b) Indebtedness, Disqualified Stock or Preferred Stock of Persons that are acquired by the Company or any Restricted Subsidiary or merged into or consolidated with the Company or a Restricted Subsidiary in accordance with the terms of the Indenture; provided , that in the case of clauses (a) and (b), after giving effect to such acquisition, merger, amalgamation or consolidation, either (x) the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Test set forth in the first paragraph of this covenant or (y) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries is equal to or greater than immediately prior to such acquisition, merger, amalgamation or consolidation;

(15) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within five Business Days of its incurrence;

(16) Indebtedness of the Company or any of its Restricted Subsidiaries supported by a letter of credit issued pursuant to the Credit Facilities, in a principal amount not in excess of the stated amount of such letter of credit;

(17) (a) any guarantee by the Company or a Restricted Subsidiary of Indebtedness or other obligations of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under the terms of the Indenture,

(b) any guarantee by a Restricted Subsidiary of Indebtedness of the Company; provided , that such guarantee is incurred in accordance with the covenant described below under “—Limitation on Guarantees of Indebtedness by Restricted Subsidiaries”, or

(c) any incurrence by the Co-Issuer of Indebtedness as a co-issuer of Indebtedness of the Company that was permitted to be incurred by another provision of this covenant;

(18) Indebtedness consisting of Indebtedness issued by the Company or any of its Restricted Subsidiaries to future, present or former employees, directors, officers, managers and consultants thereof, their respective Controlled Investment Affiliates or Immediate Family Members, in each case to finance the purchase or redemption of Equity Interests of the Company or any direct or indirect parent company of the Company to the extent described in clause (4) of the second paragraph under the caption “—Limitation on Restricted Payments”;

 

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(19) to the extent constituting Indebtedness, customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business;

(20) (a) Indebtedness owed on a short-term basis of no longer than 30 days to banks and other financial institutions incurred in the ordinary course of business of the Company and its Restricted Subsidiaries with such banks or financial institutions that arises in connection with ordinary banking arrangements to manage cash balances of the Company and its Restricted Subsidiaries and (b) Indebtedness in respect of Bank Products;

(21) Indebtedness incurred by a Restricted Subsidiary in connection with bankers’ acceptances, discounted bills of exchange or the discounting or factoring of receivables for credit management purposes, in each case incurred or undertaken in the ordinary course of business on arm’s length commercial terms;

(22) Indebtedness of the Company or any of its Restricted Subsidiaries consisting of (a) the financing of insurance premiums or (a) take-or-pay obligations contained in supply arrangements in each case, incurred in the ordinary course of business;

(23) the incurrence of Indebtedness of Restricted Subsidiaries of the Company that are not Guarantors (including Foreign Subsidiaries) in an amount outstanding under this clause (23) not to exceed together with any other Indebtedness incurred under this clause (23) the greater of (a) $50.0 million and (b) 3.5% of Total Assets (in each case, determined on the date of such incurrence); it being understood that any Indebtedness deemed incurred pursuant to this clause (23) shall cease to be deemed incurred or outstanding for purposes of this clause (23) but shall be deemed incurred for the purposes of the first paragraph of this covenant from and after the first date on which the Company or such Restricted Subsidiaries could have incurred such Indebtedness under the first paragraph of this covenant without reliance on this clause (23)); provided, that the amount of Indebtedness, Disqualified Stock and Preferred Stock that may be incurred pursuant to this clause (23), together with amounts incurred under clause (12) and the immediately preceding paragraph, by Restricted Subsidiaries that are not Guarantors (other than the Co-Issuer) shall not exceed $75.0 million at any one time outstanding; and

(24) Indebtedness of the Company or any of its Restricted Subsidiaries undertaken in connection with cash management and related activities with respect to any Subsidiary or joint venture in the ordinary course of business.

For purposes of determining compliance with this covenant:

(1) in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or Preferred Stock described in clauses (1) through (24) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company, in its sole discretion, may classify or reclassify such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) and will only be required to include the amount and type of such Indebtedness, Disqualified Stock or Preferred Stock in one of the above clauses or under the first paragraph of this covenant; provided , that all Indebtedness outstanding under the Senior Secured Credit Facilities on the Issue Date will be treated as incurred on the Issue Date under clause (1) of the second paragraph above; and

(2) the Company will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in the first and second paragraphs above.

Accrual of interest or dividends, the accretion of accreted value, the accretion or amortization of original issue discount and the payment of interest or dividends in the form of additional Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, of the same class will not be deemed to be an incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this covenant.

Notwithstanding any other provision of the Indenture to the contrary, for all purposes during the term of the Indenture, each lease in existence on the Issue Date shall have the same characterization as a Capitalized Lease

 

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Obligation or an operating lease as the characterization of that lease in the most recent financial statements in existence on the Issue Date, notwithstanding any change in characterization of that lease subsequent to the Issue Date by the Company based on changes in GAAP or its interpretation of GAAP.

For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. Dollar Equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided , that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed (a) the principal amount of such Indebtedness being refinanced plus (b) the aggregate amount of fees, underwriting discounts, premiums (including tender premiums) and other costs and expenses (including original issue discount, upfront fees or similar fees) incurred in connection with such refinancing.

The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.

The Indenture provides that the Company does not, and does not permit any Guarantor to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is contractually subordinated or junior in right of payment to any Indebtedness of the Company or such Guarantor, as the case may be, unless such Indebtedness is expressly subordinated in right of payment to the Notes or such Guarantor’s Guarantee to the extent and in the same manner as such Indebtedness is subordinated to other Indebtedness of the Company or such Guarantor, as the case may be.

The Indenture does not treat (1) unsecured Indebtedness as subordinated or junior to Secured Indebtedness merely because it is unsecured or (2) Indebtedness as subordinated or junior to any other Indebtedness merely because it has a junior priority with respect to the same collateral or because it is guaranteed by other obligors.

Liens

The Company will not, and will not permit the Co-Issuer or any Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) that secures Obligations under any Indebtedness or any related Guarantee of Indebtedness, on any asset or property of the Company, the Co-Issuer or any Guarantor, or any income or profits therefrom, or assign or convey any right to receive income therefrom, unless:

(1) in the case of Liens securing Subordinated Indebtedness, the Notes and related Guarantees are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; and

(2) in all other cases, the Notes or the Guarantees are equally and ratably secured,

except that the foregoing shall not apply to or restrict (a) Liens securing obligations in respect of the Notes and the related Guarantees, (b) Liens securing obligations in respect of (x) Indebtedness and other Obligations permitted to be incurred under Credit Facilities, including any letter of credit facility relating thereto, that was permitted by the terms of the Indenture to be incurred pursuant to clause (1) of the second paragraph under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and (y) obligations of the Issuers or any Subsidiary in respect of any Bank Products provided by any lender party to any Senior Secured Credit Facilities or any Affiliate of such lender (or any Person that was a lender or an Affiliate of a lender at the time the applicable agreements pursuant to which

 

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such Bank Products are provided were entered into) and (c) Liens securing obligations in respect of Indebtedness permitted to be incurred under the covenant described above under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; provided, that, with respect to Liens securing Indebtedness permitted under this subclause (c), at the time of incurrence and after giving pro forma effect thereto and the application of the net proceeds thereof, the Consolidated Secured Debt Ratio would be no greater than 3.50 to 1.00.

Any Lien created for the benefit of the Holders of the Notes pursuant to this covenant shall be deemed automatically and unconditionally released and discharged upon the release and discharge of each of the Liens described in clauses (1) and (2) above.

Merger, Consolidation or Sale of All or Substantially All Assets

Company

The Company may not consolidate or merge with or into or wind up into (whether or not the Company is the surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(1) the Company is the surviving Person or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made, is a Person organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Person, as the case may be, being herein called the “ Successor Company ”); provided , that in the case where the surviving Person is not a corporation, a co-obligor of the Notes is a corporation;

(2) the Successor Company, if other than the Company, expressly assumes all the obligations of the Company under the Notes pursuant to supplemental indentures or other documents or instruments;

(3) immediately after such transaction, no Default exists;

(4) immediately after giving pro forma effect to such transaction and any related financing transactions, as if such transactions had occurred at the beginning of the applicable four-quarter period,

(a) the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Test, or

(b) the Fixed Charge Coverage Ratio for the Successor Company and its Restricted Subsidiaries would be equal to or greater than the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries immediately prior to such transaction;

(5) each Guarantor, unless it is the other party to the transactions described above, in which case clause (1)(b) of the second succeeding paragraph shall apply, shall have by supplemental indenture confirmed that its Guarantee shall apply to such Person’s obligations under the Indenture, the Notes and the Registration Rights Agreement; and

(6) the Co-Issuer, unless it is the party to the transactions described above, in which case clause (3) under the subheading “—Co-Issuer” below shall apply, shall have by supplemental indenture confirmed that it continues to be a co-obligor of the Notes; and

(7) the Company (or, if applicable, the Successor Company) shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger, amalgamation or transfer and such supplemental indentures, if any, comply with the Indenture. The Successor Company will succeed to, and be substituted for the Company under the Indenture, the Guarantees and the Notes, as applicable.

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(1) any Restricted Subsidiary may consolidate or amalgamate with or merge with or into or transfer all or part of its properties and assets to the Company, and

(2) the Company may merge with an Affiliate of the Company solely for the purpose of reorganizing the Company in the United States, any state thereof, the District of Columbia or any territory thereof so long as the amount of Indebtedness of the Company and its Restricted Subsidiaries is not increased thereby.

Guarantors

Subject to certain limitations described in the Indenture governing release of a Guarantee upon the sale, disposition or transfer of a Guarantor, no Guarantor will, and the Company will not permit any Guarantor to, consolidate, amalgamate or merge with or into or wind up into (whether or not such Guarantor is the surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(1) (a) such Guarantor is the surviving Person or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a Person organized or existing under the laws of the jurisdiction of organization of such Guarantor, as applicable, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such surviving Guarantor or such Person, as the case may be, being herein called the “ Successor Person ”);

(b) the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under the Indenture and such Guarantor’s related Guarantee pursuant to supplemental indentures or other documents or instruments;

(c) immediately after such transaction, no Default exists; and

(d) the Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger, amalgamation or transfer and such supplemental indentures, if any, comply with the Indenture;

(2) the transaction is made in compliance with the first paragraph of the covenant described under “—Repurchase at the Option of Holders—Asset Sales”; or

(3) in the case of assets comprised of Equity Interests of Subsidiaries that are not Guarantors, such Equity Interests are sold, assigned, transferred, leased, conveyed or otherwise disposed of to one or more Restricted Subsidiaries.

Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, such Guarantor under the Indenture and such Guarantor’s Guarantee. Notwithstanding the foregoing, any Guarantor may (1) merge or consolidate with or into, wind up into or transfer all or part of its properties and assets to another Guarantor or the Company, (2) merge with an Affiliate of the Company solely for the purpose of reincorporating the Guarantor in the United States, any state thereof, the District of Columbia or any territory thereof, (3) convert into a corporation, partnership, limited partnership, limited liability company or trust organized or existing under the laws of the jurisdiction of organization of such Guarantor or (4) liquidate or dissolve or change its legal form if the Company determines in good faith that such action is in the best interests of the Company.

Co-Issuer

The Co-Issuer may not, directly or indirectly, consolidate or merge with or into or wind up into (whether or not the Co-Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Co-Issuer’s properties or assets, in one or more related transactions, to any Person unless:

(1) (a) concurrently therewith, a corporate Wholly-Owned Restricted Subsidiary of the Company organized and validly existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof (which may be the continuing Person as a result of such transaction)

 

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expressly assumes all the obligations of the Co-Issuer under the Notes, pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee, and the Registration Rights Agreement if the exchange offer contemplated therein has not been consummated or if the Issuers continue to have an obligation to file or maintain the effectiveness of a shelf registration statement as provided under such agreement; or

(b) after giving effect thereto, at least one obligor on the notes shall be a corporation organized and validly existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof;

(2) immediately after such transaction, no Default exists; and

(3) the Co-Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with the Indenture.

Transactions with Affiliates

The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each of the foregoing, an “ Affiliate Transaction ”) involving aggregate payments or consideration in excess of $10.0 million, unless:

(1) such Affiliate Transaction is on terms that are not materially less favorable to the Company or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis; and

(2) the Company delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $20.0 million, a resolution adopted by the majority of the board of directors of the Company approving such Affiliate Transaction and set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with clause (1) above.

The foregoing provisions will not apply to the following:

(1) transactions between or among the Company or any of its Restricted Subsidiaries;

(2) Restricted Payments permitted by the provisions of the Indenture described above under the covenant “—Limitation on Restricted Payments” and the definition of “ Permitted Investments ”;

(3) the payment of management, consulting, monitoring, transaction, advisory and other fees, indemnities and expenses pursuant to the Management Fee Agreement (plus any unpaid management, consulting, monitoring, transaction, advisory and other fees, indemnities and expenses accrued in any prior year) and the termination fees pursuant to the Management Fee Agreement, or any amendment thereto or replacement thereof so long as any such amendment or replacement is not materially disadvantageous in the good faith judgment of the board of directors of the Company to the Holders when taken as a whole, as compared to the Management Fee Agreement as in effect on the Issue Date (it being understood that any amendment thereto or replacement thereof to increase the fees payable pursuant to the Management Fee Agreement would be deemed to be materially disadvantageous to the Holders);

(4) the payment of reasonable and customary fees and compensation paid to, and indemnities and reimbursements and employment and severance arrangements provided on behalf of or for the benefit of, current or former employees, directors, officers, managers or consultants of the Company, any of its direct or indirect parent companies or any of its Restricted Subsidiaries;

(5) transactions in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to

 

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the Company or such Restricted Subsidiary from a financial point of view or stating that the terms are not materially less favorable to the Company or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis;

(6) any agreement as in effect as of the Issue Date, or any amendment thereto (so long as any such amendment is not disadvantageous in any material respect to the Holders when taken as a whole as compared to the applicable agreement as in effect on the Issue Date);

(7) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it (or any parent company of the Company which holds, directly or indirectly, 100% of the issued and outstanding Equity Interests of the Company) is a party as of the Issue Date and any similar agreements which it (or any parent company of the Company which holds, directly or indirectly, 100% of the issued and outstanding Equity Interests of the Company) may enter into thereafter; provided, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries (or such parent company) of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (7) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous in any material respect in the good faith judgment of the board of directors of the Company to the Holders when taken as a whole;

(8) the Transactions and the payment of all fees and expenses related to the Transactions, including Transaction Expenses;

(9) transactions with customers, clients, suppliers, contractors, joint venture partners or purchasers or sellers of goods or services that are Affiliates, in each case in the ordinary course of business and otherwise in compliance with the terms of the Indenture which are fair to the Company and its Restricted Subsidiaries, in the reasonable determination of the board of directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;

(10) the issuance of Equity Interests (other than Disqualified Stock) of the Company to any direct or indirect parent company of the Company or to any Permitted Holder or to any employee, director, officer, manager or consultant (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Company, any of its direct or indirect parent companies or any of its Restricted Subsidiaries;

(11) sales of accounts receivable, or participations therein, or Securitization Assets or related assets in connection with any Qualified Securitization Facility;

(12) payments by the Company or any of its Restricted Subsidiaries to any of the Investors made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which payments are approved by a majority of the board of directors of the Company in good faith;

(13) payments and Indebtedness and Disqualified Stock (and cancellation of any thereof) of the Company and its Restricted Subsidiaries and Preferred Stock (and cancellation of any thereof) of any Restricted Subsidiary to any future, current or former employee, director, officer, manager or consultant (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Company, any of its Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement that are, in each case, approved by the Company in good faith; and any employment agreements, stock option plans and other compensatory arrangements (and any successor plans thereto) and any supplemental executive retirement benefit plans or arrangements with any such employees, directors, officers, managers or consultants (or their respective Controlled Investment Affiliates or Immediate Family Members) that are, in each case, approved by the Company in good faith;

 

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(14) (i) investments by Permitted Holders in securities of the Company or any of its Restricted Subsidiaries (and payment of reasonable out-of-pocket expenses incurred by such Permitted Holders in connection therewith) so long as (x) the investment is being offered by the Company or such Restricted Subsidiary generally to other investors on the same or more favorable terms and (y) the investment constitutes less than 5.0% of the proposed or outstanding issue amount of such class of securities ( provided , that any investments in debt securities by any Debt Fund Affiliates shall not be subject to the limitation in this clause (y)), and (ii) payments to Permitted Holders in respect of securities of the Company or any of its Restricted Subsidiaries contemplated in the foregoing subclause (i) or that were acquired from Persons other than the Company and its Restricted Subsidiaries, in each case, in accordance with the terms of such securities;

(15) payments to or from, and transactions with, any joint venture in the ordinary course of business (including, without limitation, any cash management activities related thereto);

(16) payments by the Company (and any direct or indirect parent company thereof) and its Subsidiaries pursuant to tax sharing agreements among the Company (and any such parent company) and its Subsidiaries, to the extent such payments are permitted under clause (15)(b) of the second paragraph under the caption “—Limitation on Restricted Payments”;

(17) any lease entered into between the Company or any Restricted Subsidiary, as lessee and any Affiliate of the Company, as lessor, which is approved by a majority of the disinterested members of the board of directors of the Company in good faith;

(18) intellectual property licenses in the ordinary course of business;

(19) any payments by the Company and the Company’s Subsidiaries made pursuant to any Tax Receivable Agreement; and

(20) the payment of reasonable out-of-pocket costs and expenses relating to registration rights and indemnities provided to stockholders of the Company or any direct or indirect parent thereof pursuant to the stockholders agreement or the registration rights agreement entered into on the Issue Date in connection therewith.

Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

The Company will not, and will not permit any of its Restricted Subsidiaries that is not a Guarantor to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

(1) (a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries that is a Guarantor on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or

(b) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries that is a Guarantor;

(2) make loans or advances to the Company or any of its Restricted Subsidiaries that is a Guarantor; or

(3) sell, lease or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries that is a Guarantor,

except (in each case) for such encumbrances or restrictions existing under or by reason of:

(a) contractual encumbrances or restrictions in effect on the Issue Date, including pursuant to the Senior Secured Credit Facilities and the related documentation and Hedging Obligations and the related documentation;

(b) the Indenture, the Notes and the guarantees thereof;

 

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(c) purchase money obligations for property acquired in the ordinary course of business and capital lease obligations that impose restrictions of the nature described in clause (3) above on the property so acquired;

(d) applicable law or any applicable rule, regulation or order;

(e) any agreement or other instrument of a Person acquired by or merged or consolidated with or into the Company or any of its Restricted Subsidiaries in existence at the time of such acquisition or at the time it merges with or into the Company or any of its Restricted Subsidiaries or assumed in connection with the acquisition of assets from such Person (but, in any such case, not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired and its Subsidiaries, or the property or assets of the Person so acquired and its Subsidiaries or the property or assets so acquired;

(f) contracts for the sale of assets, including customary restrictions with respect to a Subsidiary of the Company pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;

(g) Secured Indebtedness otherwise permitted to be incurred pursuant to the covenants described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” and “—Liens” that limit the right of the debtor to dispose of the assets securing such Indebtedness;

(h) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business or arising in connection with any Permitted Liens;

(i) other Indebtedness, Disqualified Stock or Preferred Stock of Restricted Subsidiaries that are not Guarantors permitted to be incurred subsequent to the Issue Date pursuant to the provisions of the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(j) customary provisions in joint venture agreements and other similar agreements relating solely to such joint venture;

(k) customary provisions contained in leases, sub-leases, licenses, sub-licenses or similar agreements, including with respect to intellectual property and other agreements, in each case, entered into in the ordinary course of business;

(l) restrictions or conditions contained in any trading, netting, operating, construction, service, supply, purchase, sale or other agreement to which the Company or any of its Restricted Subsidiaries is a party entered into in the ordinary course of business; provided , that such agreement prohibits the encumbrance of solely the property or assets of the Company or such Restricted Subsidiary that are the subject to such agreement, the payment rights arising thereunder or the proceeds thereof and does not extend to any other asset or property of the Company or such Restricted Subsidiary or the assets or property of another Restricted Subsidiary;

(m) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of any Restricted Subsidiary;

(n) customary provisions restricting assignment of any agreement entered into in the ordinary course of business;

(o) restrictions arising in connection with cash or other deposits permitted under the covenant “—Liens”;

(p) any agreement or instrument (A) relating to any Indebtedness, Disqualified or preferred stock permitted to be incurred or issued subsequent to the Issue Date pursuant to the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” if the encumbrances and restrictions are not materially more disadvantageous, taken as a whole, to the Holders than is customary in comparable financings for similarly situated issuers (as determined

 

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in good faith by the Company) or is otherwise in effect on the Issue Date and (B) either (x) the Company determines that such encumbrance or restriction will not adversely affect the Company’s ability to make principal and interest payments on the Notes as and when they come due or (y) such encumbrances and restrictions apply only during the continuance of a default in respect of a payment or financial maintenance covenant relating to such Indebtedness;

(q) any encumbrances or restrictions of the type referred to in clauses (1), (2) and (3) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (a) through (p) above; provided , that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Company, not materially more restrictive with respect to such encumbrance and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing; and

(r) restrictions created in connection with any Qualified Securitization Facility that, in the good faith determination of the Company are necessary or advisable to effect such Qualified Securitization Facility.

Limitation on Guarantees of Indebtedness by Restricted Subsidiaries

The Company will not permit any of its Wholly-Owned Subsidiaries that are Restricted Subsidiaries (and non-Wholly-Owned Subsidiaries if such non-Wholly-Owned Subsidiaries guarantee other capital markets debt securities of the Company, the Co-Issuer or any Guarantor), other than a Guarantor, the Co-Issuer or a Foreign Subsidiary or a Securitization Subsidiary, to guarantee the payment of any Indebtedness of the Company, the Co-Issuer or any Guarantor unless:

(1) such Restricted Subsidiary within 30 days after the guarantee of such Indebtedness executes and delivers a supplemental indenture to the Indenture providing for a Guarantee by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Company, the Co-Issuer or any Guarantor:

(a) if such Indebtedness is by its express terms subordinated in right of payment to the Notes or such Guarantor’s Guarantee, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Guarantee substantially to the same extent as such Indebtedness is subordinated to the Notes; and

(b) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other applicable rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guarantee;

provided , that this covenant shall not be applicable to any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary. The Company may elect, in its sole discretion, to cause any Subsidiary that is not otherwise required to be a Guarantor to become a Guarantor, in which case such Subsidiary shall not be required to comply with the 30 day period described in clause (1) above.

Reports and Other Information

Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the SEC, the Indenture requires the Company to file with the SEC from and after the Issue Date:

(1) within 90 days after the end of each fiscal year (or 135 days for the fiscal year ending December 31, 2011), annual reports on Form 10-K, or any successor or comparable form, containing the information required to be contained therein, or required in such successor or comparable form;

 

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(2) within 45 days after the end of each of the first three fiscal quarters of each fiscal year (or 90, 75 and 60 days, respectively, for the first three fiscal quarters ending after the Issue Date), reports on Form 10-Q containing all quarterly information that would be required to be contained in Form 10-Q, or any successor or comparable form;

(3) within five Business Days of the date on which an event would have been required to be reported on a Form 8-K or any successor or comparable form if the Company had been a reporting company under the Exchange Act, a current report relating to such event on Form 8-K or any successor or comparable form;

in each case, in a manner that complies in all material respects with the requirements specified in such form (except as described above or below and subject, in the case of required financial information, to exceptions consistent with the presentation of financial information in this Offering Memorandum, to the extent filed within the times specified above); provided , however, that the Company shall not be so obligated to file such reports referred to in clauses (1), (2) and (3) above with the SEC (i) if the SEC does not permit such filing or (ii) prior to the consummation of an exchange offer or the effectiveness of a shelf registration statement as required by the Registration Rights Agreement, in which event the Company will make available such information to the Trustee, the Holders of the Notes and prospective purchasers of Notes, in each case within 15 days after the time the Company would be required to file such information with the SEC, if it were subject to Sections 13 or 15(d) of the Exchange Act; provided, further , that until such time as the consummation of an exchange offer or the effectiveness of a shelf registration statement as required by the Registration Rights Agreement, the Company shall not be required to (i) in the case of (x) clauses (1) and (2) provide any information beyond the financial information that would be required to be contained in an annual or quarterly report on Form 10-K or 10-Q, as applicable, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and (y) clause (3) make available any information regarding director and management compensation or the occurrence of any of the events set forth in Items 1.04, 2.01, 2.05, 2.06, 3 (other than Item 3.03), 5.01, 5.02(e)—(f), 5.03-5.08, 6, 7, 8 or 9 of Form 8-K, (ii) make available any information regarding the occurrence of any of the events set forth in Items 1.01 or 1.02 of Form 8-K if the Company determines in its good faith judgment that the event that would otherwise be required to be disclosed is not material to the holders of the notes or the business, assets, operations, financial positions or prospects of the Company and its Restricted Subsidiaries taken as a whole, (iii) comply with Regulation G under the Exchange Act or Item 10(e) of Regulation S-K with respect to any “non-GAAP” financial information contained therein (other than providing reconciliations of such non-GAAP information to extent included in the Offering Memorandum), (iv) comply with Regulation S-X or (v) provide any information that is not otherwise similar to information currently included in the Offering Memorandum. In addition, notwithstanding the foregoing, the Company will not be required to (i) comply with Sections 302, 906 and 404 of the Sarbanes-Oxley Act of 2002 or (ii) otherwise furnish any information, certificates or reports required by Items 307 or 308 of Regulation S-K prior to the consummation of an exchange offer or the effectiveness of a shelf registration statement. In addition, to the extent not satisfied by the foregoing, the Company will agree that, for so long as any Notes are outstanding, it will furnish to Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

In the event that any direct or indirect parent company of the Company of which the Company is a Wholly-Owned Subsidiary becomes a Guarantor, the Indenture permits the Company to satisfy its obligations in this covenant with respect to financial information relating to the Company by furnishing financial information relating to such parent; provided , that, if and so long as such parent company shall have Independent Assets or Operations (as defined below), the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such parent, on the one hand, and the information relating to the Company and its Restricted Subsidiaries on a stand-alone basis, on the other hand. “ Independent Assets or Operations ” means, with respect to any such parent company, that such parent company’s total assets, revenues, income from continuing operations before income taxes and cash flows from operating activities (excluding in each case amounts related to its investment in the Company and the Restricted Subsidiaries), determined in accordance with GAAP and as shown on the most recent balance sheet of such parent company, is more than 3.0% of such parent company’s corresponding consolidated amount.

 

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Notwithstanding the foregoing, such requirements shall be deemed satisfied prior to the commencement of the exchange offer or the effectiveness of the shelf registration statement (1) by the filing with the SEC of the exchange offer registration statement or shelf registration statement (or any other similar registration statement), and any amendments thereto, with such financial information that satisfies Regulation S-X of the Securities Act, subject to exceptions consistent with the presentation of financial information in this Offering Memorandum, to the extent filed within the time periods specified above, or (2) by posting on the Company’s website and providing to the Trustee within 15 days of the time periods after the Company would have been required to file annual and interim reports with the SEC if it were a non-accelerated filer, the financial information (including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section) that would be required to be included in such reports, subject to exceptions consistent with the presentation of financial information in this Offering Memorandum, to the extent filed within the times specified above.

Notwithstanding anything herein to the contrary, the Company will not be deemed to have failed to comply with any of its obligations hereunder for purposes of clause (3) under “—Events of Default and Remedies” until 90 days after the receipt of the written notice delivered thereunder.

To the extent any information is not provided within the time periods specified in this section “—Reports and Other Information” and such information is subsequently provided, the Company will be deemed to have satisfied its obligations with respect thereto at such time and any Default with respect thereto shall be deemed to have been cured.

Limitation on Business Activities of the Co-Issuer

The Co-Issuer may not hold any assets, become liable for any obligations or engage in any business activities; provided that it may be a co-obligor with respect to the Notes or any other Indebtedness issued by the Company and may engage in any activities directly related thereto or necessary in connection therewith. The Co-Issuer shall be a Wholly-Owned Subsidiary of the Company (or its permitted successors) at all times.

Events of Default and Remedies

The Indenture provides that each of the following is an “ Event of Default ”:

(1) default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Notes;

(2) default for 30 days or more in the payment when due of interest on or with respect to the Notes;

(3) failure by the Company, the Co-Issuer or any Guarantor for 60 days after receipt of written notice given by the Trustee or the Holders of not less than 25% in principal amount of the then outstanding Notes to comply with any of its obligations, covenants or agreements (other than a default referred to in clause (1) or (2) above) contained in the Indenture or the Notes;

(4) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Company, the Co-Issuer or any Restricted Subsidiary or the payment of which is guaranteed by the Company, the Co-Issuer or any Restricted Subsidiary, other than Indebtedness owed to the Company or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is created after the issuance of the Notes, if both:

(a) such default either results from the failure to pay any principal of such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity; and

(b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to

 

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any applicable grace periods), or the maturity of which has been so accelerated, aggregate $30.0 million or more outstanding;

(5) failure by the Company, the Co-Issuer or any Significant Subsidiary (or any group of Restricted Subsidiaries that together (as of the latest audited consolidated financial statements of the Issuer for a fiscal quarter end provided as required under “—Reports and Other Information”) would constitute a Significant Subsidiary) to pay final judgments aggregating in excess of $30.0 million (net of amounts covered by insurance policies issued by reputable insurance companies), which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;

(6) certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary (or any group of Restricted Subsidiaries that together (as of the latest audited consolidated financial statements of the Company for a fiscal quarter end provided as required under “—Reports and Other Information”) would constitute a Significant Subsidiary); or

(7) the Guarantee of any Significant Subsidiary (or any group of Restricted Subsidiaries that together (as of the latest audited consolidated financial statements of the Company for a fiscal quarter end provided as required under “—Reports and Other Information”) would constitute a Significant Subsidiary) shall for any reason cease to be in full force and effect or be declared null and void or any responsible officer of any Guarantor that is a Significant Subsidiary (or the responsible officers of any group of Restricted Subsidiaries that together (as of the latest audited consolidated financial statements of the Company for a fiscal quarter end) would constitute a Significant Subsidiary), as the case may be, denies in writing that it has any further liability under its Guarantee or gives written notice to such effect, other than by reason of the termination of the Indenture or the release of any such Guarantee in accordance with the Indenture.

If any Event of Default (other than of a type specified in clause (6) above) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in principal amount of the then total outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately.

Upon the effectiveness of such declaration, such principal of and premium, if any, and interest will be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising under clause (6) of the first paragraph of this section, all outstanding Notes will become due and payable without further action or notice. The Indenture provides that the Trustee may withhold from the Holders notice of any continuing Default, except a Default relating to the payment of principal, premium, if any, or interest, if it determines that withholding notice is in their interest.

The Indenture provides that the Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences under the Indenture (except a continuing Default in the payment of interest on, premium, if any, or the principal of any Note held by a non-consenting Holder) and rescind any acceleration with respect to the Notes and its consequences (except if such rescission would conflict with any judgment of a court of competent jurisdiction). In the event of any Event of Default specified in clause (4) above, such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of acceleration of the Notes) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose:

(1) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged;

(2) holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default; or

(3) the default that is the basis for such Event of Default has been cured.

 

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In case an Event of Default occurs and is continuing, the Trustee is under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders of the Notes unless the Holders have offered to the Trustee indemnity or security reasonably satisfactory to the Trustee against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder of a Note may pursue any remedy with respect to the Indenture or the Notes unless:

(1) such Holder has previously given the Trustee written notice that an Event of Default is continuing;

(2) Holders of at least 25% in principal amount of the total outstanding Notes have requested in writing the Trustee to pursue the remedy;

(3) Holders of the Notes have offered the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense;

(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and

(5) Holders of a majority in principal amount of the total outstanding Notes have not given the Trustee a direction inconsistent with such written request within such 60-day period.

Subject to certain restrictions, under the Indenture the Holders of a majority in principal amount of the total outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of a Note or that would involve the Trustee in personal liability.

The Indenture provides that the Issuers are required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuers are required, within 10 Business Days, upon becoming aware of any Default, to deliver to the Trustee a statement specifying such Default.

No Personal Liability of Directors, Officers, Employees and Stockholders

No past, present or future director, officer, employee, incorporator, member, partner or stockholder of the Issuers or any Guarantor or any of their direct or indirect parent companies (other than the Company and the Guarantors) shall have any liability, for any obligations of the Issuers or the Guarantors under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.

Legal Defeasance and Covenant Defeasance

The obligations of the Issuers and the Guarantors under the Indenture, the Notes and the Guarantees, as the case may be, will terminate (other than certain obligations) and will be released upon payment in full of all of the Notes. The Issuers may, at their option and at any time, elect to have all of their obligations discharged with respect to the Notes and have each Guarantor’s obligation discharged with respect to its Guarantee (“ Legal Defeasance ”) and cure all then existing Events of Default except for:

(1) the rights of Holders of Notes to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due solely out of the trust created pursuant to the Indenture;

(2) the Issuers’ obligations with respect to Notes concerning issuing temporary Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

 

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(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuers’ obligations in connection therewith; and

(4) the Legal Defeasance provisions of the Indenture.

In addition, the Issuers may, at their option and at any time, elect to have their obligations and those of each Guarantor released with respect to substantially all of the restrictive covenants that are described in the Indenture (“ Covenant Defeasance ”) and thereafter any omission to comply with such obligations shall not constitute a Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including bankruptcy, receivership, rehabilitation and insolvency events pertaining to the Issuers) described under “—Events of Default and Remedies” will no longer constitute an Event of Default with respect to the Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance with respect to the Notes:

(1) the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, U.S. Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest due on the Notes on the stated maturity date or on the redemption date, as the case may be, of such principal, premium, if any, or interest on such Notes and the Company must specify whether such Notes are being defeased to maturity or to a particular redemption date; provided , that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of the Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any deficit as of the date of redemption (any such amount, the “ Applicable Premium Deficit ”) only required to be deposited with the Trustee on or prior to the date of redemption. Any Applicable Premium Deficit shall be set forth in an Officer’s Certificate delivered by the Issuers to the Trustee simultaneously with the deposit of such Applicable Premium Deficit that confirms that such Applicable Premium Deficit shall be applied toward such redemption;

(2) in the case of Legal Defeasance, the Issuers shall have delivered to the Trustee an Opinion of Counsel confirming that, subject to customary assumptions and exclusions,

(a) the Issuers have received from, or there has been published by, the United States Internal Revenue Service a ruling, or

(b) since the issuance of the Notes, there has been a change in the applicable U.S. federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel confirming that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) no Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;

(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Senior Secured Credit Facilities or any other material agreement or instrument

 

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(other than the Indenture) to which, the Issuers or any Guarantor is a party or by which the Issuers or any Guarantor is bound (other than that resulting from any borrowing of funds to be applied to make the deposit required to effect such Legal Defeasance or Covenant Defeasance and any similar and simultaneous deposit relating to other Indebtedness, and, in each case, the granting of Liens in connection therewith);

(6) the Issuers shall have delivered to the Trustee an Opinion of Counsel to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions following the deposit, the trust funds will not be subject to the effect of Section 547 of Title 11 of the United States Code;

(7) the Issuers shall have delivered to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuers with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuers or any Guarantor or others; and

(8) the Issuers shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

Satisfaction and Discharge

The Indenture will be discharged and will cease to be of further effect as to all Notes, when either:

(1) all Notes theretofore authenticated and delivered, except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust, have been delivered to the Trustee for cancellation; or

(2) (a) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, will become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuers, and the Issuers or any Guarantor have irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders of the Notes, cash in U.S. dollars, U.S. dollar-denominated Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption; provided , that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of the Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any Applicable Premium Deficit only required to be deposited with the Trustee on or prior to the date of redemption. Any Applicable Premium Deficit shall be set forth in an Officer’s Certificate delivered by the Issuers to the Trustee simultaneously with the deposit of such Applicable Premium Deficit that confirms that such Applicable Premium Deficit shall be applied toward such redemption,

(b) no Default (other than that resulting from borrowing funds to be applied to make such deposit or any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) with respect to the Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under the Senior Secured Credit Facilities or any other material agreement or instrument (other than the Indenture) to which the Issuers or any Guarantor is a party or by which the Issuers or any Guarantor is bound (other than resulting from any borrowing of funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith);

(c) the Issuers have paid or caused to be paid all sums payable by it under the Indenture; and

 

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(d) the Issuers have delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.

In addition, the Issuers must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Amendment, Supplement and Waiver

Except as provided in the next two succeeding paragraphs, the Indenture, any Guarantee and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding, including consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes, and any existing Default or compliance with any provision of the Indenture or the Notes issued thereunder may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes, other than Notes beneficially owned by the Issuers or their Affiliates (including consents obtained in connection with a purchase of or tender offer or exchange offer for the Notes).

The Indenture provides that, without the consent of each affected Holder of Notes, an amendment or waiver may not, with respect to any Notes held by a non-consenting Holder:

(1) reduce the principal amount of such Notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed final maturity of any such Note or alter or waive the provisions with respect to the redemption of such Notes (other than provisions relating to (a) notice periods (to the extent consistent with applicable requirements of clearing and settlement systems) for redemption and conditions to redemption and (b) the covenants described above under the caption “—Repurchase at the Option of Holders”);

(3) reduce the rate of or change the time for payment of interest on any Note;

(4) waive a Default in the payment of principal of or premium, if any, or interest on the Notes, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in the Indenture or any Guarantee which cannot be amended or modified without the consent of all affected Holders;

(5) make any Note payable in money other than that stated therein;

(6) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes;

(7) make any change in these amendment and waiver provisions;

(8) impair the right of any Holder to receive payment of principal of, or premium, if any, or interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes;

(9) make any change to or modify the ranking of the Notes that would adversely affect the Holders; or

(10) except as expressly permitted by the Indenture, modify the Guarantees of any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company), would constitute a Significant Subsidiary, in any manner materially adverse to the Holders of the Notes.

Notwithstanding the foregoing, the Issuers, any Guarantor (with respect to a Guarantee or the Indenture to which it is a party) and the Trustee may amend or supplement the Indenture and any Guarantee or Notes without the consent of any Holder:

(1) to cure any ambiguity, omission, mistake, defect or inconsistency;

 

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(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;

(3) to comply with the covenant relating to mergers, amalgamations, consolidations and sales of assets;

(4) to provide for the assumption of the Issuers’ or any Guarantor’s obligations to the Holders;

(5) to make any change that would provide any additional rights or benefits to the Holders or that does not materially adversely affect the legal rights under the Indenture of any such Holder;

(6) to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuers or any Guarantor;

(7) to provide for the issuance of Additional Notes in accordance with the terms of the Indenture;

(8) to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act;

(9) to evidence and provide for the acceptance and appointment under the Indenture of a successor Trustee thereunder pursuant to the requirements thereof;

(10) to provide for the issuance of exchange notes or private exchange notes, which are identical to exchange notes except that they are not freely transferable;

(11) to add a Guarantor under the Indenture or to release a Guarantor in accordance with the terms of the Indenture;

(12) to conform the text of the Indenture, the Guarantees or the Notes to any provision of the “Description of the Notes” section of the Offering Memorandum to the extent that such provision in the “Description of the Notes” section of the Offering Memorandum was intended to be a verbatim recitation of a provision of the Indenture, the Guarantee or the Notes;

(13) to make any amendment to the provisions of the Indenture relating to the transfer and legending of Notes as permitted by the Indenture, including, without limitation to facilitate the issuance and administration of the Notes; provided , that (a) compliance with the Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (b) such amendment does not materially and adversely affect the rights of Holders to transfer Notes; or

(14) to make any other modifications to the Notes or the Indenture of a formal, minor or technical nature or necessary to correct a manifest error, so long as such modification does not adversely affect the rights of any Holders of the Notes in any material respect.

The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.

Notices

Notices given by publication or electronic delivery will be deemed given on the first date on which publication is made and notices given by first-class mail, postage prepaid, will be deemed given five calendar days after mailing or transmitting.

Concerning the Trustee

The Indenture contains certain limitations on the rights of the Trustee thereunder, should it become a creditor of the Issuers, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee is permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee (if the Indenture has been qualified under the Trust Indenture Act) or resign.

 

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The Indenture provides that the Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee is required, in the exercise of its power, to use the degree of care of a prudent person in the conduct of his own affairs. Subject to such provisions, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of the Notes, unless such Holder shall have offered to the Trustee security and indemnity reasonably satisfactory to it against any loss, liability or expense.

Governing Law

The Indenture, the Notes and any Guarantee are governed by and construed in accordance with the laws of the State of New York.

Certain Definitions

Set forth below are certain defined terms used in the Indenture. For purposes of the Indenture, unless otherwise specifically indicated, the term “ consolidated ” with respect to any Person refers to such Person consolidated with its Restricted Subsidiaries, and excludes from such consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate of such Person.

Acquired Indebtedness ” means, with respect to any specified Person,

(1) Indebtedness of any other Person existing at the time such other Person is merged or consolidated with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging or consolidating with or into or becoming a Restricted Subsidiary of such specified Person, and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Additional Interest ” means all additional interest then owing pursuant to the Registration Rights Agreement.

Affiliate ” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “ control ” (including, with correlative meanings, the terms “ controlling ,” “ controlled by ” and “ under common control with ”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

Applicable Premium ” means, with respect to any Note on any Redemption Date, the greater of:

(1) 1.0% of the principal amount of such Note, and

(2) the excess, if any, of (a) the present value at such Redemption Date of (i) the redemption price of such Notes at January 31, 2016 (such redemption price being set forth in the table appearing above under the caption “Optional Redemption”), plus (ii) all required remaining scheduled interest payments due on such Note through January 31, 2016 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points over (b) the then outstanding principal amount of such Note.

Asset Sale ” means:

(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions (including by way of a Sale and Lease-Back Transaction) of property or assets of the Company or any of its Restricted Subsidiaries (each referred to in this definition as a “ disposition ”); or

 

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(2) the issuance or sale of Equity Interests of any Restricted Subsidiary (other than Preferred Stock of Restricted Subsidiaries issued in compliance with the covenant described under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”), whether in a single transaction or a series of related transactions;

in each case, other than:

(a) any disposition of Cash Equivalents or Investment Grade Securities or obsolete or worn out property or equipment in the ordinary course of business or any disposition of inventory or goods (or other assets) held for sale or no longer used or useful in the ordinary course of business;

(b) the disposition of all or substantially all of the assets of the Company in a manner permitted pursuant to the provisions described above under “—Certain Covenants—Merger, Consolidation or Sale of All or Substantially All Assets” or any disposition that constitutes a Change of Control pursuant to the Indenture;

(c) the making of any Restricted Payment that is permitted to be made, and is made, under the covenant described above under “—Certain Covenants—Limitation on Restricted Payments” or any Permitted Investment;

(d) any disposition of assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of related transactions with an aggregate fair market value of less than $15.0 million;

(e) any disposition of property or assets or issuance of securities by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;

(f) to the extent allowable under Section 1031 of the Internal Revenue Code of 1986, any exchange of like property (excluding any boot thereon) for use in a Similar Business;

(g) the lease, assignment, sub-lease, license or sub-license of any real or personal property in the ordinary course of business;

(h) any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;

(i) foreclosures, condemnation, expropriation or any similar action with respect to assets or the granting of Liens not prohibited by the Indenture;

(j) sales of accounts receivable, or participations therein, or Securitization Assets (other than royalties or other revenues (except accounts receivable)) or related assets in connection with any Qualified Securitization Facility or the disposition of an account receivable in connection with the collection or compromise thereof in the ordinary course of business;

(k) any financing transaction with respect to property built or acquired by the Company or any Restricted Subsidiary after the Issue Date, including Sale and Lease-Back Transactions and asset securitizations permitted by the Indenture;

(l) the sale or discount of inventory, accounts receivable or notes receivable in the ordinary course of business or the conversion of accounts receivable to notes receivable;

(m) the licensing or sub-licensing of intellectual property or other general intangibles in the ordinary course of business, other than the licensing of intellectual property on a long-term basis;

(n) any surrender or waiver of contract rights or the settlement, release or surrender of contract rights or other litigation claims in the ordinary course of business;

(o) the unwinding of any Hedging Obligations;

(p) sales, transfers and other dispositions of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements;

 

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(q) the abandonment of intellectual property rights in the ordinary course of business, which in the reasonable good faith determination of the Company are not material to the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole;

(r) the issuance by a Restricted Subsidiary of Preferred Stock or Disqualified Stock that is permitted by the covenant described under “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(s) the granting of a Lien that is permitted under the covenant described above under “—Certain Covenants—Liens”; and

(t) the issuance of directors’ qualifying shares and shares issued to foreign nationals as required by applicable law.

Bank Products ” means any facilities or services related to cash management, including treasury, depository, overdraft, credit or debit card, purchase card, electronic funds transfer and other cash management arrangements.

Business Day ” means each day which is not a Legal Holiday.

Capital Stock ” means:

(1) in the case of a corporation, corporate stock or shares in the capital of such corporation;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

Capitalized Lease Obligation ” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP; provided that any obligations of the Company or its Restricted Subsidiaries, or of a special purpose or other entity not consolidated with the Company and its Restricted Subsidiaries, either existing on the Issue Date or created prior to any recharacterization described below (or any refinancing thereof) (i) that were not included on the consolidated balance sheet of the Company as capital lease obligations and (ii) that are subsequently recharacterized as capital lease obligations or, in the case of such a special purpose or other entity becoming consolidated with the Company and its Restricted Subsidiaries, due to a change in accounting treatment or otherwise, shall for all purposes not be treated as a Capitalized Lease Obligations or Indebtedness.

Capitalized Software Expenditures ” means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by a Person and its Restricted Subsidiaries during such period in respect of licensed or purchased software or internally developed software and software enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of a Person and its Restricted Subsidiaries.

Cash Equivalents ” means:

(1) United States dollars;

(2) (a) Canadian dollars, pounds sterling, yen, euros or any national currency of any participating member state of the EMU; or

(b) in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by it from time to time in the ordinary course of business;

 

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(3) securities issued or directly and fully and unconditionally guaranteed or insured by the U.S. government or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition;

(4) certificates of deposit, time deposits and eurodollar time deposits with maturities of 24 months or less from the date of acquisition, demand deposits, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any domestic or foreign commercial bank having capital and surplus of not less than $250.0 million;

(5) repurchase obligations for underlying securities of the types described in clauses (3), (4), (7) and (8) entered into with any financial institution or recognized securities dealer meeting the qualifications specified in clause (4) above;

(6) commercial paper and variable or fixed rate notes rated at least P-2 by Moody’s or at least A-2 by S&P (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency) and in each case maturing within 24 months after the date of creation thereof;

(7) marketable short-term money market and similar funds having a rating of at least P-2 or A-2 from either Moody’s or S&P, respectively (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency);

(8) readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision or taxing authority thereof having an Investment Grade Rating from either Moody’s or S&P (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency) with maturities of 24 months or less from the date of acquisition;

(9) readily marketable direct obligations issued by any foreign government or any political subdivision or public instrumentality thereof, in each case having an Investment Grade Rating from either Moody’s or S&P (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency) with maturities of 24 months or less from the date of acquisition;

(10) Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moody’s (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency);

(11) securities with maturities of 12 months or less from the date of acquisition backed by standby letters of credit issued by any financial institution or recognized securities dealer meeting the qualifications specified in clause (4) above; and

(12) investment funds investing substantially all of their assets in securities of the types described in clauses (1) through (11) above.

In the case of Investments by any Foreign Subsidiary that is a Restricted Subsidiary or Investments made in a country outside the United States of America, Cash Equivalents shall also include (a) investments of the type and maturity described in clauses (1) through (8) and clauses (10), (11) and (12) above of foreign obligors, which Investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies and (b) other short-term investments utilized by Foreign Subsidiaries that are Restricted Subsidiaries in accordance with normal investment practices for cash management in investments analogous to the foregoing investments in clauses (1) through (12) and in this paragraph.

Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (1) and (2) above, provided that such amounts are converted into any currency listed in clauses (1) and (2) as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.

 

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Change of Control ” means the occurrence of any of the following:

(1) the sale, lease, transfer, conveyance or other disposition in one or a series of related transactions (other than by merger, consolidation or amalgamation), of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person other than any Permitted Holder; or

(2) the Company becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by (A) any Person (other than any Permitted Holder) or (B) Persons (other than any Permitted Holders) that are together a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any such group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 50.0% or more of the total voting power of the Voting Stock of the Company directly or indirectly through any of its direct or indirect parent holding companies.

Consolidated Depletion, Depreciation and Amortization Expense ” means with respect to any Person for any period, the total amount of depletion, depreciation and amortization expense of such Person, including the amortization of intangible assets, deferred financing fees, debt issuance costs, commissions, fees and expenses and Capitalized Software Expenditures of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

Consolidated Interest Expense ” means, with respect to any Person for any period, without duplication, the sum of:

(1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Lease Obligations, and (e) net payments, if any made (less net payments, if any, received), pursuant to interest rate Hedging Obligations with respect to Indebtedness, and excluding (q) annual agency fees paid to the administrative agents and collateral agents under any Credit Facilities, (r) costs associated with obtaining Hedging Obligations, (s) any expense resulting from the discounting of any Indebtedness in connection with the application of recapitalization accounting or, if applicable, purchase accounting in connection with the Transactions or any acquisition, (t) penalties and interest relating to taxes, (u) any Additional Interest and any “ additional interest ” or “ liquidated damages ” with respect to other securities for failure to timely comply with registration rights obligations, (v) amortization or expensing of deferred financing costs and any other amounts of non-cash interest, amendment and consent fees, debt issuance costs, commissions, fees and expenses and discounted liabilities, (w) any expensing of bridge, commitment and other financing fees and any other fees related to the Transactions or any acquisitions after the Issue Date, (x) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Qualified Securitization Facility, (y) any accretion of accrued interest on discounted liabilities and any prepayment premium or penalty) and (z) interest expense resulting from push-down accounting; plus

(2) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less

(3) interest income of such Person and its Restricted Subsidiaries for such period.

For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.

 

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Consolidated Leverage Ratio ” means, as at any date of determination, the ratio of (1) the Consolidated Total Indebtedness of the Company and its Restricted Subsidiaries as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (2) the Company’s EBITDA for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case with such pro forma adjustments to Consolidated Total Indebtedness and EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

Consolidated Net Income ” means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided , that, without duplication,

(1) any after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto), charges or expenses (including relating to any multi-year strategic initiatives), Transaction Expenses, duplicative running costs, relocation costs, integration costs, facility consolidation and closing costs, severance costs and expenses, one-time compensation charges, costs relating to pre-opening and opening costs for plants/facilities, losses, costs or cost inefficiencies related to plant/facility disruptions or shutdowns, signing, retention and completion bonuses, costs incurred in connection with any strategic initiatives, transition costs, costs incurred in connection with acquisitions and non-recurring product and intellectual property development, other business optimization expenses (including costs and expenses relating to business optimization programs and new systems design, retention charges, system establishment costs and implementation costs) and operating expenses attributable to the implementation of cost-savings initiatives, and curtailments or modifications to pension and post-retirement employee benefit plans shall be excluded,

(2) the cumulative effect of a change in accounting principles and changes as a result of the adoption or modification of accounting policies during such period shall be excluded;

(3) any net after-tax effect of gains or losses on disposal, abandonment or discontinuance of disposed, abandoned or discontinued operations, as applicable, shall be excluded,

(4) any net after-tax effect of gains or losses (less all fees, expenses and charges relating thereto) attributable to asset dispositions or abandonments or the sale or other disposition of any Capital Stock of any Person other than in the ordinary course of business shall be excluded,

(5) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary or that is accounted for by the equity method of accounting, shall be excluded; provided , that Consolidated Net Income of such Person shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to such Person or a Restricted Subsidiary thereof in respect of such period,

(6) solely for the purpose of determining the amount available for Restricted Payments under clause (3)(a) of the first paragraph of “—Certain Covenants—Limitation on Restricted Payments,” the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders (other than restrictions in the Notes or the Indenture), unless such restriction with respect to the payment of dividends or similar distributions has been legally waived, provided that Consolidated Net Income of such Person will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to such Person or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,

 

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(7) effects of adjustments (including the effects of such adjustments pushed down to such Person and its Restricted Subsidiaries) in such Person’s consolidated financial statements pursuant to GAAP (including in the inventory, property and equipment, software, goodwill, intangible assets, in-process research and development, deferred revenue and debt line items thereof) resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in relation to the Transactions or any consummated acquisition or joint venture investment or the amortization or write-off or write-down of any amounts thereof, net of taxes, shall be excluded,

(8) any after-tax effect of income (loss) from the early extinguishment or conversion of (i) Indebtedness, (ii) Hedging Obligations or (iii) other derivative instruments shall be excluded,

(9) any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities and investments recorded using the equity method or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP shall be excluded,

(10) any equity-based or non-cash compensation charge or expense including any such charge or expense arising from grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity incentive programs, and any cash charges associated with the rollover, acceleration, or payout of Equity Interests by management of the Company or any of its direct or indirect parent companies in connection with the Transactions, shall be excluded,

(11) any fees, expenses or charges incurred during such period, or any amortization thereof for such period, in connection with any acquisition, Investment, Asset Sale, disposition, incurrence or repayment of Indebtedness (including such fees, expenses or charges related to the offering and issuance of the Notes and other securities and the syndication and incurrence of any Credit Facilities), issuance of Equity Interests, refinancing transaction or amendment or modification of any debt instrument (including any amendment or other modification of the Notes and other securities and any Credit Facilities) and including, in each case, any such transaction consummated on or prior to the Issue Date and any such transaction undertaken but not completed, and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful or consummated (including, for the avoidance of doubt the effects of expensing all transaction related expenses in accordance with Financial Accounting Standards Board Accounting Standards Codification 805), shall be excluded,

(12) accruals and reserves that are established within 12 months after the Issue Date that are so required to be established as a result of the Transactions (or within 12 months after the closing of any acquisition that are so required to be established as a result of such acquisition) in accordance with GAAP shall be excluded,

(13) any expenses, charges or losses to the extent covered by insurance or indemnity and actually reimbursed, or, so long as such Person has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer or indemnifying party and only to the extent that such amount is in fact reimbursed within 365 days of the date of the insurable or indemnifiable event (net of any amount so added back in any prior period to the extent not so reimbursed within the applicable 365-day period), shall be excluded;

(14) any net pension or other post-employment benefit costs representing amortization of unrecognized prior service costs, actuarial losses, including amortization of such amounts arising in prior periods, amortization of the unrecognized net obligation (and loss or cost) existing at the date of initial application of Accounting Standards Codification Topic No. 715, Compensation-Retirement Benefits , shall be excluded, and

(15) any noncash compensation expense resulting from the application of Accounting Standards Codification Topic No. 718, Compensation—Stock Compensation , shall be excluded, and

 

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(16) the following items shall be excluded:

(a) any net unrealized gain or loss (after any offset) resulting in such period from Hedging Obligations and the application of Accounting Standards Codification Topic No. 815, Derivatives and Hedging ,

(b) any net unrealized gain or loss (after any offset) resulting in such period from currency translation gains or losses including those related to currency remeasurements of Indebtedness (including any net loss or gain resulting from Hedging Obligations for currency exchange risk) and any other foreign currency translation gains and losses, to the extent such gain or losses are non-cash items,

(c) any adjustments resulting for the application of Accounting Standards Codification Topic No. 460, Guarantees, or any comparable regulation,

(d) effects of adjustments to accruals and reserves during a prior period relating to any change in the methodology of calculating reserves for returns, rebates and other chargebacks, and

(e) changes related to earn-outs and other deferred or contingent consideration obligations (including to the extent accounted for as bonuses or otherwise) and adjustments thereof and purchase price adjustments.

In addition, to the extent not already included in the Consolidated Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any acquisition, Investment or any sale, conveyance, transfer or other disposition of assets permitted under the Indenture.

Notwithstanding the foregoing, for the purpose of the covenant described under “—Certain Covenants — Limitation on Restricted Payments” only (other than clause (3)(d) of the first paragraph thereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Company and its Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Company and its Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Company or any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under such covenant pursuant to clause (3)(d) thereof.

Consolidated Secured Debt Ratio ” as of any date of determination means, the ratio of (1) Consolidated Total Indebtedness of the Company and its Restricted Subsidiaries that is secured by Liens on the property of the Company and its Restricted Subsidiaries as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (2) EBITDA of the Company for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case with such pro forma adjustments to Consolidated Total Indebtedness and EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

Consolidated Total Indebtedness ” means, as at any date of determination, an amount equal to the sum of (1) the aggregate amount of all outstanding Indebtedness of the Company and its Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Obligations in respect of Capitalized Lease Obligations and debt obligations evidenced by promissory notes and similar instruments, as determined in accordance with GAAP (excluding for the avoidance of doubt all undrawn amounts under revolving credit facilities and letters of credit, all obligations relating to Qualified Securitization Facilities and Tax Receivable

 

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Agreements), and (2) the aggregate amount of all outstanding Disqualified Stock of the Company and all Preferred Stock of its Restricted Subsidiaries on a consolidated basis, with the amount of such Disqualified Stock and Preferred Stock equal to the greater of their respective voluntary or involuntary liquidation preferences and maximum fixed repurchase prices, in each case determined on a consolidated basis in accordance with GAAP (but excluding the effects of any discounting of Indebtedness resulting from the application of repurchase or purchase accounting in connection with the Transactions or any acquisition); provided , that Consolidated Total Indebtedness shall not include Indebtedness in respect of (A) any letter of credit, except to the extent of unreimbursed amounts under standby letters of credit and (B) Hedging Obligations existing on the Issue Date or otherwise permitted by clause (10) of the second paragraph under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; it being understood, for the avoidance of doubt that earn-out payments and non-compete payments (to the extent such payments would not become a liability on the balance sheet of such Person in accordance with GAAP as GAAP existed on December 31, 2008) and obligations to pay the deferred purchase price of property or services do not constitute Consolidated Total Indebtedness. For purposes hereof, the “ maximum fixed repurchase price ” of any Disqualified Stock or Preferred Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or Preferred Stock, such fair market value shall be determined reasonably and in good faith by the Company. The U.S. Dollar Equivalent principal amount of any Indebtedness denominated in a foreign currency will reflect the currency translation effects, determined in accordance with GAAP, of Hedging Obligations for currency exchange risks with respect to the applicable currency in effect on the date of determination of the U.S. Dollar Equivalent principal amount of such Indebtedness.

Contingent Obligations ” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“ primary obligations ”) of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent,

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor;

(2) to advance or supply funds,

(a) for the purchase or payment of any such primary obligation; or

(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or

(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

Controlled Investment Affiliate ” means, as to any Person, any other Person, other than any Investor, which directly or indirectly is in control of, is controlled by, or is under common control with such Person and is organized by such Person (or any Person controlling such Person) primarily for making direct or indirect equity or debt investments in the Company and/or other companies.

Credit Agreement ” means that certain Credit Agreement, dated as of the Issue Date, by and among the Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc., as joint lead arrangers, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Barclays Capital, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as joint bookrunners, Bank of America, N.A., as administrative agent, collateral agent and swing line lender, Bank of America, N.A., as letter of credit issuer, Citigroup Global Markets Inc., as syndication agent and other parties party thereto.

 

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Credit Facilities ” means, with respect to the Company or any of its Restricted Subsidiaries, one or more debt facilities, including the Senior Secured Credit Facilities, or other financing arrangements (including, without limitation, commercial paper facilities or indentures) providing for revolving credit loans, term loans, letters of credit or other long-term indebtedness, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof, in whole or in part, and any indentures or credit facilities or commercial paper facilities that replace, refund, supplement or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding, supplemental or refinancing facility, arrangement or indenture that increases the amount permitted to be borrowed or issued thereunder or alters the maturity thereof ( provided that such increase in borrowings or issuances is permitted under “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”) or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, trustee, lender or group of lenders or other holders.

Debt Fund Affiliate ” means (i) any fund managed by, or under common management with, GSO Capital Partners LP, (ii) any fund managed by GSO Debt Funds Management LLC, Blackstone Debt Advisors L.P., Blackstone Distressed Securities Advisors L.P., Blackstone Mezzanine Advisors L.P. or Blackstone Mezzanine Advisors II L.P. and (iii) any other Affiliate of the Investors that is a bona fide debt fund or an investment vehicle that is engaged in the making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course.

Default ” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

Designated Non-cash Consideration ” means the fair market value of non-cash consideration received by the Company or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officer’s Certificate delivered by the Company, setting forth the basis of such valuation, executed by the principal financial officer of the Company, less the amount of Cash Equivalents received in connection with a subsequent sale, redemption or repurchase of or collection or payment on such Designated Non-cash Consideration.

Designated Preferred Stock ” means Preferred Stock of the Company or any direct or indirect parent company thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officer’s Certificate delivered by the Company executed by the principal financial officer of the Company or the applicable parent company thereof, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (3) of the first paragraph of “—Certain Covenants—Limitation on Restricted Payments.”

Disqualified Stock ” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely as a result of a change of control or asset sale) pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than solely as a result of a change of control or asset sale), in whole or in part, in each case prior to the date 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding; provided , that if such Capital Stock is issued to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations; provided , further , that any Capital Stock held by any future, current or former employee, director, officer, manager or consultant (or their respective Controlled Investment Affiliates or Immediate Family Members), of the Company, any of its Subsidiaries, any of its direct or indirect parent companies or any other entity in which the Company or a Restricted Subsidiary has an

 

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Investment and is designated in good faith as an “ affiliate ” by the board of directors of the Company (or the compensation committee thereof), in each case pursuant to any stock subscription or shareholders’ agreement, management equity plan or stock option plan or any other management or employee benefit plan or agreement shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company or its Subsidiaries or in order to satisfy applicable statutory or regulatory obligations; provided, further, that the Class B Membership Interests of Continental Cement Company, L.L.C. shall not constitute Disqualified Stock.

EBITDA ” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period

(1) increased (without duplication) by the following, in each case (other than with respect to clauses (h) and (k)) to the extent deducted (and not added back) in determining Consolidated Net Income for such period:

(a) provision for taxes based on income or profits or capital, including, without limitation, federal, state, franchise and similar taxes and foreign withholding taxes (including any future taxes or other levies which replace or are intended to be in lieu of such taxes and any penalties and interest related to such taxes or arising from tax examinations) and the net tax expense associated with any adjustments made pursuant to clauses (1) through (16) of the definition of “ Consolidated Net Income ”; plus

(b) Fixed Charges of such Person for such period (including (x) net losses or Hedging Obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, (y) bank fees and other financing fees and (z) costs of surety bonds in connection with financing activities, plus amounts excluded from Consolidated Interest Expense as set forth in clauses (1)(q) through (z) in the definition thereof); plus

(c) Consolidated Depletion, Depreciation and Amortization Expense of such Person for such period; plus

(d) the amount of any severance, relocation costs and expenses, integration costs, transition costs, pre-opening, opening, consolidation and/or closing costs for facilities, costs incurred in connection with any non-recurring strategic initiatives, costs incurred in connection with acquisitions and Investments and non-recurring product and intellectual property development, other business optimization expenses (including costs and expenses relating to business optimization programs and new systems design and implementation costs), project start-up costs, restructuring charges, accruals or reserves (including restructuring costs related to acquisitions and to closure/consolidation of facilities, retention charges, systems establishment costs and excess pension charges); plus

(e) any other non-cash charges, including any write-offs or write-downs reducing Consolidated Net Income for such period ( provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, (A) the Company may elect not to add back such non-cash charge in the current period and (B) to the extent the Company elects to add back such non-cash charge, the cash payment in respect thereof in such future period shall be subtracted from EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period); plus

(f) the amount of any non-controlling interest or minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-Wholly-Owned Subsidiary; plus

(g) the amount of management, monitoring, consulting, advisory fees and other fees (including termination fees) and indemnities and expenses paid or accrued in such period under the Management Fee Agreement or otherwise to the Investors to the extent otherwise permitted under “—Certain Covenants—Transactions with Affiliates”; plus

(h) the amount of “ run rate ” cost savings, operating expense reductions and synergies projected by the Company in good faith to result from actions taken, committed to be taken or expected in good faith to be taken no later than 12 months after the end of such period (calculated on a pro forma basis as

 

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though such cost savings, operating expense reductions and synergies had been realized on the first day of such period for which EBITDA is being determined and as if such cost savings, operating expense reductions and synergies were realized during the entirety of such period), net of the amount of actual benefits realized during such period from such actions; provided , that such cost savings and synergies are reasonably identifiable and factually supportable (it is understood and agreed that “ run-rate ” means the full recurring benefit for a period that is associated with any action taken, committed to be taken or expected to be taken, net of the amount of actual benefits realized during such period from such actions); plus

(i) the amount of loss on sale of receivables, Securitization Assets and related assets to any Securitization Subsidiary in connection with a Qualified Securitization Facility; plus

(j) any costs or expense incurred by the Company or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Company or net cash proceeds of an issuance of Equity Interest of the Company (other than Disqualified Stock) solely to the extent that such net cash proceeds are excluded from the calculation set forth in clause (3) of the first paragraph under “—Certain Covenants—Limitation on Restricted Payments”; plus

(k) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of EBITDA pursuant to clause (2) below for any previous period and not added back; plus

(l) any net loss from disposed, abandoned or discontinued operations; plus

(m) accretion of asset retirement obligations in accordance with Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations ; plus

(n) interest income or investment earnings on retiree medical and intellectual property, royalty or license receivables;

(2) decreased (without duplication) by the following, in each case to the extent included in determining Consolidated Net Income for such period:

(a) non-cash gains increasing Consolidated Net Income of such Person for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period and any non-cash gains with respect to cash actually received in a prior period so long as such cash did not increase EBITDA in such prior period; plus

(b) any net income from disposed, abandoned or discontinued operations.

EMU ” means economic and monetary union as contemplated in the Treaty on European Union.

Equity Interests ” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

Equity Offering ” means any public or private sale or issuance of common stock or Preferred Stock of the Company or any of its direct or indirect parent companies (excluding Disqualified Stock), other than:

(1) public offerings with respect to the Company’s or any direct or indirect parent company’s common stock registered on Form S-4 or Form S-8;

(2) issuances to any Subsidiary of the Company; and

(3) any such public or private sale or issuance that constitutes an Excluded Contribution.

euro ” means the single currency of participating member states of the EMU.

 

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Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

Excluded Contribution ” means net cash proceeds, marketable securities or Qualified Proceeds received by the Company from

(1) contributions to its common equity capital; and

(2) the sale (other than to a Subsidiary of the Company or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Company) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Company,

in each case designated as Excluded Contributions pursuant to an Officer’s Certificate delivered by the Company executed by the principal financial officer of the Company on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in clause (3) of the first paragraph under “—Certain Covenants—Limitation on Restricted Payments.”

fair market value ” means, with respect to any asset or liability, the fair market value of such asset or liability as determined by the Company in good faith.

Fixed Charge Coverage Ratio ” means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any Restricted Subsidiary incurs, assumes, guarantees, redeems, repays, retires or extinguishes any Indebtedness (other than Indebtedness incurred or repaid under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “ Fixed Charge Coverage Ratio Calculation Date ”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, repayment, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period.

For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, amalgamations, consolidations and discontinued operations (as determined in accordance with GAAP) that have been made by the Company or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Fixed Charge Coverage Ratio Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, amalgamations, consolidations and discontinued operations (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Company or any of its Restricted Subsidiaries since the beginning of such period shall have made any Investment, acquisition, disposition, merger, amalgamation, consolidation or discontinued operation that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger, amalgamation, consolidation or discontinued operation had occurred at the beginning of the applicable four-quarter period.

For purposes of this definition, whenever pro forma effect is to be given to an Investment, acquisition, disposition, merger, amalgamation, consolidation or discontinued operation (including the Transactions), the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Company (and may include, for the avoidance of doubt, cost savings, synergies and operating expense reductions resulting from such Investment, acquisition, merger, amalgamation or consolidation (including the Transactions) which is being given pro forma effect that have been or are expected to be realized based on actions taken, committed to

 

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be taken or expected in good faith to be taken within 18 months). If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Fixed Charge Coverage Ratio Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period except as set forth in the first paragraph of this definition. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Company may designate.

Fixed Charges ” means, with respect to any Person for any period, the sum of, without duplication:

(1) Consolidated Interest Expense of such Person for such period;

(2) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Preferred Stock during such period; and

(3) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Disqualified Stock during such period.

Foreign Subsidiary ” means, with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof and any Restricted Subsidiary of such Foreign Subsidiary.

GAAP ” means (1) generally accepted accounting principles in the United States of America which are in effect from time to time (other than with respect to Capitalized Lease Obligations), it being understood that, for purposes of the Indenture, all references to codified accounting standards specifically named in the Indenture shall be deemed to include any successor, replacement, amended or updated accounting standard under GAAP or (2) if elected by the Company by written notice to the Trustee in connection with the delivery of financial statements and information, the accounting standards and interpretations (“ IFRS ”) adopted by the International Accounting Standard Board, as in effect on the first date of the period for which the Company is making such election; provided , that (a) any such election once made shall be irrevocable, (b) all financial statements and reports required to be provided, after such election pursuant to the Indenture shall be prepared on the basis of IFRS, (c) from and after such election, all ratios, computations and other determinations based on GAAP contained in the Indenture shall be computed in conformity with IFRS, (d) in connection with the delivery of financial statements (x) for any of its first three financial quarters of any financial year, it shall restate its consolidated interim financial statements for such interim financial period and the comparable period in the prior year to the extent previously prepared in accordance with GAAP as in effect on the Issue Date and (y) for delivery of audited annual financial information, it shall provide consolidated historical financial statements prepared in accordance with IFRS for the prior most recent fiscal year to the extent previously prepared in accordance with GAAP as in effect on the first date of the period in which the Company is making such election. For the avoidance of doubt, solely making an election (without any other action) referred to in this definition will not be treated as an incurrence of Indebtedness.

guarantee ” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

Guarantee ” means the guarantee by any Guarantor of the Issuers’ Obligations under the Indenture and the Notes.

 

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Guarantor ” means each Subsidiary of the Company, if any, that Guarantees the Notes in accordance with the terms of the Indenture.

Hedging Obligations ” means, with respect to any Person, the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, commodity swap agreement, commodity cap agreement, commodity collar agreement, foreign exchange contract, currency swap agreement or similar agreement providing for the transfer or mitigation of interest rate, currency or commodity risks either generally or under specific contingencies.

Holder ” means the Person in whose name a Note is registered on the registrar’s books.

Immediate Family Members ” means with respect to any individual, such individual’s child, stepchild, grandchild or more remote descendant, parent, stepparent, grandparent, spouse, former spouse, qualified domestic partner, sibling, mother- in-law, father-in-law, son-in-law and daughter-in-law (including adoptive relationships) and any trust, partnership or other bona fide estate-planning vehicle the only beneficiaries of which are any of the foregoing individuals or any private foundation or fund that is controlled by any of the foregoing individuals or any donor-advised fund of which any such individual is the donor.

Indebtedness ” means, with respect to any Person, without duplication:

(1) any indebtedness (including principal and premium) of such Person, whether or not contingent:

(a) in respect of borrowed money;

(b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without duplication, reimbursement agreements in respect thereof);

(c) representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations), except (i) any such balance that constitutes an obligation in respect of a commercial letter of credit, a trade payable or similar obligation to a trade creditor, in each case accrued in the ordinary course of business and (ii) any earn-out or non-compete obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP as GAAP existed on the Issue Date and is not paid after becoming due and payable; or

(d) representing the net obligations under any Hedging Obligations,

if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP; provided , that Indebtedness of any direct or indirect parent of the Company appearing upon the balance sheet of the Company solely by reason of push-down accounting under GAAP shall be excluded;

(2) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (1) of a third Person (whether or not such items would appear upon the balance sheet of the such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business; and

(3) to the extent not otherwise included, the obligations of the type referred to in clause (1) of a third Person secured by a Lien on any asset owned by such first Person, whether or not such Indebtedness is assumed by such first Person;

provided , that notwithstanding the foregoing, Indebtedness shall be deemed not to include (a) Contingent Obligations incurred in the ordinary course of business or (b) obligations under or in respect of Qualified Securitization Facilities; provided, further , that Indebtedness shall be calculated without giving effect to the effects of Financial Accounting Standards Board Accounting Standards Codification 815 and related

 

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interpretations to the extent such effects would otherwise increase or decrease an amount of Indebtedness for any purpose under the Indenture as a result of accounting for any embedded derivatives created by the terms of such Indebtedness.

Independent Financial Advisor ” means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Company, qualified to perform the task for which it has been engaged.

Initial Purchasers ” means Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Securities LLC, Barclays Capital Inc., Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc.

Investment Grade Rating ” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or if the applicable securities are not then rated by Moody’s or S&P an equivalent rating by any other Rating Agency.

Investment Grade Securities ” means:

(1) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);

(2) debt securities or debt instruments with an Investment Grade Rating, but excluding any debt securities or instruments constituting loans or advances among the Company and its Subsidiaries;

(3) investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2) which fund may also hold immaterial amounts of cash pending investment or distribution; and

(4) corresponding instruments in countries other than the United States customarily utilized for high quality investments.

Investments ” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit, advances to customers, commission, travel and similar advances to employees, directors, officers, managers and consultants, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of the Company in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of “ Unrestricted Subsidiary ” and the covenant described under “—Certain Covenants—Limitation on Restricted Payments”:

(1) “ Investments ” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided , that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “ Investment ” in an Unrestricted Subsidiary in an amount (if positive) equal to:

(a) the Company’s “ Investment ” in such Subsidiary at the time of such redesignation; less

(b) the portion (proportionate to the Company’s Equity Interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer.

The amount of any Investment outstanding at any time shall be the original cost of such Investment, reduced by any dividend, distribution, interest payment, return of capital, repayment or other amount received in cash by the Company or a Restricted Subsidiary in respect of such Investment.

 

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Investors ” means any of (i) Blackstone Capital Partners V L.P. and its Affiliates and any investment funds advised or managed by any of the foregoing (other than any portfolio operating companies of Blackstone Capital Partners V L.P.) and (ii) Silverhawk Summit, L.P. and its Affiliates and any investment funds advised or managed by any of the foregoing (other than any portfolio operating companies of Silverhawk Summit, L.P.).

Issue Date ” means January 30, 2012.

Legal Holiday ” means a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York or at the place of payment. If a payment date is on a Legal Holiday, payment will be made on the next succeeding day that is not a Legal Holiday and no interest shall accrue for the intervening period.

Lien ” means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided , that in no event shall an operating lease be deemed to constitute a Lien.

Management Fee Agreement ” means the transaction and management fee agreement or similar agreements between certain of the management companies associated with one or more of the Investors or their advisors, if applicable, and the Company (and/or its direct or indirect parent companies).

Management Stockholders ” means the members of management (and their Controlled Investment Affiliates and Immediate Family Members) of the Company (or its indirect or direct parent companies) who were holders of Equity Interests of any direct or indirect parent companies of the Companies on the Issue Date.

Moody’s ” means Moody’s Investors Service, Inc. and any successor to its rating agency business.

Net Income ” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

Net Proceeds ” means the aggregate Cash Equivalents proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale, including any Cash Equivalents received upon the sale or other disposition of any Designated Non-cash Consideration received in any Asset Sale, net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Non-cash Consideration, including legal, accounting and investment banking fees, payments made in order to obtain a necessary consent or required by applicable law, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, other fees and expenses, including title and recordation expenses, taxes paid or payable as a result thereof or any transactions occurring or deemed to occur to effectuate a payment under the Indenture (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of principal, premium, if any, and interest on Senior Indebtedness or amounts required to be applied to the repayment of Indebtedness secured by a Lien on such assets and required (other than required by clause (1) of the second paragraph of “—Repurchase at the Option of Holders—Asset Sales”) to be paid as a result of such transaction and any deduction of appropriate amounts to be provided by the Company or any of its Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Company or any of its Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

Obligations ” means any principal, interest (including any interest accruing on or subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with

 

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respect thereto, whether or not such interest is an allowed claim under applicable state, federal or foreign law), premium, penalties, fees, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and banker’s acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness; provided , that any of the foregoing (other than principal and interest) shall no longer constitute “ Obligations ” after payment in full of such principal and interest except to the extent such obligations are fully liquidated and non-contingent on or prior to such payment in full.

Offering Memorandum ” means the confidential offering memorandum, dated January 23, 2012, relating to the initial sale of the Notes.

Officer ” means the Chairman of the board of directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the applicable Issuer or Guarantor.

Officer’s Certificate ” means a certificate signed on behalf of a Person by an Officer of such Person that meets the requirements set forth in the indenture. An Officer’s Certificate required to be delivered by the Issuers shall be signed by an Officer of each Issuer.

Opinion of Counsel ” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee that meets the requirements set forth in the Indenture.

Permitted Asset Swap ” means the substantially concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and Cash Equivalents between the Company or any of its Restricted Subsidiaries and another Person; provided , that any Cash Equivalents received must be applied in accordance with the covenant described under “—Repurchase at the Option of Holders—Asset Sales.”

Permitted Holders ” means each of the Investors and Management Stockholders and any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision) of which any of the foregoing are members; provided , that in the case of such group and without giving effect to the existence of such group or any other group, such Investors and Management Stockholders, collectively, have beneficial ownership of more than 50.0% of the total voting power of the Voting Stock of the Company or any of its direct or indirect parent companies. Any Person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the Indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder.

Permitted Investments ” means:

(1) any Investment in the Company or any of its Restricted Subsidiaries;

(2) any Investment in Cash Equivalents or Investment Grade Securities;

(3) any Investment by the Company or any of its Restricted Subsidiaries in a Person (including, to the extent constituting an Investment, in assets of a Person that represent substantially all of its assets or a division, business unit or product line, including research and development and related assets in respect of any product) that is engaged directly or through entities that will be Restricted Subsidiaries in a Similar Business if as a result of such Investment:

(a) such Person becomes a Restricted Subsidiary; or

(b) such Person, in one transaction or a series of related transactions, is amalgamated, merged or consolidated with or into, or transfers or conveys substantially all of its assets (or such division, business unit or product line) to, or is liquidated into, the Company or a Restricted Subsidiary,

 

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and, in each case, any Investment held by such Person; provided, that such Investment was not acquired by such Person in contemplation of such acquisition, merger, amalgamation, consolidation or transfer;

(4) any Investment in securities or other assets not constituting Cash Equivalents or Investment Grade Securities and received in connection with an Asset Sale made pursuant to the first paragraph under “—Repurchase at the Option of Holders—Asset Sales” or any other disposition of assets not constituting an Asset Sale;

(5) any Investment existing on the Issue Date or made pursuant to binding commitments in effect on the Issue Date or an Investment consisting of any extension, modification or renewal of any such Investment or binding commitment existing on the Issue Date; provided , that the amount of any such Investment may be increased in such extension, modification or renewal only (a) as required by the terms of such Investment or binding commitment as in existence on the Issue Date (including as a result of the accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities) or (b) as otherwise permitted under the Indenture;

(6) any Investment acquired by the Company or any of its Restricted Subsidiaries:

(a) consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business; or

(b) in exchange for any other Investment or accounts receivable, indorsements for collection or deposit held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable (including any trade creditor or customer); or

(c) in satisfaction of judgments against other Persons; or

(d) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

(7) Hedging Obligations permitted under clause (10) of the covenant described in “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(8) any Investment in a Similar Business taken together with all other Investments made pursuant to this clause (8) that are at that time outstanding not to exceed the greater of (a) $35.0 million and (b) 2.50% of Total Assets (in each case, determined on the date such Investment is made, with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(9) Investments the payment for which consists of Equity Interests (other than Disqualified Stock) of the Company, or any of its direct or indirect parent companies; provided , that such Equity Interests will not increase the amount available for Restricted Payments under clause (3) of the first paragraph under the covenant described in “—Certain Covenants—Limitations on Restricted Payments”;

(10) guarantees of Indebtedness permitted under the covenant described in “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock,” performance guarantees and Contingent Obligations incurred in the ordinary course of business and the creation of liens on the assets of the Company or any Restricted Subsidiary in compliance with the covenant described under “—Certain Covenants—Liens”;

(11) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of the second paragraph of the covenant described under “—Certain Covenants—Transactions with Affiliates” (except transactions described in clauses (2), (5) and (9) of such paragraph);

(12) Investments consisting of purchases or other acquisitions of inventory, supplies, material or equipment or the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;

 

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(13) Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (13) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities), not to exceed the greater of (a) $25.0 million and (b) 1.75% of Total Assets (in each case, determined on the date such Investment is made, with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(14) Investments in or relating to a Securitization Subsidiary that, in the good faith determination of the Company are necessary or advisable to effect any Qualified Securitization Facility or any repurchase obligation in connection therewith;

(15) advances to, or guarantees of Indebtedness of, employees not in excess of $10.0 million outstanding in the aggregate;

(16) loans and advances to employees, directors, officers, managers and consultants (a) for business-related travel expenses, moving expenses and other similar expenses or payroll advances, in each case incurred in the ordinary course of business or consistent with past practices or (b) to fund such Person’s purchase of Equity Interests of the Company from the Company or any direct or indirect parent company thereof from such parent company;

(17) advances, loans or extensions of trade credit in the ordinary course of business by the Company or any of its Restricted Subsidiaries;

(18) any Investment in any Subsidiary or any joint venture in connection with intercompany cash management arrangements or related activities arising in the ordinary course of business;

(19) Investments consisting of purchases and acquisitions of assets or services in the ordinary course of business;

(20) Investments made in the ordinary course of business in connection with obtaining, maintaining or renewing client contacts;

(21) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers compensation, performance and similar deposits entered into as a result of the operations of the business in the ordinary course of business;

(22) repurchases of Notes;

(23) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection of deposit and Article 4 customary trade arrangements with customers consistent with past practices; and

(24) Investments consisting of promissory notes issued by the Company or any Guarantor to future, present or former officers, directors and employees, members of management, or consultants of the Company or any of its Subsidiaries or their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of the Company or any direct or indirect parent thereof, to the extent the applicable Restricted Payment is a permitted by the covenant described under “—Certain Covenants—Limitation on Restricted Payment”.

Permitted Liens ” means, with respect to any Person:

(1) pledges, deposits or security by such Person under workmen’s compensation laws, unemployment insurance, employers’ health tax, and other social security laws or similar legislation or other insurance related obligations (including, but not limited to, in respect of deductibles, self insured retention amounts and premiums and adjustments thereto) or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory

 

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obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;

(2) Liens imposed by law, such as landlords’, carriers’, warehousemen’s, materialmen’s, repairmen’s and mechanics’ Liens, in each case for sums not yet overdue for a period of more than 30 days or being contested in good faith by appropriate actions or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

(3) Liens for taxes, assessments or other governmental charges not yet overdue for a period of more than 30 days or not yet payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

(4) Liens in favor of issuers of performance, surety, bid, indemnity, warranty, release, appeal or similar bonds or with respect to other regulatory requirements or letters of credit or bankers acceptances issued, and completion guarantees provided for, in each case, issued pursuant to the request of and for the account of such Person in the ordinary course of its business or consistent with past practice prior to the Issue Date;

(5) minor survey exceptions, minor encumbrances, ground leases, easements or reservations of, or rights of others for, licenses, rights-of-way, servitudes, sewers, electric lines, drains, telegraph, telephone and cable television lines and other similar purposes, or zoning, building codes or other restrictions (including minor defects and irregularities in title and similar encumbrances) as to the use of real properties or Liens incidental, to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person and exceptions on title policies insuring liens granted on Mortgaged Properties (as defined in the Senior Secured Credit Facilities);

(6) Liens securing Obligations relating to any Indebtedness permitted to be incurred pursuant to clause (4), (12)(b) (in an amount not to exceed $60.0 million at any one time outstanding under such clause), (13) or (23) of the second paragraph under “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; provided , that (a) Liens securing Obligations relating to any Indebtedness, Disqualified Stock or Preferred Stock permitted to be incurred pursuant to clause (13) relate only to Obligations relating to Refinancing Indebtedness that (x) is secured by Liens on the same assets as the assets securing the Refinancing Indebtedness or (y) extends, replaces, refunds, refinances, renews or defeases Indebtedness incurred or Disqualified Stock or Preferred Stock issued under clauses (3), (4), (12) or (13) of the second paragraph under “—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock,” (b) Liens securing Obligations relating to Indebtedness permitted to be incurred pursuant to clause (23) extend only to the assets of Restricted Subsidiaries of the Company that are not Guarantors and (c) Liens securing Obligations relating to any Indebtedness, Disqualified Stock or Preferred Stock to be incurred pursuant to clause (4) of the second paragraph under “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” extend only to the assets so purchased, leased or improved;

(7) Liens existing on the Issue Date (including to secure any Refinancing Indebtedness of any Indebtedness secured by such Liens);

(8) Liens on property or shares of stock or other assets of a Person at the time such Person becomes a Subsidiary; provided , that such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided , further , that such Liens may not extend to any other property or other assets owned by the Company or any of its Restricted Subsidiaries;

 

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(9) Liens on property or other assets at the time the Company or a Restricted Subsidiary acquired the property or such other assets, including any acquisition by means of a merger, amalgamation or consolidation with or into the Company or any of its Restricted Subsidiaries; provided , that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition, amalgamation, merger or consolidation; provided , further , that the Liens may not extend to any other property owned by the Company or any of its Restricted Subsidiaries;

(10) Liens securing Obligations relating to any Indebtedness or other obligations of a Restricted Subsidiary owing to the Company or another Restricted Subsidiary permitted to be incurred in accordance with the covenant described under “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;

(11) Liens securing (x) Hedging Obligations and (y) obligations in respect of Bank Products;

(12) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s accounts payable or similar trade obligations in respect of bankers’ acceptances or trade letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(13) leases, sub-leases, licenses or sub-licenses granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries and do not secure any Indebtedness;

(14) Liens arising from Uniform Commercial Code (or equivalent statute) financing statement filings regarding operating leases or consignments entered into by the Company and its Restricted Subsidiaries in the ordinary course of business or purported Liens evidenced by the filing of precautionary Uniform Commercial Code financing statements or similar public filings;

(15) Liens in favor of the Company, the Co-Issuer or any Guarantor;

(16) Liens on equipment of the Company or any of its Restricted Subsidiaries granted in the ordinary course of business to the Company’s clients;

(17) Liens on accounts receivable, Securitization Assets and related assets incurred in connection with a Qualified Securitization Facility;

(18) Liens to secure any modification, refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (6), (7), (8) and (9); provided , that (a) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and proceeds and products thereof, and (b) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (6), (7), (8) and (9) at the time the original Lien became a Permitted Lien under the Indenture, and (ii) an amount necessary to pay any fees and expenses (including original issue discount, upfront fees or similar fees) and premiums (including tender premiums and accrued and unpaid interest) related to such modification, refinancing, refunding, extension, renewal or replacement;

(19) deposits made or other security provided in the ordinary course of business to secure liability to insurance carriers;

(20) Liens securing obligations in an aggregate principal amount outstanding which does not exceed the greater of (a) $50.0 million and (b) 3.75% of Total Assets (in each case, determined as of the date of such incurrence);

(21) security given to a public utility or any municipality or governmental authority when required by such utility or authority in connection with the operations of that Person in the ordinary course of business;

 

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(22) Liens securing judgments for the payment of money not constituting an Event of Default under clause (5) under the caption “—Events of Default and Remedies” so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

(23) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(24) Liens (a) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (b) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, and (c) in favor of banking institutions arising as a matter of law or under general terms and conditions encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(25) Liens deemed to exist in connection with Investments in repurchase agreements permitted under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; provided, that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement;

(26) Liens encumbering reasonable customary deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(27) Liens that are contractual rights of set-off (a) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (b) relating to pooled deposit or sweep accounts of the Company or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Company and its Restricted Subsidiaries or (c) relating to purchase orders and other agreements entered into with customers of the Company or any of its Restricted Subsidiaries in the ordinary course of business;

(28) Liens securing obligations owed by the Company or any Restricted Subsidiary to any lender under the Senior Secured Credit Facilities or any Affiliate of such a lender in respect of any overdraft and related liabilities arising from treasury, depository and cash management services or any automated clearing house transfers of funds;

(29) any encumbrance or restriction (including put and call arrangements) with respect to Capital Stock of any joint venture or similar arrangement pursuant to any joint venture or similar agreement;

(30) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale or purchase of goods entered into by the Company or any Restricted Subsidiary in the ordinary course of business;

(31) Liens solely on any cash earnest money deposits made by the Company or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted by the Indenture;

(32) ground leases in respect of real property on which facilities owned or leased by the Company or any of its Subsidiaries are located;

(33) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;

(34) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary;

(35) Liens on the assets of non-guarantor Restricted Subsidiaries securing Indebtedness of such Subsidiaries that were permitted by the terms of the Indenture to be incurred;

(36) Liens on cash advances in favor of the seller of any property to be acquired in an Investment permitted under the Indenture to be applied against the purchase price for such Investment;

 

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(37) any interest or title of a lessor, sub-lessor, licensor or sub-licensor or secured by a lessor’s, sub-lessor’s, licensor’s or sub-licensor’s interest under leases or licenses entered into by the Company or any of the Restricted Subsidiaries in the ordinary course of business; and

(38) deposits of cash with the owner or lessor of premises leased and operated by the Company or any of its Subsidiaries in the ordinary course of business of the Company and such Subsidiary to secure the performance of the Company’s or such Subsidiary’s obligations under the terms of the lease for such premises.

For purposes of this definition, the term “ Indebtedness ” shall be deemed to include interest on such Indebtedness.

Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

Preferred Stock ” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.

Qualified Proceeds ” means the fair market value of assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business.

Qualified Securitization Facility ” means any Securitization Facility (a) constituting a securitization financing facility that meets the following conditions: (i) the board of directors of the Company shall have determined in good faith that such Securitization Facility (including financing terms, covenants, termination events and other provisions) is in the aggregate economically fair and reasonable to the Company and the applicable Securitization Subsidiary, (ii) all sales and/or contributions of Securitization Assets and related assets to the applicable Securitization Subsidiary are made at fair market value (as determined in good faith by the Company) and (iii) the financing terms, covenants, termination events and other provisions thereof shall be market terms (as determined in good faith by the Company) or (b) constituting a receivables financing facility.

Rating Agencies ” means Moody’s and S&P or if Moody’s or S&P or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuers which shall be substituted for Moody’s or S&P or both, as the case may be.

Registration Rights Agreement ” means a registration rights agreement with respect to the Notes dated as of the Issue Date, among the Issuers, the Guarantors and the representatives of the Initial Purchasers.

Related Business Assets ” means assets (other than Cash Equivalents) used or useful in a Similar Business, provided that any assets received by the Company or a Restricted Subsidiary in exchange for assets transferred by the Company or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.

Restricted Investment ” means an Investment other than a Permitted Investment.

Restricted Subsidiary ” means, with respect to any Person, at any time, any direct or indirect Subsidiary of such Person (including the Co-Issuer and any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided , however , that upon an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary.” Unless otherwise indicated in this “Description of the Notes,” all references to Restricted Subsidiaries shall mean Restricted Subsidiaries of the Company.

S&P ” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.

 

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Sale and Lease-Back Transaction ” means any arrangement providing for the leasing by the Company or any of its Restricted Subsidiaries of any real or tangible personal property, which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to a third Person in contemplation of such leasing.

SEC ” means the U.S. Securities and Exchange Commission.

Secured Indebtedness ” means any Indebtedness of the Company or any of its Restricted Subsidiaries secured by a Lien.

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

Securitization Assets ” means the accounts receivable, royalty or other revenue streams and other rights to payment and any other assets related thereto subject to a Qualified Securitization Facility and the proceeds thereof.

Securitization Facility ” means any of one or more receivables or securitization financing facilities as amended, supplemented, modified, extended, renewed, restated or refunded from time to time, the Obligations of which are non-recourse (except for customary representations, warranties, covenants and indemnities made in connection with such facilities) to the Company or any of its Restricted Subsidiaries (other than a Securitization Subsidiary) pursuant to which the Company or any of its Restricted Subsidiaries sells or grants a security interest in its accounts receivable or Securitization Assets or assets related thereto to either (a) a Person that is not a Restricted Subsidiary or (b) a Securitization Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.

Securitization Fees ” means distributions or payments made directly or by means of discounts with respect to any participation interest issued or sold in connection with, and other fees paid to a Person that is not a Securitization Subsidiary in connection with, any Qualified Securitization Facility.

Securitization Subsidiary ” means any Subsidiary formed for the purpose of, and that solely engages only in one or more Qualified Securitization Facilities and other activities reasonably related thereto.

Senior Indebtedness ” means:

(1) all Indebtedness of the Company or any Guarantor outstanding under the Senior Secured Credit Facilities and the related guarantees and Notes and related Guarantees (including interest accruing on or after the filing of any petition in bankruptcy or similar proceeding or for reorganization of the Company or any Guarantor (at the rate provided for in the documentation with respect thereto, regardless of whether or not a claim for post-filing interest is allowed in such proceedings)), and any and all other fees, expense reimbursement obligations, indemnification amounts, penalties, and other amounts (whether existing on the Issue Date or thereafter created or incurred) and all obligations of the Company or any Guarantor to reimburse any bank or other Person in respect of amounts paid under letters of credit, acceptances or other similar instruments;

(2) all (x) Hedging Obligations (and guarantees thereof) and (y) obligations in respect of Bank Products (and guarantees thereof) owing to a lender under the Senior Secured Credit Facilities or any Affiliate of such lender (or any Person that was a lender or an Affiliate of such lender at the time the applicable agreement giving rise to such Hedging Obligation was entered into); provided, that such Hedging Obligations and obligations in respect of Bank Products, as the case may be, are permitted to be incurred under the terms of the Indenture;

(3) any other Indebtedness of the Company or any Guarantor permitted to be incurred under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any related Guarantee; and

 

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(4) all Obligations with respect to the items listed in the preceding clauses (1), (2) and (3); provided , that Senior Indebtedness shall not include:

(a) any obligation of such Person to the Issuers or any of their Subsidiaries;

(b) any liability for federal, state, local or other taxes owed or owing by such Person;

(c) any accounts payable or other liability to trade creditors arising in the ordinary course of business;

(d) any Indebtedness or other Obligation of such Person which is subordinate or junior in any respect to any other Indebtedness or other Obligation of such Person; or

(e) that portion of any Indebtedness which at the time of incurrence is incurred in violation of the Indenture.

Senior Secured Credit Facilities ” means the term loan facility, revolving credit facility and other credit facilities under the Credit Agreement, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements, refundings, refinancings or replacements thereof and any one or more indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that replace, refund, supplement or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof ( provided that such increase in borrowings is permitted under the caption “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” above) or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, trustee, lender or group of lenders or holders.

Significant Subsidiary ” means any Restricted Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X promulgated pursuant to the Securities Act, as such regulation is in effect on the Issue Date.

Similar Business ” means (1) any business conducted by the Company or any of its Restricted Subsidiaries on the Issue Date, and any reasonable extension thereof, or (2) any business or other activities that are reasonably similar, ancillary, incidental, complementary or related to, or a reasonable extension, development or expansion of, the businesses in which the Company and its Restricted Subsidiaries are engaged on the Issue Date.

Subordinated Indebtedness ” means, with respect to the Notes,

(1) any Indebtedness of the Issuers which is by its terms subordinated in right of payment to the Notes, and

(2) any Indebtedness of any Guarantor which is by its terms subordinated in right of payment to the Guarantee of such entity of the Notes.

Subsidiary ” means, with respect to any Person:

(1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50.0% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and

(2) any partnership, joint venture, limited liability company or similar entity of which

(a) more than 50.0% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

 

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(b) such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

Total Assets ” means the total assets of the Company and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, as shown on the most recent balance sheet of the Company or such other Person as may be expressly stated.

Transaction Expenses ” means any fees or expenses incurred or paid by the Company or any Restricted Subsidiary in connection with the Transactions, including payments to officers, employees and directors as change of control payments, severance payments, special or retention bonuses and charges for repurchase or rollover of, or modifications to, stock options.

Transactions ” means the issuance of the Notes and borrowings under the Senior Secured Credit Facilities on the Issue Date to repay certain debt as described in the Offering Memorandum under “Offering Memorandum Summary—The Transactions” and the payment of related premiums, fees and expenses.

Treasury Rate ” means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to January 31, 2016; provided , that if the period from the Redemption Date to such date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

Trust Indenture Act ” means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-777bbbb).

Uniform Commercial Code ” means the Uniform Commercial Code or any successor provision thereof as the same may from time to time be in effect in the State of New York.

Unrestricted Subsidiary ” means:

(1) any Subsidiary of the Company which at the time of determination is an Unrestricted Subsidiary (as designated by the Company, as provided below); and

(2) any Subsidiary of an Unrestricted Subsidiary.

The Company may designate any Subsidiary of the Company, other than the Co-Issuer (including any existing Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Company or any Subsidiary of the Company (other than solely any Subsidiary of the Subsidiary to be so designated); provided , that:

(1) any Unrestricted Subsidiary must be an entity of which the Equity Interests entitled to cast at least a majority of the votes that may be cast by all Equity Interests having ordinary voting power for the election of directors or Persons performing a similar function are owned, directly or indirectly, by the Company;

(2) such designation complies with the covenants described under “—Certain Covenants—Limitation on Restricted Payments”; and

(3) each of (a) the Subsidiary to be so designated and (b) its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any Restricted Subsidiary.

 

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The Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either:

(1) the Company could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Test; or

(2) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be equal to or greater than such ratio for the Company and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation.

Any such designation by the Company shall be notified by the Company to the Trustee by promptly filing with the Trustee a copy of the resolution of the board of directors of the Company or any committee thereof giving effect to such designation and an Officer’s Certificate certifying that such designation complied with the foregoing provisions.

U.S. Dollar Equivalent ” means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The Wall Street Journal in the “ Exchange Rates ” column under the heading “ Currency Trading ” on the date two business days prior to such determination.

U.S. Government Securities ” means securities that are:

(1) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or

(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Securities or a specific payment of principal of or interest on any such U.S. Government Securities held by such custodian for the account of the holder of such depository receipt; provided , that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Securities or the specific payment of principal of or interest on the U.S. Government Securities evidenced by such depository receipt.

Voting Stock ” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.

Weighted Average Life to Maturity ” means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing:

(1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment; by

(2) the sum of all such payments.

provided , that for purposes of determining the Weighted Average Life to Maturity of any Indebtedness that is being extended, replaced, refunded, refinanced, renewed or defeased (the “ Applicable Indebtedness ”), the effects of any amortization or prepayments made on such Applicable Indebtedness prior to the date of the applicable extension, replacement, refunding, refinancing, renewal or defeasance shall be disregarded.

 

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Wholly-Owned Subsidiary ” of any Person means a Subsidiary of such Person, 100.0% of the outstanding Equity Interests of which (other than directors’ qualifying shares and shares issued to foreign nationals as required by applicable law) shall at the time be owned by such Person and/or by one or more Wholly-Owned Subsidiaries of such Person.

 

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THE EXCHANGE OFFER

Purpose and Effect of the Exchange Offer

The Issuers and the guarantors of the notes and the initial purchasers have entered into a registration rights agreement on the original Issue Date of the notes. In the registration rights agreement, each of the Issuers and the guarantors of the notes have agreed that it will, at its expense, for the benefit of the holders of notes, (i) file one or more registration statements on an appropriate registration form with respect to a registered offer to exchange the notes for new notes guaranteed by the guarantors on a full and unconditional, joint and several senior unsecured basis, with terms substantially identical in all material respects to the notes and (ii) use its commercially reasonable efforts to cause the registration statement to be declared effective under the Securities Act. As of the date of this prospectus, $250.0 million aggregate principal amount of the 10.5% Senior Notes due 2020 is outstanding, and the outstanding notes were issued in January 30, 2012.

Under the circumstances set forth below, the Issuers and the guarantors will use their commercially reasonable best efforts to cause the SEC to declare effective a shelf registration statement with respect to the resale of the outstanding notes within the time periods specified in the registration rights agreement and keep such registration statement effective for up to one year after the effective date of the shelf registration statement. These circumstances include:

 

   

if any change in law or in currently prevailing interpretations of the Staff of the SEC do not permit us to effect an exchange offer;

 

   

if an exchange offer is not consummated within the registration period contemplated by the registration rights agreement;

 

   

if, in certain circumstances, certain holders of unregistered exchange notes so request; or

 

   

if in the case of any holder that participates in an exchange offer, such holder does not receive exchange notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such holder as an affiliate of ours within the meaning of the Securities Act).

Under the registration rights agreement, if (A) we neither (i) exchanged exchange notes for all notes validly tendered in accordance with the terms of an exchange offer nor (ii) if applicable, had a shelf registration statement declared effective under the Securities Act, in either case on prior to the 540th day after the Issue Date, (B) notwithstanding clause (A), we are required to file a shelf registration statement and such shelf registration statement is not declared effective on or prior to the 90th day after the delivery of a shelf notice (as defined in the registration rights agreement) with respect thereto (the “Effectiveness Date”) or (C) if applicable, a shelf registration statement has been declared effective and such shelf registration statement ceases to be effective at any time during the effectiveness period (subject to certain exceptions) (each such event referred to in clauses (A), (B) and (C), a “Registration Default”), then additional interest (“Additional Interest”) shall accrue on the principal amount of the notes affected thereby at a rate of 0.25% per annum during the 90-day period immediately following the occurrence of any Registration Default (which rate will be increased by an additional 0.25% per annum for each subsequent 90-day period that such Additional Interest continues to accrue; provided that the rate at which such Additional Interest accrues may in no event exceed 1.00% per annum) (any such Additional Interest to be calculated by us) commencing on (x) the 540th day after the Issue Date (in the case of clause (A) above), (y) the Effectiveness Date (in the case of clause (B) above) or (z) the day on which such shelf registration statement ceases to be effective (in the case of clause (C) above); provided , however , that upon the exchange of exchange notes for all notes tendered (in the case of clause (A)(i) above), upon the effectiveness of the applicable shelf registration statement (in the case of clause (A)(ii) and (B) above) or upon the effectiveness of a shelf registration statement that had ceased to remain effective (in the case of clause (C) above), Additional Interest on such notes as a result of such clause (or the relevant sub-clause thereof), as the case may be, shall cease to accrue.

 

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If you wish to exchange your outstanding notes for exchange notes in the exchange offer, you will be required to make the following written representations:

 

   

you are not an affiliate of the Issuers or any guarantor within the meaning of Rule 405 of the Securities Act;

 

   

you have no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of the exchange notes in violation of the Securities Act;

 

   

you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and

 

   

you are acquiring the exchange notes in the ordinary course of your business.

Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where the broker-dealer acquired the outstanding notes as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. Please see “Plan of Distribution.”

Resale of Exchange Notes

Based on interpretations by the SEC set forth in no-action letters issued to third parties, we believe that you may resell or otherwise transfer exchange notes issued in the exchange offer without complying with the registration and prospectus delivery provisions of the Securities Act, if:

 

   

you are not an affiliate of the Issuers or any guarantor within the meaning of Rule 405 under the Securities Act;

 

   

you do not have an arrangement or understanding with any person to participate in a distribution of the exchange notes;

 

   

you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and

 

   

you are acquiring the exchange notes in the ordinary course of your business.

If you are an affiliate of the Issuers or any guarantor, or are engaging in, or intend to engage in, or have any arrangement or understanding with any person to participate in, a distribution of the exchange notes, or are not acquiring the exchange notes in the ordinary course of your business:

 

   

you cannot rely on the position of the SEC set forth in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated July 2, 1993, or similar no-action letters; and

 

   

in the absence of an exception from the position stated immediately above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes.

This prospectus may be used for an offer to resell, resale or other transfer of exchange notes only as specifically set forth in this prospectus. With regard to broker-dealers, only broker-dealers that acquired the outstanding notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. Please read “Plan of Distribution” for more details regarding the transfer of exchange notes.

Terms of the Exchange Offer

On the terms and subject to the conditions set forth in this prospectus and in the accompanying letters of transmittal, the Issuers will accept for exchange in the exchange offer any outstanding notes that are validly tendered and not validly withdrawn prior to the expiration date. Outstanding notes may only be tendered in a

 

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principal amount of $2,000 and in integral multiples of $1,000 in excess thereof. The Issuers will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes surrendered in the exchange offer.

The form and terms of the exchange notes will be identical in all material respects to the form and terms of the outstanding notes except the exchange notes will be registered under the Securities Act, will not bear legends restricting their transfer and will not provide for any additional interest upon failure by the Issuers and the guarantors to fulfill their obligations under the registration rights agreement to complete the exchange offer, or file, and cause to be effective, a shelf registration statement, if required thereby, within the specified time period. The exchange notes will evidence the same debt as the outstanding notes. The exchange notes will be issued under and entitled to the benefits of the same indenture that governs the terms of the outstanding notes. For a description of the indenture, see “Description of the Notes.”

The exchange offer is not conditioned upon any minimum aggregate principal amount of outstanding notes being tendered for exchange.

This prospectus and the letters of transmittal are being sent to all registered holders of outstanding notes. There will be no fixed record date for determining registered holders of outstanding notes entitled to participate in the exchange offer. The Issuers and the guarantors intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC. Outstanding notes that are not tendered for exchange in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits such holders have under the indenture and the registration rights agreement except the Issuers and the guarantors will not have any further obligation to you to provide for the registration of the outstanding notes under the registration rights agreement.

The Issuers will be deemed to have accepted for exchange properly tendered outstanding notes when the Issuers have given written notice of the acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the exchange notes from the Issuers and delivering exchange notes to holders. Subject to the terms of the registration rights agreement, the Issuers expressly reserve the right to amend or terminate the exchange offer and to refuse to accept the occurrence of any of the conditions specified below under “—Conditions to the Exchange Offer.”

If you tender your outstanding notes in the exchange offer, you will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of outstanding notes. We will pay all charges and expenses, other than certain applicable taxes described below in connection with the exchange offer. It is important that you read “—Fees and Expenses” below for more details regarding fees and expenses incurred in the exchange offer.

Expiration Date; Extensions, Amendments

As used in this prospectus, the term “expiration date” means 5:00 p.m., New York City time, on                     , 2013, which is the 21st business day after the date of this prospectus. However, if the Issuers, in their sole discretion, extend the period of time for which the exchange offer is open, the term “expiration date” will mean the latest time and date to which the Issuers shall have extended the expiration of the exchange offer.

To extend the period of time during which the exchange offer is open, the Issuers will notify the exchange agent of any extension by written notice, followed by notification by press release or other public announcement to the registered holders of the outstanding notes no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. The Issuers are generally required to extend the offering period for any material change, including the waiver of a material condition, so that at least five business days remain in the exchange offer after the change.

 

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The Issuers reserve the right, in their sole discretion:

 

   

to delay accepting for exchange any outstanding notes (if the Issuers amend or extend the exchange offer);

 

   

to extend the exchange offer or to terminate the exchange offer if any of the conditions set forth below under “—Conditions to the Exchange Offer” have not been satisfied, by giving written notice of such delay, extension or termination to the exchange agent; and

 

   

subject to the terms of the registration rights agreement, to amend the terms of the exchange offer in any manner.

Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by notice to the registered holders of the outstanding notes. If the Issuers amend the exchange offer in a manner that it determines to constitute a material change, the Issuers will promptly disclose the amendment in a manner reasonably calculated to inform the holders of applicable outstanding notes of that amendment.

Conditions to the Exchange Offer

Despite any other term of the exchange offer, the Issuers will not be required to accept for exchange, or to issue exchange notes in exchange for, any outstanding notes and the Issuers may terminate or amend the exchange offer as provided in this prospectus prior to the expiration date if in their reasonable judgment:

 

   

the exchange offer or the making of any exchange by a holder violates any applicable law or interpretation of the SEC; or

 

   

any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in their judgment, would reasonably be expected to impair their ability to proceed with the exchange offer.

In addition, the Issuers will not be obligated to accept for exchange the outstanding notes of any holder that has not made to the Issuers:

 

   

the representations described under “—Purpose and Effect of the Exchange Offer,” “—Procedures for Tendering Outstanding Notes” and “Plan of Distribution;” or

 

   

any other representations as may be reasonably necessary under applicable SEC rules, regulations, or interpretations to make available to the Issuers an appropriate form for registration of the exchange notes under the Securities Act.

The Issuers expressly reserve the right at any time or at various times to extend the period of time during which the exchange offer is open. Consequently, the Issuers may delay acceptance of any outstanding notes by giving written notice of such extension to their holders. The Issuers will return any outstanding notes that the Issuers do not accept for exchange for any reason without expense to their tendering holder promptly after the expiration or termination of the exchange offer.

The Issuers expressly reserve the right to amend or terminate the exchange offer and to reject for exchange any outstanding notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified above. In addition, the Issuers are generally required to extend the offering period for any material change, including the waiver of a material condition, so that at least five business days remain in the exchange offer after the change. The Issuers will give written notice of any extension, amendment, non-acceptance or termination to the holders of the outstanding notes as promptly as practicable. In the case of any extension, such notice will be issued no later than 9:00 a.m. New York City time, on the next business day after the previously scheduled expiration date.

 

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These conditions are for sole benefit of the Issuers and the Issuers may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times prior to the expiration date in their sole discretion. If the Issuers fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of such right. Each such right will be deemed an ongoing right that the Issuers may assert at any time or at various times prior to the expiration date.

In addition, the Issuers will not accept for exchange any outstanding notes tendered, and will not issue exchange notes in exchange for any such outstanding notes, if at such time any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939 (the “TIA”).

Procedures for Tendering Outstanding Notes

To tender your outstanding notes in the exchange offer, you must comply with either of the following:

 

   

complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, have the signature(s) on the letter of transmittal guaranteed if required by the letter of transmittal and mail or deliver such letter of transmittal or facsimile thereof to the exchange agent at the address set forth below under “—Exchange Agent” prior to the expiration date; or

 

   

comply with DTC’s Automated Tender Offer Program procedures described below.

In addition, either:

 

   

the exchange agent must receive certificates for outstanding notes along with the letter of transmittal prior to the expiration date;

 

   

the exchange agent must receive a timely confirmation of book-entry transfer of outstanding notes into the exchange agent’s account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent’s message prior to the expiration date; or

 

   

you must comply with the guaranteed delivery procedures described below.

Your tender, if not withdrawn prior to the expiration date, constitutes an agreement between the Issuers and you upon the terms and subject to the conditions described in this prospectus and in the letter of transmittal.

The method of delivery of outstanding notes, letters of transmittal, and all other required documents to the exchange agent is at your election and risk. We recommend that instead of delivery by mail, you use an overnight or hand delivery service, properly insured. In all cases, you should allow sufficient time to assure timely delivery to the exchange agent before the expiration date. You should not send letters of transmittal or certificates representing outstanding notes to us. You may request that your broker, dealer, commercial bank, trust company or nominee effect the above transactions for you.

If you are a beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and you wish to tender your notes, you should promptly contact the registered holder and instruct the registered holder to tender on your behalf. If you wish to tender the outstanding notes yourself, you must, prior to completing and executing the letter of transmittal and delivering your outstanding notes, either:

 

   

make appropriate arrangements to register ownership of the outstanding notes in your name; or

 

   

obtain a properly completed bond power from the registered holder of outstanding notes.

The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date.

 

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Signatures on the letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the Financial Industry Regulatory Authority, Inc., a commercial bank or trust company having an office or correspondent in the United States or another “eligible guarantor institution” within the meaning of Rule 17A(d)-15 under the Exchange Act unless the outstanding notes surrendered for exchange are tendered:

 

   

by a registered holder of the outstanding notes who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” in the letter of transmittal; or

 

   

for the account of an eligible guarantor institution.

If the letter of transmittal is signed by a person other than the registered holder of any outstanding notes listed on the outstanding notes, such outstanding notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder’s name appears on the outstanding notes and an eligible guarantor institution must guarantee the signature on the bond power.

If the letter of transmittal or any certificates representing outstanding notes, or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, those persons should also indicate when signing and, unless waived by the Issuers, they should also submit evidence satisfactory to the Issuers of their authority to so act.

The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC’s system may use DTC’s Automated Tender Offer Program to tender. Participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the exchange agent, electronically transmit their acceptance of the exchange by causing DTC to transfer the outstanding notes to the exchange agent in accordance with DTC’s Automated Tender Offer Program procedures for transfer. DTC will then send an agent’s message to the exchange agent. The term “agent’s message” means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, which states that:

 

   

DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering outstanding notes that are the subject of the book-entry confirmation;

 

   

the participant has received and agrees to be bound by the terms of the letter of transmittal, or in the case of an agent’s message relating to guaranteed delivery, that such participant has received and agrees to be bound by the notice of guaranteed delivery; and

 

   

the Issuers may enforce that agreement against such participant.

Acceptance of Exchange Notes

In all cases, the Issuers will promptly issue exchange notes for outstanding notes that they have accepted for exchange under the exchange offer only after the exchange agent timely receives:

 

   

outstanding notes or a timely book-entry confirmation of such outstanding notes into the exchange agent’s account at the book-entry transfer facility; and

 

   

a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message.

 

   

By tendering outstanding notes pursuant to the exchange offer, you will represent to the Issuers that, among other things:

 

   

you are not an affiliate of the Issuers or the guarantors within the meaning of Rule 405 under the Securities Act;

 

   

you do not have an arrangement or understanding with any person or entity to participate in a distribution of the exchange notes; and

 

   

you are acquiring the exchange notes in the ordinary course of your business.

 

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In addition, each broker-dealer that is to receive exchange notes for its own account in exchange for outstanding notes must represent that such outstanding notes were acquired by that broker-dealer as a result of market-making activities or other trading activities and must acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in connection with any resale of the exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. See “Plan of Distribution.”

The Issuers will interpret the terms and conditions of the exchange offer, including the letters of transmittal and the instructions to the letters of transmittal, and will resolve all questions as to the validity, form, eligibility, including time of receipt, and acceptance of outstanding notes tendered for exchange. Determinations of the Issuers in this regard will be final and binding on all parties. The Issuers reserve the absolute right to reject any and all tenders of any particular outstanding notes not properly tendered or to not accept any particular outstanding notes if the acceptance might, in their or their counsel’s judgment, be unlawful. The Issuers also reserve the absolute right to waive any defects or irregularities as to any particular outstanding notes prior to the expiration date.

Unless waived, any defects or irregularities in connection with tenders of outstanding notes for exchange must be cured within such reasonable period of time as the Issuers determine. Neither the Issuers, the exchange agent, nor any other person will be under any duty to give notification of any defect or irregularity with respect to any tender of outstanding notes for exchange, nor will any of them incur any liability for any failure to give notification. Any outstanding notes received by the exchange agent that are not properly tendered and as to which the irregularities have not been cured or waived will be returned by the exchange agent to the tendering holder, unless otherwise provided in the letter of transmittal, promptly after the expiration date.

Book-Entry Delivery Procedures

Promptly after the date of this prospectus, the exchange agent will establish an account with respect to the outstanding notes at DTC, as book-entry transfer facilities, for purposes of the exchange offer. Any financial institution that is a participant in the book-entry transfer facility’s system may make book-entry delivery of the outstanding notes by causing the book-entry transfer facility to transfer those outstanding notes into the exchange agent’s account at the facility in accordance with the facility’s procedures for such transfer. To be timely, book-entry delivery of outstanding notes requires receipt of a confirmation of a book-entry transfer, a “book-entry confirmation,” prior to the expiration date. In addition, although delivery of outstanding notes may be effected through book-entry transfer into the exchange agent’s account at the book-entry transfer facility, the letter of transmittal or a manually signed facsimile thereof, together with any required signature guarantees and any other required documents, or an “agent’s message,” as defined below, in connection with a book-entry transfer, must, in any case, be delivered or transmitted to and received by the exchange agent at its address set forth on the cover page of the letter of transmittal prior to the expiration date to receive exchange notes for tendered outstanding notes, or the guaranteed delivery procedure described below must be complied with. Tender will not be deemed made until such documents are received by the exchange agent. Delivery of documents to the book-entry transfer facility does not constitute delivery to the exchange agent.

Holders of outstanding notes who are unable to deliver confirmation of the book-entry tender of their outstanding notes into the exchange agent’s account at the book-entry transfer facility or all other documents required by the letter of transmittal to the exchange agent on or prior to the expiration date must tender their outstanding notes according to the guaranteed delivery procedures described below.

 

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Guaranteed Delivery Procedures

If you wish to tender your outstanding notes but your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC’s Automatic Tender Offer Program, prior to the expiration date, you may still tender if:

 

   

the tender is made through an eligible guarantor institution;

 

   

prior to the expiration date, the exchange agent receives from such eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail, or hand delivery or a properly transmitted agent’s message and

 

   

notice of guaranteed delivery, that (1) sets forth your name and address, the certificate number(s) of such outstanding notes and the principal amount of outstanding notes tendered; (2) states that the tender is being made thereby; and (3) guarantees that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal, or facsimile thereof, together with the outstanding notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent; and

 

   

the exchange agent receives the properly completed and executed letter of transmittal or facsimile thereof, as well as certificate(s) representing all tendered outstanding notes in proper form for transfer or a book-entry confirmation of transfer of the outstanding notes into the exchange agent’s account at DTC, and all other documents required by the letter of transmittal within three New York Stock Exchange trading days after the expiration date.

Upon request, the exchange agent will send to you a notice of guaranteed delivery if you wish to tender your outstanding notes according to the guaranteed delivery procedures.

Withdrawal Rights

Except as otherwise provided in this prospectus, you may withdraw your tender of outstanding notes at any time prior to 5:00 p.m., New York City time, on the expiration date.

For a withdrawal to be effective:

 

   

the exchange agent must receive a written notice, which may be by telegram, telex, facsimile or letter, of withdrawal at its address set forth below under “—Exchange Agent;” or

 

   

you must comply with the appropriate procedures of DTC’s Automated Tender Offer Program system.

Any notice of withdrawal must:

 

   

specify the name of the person who tendered the outstanding notes to be withdrawn;

 

   

identify the outstanding notes to be withdrawn, including the certificate numbers and principal amount of the outstanding notes; and

 

   

where certificates for outstanding notes have been transmitted, specify the name in which such outstanding notes were registered, if different from that of the withdrawing holder.

If certificates for outstanding notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, you must also submit:

 

   

the serial numbers of the particular certificates to be withdrawn; and

 

   

a signed notice of withdrawal with signatures guaranteed by an eligible institution unless you are an eligible guarantor institution.

 

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If outstanding notes have been tendered pursuant to the procedures for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn outstanding notes and otherwise comply with the procedures of the facility. The Issuers will determine all questions as to the validity, form, and eligibility, including time of receipt of notices of withdrawal and their determination will be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any outstanding notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder, without cost to the holder, or, in the case of book-entry transfer, the outstanding notes will be credited to an account at the book-entry transfer facility, promptly after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn outstanding notes may be retendered by following the procedures described under “—Procedures for Tendering Outstanding Notes” above at any time on or prior to the expiration date.

Exchange Agent

Wilmington Trust, National Association has been appointed as the exchange agent for the exchange offer. Wilmington Trust, National Association also acts as trustee under the indenture governing the notes. You should direct all executed letters of transmittal and all questions and requests for assistance, requests for additional copies of this prospectus or of the letters of transmittal, and requests for notices of guaranteed delivery to the exchange agent addressed as follows:

 

By Mail or Overnight Courier:   By Facsimile:   By Hand Delivery:
Wilmington Trust, National Association   (302) 636-4139   Wilmington Trust, National Association
c/o Wilmington Trust Company   Attn: Sam Hamed   c/o Wilmington Trust Company
Corporate Capital Markets     Corporate Capital Markets
Rodney Square North     Rodney Square North
1100 North Market Street     1100 North Market Street
Wilmington, Delaware 19890-1626     Wilmington, Delaware 19890-1626
Attn: Sam Hamed     Attn: Sam Hamed
  To Confirm by Telephone:  
  (302) 636-6181  
  Attn: Sam Hamed  

If you deliver the letter of transmittal to an address other than the one set forth above or transmit instructions via facsimile other than the one set forth above, that delivery or those instructions will not be effective.

Fees and Expenses

The registration rights agreement provide that we will bear all expenses in connection with the performance of our obligations relating to the registration of the exchange notes and the conduct of the exchange offer. These expenses include registration and filing fees, accounting and legal fees and printing costs, among others. We will pay the exchange agent reasonable and customary fees for its services and reasonable out-of-pocket expenses. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for customary mailing and handling expenses incurred by them in forwarding this prospectus and related documents to their clients that are holders of outstanding notes and for handling or tendering for such clients.

We have not retained any dealer-manager in connection with the exchange offer and will not pay any fee or commission to any broker, dealer, nominee or other person, other than the exchange agent, for soliciting tenders of outstanding unregistered notes pursuant to the exchange offer.

 

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Accounting Treatment

We will record the exchange notes in our accounting records at the same carrying value as the outstanding notes, which is the aggregate principal amount as reflected in our accounting records on the date of exchanges, as the terms of the exchange notes are substantially identical to the terms of the outstanding notes. Accordingly, we will not recognize any gain or loss for accounting purposes upon the consummation of this exchange offer. We will capitalize the expenses relating to the exchange offer.

Transfer Taxes

The Issuers and the guarantors will pay all transfer taxes, if any, applicable to the exchanges of outstanding notes under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if:

 

   

certificates representing outstanding notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding notes tendered;

 

   

tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal; or

 

   

a transfer tax is imposed for any reason other than the exchange of outstanding notes under the exchange

If satisfactory evidence of payment of such taxes is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed to that tendering holder.

Holders who tender their outstanding notes for exchange will not be required to pay any transfer taxes. However, holders who instruct the Issuers to register exchange notes in the name of, or request that outstanding notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be required to pay any applicable transfer tax.

Consequences of Failure to Exchange

If you do not exchange your outstanding notes for exchange notes under the exchange offer, your outstanding notes will remain subject to the restrictions on transfer of such outstanding notes:

 

   

as set forth in the legend printed on the outstanding notes as a consequence of the issuances of the outstanding notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and

 

   

as otherwise set forth in the offering memorandum distributed in connection with the private offering of the outstanding notes.

In general, you may not offer or sell your outstanding notes unless they are registered under the Securities Act or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act.

Other

Participating in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take.

We may in the future seek to acquire untendered outstanding notes in open market or privately negotiated transactions, through subsequent exchange offer or otherwise. We have no present plans to acquire any outstanding notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered outstanding notes.

 

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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

The exchange of outstanding notes for exchange notes in the exchange offer will not constitute a taxable event to holders for U.S. federal income tax purposes. Consequently, you will not recognize gain or loss upon receipt of an exchange note, the holding period of the exchange note will include the holding period of the outstanding note exchanged therefor and the basis of the exchange note will be the same as the basis of the outstanding note immediately before the exchange.

In any event, persons considering the exchange of outstanding notes for exchange notes should consult their own tax advisors concerning the U.S. federal income tax consequences in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.

 

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CERTAIN ERISA CONSIDERATIONS

The following is a summary of certain considerations associated with the acquisition and holding of the notes by employee benefit plans that are subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) or provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, “Similar Laws”), and entities whose underlying assets are considered to include “plan assets” of any such plan, account or arrangement (each, a “Plan”).

General Fiduciary Matters

ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code (an “ERISA Plan”) and prohibit certain transactions involving the assets of an ERISA Plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of such an ERISA Plan or the management or disposition of the assets of such an ERISA Plan, or who renders investment advice for a fee or other compensation to such an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan.

In considering an investment in the notes of a portion of the assets of any Plan, a fiduciary should determine whether the investment is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code or any Similar Law relating to a fiduciary’s duties to the Plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of ERISA, the Code and any other applicable Similar Laws.

Prohibited Transaction Issues

Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from engaging in specified transactions involving plan assets with persons or entities who are “parties in interest,” within the meaning of ERISA, or “disqualified persons,” within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engaged in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the ERISA Plan that engaged in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code. The acquisition and/or holding of notes (including an exchange of outstanding notes for exchange notes) by an ERISA Plan with respect to which an issuer or a guarantor is considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption. In this regard, the U.S. Department of Labor has issued prohibited transaction class exemptions, or “PTCEs,” that may apply to the acquisition and holding of the notes. These class exemptions include, without limitation, PTCE 84-14 respecting transactions determined by independent qualified professional asset managers, PTCE 90-1 respecting insurance company pooled separate accounts, PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting life insurance company general accounts and PTCE 96-23 respecting transactions determined by in-house asset managers. There can be no assurance that all of the conditions of any such exemptions will be satisfied.

Because of the foregoing, the notes should not be acquired or held by any person investing “plan assets” of any Plan, unless such acquisition and holding (and the exchange of outstanding notes for exchange notes) will not constitute a non-exempt prohibited transaction under ERISA and the Code or a similar violation of any applicable Similar Laws.

 

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Representation

Accordingly, by acceptance of a note (including an exchange of outstanding notes for exchange notes), each purchaser and subsequent transferee of a note will be deemed to have represented and warranted that either (i) no portion of the assets used by such purchaser or transferee to purchase or hold the notes or any interest therein constitutes assets of any Plan or (ii) the purchase and holding of the notes or any interest therein by such purchaser or transferee will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or similar violation under any applicable Similar Laws.

The foregoing discussion is general in nature and is not intended to be all inclusive. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries, or other persons considering acquiring or holding the notes on behalf of, or with the assets of, any Plan, consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment and whether an exemption would be applicable to the acquisition and holding of the notes.

 

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PLAN OF DISTRIBUTION

Each broker dealer that receives exchange notes for its own account pursuant to an exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market making activities or other trading activities. We have agreed that, for a period ending on the earlier of (i) 90 days from the date on which the registration statement for the exchange offer is declared effective, (ii) the date on which a broker dealer is no longer required to deliver a prospectus in connection with market making or other trading activities and (iii) the date on which all the notes covered by such registration statement have been sold pursuant to the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker dealer for use in connection with any such resale, and will promptly send additional copies of this prospectus and any amendments or supplements to this prospectus to any broker dealer that requests such documents in the letter of transmittal. In addition, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.

We will not receive any proceeds from any sale of exchange notes by broker dealers. Exchange notes received by broker dealers for their own account pursuant to an exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker dealer and/or the purchasers of any such exchange notes. Any broker dealer that resells exchange notes that were received by it for its own account pursuant to an exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit of any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the outstanding notes) other than commissions or concessions of any broker dealers and will indemnify you (including any broker dealers) against certain liabilities, including liabilities under the Securities Act.

 

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LEGAL MATTERS

The validity and enforceability of the exchange notes will be passed upon for us by Simpson Thacher & Bartlett LLP, New York, New York. In rendering its opinion, Simpson Thacher & Bartlett LLP will rely upon the opinion of Holland & Hart LLP as to all matters governed by the laws of the states of Colorado, New Mexico, Utah and Wyoming, the opinion of Kutak Rock LLP as to all matters governed by the laws of the states of Kansas and Missouri, the opinion of Stites & Harbison PLLC as to all matters governed by the laws of the state of Kentucky and the opinion of Bell Nunnally & Martin LLP as to all matters governed by the laws of the state of Texas. An investment vehicle comprised of several partners of Simpson Thacher & Bartlett LLP, members of their families, related persons and others own interest representing less than 1% of the capital commitments of funds affiliated with Blackstone.

EXPERTS

The consolidated financial statements of Summit Materials, LLC as of December 29, 2012 and for the year then ended have been included herein in reliance on the report of KPMG LLP, an independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Summit Materials, LLC and subsidiaries as of December 31, 2011 and for the years ended December 31, 2011 and 2010, and the retrospective adjustments to such financial statements included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein (which report expresses an unqualified opinion on the those consolidated financial statements and includes an explanatory paragraph referring to retrospective adjustments for discontinued operations). Such consolidated financial statements have been included upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Continental Cement Company, L.L.C. as of December 31, 2012 and for the year then ended have been included herein in reliance on the report of KPMG LLP, an independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Continental Cement Company, L.L.C. as of December 31, 2011 and for the year ended December 31, 2011 and for the periods from May 27, 2010 to December 31, 2010 (Successor) and from January 1, 2010 to May 26, 2010 (Predecessor) included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such consolidated financial statements have been included upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Cornejo & Sons, Inc. and subsidiaries as of October 31, 2009 and 2008 and for each of the years in the three year period ended October 31, 2009 included in this prospectus have been included in reliance on the report of Allen, Gibbs & Houlik, L.C., independent auditors, upon the authority of said firm as experts in accounting and auditing in giving said report.

The audited financial statements of Kilgore Pavement Maintenance, LLC for the period ended August 1, 2010, as of August 1, 2010 and December 31, 2009 and for the year ended December 31, 2009 included in this prospectus have been included in reliance on the report of Wisan, Smith, Racker & Prescott, LLP, independent auditors, upon the authority of said firm as experts in accounting and auditing in giving said report.

The audited financial statements of Norris Aggregate Products Co. for the two month period ended February 28, 2012, as of February 28, 2012 and December 31, 2011 and for the year ended December 31, 2011 included in this prospectus have been included in reliance on the report of CliftonLarsonAllen LLP, independent auditors, upon the authority of said firm as experts in accounting and auditing in giving said report.

 

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The combined financial statements of R.K. Hall Construction, Ltd. and Affiliates as of December 31, 2009 and December 31, 2008 and for the three year period ended December 31, 2009 included in this prospectus have been included in reliance on the report of Perryman Chaney Russell, LLP, independent auditors, upon the authority of said firm as experts in accounting and auditing in giving said report.

CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

On June 15, 2012, the Board dismissed Deloitte & Touche LLP (“Deloitte”) as the independent registered public accounting firm of Summit Materials, LLC and Subsidiaries and Continental Cement Company, L.L.C. and Subsidiary and on August 7, 2012 engaged KPMG LLP (“KPMG”). Deloitte’s reports on the financial statements of Summit Materials, LLC and Subsidiaries and Continental Cement Company, L.L.C. and Subsidiary, for the periods specified in such reports did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. There were (i) no disagreements with Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the subject matter of the disagreements in connection with its reports and (ii) no reportable events of the type listed in paragraphs (A) through (D) of Item 304(a)(1)(v) of Regulation S-K issued by the SEC, in connection with the audits of the financial statements of Summit Materials, LLC and Subsidiaries and Continental Cement Company, L.L.C. and Subsidiary for each of the 2011 and 2010 periods audited by Deloitte through the replacement of Deloitte with KPMG.

Neither we nor anyone acting on our behalf consulted with KPMG at any time prior to their retention by us with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Summit Materials, LLC and Subsidiaries and Continental Cement Company, L.L.C. and Subsidiary financial statements, and neither a written report was provided to us nor oral advice was provided that KPMG concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue or (ii) any matter that was the subject of a disagreement or reportable events set forth in Item 304(a)(1)(iv) and (v), respectively, of Regulation S-K.

WHERE YOU CAN FIND MORE INFORMATION

We and our guarantors have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to the exchange notes. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information with respect to us, our guarantors and the exchange notes, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete, and, where such contract or other document is an exhibit to the registration statement, each such statement is qualified by the provisions in such exhibit, to which reference is hereby made. The registration statement and other information can be inspected and copied at the Public Reference Room of the SEC located at Room 1580, 100 F Street, N.E., Washington D.C. 20549. Copies of such materials, including copies of all or any portion of the registration statement, can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC’s home page on the Internet (http://www.sec.gov). However, any such information filed with the SEC does not constitute a part of this prospectus.

So long as we are subject to the periodic reporting requirements of the Exchange Act, we are required to furnish the information required to be filed with the SEC to the trustee and the holders of the outstanding unregistered notes. We have agreed that, even if we are not required under the Exchange Act to furnish such information to the SEC, we will nonetheless continue to furnish information that would be required to be furnished by us by Section 13 or 15(d) of the Exchange Act.

 

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INDEX TO FINANCIAL STATEMENTS

 

    

Page

 

Audited Consolidated Financial Statements of Summit Materials, LLC and Subsidiaries

  

Report of KPMG LLP, Independent Registered Public Accounting Firm

     F-3   

Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm

     F-4   

Consolidated Balance Sheets as of December 29, 2012 and December 31, 2011

     F-5   

Consolidated Statements of Operations for the years ended December 29, 2012, December  31, 2011 and December 31, 2010

  

 

F-6

  

Consolidated Statements of Comprehensive (Loss) Income for the years ended December 29, 2012, December 31, 2011 and December 31, 2010

  

 

F-7

  

Consolidated Statements of Cash Flows for the years ended December 29, 2012, December  31, 2011 and December 31, 2010

  

 

F-8

  

Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Member’s Interest for the years ended December 29, 2012, December 31, 2011 and December 31, 2010

  

 

F-9

  

Notes to Consolidated Financial Statements

     F-10   

Audited Consolidated Financial Statements of Continental Cement Company, L.L.C. and Subsidiary

  

Report of KPMG LLP, Independent Registered Public Accounting Firm

     F-50   

Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm

     F-51   

Consolidated Balance Sheets as of December 31, 2012 and 2011

     F-52   

Consolidated Statements of Operations for the years ended December 31, 2012 and 2011 and for the periods from May 27, 2010 to December 31, 2010 (Successor) and January 1, 2010 to May 26, 2010 (Predecessor)

  

 

F-53

  

Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2012 and 2011 and for the periods from May 27, 2010 to December 31, 2010 (Successor) and January 1, 2010 to May 26, 2010 (Predecessor)

  

 

F-54

  

Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011 and for the periods from May 27, 2010 to December 31, 2010 (Successor) and January 1, 2010 to May 26, 2010 (Predecessor)

  

 

F-55

  

Consolidated Statements of Changes in Redeemable Members’ Interest and Member’s Interest for the years ended December 31, 2012 and 2011 and for the periods from May 27, 2010 to December 31, 2010 (Successor) and January 1, 2010 to May 26, 2010 (Predecessor)

  

 

F-56

  

Notes to Consolidated Financial Statements

     F-57   

Audited Consolidated Financial Statements of Cornejo & Sons, Inc. and Subsidiaries

  

Report of Allen, Gibbs & Houlik, L.C., Independent Auditors

     F-76   

Consolidated Balance Sheets as of October 31, 2009 and 2008

     F-77   

Consolidated Statements of Operations for the years ended October 31, 2009, 2008 and 2007

     F-78   

Consolidated Statements of Stockholders’ Equity for the years ended October  31, 2009, 2008 and 2007

     F-79   

Consolidated Statements of Cash Flows for the years ended October 31, 2009, 2008 and 2007

     F-80   

Notes to Consolidated Financial Statements

     F-81   

Unaudited Consolidated Statements of Operations for the three months ended January  31, 2009 and January 31, 2010

     F-90   

Unaudited Consolidated Statements of Cash Flows for the three months ended January  31, 2009 and January 31, 2010

     F-91   

Notes to the Unaudited Consolidated Financial Statements

     F-92   

 

F-1


Table of Contents
    

Page

 

Audited Financial Statements of Kilgore Pavement Maintenance, LLC

  

Report of Wisan, Smith, Racker & Prescott, LLP, Independent Auditors

     F-96   

Balance Sheets as of August 1, 2010 and December 31, 2009

     F-97   

Statements of Operations and Members’ Equity for the period ended August  1, 2010 and for the year ended December 31, 2009

     F-98   

Statements of Cash Flows for the period ended August 1, 2010 and for the year ended December  31, 2009

     F-99   

Notes to Financial Statements

     F-100   

Audited Financial Statements of Norris Aggregate Products Co.

  

Report of CliftonLarsonAllen LLP, Independent Auditors

     F-106   

Balance Sheets as of February 28, 2012 and December 31, 2011

     F-107   

Statements of Operations for the two month period ended February 28, 2012 and for the year ended December 31, 2011

     F-108   

Statements of Stockholders’ Equity for the two month period ended February 28, 2012 and for the year ended December 31, 2011

     F-109   

Statement of Cash Flows for the two month period ended February 28, 2012 and for the year ended December 31, 2011

     F-110   

Notes to Financial Statements

     F-111   

Audited Combined Financial Statements of R.K. Hall Construction, Ltd.

  

Report of Perryman Chaney Russell, LLP, Independent Auditors

     F-116   

Combined Balance Sheets as of December 31, 2009 and 2008

     F-117   

Combined Statements of Operations and Equity for the years ended December 31, 2009, December  31, 2008 and December 31, 2007

     F-118   

Combined Statements of Cash Flows for the years ended December 31, 2009, December 31, 2008 and December 31, 2007

     F-119   

Notes to Combined Financial Statements

     F-120   

Unaudited Combined Balance Sheets as of December 31, 2009 and September 30, 2010

     F-126   

Unaudited Combined Statements of Operations and Equity for the nine months ended September  30, 2009 and September 30, 2010

     F-127   

Unaudited Combined Statements of Cash Flows for the nine months ended September  30, 2009 and September 30, 2010

     F-128   

Notes to Unaudited Combined Financial statements

     F-129   

 

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Table of Contents

 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors

Summit Materials, LLC:

 

We have audited the accompanying consolidated balance sheet of Summit Materials, LLC and subsidiaries as of December 29, 2012, and the related consolidated statements of operations, comprehensive (loss) income, cash flows and changes in redeemable noncontrolling interest and member’s interest for the year then ended. The consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Summit Materials, LLC and subsidiaries as of December 29, 2012, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

 

/s/ KPMG LLP

McLean, Virginia

March 27, 2013

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Member of

Summit Materials, LLC and Subsidiaries

Washington, D.C.

 

We have audited the accompanying consolidated balance sheet of Summit Materials, LLC and Subsidiaries (the “Company”) as of December 31, 2011, and the related consolidated statements of operations, comprehensive (loss) income, changes in redeemable noncontrolling interest and member’s interest, and cash flows for each of the years ended December 31, 2011 and 2010. 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). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Summit Materials, LLC and Subsidiaries as of December 31, 2011, and the results of their operations and their cash flows for each of the years ended December 31, 2011 and 2010, in conformity with accounting principles generally accepted in the United States of America.

 

As discussed in Note 3 to the consolidated financial statements, the accompanying 2011 and 2010 consolidated financial statements have been retrospectively adjusted for discontinued operations.

 

/s/ DELOITTE & TOUCHE LLP

McLean, Virginia

 

May 1, 2012 (March 26, 2013 as to Note 3)

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Consolidated Balance Sheets

December 29, 2012 and December 31, 2011

(In thousands)

 

     2012     2011  
Assets     

Current assets:

    

Cash

   $ 27,431     $ 42,790  

Accounts receivable, net

     100,298       105,233  

Costs and estimated earnings in excess of billings

     11,575       18,506  

Inventories

     92,977       84,263  

Other current assets

     10,068       12,382  
  

 

 

   

 

 

 

Total current assets

     242,349       263,174  

Property, plant and equipment, net

     813,607       821,903  

Investments in affiliates

     12,989       13,123  

Goodwill

     179,120       153,375  

Intangible assets, net

     8,606       9,179  

Other assets

     24,542       23,511  
  

 

 

   

 

 

 

Total assets

   $ 1,281,213     $ 1,284,265  
  

 

 

   

 

 

 

Liabilities, Redeemable Noncontrolling Interest and Member’s Interest

    

Current liabilities:

    

Current portion of long-term debt

   $ 4,000      $ 7,960   

Current portion of acquisition-related liabilities

     9,525        8,465   

Accounts payable

     61,634       69,643  

Accrued expenses

     49,822       33,995  

Billings in excess of costs and estimated earnings

     6,926       4,336  
  

 

 

   

 

 

 

Total current liabilities

     131,907       124,399  

Long-term debt

     635,843       601,021  

Acquisition-related liabilities

     23,919       20,238  

Other noncurrent liabilities

     84,266       80,935  
  

 

 

   

 

 

 

Total liabilities

     875,935       826,593  
  

 

 

   

 

 

 

Commitments and contingencies (see note 13)

    

Redeemable noncontrolling interest

     22,850       21,300  

Member’s interest:

    

Member’s equity

     484,584        482,707   

Accumulated deficit

     (94,085     (40,932

Accumulated other comprehensive loss

     (9,130     (6,577
  

 

 

   

 

 

 

Member’s interest

     381,369        435,198   

Noncontrolling interest

     1,059        1,174   
  

 

 

   

 

 

 

Total member’s interest

     382,428        436,372   
  

 

 

   

 

 

 

Total liabilities, redeemable noncontrolling interest and member’s interest

   $ 1,281,213     $ 1,284,265  
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Consolidated Statements of Operations

Years ended December 29, 2012, December 31, 2011 and December 31, 2010

(In thousands)

 

     2012     2011     2010  

Revenue:

      

Product

   $ 588,762     $ 427,419     $ 240,120  

Service

     374,140       395,129       190,238  
  

 

 

   

 

 

   

 

 

 

Total revenue

     962,902       822,548       430,358  
  

 

 

   

 

 

   

 

 

 

Costs of revenue (exclusive of items shown separately below):

      

Product

     444,569       317,360       181,901  

Service

     304,794       313,584       126,396  
  

 

 

   

 

 

   

 

 

 

Total costs of revenue

     749,363       630,944       308,297  

General and administrative expenses

     128,032        96,886       49,479  

Depreciation, depletion, amortization and accretion

     68,876       61,964       34,415  

Transaction costs

     1,988       9,120       22,268  
  

 

 

   

 

 

   

 

 

 

Operating income

     14,643        23,634       15,899  

Other (income) expense, net

     (1,182     (21,244     1,583  

Loss on debt refinancing

     9,469       —         9,975  

Interest expense

     58,079       47,784       25,430  
  

 

 

   

 

 

   

 

 

 

Loss from continuing operations before income tax (benefit) expense

     (51,723     (2,906     (21,089

Income tax (benefit) expense

     (3,920     3,408       2,363  
  

 

 

   

 

 

   

 

 

 

Loss from continuing operations

     (47,803     (6,314     (23,452

Loss from discontinued operations

     (2,774     (3,736     (411
  

 

 

   

 

 

   

 

 

 

Net loss

     (50,577     (10,050     (23,863

Net income attributable to noncontrolling interest

     1,919       695       86  
  

 

 

   

 

 

   

 

 

 

Net loss attributable to member of Summit Materials, LLC

   $ (52,496   $ (10,745   $ (23,949
  

 

 

   

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Consolidated Statements of Comprehensive (Loss) Income

Years ended December 29, 2012, December 31, 2011 and December 31, 2010

(In thousands)

 

     2012     2011     2010  

Net loss

   $ (50,577   $ (10,050   $ (23,863

Other comprehensive loss:

      

Pension and postretirement adjustment

     (3,648     (5,675     (2,708
  

 

 

   

 

 

   

 

 

 

Comprehensive loss

     (54,225     (15,725     (26,571

Less comprehensive income (loss) attributable to the noncontrolling interest

     824       (675     (350
  

 

 

   

 

 

   

 

 

 

Comprehensive loss attributable to member of Summit Materials, LLC

   $ (55,049   $ (15,050   $ (26,221
  

 

 

   

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Consolidated Statements of Cash Flows

Years ended December 29, 2012, December 31, 2011 and December 31, 2010

(In thousands)

 

     2012     2011     2010  

Cash flow from operating activities:

      

Net loss

   $ (50,577   $ (10,050   $ (23,863

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

      

Depreciation, depletion, amortization and accretion

     72,179       64,983       35,456  

Share-based compensation expense

     2,533       2,484       1,169  

Financing fee amortization

     3,266       2,335       2,067  

Deferred income tax benefit

     (3,468     (1,974     (2,022

Loss on sale of property, plant and equipment

     2,564       2,349       242  

Bargain purchase gain

     —         (12,133     —    

Revaluation of asset retirement obligations

     —          (3,420     —    

Revaluation of contingent consideration

     (409     (10,344     —    

Loss on debt refinancing

     9,469       —         9,975  

Other

     (465     894       656  

Decrease (increase) in operating assets, net of acquisitions:

      

Accounts receivable

     5,201       13,901       12,242  

Costs and estimated earnings in excess of billings

     6,931       (613     (5,088

Inventories

     (1,726     (12,643     184  

Other current assets

     3,494       (4,823     (245

Other assets

     1,189       (1,016     3,164  

(Decrease) increase in operating liabilities, net of acquisitions:

      

Accounts payable

     (6,076     6,612       (14,128

Accrued expenses

     17,175        (6,455     (28,547

Billings in excess of costs and estimated earnings

     2,589       (8,209     (4,828

Other liabilities

     (1,590     1,375       (6,963
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     62,279       23,253       (20,529
  

 

 

   

 

 

   

 

 

 

Cash flow from investing activities:

      

Acquisitions, net of cash acquired

     (48,757     (161,073     (482,333

Purchases of property, plant and equipment

     (45,488     (38,656     (21,145

Proceeds from the sale of property, plant and equipment

     8,836       7,157       4,700  

Other

     69       241       (603
  

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

     (85,340     (192,331     (499,381
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities:

      

Proceeds from investment by member

     —         103,630       338,639  

Net proceeds from debt issuance

     713,361       96,748       485,373  

Payments on long-term debt

     (697,438     (49,000     (245,855

Payments on acquisition-related liabilities

     (7,519     (4,593     (2,721

Other

     (702     (10     (47
  

 

 

   

 

 

   

 

 

 

Net cash provided by financing activities

     7,702       146,775       575,389  
  

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash

     (15,359     (22,303     55,479  

Cash — beginning of period

     42,790       65,093       9,614  
  

 

 

   

 

 

   

 

 

 

Cash — end of period

   $ 27,431     $ 42,790     $ 65,093  
  

 

 

   

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Member’s Interest

Years ended December 29, 2012, December 31, 2011 and December 31, 2010

(In thousands)

 

    Total member’s interest                    
    Member’s
equity
    Retained
earnings/
accumulated
deficit
    Accumulated
other
comprehensive
income (loss)
(AOCI)
    Noncontrolling
interest
    Total
member’s
interest
    Redeemable
noncontrolling
interest
 
           
           
           
           

Balance — December 31, 2009

  $ 36,785     $ (5,256   $ —       $ —       $ 31,529     $ —    

Contributed capital

    338,639       —         —         1,274       339,913       21,300  

Accretion / redemption value adjustment

    —         (350     —         —         (350     350  

Net (loss) income

    —         (23,949     —         —         (23,949     86  

Other comprehensive loss

    —         —         (2,272     —         (2,272     (436

Share-based compensation

    1,169       —         —         —         1,169       —    

Payment of dividends

    —         —         —         (47     (47     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance — December 31, 2010

    376,593       (29,555     (2,272     1,227       345,993       21,300  

Contributed capital

    103,630       —         —         —         103,630       —    

Accretion / redemption value adjustment

    —         (632     —         —         (632     632  

Net (loss) income

    —         (10,745     —         (43     (10,788     738  

Other comprehensive loss

    —         —         (4,305     —         (4,305     (1,370

Share-based compensation

    2,484       —         —         —         2,484       —    

Payment of dividends

    —         —         —         (10     (10     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance — December 31, 2011

    482,707       (40,932     (6,577     1,174       436,372       21,300  

Accretion / redemption value adjustment

    —          (657     —          —          (657     657   

Net (loss) income

    —          (52,496 )     —          (69 )     (52,565 )     1,988  

Other comprehensive loss

    —         —         (2,553     —         (2,553     (1,095

Repurchase of member’s interest

    (656     —         —         —         (656     —    

Share-based compensation

    2,533       —         —         —         2,533       —    

Payment of dividends

    —         —         —         (46     (46     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance — December 29, 2012

  $ 484,584     $ (94,085   $ (9,130   $ 1,059     $ 382,428     $ 22,850   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

(1)   Summary of Organization and Significant Accounting Policies

 

Summit Materials, LLC (“Summit” or the “Company”) is a wholly owned subsidiary of Summit Materials Holdings L.P. (“Parent”) whose major indirect owners are certain investment funds affiliated with Blackstone Capital Partners V L.P. (“BCP”). Summit has a number of subsidiaries including Summit Materials Holdings I, LLC (“Summit I”) and Summit Materials Holdings II, LLC (“Summit II”), which have individually made a number of acquisitions through 2012.

 

Noncontrolling interests represent a 20% ownership of Ohio Valley Asphalt, LLC (“OVA”) and a 30% redeemable ownership in Continental Cement Company, L.L.C. (“Continental Cement”).

 

The Company’s fiscal year-end in 2010 was December 31. In 2011, the Company changed its fiscal year to be 52 weeks with each quarter comprised of 13 weeks ending on a Saturday. The Company’s year-end in 2012 and 2011 fell on December 29 and December 31, respectively.

 

Company’s Activities — Summit is a vertically-integrated, heavy building materials company. Across its subsidiaries, it is engaged in the manufacturing and sale of aggregate material, hot-mix asphalt, Portland cement and ready - mixed concrete. It is also engaged in road paving and related construction services. Summit owns and operates stone quarries, asphalt plants, ready - mix plants, a cement plant and landfill sites. Most of the Company’s construction work is performed under fixed unit-price contracts with state and local governmental entities. The operations of Summit are conducted primarily across 12 states, with the most significant revenues generated in Texas, Kansas, Kentucky, Missouri and Utah.

 

Principles of Consolidation — The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All intercompany balances and transactions have been eliminated. The Company attributes member’s interests and net (loss) income separately to the controlling and noncontrolling interest, whereby consolidated member’s interests and net (loss) income are separately attributable to the controlling interest and to the noncontrolling interest. The Company accounts for investments in entities for which it has an ownership of 20% to 50% using the equity method of accounting.

 

Use of Estimates — The consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), which require management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, inventories, goodwill, intangible and other long-lived assets, pension and other postretirement obligations, asset retirement obligations and the redeemable noncontrolling interest. Estimates also include revenue earned and costs to complete open contracts. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management adjusts such estimates and assumptions when circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from estimates made. Changes in estimates, including those resulting from continuing changes in the economic environment, will be reflected in the Company’s consolidated financial statements in the period in which the change in estimate occurs.

 

Business and Credit Concentrations — The majority of Summit’s customers are located in Texas, Kansas, Kentucky, Missouri and Utah. Summit’s accounts receivable consist primarily of amounts due from individuals, corporations and governmental entities within these areas. Collection of these accounts is, therefore, dependent on the economic conditions in the aforementioned states.

 

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Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

However, credit granted within Summit’s trade areas has been granted to a wide variety of customers. No single customer accounted for more than 10% of revenue in 2012, 2011 or 2010. Management does not believe that any significant concentrations of credit exist with respect to individual customers or groups of customers.

 

Cash — The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. As of December 29, 2012 and December 31, 2011, the Company had no cash equivalents.

 

Accounts Receivable — Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the collectability of individual accounts. In establishing the allowance, management considers historical losses adjusted to take into account current market conditions and its customers’ financial condition, the amount of receivables in dispute, the current receivables aging and current payment terms. Balances that remain outstanding after reasonable collection efforts are exercised are written off through a charge to the valuation allowance.

 

The balances billed but not paid by customers, pursuant to retainage provisions included in contracts, will be due upon completion of the contracts.

 

Revenue and Cost Recognition — Revenues from construction contracts are included in service revenue in the consolidated statements of operations and are recognized under the percentage-of-completion accounting method. The percent complete is measured by the cost incurred to date compared to the estimated total cost of each project. This method is used as management considers expended cost to be the best available measure of progress on these contracts, the majority of which are completed within one year, but may occasionally extend beyond one year. Inherent uncertainties in estimating costs make it at least reasonably possible that the estimates used will change within the near term and over the life of the contracts.

 

Contract costs include all direct material and labor costs and those indirect costs related to contract performance and completion. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. General and administrative costs are charged to expense as incurred.

 

Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income. Such revisions are recognized in the period in which they are determined. An amount equal to contract costs incurred that are attributable to claims is included in revenue when realization is probable and the amount can be reliably estimated.

 

Costs and estimated earnings in excess of billings are comprised principally of revenue recognized on contracts (on the percentage-of-completion method) for which billings had not been presented to customers because the amount were not billable under the contract terms at the balance sheet date. In accordance with the contract terms, the unbilled receivables at December 29, 2012 will be billed in 2013. Amounts are billed based on contractual terms. Billings in excess of costs and estimated earnings represent billings in excess of revenues recognized.

 

Revenues for product sales are recognized when evidence of an arrangement exists, the fee is fixed or determinable, title passes, which is generally when the product is shipped, and collection is reasonably assured. Product revenues include sales of aggregates, cement and other materials to customers, net of discounts, allowances or taxes, if any. Internal product sales are eliminated from service revenue in the consolidated statements of operations.

 

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Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Revenues from the receipt of waste are based on fees charged for waste transfer and disposal upon acceptance of the waste.

 

Inventories — Inventories consist of stone removed from quarries and processed for future sale, raw materials and finished concrete blocks. Inventories are valued at the lower of cost or market and are accounted for on a first-in first-out basis or an average cost basis. If items become obsolete or otherwise unusable, they will be charged to costs of production in the period that determination is made by management. Stripping costs are costs of removing overburden and waste material to access aggregate materials. Stripping costs incurred during the production process are considered costs of extraction and are capitalized and recognized in cost of revenue in the same period as the revenue from the sale of the inventory.

 

Property, Plant and Equipment, net — Property, plant and equipment are recorded at cost, less accumulated depreciation and depletion. Expenditures for additions and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Repair and maintenance costs that do not substantially add to the productive capacity or extend the useful life of the asset are expensed as incurred.

 

Landfill airspace is included in property, plant and equipment at cost and is amortized based on utilization of the asset. Management reassesses the landfill airspace capacity with any changes in value recorded in cost of revenue. Capitalized landfill costs include expenditures for the acquisition of land and related airspace, engineering and permitting costs, cell construction costs and direct site improvement costs.

 

Upon disposal, the cost and related accumulated depreciation are removed from the Company’s accounts and any gain or loss is included in operating income.

 

Depreciation on property, plant and equipment, including capital lease assets, is computed on a straight-line basis or based on the economic usage over the estimated useful life of the asset. The estimated useful lives are generally as follows:

 

Buildings and improvements

     7–40 years   

Plant, machinery and equipment

     3–40 years   

Truck and auto fleet

     3–10 years   

Mobile equipment and barges

     3–20 years   

Landfill airspace and improvements

     5–60 years   

 

Depletion of mineral reserves is calculated for proven and probable reserves by the units of production method on a quarry-by-quarry basis. Leasehold improvements are amortized on a straight-line basis over the lesser of the asset’s useful life or the remaining lease term.

 

The Company reviews the carrying value of property, plant and equipment for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. Such indicators may include, among others, deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows or a trend of negative or declining cash flows over multiple periods. In 2012, impairment charges of $1.6 million were recognized in operating income. No material impairment charges were recognized in 2011 or 2010.

 

Accrued Mining and Landfill Reclamation — The mining reclamation reserve and financial commitments for landfill closure and post-closure activities are based on management’s estimate of future cost requirements to reclaim property at both currently operating and closed sites. Estimates of these obligations have been

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

developed based on management’s interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Costs are estimated in current dollars, inflated until the expected time of payment, using an inflation rate of 2.5%, and then discounted back to present value using a credit-adjusted, risk-free rate on obligations of similar maturity, adjusted to reflect the Company’s credit rating. Changes in the credit-adjusted, risk-free rate do not change recorded liabilities, but subsequently recognized obligations are measured using the revised credit-adjusted, risk-free rate.

 

Significant changes in inflation rates or the amount or timing of future cost estimates typically result in both (1) a current adjustment to the recorded liability (and corresponding adjustment to the asset) and (2) a change in liability and asset amounts to be recorded prospectively over the remaining capacity of the landfill or unmined quarry. Any changes related to the capitalized and future cost of the related assets are recognized in accordance with Summit’s amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining life of the asset.

 

Intangible Assets — The Company’s intangible assets are comprised of quarry lease agreements and trade names. The assets related to quarry lease agreements are a result of the submarket royalty rates paid under agreements for extracting aggregate. The values were determined as of the respective acquisition dates by a comparison of market-royalty rates to contract-royalty rates. The intangible assets are amortized on a straight-line basis over the lives of the leases. Continental Cement’s trade name comprises the majority of the remaining intangible assets. The following table shows intangible assets by type and in total (in thousands):

 

     December 29, 2012      December 31, 2011  
     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
 

Quarry leases

   $ 8,940       $ (1,092   $ 7,848       $ 8,940       $ (623   $ 8,317   

Trade names

     1,020         (262     758         1,020         (158     862   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total intangible assets

   $ 9,960       $ (1,354   $ 8,606       $ 9,960       $ (781   $ 9,179   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

The weighted average useful life of the quarry intangible assets is 19.8 years and 10.0 years for the Continental Cement trade name. Amortization expense in 2012, 2011 and 2010 was $0.6 million, $0.5 million and $0.3 million, respectively. The estimated amortization expense for intangible assets for each of the next five years and thereafter is as follows (in thousands):

 

2013

   $ 546   

2014

     549   

2015

     549   

2016

     549   

2017

     545   

Thereafter

     5,868   
  

 

 

 

Total

   $ 8,606   
  

 

 

 

 

Goodwill — Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. Goodwill recorded in connection with the Company’s acquisitions is primarily attributable to the expected profitability, assembled workforces of the acquired businesses and the synergies expected to arise after the Company’s acquisition of those businesses. Goodwill is not amortized, but is tested

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

annually for impairment as of the first day of the fourth quarter and whenever events or circumstances indicate that goodwill may be impaired. The test for goodwill impairment is a two-step process to first identify potential goodwill impairment for each reporting unit and then, if necessary, measure the amount of the impairment loss. Goodwill is tested for impairment based on the Company’s operating companies, which management has determined to be the Company’s reporting units, which are one level below its segments.

 

As of December 29, 2012, we had eight reporting units with goodwill for which we completed our annual goodwill impairment test. The first step of the goodwill impairment test employed by the company compares the fair value of the reporting units to their carrying values. Management estimates the fair value of the reporting units primarily based on the discounted projected cash flows of the underlying operations. A number of significant assumptions and estimates are required to forecast operating cash flows, including macroeconomic trends in the public and private construction industry, the timing of work embedded in backlog, performance and profitability under contracts, expected success in securing future sales and the appropriate interest rate used to discount the projected cash flows. These assumptions may vary significantly among the reporting units. During the 2012 annual review of goodwill, management concluded that the estimated fair value of the reporting units was substantially in excess of their carrying values, resulting in no impairment. The Company has recorded no goodwill impairment charges to date.

 

The following table presents goodwill by reportable segments and in total (in thousands):

 

     Central      West     East      Total  

Beginning balance — January 1, 2011

   $ 48,210      $ 63,905     $ 5,071      $ 117,186  

Acquisitions

     5,375        27,693       3,121        36,189  
  

 

 

    

 

 

   

 

 

    

 

 

 

Balance — December 31, 2011

     53,585        91,598       8,192        153,375  

Acquisitions ( i )

     19,204        (205     6,746        25,745  
  

 

 

    

 

 

   

 

 

    

 

 

 

Ending balance — December 29, 2012

   $ 72,789      $ 91,393     $ 14,938      $ 179,120  
  

 

 

    

 

 

   

 

 

    

 

 

 

 

  (i)   Includes certain immaterial working capital adjustments in the West region related to 2011 acquisitions.

 

Income Taxes — The Company is a limited liability company and passes tax attributes for Federal and state tax purposes to Parent and is generally not subject to Federal or state income tax. However, the consolidated financial statements of the Company include federal and state income tax provisions and related accounts for subsidiaries that are taxable entities.

 

For the Company’s taxable entities, deferred income tax assets and liabilities are computed for differences between the financial statement amounts and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

 

The Company evaluates the tax positions taken on income tax returns that remain open to examination by the respective tax authorities from prior years and positions expected to be taken on the current year tax returns to identify uncertain tax positions. Interest and penalties are recorded in income tax expense.

 

Fair Value Measurements — The fair value accounting guidance establishes the following fair value hierarchy that prioritizes the inputs used to measure fair value:

 

Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets.

 

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Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Level 2 — Inputs other than Level 1 that are based on observable market data, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs that are observable that are not prices and inputs that are derived from or corroborated by observable markets.

 

Level 3 — Valuations developed from unobservable data, reflecting the Company’s own assumptions, which market participants would use in pricing the asset or liability.

 

Assets and liabilities measured at fair value in the consolidated balance sheets as of year-end 2012 and 2011 are as follows (in thousands):

 

     2012      2011  

Accrued expenses:

     

Current portion of contingent consideration

   $ 746       $ 1,155   

Acquisition-related liabilities:

     

Contingent consideration

   $ 1,908       $ 2,123   

 

Certain acquisitions made by the Company require the payment of additional consideration contingent upon the achievement of specified operating results, referred to as contingent consideration or earn-out obligations. These payments will not be made if earn-out thresholds are not achieved. No material earn-out payments have been made to date.

 

Summit records contingent consideration at fair value on the acquisition date and then remeasures its fair value each reporting period. Any adjustments to fair value are recognized in earnings in the period identified. Management of the Company determines the appropriate policies and procedures to be used when determining the fair value of contingent consideration. Its fair values are based on unobservable inputs, or Level 3 assumptions, including projected probability-weighted cash payments and an 8.5% discount rate, which reflects the Company’s credit risk. Changes in fair value may occur as a result of a change in actual or projected cash payments, the probability weightings applied by the Company to projected payments or a change in the discount rate. Significant increases or decreases in any of these inputs in isolation could result in a significantly lower, or higher, fair value measurement. In 2012 and 2011, we recognized reductions to contingent consideration of $0.4 million and $10.3 million, respectively, due primarily to revised estimates of the probability of achieving the specified targets.

 

Financial Instruments — The Company’s financial instruments include certain acquisition related liabilities (deferred consideration and noncompete obligations) and debt. The fair value of the deferred consideration and noncompete obligations approximate their carrying value of $23.4 million and $7.4 million, respectively, as of December 29, 2012, and $15.1 million and $10.3 million, respectively, as of December 31, 2011. The fair value was determined based on level 3 inputs of the fair value hierarchy, including the cash payment terms in the purchase agreements and a discount rate reflecting the Company’s credit risk.

 

The fair value of long-term debt approximates $670.7 million and $605.0 million as of December 29, 2012 and December 31, 2011, respectively, compared to its carrying value of $639.8 million and $609.0 million, respectively. Fair value was determined based on Level 2 inputs of the fair value hierarchy, including observable inputs such as interest rates, bond yields and quoted prices for these instruments in inactive markets.

 

Kiln-Down Costs — Continental Cement experiences periodic major maintenance of its kiln (referred to as a kiln-down). The Company accounts for these costs under the direct expensing method, whereby costs are charged to operations as incurred.

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

New Accounting Standards — In May 2011, the FASB issued Accounting Standards Update No. 2011-04 Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ ASU 2011-04”) . The amendments in this update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendments in this update to result in a change in the application of the existing requirements. Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2011. The Company adopted ASU 2011-04 as of January 1, 2012, which did not result in a material impact on fair value measurements or related disclosures.

 

Reclassifications — Certain amounts have been reclassified in prior periods to conform to the presentation in the consolidated financial statements as of and for the year-ended December 29, 2012.

 

(2)   Acquisitions

 

The Company has acquired a number of entities since its formation in 2009, which were financed through a combination of debt and contributions from the Company’s member. Debt financing was composed of term loan debt and revolver facilities. Member’s contributions were provided by Parent to the Company. The operations of each acquisition have been included in the Company’s consolidated results of operations since the respective dates of the acquisitions. The Company measures all assets acquired and liabilities assumed at their acquisition-date fair value. The purchase price allocation for the acquisitions has been finalized with the exception of Kay & Kay Contracting, LLC and Sandco Inc. due to the recent nature of the acquisitions.

 

2012 Acquisitions — The following describes the acquisitions that occurred in 2012 by region.

 

Central region

 

   

On February 29, 2012, the Company acquired certain assets of Norris Quarries, LLC, an aggregates business in northwest Missouri, with cash raised through the January 2012 financing transaction and drawn from the senior secured credit facility.

 

West region

 

   

On November 30, 2012, the Company acquired the stock of Sandco Inc., an aggregates and ready-mix business in Colorado with cash on-hand.

 

East region

 

   

On October 5, 2012, the Company acquired certain assets of Kay & Kay Contracting, LLC, an aggregates business in Kentucky with cash on-hand.

 

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Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Pro forma Financial Information (Unaudited) — The following unaudited supplemental pro forma information presents the financial results as if the 2012 acquisitions occurred on January 1, 2011. The acquisitions made in 2011 are not included in the pro forma summary as these acquisitions were not material individually or in the aggregate. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on January 1, 2011, nor is it indicative of any future results.

 

(in thousands)    Year ended  
     December 29,
2012
    December 31,
2011
 

Revenue

   $ 976,797      $ 870,414  

Net loss

     (45,976     (657

 

2011 acquisitions — The following describes the acquisitions that occurred in 2011 by region.

 

Central region

 

   

On May 27, 2011, the Company acquired the membership interests of Fischer Quarries, L.L.C. using funds provided by Parent.

 

West region

 

   

On January 14, 2011, the Company acquired all of the stock of Triple C Concrete, Inc. in Idaho, financed with cash raised from the December 2010 refinancing.

 

   

On March 31, 2011, the Company acquired Elam Construction, Inc. in Colorado, financed with cash from the December 2010 refinancing.

 

   

On June 8, 2011, the Company acquired B & B Resources, Inc. using cash funded through a combination of debt and funds provided by Parent.

 

   

On June 10, 2011, the Company acquired the stock of Grand Junction Pipe, Inc. using funds provided by Parent.

 

   

On August 2, 2011, the Company, acquired the stock of Asphalt Paving Company of Austin, L.L.C. and certain of its Affiliates (“Asphalt Paving”) in Texas with funds provided by Parent.

 

   

On October 28, 2011, the Company acquired the stock of JD Ramming, Inc., RTI Hot Mix, Inc., RTI Equipment, Inc. and Ramming Transportation, Inc. in Texas funded through a combination of debt, cash on hand and funds provided by Parent.

 

East region

 

   

On May 27, 2011, the Company acquired the remaining 50% interest in a joint venture it had with Bourbon Limestone, Company using funds provided by Parent.

 

The application of purchase accounting resulted in a bargain purchase gain of $2.6 million and $9.6 million for Elam Construction, Inc. and Grand Junction Pipe, Inc., respectively, which is reflected in other (income) expense in the consolidated statement of operations for the year-ended December 31, 2011. The amount of the bargain purchase gain is equal to the amount by which the fair value of net assets acquired exceeded the consideration transferred. The Company believes that the resulting bargain purchase gains are reasonable as the sellers were highly motivated.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

2010 Acquisitions — The following describes the acquisitions that occurred in 2010 by region.

 

Central region

 

   

On April 16, 2010, the Company purchased 100% of the outstanding ownership interests in Cornejo & Sons, L.L.C., C&S Group, Inc., Concrete Materials Company of Kansas, LLC and Cornejo Materials, Inc, collectively referred to as Cornejo. Cornejo provides construction, excavation and paving contracting services for government agencies and private industry primarily within the state of Kansas. Cornejo operates concrete, sand and asphalt production facilities. It also operates a landfill that is open to the public.

 

   

On June 15, 2010, the Company purchased the lease on a quarry and assets from Harshman Construction L.L.C. and Harshman Farms, Inc. (collectively, Harshman), in Moline, Kansas.

 

   

On May 27, 2010, the Company acquired 70% of the outstanding ownership interests of Continental Cement. The proceeds from the purchase were used by Continental Cement to repay certain outstanding indebtedness.

 

   

On September 15, 2010, the Company acquired 100% of the outstanding ownership interests of Con-Agg of MO, L.L.C. (“Con-Agg”). Con-Agg owns and operates aggregate, ready-mix facilities and an underground storage facility.

 

West region

 

   

The Company acquired the assets of Harper Contracting, Inc., Harper Sand and Gravel, Inc., Harper Ready Mix Company, Inc. and Harper Investments, Inc. (collectively referred to as Harper) and the assets of Kilgore Pavement Maintenance, LLC and Kilgore Properties, LLC, pursuant to two separate purchase agreements (collectively referred to as Kilgore). The transactions closed on August 2, 2010. Kilgore is engaged in various contracting and construction projects, primarily road and earthwork for governmental and commercial properties located in Utah. It also owns and operates quarry and asphalt production facilities.

 

   

On September 15, 2010, the Company purchased all interests in Altaview Concrete, LLC, Peak Construction Materials, LLC, Peak Management, L.C. and Wasatch Concrete Pumping, LLC (collectively, Altaview). Altaview is engaged primarily in the production and delivery of concrete to governmental, commercial and private properties in Utah.

 

   

On September 28, 2010, the Company purchased certain assets of EnerCrest Products, Inc. (Enercrest). Enercrest is engaged primarily in the mining and selling of quarry aggregates, including crushed stone and other similar products to customers located in Wyoming.

 

   

On November 30, 2010, the Company acquired 100% of the ownership equity interests of RK Hall Construction, Ltd., RHMB Capital, L.L.C., Hall Materials, Ltd., SCS Materials, L.P., B&H Contracting, L.P. and RKH Capital, LLC (collectively referred to as RK Hall) pursuant to an interest purchase agreement. RK Hall is engaged in road and bridge building and the third-party sale of aggregate material and hot-mix asphalt. It owns and operates a number of asphalt plant facilities and a concrete plant facility, all located in Northeast Texas.

 

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Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

East region

 

   

On February 1, 2010, the Company acquired 100% of the outstanding ownership interests of Hinkle Contracting Company, LLC (“Hinkle”). The purchase included the remaining 20% interests in Hinkle’s subsidiary, Glass Aggregates, LLC (Glass f.k.a. Glass Paving and Stone, LLC). Hinkle owns 80% of OVA. The remaining 20% noncontrolling interest was valued based on the fair value of net assets adjusted for income or losses, dividends received and contributions made. Hinkle is primarily engaged in business as a highway and site contractor. It also owns and operates stone quarries, asphalt plants and concrete block plants.

 

   

On April 20, 2010, the Company purchased certain assets of Elmo Greer & Sons, LLC (“Greer”), including three asphalt plants, mobile equipment and a leased quarry.

 

   

On July 23, 2010, the Company sold two asphalt plants and related construction assets in Hart and Barren counties in Kentucky in exchange for the long-term leases of four active quarries in Barren, Metcalfe, Monroe and Allen counties in Kentucky held by Scotty’s Contracting & Stone, LLC (“Scottys”). Inventory and quarry equipment were also included in the exchange.

 

The following table summarizes aggregated information regarding the fair values of the assets acquired and liabilities assumed as of the respective acquisition dates in 2012, 2011 and 2010 (in thousands):

 

     Year-ended  
     2012     2011     2010  

Financial assets

   $ 1,397     $ 50,036     $ 96,759  

Inventories

     6,988       22,329       41,474  

Plant and equipment

     21,543       125,187       658,524  

Other assets

     1,330       4,811       14,879  

Investments in affiliates

     —         —         21,655  

Intangible assets (quarry lease)

     3,172       2,708       7,232  

Financial liabilities

     (944     (27,304     (94,380

Long-term debt

     —         —         (160,480

Other long term liabilities

     (364     (17,503     (20,083
  

 

 

   

 

 

   

 

 

 

Net assets acquired

     33,122       160,264       565,580  

Goodwill

     26,230       36,189       117,186  

Pre-existing interest

     —         (7,565     —    

Noncontrolling interest

     —         —         (22,574
  

 

 

   

 

 

   

 

 

 

Total purchase price

     59,352       188,888       660,192  
  

 

 

   

 

 

   

 

 

 

Noncash transactions:

      

Acquisition related liabilities

     (10,547     (7,603     (36,942

Continental Cement member’s interest

     —          —          (135,000

Other

     (48     (20,212     (5,917
  

 

 

   

 

 

   

 

 

 

Total noncash transactions

     (10,595     (27,815     (177,859
  

 

 

   

 

 

   

 

 

 

Net cash paid for acquisitions

   $ 48,757     $ 161,073     $ 482,333  
  

 

 

   

 

 

   

 

 

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

(3)   Discontinued Operations

 

In 2012, the Company sold its railroad construction and repair business (referred to herein as railroad business) and its environmental business, which is primarily associated with building retaining walls and removal and remediation of underground fuel storage tanks, in separate transactions for $3.1 million. Prior to recognition as discontinued operations, the railroad and environmental businesses were included as components of the East region’s operations.

 

Debt and interest expense were not allocated to the railroad and environmental businesses since there was no debt specifically attributable to the operations. The railroad and environmental businesses are organized within a limited liability company and passes its tax attributes for Federal and state tax purposes to its parent company and is generally not subject to Federal or state income tax. The railroad and environmental businesses’ revenue and loss before income tax expense in fiscal years 2012, 2011 and 2010 are summarized below (in thousands):

 

     2012     2011     2010  

Revenue

   $ 13,505      $ 16,065      $ 20,495   

Loss from discontinued operations before income tax expense

     (2,774     (3,736     (411

 

(4)   Accounts Receivable, Net

 

Accounts receivable, net consists of the following as of year-end 2012 and 2011 (in thousands):

 

     2012     2011  

Trade accounts receivable

   $ 88,637      $ 94,420  

Retention receivables

     13,181       13,321  

Receivables from related parties

     1,871        1,052  

Other

     —         70  
  

 

 

   

 

 

 

Accounts receivable

     103,689       108,863  

Less allowance for doubtful accounts

     (3,391     (3,630
  

 

 

   

 

 

 

Accounts receivable, net

   $ 100,298     $ 105,233  
  

 

 

   

 

 

 

 

Retention receivables are amounts earned by the Company, but held by customers until construction contracts and projects have been fully completed or near completion. Amounts are expected to be billed and collected within a year.

 

(5)   Inventories

 

Inventories consist of the following as of year-end 2012 and 2011 (in thousands):

 

     2012      2011  

Aggregate stockpiles

   $ 62,872       $ 52,219   

Finished goods

     9,342         11,728   

Work-in-process

     2,679         2,961   

Raw materials

     18,084         17,355   
  

 

 

    

 

 

 

Total

   $ 92,977       $ 84,263   
  

 

 

    

 

 

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

(6)   Property, Plant and Equipment, Net

 

Property, plant and equipment, net, consist of the following as of year-end 2012 and 2011 (in thousands):

 

     2012     2011  

Land (mineral bearing) and asset retirement costs

   $ 106,135      $ 93,899   

Land (nonmineral bearing)

     69,560        71,996   

Buildings and improvements

     78,168        77,330   

Plants, machinery and equipment

     623,949        589,622   

Truck and auto fleet

     19,399        20,930   

Landfill airspace and improvements

     46,841        46,734   

Construction in progress

     20,734        11,877   

Other

     5,134        5,175   
  

 

 

   

 

 

 

Property, plant and equipment

     969,920        917,563   

Less accumulated depreciation, depletion and amortization

     (156,313     (95,660
  

 

 

   

 

 

 

Property, plant and equipment, net

   $ 813,607      $ 821,903   
  

 

 

   

 

 

 

 

Depreciation, depletion and amortization expense of property, plant and equipment was $68.6 million, $61.8 million and $34.7 million for the years ended December 29, 2012, December 31, 2011 and December 31, 2010, respectively.

 

Property, plant and equipment at year-end 2012 and 2011 include $3.1 million (net of $0.2 million accumulated amortization) and $3.3 million (net of $0.2 million accumulated amortization), respectively, of capital leases for a building. Approximately $0.4 million of the future obligations associated with the capital leases are included in accrued expenses and the present value of the remaining future capital lease payments is included in other noncurrent liabilities on the consolidated balance sheets. Future minimum rental commitments under long-term capital leases over the next five years as of December 29, 2012 are $0.4 million annually.

 

(7)   Investments in Affiliates

 

Summit’s investments in affiliates are accounted for using the equity method. Summit’s share of the net income from affiliates was $0.7 million in 2012 and $0.9 million and $0.7 million of the net loss in 2011 and 2010, respectively, which is included in other (income) expense. Distributions from affiliates during 2012 were $0.7 million. No material distributions were made in 2011. In 2012, Summit sold its investment in Hinkle Meyer Environmental Services, LLC in conjunction with the sale of the environmental business. Investments in affiliates as of year-end 2012 and 2011 are as follows (in thousands):

 

     Ownership
percentage
    2012      Ownership
percentage
    2011  

Nally & Gibson, Georgetown, LLC

     50   $ 12,138         50   $ 12,027   

Carrollton River Terminal, LLC

     50     722         50     642   

The Rock Group, LLC

     50     129         50     245   

Hinkle Meyer Environmental

         

Services, LLC

     —          —           50     209   
    

 

 

      

 

 

 

Total

     $ 12,989         $ 13,123   
    

 

 

      

 

 

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

(8)   Debt

 

Debt as of year-end 2012 and 2011 are summarized as follows (in thousands):

 

     2012      2011  

Borrowings on revolver facilities:

     

Current portion

   $ —         $ 4,000   

Long-term portion

     —           57,000   
  

 

 

    

 

 

 

Total borrowings on revolver facilities

   $ —         $ 61,000   
  

 

 

    

 

 

 

Long-term debt:

     

$250.0 million senior notes, net of $4.7 million discount

   $ 245,303       $ —     

$400.0 million senior secured credit facility, net of $3.5 million discount

     394,540         —     

Summit I $400.0 million credit facility

     —           396,001   

Summit II:

     

$45.0 million term loan

     —           39,000   

Subordinated secured credit note

     —           100,000   

Unsecured note payable to related party

     —           12,980   
  

 

 

    

 

 

 

Total debt

     639,843         547,981   

Current portion of debt

     4,000         3,960   
  

 

 

    

 

 

 

Long-term debt

   $ 635,843       $ 544,021   
  

 

 

    

 

 

 

 

Accrued interest expense on long-term debt as of year-end 2012 and 2011 was $19.7 million and $3.7 million, respectively, and is included in accrued expenses on the consolidated balance sheets. The year-end 2012 balance includes accrued interest on the Senior Notes and the December 31 interest payment on the senior secured credit facility, both payable in January 2013.

 

As of December 29, 2012, the Company has no outstanding borrowings on the revolving credit commitments. The total contractual payments of long-term debt for the five years subsequent to December 29, 2012, are as follows (in thousands):

 

2013

   $ 4,000   

2014

     4,000   

2015

     4,000   

2016

     5,000   

2017

     4,000   

Thereafter

     627,000   
  

 

 

 

Total

     648,000   

Less: Original issue discount

     8,157   
  

 

 

 

Total debt

   $ 639,843   
  

 

 

 

 

January 2012 Financing Transactions

 

On January 30, 2012, Summit and Summit Materials Finance Corp (collectively, the “Issuers”) issued $250.0 million aggregate principal amount of 10.5% Senior Notes due January 31, 2020 (“Senior Notes”). Concurrently with the issuance of the Senior Notes, on January 30, 2012, Summit entered into a new senior secured credit facility that provided for term loans in an initial aggregate amount of $400.0 million and revolving credit commitments in an initial aggregate amount of $150.0 million (the “Senior Secured Credit Facility”).

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Summit, along with all of its wholly-owned subsidiaries and its non wholly-owned subsidiary, Continental Cement, are named as guarantors of the Senior Secured Credit Facility and the Senior Notes. In addition, Summit has pledged substantially all of its assets and those of Continental Cement as collateral for the Senior Secured Credit Facility.

 

Proceeds from the Senior Notes and the Senior Secured Credit Facility were used primarily for (i) repayment of $451.0 million of borrowings under the existing credit facility, consisting of $396.0 million of term debt and $55.0 million of revolving credit facility debt, (ii) repayment of $142.7 million of secured debt of Continental Cement, (iii) repayment of $13.0 million due under a promissory note by and between Continental Cement and a related party, (iv) payment of $4.5 million of accrued interest related to the existing credit facility and the Continental Cement debt, (v) payment of $12.9 million of fees and (vi) $16.5 million to cash on hand. The refinancing of the pre-existing credit facility was partially accounted for as an extinguishment.

 

As a result, $9.5 million of deferred financing fees were charged to earnings in January 2012 and $15.0 million in deferred financing fees were recorded and are being amortized over the term of the debt using the effective interest method. The Company recognized $1.3 million of amortization on the original issuance discount in 2012. In addition, the debt was issued with an original issuance discount of $9.5 million, which was recorded as a reduction to debt in January 2012, and is being accreted with a charge to earnings over the term of the debt.

 

Senior Notes — The $250.0 million Senior Notes bear interest at 10.5% per year, payable semi-annually in arrears; interest payments commenced on July 31, 2012. The Notes will mature on January 31, 2020.

 

At any time prior to January 31, 2015, the Issuers may redeem some or all of the Senior Notes at a redemption price equal to 110.500% of the principal amount thereof, plus accrued and unpaid interest. The redemption price decreases to 105.250%, 102.625% and 100.000% of the principal amount on January 31, 2016, January 31, 2017 and January 31, 2018 and thereafter, respectively.

 

Upon the occurrence of a change of control or upon the sale of certain assets in which Summit does not apply the proceeds as required, the holders of the Senior Notes will have the right to require the Issuers to make an offer to repurchase each holder’s Notes at a price equal to 101% (in the case of a change of control) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest.

 

The Senior Notes contain covenants limiting, among other things, Summit and the guarantor subsidiaries’ ability to incur additional indebtedness or issue certain preferred shares, pay dividends, redeem stock or make other distributions, make certain investments, sell or transfer certain assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of Summit’s assets, enter into certain transactions with affiliates, and designate subsidiaries as unrestricted subsidiaries. The Senior Notes also contain customary events of default. As of December 29, 2012, Summit was in compliance with all covenants.

 

Senior Secured Credit Facility — The Senior Secured Credit Facility includes a term loan in the amount of $400.0 million with a 6.0% interest rate and requires principal repayments of $1.0 million on the last business day of each March, June, September and December, commencing in June 2012. The remaining principal balance is due in full on the maturity date, which is January 30, 2019.

 

The Senior Secured Credit Facility has revolving credit commitments of $150.0 million. The revolving credit facility matures on January 30, 2017. Borrowings under the Senior Secured Credit Facility bear interest per annum equal to an applicable margin of 4.5% plus, at the Company’s option, either (i) a base rate determined by reference to the highest of (a) the Federal Funds rate plus 0.50%, (b) the prime rate of

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Bank of America, N.A. and (c) the British Bankers Association London Interbank Offered Rate (“LIBOR”) Rate plus 1.00% or (ii) a British Bankers Association LIBOR rate determined by reference to Reuters prior to the interest period relevant to such borrowing adjusted for certain additional costs.

 

The available borrowings under the revolving credit facility were reduced by $14.5 million of irrevocable letters of credit issued to Summit. As of December 29, 2012, the Company has no outstanding balance under the revolver facility and $135.5 million was available for borrowings.

 

The Senior Secured Credit Facility contains certain financial covenants related to debt and interest leverage calculated based on definitions set forth in the agreement. The consolidated first lien net leverage ratio, reported each quarter should be no greater than 4.75:1.0 through December 31, 2012; 4.25:1.0 from January 1, 2013 to September 30, 2013; 4.00:1.0 from October 1, 2013 to December 31, 2014, and 3.85:1.0 thereafter. The interest coverage ratio must be at least 1.75:1.0 from April 1, 2012 through December 31, 2012; 1.85:1.0 from January 1, 2013 to December 31, 2013 and 2.0:1.0 thereafter. As of December 29, 2012, Summit was in compliance with all covenants.

 

A summary of the significant terms of the December 31, 2011 credit facilities, which were repaid with the January 30, 2012 transactions, follows:

 

Summit I

 

On February 1, 2010, Summit I entered into a credit agreement with a syndicate of banks secured by assets within and administered by Summit I. The original credit agreement provided for a four-and-a-half-year term loan with interest charged at a rate of 6.75% and a repayment of principal at a rate of 1% per annum payable quarterly. Summit I’s total borrowings under the original term loan were $136.4 million at February 1, 2010. On December 17, 2010, Summit I finalized an amendment to the credit agreement, which amended and restated the original facility (the “Amended Credit Agreement”). Under the Amended Credit Agreement, Summit I’s term loan borrowings increased to $400.0 million with a 6.5% interest rate and required principal repayments of 1% of term debt per annum which are payable quarterly. There were $11.0 million in capitalized loan fees associated with this transaction.

 

Summit I’s revolver facility increased from $50.0 million to $75.0 million with the Amended Credit Agreement. There are two classes within the facility: Class A matures on January 31, 2014 and makes up $17.5 million of the revolver facility, and Class B matures on January 31, 2015 and makes up $57.5 million of the facility. The available borrowings under the revolver facility remained reduced by $13.3 million irrevocable letters of credit issued to Summit I. The letters of credit were required by insurance carriers to secure surety bonds for certain construction contracts. There was a $61.0 million outstanding balance under the revolver facility as of December 31, 2011, which was repaid in conjunction with the January 2012 financing transaction.

 

Summit I must adhere to certain financial covenants related to debt and interest leverage calculated based on definitions laid out in the amended credit agreement. As of December 31, 2011, Summit I was in compliance with all financial covenants.

 

Summit I, along with all its subsidiary companies, were named as guarantors of the term loan and on the revolver facility. In addition, Summit I had pledged substantially all of its assets as collateral for the term loan and revolver facility.

 

Summit II

 

Continental Cement, a subsidiary of Summit II, entered into its Second Amended and Restated Credit Agreement (“First Lien Credit Agreement”) on May 27, 2010 with its syndicate banks providing a term loan

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

commitment and revolving line of credit facility, with swing line, and letter of credit sub-limit. Interest was charged on outstanding borrowings at increments of either, (a) the Base Rate, as defined in the credit agreement, plus 3.5% margin or (b) the greater of (i) 1.5% or (ii) the LIBOR plus 4.5% margin. Continental Cement has the option of selecting either rate but must have minimum levels and increments for selecting the LIBOR rate. Interest on funds borrowed at the Base Rate is payable quarterly, except the swing line which is paid monthly. Alternatively, interest on funds borrowed based on the LIBOR rate is payable in either one-, two-, three-, or nine-month intervals. Outstanding borrowings were secured by substantially all of Continental Cement’s assets and all such commitments were set to expire on May 27, 2013. The revolving line of credit facility had $20.0 million available and included a $10.0 million sub-limit for standby letter of credits and a $2.0 million swingline sub-limit.

 

Continental Cement borrowed $45.0 million from the term loan facility and repaid $6.0 million in optional principle payments during 2010. Under the terms of the First Lien Credit Agreement, Continental Cement was required to adhere to certain financial covenants related to debt and interest leverage calculated based on definitions laid out in the First Lien Credit Agreement.

 

On May 27, 2010, Continental Cement amended its Second Lien Credit Agreement with its subordinated lenders of the subordinated secured credit facility totalling $100.0 million. The Second Lien Credit Agreement provided for a term loan maturing August 28, 2013. The Second Lien Credit Agreement was subject to the same financial covenants in the First Lien Credit Agreement.

 

On May 27, 2010, the Company executed an unsecured note payable from a related party totalling $13.0 million. Payment including principal and interest were due in one lump-sum on May 30, 2015 subject to a subordination agreement required by Continental Cement’s term loan.

 

(9)   Member’s Interest

 

Business affairs of the Company are managed by the Board of Directors, which is composed of six directors. Directors of the Board are appointed by the unit holders of Summit Materials Holdings L.P., which is the sole member of the Company. Additional directors may be admitted to Summit with the written consent of Summit Materials Holdings L.P.

 

During the years ended December 31, 2011 and December 31, 2010, the Member of the Company contributed $103.6 million and $338.6 million, respectively, to Summit. No contributions were made during the year-ended December 29, 2012. Contributions are presented as member’s interest in the consolidated statements of changes in member’s interest.

 

(10)   Income Taxes

 

As of year-end 2012, 2011 and 2010, income taxes consist of the following (in thousands):

 

     2012     2011     2010  

Provision for income taxes:

      

Current

   $ (452   $ 5,382     $ 4,385  

Deferred

     (3,468     (1,974     (2,022
  

 

 

   

 

 

   

 

 

 

Income tax (benefit) expense

   $ (3,920   $ 3,408     $ 2,363  
  

 

 

   

 

 

   

 

 

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

The effective tax rate on pre-tax income differs from the U.S. statutory rate due to the following (in thousands):

 

     2012     2011     2010  

Income tax provision (benefit) at federal statutory tax rate

   $ (19,074   $ (6,895   $ (7,310

Book loss (income) not subject to income tax

     16,167        13,790       9,364  

State and local income taxes

     (90     666       241  

Depletion expense

     (377     (372     (377

Domestic production activities deduction

     —          (273     (213

Bargain purchase gain

     —         (4,250     —    

Effective rate change

     (532     627       —    

Valuation allowance

     36       (360     359  

Other

     (50 )     475       299  
  

 

 

   

 

 

   

 

 

 

Income tax provision (benefit)

   $ (3,920   $ 3,408     $ 2,363  
  

 

 

   

 

 

   

 

 

 

 

The following table summarizes the components of the net deferred income tax liability as of year-end 2012 and 2011 (in thousands):

 

     2012     2011  

Deferred tax assets (liabilities):

    

Mining reclamation reserve

   $ 1,449     $ 865  

Accelerated depreciation

     (34,733     (41,892

Net operating loss

     2,134       1,037  

Capital losses on securities

     989        1,734  

Landfill closure reserve

     (30     92  

Working capital (e.g., accrued compensation, prepaid assets)

     3,101        3,189  
  

 

 

   

 

 

 

Defered tax liabilities, net

     (27,090     (34,975

Less valuation allowance on loss carryforwards

     (1,025     (1,010
  

 

 

   

 

 

 

Total

   $ (28,115   $ (35,985
  

 

 

   

 

 

 

Included in accompanying consolidated balance sheets under the following captions:

    

Current asset — deferred income taxes

   $ 2,275     $ 2,426  

Other noncurrent liability

     (30,390     (38,411
  

 

 

   

 

 

 

Total

   $ (28,115   $ (35,985
  

 

 

   

 

 

 

 

In assessing the realizability of deferred tax assets as of year-end 2012 and 2011, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment. Management anticipates the deferred income tax asset related to losses on securities and net operating losses will not be fully utilized before their expiration in 2014; therefore, a valuation allowance has been recorded as of year-end 2012 and 2011. In 2011, $0.8 million of capital loss was carried back for a tax benefit recovery of $0.3 million. The remaining capital loss of $1.0 million is not expected to be utilized

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

prior to expiration in 2014; therefore, the remaining balance has been fully reserved in the valuation allowance as of year-end 2012. At December 29, 2012, the Company has net operating loss carryforwards for Federal and state income tax purposes of $2.0 million and $0.1 million, respectively, which are available to offset future Federal and state taxable income, if any, through 2032.

 

Summit does not have any uncertain tax positions as of December 29, 2012. Tax years from 2009 to 2011 remain open and subject to audit by Federal and state tax authorities. No income tax expense or benefit was recognized in other comprehensive loss in 2012, 2011 or 2010.

 

(11)   Employee Benefit Plans

 

Deferred Compensation Plan — The Company sponsors employee 401(k) savings plans for all salaried employees and certain union employees. The plans provide for various required and discretionary Company matches of employees’ eligible compensation contributed to the plans. The expense for all defined contribution plans amounted to $2.2 million, $1.9 million and $0.8 million for the years ended December 29, 2012, December 31, 2011 and December 31 2010, respectively.

 

Defined Benefit and Other Postretirement Benefits Plans — One of the Company’s subsidiaries, Continental Cement, sponsors two noncontributory defined benefit pension plans for hourly and salaried employees. The salary employee pension plan was closed to new participants and frozen in January 2000 and the hourly employee pension plan was closed to new participants in May 2003. Pension benefits for certain eligible hourly employees are based on a monthly pension factor for each year of credited service. Pension benefits for certain eligible salaried employees are generally based on years of service and average eligible compensation.

 

Continental Cement also sponsors healthcare and life insurance benefits for certain eligible retired employees, which are not funded. Effective January 1, 2012, the Company eliminated all future retiree health and life coverage for active salaried, nonunion hourly and certain union employees that retire on or after January 1, 2012. This change in the other postretirement benefit plans resulted in a $1.7 million reduction in the December 31, 2011 accumulated benefit obligations.

 

The funded status of the pension and other postretirement benefit plans is recognized in the consolidated balance sheets as the difference between the fair value of plan assets and the benefit obligations. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (“PBO”) and for the other postretirement benefit plans, the benefit obligation is the accumulated postretirement benefit obligation (“APBO”). The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The APBO represents the actuarial present value of postretirement benefits attributed to employee services already rendered. The fair value of plan assets represents the current market value of assets held by an irrevocable trust fund for the sole benefit of participants. The measurement of the benefit obligations are based on the Company’s estimates and actuarial valuations. These valuations reflect the terms of the plan and use participant-specific information, such as compensation, age and years of service, as well as certain assumptions that require significant judgment, including estimates of discount rates, expected return on plan assets, rate of compensation increases, interest-crediting rates and mortality rates.

 

The Company uses its fiscal year-end as the measurement date for its defined benefit pension plans and for its other postretirement benefit plans.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Obligations and Funded Status — The following information is as of year-end 2012 and 2011 (in thousands):

 

     2012     2011  
     Pension
benefits
    Other
benefits
    Pension
benefits
    Other
benefits
 

Change in benefit obligations:

        

Beginning of period

   $ 26,514      $ 14,467      $ 23,732      $ 13,110   

Service cost

     276        207        275        227   

Interest cost

     1,056        585        1,161        710   

Actuarial loss

     2,347        1,597        2,710        3,390   

Change in plan provisions

     —          —          —          (1,705

Benefits paid

     (1,518     (1,046     (1,364     (1,265
  

 

 

   

 

 

   

 

 

   

 

 

 

End of period

     28,675        15,810        26,514        14,467   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in plan assets:

        

Fair value of assets at beginning of period

     16,639        —          16,531        —     

Actual return on plan assets

     1,205        —          43        —     

Employer contributions

     1,537        1,046        1,428        1,265   

Benefits paid

     (1,518     (1,046     (1,363     (1,265
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair value of assets at end of period

     17,863        —          16,639        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Liability recognized

   $ 10,812     $ 15,810     $ 9,875     $ 14,467  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Approximately $1.1 million and $1.0 million of the obligation for postretirement benefits is included in current liabilities as of year-end 2012 and 2011, respectively.

 

     2012     2011  
     Pension
benefits
     Other
benefits
    Pension
benefits
     Other
benefits
 

Amounts recognized in accumulated other comprehensive income:

          

Net actuarial loss

   $ 8,056       $ 5,501      $ 5,875       $ 4,213   

Prior service cost

     —           (1,526     —           (1,705
  

 

 

    

 

 

   

 

 

    

 

 

 

Total amount recognized

   $ 8,056       $ 3,975      $ 5,875       $ 2,508   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

The amount recognized in accumulated other comprehensive income (“AOCI”) is the actuarial loss and prior service cost, which has not yet been recognized in periodic benefit cost, adjusted for amounts allocated to the redeemable noncontrolling interest. At December 29, 2012, the actuarial loss expected to be amortized from AOCI to periodic benefit cost in 2013 is $0.4 million and $0.2 million for the pension and postretirement obligations, respectively.

 

 

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Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

     Year-end 2012     Year-end 2011     Year-end 2010  
     Pension
benefits
    Other
benefits
    Pension
benefits
    Other
benefits
    Pension
benefits
     Other
benefits
 

Amounts recognized in other comprehensive loss:

             

Net actuarial loss

   $ 2,444     $ 1,597     $ 4,066     $ 3,390     $ 1,814      $ 894  

Prior service cost

     —            —          (1,705     —           —     

Amortization of prior year service cost

     —          180       —          —          —           —     

Amortization of loss

     (261     (312     (5     (71     —           —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total amount recognized

   $ 2,183     $ 1,465     $ 4,061     $ 1,614     $ 1,814      $ 894  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

     Year-end
2012
    Year-end
2011
     Year-end
2010
 
     Pension
benefits
    Other
benefits
    Pension
benefits
    Other
benefits
     Pension
benefits
    Other
benefits
 

Components of net periodic benefit cost:

             

Service cost

   $ 276      $ 207      $ 275      $ 227       $ 121      $ 116   

Interest cost

     1,056        585        1,161        710         677        380   

Amortization of loss

     261        312        5        69         —          —     

Expected return on plan assets

     (1,301     (180     (1,400     —           (788     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net periodic benefit cost

   $ 292      $ 924      $ 41      $ 1,006       $ 10      $ 496   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

Assumptions — Weighted-average assumptions used to determine the benefit obligations are:

 

     2012      2011  
     Pension
benefits
     Other
benefits
     Pension
benefits
     Other
benefits
 

Discount rate

     3.30% – 3.57%         3.41%         3.89% – 4.07%         4.00%   

 

The expected long-term return on plan assets is based upon the Company’s estimation of what a portfolio, with the target allocation described below, will earn over a long-term horizon. The discount rate is derived using the Citigroup Pension Discount Curve.

 

Weighted-average assumptions used to determine net periodic benefit cost for the period are:

 

     Year-end
2012
     Year-end
2011
 
     Pension
benefits
     Other
benefits
     Pension
benefits
     Other
benefits
 

Discount rate

     3.89% – 4.07%         4.00%         4.94% – 5.12%         5.07%   

Expected long-term rate of return on plan assets

     7.50%         NA         8.50%         NA   

 

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Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Assumed health care cost trend rates are 9% grading to 7% and 7% grading to 5% as of year-end 2012 and 2011, respectively. Assumed health care cost trend rates have a significant effect on the amounts reported for the Company’s post retirement medical and life plans. A one percentage-point change in assumed health care cost trend rates would have the following effects (in thousands):

 

     2012     2011  
     Increase      (Decrease)     Increase      (Decrease)  

Total service cost and interest cost components

   $ 73       $ (63   $ 93       $ (77

Estimated APBO

     1,555         (1,331     1,348         (1,145

 

Plan Assets — The defined benefit pension plans’ (the “Plans”) investment strategy is to minimize investment risk while generating acceptable returns. The Plans currently invest a relatively high proportion of the plan assets in fixed income securities, while the remainder is invested in equity securities. The equity securities are diversified into funds with growth and value investment strategies. The target allocation for plan assets is as follows: equity securities – 30%; fixed income securities –65%; and cash reserves –5%. The Plans’ current investment allocations are within the tolerance of the target allocation. The Company has no level 3 investments as of or for the years-ended December 29, 2012 and December 31, 2011.

 

At year-end 2012 and 2011, the trust was invested largely in publicly traded equities and fixed-income securities, but may invest in other asset classes in the future consistent with our investment policy. The Plans’ investments in equity assets include U.S. and international securities and equity funds. The Plans’ investments in fixed-income assets include U.S. Treasury and U.S. agency securities and corporate bonds. Retirement plan assets are reported at fair value at each measurement date. The Company estimates the fair value of the Plans’ assets using various valuation techniques and, to the extent available, quoted market prices in active markets or observable market inputs are used in estimating the fair value of the Plans’ assets. The descriptions and fair value methodologies for the Plans’ assets are as follows:

 

Cash — The carrying amounts of cash approximate fair value due to the short-term maturity.

 

Equity Securities — Equity securities are valued at the closing market price reported on a U.S. exchange where the security is actively traded and are therefore classified as Level 1 assets.

 

Fixed Income Securities — Corporate and government bonds are classified as Level 2 assets, as they are either valued at quoted market prices from observable pricing sources at the reporting date or valued based upon comparable securities with similar yields and credit ratings.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

The fair value of the Company’s pension plans’ assets by asset class and fair value hierarchy level as of year-end 2012 and 2011 are as follows (in thousands):

 

     Fair value measurements at year-end 2012  
     Total
fair
value
     Quoted prices in
active markets for
identical assets
(Level 1)
     Observable
inputs
(Level 2)
 

Cash

   $ 1,656       $ 1,656       $ —     

Equity securities:

        

U.S. Large cap value

     1,063         1,063         —     

U.S. Large cap growth

     1,037         1,037         —     

U.S. Mid cap value

     542         542         —     

U.S. Mid cap growth

     536         536         —     

U.S. Small cap value

     546         546         —     

U.S. Small cap growth

     539         539         —     

International

     1,134         1,134         —     

Fixed income securities:

        

Intermediate-government

     1,247         —           1,247   

Intermediate-corporate

     4,402         —           4,402   

Short term-government

     2,038         —           2,038   

Short term-corporate

     3,123         —           3,123   
  

 

 

    

 

 

    

 

 

 

Total

   $ 17,863       $ 7,053       $ 10,810   
  

 

 

    

 

 

    

 

 

 

 

     Fair value measurements at year-end 2011  
     Total
fair
value
     Quoted prices in
active markets for
identical assets
(Level 1)
     Observable
inputs
(Level 2)
 

Cash

   $ 1,217       $ 1,217       $ —     

Equity securities:

        

U.S. Large cap value

     1,399         1,399         —     

U.S. Large cap growth

     1,388         1,388         —     

U.S. Mid cap value

     700         700         —     

U.S. Mid cap growth

     687         687         —     

U.S. Small cap value

     701         701         —     

U.S. Small cap growth

     705         705         —     

International

     1,378         1,378         —     

Fixed income securities:

        

Intermediate-government

     1,100         —           1,100   

Intermediate-corporate

     2,418         —           2,418   

Short term-government

     2,067         —           2,067   

Short term-corporate

     2,879         —           2,879   
  

 

 

    

 

 

    

 

 

 

Total

   $ 16,639       $ 8,175       $ 8,464   
  

 

 

    

 

 

    

 

 

 

 

Cash Flows — The Company expects to contribute approximately $1.3 million to its pension plans and $1.1 million to its other postretirement benefit plans in 2013.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

The estimated benefit payments for each of the next five years and the five-year period thereafter are as follows (in thousands):

 

     Pension
benefits
     Other
benefits
 

2013

   $ 1,718       $ 1,055   

2014

     1,707         1,113   

2015

     1,715         1,022   

2016

     1,748         1,079   

2017

     1,744         945   

2018–2022

     8,738         4,724   
  

 

 

    

 

 

 

Total

   $ 17,370       $ 9,938   
  

 

 

    

 

 

 

 

(12)   Accrued Mining and Landfill Reclamation

 

The Company has asset retirement obligations arising from regulatory requirements to perform certain reclamation activities at the time that certain quarries and landfills are closed. The liability was initially measured at fair value and subsequently is adjusted for accretion expense, payments and changes in the amount or timing of the estimated cash flows. The corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s remaining useful life. The following table presents the activity for the asset retirement obligations for the years-ended December 29, 2012 and December 31, 2011 (in thousands):

 

     2012     2011  

Beginning balance

   $ 13,328      $ 13,766   

Acquired obligations

     364        1,884   

Change in cost estimate

     604        (4,530

Settlement of reclamation obligations

     (77     (993

Additional liabilities incurred

     —          2,511   

Accretion expense

     625        690   
  

 

 

   

 

 

 

Ending balance

   $ 14,844      $ 13,328   
  

 

 

   

 

 

 

 

In 2011, the Company received an interpretation of the landfill reclamation requirements from the State of Kansas, which resulted in an approximate $4.5 million reduction to the post-closure liabilities. This adjustment, after reducing the related asset retirement landfill asset to zero, was included in cost of revenue for the year-ended December 31, 2011.

 

(13)   Commitments and Contingencies

 

Litigation and Claims — Summit is party to certain legal actions arising from the ordinary course of business activities. In the opinion of management, these actions are without merit or the ultimate disposition, if any, resulting from them will not have a material effect on Summit’s consolidated financial position, results of operations or liquidity. Summit’s policy is to record legal fees as incurred.

 

Environmental Remediation — Summit’s mining operations are subject to and affected by Federal, state and local laws and regulations relating to the environment, health and safety and other regulatory matters. These operations require environmental operating permits, which are subject to modification, renewal and revocation. Summit regularly monitors and reviews its operations, procedures and policies for compliance

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in the operation of Summit’s business, as it is with other companies engaged in similar businesses and there can be no assurance that environmental liabilities will not have a material adverse effect on Summit’s consolidated financial position, results of operations or liquidity.

 

On July 11, 2006, the Company received a construction permit for a new kiln system for the cement plant to replace the current system at that time. The new kiln began shakedown operations in 2008 and is operating under the Hazardous Waste Combustor National Emission Standards for Hazardous Air Pollutants (“NESHAP”). Continental Cement performed the required Comprehensive Performance Test in 2009/2010 and submitted the Notification of Compliance (“NOC”) to the regulatory agencies. In 2012, the Company tested and passed the required Confirmatory Performance Test and submitted an amended NOC at that time. The next required Confirmatory Performance Test will be in 2015. Summit applied for renewal of their Part 70 Operating Permit in 2010 and received the permit on September 22, 2011. This permit encompasses all active construction permits and general operating requirements for the entire plant, and will remain in effect for five years.

 

On October 14, 1999, the Missouri Dept. of Natural Resources (“MDNR”) and the EPA granted the company a Final Hazardous Waste Management Facility Permit that authorizes the Company to handle, treat, store, recover energy from and dispose of hazardous waste as a supplemental fuel source (RCRA Part B Permit). This permit also incorporated certain Boiler and Industrial Furnace (“BIF”) regulation emission limits and operating parameters that the company was subject to prior to the Hazardous Waste Combustor Maximum Achievable Control Technology standards. On October 13, 2009, a permit renewal application was submitted to MDNR. The application was accepted as complete and MDNR annually issues a notification that the Company can operate under the original permit until review of the renewal is complete. MDNR has delayed review of the renewal application until the agency revises their Health Profile regulations. MDNR has authorized the company to operate under interim status. Once the permit renewal is approved, the renewal will cover another ten-year period.

 

Other — The Company is obligated under an indemnification agreement entered into with the sellers of Harper for the sellers’ ownership interests in a joint venture agreement. Summit has the rights to any benefits under the joint venture as well as the assumption of any obligations, but does not own equity interests in the joint venture. The joint venture has incurred significant losses on a highway project in Utah, which have resulted in requests for funding from the joint venture partners and ultimately from the Company. Through year-end 2012, the Company has funded $8.8 million, $4.0 million in 2012 and $4.8 million in 2011. In 2012 and 2011, the Company recognized losses on the indemnification agreement of $8.0 million and $1.9 million, respectively, which are included in general and administrative expenses. As of year end 2012 and 2011, accruals of $4.3 million and $0.3 million, respectively, were recorded in other noncurrent liabilities as management’s best estimate of future funding obligations.

 

In February 2011, Continental Cement incurred a property loss related to a sunken barge with cement product aboard. At which time, the Company recognized a loss of $0.6 million for the lost product and property. As of December 29, 2012, the Company has a $0.9 million accrual for the estimated reclamation costs. Any insurance recoveries from the loss will be recognized when probable.

 

During the course of business, there may be revisions to project costs and conditions that can give rise to change orders. Revisions can also result in claims we might make against the customer or a subcontractor to recover project variances that have not been satisfactorily addressed through change orders with the customer. As of year-end 2012 and 2011, unapproved change orders and claims are $4.8 million ($1.6 million in costs and estimated earnings in excess of billings and $3.2 million in other assets) and $4.7 million ($0.4 million in accounts receivable, $1.1 million in costs and estimated earnings in excess of billings and $3.2 million in other assets), respectively.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

(14)   Related-Party Transactions

 

The Company incurred management fees paid to Blackstone Management Partners L.L.C. (“BMP”) totaling $2.1 million, $3.0 million and $2.5 million in 2012, 2011 and 2010, respectively, under terms of an agreement dated July 30, 2009, between Summit Materials Holdings L.P. and BMP. Under the terms of the agreement, BMP is permitted to, and has, assigned a portion of the fees to which it is entitled to receive to Silverhawk Summit, L.P. and to certain members of management. The fees were paid for consultancy services related to acquisition activities and are included in general and administrative expenses.

 

The Company purchased equipment from a noncontrolling member of Continental Cement for approximately $2.3 million, inclusive of $0.1 million of interest, in 2011, which was paid for in 2012.

 

Summit earned revenue of $7.9 million, $8.6 million and $8.5 million and incurred costs of $0.2 million, $0.7 million and $1.1 million in connection with several transactions with unconsolidated affiliates for the years ended December 29, 2012, December 31, 2011 and December 31, 2010, respectively. As of December 29, 2012 and December 31, 2011, accounts receivable from affiliates was $1.9 million and $1.1 million, respectively, and accounts payable to affiliates was $0.2 million and $2.2 million, respectively.

 

Cement sales to companies owned by certain noncontrolling members of Continental Cement were approximately $12.5 million, $9.5 million and $9.0 million for the years ended December 29, 2012, December 2011 and December 31, 2010, respectively, and accounts receivables due from these parties were approximately $1.0 million and $1.3 million as of December 29, 2012 and December 2011, respectively.

 

The Company owes $2.1 million to a noncontrolling member of Continental Cement for accrued interest on a related party note, which is expected to be fully settled by 2014. The principal balance on the note was repaid as part of the January 2012 financing transactions.

 

Lease payments of $1.0 million, $0.4 million and $0.2 million were made to related parties for the years ended December 29, 2012, December 2011 and December 31, 2010, respectively.

 

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Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

(15)   Acquisition-Related Costs and Liabilities

 

A number of acquisition-related liabilities have been recorded subject to terms in the relevant purchase agreements. There are three main categories of such obligations, deferred consideration, noncompete payments and earn-out obligations. Noncompete payments have been accrued where certain former owners of newly acquired companies have entered into standard noncompete arrangements. Subject to terms and conditions stated in these noncompete agreements, payments are generally made over a five-year period. Deferred consideration is purchase price consideration paid in the future as agreed to in the purchase agreement and is not contingent on future events. Deferred consideration is scheduled to be paid in years ranging from 5 to 20 years in either monthly, quarterly or annual installments. The remaining payments due under these noncompete and deferred consideration agreements are as follows (in thousands):

 

2013

   $ 8,779   

2014

     8,528   

2015

     4,545   

2016

     3,790   

2017

     3,790   

Thereafter

     13,254   
  

 

 

 

Total scheduled payments

     42,686   

Present value adjustments

     (11,896
  

 

 

 

Total noncompete obligations and deferred consideration

   $ 30,790   
  

 

 

 

 

Accretion on the deferred consideration and noncompete obligations is charged to interest expense.

 

Certain acquisitions require purchase consideration if specified operating results are achieved. The changes to earn-out obligations as of year-end 2012 and 2011 are as follows (in thousands):

 

     2012     2011  

Beginning balance

   $ 3,278      $ 13,622   

Payments

     (215     —     

Revaluation

     (409     (10,344
  

 

 

   

 

 

 

Ending balance

   $ 2,654      $ 3,278   
  

 

 

   

 

 

 

Current portion of earn-out obligations

   $ 746      $ 1,155   

Long-term portion of earn-out obligations

     1,908        2,123   
  

 

 

   

 

 

 

Total earn-out obligations

   $ 2,654      $ 3,278   
  

 

 

   

 

 

 

 

(16)   Supplemental Cash Flow Information

 

Supplemental cash flow information for year-end 2012, 2011 and 2010 is as follows (in thousands):

 

     2012     2011     2010  

Cash payments:

      

Interest

   $ 36,357      $ 41,790      $ 36,862   

Income taxes

     799        5,608        5,755   

Noncash investing activities:

      

Acquisitions

   $ (10,595   $ (27,815   $ (177,859

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

(17)   Leasing Arrangements

 

Rent expense, including short-term rentals, during the years ended December 29, 2012, December 31, 2011 and December 31, 2010 was $3.5 million, $4.3 million and $4.2 million, respectively.

 

Minimum rental commitments under long-term operating leases, which primarily relate to land, plant and equipment as of December 29, 2012, are as follows (in thousands):

 

2013

   $ 3,614   

2014

     2,807   

2015

     2,385   

2016

     1,745   

2017

     1,350   

 

The Company has lease agreements associated with quarry facilities under which royalty payments are made. The payments are generally based on tons sold in a particular period; however, certain agreements have minimum annual payments. Royalty expense recorded in cost of revenue in for the years ended December 29, 2012, December 31, 2011 and December 31, 2010 were $3.9 million, $3.1 million and $1.0 million, respectively. Future contractual minimum commitments under royalty agreements as of December 29, 2012 are as follows (in thousands):

 

2013

   $ 1,593   

2014

     1,586   

2015

     1,621   

2016

     1,585   

2017

     1,659   

 

(18)   Redeemable Noncontrolling Interest

 

The Company owns 100 Class A Units of Continental Cement, which represent a 70% economic interest in Continental Cement and have a preference in liquidation to the Class B Units. Continental Cement issued 100,000,000 Class B Units in May 2010, which remain outstanding. These units represent a 30% economic interest in Continental Cement and are subordinate to the Class A Units.

 

Continental Cement’s Class A Units include a cumulative distribution preference which requires, to the extent distributions are authorized by its Board of Directors, Continental Cement Class A Units receive, prior to any distributions to the Class B Unit holders, a priority return of 11% accruing daily and compounding annually on each anniversary of the date of issuance to Class A Unit holders. To the extent the priority return is not made in a given year, the amount of the priority return will increase the liquidation preference of the Class A Units up to an 80% allowable sharing percentage in distributions and liquidation proceeds. The Company holds all the Class A Units. No distributions are currently anticipated.

 

The Continental Cement Amended and Restated Limited Liability Company Agreement (“Subscription Agreement”) provides Summit with a call option that allows the Company to call the Class B Units held by the owners of Continental Cement prior to Summit’s purchase of the Class A Units (“Rollover Members”), at a strike price that approximates fair value, on the earlier of May 2016, on the date that Summit affects an initial public offering or upon any other change of control of Summit. The Rollover Members have a put option that allows them to put the Class B Units to Summit, at a strike price that approximates fair value, exercisable if there is a change of control of the Summit Class A Units, or after May 2016. Finally, the

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Subscription Agreement includes transfer restrictions which prohibit the Rollover Members from transferring their Class B Units without the consent of the Board of Continental Cement.

 

Because the Class B Units are puttable by the Rollover Members in the future based on the passage of time, which can be accelerated upon the occurrence of a contingent event, Summit’s noncontrolling interest is classified in temporary equity. The redemption value is based upon the estimated fair value of Continental Cement, which is valued using Level 3 inputs. Summit elected to accrete changes in the redemption value of the noncontrolling interest over the period from the date of issuance to the earliest anticipated redemption date of the instrument, which is currently May 2016, using an interest method. The accretion is as an adjustment to the consolidated accumulated deficit. The redemption value of the redeemable noncontrolling interest as of year-end 2012 and 2011 approximated its carrying value.

 

(19)   Employee Long Term Incentive Plan

 

Certain employees of the Company hold Class D unit interests in Summit Materials Holdings L.P. The Class D units provide rights to cash distributions based on a predetermined distribution formula upon the general partner of Summit Materials Holdings L.P. declaring a distribution.

 

Certain of the Class D units vest with the passage of time (time-vesting interests) and the remaining vest when certain investment returns are achieved by the investors of Summit Materials Holdings L.P. (performance-vesting interests). Of the time-vesting-interests, 20% vest on the first anniversary and the remaining 80% vest monthly over a period of four years following the first anniversary date. The performance-vesting interests vest when certain specified cash distribution targets are achieved by Summit Materials Holdings L.P. If the employee leaves the Company, the Company can (1) purchase the vested Class D units for a lump sum payment provided certain conditions have been met or (2) elect to convert all of the employee’s Class D units into a right to receive future distributions capped at a termination amount. The termination amount is determined as an amount equal to the fair market value of the Class D unit holder’s vested interests minus any amounts already distributed to the Class D unit holders respective of those Class D units. The fair value of the time-vesting Class D units granted in 2012, 2011 and 2010 totaled $1.1 million, $3.4 million and $11.1 million, respectively. The weighted-average grant-date fair value in 2012, 2011 and 2010 was $3,761; $3,876 and $4,110, respectively.

 

The following table summarizes information for Class D unit interests in Summit Materials Holdings L.P.:

 

     Time-vesting interests      Performance-vesting
interests
 
     Number of
Awards
    Weighted
average
grant-date
fair value
     Number of
Awards
    Weighted
average
grant-date
fair value
 

Beginning balance — January 1, 2012

     2,750      $ 3,949         4,801      $ 3,081   

Granted

     300        3,761         390        3,050   

Vested

     (825     3,884         —          —     

Forfeited

     (497     4,184         (989     3,419   

Redeemed

     (36     4,629         —          —     
  

 

 

      

 

 

   

Balance — December 29, 2012

     1,692      $ 3,864         4,202      $ 3,087   
  

 

 

      

 

 

   

 

As of year-end 2012 and 2011, the cumulative amount of units vested total 1,732 and 943, respectively. The fair value of the Class D units is estimated as of the grant date using Monte Carlo simulations, which

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

requires the input of subjective assumptions, including the expected volatility and the expected term. The following table presents the weighted average assumptions used to estimate the fair value of grants in 2012, 2011 and 2010:

 

     2012    2011    2010

Class D Units:

        

Risk-free interest rate

   1.62%    1.71% – 2.39%    1.65% – 3.47%

Dividend yield

   None    None    None

Volatility

   47%    42% – 49%    41% – 51%

Expected term

   6 – 8 years    6 – 8 years    6 – 8 years

 

The risk-free rate is based on the yield at the date of grant of a U.S. Treasury security with a maturity period approximating the expected term. As the Company has no plans to issue regular dividends, a dividend yield of zero was used. The volatility assumption is based on reported data of a peer group of publically traded companies for which historical information was available adjusted for the Company’s capital structure. The expected term is based on expectations about future exercises and represents the period of time that the units granted are expected to be outstanding.

 

Compensation expense for time-vesting interest granted is based on the grant-date fair value. The Company recognizes these compensation costs on a straight-line basis over the service period, which is generally the vesting period of the award. A forfeiture rate assumption is factored into the compensation cost based on historical forfeitures. Compensation expense for performance-vesting interests would be recognized based on the grant date fair value. However, no compensation expense has been recognized for the performance-vesting interests, as management does not believe it is currently probable that certain investment returns, the performance criteria, will be achieved.

 

Share-based compensation expense, which is recognized in general and administrative expenses, totaled $2.5 million, $2.5 million and $1.2 million for the years ended December 29, 2012, December 31, 2011 and December 31, 2010, respectively. As of December 29, 2012, unrecognized compensation cost totaled $5.2 million. The weighted average remaining contractual term over which the unrecognized compensation cost is to be recognized is 3.0 years as of year-end 2012.

 

(20)   Segment Information

 

The Company has determined that it has three operating segments, which are its reportable segments: Central region, West region and East region. These segments are consistent with the Company’s management reporting structure. The operating results of each segment are regularly reviewed and evaluated separately by the Chief Executive Officer, the Company’s Chief Operating Decision Maker (“CODM”). The CODM primarily evaluates the performance of its segments and allocates resources to them based on segment profit, which is computed as earnings before interest, taxes, depreciation, depletion, amortization and accretion. In addition, certain items such as management fees are excluded from the calculation of segment profit.

 

Each region has several acquired subsidiaries that are engaged in various activities including quarry mining, aggregate production and contracting. Assets employed by segment include assets directly identified with those operations. Corporate assets consist primarily of cash, property, plant and equipment for corporate operations and other assets not directly identifiable with a reportable business segment. The accounting policies applicable to each segment are consistent with those used in the consolidated financial statements.

 

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Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

The following tables display selected financial data for the Company’s reportable business segments (in thousands):

 

     2012     2011     2010  

Revenue:

      

Central region

   $ 302,113      $ 264,008      $ 211,238   

West region

     484,922        362,577        59,337   

East region

     175,867        195,963        159,783   
  

 

 

   

 

 

   

 

 

 

Total revenue

   $ 962,902      $ 822,548      $ 430,358   
  

 

 

   

 

 

   

 

 

 
     2012     2011     2010  

Segment profit:

      

Central region

   $ 65,767      $ 65,651      $ 43,639   

West region

     14,429        36,442        (1,710

East region

     10,596        14,626        7,223   

Corporate and other

     (15,560     (9,877     (10,396
  

 

 

   

 

 

   

 

 

 

Total reportable segments and corporate

     75,232        106,842        38,756   

Interest expense

     (58,079     (47,784     (25,430

Depreciation, depletion, amortization and accretion

     (68,876     (61,964     (34,415
  

 

 

   

 

 

   

 

 

 

Loss before income tax expense (benefit)

   $ (51,723   $ (2,906   $ (21,089
  

 

 

   

 

 

   

 

 

 
     2012     2011     2010  

Cash paid for capital expenditures:

      

Central region

   $ 20,996      $ 20,078      $ 8,384   

West region

     14,993        9,256        3,512   

East region

     8,736        9,311        9,114   
  

 

 

   

 

 

   

 

 

 

Total reportable segments

     44,725        38,645        21,010   

Corporate and other

     763        11        135   
  

 

 

   

 

 

   

 

 

 

Total capital expenditures

   $ 45,488      $ 38,656      $ 21,145   
  

 

 

   

 

 

   

 

 

 
     2012     2011     2010  

Depreciation, depletion, amortization and accretion:

      

Central region

   $ 30,215      $ 27,646      $ 18,352   

West region

     23,771        19,706        3,971   

East region

     14,809        14,525        12,052   
  

 

 

   

 

 

   

 

 

 

Total reportable segments

     68,795        61,877        34,375   

Corporate and other

     81        87        40   
  

 

 

   

 

 

   

 

 

 

Total depreciation, depletion, amortization and accretion

   $ 68,876      $ 61,964      $ 34,415   
  

 

 

   

 

 

   

 

 

 

 

F-39


Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

     2012     2011     2010  

Total assets:

      

Central region

   $ 610,003      $ 587,341      $ 577,808   

West region

     428,115        451,017        263,388   

East region

     224,603        238,018        220,809   
  

 

 

   

 

 

   

 

 

 

Total reportable segments

     1,262,721        1,276,376        1,062,005   

Corporate and other

     18,492        7,889        39,576   
  

 

 

   

 

 

   

 

 

 

Total

   $ 1,281,213      $ 1,284,265      $ 1,101,581   
  

 

 

   

 

 

   

 

 

 
     2012     2011     2010  

Revenue by product (a) :

      

Aggregates

   $ 146,991      $ 116,082      $ 69,848   

Asphalt

     242,458        182,952        82,338   

Readymix

     100,941        94,302        31,756   

Cement

     77,676        69,664        50,272   

Construction and paving

     541,837        498,338        241,565   

Other

     (147,001     (138,790     (45,421
  

 

 

   

 

 

   

 

 

 

Total reportable segments

   $ 962,902      $ 822,548      $ 430,358   
  

 

 

   

 

 

   

 

 

 

 

  (a)   Revenue by product includes intercompany sales transferred at market value. The elimination of intercompany transactions is included in Other.

 

(21)   Condensed Consolidating Financial Information

 

On January 30, 2012, the Issuers issued $250.0 million aggregate principal amount of 10.5% Senior Notes due January 31, 2020 (the Senior Notes). Concurrently with the issuance of the Senior Notes, on January 30, 2012, Summit entered into a new credit facility which provided for term loans in an initial aggregate amount of $400.0 million and revolving credit commitments in an initial aggregate amount of $150.0 million (the Senior Secured Credit Facility).

 

The Company, along with all of its domestic wholly owned subsidiary companies (Wholly owned Guarantors) and non wholly owned subsidiary, Continental Cement (Non-Wholly owned Guarantor), are named as guarantors (collectively, the Guarantors) of the Senior Secured Credit Facility and the Senior Notes. Certain other partially owned subsidiaries do not guarantee the notes (collectively, the Non-Guarantors), which includes a subsidiary of Continental Cement. The Guarantors provide a joint and several, full and unconditional guarantee of the securities. There are no significant restrictions on the Company’s ability to obtain funds from any of the Guarantor Subsidiaries in the form of a dividend or loan. Additionally, there are no significant restrictions on a Guarantor Subsidiary’s ability to obtain funds from the Company or its direct or indirect subsidiaries.

 

The following condensed consolidating balance sheets, statements of operations and statements of cash flows are provided for the Company, the Wholly owned Guarantors, the Non-Wholly owned Guarantor and the Non Guarantors. Summit Materials Finance Corp as a co-issuer of the Senior Notes had no transactions during 2012 or assets as of December 29, 2012. Earnings from subsidiaries are included in other (income) expense in the condensed consolidated statements of operations below. The financial information may not necessarily be indicative of results of operations and comprehensive income, cash flows or financial position had the guarantor or nonguarantor subsidiaries operated as independent entities.

 

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Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Condensed Consolidating Balance Sheets

December 29, 2012

 

    Summit
Materials,
LLC
(Parent)
    Non
wholly
owned
Guarantor
    Wholly
owned
Guarantors
    Non
Guarantors
    Eliminations     Consolidated  
Assets            

Current assets:

           

Cash

  $ 697     $ 397     $ 30,981     $ 680     $ (5,324   $ 27,431  

Accounts receivable, net

    —          7,421       90,765       3,255       (1,143     100,298  

Intercompany receivables

    14,931       15,557       9,018       —          (39,506     —     

Cost and estimated earnings in excess of billings

    —          —          11,428       147       —          11,575  

Inventories

    —          7,073       84,555       1,349       —          92,977  

Other current assets

    25       726       8,447       2,409       (1,539     10,068  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    15,653       31,174       235,194       7,840       (47,512     242,349  

Property, plant and equipment, net

    1,074       287,677       517,994       6,862       —          813,607  

Investments in affiliates

    374,528       1,779       147,658       722       (511,698     12,989  

Goodwill

    —          23,124       155,024       972       —          179,120  

Intangible assets, net

    —          742       7,864       —          —          8,606  

Other assets

    53       10,112       13,784       593       —          24,542  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 391,308     $ 354,608     $ 1,077,518     $ 16,989     $ (559,210   $ 1,281,213  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Liabilities, Redeemable Noncontrolling Interest and Member’s Interest            

Current liabilities:

           

Current portion of debt

  $ —        $ 965     $ 3,035     $ —        $ —        $ 4,000  

Current portion of acquisition-related liabilities

    —          —          9,525       —          —          9,525  

Accounts payable

    2,745       6,715       51,179       2,138       (1,143     61,634  

Accrued expenses

    6,877       10,742       38,050       1,015       (6,862     49,822  

Intercompany payables

    —          —          33,396       6,110       (39,506     —     

Billings in excess of cost and estimated earnings

    —          —          6,656       270       —          6,926  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    9,622       18,422       141,841       9,533       (47,511     131,907  

Long-term debt

    —          155,394       480,449       —          —          635,843  

Acquisition-related liabilities

    —          —          23,919       —          —          23,919  

Other noncurrent liabilities

    395       27,091       56,780       —          —          84,266  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    10,017       200,907       702,989       9,533       (47,511     875,935  

Redeemable noncontrolling interest

    —          —          —          —          22,850       22,850  

Redeemable members’ interest

    —          22,850       —          —          (22,850     —     

Total member’s interest

    381,291       130,851       374,529       7,456       (511,699     382,428  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities, redeemable noncontrolling interest and member’s interest

  $ 391,308     $ 354,608     $ 1,077,518     $ 16,989     $ (559,210   $ 1,281,213  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-41


Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Condensed Consolidating Balance Sheets

December 31, 2011

 

     Summit
Materials,
LLC
(Parent)
     Non
wholly
owned
Guarantor
     Wholly
owned
Guarantors
     Non
Guarantors
     Eliminations     Consolidated  
Assets                 

Current assets:

                

Cash

   $ 6,701      $ 8      $ 33,997      $ 2,084      $ —        $ 42,790  

Accounts receivable, net

     —          5,419        97,010        3,059        (255     105,233  

Intercompany receivables

     6,819        7,330        17,341        —           (31,490     —     

Cost and estimated earnings in excess of billings

     —           —           18,425        81        —          18,506  

Inventories

     —           9,914        73,832        517        —          84,263  

Other current assets

     124        770        11,591        185        (288     12,382  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     13,644        23,441        252,196        5,926        (32,033     263,174  

Property, plant and equipment, net

     393        285,305        528,640        7,565        —          821,903  

Investments in affiliates

     431,317        —           148,154        622        (566,970     13,123  

Goodwill

     —           23,124        129,279        972        —          153,375  

Intangible assets, net

     —           842        8,337        —           —          9,179  

Other assets

     —           11,050        12,006        455        —          23,511  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 445,354      $ 343,762      $ 1,078,612      $ 15,540      $ (599,003   $ 1,284,265  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities, Redeemable Noncontrolling Interest and Member’s Interest

                

Current liabilities:

                

Current portion of debt

   $ —         $ —         $ 7,960      $ —         $ —        $ 7,960  

Current portion of acquisition-related liabilities

     —           —           8,465        —           —          8,465  

Accounts payable

     1,903        8,012        59,162        2,252        (1,686     69,643  

Accrued expenses

     6,607        5,354        21,587        741        (294     33,995  

Intercompany payables

     —           —           22,721        7,330        (30,051     —     

Billings in excess of cost and estimated earnings

     —           —           4,318        18        —          4,336  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     8,510        13,366        124,213        10,341        (32,031     124,399  

Long-term debt

     —           153,980        447,041        —           —          601,021  

Acquisition-related liabilities

     —           —           20,238        —           —          20,238  

Other noncurrent liabilities

     472        24,374        55,803        286        —          80,935  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     8,982        191,720        647,295        10,627        (32,031     826,593  

Redeemable noncontrolling interest

     —           —           —           —           21,300       21,300  

Redeemable members’ interest

     —           22,250        —           —           (22,250     —     

Total member’s interest

     436,372        129,792        431,317        4,913        (566,022     436,372  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities, redeemable noncontrolling interest and member’s interest

   $ 445,354      $ 343,762      $ 1,078,612      $ 15,540      $ (599,003   $ 1,284,265  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Condensed Consolidating Statements of Operations and Comprehensive (Loss) Income

Year ended December 29, 2012

 

     Summit
Materials,
LLC
(Parent)
    Non wholly
owned
Guarantor
    Wholly
owned
Guarantors
    Non
Guarantors
    Eliminations     Consolidated  

Revenue

   $ —        $ 81,516     $ 861,444     $ 33,074     $ (13,132   $ 962,902  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue (exclusive of items shown separately below)

     —          58,319       685,594       18,582       (13,132     749,363  

General and administrative expenses

     8       6,235       120,462       1,327       —          128,032  

Depreciation, depletion, amortization and accretion

     81       10,093       57,666       1,036       —          68,876  

Transaction costs

     —          —          1,988       —          —          1,988  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (expense)

     (89     6,869       (4,266     12,129       —          14,643  

Other (income) expense

     52,400       (2,065     6,630       (101     (48,577     8,287  

Interest expense

     —          12,045       47,293       633       (1,892     58,079  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) gain from continuing operations before taxes

     (52,489     (3,111     (58,189     11,597       50,469       (51,723

Income tax expense (benefit)

     5       —          (3,925     —          —          (3,920
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations

     (52,494     (3,111     (54,264     11,597       50,469       (47,803

Loss from discontinued operations

     —          —          (2,774     —          —          (2,774
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

     (52,494     (3,111     (57,038     11,597       50,469       (50,577

Net income attributable to noncontrolling interest

     —          —          —          —          1,919       1,919  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to member of Summit Materials, LLC

   $ (52,494   $ (3,111   $ (57,038   $ 11,597     $ 48,560     $ (52,496
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income attributable to member of Summit Materials, LLC

   $ (52,494   $ (6,759   $ (57,038   $ 11,597     $ 49,645     $ (55,049
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Condensed Consolidating Statements of Operations and Comprehensive (Loss) Income

Year ended December 31, 2011

 

     Summit
Materials,
LLC
(Parent)
    Non wholly
owned
Guarantor
    Wholly
owned
Guarantors
    Non
Guarantors
     Eliminations     Consolidated  

Revenue

   $ —       $ 70,064     $ 734,388     $ 21,566      $ (3,470   $ 822,548  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Cost of revenue (exclusive of items shown separately below)

     —         41,221       575,989       17,204        (3,470     630,944  

General and administrative expenses

     1,453       3,933       90,071       1,429        —         96,886  

Depreciation, depletion, amortization and accretion

     87       9,697       51,227       953        —         61,964  

Transaction costs

     —          —          9,120       —           —          9,120  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (expense)

     (1,540     15,213       7,981       1,980        —          23,634  

Other expense (income)

     8,510       (61     (24,375     124        (5,442     (21,244

Interest expense

     —          14,004       33,685       647        (552     47,784  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

(Loss) gain from continuing operations before taxes

     (10,050     1,270       (1,329     1,209        5,994       (2,906

Income tax expense (benefit)

     —          —          3,408       —           —          3,408  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

(Loss) income from continuing operations

     (10,050     1,270       (4,737     1,209        5,994       (6,314

Loss from discontinued operations

     —          —          (3,736     —           —          (3,736
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net (loss) income

     (10,050     1,270       (8,473     1,209        5,994       (10,050

Net income attributable to noncontrolling interest

     695       —          695       —           (695     695  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net (loss) income attributable to member of Summit Materials, LLC

   $ (10,745   $ 1,270     $ (9,168   $ 1,209      $ 6,689     $ (10,745
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive (loss) income attributable to member of Summit Materials, LLC

   $ (9,375   $ (4,405   $ (13,473   $ 1,209      $ 10,994     $ (15,050
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

F-44


Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Condensed Consolidating Statements of Operations and Comprehensive (Loss) Income

Year ended December 31, 2010

 

     Summit
Materials,
LLC
(Parent)
    Non wholly
owned
Guarantor
    Wholly
owned
Guarantors
    Non
Guarantors
     Eliminations     Consolidated  

Revenue:

   $ —        $ 50,597     $ 366,036     $ 14,052      $ (327   $ 430,358  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Cost of revenue (exclusive of items shown separately below):

     —          30,424       266,577       11,623        (327     308,297  

General and administrative expenses

     4,604       1,402       42,237       1,236        —          49,479  

Depreciation, depletion, amortization and accretion

     40       5,258       28,392       725        —          34,415  

Transaction costs

     1,712       5,671       14,885       —           —          22,268  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (expense)

     (6,356     7,842       13,945       468        —          15,899  

Other (income) expense

     17,507       (141     12,132       18        (17,958     11,558  

Interest expense

     —          7,799       17,213       418        —          25,430  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

(Loss) gain from continuing operations before taxes

     (23,863     184       (15,400     32        17,958       (21,089

Income tax expense

     —          —          2,363       —           —          2,363  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

(Loss) income from continuing operations

     (23,863     184       (17,763     32        17,958       (23,452

Loss from discontinued operations

     —          —          (411     —           —          (411
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net (loss) income

     (23,863     184       (18,174     32        17,958       (23,863

Net income attributable to noncontrolling interest

     86       —          86       —           (86     86  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net (loss) income attributable to member of Summit Materials, LLC

   $ (23,949   $ 184     $ (18,260   $ 32      $ 18,044     $ (23,949
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive (loss) income attributable to member of Summit Materials, LLC

   $ (23,513   $ (2,524   $ (20,532   $ 32      $ 20,316     $ (26,221
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

F-45


Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Condensed Consolidating Statements of Cash Flows

Year ended December 29, 2012

 

     Summit
Materials,
LLC
(Parent)
    Non wholly
owned
Guarantor
    Wholly owned
Guarantors
    Non
Guarantors
    Eliminations     Consolidated  

Net cash provided by operating activities

   $ 4,845     $ 12,806     $ 36,649     $ 8,217     $ (238   $ 62,279  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flow from investing activities:

            

Acquisitions — net of cash acquired

     —          —          (48,757     —          —          (48,757

Purchases of property, plant and equipment

     (762     (12,174     (31,818     (734     —          (45,488

Proceeds from the sale of property, plant and equipment

     —          69       8,577       190       —          8,836  

Other

     —          —          69       —          —          69  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

     (762     (12,105     (71,929     (544     —          (85,340
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flow from financing activities:

            

Net proceeds from debt issuance

     713,378       (17     —          —          —          713,361  

Loans received from and payments made on loans from other Summit Companies

     (25,371     (295     39,783       (8,793     (5,324     —     

Payments on long-term debt

     (697,438     —          —          —          —          (697,438

Payments on acquisition-related liabilities

     —          —          (7,519     —          —          (7,519

Other

     (656     —          —          (284     238       (702
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used for) provided by financing activities

     (10,087     (312     32,264       (9,077     (5,086     7,702  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (6,004     389       (3,016     (1,404     (5,324     (15,359

Cash — beginning of period

     6,701       8       33,997       2,084       —          42,790  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash — end of period

   $ 697     $ 397     $ 30,981     $ 680     $ (5,324   $ 27,431  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-46


Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Condensed Consolidating Statements of Cash Flows

Year ended December 31, 2011

 

     Summit
Materials,
LLC
(Parent)
    Non wholly
owned
Guarantor
    Wholly owned
Guarantors
    Non
Guarantors
    Eliminations     Consolidated  

Net cash (used in) provided by operating activities

   $ (824   $ 3,808     $ 17,262     $ 2,586     $ 421     $ 23,253  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

            

Acquisitions — net of cash acquired

     —          —          (161,073     —          —          (161,073

Proceeds from the sale of investments

     —          —          377       (136     —          241  

Purchases of property, plant and equipment

     (11     (5,933     (31,210     (1,502     —          (38,656

Proceeds from the sale of property, plant and equipment

     —          168       6,880       109       —          7,157  

Cash contribution to affiliates

     (135,530     —          —          —          135,530       —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

     (135,541     (5,765     (185,026     (1,529     135,530       (192,331
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flow from financing activities:

            

Proceeds from investment by member

     103,630       —          135,530       421       (135,951     103,630  

Net proceeds from debt issuance

     —          36,456       60,292       —          —          96,748  

Payments on long-term debt

     —          (34,500     (14,500     —          —          (49,000

Payments on acquisition-related liabilities

     —          —          (4,593     —          —          (4,593

Payment of dividends

     —          —          —          (10     —          (10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     103,630       1,956       176,729       411       (135,951     146,775  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash

     (32,735     (1     8,965       1,468       —          (22,303

Cash — beginning of period

     39,436       9       25,032       616       —          65,093  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash — end of period

   $ 6,701     $ 8     $ 33,997     $ 2,084     $ —        $ 42,790  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-47


Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

Condensed Consolidating Statements of Cash Flows

Year ended December 31, 2010

 

     Summit
Materials,
LLC
(Parent)
    Non wholly
owned
Guarantor
    Wholly
owned
Guarantors
    Non
Guarantors
    Eliminations     Consolidated  

Net cash (used in) provided by operating activities

   $ (669   $ (12,379   $ (8,626   $ 1,145     $ —        $ (20,529
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

            

Acquisitions — net of cash acquired

     —          —          (482,333     —          —          (482,333

Proceeds from the sale of investments

     —          —          —          —          —          —     

Purchases of property, plant and equipment

     (135     (5,334     (15,312     (364     —          (21,145

Proceeds from the sale of property, plant and equipment

     —          475       4,162       63       —          4,700  

Cash contribution to affiliates

     (336,280     —          (135,000     —          471,280       —     

Other

     —          —          —          (603     —          (603
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used for) provided by investing activities

     (336,415     (4,859     (628,483     (904     471,280       (499,381
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flow from financing activities:

            

Proceeds from investment by member

     338,639       135,000       336,280       —          (471,280     338,639  

Net proceeds from debt issuance

     37,478       7,300       439,383       1,212       —          485,373  

Payments on long-term debt

     —          (125,053     (120,202     (600     —          (245,855

Payments on acquisition-related liabilities

     —          —          (2,721     —          —          (2,721

Payment of dividends

     —          —          190       (237     —          (47
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     376,117       17,247       652,930       375       (471,280     575,389  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash

     39,033       9       15,821       616       —          55,479  

Cash — beginning of period

     403       —          9,211       —          —          9,614  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash — end of period

   $ 39,436     $ 9     $ 25,032     $ 616     $ —        $ 65,093  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-48


Table of Contents

SUMMIT MATERIALS, LLC AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 29, 2012 and December 31, 2011

 

(22)   Subsequent Events

 

The Company has evaluated its December 29, 2012 consolidated financial statements for subsequent events through March 27, 2013, the date the financial statements were available to be issued.

 

On February 5, 2013, the Company entered into an amendment to its existing Senior Notes and Senior Secured Credit Facility (Amendment No. 1). On February 7, 2013, the Company entered into a Tranche A Revolving Credit Commitment Conversion Agreement. The terms of Amendment No.1 include the following:

 

   

reduction in the applicable margins used to calculate interest rates for term loans and $131.0 million of the $150.0 million revolving credit loans by 1.0%;

 

   

increase in the principal amount of the term loans borrowed by $25.0 million with the same terms as the existing term loans;

 

   

a requirement that the Company pay a fee equal to 1.0% of the principal amount of term loans repaid in connection with certain repricing or refinancing transactions within six months after February 5, 2013; and

 

   

additional flexibility under the financial maintenance covenants, which are tested quarterly, by increasing the applicable maximum Consolidated Net Leverage Ratio and reducing the applicable minimum Interest Coverage Ratio.

 

F-49


Table of Contents

Report of Independent Registered Public Accounting Firm

 

The Board of Directors

Summit Materials, LLC:

 

We have audited the accompanying consolidated balance sheet of Continental Cement Company, L.L.C. and subsidiary as of December 31, 2012, and the related consolidated statements of operations, comprehensive income (loss), cash flows and changes in redeemable members’ interest and member’s interest for the year then ended. The consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Continental Cement Company, L.L.C. and subsidiary as of December 31, 2012, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

 

/s/ KPMG LLP

 

McLean, Virginia

March 27, 2013

 

F-50


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Member of

Summit Materials, LLC and Subsidiaries

Washington, D.C.

 

We have audited the accompanying consolidated balance sheet of Continental Cement Company, L.L.C. and Subsidiary (the “Company”) as of December 31, 2011, and the related consolidated statements of operations, comprehensive (loss) income, changes in redeemable member’s interest and equity, and cash flows for the year ended December 31, 2011 and for the periods from May 27, 2010 to December 31, 2010 (Successor) and from January 1, 2010 to May 26, 2010 (Predecessor). 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). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statements, present fairly, in all material respects, the financial position of Continental Cement Company, L.L.C. and Subsidiary as of December 31, 2011, and the results of their operations and their cash flows for the year ended December 31, 2011 and for the periods from May 27, 2010 to December 31, 2010 (Successor) and from January 1, 2010 to May 26, 2010 (Predecessor), in conformity with accounting principles generally accepted in the United States of America.

 

/s/DELOITTE & TOUCHE LLP

McLean, Virginia

 

April 18, 2012

 

F-51


Table of Contents

CONTINENTAL CEMENT COMPANY, L.L.C.

AND SUBSIDIARY

 

Consolidated Balance Sheets

December 31, 2012 and 2011

(In thousands, except unit amounts)

 

     2012     2011  
Assets     

Current assets:

    

Cash

   $ 599     $ 55  

Accounts receivable, net

     9,924       7,657  

Due from Summit

     10,303       —    

Inventories

     7,073       9,914  

Other current assets

     815       795  
  

 

 

   

 

 

 

Total current assets

     28,714       18,421  

Property, plant and equipment, net

     291,666       289,083  

Goodwill

     24,096       24,096  

Intangible asset, net

     742       842  

Other assets

     10,705       11,505  
  

 

 

   

 

 

 

Total assets

   $ 355,923     $ 343,947  
  

 

 

   

 

 

 

Liabilities, Redeemable Members’

Interest and Member’s Interest

    
     2012     2011  

Current liabilities:

    

Accounts payable

   $ 7,248     $ 8,550  

Accrued expenses

     11,301       5,509  

Deferred sales revenue

     222       585  

Current portion of long-term debt

     965       —    
  

 

 

   

 

 

 

Total current liabilities

     19,736       14,644  

Long-term debt

     155,394       153,980  

Pension and postretirement benefit obligations

     25,568       23,322  

Other noncurrent liabilities

     1,524       1,339  
  

 

 

   

 

 

 

Total liabilities

     202,222       193,285  
  

 

 

   

 

 

 

Redeemable members’ interest (100,000,000 Class B units issued and authorized)

     22,850       22,250  

Member’s interest:

    

Member’s equity (100 Class A units issued and authorized)

     135,000       135,000  

Paid-in capital

     118       56  

Retained earnings

     7,764       1,739  

Accumulated other comprehensive loss

     (12,031     (8,383
  

 

 

   

 

 

 

Total member’s interest

     130,851       128,412  
  

 

 

   

 

 

 

Total liabilities, redeemable members’ interest and member’s interest

   $ 355,923     $ 343,947  
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

 

F-52


Table of Contents

CONTINENTAL CEMENT COMPANY, L.L.C.

AND SUBSIDIARY

 

Consolidated Statements of Operations

Years ended December 31, 2012 and 2011 and periods

from May 27, 2010 to December 31, 2010 (Successor) and

January 1, 2010 to May 26, 2010 (Predecessor)

(In thousands)

 

     Successor            Predecessor  
     Year ended December 31,     May 27, 2010
to
December 31,

2010
           January  1,
2010

to
May 26, 2010
 
     2012     2011         

Revenue:

             

Revenue from third parties:

             

Product

   $ 65,213     $ 57,804     $ 37,763          $ 18,466  

Service

     13,366       8,708       4,084            1,454  

Revenue from related parties:

             

Product

     16,303       12,269       12,990            3,976  

Service

     —         707       668            379  
  

 

 

   

 

 

   

 

 

        

 

 

 

Total revenue

     94,882       79,488       55,505            24,275  
  

 

 

   

 

 

   

 

 

        

 

 

 

Cost of revenue (exclusive of items shown separately below):

             

Product

     49,541       41,221       30,424            24,474  

Service

     8,778       6,500       3,237            1,994  
  

 

 

   

 

 

   

 

 

        

 

 

 

Total cost of revenue

     58,319       47,721       33,661            26,468  

General and administrative expenses

     6,706       4,761       2,547            3,549  

Depreciation, depletion, amortization and accretion

     10,479       9,984       5,390            4,317  

Transaction costs

     —         —         5,671            7,989  
  

 

 

   

 

 

   

 

 

        

 

 

 

Operating income (loss)

     19,378       17,022       8,236            (18,048

Other income (expense)

     (131     61       141            27  

Interest expense

     (12,622     (14,621     (8,150          (18,536
  

 

 

   

 

 

   

 

 

        

 

 

 

Net income (loss)

     6,625       2,462       227            (36,557

Net loss attributable to noncontrolling interest

     —         —         —              (97
  

 

 

   

 

 

   

 

 

        

 

 

 

Net income (loss) attributable to controlling interest

   $ 6,625     $ 2,462     $ 227          $ (36,460
  

 

 

   

 

 

   

 

 

        

 

 

 

 

See accompanying notes to consolidated financial statements.

 

F-53


Table of Contents

CONTINENTAL CEMENT COMPANY, L.L.C.

AND SUBSIDIARY

 

Consolidated Statements of Comprehensive Income (Loss)

Years ended December 31, 2012 and 2011 and periods

from May 27, 2010 to December 31, 2010 (Successor) and

January 1, 2010 to May 26, 2010 (Predecessor)

(In thousands)

 

     Successor    

 

   Predecessor  
     Year ended December 31,     May 27, 2010
to
December 31,

2010
   

 

   January  1,
2010

to
May 26, 2010
 
         2012             2011             

Net income (loss)

   $ 6,625     $ 2,462     $ 227          $ (36,557

Other comprehensive loss – pension and post-retirement liability adjustment

     (3,648     (5,675     (2,708          (3,546
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Comprehensive income (loss)

     2,977       (3,213     (2,481          (40,103

Less comprehensive loss attributable to the noncontrolling interest

     —         —         —              (97
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Comprehensive income (loss) attributable to the controlling interest

   $ 2,977     $ (3,213   $ (2,481        $ (40,006
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

 

See accompanying notes to consolidated financial statements.

 

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CONTINENTAL CEMENT COMPANY, L.L.C.

AND SUBSIDIARY

 

Consolidated Statements of Cash Flows

Years ended December 31, 2012 and 2011 and periods

from May 27, 2010 to December 31, 2010 (Successor) and

January 1, 2010 to May 26, 2010 (Predecessor)

(In thousands)

 

     Successor    

 

   Predecessor  
     Year ended December 31,     May 27, 2010
to
December 31,

2010
   

 

   January  1,
2010

to
May 26, 2010
 
         2012             2011             

Cash flows from operating activities:

             

Net income (loss)

   $ 6,625     $ 2,462     $ 227          $ (36,557

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

             

Depreciation, depletion, amortization and accretion

     10,479       9,985       5,390            4,317  

Financing fee amortization

     12       138       80            1,166  

Interest expense paid in kind

     —         —         —              4,421  

Grant of redeemable members’ interest to interest expense

     —         —         —              3,528  

Interest payments on loans from other Summit companies

     (83     —         —              —    

Other

     (10     170       25            (224

(Increase) decrease in operating assets, net of acquisitions:

             

Account receivable

     (1,924     (1,232     2,819            (2,834

Other current assets

     58       (251     (119          (202

Inventories

     2,841       (3,191     9,750            7,014  

Other assets

     308       (2,872     1,939            25  

(Decrease) increase in operating liabilities, net of acquisitions:

             

Accounts payable

     (907     865       640            (2,553

Accrued expenses

     6,685       650       (26,359          15,606  

Pension and postretirement benefit obligations

     (1,368     (1,644     (2,328          —    

O t her liabilities

     (340     (49     (5,236          (95
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Net cash provided by (used in) operating activities

     22,379       5,031       (13,172          (6,388
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Cash flows from investing activities:

             

Loans to affiliates

     (10,220     —         —              —    

Decrease in restricted cash

     —         —         —              3,105  

Purchase of property, plant and equipment

     (12,805     (7,110     (6,726          (4,341

Proceeds from the sale of property, plant and equipment

     69       168       475            —    

Other

     (79     —         —              —    
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Net cash used in investing activities

     (23,035     (6,942     (6,251          (1,236
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Cash flows from financing activities:

             

Member contribution

     —         —         135,000            —    

Proceeds from borrowing

     7,000       36,500       7,300            21,900  

Principal payments on long-term debt

     (5,783     (34,500     (125,053          (12,100

Deferred financing fees

     (17     (43     —              —    
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Net cash provided by financing activities

     1,200       1,957       17,247            9,800  
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Net increase (decrease) in cash

     544       46       (2,176          2,176  

Cash – beginning of period

     55       9       2,185            9  
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

Cash – end of period

   $ 599     $ 55     $ 9          $ 2,185  
  

 

 

   

 

 

   

 

 

   

 

  

 

 

 

 

See accompanying notes to consolidated financial statements.

 

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CONTINENTAL CEMENT COMPANY, L.L.C.

AND SUBSIDIARY

 

Consolidated Statements of Changes in Redeemable Members’ Interest and Member’s Interest

Years ended December 31, 2012 and 2011 and periods

from May 27, 2010 to December 31, 2010 (Successor) and

January 1, 2010 to May 26, 2010 (Predecessor)

(In thousands)

 

    Redeemable
members’
interest
    Member’s
equity
    Paid
in
capital
    Retained
earnings
(accumulated
deficit)
    Accumulated
other
comprehensive
loss
    Total
controlling
interest in
member’s
equity (deficit)
    Noncontrolling
interest
    Total
member’s
interest
 

Balance – January 1, 2010

  $ 5,000     $ 16,000     $ —       $ (26,884   $ (12,465   $ (23,349   $ (161   $ (23,510

Net loss

    —         —         —         (36,460     —         (36,460     (97     (36,557

Other comprehensive loss

    —         —         —         —         (3,546     (3,546     —         (3,546

Grant of redeemable members’ units

    3,528       —         —         —         —         —         —         —    

Fair value adjustment – redeemable members’ units

    1,526       —         —         (1,526     —         (1,526     —         (1,526
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance – May 26, 2010 (Predecessor)

  $ 10,054     $ 16,000     $ —       $ (64,870   $ (16,011   $ (64,881   $ (258   $ (65,139
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               

Balance – May 27, 2010 (Successor)

  $ 21,300     $ 135,000     $ —       $ —       $  —       $ 135,000     $ —       $ 135,000  

Accretion of redeemable noncontrolling interest

    350       —         —         (350     —         (350     —         (350

Other comprehensive loss

    —         —         —         —         (2,708     (2,708     —         (2,708

Net income

    —         —         —         227       —         227       —         227  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance – December 31, 2010

    21,650       135,000       —         (123     (2,708     132,169       —         132,169  

Accretion of redeemable members’ interest

    600       —         —         (600     —         (600     —         (600

Other comprehensive loss

    —         —         —         —         (5,675     (5,675     —         (5,675

Net income

    —         —         —         2,462       —         2,462       —         2,462  

Share-based compensation

    —         —         56       —         —         56       —         56  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance – December 31, 2011

    22,250       135,000       56       1,739       (8,383     128,412       —         128,412  

Accretion of redeemable members’ interest

    600       —         —         (600     —         (600     —         (600

Other comprehensive loss

    —         —         —         —         (3,648     (3,648     —         (3,648

Net income

    —         —         —         6,625       —         6,625       —         6,625  

Share-based compensation

    —         —         62       —         —         62       —         62  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance – December 31, 2012

  $ 22,850     $ 135,000     $ 118     $ 7,764     $ (12,031   $ 130,851     $ —       $ 130,851  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

(1)   Summary of Organization and Significant Accounting Policies

 

  (a) Business Organization

 

Continental Cement Company, L.L.C. (the “Company” or “Continental Cement”), a Delaware limited liability company, was formed pursuant to the Amended and Restated Continental Cement Limited Liability Company Agreement (“LLC Agreement”). As such, liability of its Members is generally limited to the amount of their net investment in the Company.

 

  (b) Successor/Predecessor Presentation

 

As a result of Summit Holdings II, LLC (“Summit II”), a wholly-owned subsidiary of Summit Materials, LLC (“Summit”), purchasing a controlling interest in Continental Cement effective May 27, 2010 (“Transaction”), the consolidated financial statements and certain footnote presentations included herein separate the Company’s presentations into two distinct periods, the periods subsequent to Summit’s acquisition of a majority of the Company’s membership interests (labeled Successor) and the preceding period (labeled Predecessor), to indicate the application of different bases of accounting between the periods presented. This is presented in the consolidated financial statements with a black line separating Predecessor and Successor indicating that the amounts shown for the periods before and after the Transaction of Continental Cement are not comparable.

 

  (c) Company’s Activities

 

The Company produces Portland cement at its plant located in Hannibal, Missouri. Cement distribution terminals are maintained in Hannibal and St. Louis, Missouri and Bettendorf, Iowa. The Company’s primary cement operation customers are ready-mix operators and contractors located in the Midwestern United States.

 

Green America Recycling, L.L.C. (“GAR”), a wholly owned subsidiary of the Company, is engaged in the business of securing, processing and blending hazardous and nonhazardous waste materials primarily for use as supplemental fuels in Continental Cement’s manufacturing process. GAR’s primary customers are commercial transportation disposal facilities and petroleum and chemical manufacturers located in the continental United States.

 

  (d) Principles of Consolidation

 

The consolidated financial statements of the Company include the accounts of Continental Cement and its wholly owned subsidiary, GAR. All significant intercompany balances and transactions have been eliminated.

 

  (e) Use of Estimates

 

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

revenues and expenses. Such estimates include the valuation of accounts receivable, inventories, goodwill, intangible and other long-lived assets, pension and other postretirement obligations, asset retirement obligations and the redeemable members’ interest. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management adjusts such estimates and assumptions when circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from estimates made. Changes in estimates, including those resulting from continuing changes in the economic environment, will be reflected in the Company’s consolidated financial statements in the period in which the change in estimate occurs.

 

  (f) Business and Credit Concentrations

 

The majority of the Company’s customers are located in Iowa, Illinois, and Missouri. The Company’s accounts receivable consist primarily of accounts of ready-mix operators and contractors within this area. Collection of these accounts is, therefore, dependent on the economic conditions of the area. However, credit granted within the Company’s trade area has been granted to a wide variety of customers, and management does not believe that any significant concentrations of credit exist with respect to individual customers or groups of customers who are engaged in similar activities that would be similarly affected by changes in economic or other conditions. The Company had approximately 13%, 14%, 16%, and 18% cement sales concentration with companies owned by a certain minority owner of the Company for the years ended December 31, 2012 and 2011 and the periods from May 27, 2010 to December 31, 2010 (Successor) and January 1, 2010 to May 26, 2010 (Predecessor), respectively.

 

  (g)   Cash

 

During 2012, the Company began participating in Summit’s centralized treasury function whereby cash is periodically swept to an intercompany bank account with Summit. As of December 31, 2012, the Company’s net cash position held by Summit was $10,303.

 

  (h) Accounts Receivable

 

Accounts receivable is stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollected amounts through a charge to earnings and a credit to the allowance for doubtful accounts based on its assessment of the status of individual accounts. In establishing the allowance, management considers historical losses adjusted to take into account current market conditions and our customers’ financial condition, the amount of receivables in dispute, the current receivables aging and current payment terms. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts. Changes in the allowance for doubtful accounts have not been material to the consolidated financial statements.

 

  (i) Revenue Recognition

 

Revenue from the sale of cement is recorded when evidence of an arrangement exists, the fee is fixed or determinable, title passes, which is generally when the product is shipped, and collection is reasonably assured. The Company records freight revenue on a net basis together with freight costs within cost of sales.

 

Revenues from the receipt of waste fuels are based on fees charged for the waste disposal and recorded when the waste is accepted.

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

  (j) Inventories

 

Inventories of raw materials, work in process and finished goods are carried at the lower of cost (determined using the average cost method) or market. If items become obsolete or otherwise unusable, they will be charged to costs of production when that determination is made by management.

 

  (k) Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost, less accumulated depreciation, depletion and amortization. Expenditures for additions and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Repair and maintenance costs that do not substantially extend the life of the Company’s property, plant and equipment are expensed as incurred.

 

Upon disposal, the cost and related accumulated depreciation are removed from the Company’s accounts and any gain or loss is included in operating income.

 

Depreciation on property, plant and equipment is computed on a straight-line basis. These estimated useful lives are as follows:

 

Building and improvements

   30 – 40 years

Plant, machinery and equipment

   3 – 40 years

Mobile equipment and barges

   3 – 20 years

Other

   3 – 7 years

 

Depletion of mineral reserves is calculated over proven and probable reserves by the units of production method on a quarry-by-quarry basis.

 

The Company reviews the carrying value of property, plant and equipment for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. Such indicators may include, among others, deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows or a trend of negative or declining cash flows over multiple periods.

 

  (l) Accrued Mining Reclamation

 

The mining reclamation obligations are based on management’s estimate of future cost requirements to reclaim property at quarry sites. Estimates of these obligations have been developed based on management’s interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Costs are estimated in current dollars, inflated until the expected time of payment, using an inflation rate of 2.5%, and then discounted back to present value using a risk-free rate on obligations of similar maturity, adjusted to reflect the Company’s credit rating. Changes in the credit-adjusted, risk-free rate do not change recorded liabilities, but subsequently recognized obligations are measured using the revised credit-adjusted, risk-free rate.

 

Significant changes in inflation rates or the amount or timing of future cost estimates typically result in both (1) a current adjustment to the recorded liability (and corresponding adjustment to the asset) and (2) a change in liability and asset amounts to be recorded prospectively over the remaining capacity of

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

the unmined quarry. Any changes related to the capitalized and future cost of the related assets are recognized in accordance with Continental Cement’s amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining life of the asset.

 

  (m) Intangible Asset

 

The Company’s intangible asset related to its trade name was $742 and $842 as of December 31, 2012 and 2011, respectively. The intangible asset is amortized on a straight-line basis over its ten year life. Amortization expense for the years ended December 31, 2012 and 2011 and for the period from May 27, 2010 to December 31, 2010, was $100, $100 and $58, respectively. The estimated amortization expense for the intangible asset for each of the next five years and thereafter is as follows:

 

2013

   $  100  

2014

     100  

2015

     100  

2016

     100  

2017

     100  

Thereafter

     242  
  

 

 

 

Total

   $ 742  
  

 

 

 

 

  (n)   Goodwill

 

Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill recorded in connection with the Transaction described in note 2 is primarily attributable to the expected profitability and assembled workforce of the Company. The value of goodwill as of December 31, 2012 and 2011 was $24,096. Goodwill is not amortized, but is tested annually for impairment and whenever events or circumstances change that would make it more likely than not that an impairment may have occurred.

 

Continental Cement performs an annual impairment analysis as of the first day of the fourth quarter of each fiscal year for its one reporting unit. The first step of the goodwill impairment test compares the fair value of the reporting unit to its carrying value. Management estimates the fair value of the reporting unit primarily based on the discounted projected cash flows of the underlying operations. A number of significant assumptions and estimates are required to forecast operating cash flows, including macroeconomic trends in the public and private construction industry, the timing of work embedded in backlog, performance and profitability under contracts, expected success in securing future sales and the appropriate interest rate used to discount the projected cash flows. During the 2012 and 2011 annual review of goodwill, management concluded that the estimated fair value of the reporting unit was substantially in excess of its carrying value, resulting in no impairment. The Company has recorded no goodwill impairment charges to date.

 

  (o)   Income Taxes

 

Continental Cement and GAR are limited liability companies that pass their tax attributes for Federal and state tax purposes to their members and are generally not subject to Federal or state income tax.

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

  (p)   Kiln-Down Costs

 

Continental Cement experiences annual major maintenance of its kiln (referred to as a kiln-down). The Company accounts for these costs under the direct expensing method, whereby costs are charged to operations as incurred.

 

  (q)   New Accounting Standards

 

In May 2011, the FASB issued Accounting Standards Update No. 2011-04 Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs ( “ASU 2011-04”) . The amendments in this update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendments in this update to result in a change in the application of the existing requirements. Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2011. The Company adopted ASU 2011-04 as of January 1, 2012, which did not result in a material impact on fair value measurements or related disclosures.

 

  (2)   Sale of Controlling Interest

 

On May 27, 2010, the Company became a 70% owned subsidiary of Summit II pursuant to the Transaction whereby the Company issued new Class A units representing 70% ownership interests in the Company to Summit II for $135,000 while the Company’s former owners received Class B units representing the remaining 30% ownership of the Company. Pursuant to the terms of the Amended and Restated Continental Cement Company Limited Liability Company Agreement to the extent distributions are authorized by the Company’s Board of Directors, Summit is entitled up to an 11% priority return which accrues daily and compounds annually on the date of issuance of the Class A units. To the extent that the priority return is not made in a given year, the priority return increases Summit’s sharing percentage in distributions and liquidation proceeds of the Company up to a maximum of 80 percent.

 

The proceeds from the new equity raised by the Company of $135,000, together with the issuance of $1,000 of subordinated debt to the existing shareholders were used to repay the outstanding balance on the Company’s senior secured credit facility (the First Lien Facility) of $107,600 and the outstanding balance on the Company’s subordinated debt facility (the Second Lien Facility) of $2,700. Concurrent with the Transaction, the Company entered into second amendments to their First Lien Facility and Second Lien Facility (the Second Amendments) which provide, among other things, for the admission of Summit as permitted holder and amends relevant portions of the First Lien Facility and Second Lien Facility agreements to conform to the recapitalized structure. The Second Amendments also reduce the revolving credit line available under the First Lien Facility to $20,000.

 

The Transaction was accounted for under the acquisition method of accounting as Summit, together with the non-controlling interest holders acting as a collaborative group, obtained substantial

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

ownership of the Company. Accordingly, the assets acquired and liabilities assumed, as well as redeemable members’ interests, were recorded at fair value at the Transaction date. The purchase price for Summit’s 70% of the Company of $135,000 was first allocated to the identified assets acquired and liabilities assumed based on their estimated fair values at the date of the transaction and the excess was allocated to goodwill. The transaction costs associated with the Transaction totaled $5,671.

 

The following table summarizes the finalized fair value of the assets and liabilities at the date of Transaction:

 

Financial assets

   $ 9,753  

Inventories

     11,179  

Property, plant and equipment

     289,960  

Other assets

     12,502  

Intangible assets (trade name)

     1,000  

Current liabilities

     (11,627

Long-term debt

     (160,480

Other long-term liabilities

     (20,083

Goodwill

     24,096  

Redeemable members’ interest

     (21,300
  

 

 

 

Fair value of net assets acquired

   $ 135,000  
  

 

 

 

 

  (3)   Accounts Receivable, net

 

Accounts receivable, net consists of the following:

 

     December 31,  
     2012     2011  

Trade accounts receivable from unaffiliated entities

   $ 8,859      $ 6,745   

Trade accounts receivable from related parties

     1,193        1,501   

Accounts receivable

     10,052        8,246   

Less allowance for doubtful accounts

     (128     (589
  

 

 

   

 

 

 

Accounts receivable, net

   $ 9,924      $ 7,657   
  

 

 

   

 

 

 

 

  (4)   Inventories

 

Inventories consist of the following:

 

     December 31,  
     2012      2011  

Raw materials

   $ 475       $ 604   

Work-in-process

     2,248         2,961   

Finished goods

     4,350         6,349   
  

 

 

    

 

 

 

Total inventories

   $ 7,073       $ 9,914   
  

 

 

    

 

 

 

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

  (5)   Property, Plant and Equipment, net

 

Property, plant and equipment, net consist of the following:

 

     December 31,  
     2012     2011  

Land (nonmineral bearing)

   $ 4,605      $ 4,605   

Land (mineral bearing) and asset retirement costs

     15,449        14,832   

Building and improvements

     40,681        40,393   

Plant, machinery and equipment

     231,454        227,655   

Mobile equipment and barges

     7,859        7,857   

Construction in progress

     15,301        7,933   

Other

     1,373        825   
  

 

 

   

 

 

 

Property, plant and equipment

     316,722        304,100   

Less accumulated depreciation, depletion and accretion

     (25,056     (15,017
  

 

 

   

 

 

 

Property, plant and equipment, net

   $ 291,666      $ 289,083   
  

 

 

   

 

 

 

 

Depreciation, depletion and accretion expense of property, plant and equipment was $10,295, $9,818, $5,329 and $4,270 for the years ended December 31, 2012 and 2011 and the periods from May 27, 2010 to December 31, 2010 (Successor) and January 1, 2010 to May 26, 2010 (Predecessor), respectively.

 

  (6)   Other Assets

 

Other assets consist of the following:

 

     December 31,  
     2012      2011  

Spare repair parts

   $ 10,059       $ 9,973   

Other

     646         1,532   
  

 

 

    

 

 

 

Total other assets

   $ 10,705       $ 11,505   
  

 

 

    

 

 

 

 

  (7)   Accrued Expenses

 

Accrued expenses and other liabilities consist of the following:

 

     December 31,  
     2012      2011  

Accrued interest due to Summit

   $ 4,283       $ 120   

Accrued interest due to certain members

     2,149         2,273   

Accrued postretirement benefits other than pensions, current portion

     1,055         1,021   

Accrued professional fees

     1,250         742   

Accrued payroll, insurance, and benefits

     897         1,013   

Accrued bonus liability

     1,153         194   

Other

     514         146   
  

 

 

    

 

 

 

Total

   $ 11,301       $ 5,509   
  

 

 

    

 

 

 

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

  (8)   Long-Term Debt

 

Long-term debt, including the current portion of long-term debt, consists of the following:

 

     December 31,  
     2012      2011  

Debt due to Summit

   $  156,359       $ —     

1st lien facility

     —           2,000   

2nd lien facility

     —           39,000   

Subordinated secured credit note

     —           100,000   

Unsecured note payable to related party

     —           12,980   
  

 

 

    

 

 

 

Total debt

   $ 156,359       $ 153,980   
  

 

 

    

 

 

 

 

Interest costs incurred were $12,622, $14,621, $8,150 and $18,536 for the years ended December 31, 2012 and 2011 and the periods from May 27, 2010 to December 31, 2010 (Successor) and January 1, 2010 to May 26, 2010 (Predecessor), respectively.

 

  (a)   January 2012 Financing Transactions

 

On January 30, 2012, Summit refinanced its consolidated outstanding indebtedness, including $142.7 million of the Company’s indebtedness and interest thereon. As a result of the January 2012 financing transactions, Continental Cement’s existing debt was repaid by Summit and was replaced by $156.8 million of long-term debt due to Summit. In addition, Continental Cement recognized a charge to earnings of $0.3 million related to financing fees on the debt repaid.

 

The terms of Summit’s debt limit certain transactions of its subsidiaries, including those of Continental Cement. Continental Cement’s ability to incur additional indebtedness or issue certain preferred shares, pay dividends to the noncontrolling members, redeem stock or make other distributions, make certain investments, sell or transfer certain assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into certain transactions with affiliates are limited.

 

Continental Cement, excluding GAR, is named as a guarantor of Summit’s debt and the Company pledged substantially all of its assets as collateral for Summit’s debt.

 

Future maturities of long-term debt due to Summit as allocated to the Company as of December 31, 2012 are as follows:

 

2013

   $ 965   

2014

     965   

2015

     965   

2016

     965   

2017

     965   

Thereafter

     151,534   
  

 

 

 

Total

   $ 156,359   
  

 

 

 

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

  (b)   May 2010 Financing Transactions

 

Continental Cement entered into the Second Amended and Restated Credit Agreement (First Lien Credit Agreement) on May 27, 2010, with its syndicate banks providing a term loan commitment and revolving line of credit facility, with swing line and letter of credit sub-limit. Interest was charged on outstanding borrowings at increments of either, (a) the Base Rate, as defined in the credit agreement, plus 3.5% margin or (b) the greater of (i) 1.5% or (ii) the LIBOR plus 4.5% margin. The interest rate during 2011 varied from 6.0% to 6.75%. Continental Cement had the option of selecting either rate but must have minimum levels and increments for selecting the LIBOR rate. Interest on funds borrowed at the Base Rate was payable quarterly, except the swing line which was paid monthly. Alternatively, interest on funds borrowed based on the LIBOR rate was payable in either one-, two-, three-, or six-month intervals. Outstanding borrowings were secured by substantially all of Continental Cement’s assets and all such commitments expire on May 27, 2013. The revolving line of credit facility has $20,000 available and included a $10,000 sub-limit for standby letters of credit and a $2,000 swingline sub-limit. At December 31, 2012, all outstanding debt was reported as long-term debt in the accompanying balance sheet reflecting the Company’s intent and ability to refinance these borrowings on a long-term basis. On January 30, 2012, Continental Cement’s debt was refinanced.

 

Prior to the Transaction, the term loan was to mature in May 2013. Under the terms of the First Lien Credit Agreement, Continental Cement had to adhere to certain financial covenants related to debt and interest leverage calculated based on definitions laid out in the First Lien Credit Agreement. The senior leverage ratio, reported each quarter, was to be no greater than 2.75:1.0 through March 31, 2011 and no greater than 2.25:1 for the period June 30, 2011 to March 31, 2013. The total leverage ratio, reported each quarter, was to be no greater than 7.25:1.0 through March 31, 2011; 6.75:1.0 for the period June 30, 2011 to September 30, 2011; 6.5:1.0 for the period December 31, 2011; 6.25:1 for the period March 31, 2012 to June 30, 2012 and 6.0:1 for the period September 30, 2012 to March 31, 2013. The interest coverage ratio needed to be at least 1.5:1.0. Capital expenditures could not exceed $15,000 for fiscal year ended December 31, 2010; $17,000 for fiscal year ended December 31, 2011; $20,000 in fiscal years ending December 31, 2012 and 2013, and dividends were restricted, absent Continental Cement meeting certain requirements outlined in the First Lien Credit Agreement. As of December 31, 2011, Continental Cement was in compliance with all financial covenants. There were no financial covenants as of December 31, 2012 related to amounts due to Summit.

 

On May 27, 2010, Continental Cement amended its Second Lien Credit Agreement with its subordinated lenders of the subordinated secured credit facility totaling $100,000. The Second Lien Credit Agreement provided for a term loan at 10.0% until May 27, 2012, at which point the interest rate increases to 12.0%, maturing August 28, 2013 and was subject to the same financial covenants in the First Lien Credit Agreement.

 

On May 27, 2010, Continental Cement executed an unsecured note payable at 11% from a related party totaling $12,980. Payment including principal and interest were due in one lump-sum on May 30, 2015, subject to a subordination agreement required by Continental Cement’s term loan.

 

Borrowings under the First Lien Credit Agreement, Second Lien Credit Agreement, the subordinated secured credit note and the unsecured note payable were retired in conjunction with the January 2012 financing transactions, as described above.

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

  (9)   Members’ Interest

 

Business affairs of the Company are managed by the Board composed of up to seven Directors. As of December 31, 2012 and 2011, Summit Members are entitled to appoint four Directors to the Board and Rollover Members (the Predecessor Members that collaborated with Summit to complete the Transaction) are entitled to appoint three Directors to the Board. Any Director may be removed from the Board with or without cause at any time by the Directors entitled to appoint such Director.

 

The LLC Agreement provides that resolutions of the Board of Directors require the consent of at least a majority of the Directors, with the exception of matters requiring Special Board Approval. Special Board Approval requires the consent of one or two directors appointed by the Rollover Members (depending on the level of ownership held by the Rollover Members in the aggregate as of the approval date). Such matters included (1) a merger or consolidation of Continental Cement with or into any other company, (2) any transfer of Class A or Class B Units that would cause a change in control, (3) any acquisition or divestiture by the Company of any of its subsidiaries at a price equal to or greater than $15,000, (4) the creation or issuance of any new Units, any new class of Units or any other form of equity securities, (5) the liquidation, dissolution or winding up of the Company and (6) any amendments to the LLC Agreement or other governing documents of the Company except as specifically permitted by the LLC Agreement.

 

  (a)   Class A Units

 

The Company has issued 100 Class A Units as of December 31, 2012 and 2011 to Summit. These units represent a 70% economic interest in the Company and have a preference in liquidation to the Class B Units. Class A Units are entitled to a priority distribution which accrues daily and compounds annually and requires that Continental Cement make distributions ahead of the Class B Units up to an amount equal to the capital contributions made by Summit in respect to the Class A Units, plus interest on such capital contributions of 11%, to Class A Unit holders prior to making distributions to the Class B Unit holders. To the extent that the priority return is not made in a given year, the amount of the priority return will increase the liquidation preference of the Class A Units.

 

  (b)   Class B Units

 

The Company has issued 100,000,000 Class B Units as of December 31, 2012 and 2011. These units represent a 30% economic interest in Continental Cement and are subordinate to the Class A Units.

 

The LLC Agreement also provides Summit with a call option that allows it to call the Class B Units held by the original owners of Continental Cement, at a strike price that approximates fair value, after the sixth anniversary of the Transaction, on the date that Summit affects an initial public offering or upon any other change of control of Summit. The original owners have a put option that allows them to put the Class B Units to Summit, at a strike price that approximates fair value, exercisable on the second anniversary of the Transaction if there is a change of control of the Summit Class A units or after the sixth anniversary of the Transaction. Finally, the Agreement includes transfer restrictions which prohibit the Rollover Members from transferring their Class B Units without the consent of the Board until the fifth anniversary after the Transaction.

 

Net income or loss from operations is generally allocated in a manner such that the capital account of each Member is equal to the distributions that would be made to such Member if the Company were dissolved, its affairs wound up, its assets and liabilities settled for cash and the net assets of the Company were distributed in accordance with the LLC Agreement.

 

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

  (c)   Predecessor

 

On March 31, 2009, the Company entered into an agreement with its subordinated secured lenders providing for the automatic execution of an amended operating agreement contingent on the event that $10,152 of the subordinated notes issued on March 31, 2009, were not repaid in full before August 31, 2009. The contingent amended agreement, if executed, granted membership units to the subordinated secured lenders on a graduated scale. These membership units are puttable at fair value with a floor of $0.925 per unit by the subordinated secured lenders after five years and contain certain protective rights.

 

At May 26, 2010, 8,108,108 membership units had been issued based on the passage without payment of the August 31, 2009, November 30, 2009, and February 28, 2010 early payment dates. On February 28, 2010, 2,844,950 units were issued to the subordinated secured lenders valued at $3,528.

 

The Company voluntarily adopted FASB Accounting Standards Codification (ASC) 480-10-S99-3A and because the membership units are puttable by and at the discretion of the subordinated secured lenders, classified the membership units in mezzanine equity. The Company elected to recognize changes in the greater of redemption value or fair value as they occur and adjust the carrying amount of the instrument to equal the greater of redemption value or fair value at the end of each reporting period. The fair value is determined using Level 3 inputs and redemption value is determined based on the contractual terms of the underlying agreement. A $1,526 fair value adjustment to member’s interest was recognized in the period from January 1, 2010 to May 26, 2010. These membership units were settled for no compensation with the Transaction discussed in note 2.

 

(10)   Employee Benefit Plans

 

  (a)   Deferred Compensation Plan

 

The Company sponsors an Employee 401(k) Savings Plan for all salaried employees and certain union employees. The plan provides for various required and discretionary Company matches of employees’ eligible compensation contributed to the plan and a discretionary profit sharing contribution as determined by the Board. The Company contributions to the plan were $385, $294, $192 and $133 for the years ended December 31, 2012 and 2011 and the periods from May 27, 2010 to December 31, 2010 (Successor) and January 1, 2010 to May 26, 2010 (Predecessor), respectively.

 

  (b)   Defined Benefit Plans and Postretirement Benefits Other than Pensions

 

Continental Cement sponsors two noncontributory defined benefit pension plans for hourly and salaried employees. The salary employee pension plan was closed to new participants and frozen in January 2000 and the hourly employee pension plan was closed to new participants in May 2003. Pension benefits for certain eligible hourly employees are based on a monthly pension factor for each year of credited service. Pension benefits for certain eligible salaried employees are generally based on years of service and average eligible compensation.

 

Continental Cement also sponsors healthcare and life insurance benefits for certain eligible retired employees, which are not funded. The retiree healthcare and life insurance plan was closed for salaried employees in January 2003 and hourly employees in July 2006. Effective January 1, 2012, the Company eliminated all future retiree health and life coverage for active salaried, nonunion hourly and

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

certain union employees that retire on or after January 1, 2012. This change in the other postretirement benefit plans resulted in a $1.7 million reduction in the December 31, 2011 accumulated benefit obligations. The funded status of the pension and other postretirement benefit plans is recognized in the balance sheets as the difference between the fair value of plan assets and the benefit obligations. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (“PBO”) and for the other postretirement benefit plans the benefit obligation is the accumulated postretirement benefit obligation (“APBO”). The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The APBO represents the actuarial present value of postretirement benefits attributed to employee services already rendered. Starting in 2010, the PBO equals the APBO because no employees included in the plan have future salary increases. The fair value of plan assets represents the current market value of assets held by an irrevocable trust fund for the sole benefit of participants. The measurement of the benefit obligation is based on Continental Cement’s estimates and actuarial valuations provided by third-party actuaries. These valuations reflect the terms of the plan and use participant-specific information such as compensation, age and years of service, as well as certain assumptions that require significant judgment, including estimates of discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates.

 

The Company uses its fiscal year-end as the measurement date for its defined benefit pension plans and for its other postretirement benefit plans.

 

Obligations and Funded Status - The following information is as of December 31, 2012 and 2011:

 

     2012     2011  
     Pension
benefits
    Other
benefits
    Pension
benefits
    Other
benefits
 

Change in benefit obligations:

        

Beginning of period

   $ 26,514      $ 14,467      $ 23,732      $ 13,110   

Service cost

     276        207        275        227   

Interest cost

     1,056        585        1,161        710   

Actuarial loss

     2,347        1,597        2,710        3,390   

Change in plan provisions

     —          —          —          (1,705

Benefits paid

     (1,518     (1,046     (1,364     (1,265
  

 

 

   

 

 

   

 

 

   

 

 

 

End of period

     28,675        15,810        26,514        14,467   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in plan assets:

        

Fair value of assets at beginning of period

     16,639        —          16,531        —     

Actual return on plan assets

     1,205        —          43        —     

Employer contributions

     1,537        1,046        1,428        1,265   

Benefits paid

     (1,518     (1,046     (1,363     (1,265
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair value of assets at end of period

     17,863        —          16,639        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Liability recongized

   $ 10,812     $ 15,810     $ 9,875     $ 14,467  
  

 

 

   

 

 

   

 

 

   

 

 

 

Current liabilities

   $ —        $ (1,055   $ —        $ (1,021

Noncurrent liabilities

     (10,812     (14,755     (9,875     (13,447
  

 

 

   

 

 

   

 

 

   

 

 

 

Liability recognized

   $ (10,812   $ (15,810   $ (9,875   $ (14,468
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

Approximately $1.1 million and $1.0 million of the obligation for postretirement benefits is included in current liabilities as of year-end 2012 and 2011, respectively.

 

     2012     2011  
     Pension
benefits
     Other
benefits
    Pension
benefits
     Other
benefits
 
            

Amounts recognized in accumulated other comprehensive income:

          

Net actuarial loss

   $ 8,056       $ 5,501      $ 5,875       $ 4,213   

Prior service cost

     —           (1,526     —           (1,705
  

 

 

    

 

 

   

 

 

    

 

 

 

Total amount recognized

   $ 8,056       $ 3,975      $ 5,875       $ 2,508   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

The amount recognized in accumulated other comprehensive income (“AOCI”) is the actuarial loss, which has not yet been recognized in periodic benefit cost. At December 31, 2012, the actuarial loss expected to be amortized from AOCI to periodic benefit cost in 2013 is $0.4 million and $0.2 million for the pension and postretirement obligations, respectively.

 

     Successor            Predecessor  
     Year ended December 31,     May 27, 2010 to
December 31, 2010
           January 1, 2010 to
May 26, 2010
 
     2012     2011             
     Pension
benefits
    Other
benefits
    Pension
benefits
    Other
benefits
    Pension
benefits
     Other
benefits
           Pension
benefits
     Other
benefits
 

Amounts recognized in other comprehensive loss:

                       

Net actuarial loss

   $ 2,444      $ 1,597      $ 4,066      $ 3,390      $ 1,814       $ 894           $ 1,696       $ 2,242   

Prior service cost

                     (1,705                         (47      80   

Amortization of prior year service cost

            180                                                    

Gain due to curtailment

                                                     (38        

Amortization of loss

     (261     (312     (5     (71                         (300      (87
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

        

 

 

    

 

 

 

Total amount recognized

   $ 2,183      $ 1,465      $ 4,061      $ 1,614      $ 1,814       $ 894           $ 1,311       $ 2,235   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

        

 

 

    

 

 

 

 

     Successor            Predecessor  
     Year ended December 31,      May 27, 2010 to
December 31, 2010
           January 1, 2010 to
May 26, 2010
 
     2012     2011              
     Pension
benefits
    Other
benefits
    Pension
benefits
    Other
benefits
     Pension
benefits
    Other
benefits
           Pension
benefits
     Other
benefits
 

Components of net periodic benefit cost:

                       

Service cost

   $ 276        207        275        227         121        116             84         59   

Interest cost

     1,056        585        1,161        710         677        380             507         256   

Amortization of loss

     261        312        5        69                            347         7   

Expected return on plan assets

     (1,301     (180     (1,400             (788                 (566        
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

        

 

 

    

 

 

 

Net periodic pension benefit cost

     292        924        41        1,006         10        496             372         322   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

        

 

 

    

 

 

 

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

Assumptions - Weighted-average assumptions used to determine the benefit obligations are:

 

     2012     2011  
     Pension
benefits
     Other
benefits
    Pension
benefits
     Other
benefits
 

Discount rate

     3.30% – 3.57%         3.41     3.89% – 4.07%         4.00

 

The expected long-term return on plan assets is based upon the Company’s estimation of what a portfolio, with the target allocation described below, will earn over a long-term horizon. The discount rate is derived using the Citigroup Pension Discount Curve.

 

Weighted-average assumptions used to determine net periodic benefit cost for the period are:

 

     Year-end 2012     Year-end 2011  
     Pension
benefits
    Other
benefits
    Pension
benefits
    Other
benefits
 

Discount rate

     3.89% – 4.07%        4.00     4.94% – 5.12%        5.07

Expected long-term rate of return on plan assets

     7.50     NA        8.50     NA   

 

Assumed health care cost trend rates are 9% grading to 7% and 7% grading to 5% as of year-end 2012 and 2011, respectively. Assumed health care cost trend rates have a significant effect on the amounts reported for the Company’s post-retirement medical and life plans. A one percentage-point change in assumed health care cost trend rates would have the following effects (in thousands):

 

     2012     2011  
     Increase      (Decrease)     Increase      (Decrease)  

Total service cost and interest cost components

   $ 73       $ (63   $ 93       $ (77

Estimated APBO

     1,555         (1,331     1,348         (1,145

 

Plan Assets - The defined benefit pension plans’ (the “Plans”) investment strategy is to minimize investment risk while generating acceptable returns. The Plans currently invest a relatively high proportion of the plan assets in fixed income securities, while the remainder is invested in equity securities. The equity securities are diversified into funds with growth and value investment strategies. The target allocation for plan assets is as follows: equity securities – 30%; fixed income securities –65%; and cash reserves –5%. The Plans’ current investment allocations are within the tolerance of the target allocation.

 

Fair value determinations are based on the following hierarchy, which prioritizes the inputs used to measure fair value:

 

Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.

 

Level 2 – Inputs other than Level 1 that are based on observable market data, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs that are observable that are not prices and inputs that are derived from or corroborated by observable markets.

 

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

Level 3 – Developed from unobservable data, reflecting the Company’s own assumptions.

 

The Company has no level 3 investments as of or for the years-ended December 31, 2012 and 2011.

 

At year-end 2012 and 2011, the trust was invested largely in publicly traded equities and fixed-income securities, but may invest in other asset classes in the future consistent with our investment policy. The Plans’ investments in equity assets include U.S. and international securities and equity funds. The Plans’ investments in fixed-income assets include U.S. Treasury and U.S. agency securities and corporate bonds. Retirement plan assets are reported at fair value at each measurement date. The Company estimates the fair value of the Plans’ assets using various valuation techniques and, to the extent available, quoted market prices in active markets or observable market inputs are used in estimating the fair value of the Plans’ assets. The descriptions and fair value methodologies for the Plans’ assets are as follows:

 

Cash - The carrying amounts of cash approximate fair value due to the short-term maturity.

 

Equity Securities - Equity securities are valued at the closing market price reported on a U.S. exchange where the security is actively traded and are therefore classified as Level 1 assets.

 

Fixed Income Securities – Corporate and government bonds are classified as Level 2 assets, as they are either valued at quoted market prices from observable pricing sources at the reporting date or valued based upon comparable securities with similar yields and credit ratings.

 

The fair value of the Company’s pension plans’ assets by asset class and fair value hierarchy level as of year-end 2012 and 2011 are as follows:

 

     Fair value measurements at year-end
2012
 
     Total fair
value
     Quoted
prices

in active
markets

for identical
assets

(Level 1)
     Observable
inputs

(Level  2)
 

Cash

   $ 1,656       $ 1,656       $ —     

Equity securities:

        

U.S. Large cap value

     1,063         1,063         —     

U.S. Large cap growth

     1,037         1,037         —     

U.S. Mid cap value

     542         542         —     

U.S. Mid cap growth

     536         536         —     

U.S. Small cap value

     546         546         —     

U.S. Small cap growth

     539         539         —     

International

     1,134         1,134         —     

Fixed income securities:

        

Intermediate-government

     1,247         —           1,247   

Intermediate-corporate

     4,402         —           4,402   

Short term-government

     2,038         —           2,038   

Short term-corporate

     3,123         —           3,123   
  

 

 

    

 

 

    

 

 

 

Total

   $ 17,863       $ 7,053       $ 10,810   
  

 

 

    

 

 

    

 

 

 

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

     Fair value measurements at year-end 2011  
     Total fair
value
     Quoted
prices in
active
markets
for identical
assets
(Level 1)
     Observable
inputs
(Level 2)
 

Cash

   $ 1,217       $ 1,217       $ —     

Equity securities:

        

U.S. Large cap value

     1,399         1,399         —     

U.S. Large cap growth

     1,388         1,388         —     

U.S. Mid cap value

     700         700         —     

U.S. Mid cap growth

     687         687         —     

U.S. Small cap value

     701         701         —     

U.S. Small cap growth

     705         705         —     

International

     1,378         1,378         —     

Fixed income securities:

        

Intermediate-government

     1,100         —           1,100   

Intermediate-corporate

     2,418         —           2,418   

Short term-government

     2,067         —           2,067   

Short term-corporate

     2,879         —           2,879   
  

 

 

    

 

 

    

 

 

 

Total

   $ 16,639       $ 8,175       $ 8,464   
  

 

 

    

 

 

    

 

 

 

 

Cash Flows - The Company expects to contribute approximately $1.3 million to its pension plans and $1.1 million to its other postretirement benefit plans in 2013.

 

The estimated benefit payments for each of the next five years and the five-year period thereafter are as follows:

 

     Pension
benefits
     Other
benefits
 

2013

   $ 1,718       $ 1,055   

2014

     1,707         1,113   

2015

     1,715         1,022   

2016

     1,748         1,079   

2017

     1,744         945   

2018–2022

     8,738         4,724   
  

 

 

    

 

 

 

Total

   $ 17,370       $ 9,938   
  

 

 

    

 

 

 

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

(11)   Accrued Mining Reclamation

 

The Company has asset retirement obligations arising from regulatory requirements to perform certain reclamation activities at the time that certain quarries are closed. The liability was initially measured at fair value and subsequently is adjusted for accretion expense, payments and changes in the amount or timing of the estimated cash flows. The corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s remaining useful life. The following table presents the activity for the asset retirement obligations for the years-ended December 31, 2012 and 2011:

 

     Year ended December 31,  
       2012          2011    

Beginning balance

   $ 687       $ 659   

Increase in cost estimate

     532         —    

Accretion expense

     30         28   
  

 

 

    

 

 

 

Ending balance

   $ 1,249       $ 687   
  

 

 

    

 

 

 

 

(12)   Commitments and Contingencies

 

  (a)   Litigation and Claims

 

Continental Cement is party to certain legal actions arising from the ordinary course of business activities. In the opinion of management, these actions are without merit or that the ultimate disposition, if any, resulting from them will not have a material effect on Continental Cement’s consolidated financial position, results of operations or liquidity. Continental Cement’s policy is to record legal fees as incurred.

 

  (b)   Environmental Remediation

 

Continental Cement’s mining operations are subject to and affected by Federal, state and local laws and regulations relating to the environment, health and safety and other regulatory matters. These operations require environmental operating permits, which are subject to modification, renewal and revocation. Continental Cement regularly monitors and reviews its operations, procedures and policies for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in the operation of Continental Cement’s business, as it is with other companies engaged in similar businesses and there can be no assurance that environmental liabilities will not have a material adverse effect on Continental Cement in the future.

 

On October 14, 1999, the Missouri Department of Natural Resources (MDNR) and the EPA granted the Company a Final Hazardous Waste Management Facility Permit that authorizes Continental Cement to handle, treat, store, recover energy from and dispose of hazardous waste as a supplemental fuel source (RCRA Part B Permit). This permit also incorporated certain Boiler and Industrial Furnace (BIF) regulation emission limits and operating parameters that the Company was subject to prior to the Maximum Achievable Control Technology Standards. On October 13, 2009, a permit renewal application was submitted to MDNR. MDNR has authorized the Company to operate under interim status. Once approved, the renewal will cover another ten-year period.

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

On July 11, 2006, Continental Cement received a Construction Permit for a new kiln system to replace the system in operation at that time. The new kiln began shakedown operations in 2008 and is operating under the new Hazardous Waste Combustor Maximum Achievable Control Technology Standards. Continental Cement has performed the required confirmatory permit tests and submitted a Notification of Compliance to the regulatory agencies. The amended Construction Permit is in place and Continental Cement is now preparing an application for renewal of the Part 70 Operating Permit that will encompass the new permit requirements as well as those that still apply to the components of the existing facility.

 

  (c)   Other

 

In February 2011, Continental Cement incurred a property loss related to a sunken barge with cement product aboard. At which time, the Company recognized a loss of $0.6 million for the lost product and property. As of December 31, 2012, the Company has a $0.9 million accrual for the estimated remaining costs to remove the barge. Any insurance recoveries from the loss will be recorded when probable.

 

Continental Cement is obligated under various firm purchase commitments for certain raw materials and services that are in the ordinary course of business. Management does not expect any significant changes in the market value of these goods and services during the commitment period that would have a material adverse effect on the financial position, results of operations, and cash flows of Continental Cement. The terms of the purchase commitments are generally less than one year.

 

Approximately 64% of the Company’s employees are represented by labor organizations under collective bargaining agreements. The collective bargaining agreements expire between 2013 and 2015. Historically, the Company has been successful at negotiating successor agreements without any material disruptions to operating activities. The Company does not expect the 2013 negotiations to have a material impact on its results of operations, financial position or liquidity.

 

(13)   Related-Party Transactions

 

The Company purchased equipment from a certain member of the Company for approximately $2,130 during the year ended December 31, 2011. In addition, interest expense of $90 was recorded on this purchase during the year ended December 31, 2011. This related party equipment purchase and interest was included in accounts payable at December 31, 2011 and paid in 2012.

 

The Company owes $2.1 million to a certain member of Continental Cement for accrued interest on a related party note. The principal balance on the note was repaid as part of the January 2012 financing transactions.

 

Cement sales to companies owned by certain members of Continental Cement were approximately $12.5 million, $9.5 million, $9.0 million and $4.0 million for the years ended December 31, 2012 and December 31, 2011 and for the periods from May 27, 2010 to December 31, 2010 (Successor) and from January 1, 2010 to May 26, 2010 (Predecessor), respectively, and accounts receivables due from these parties were approximately $1.0 million and $1.3 million as of December 31, 2012 and 2011, respectively.

 

Cement sales to other companies owned by Summit were approximately $3.8 million, $2.8 million and $3.9 million for the years ended December 31, 2012 and December 31, 2011 and for the period from May 27, 2010 to December 31, 2010, respectively, and accounts receivables due from these parties were approximately $0.2 million and $0.2 million as of December 31, 2012 and 2011, respectively.

 

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CONTINENTAL CEMENT COMPANY, L.L.C. AND SUBSIDIARY

 

Notes to Consolidated Financial Statements

December 31, 2012 and 2011

(In thousands)

 

Waste fuel sales by Continental Cement to American Environmental Services, Inc. (related through common ownership in Green America Recycling) were approximately $0.7 million for the year ended December 31, 2011 and the period from May 27, 2010 through December 31, 2010 (Successor) and $0.4 million for the period from January 1, 2010 through May 26, 2010 (Predecessor). During 2011, the Company purchased the remaining interest in Green America Recycling for $1, at which point American Environmental Services, Inc. was no longer a related party.

 

From January 1, 2010 to May 26, 2010 (Predecessor), the Company’s Operating Agreement provided for $121 for non-compete fee to be paid to the Managing Member of the Company.

 

(14)   Supplemental Cash Flow Information

 

Supplemental cash flow information is as follows:

 

     Successor            Predecessor  
            May  27,
2010
to
December 31,
2010
           January  1,
2010

to
May  26,
2010
 
     Year ended December 31,          
     2012     2011          

Cash paid for interest

   $ 7,353      $ 12,946       $ 22,389           $ 8,321   

Non cash financing activities:

              

Financing fees

   $ —       $ —        $ 424           $ 800   

Redeemable members unit

     —         —          —              3,528   

Long-term debt due to Summit

     156,842        —          —              —    

Repayment of long-term debt and accrued interest by Summit

     (156,842     —          —              —    

 

(15)   Leasing Arrangements

 

Rent expense incurred, including short term rentals and primarily related to land and equipment, was $524, $426, $542, and $521 for the years ended December 31, 2012 and 2011 and the periods from May 27, 2010 to December 31, 2010 (Successor) and January 1, 2010 to May 26, 2010 (Predecessor), respectively.

 

Minimum rental commitments under long-term operating leases as of December 31, 2012, are as follows:

 

Year ending December 31:

  

2013

   $ 377  

2014

     209  

2015

     177  

2016

     172  

2017

     172  

 

(16)   Subsequent Events

 

The Company has evaluated its December 31, 2012 consolidated financial statements for subsequent events through March 27, 2013, the date the financial statements were available to be issued.

 

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LOGO

 

INDEPENDENT AUDITOR’S REPORT

 

To the Board of Directors

 

Cornejo & Sons, Inc. and Subsidiaries

 

We have audited the accompanying consolidated balance sheets of Cornejo & Sons, Inc. and Subsidiaries as of October 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended October 31, 2009, 2008 and 2007. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cornejo & Sons, Inc. and Subsidiaries as of October 31, 2009 and 2008 and the results of their operations and their cash flows for the years ended October 31, 2009, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Allen, Gibbs & Houlik, L.C.

 

December 15, 2011

 

301 N. Main, Suite 1700  ·  Wichita, Kansas 67202-4868  ·  (316)  267-7231  ·   (316)  267-0339  fax  ·  www.aghlc.com

 

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CORNEJO & SONS, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

October 31, 2009 and 2008

 

     2009      2008  
ASSETS      

CURRENT ASSETS

     

Cash and cash equivalents

   $ 11,659,720       $ 5,343,679   

Receivables (including retainage), less allowance for doubtful accounts of $47,385 and $58,597

     7,314,880         10,738,012   

Notes receivable, related party

     101,997         11,320   

Inventory

     640,827         295,290   

Costs and estimated earnings in excess of billings on uncompleted contracts

     2,225,358         1,934,321   

Prepaid expenses

     239,393         132,309   
  

 

 

    

 

 

 

Total current assets

     22,182,175         18,454,931   
  

 

 

    

 

 

 

PROPERTY AND EQUIPMENT

     

Property and equipment

     47,443,915         42,100,844   

Less accumulated depreciation

     30,261,970         26,739,922   
  

 

 

    

 

 

 
     17,181,945         15,360,922   
  

 

 

    

 

 

 

OTHER ASSETS

     

Cash surrender value of life insurance

     931,180         959,101   

Land and buildings held for investment

     1,243,184         1,243,184   

Notes receivable, related party

     1,180,880         1,066,119   

Income tax deposit

     449,446         337,123   

Goodwill

     1,949,021         1,949,021   

Other assets

     2,251,245         2,459,590   
  

 

 

    

 

 

 
     8,004,956         8,014,138   
  

 

 

    

 

 

 
   $ 47,369,076       $ 41,829,991   
  

 

 

    

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY      

CURRENT LIABILITIES

     

Current maturities of long-term debt

   $ 792,619       $ 1,121,360   

Current maturities of related party notes payable

     267,705         441,455   

Accounts payable, including retainage of $1,065,191 and $857,442

     6,243,871         5,096,669   

Billings in excess of costs and estimated earnings on uncompleted contracts

     1,439,934         1,537,568   

Accrued liabilities:

     

Salaries and wages

     256,053         462,853   

Property, payroll, and other taxes

     1,102,164         1,326,411   

Other

     213,176         225,521   
  

 

 

    

 

 

 

Total current liabilities

     10,315,522         10,211,837   
  

 

 

    

 

 

 

Long-term debt, less current maturities

     1,824,753         3,415,360   

Related party notes payable, less current maturities

     762,206         965,082   

Deferred income taxes

     160,151         168,000   
  

 

 

    

 

 

 

Total long-term liabilities

     2,747,110         4,548,442   
  

 

 

    

 

 

 

STOCKHOLDERS’ EQUITY

     

Common stock — no par value

     30,000         30,000   

Retained earnings

     37,085,246         29,848,514   
  

 

 

    

 

 

 
     37,115,246         29,878,514   

Less treasury stock — 1,221,000 shares at cost

     2,808,802         2,808,802   
  

 

 

    

 

 

 

Total stockholders’ equity

     34,306,444         27,069,712   
  

 

 

    

 

 

 
   $ 47,369,076       $ 41,829,991   
  

 

 

    

 

 

 

 

The accompanying notes are an integral

part of these consolidated financial statements.

 

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Table of Contents

CORNEJO & SONS, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended October 31, 2009, 2008 and 2007

 

     2009     2008     2007  

Revenues earned

   $ 84,507,746      $ 79,554,879      $ 65,632,472   

Cost of revenues earned

     66,246,714        64,524,133        54,005,588   
  

 

 

   

 

 

   

 

 

 

Gross profit

     18,261,032        15,030,746        11,626,884   

Selling, general, and administrative expenses

     (8,655,619     (6,767,591     (6,103,254

Gain on disposal of property and equipment

     1,420,833        18,244        199,075   
  

 

 

   

 

 

   

 

 

 

Income from operations

     11,026,246        8,281,399        5,722,705   
  

 

 

   

 

 

   

 

 

 

Other income (expense):

      

Interest and dividend income

     93,875        127,655        103,062   

Interest expense

     (236,439     (299,504     (235,760

Miscellaneous

     249,638        270,965        178,908   
  

 

 

   

 

 

   

 

 

 
     107,074        99,116        46,210   
  

 

 

   

 

 

   

 

 

 

Net income before taxes

     11,133,320        8,380,515        5,768,915   

Income tax benefit (expense)

     5,000        (589,000     (119,000
  

 

 

   

 

 

   

 

 

 

Net income

   $ 11,138,320      $ 7,791,515      $ 5,649,915   
  

 

 

   

 

 

   

 

 

 

 

The accompanying notes are an integral

part of these consolidated financial statements.

 

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CORNEJO & SONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended October 31, 2009, 2008 and 2007

 

    Common Stock –
Class A
    Common Stock –
Class B
                   
    Number
of
Shares
    Par
Value
    Number
of
Shares
    Par
Value
    Retained
Earnings
    Treasury
Stock
    Total  

Balance, October 31, 2006

    17,787      $ 300        1,760,906      $ 29,700      $ 21,608,179      $ (2,808,802   $ 18,829,377   

Stockholder distributions

            (2,968,947       (2,968,947

Net income

            5,649,915          5,649,915   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, October 31, 2007

    17,787        300        1,760,906        29,700        24,289,147        (2,808,802     21,510,345   

Stockholder distributions

            (2,232,148       (2,232,148

Net income

            7,791,515          7,791,515   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, October 31, 2008

    17,787        300        1,760,906        29,700        29,848,514        (2,808,802     27,069,712   

Stockholder distributions

            (3,901,588       (3,901,588

Net income

            11,138,320          11,138,320   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, October 31, 2009

    17,787      $ 300        1,760,906      $ 29,700      $ 37,085,246      $ (2,808,802   $ 34,306,444   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The accompanying notes are an integral

part of these consolidated financial statements.

 

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Table of Contents

CORNEJO & SONS, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended October 31, 2009, 2008 and 2007

 

     2009     2008     2007  

Cash flows from operating activities:

      

Net income

   $ 11,138,320      $ 7,791,515      $ 5,649,915   

Adjustments to reconcile net income to net cash flows from operating activities:

      

Depreciation and amortization

     4,147,493        4,000,603        3,210,240   

Gain on disposal of property and equipment

     (1,420,833     (18,244     (199,075

Deferred income taxes

     (7,849     155,410        126,017   

Changes in operating assets and liabilities:

      

Receivables

     3,423,132        (2,225,351     (1,930,898

Inventory

     (345,537     19,152        (237,208

Costs and estimated earnings in excess of billings on uncompleted contracts

     (291,037     (841,114     126,466   

Interest receivable

     —          2,301        (1,020

Prepaid expenses

     (107,084     3,548        (35,412

Income tax deposit

     (112,323     59,032        (218,197

Accounts payable

     1,147,202        (194,712     1,549,863   

Billings in excess of costs and estimated earnings on uncompleted contracts

     (97,634     211,790        (70,172

Accrued liabilities

     (443,392     654,251        (16,226
  

 

 

   

 

 

   

 

 

 

Net cash flow from operating activities

     17,030,458        9,618,181        7,954,293   
  

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

      

Proceeds from sale of property and equipment

     1,971,409        41,877        354,238   

Acquisition of property and equipment

     (6,309,976     (4,634,813     (3,347,187

Disbursement of notes receivable, related party

     (496,838     (1,418,366     (380,418

Proceeds from notes receivable, related party

     291,400        350,327        510,916   

Purchase of other assets

     (771     (1,406     (1,136

Proceeds from sale of land and buildings held for investment

     —          25,000        11,100   

Purchase of land and buildings held for investment

     —          —          (92,946

Decrease in cash surrender value of life insurance

     27,921        728,927        91,686   
  

 

 

   

 

 

   

 

 

 

Net cash flow from investing activities

     (4,516,855     (4,908,454     (2,853,747
  

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

      

Distributions to stockholders

     (3,901,588     (2,232,148     (2,968,947

Payment of long-term debt

     (2,551,503     (2,898,054     (1,092,470

Proceeds from long-term debt

     632,155        423,528        988,616   

Payment of related party notes payable

     (376,626     (173,397     (245,399

Proceeds from related party notes payable

     —          1,425,000        —     
  

 

 

   

 

 

   

 

 

 

Net cash flow from financing activities

     (6,197,562     (3,455,071     (3,318,200
  

 

 

   

 

 

   

 

 

 

Increase in cash and cash equivalents

     6,316,041        1,254,656        1,782,346   

Cash and cash equivalents, beginning of year

     5,343,679        4,089,023        2,306,677   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of year

   $ 11,659,720      $ 5,343,679      $ 4,089,023   
  

 

 

   

 

 

   

 

 

 

Non-cash transaction:

      

Acquisition of other assets and property and equipment with the issuance of long-term debt

   $ —        $ 3,500,000      $ —     
  

 

 

   

 

 

   

 

 

 

 

The accompanying notes are an integral

part of these consolidated financial statements.

 

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Table of Contents

CORNEJO & SONS, INC. AND SUBSIDIARIES

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Business Operations — Cornejo & Sons, Inc. (Company) was incorporated on May 2, 1983, and performs construction, excavation, and paving contracting services for governmental agencies and private industry primarily within the state of Kansas. The work is generally performed under fixed price contracts. In connection with its normal construction activities, the Company may be required to purchase bid and performance bonds. The surety issuing the bonds has recourse against certain of the Company’s assets in the event the surety is required to honor the bonds. The length of the Company’s contracts varies, but is generally under one year. Billings are submitted as work progresses, and retainages are generally due upon job completion and acceptance.

 

The Company’s wholly-owned subsidiary, Concrete Materials Company of Kansas, L.L.C. (CMC), operates concrete production facilities and provides concrete to the Company, as well as unrelated third parties.

 

The Company’s wholly-owned subsidiary, Cornejo Materials, Inc., (CMI) operates sand production facilities and provides sand and top soil to the Company and CMC, as well as unrelated third parties.

 

The Company’s wholly-owned subsidiary, Allmetal Recycling, L.L.C. (AMR), operates a facility that buys and accepts scrap metal from the Company as well as unrelated third parties, and sells metal.

 

Principles of Consolidation — The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries (Companies). All material intercompany accounts and transactions are eliminated in the consolidation. Management has determined that there are no other entities that require consolidation under authoritative literature.

 

Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect: (1) the reported amounts of assets and liabilities, (2) disclosures such as contingencies, and (3) the reported amounts of revenues and expenses included in such financial statements. Actual results could differ from those estimates.

 

Cash and Cash Equivalents — The Companies consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Companies maintain cash in bank accounts that, at times, may exceed federally insured limits. The Companies have not experienced any losses in such accounts and believe they are not exposed to any significant credit risk on cash and cash equivalents.

 

Receivables — Receivables are carried at the original billing amount less an estimate made for doubtful receivables based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received.

 

A receivable is considered to be past due if any portion of the receivable balance is outstanding more than 90 days. Interest is charged on receivables outstanding for more than 60 days and is recognized as it is charged. Interest charges are suspended when the balance is deemed uncollectible.

 

Inventory — Inventory consists of various asphalt and concrete aggregates and is stated at the lower of cost (determined on the first-in, first-out basis) or market.

 

Contracts — Profits on long-term contracts are recorded on the basis of the Company’s estimates of the percentage-of-completion of individual contracts. That portion of the total contract is accrued, which is allocable, on the basis of the Company’s engineering estimates of the percentage-of-completion, to contract expenditures

 

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

incurred and work performed. In circumstances where estimating the final outcome is impractical except to assure no loss will be incurred, the Company uses a zero estimate of profit.

 

Contract costs include all direct costs plus indirect shop costs related to contract performance. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Revisions in the costs and profit estimates during the course of the work are reflected in the accounting period in which the facts that require the revision become known.

 

The asset, “costs and estimated earnings in excess of billings on uncompleted contracts,” represents costs in excess of revenues recognized. The liability, “billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized.

 

Non-Contract Revenue Recognition — CMC and CMI generally recognize revenue when product is delivered to the customers. AMR generally recognizes revenue upon the sale of metal to a customer in accordance with pre-approved agreements.

 

Property and Equipment — Property and equipment are carried at cost. Depreciation is computed using both the straight-line and declining-balance methods. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to expense as incurred; significant renewals and betterments are capitalized. Deduction is made for retirements resulting from renewals or betterments.

 

Goodwill — The Companies record as goodwill the excess of purchase price over the fair value of the identifiable net assets acquired. Authoritative literature prescribes a two-step process for impairment testing of goodwill, which is performed annually, as well as when an event triggering impairment may have occurred. The first step tests for impairment, while the second step, if necessary, measures the impairment. The Companies have elected to perform the annual analysis during the fourth quarter of each fiscal year as of October 31 st . No indicators of impairment were identified as of October 31, 2009 or 2008.

 

Other Assets — Other assets consist of non-compete agreements and acquired landfill rights of $2,246,733 less accumulated amortization, and are amortized on the straight-line method over their estimated useful lives, generally 5 years and 15 years, respectively. Total amortization was $209,116, $184,152 and $59,334 for the years ended October 31, 2009, 2008 and 2007, respectively. Estimated aggregate amortization expenses will approximate $209,116 for each of the next three years and then will be approximately $173,000 after that until each asset is fully amortized.

 

Fair Value of Financial Instruments — Non-derivative financial instruments included in the balance sheets are cash value of life insurance. These instruments are carried at amounts approximating fair value.

 

Income Taxes — Effective November 1, 2002, the Company and CMC each elected to be taxed as an ‘S’ Corporation. CMI was a ‘C’ Corporation for tax purposes until electing to be taxed as an ‘S’ Corporation effective January 1, 2009. AMR is organized as a limited liability company and will be included with the Company for tax purposes.

 

Under an ‘S’ Corporation election, income and losses, along with any tax credits, will be reportable for income tax purposes by the stockholders on their individual income tax returns. Accordingly, the accompanying financial statements do not include a provision for income taxes on ‘S’ corporate earnings. Customarily,

 

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

stockholders in ‘S’ Corporations withdraw funds from equity to make quarterly and annual income tax payments. The Companies do not accrue such withdrawals as the taxable income is earned, instead, the Companies’ policy is to record such withdrawals when the cash is distributed.

 

Prior to January 1, 2009, CMI filed its own tax return on a calendar year-end basis. After January 1, 2009, CMI will be consolidated with the Company’s tax return.

 

As a condition of this ‘S’ Corporation election, the Internal Revenue Service (IRS) requires a tax deposit for fiscal years other than a calendar year-end. As of October 31, 2009 and 2008, the deposit with the IRS in order for the Companies to maintain a fiscal year-end of October 31 is $449,446 and $337,123, respectively.

 

Companies making the election to become an ‘S’ Corporation are subject to a tax on any unrecognized “built-in” gain realized during the 10-year period after the conversion. The unrecognized built-in gain is any gain realized upon disposing of an asset that can be attributed to appreciation before the conversion to ‘S’ status. During the years ended October 31, 2009, 2008 and 2007, the Companies did not recognize any built-in gains tax expense from the sale of appreciated assets. The Company has reduced its deferred tax liability to its estimate of future tax obligations related to disposals of assets subject to the built-in gains tax. However, the Company intends to utilize tax planning techniques in an effort to defer tax obligations as a result of disposals of assets subject to the built-in gains tax when possible.

 

Stockholder’s Equity — During January 2010, the Companies amended the Articles of Incorporation to allow for the issuance of up to 10 million shares of common stock without par value with the shares divided into two classes: 100,000 shares of Class A shares (voting) and 9,900,000 shares of Class B shares (non-voting). Further, the Companies declared a 1,000: 1 stock split based on the respective numbers of outstanding shares owned by each shareholder of record as of January 14, 2010. Shares were issued on the basis of 1% of the common stock issued as Class A voting stock and 99% issued as Class B non-voting stock. This resulted in 3,000 shares of common stock issued at October 31, 2009 and 2008 being retroactively split into 17,787 shares of Class A and 1,760,906 shares of Class B stock issued. This had no effect on the total stockholder’s equity or value of common stock issued.

 

Advertising — The Companies charge the cost of advertising to expense as incurred. Advertising expense was $60,041, $86,170 and $64,539 for the years ended October 31, 2009, 2008 and 2007, respectively.

 

Asset Retirement Obligation — In connection with the Companies’ landfill operations, the Companies accrue annually a portion of the estimated liability expected to close the landfills at the end of their operational lives as well as the estimated post-closure costs. At October 31, 2009 and 2008, the Companies have accrued $104,286 and $29,750, respectively, in estimated asset retirement obligations, which is included in other accrued liabilities.

 

Subsequent Events — Subsequent events have been evaluated through the date of the independent auditor’s report, December 15, 2011, which is the date these financial statements were available to be issued.

 

Recently Issued Accounting Standards — The FASB has issued interpretations related to the accounting for uncertain tax positions, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements for both ‘C’ corporations and pass-through entities. This guidance prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return including positions that the organization is exempt from

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

income taxes or not subject to income taxes on unrelated business income. In addition, it provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

 

The Company presently discloses or recognizes income tax positions based on management’s estimate of whether it is reasonably possible or probable, respectively, that a liability has been incurred for unrecognized income tax expense or benefits by applying accounting literature on accounting for contingencies.

 

The Company will adopt this new interpretation in its 2010 annual financial statements but does not anticipate it will significantly affect its financial statements.

 

2. RECEIVABLES

 

     October 31,  
     2009      2008  

Completed contracts and other

   $ 3,593,779       $ 5,291,185   

Contracts-in-process

     2,442,989         3,388,344   

Retainage

     1,278,112         2,058,483   
  

 

 

    

 

 

 
   $ 7,314,880       $ 10,738,012   
  

 

 

    

 

 

 

 

3. RECEIVABLES, RELATED PARTY

 

The Companies have various unsecured demand notes receivable at October 31, 2009 and 2008, in the aggregate amount of $101,997 and $11,320, respectively, due from stockholders or related parties.

 

The Companies have an unsecured note receivable at October 31, 2009 and 2008, in the amount of $1,180,880 and $1,066,119, respectively, due from a related party. The Companies anticipate the collection of this note via proceeds from the ultimate maturity of a life insurance policy on this related party. As such, this note has been classified as long-term.

 

4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

 

     2009      2008  

Costs incurred on uncompleted contracts

   $ 57,877,170       $ 45,183,095   

Estimated earnings

     11,888,838         8,173,404   
  

 

 

    

 

 

 
     69,766,008         53,356,499   

Less: billings to date

     68,980,584         52,959,746   
  

 

 

    

 

 

 
   $ 785,424       $ 396,753   
  

 

 

    

 

 

 

 

Included in accompanying balance sheets under the following captions:

 

Costs and estimated earnings in excess of billings on uncompleted contracts

   $ 2,225,358      $ 1,934,321   

Billings in excess of costs and estimated earnings on uncompleted contracts

     (1,439,934     (1,537,568
  

 

 

   

 

 

 
   $ 785,424      $ 396,753   
  

 

 

   

 

 

 

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

5. PROPERTY AND EQUIPMENT

 

Property and equipment consists of the following at October 31:

 

Classification

   Useful Life      2009      2008  

Land

      $ 1,970,633       $ 1,970,633   

Buildings and improvements

     12 to 40 years         3,611,875         3,585,796   

Automobiles and trucks

     5 to 15 years         6,019,170         5,526,690   

Construction equipment

     5 to 20 years         29,050,211         26,085,454   

Office equipment

     5 to 10 years         285,249         241,351   

Asphalt plant equipment

     10 years         1,520,581         1,520,581   

Rock crushing equipment

     10 years         1,285,965         1,073,900   

Concrete plant equipment

     10 years         3,700,231         2,096,439   
     

 

 

    

 

 

 
      $ 47,443,915       $ 42,100,844   
     

 

 

    

 

 

 

 

Depreciation expense for 2009, 2008 and 2007 was $3,938,377, $3,816,451 and $3,150,906, respectively.

 

6. LONG-TERM DEBT

 

The Companies have an unsecured note payable to an unrelated third party. The note is payable in annual installments of $50,552 through April 2012 and bears interest at 4.5%. The balance of this note was $138,965 and $181,355 at October 31, 2009 and 2008, respectively.

 

The Companies had a secured note payable to a bank for the purchase of land. The note was payable in monthly installments of $7,807 at a variable interest rate of 0.5% below prime rate. The note was to mature on May 1, 2012. This note was paid off during 2009. The balance of this note was $0 and $324,034 at October 31, 2009 and 2008, respectively.

 

In April 2006, the Companies secured a note payable for $1,000,000 to a bank. The note was payable in monthly installments of $15,069 at a variable interest rate of 2.0% above the London Interbank Offered Rate (LIBOR) (2.24% at October 31, 2009). The note was to mature on May 1, 2013. This note was paid off during 2009. The balance of this note was $0 and $706,369 at October 31, 2009 and 2008, respectively, and was secured by substantially all assets of the Company.

 

The Companies have several secured notes payable to certain finance companies for the acquisition of equipment. The notes are interest free and call for monthly payments between approximately $1,400 and $11,000 through maturity. The aggregate outstanding balance on these notes at October 31, 2009 and 2008 was $15,327 and $168,411, respectively.

 

The Companies have interest free, unsecured notes payable for acquisition of equipment and construction of a plant, payable in monthly installments. The aggregate outstanding balance on these notes is $17,765 and $25,661, at October 31, 2009 and 2008, respectively.

 

In connection with the acquisition of the remaining interest of CMI during 2006, the Companies entered into a financing arrangement for the payment of a non-compete agreement with the former stockholder. The agreement calls for monthly payments of $3,000 for five years. The remaining balance on this agreement at October 31, 2009 and 2008 was $54,000 and $90,000, respectively.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

6. LONG-TERM DEBT (CONTINUED)

 

During 2008, in connection with the acquisition of property and equipment and landfill rights (included in other assets), the Companies have a 5.80% interest rate note payable to a Bank payable in monthly installments of $67,682 with all outstanding principal and interest due January 1, 2011. The balance on this note at October 31, 2009 and 2008 is $2,391,315 and $3,040,890, respectively, and is secured by substantially all assets of the Companies.

 

Maturities of long-term debt are as follows:

 

     Year Ending October 31,  

2010

   $ 792,619   

2011

     1,774,404   

2012

     50,349   
  

 

 

 
   $ 2,617,372   
  

 

 

 

 

Interest paid on long-term debt above for the years ended October 31, 2009, 2008 and 2007 was $238,024, $286,419 and $236,194, respectively.

 

The Company and CMC each have revolving credit agreements with a local bank secured by substantially all assets. Under these agreements, the Company and CMC may borrow up to $2,500,000 and $500,000, respectively, at 2.00% above LIBOR (2.24% at October 31, 2009). At October 31, 2009 and 2008, no amounts were drawn on these agreements, and the full balances were available for borrowing.

 

7. RELATED PARTY NOTES PAYABLE

 

     October 31,  
     2009      2008  

Note payable to a relative of the stockholders for acquisition of land and buildings. This secured note is structured as a life annuity with monthly payments of $13,120. Monthly payments are expected to continue until paid and/or cancellation of the life annuity.

   $ 1,029,911       $ 1,406,537   

Less current maturities

     267,705         441,455   
  

 

 

    

 

 

 
   $ 762,206       $ 965,082   
  

 

 

    

 

 

 

 

Interest imputed on the above related party notes payable for the years ended October 31, 2009 and 2008 was $3,149 and $10,533, respectively.

 

8. EMPLOYEE BENEFIT PLANS

 

The Companies have a profit sharing retirement plan for the benefit of all qualified employees. The Trust Agreement stipulates the amount of the annual contribution to the plan shall be determined by the Board of Directors of the Companies. The amount so determined is not to exceed the amount deductible for income tax purposes. The Companies did not make contributions in 2009, 2008 or 2007.

 

The Companies also have a 401(k) plan for the benefit of substantially all of its employees. The Companies contribute a matching contribution at the discretion of the Board of Directors. The Companies’ contributions for 2009, 2008 and 2007 were $104,351, $127,332 and $91,565, respectively.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

8. EMPLOYEE BENEFIT PLANS (CONTINUED)

 

The Companies have a deferred compensation agreement with three key employees that will pay each employee monthly an agreed upon amount for 10 years (aggregates to approximately $105,000 annually) after the earlier of retirement or a change in control event (as defined). The agreements are partially funded through Company owned life insurance policies on the three employees. The total amount accrued is $43,766 at October 31, 2009 and $0 at October 31, 2008.

 

9. INCOME TAXES

 

At October 31, 2009 and 2008, deferred taxes consist of management’s estimate of future tax obligations related to disposals of assets subject to built-in gains tax. Management’s historical practice has been to defer gains on disposals for tax purposes by trading in assets via tax-free exchanges. Should this historical practice change or not be available, the potential liability for future built-in gains tax could be substantially greater. Deferred taxes consist of the following at October 31:

 

     2009     2008  

Deferred tax liability:

    

Built-in gains tax

   $ (160,151   $ (168,000
  

 

 

   

 

 

 

 

The income tax provision on CMI (attributed to operations prior to the conversion to an ‘S’ corporation) differs from the amount of income tax determined by applying the U.S. Federal income tax rate (34%) to pretax income for the years ended October 31, 2009 and 2008, primarily due to non-deductible items.

 

10. RELATED PARTY TRANSACTIONS

 

The Companies leased their office and other shop facilities from entities owned by the officers and stockholders of the Corporation, under an operating lease agreement that expired in October 2007. The leases contained a one-year renewal option, which was exercised, and required monthly payment aggregating $14,000. The lease also required the Companies to pay all executor costs (such as property taxes, maintenance, and insurance). Rents paid under this agreement were approximately $146,000 for the year ended October 31, 2008 and $168,000 for the year ended October 31, 2007. During fiscal 2008, the Companies acquired the office and shop facilities that were previously rented from related entities by issuing debt (see Note 7).

 

11. MAJOR CUSTOMERS

 

Revenue from one of the Companies’ customers during the years ended October 31, 2009, 2008 and 2007 was approximately $34 million, $22 million and $19 million, respectively. The amount receivable from this same customer at October 31, 2009 and 2008 was $1,141,079 and $2,615,891, respectively.

 

12. COMMITMENTS AND CONTINGENCIES

 

From time to time, the Companies are subject to claims and litigation that arise in the ordinary course of business. Management does not expect these matters to have a material adverse effect on the Companies’ financial condition.

 

13. FAIR VALUE MEASUREMENT

 

In September 2006, the FASB issued guidance which defines fair value, establishes a framework for measuring fair value under current accounting pronouncements that require or permit fair value measurement and enhances disclosures about fair value measurements. Effective November 1, 2008, the Company adopted this

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

13. FAIR VALUE MEASUREMENT (CONTINUED)

 

guidance. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction value hierarchy which requires an entity to maximize the use of observable inputs when measuring fair value.

 

The guidance describes three levels of inputs that may be used to measure fair value:

 

Level 1 — Inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date;

 

Level 2 — Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value can be determined through the use of models or other valuation methodologies; and

 

Level 3 — Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

 

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

 

Cash Value of Life Insurance — These instruments are classified as Level 3. The values are determined by the underwriting insurance company’s valuation models and represent the guaranteed value the Company would receive upon surrender of the policies as of October 31, 2009. These policies are held on key employees.

 

Below are the Company’s financial instruments carried at fair value on a recurring basis by the fair value hierarchy levels described above.

 

     Assets at Fair Value as of October 31, 2009      Fair Value  
         Level 1              Level 2              Level 3         

Cash value of life insurance

   $ —         $ —         $ 931,180       $ 931,180   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The table below sets forth a summary of changes in the fair value of the Company’s level 3 assets for the year ended October 31, 2009:

 

     Level 3 Assets  
     Cash Value of  Life
Insurance
 

Balance, beginning of year

   $ 959,101   

Net of change in fair market value and premiums paid

     (27,921
  

 

 

 

Balance, end of year

   $ 931,180   
  

 

 

 

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

14. ACQUISITION

 

Effective August 7, 2009, the Company (through a wholly-owned subsidiary specifically created for this acquisition, AMR) acquired the assets of an entity in Wichita. This acquisition has been accounted for in accordance with applicable accounting guidance on business combinations. The aggregate purchase price of $1,500,000 was all allocated to the estimated fair values of the fixed assets acquired.

 

15. SUBSEQUENT EVENT

 

Effective April 16, 2010, the Companies sold substantially all assets to an unrelated third party. This transaction triggered the change of control provision in the deferred compensation agreements. This resulted in an additional accrual, on the effective date of the transaction, of approximately $572,000. This transaction also triggered built-in gains tax (see Note 9) of approximately $516,000 on the effective date of the transaction.

 

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CORNEJO & SONS, INC. AND SUBSIDIARIES

 

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended January 31, 2010 and 2009

 

     2010     2009  

Revenues earned

   $ 15,566,623      $ 15,148,511   

Cost of revenues earned

     10,957,490        12,396,098   
  

 

 

   

 

 

 

Gross profit

     4,609,133        2,752,413   

Selling, general, and administrative expenses

     2,285,313        1,738,645   

Gain on disposal of property and equipment

     240,171        —     
  

 

 

   

 

 

 

Income from operations

     2,563,991        1,013,768   
  

 

 

   

 

 

 

Other income (expense):

    

Interest and dividend income

     31,940        16,457   

Interest expense

     (39,188     (60,086

Miscellaneous

     66,001        63,048   
  

 

 

   

 

 

 
     58,753        19,419   
  

 

 

   

 

 

 

Net income before taxes

     2,622,744        1,033,187   

Income tax expense

     —          (90,000
  

 

 

   

 

 

 

Net income

   $ 2,622,744      $ 943,187   
  

 

 

   

 

 

 

 

The accompanying notes are an integral

part of these unaudited interim financial statements.

 

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended January 31, 2010 and 2009

 

     2010     2009  

Cash flows from operating activities:

    

Net income

   $ 2,622,744      $ 943,187   

Adjustments to reconcile net income to net cash flow from operating activities:

    

Depreciation and amortization

     1,096,008        1,420,670   

Gain on disposal of property and equipment

     (240,171     —     

Changes in operating assets and liabilities:

    

Receivables

     1,141,118        4,048,040   

Inventory

     (304,647     (305,636

Costs and estimated earnings in excess of billings on uncompleted contracts

     181,784        1,206,294   

Prepaid expenses

     (1,108,005     (1,054,328

Income tax deposit

     —          (7,500

Accounts payable

     (4,227,489     (2,287,361

Billings in excess of costs and estimated earnings on uncompleted contracts

     440,617        342,153   

Accrued liabilities

     92,946        (532,655
  

 

 

   

 

 

 

Net cash flow from operating activities

     (305,095     3,772,864   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Proceeds from sale of property and equipment

     385,495        —     

Acquisition of property and equipment

     (1,019,411     (1,709,542

Disbursement of notes receivable, related party

     (27,488     (60,502

Receipts on notes receivable, related party

     96,397        —     

Purchases of/change in other assets

     (466,152     30,970   
  

 

 

   

 

 

 

Net cash flow from investing activities

     (1,031,159     (1,739,074
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Distributions to stockholders

     (802,704     (1,291,425

Payment of long-term debt

     (449,036     (480,560

Proceeds from long-term debt

     898,241        632,155   

Payment of related party notes payable

     (38,301     (43,357

Proceeds from related party notes payable

     46,715        218,025   
  

 

 

   

 

 

 

Net cash flow from financing activities

     (345,085     (965,162
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     (1,681,339     1,068,628   

Cash and cash equivalents, beginning of period

     11,659,720        5,343,679   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 9,978,381      $ 6,412,307   
  

 

 

   

 

 

 

 

The accompanying notes are an integral

part of these unaudited interim financial statements.

 

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The consolidated interim financial statements for Cornejo & Sons, Inc. and Subsidiaries have been prepared by the Company, without audit. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. Management believes that the disclosures are adequate to present fairly the financial position, results of operations and cash flows at the dates and for the periods presented. It is suggested that this interim financial information be read in conjunction with the financial statements and notes thereto appearing in the Company’s latest annual audit report. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

 

Stockholders’ Equity — During January 2010, the Companies amended the Articles of Incorporation to allow for the issuance of up to 10 million shares of common stock without par value with the shares divided into two classes: 100,000 shares of Class A shares (voting) and 9,900,000 shares of Class B shares (non-voting). Further, the Companies declared a 1,000:1 stock split based on the respective number of outstanding shares owned by each shareholder of record as of January 14, 2010. Shares were issued on the basis of 1% of the common stock issued as Class A voting stock and 99% issued as Class B non-voting stock. This resulted in 3,000 shares of common stock issued at October 31, 2009 split into 17,787 shares of Class A and 1,760,906 shares of Class B stock issued at January 31, 2010. This had no effect on the total stockholders’ equity or value of common stock issued.

 

Asset Retirement Obligation — In connection with the Companies’ landfill operations, the Companies accrue a portion of the estimated liability expected to close the landfills at the end of their operational lives as well as the estimated post-closure costs. The Company established a new estimate of this retirement obligation based on revised cash flow projections, which primarily relate to capping and closing the landfills. This change in estimate, that resulted in the recognition of an additional liability of approximately $500,000, was recognized as of November 1, 2009. At January 31, 2010 and October 31, 2009, the Companies have accrued $602,305 and $104,286, respectively, in estimated asset retirement obligations, which is included in other liabilities.

 

Subsequent Events — These financial statements considered subsequent events through December 15, 2011, the date the financial statements were available to be issued.

 

Future Adoption of New Accounting Standards — In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”, which also requires additional disclosures about purchases, sales, issuances and settlements in the roll-forward of Level 3 fair value measurements. This new guidance will be effective for the Company on January 1, 2011. The adoption of this new accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

2. RECEIVABLES

 

     January 31,
2010
     October 31,
2009
 

Construction contracts (completed and in-process)

   $ 4,950,350       $ 6,036,768   

Retainage

     1,223,412         1,278,112   
  

 

 

    

 

 

 
   $ 6,173,762       $ 7,314,880   
  

 

 

    

 

 

 

 

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CORNEJO & SONS, INC. AND SUBSIDIARIES

 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

3. NOTES RECEIVABLE, RELATED PARTY

 

The Companies have various unsecured demand notes receivable at January 31, 2010 and October 31, 2009, in the aggregate amount of $19,966 and $101,997, respectively, due from stockholders, employees or related parties.

 

The Companies have an unsecured note receivable at January 31, 2010 and October 31, 2009, in the amount of $1,194,002 and $1,180,880, respectively, due from a related party. The Companies anticipate the collection of this note via proceeds from the ultimate maturity of a life insurance policy on this related party. As such, this note has been classified as long-term.

 

4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

 

     January 31,
2010
    October 31,
2009
 

Costs incurred on uncompleted contracts

   $ 65,194,582      $ 57,877,170   

Estimated earnings

     15,260,938        11,888,838   
  

 

 

   

 

 

 
     80,455,520        69,766,008   

Less: billings to date

     80,292,497        68,980,584   
  

 

 

   

 

 

 
   $ 163,023      $ 785,424   
  

 

 

   

 

 

 

Included in accompanying balance sheets under the following captions:

    

Costs and estimated earnings in excess of billings on uncompleted contracts

   $ 2,043,574      $ 2,225,358   

Billings in excess of costs and estimated earnings on uncompleted contracts

     (1,880,551     (1,439,934
  

 

 

   

 

 

 
   $ 163,023      $ 785,424   
  

 

 

   

 

 

 

 

5. PROPERTY AND EQUIPMENT

 

Property and equipment consists of the following:

 

Classification

  

Useful Life

   January 31,
2010
     October 31,
2009
 

Land

      $ 1,970,633       $ 1,970,633   

Buildings and improvements

   12 to 40 years      3,611,875         3,611,875   

Automobiles and trucks

   5 to 15 years      5,868,995         6,019,170   

Construction equipment

   5 to 20 years      29,606,480         29,050,211   

Office equipment

   5 to 10 years      286,128         285,249   

Asphalt plant equipment

   10 years      1,520,581         1,520,581   

Rock crushing equipment

   10 years      1,285,965         1,285,965   

Concrete plant equipment

   10 years      3,413,241         3,700,231   
     

 

 

    

 

 

 
      $ 47,563,898       $ 47,443,915   
     

 

 

    

 

 

 

 

Depreciation expense for the three months ended January 31, 2010 and 2009 was $1,043,728 and $1,368,390, respectively.

 

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CORNEJO & SONS, INC. AND SUBSIDIARIES

 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

6. LONG-TERM DEBT

 

The Companies have an unsecured note payable to an unrelated third party. The note is payable in annual installments of $50,552 through April 2012 and bears interest at 4.5%. The balance of this note was $138,965 at January 31, 2010 and October 31, 2009.

 

The Companies have several secured notes payable to certain finance companies for the acquisition of equipment. The notes are interest free and call for monthly payments between approximately $1,400 and $11,000 through maturity. The aggregate outstanding balance on these notes at January 31, 2010 and October 31, 2009 was $11,147 and $15,327, respectively.

 

The Companies have interest free, unsecured notes payable for acquisition of equipment and construction of a plant, payable in monthly installments. The aggregate outstanding balance on these notes is $16,446 and $17,765 at January 31, 2010 and October 31, 2009, respectively.

 

In connection with the acquisition of the remaining interest of CMI during 2006, the Companies entered into a financing arrangement for the payment of a non-compete agreement with the former stockholder. The agreement calls for monthly payments of $3,000 for five years. The remaining balance on this agreement at January 31, 2010 and October 31, 2009 was $45,000 and $54,000, respectively.

 

The Companies have an unsecured note payable to an unrelated third party. The note is payable in monthly installments of $91,475 through August 2010 and bears interest at 3.99%. The balance of this note was $631,893 and $0 at January 31, 2010 and October 31, 2009, respectively.

 

During 2008, in connection with the acquisition of property and equipment and landfill rights (included in other assets), the Companies have a 5.80% interest rate note payable to a bank payable in monthly installments of $67,682 with all outstanding principal and interest due January 1, 2011. The balance on this note at January 31, 2010 and October 31, 2009 is $2,223,126 and $2,391,315, and is secured by substantially all assets of the Companies.

 

Maturities of long-term debt are as follows:

 

Periods Ending October 31,

      

2010 (nine months)

   $ 1,241,167   

2011

     1,774,404   

2012

     51,006   
  

 

 

 
   $ 3,066,577   
  

 

 

 

 

Interest paid on long-term debt above for the three months ended January 31, 2010 and 2009 was $45,424 and $60,086, respectively.

 

The Company and CMC each have revolving credit agreements with a local bank secured by substantially all assets. Under these agreements, the Company and CMC may borrow up to $2,500,000 and $500,000, respectively, at 2.00% above LIBOR (0.90% at January 31, 2010). At January 31, 2010 and October 31, 2009, no amounts were drawn on these agreements, and the full balances were available for borrowing.

 

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CORNEJO & SONS, INC. AND SUBSIDIARIES

 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

7. RELATED PARTY NOTES PAYABLE

 

       January 31,
2010
     October 31,
2009
 

Note payable to a relative of the stockholders for acquisition of land and buildings. This secured note is structured as a life annuity with monthly payments of $13,120. Monthly payments are expected to continue until paid and/or cancellation of the life annuity.

   $ 1,038,325       $ 1,029,911   

Less current maturities

     314,420         267,705   
  

 

 

    

 

 

 
   $ 723,905       $ 762,206   
  

 

 

    

 

 

 

 

8. INCOME TAXES

 

At January 31, 2010 and October 31, 2009, deferred taxes consist of management’s estimate of future tax obligations related to disposals of assets subject to built-in gains tax. Management’s historical practice has been to defer gains on disposals for tax purposes by trading in assets via tax-free exchanges (see also Note 9). Should this historical practice change or not be available, the potential liability for future built-in gains tax could be substantially greater. Deferred taxes consist of a $168,000 and $160,151 built-in gains tax liability at January 31, 2010 and October 31, 2009, respectively.

 

The income tax provision on CMI (attributed to operations prior to the conversion to an ‘S’ corporation) differs from the amount of income tax determined by applying the U.S. Federal income tax rate (34%) to pretax income for the three months ended January 31, 2010 and 2009, primarily due to non-deductible items.

 

9. SUBSEQUENT EVENT

 

Effective April 16, 2010, the Companies sold substantially all assets to an unrelated third party. This transaction triggered the change of control provisions in the deferred compensation agreements. This resulted in an additional accrual, on the effective date of the transaction, of approximately $572,000. This transaction also triggered built-in gains tax (see Note 8) of approximately $516,000 on the effective date of the transaction.

 

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INDEPENDENT AUDITORS’ REPORT

 

Board of Directors

Kilgore Pavement Maintenance, LLC

Salt Lake City, Utah

 

We have audited the accompanying balance sheets of Kilgore Pavement Maintenance, LLC as of August 1, 2010 and December 31, 2009, and the related statements of operations and members’ equity, and cash flows for the period from January 1, 2010 through August 1, 2010 and for the year ended December 31, 2009. 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 U.S. generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kilgore Pavement Maintenance, LLC as of August 1, 2010 and December 31, 2009 and the results of its operations and its cash flows for the period from January 1, 2010 through August 1, 2010 and for the year ended December 31, 2009 in conformity with U.S. generally accepted accounting principles.

 

 

/s/ Wisan, Smith, Racker & Prescott, LLP

Salt Lake City, Utah

October 25, 2011

 

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KILGORE PAVEMENT MAINTENANCE, LLC

 

BALANCE SHEETS

August 1, 2010 and December 31, 2009

 

     2010     2009  
ASSETS     

CURRENT ASSETS

    

Cash and cash equivalents

   $ 793,485      $ 2,237,524   

Receivables:

    

Trade accounts including amounts retained on construction contracts of $437,804 and $1,343,104, respectively

     8,365,634        12,021,269   

Employee advances

     —          700   
  

 

 

   

 

 

 

Total receivables

     8,365,634        12,021,969   

Less allowance for doubtful accounts

     (12,238     (100,000
  

 

 

   

 

 

 

Net receivables

     8,353,396        11,921,969   

Costs and estimated earnings in excess of billings on uncompleted contracts

     247,209        75,721   

Inventories

     2,165,882        453,280   

Prepaid expenses

     —          73,111   
  

 

 

   

 

 

 

TOTAL CURRENT ASSETS

     11,559,972        14,761,605   

EQUIPMENT, net of accumulated depreciation of $9,552,839 and $8,397,963, respectively

     4,461,276        5,582,298   

OTHER ASSETS

    

Deposits

     71,821        71,821   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 16,093,069      $ 20,415,724   
  

 

 

   

 

 

 
LIABILITIES AND MEMBERS’ EQUITY     

CURRENT LIABILITIES

    

Accounts payable including amounts retained on construction contracts of $114,167 and $177,725, respectively

   $ 1,971,247      $ 1,677,171   

Accrued expenses

     217,644        70,026   

Accrued losses on uncompleted contracts

     41,012        —     

Current portion of long-term liabilities

     612,290        669,646   

Current portion of obligations under capital leases

     28,279        59,136   

Billings in excess of costs and estimated earnings on uncompleted contracts

     21,734        244,976   
  

 

 

   

 

 

 

TOTAL CURRENT LIABILITIES

     2,892,206        2,720,955   

LONG-TERM LIABILITIES

     1,446,585        1,817,364   

OBLIGATIONS UNDER CAPITAL LEASES

     20,593        37,181   

MEMBERS’ EQUITY

     11,733,685        15,840,224   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND MEMBERS’ EQUITY

   $ 16,093,069      $ 20,415,724   
  

 

 

   

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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KILGORE PAVEMENT MAINTENANCE, LLC

 

STATEMENTS OF OPERATIONS AND MEMBERS’ EQUITY

Period ended August 1, 2010 and Year ended December 31, 2009

 

     2010     2009  

INCOME

    

Contract revenues earned

   $ 11,037,841      $ 37,616,032   

EXPENSES

    

Cost of revenues earned

     6,454,067        21,101,592   

Selling, general and administrative

     5,759,705        5,846,665   

Bad debts

     927,551        100,000   

Depreciation

     1,154,876        1,973,739   
  

 

 

   

 

 

 
     14,296,199        29,021,996   
  

 

 

   

 

 

 

OPERATING INCOME (LOSS)

     (3,258,358     8,594,036   

OTHER INCOME (EXPENSE)

    

Interest income

     3,296        55,175   

Interest expense

     (68,592     (71,161
  

 

 

   

 

 

 
     (65,296     (15,986
  

 

 

   

 

 

 

NET INCOME (LOSS)

     (3,323,654     8,578,050   

MEMBERS’ EQUITY

    

Balance — beginning of period

     15,840,224        15,806,806   

Distributions to members

     (782,885     (8,544,632
  

 

 

   

 

 

 

Balance — end of period

   $ 11,733,685      $ 15,840,224   
  

 

 

   

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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KILGORE PAVEMENT MAINTENANCE, LLC

 

STATEMENTS OF CASH FLOWS

Period ended August 1, 2010 and Year ended December 31, 2009

 

     2010     2009  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net income (loss)

   $ (3,323,654   $ 8,578,050   

Adjustments to reconcile net income (loss) to net cash flows from (used by) operating activities:

    

Depreciation

     1,154,876        1,973,739   

Bad debts

     927,551        100,000   

Loss on sale of assets

     —          19,945   

(Increase) decrease in assets:

    

Trade accounts receivable

     2,640,322        2,669,852   

Employee advances

     700        (50

Costs and estimated earnings in excess of billings on uncompleted contracts

     (171,488     (25,571

Inventories

     (1,712,602     (427,291

Prepaid expenses

     73,111        (3,980

Deposits

     —          (10,374

Increase (decrease) in liabilities:

    

Accounts payable

     294,076        (959,749

Accrued expenses

     147,618        (37,427

Accrued losses on uncompleted contracts

     41,012        —     

Billings in excess of costs and estimated earnings on uncompleted contracts

     (223,242     228,924   
  

 

 

   

 

 

 

Net cash flows from (used by) operating activities

     (151,720     12,106,068   

CASH FLOWS FROM INVESTING ACTIVITIES

    

Cash from disposal of equipment

     —          61,312   

Cash paid for purchases of equipment

     (33,854     (283,130
  

 

 

   

 

 

 

Net cash used by investing activities

     (33,854     (221,818

CASH FLOWS FROM FINANCING ACTIVITIES

    

Distributions to members

     (782,885     (8,544,632

Cash paid to reduce long-term liabilities

     (428,135     (1,756,068

Cash paid to reduce obligations under capital leases

     (47,445     (81,816
  

 

 

   

 

 

 

Net cash used by financing activities

     (1,258,465     (10,382,516
  

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     (1,444,039     1,501,734   

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

     2,237,524        735,790   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

   $ 793,485      $ 2,237,524   
  

 

 

   

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

    

Equipment acquired through assumption of long-term liabilities

   $ —        $ 1,886,671   
  

 

 

   

 

 

 

Refinanced debt

   $ —        $ 377,921   
  

 

 

   

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

    

Cash paid for interest

   $ 68,592      $ 71,161   
  

 

 

   

 

 

 

Cash paid for income taxes

   $ —        $ —     
  

 

 

   

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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KILGORE PAVEMENT MAINTENANCE, LLC

 

NOTES TO FINANCIAL STATEMENTS

August 1, 2010 and December 31, 2009

 

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

 

The Company’s accounting policies conform to U.S. generally accepted accounting principles. The following policies are considered to be significant:

 

Business Activity

 

The Company operates in the construction industry, paving and maintaining asphalt surfaces. The work is usually performed under fixed price contracts. Projects are generally located in the State of Utah. The Company files statutory liens on all construction projects where collection problems are anticipated.

 

Income Recognition — Construction Contracts

 

The financial statements are prepared on the percentage-of-completion method of accounting. Profits on contracts are recorded on the basis of “cost-to-cost” determination of percentage-of-completion on individual contracts, commencing when progress reaches a point where cost and estimate analysis and other evidence of trend are sufficient to estimate final results with reasonable accuracy. That portion of the total contract price which is allocable to contract expenditures incurred and work performed is accrued as earned income. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is accrued. Claims for additional revenue are recognized when settled.

 

Costs and Billings on Uncompleted Contracts

 

Costs and estimated earnings in excess of billings on uncompleted contracts represent the amount by which costs of contracts in progress plus estimated earnings exceed related progress billings.

 

Billings in excess of costs and estimated earnings on uncompleted contracts represent the amount by which progress billings on contracts in progress exceed related costs and estimated earned profit.

 

Cash and Cash Equivalents

 

Cash equivalents are generally comprised of certain highly liquid investments with original maturities of less than three months.

 

Trade Accounts Receivable

 

Trade accounts receivable are stated at the amount management expects to collect from balances outstanding at year end. Based on management’s assessment of the credit history with customers having outstanding balances and current relationships with them, it has concluded that realization losses on balances outstanding at year end will be immaterial.

 

Inventories

 

Inventories consist mainly of the components necessary to produce asphalt and inventories are reflected in the financial statements at their aggregate lower of cost (first-in, first-out) or market.

 

Equipment

 

Equipment is recorded at cost less accumulated depreciation with depreciation expense computed using the straight-line method in amounts sufficient to write off the cost of depreciable assets over their estimated useful lives.

 

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KILGORE PAVEMENT MAINTENANCE, LLC

 

NOTES TO FINANCIAL STATEMENTS

August 1, 2010 and December 31, 2009

 

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Normal maintenance and repair items are charged to costs and expenses as incurred. The cost and accumulated depreciation of equipment sold or otherwise retired is removed from the accounts and gain or loss on disposition is reflected in net income in the period of disposition.

 

Income Taxes

 

The Company is a limited liability company and as allowed under IRS statutes, the Company has elected to report taxable income as an “S” Corporation. Under such election, federal and state income taxes on earnings of the Company are generally the responsibility of the individual member.

 

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash deposits, trade accounts receivable and accounts payable.

 

The Company maintains its cash deposits at one financial institution. At times such deposits may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash.

 

Approximately 33% and 51% of the Company’s trade accounts receivable balance is derived from one and three customers at August 1, 2010 and December 31, 2009, respectively. One and two of the Company’s customers accounted for approximately 22% of 2010 and 25% of 2009 revenues, respectively. Concentrations of credit risk with respect to trade accounts receivable are limited because the Company routinely assesses the financial strength of its customers and follows the practice of filing statutory liens or filing claims against payment and performance bonds on all construction projects where collection problems are anticipated.

 

Approximately 43% and 71% of the Company’s August 1, 2010 and December 31, 2009 trade accounts payable, respectively, are due to two and one suppliers, respectively. The materials and products provided by one of these suppliers plus three others represent approximately 52% and 12% of the Company’s 2010 and 2009 cost of revenues earned. The Company limits its exposure by maintaining buying relationships with other capable vendors.

 

Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. In these financial statements assets, liabilities, and earnings from contracts involve extensive reliance on management’s estimates. Actual results could differ from those estimates.

 

Advertising and Promotion

 

All costs associated with advertising and promoting the Company’s services are expensed in the period incurred. Advertising and promotion expenses during the period ended August 1, 2010 totaled $31,783. Advertising and promotion expenses for the year ended December 31, 2009 totaled $75,511.

 

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KILGORE PAVEMENT MAINTENANCE, LLC

 

NOTES TO FINANCIAL STATEMENTS

August 1, 2010 and December 31, 2009

 

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Subsequent Events

 

Management has evaluated subsequent events through October 25, 2011, which is also the date the financial statements were available to be issued. Except as disclosed in Note 13, no subsequent events were noted during this evaluation that require disclosure in these financial statements.

 

NOTE 2 — CONTRACTS IN PROGRESS

 

Information with respect to contracts in progress at August 1, 2010 and December 31, 2009 follows:

 

     2010     2009  

Expenditures on uncompleted contracts

   $ 1,635,886      $ 4,342,922   

Estimated earnings (losses) thereon

     (57,760     1,840,975   
  

 

 

   

 

 

 
     1,578,126        6,183,897   

Less billings applicable thereto

     (1,352,651     (6,353,152
  

 

 

   

 

 

 

Net (over)/under billings

   $ 225,475      $ (169,255
  

 

 

   

 

 

 

 

     2010     2009  

Included in the accompanying balance sheets under the following captions:

    

Costs and estimated earnings in excess of billings on uncompleted contracts

   $ 247,209      $ 75,721   

Billings in excess of costs and estimated earnings on uncompleted contracts

     (21,734     (244,976
  

 

 

   

 

 

 

Net (over)/under billings

   $ 225,475      $ (169,255
  

 

 

   

 

 

 

 

NOTE 3 — INVENTORIES

 

Inventories at August 1, 2010 and December 31, 2009 consist of the following:

 

     2010      2009  

Road base and fill materials

   $ 1,890,425       $ 360,008   

Oils

     240,504         59,700   

Fuel

     34,953         33,572   
  

 

 

    

 

 

 
   $ 2,165,882       $ 453,280   
  

 

 

    

 

 

 

 

NOTE 4 — EQUIPMENT

 

Equipment as of August 1, 2010 and December 31, 2009 is summarized as follows:

 

     2010     2009  

Cost:

    

Autos and trucks

   $ 5,763,558      $ 5,805,958   

Asphalt plant and equipment

     2,801,050        2,801,050   

Construction equipment

     5,290,186        5,213,932   

Office equipment

     159,321        159,321   
  

 

 

   

 

 

 
     14,014,115        13,980,261   

Less accumulated depreciation

     (9,552,839     (8,397,963
  

 

 

   

 

 

 

Net book value

   $ 4,461,276      $ 5,582,298   
  

 

 

   

 

 

 

 

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KILGORE PAVEMENT MAINTENANCE, LLC

 

NOTES TO FINANCIAL STATEMENTS

August 1, 2010 and December 31, 2009

 

NOTE 4 — EQUIPMENT (CONTINUED)

 

Amounts included in equipment for assets capitalized under capital lease obligations at August 1, 2010 and December 31, 2009 are $130,388 and $450,738, respectively. Accumulated amortization for items capitalized under capital leases was $84,752 and $324,566 at August 1, 2010 and December 31, 2009, respectively. Amortization expense on assets recorded under capital leases is included in depreciation expense.

 

NOTE 5 — LINE OF CREDIT

 

The Company has a $1,500,000 line of credit with a bank. This line bears interest at the greater of the bank’s prime rate or 5.0%, but never below 5.0% and is secured by assets of the Company. As of August 1, 2010, there were no draws against the line of credit. The line of credit matures on July 5, 2011.

 

NOTE 6 — LONG-TERM LIABILITIES

 

Long-term liabilities as of August 1, 2010 and December 31, 2009 are summarized below:

 

     2010     2009  

Notes to a bank, interest ranging from 2.5% to 5.0%, due in monthly installments of $30,844, including interest, secured by equipment

   $ 1,577,867      $ 1,735,752   

Notes to equipment finance companies, interest ranging from 4% to 5%, due in monthly installments of $29,475, including interest, secured by equipment

     481,008        751,258   
  

 

 

   

 

 

 
     2,058,875        2,487,010   

Less current portion of long-term liabilities

     (612,290     (669,646
  

 

 

   

 

 

 

Long-term liabilities excluding current portion

   $ 1,446,585      $ 1,817,364   
  

 

 

   

 

 

 

 

Aggregate maturities of long-term liabilities in each of the next five years are summarized as follows:

 

2011

   $ 612,290   

2012

     452,472   

2013

     315,560   

2014

     332,508   

2015

     278,522   

Thereafter

     67,523   
  

 

 

 
   $ 2,058,875   
  

 

 

 

 

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KILGORE PAVEMENT MAINTENANCE, LLC

 

NOTES TO FINANCIAL STATEMENTS

August 1, 2010 and December 31, 2009

 

NOTE 7 — OBLIGATIONS UNDER CAPITAL LEASES

 

The Company has entered into capital leases for construction equipment. Aggregate future minimum lease payments under these leases are as follows:

 

2011

   $ 30,894   

2012

     23,170   

2013

     —     

2014

     —     

2015

     —     

Thereafter

     —     
  

 

 

 

Total minimum lease payments

     54,064   

Less amount representing interest

     (5,192
  

 

 

 

Present value of minimum lease payments (including $28,279 classified as current)

   $ 48,872   
  

 

 

 

 

NOTE 8 — OPERATING LEASE

 

The Company leases its facilities from a related entity through common ownership under a long-term operating lease agreement. This lease expires in October 2025. The Company also has operating leases for construction equipment and also leases other equipment under short-term arrangements as needed. These leases expire in March 2011 and May 2012. Rents expensed, including rents to the related entity, under operating leases during the period ended August 1, 2010 totaled $381,053 and for the year ended December 31, 2009 totaled $851,602.

 

The following is a schedule of the future minimum lease payments as of August 1, 2010:

 

     Third
Party
     Related
Entity
     Total  

2011

   $ 249,978       $ 360,000       $ 609,978   

2012

     127,762         360,000         487,762   

2013

     —           360,000         360,000   

2014

     —           360,000         360,000   

2015

     —           360,000         360,000   

Thereafter

     —           3,660,000         3,660,000   
  

 

 

    

 

 

    

 

 

 
   $ 377,740       $ 5,460,000       $ 5,837,740   
  

 

 

    

 

 

    

 

 

 

 

The total amount expensed on the related entity lease was $210,000 and $360,000 during the period ended August 1, 2010 and the year ended December 31, 2009, respectively.

 

NOTE 9 — BENEFIT PLAN

 

The Company sponsors a 401(k) contributory retirement plan (the Plan) covering all full-time personnel who have attained the age of twenty-one and who have been employed longer than one year. The Company may elect to make matching contributions to the Plan matching 50% of employee contributions up to 6% of eligible compensation. Matching contributions to the Plan amounted to $73,467 and $120,437 for the period ended August 1, 2010 and for the year ended December 31, 2009, respectively. Administrative expenses paid by the Company for the Plan totaled $4,269 and $2,880 for the period ended August 1, 2010 and for the year ended December 31, 2009, respectively.

 

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KILGORE PAVEMENT MAINTENANCE, LLC

 

NOTES TO FINANCIAL STATEMENTS

August 1, 2010 and December 31, 2009

 

NOTE 10 — RELATED-PARTY TRANSACTIONS

 

The Company leases its facilities from a related entity that is owned by a member of the Company. (See note 8).

 

NOTE 11 — COMMITMENTS AND CONTINGENCIES

 

In connection with the sale of the Company described in Note 13, the Company’s acquirer also acquired the operations of another entity that was subsequently merged into the operations acquired from the Company. This other entity has historically been the Company’s largest customer and largest vendor and the two companies have had other business relationships. In connection with the sale, the former owner of the other entity required that the Company pay a fee for land previously used and pay an additional amount related to shared use of a permit. In the Company’s dealings with this entity as supplier and customer, the use of the land and the permit was considered part of the business relationship. The amounts paid of $500,000 and $245,800 for the land fee and permit, respectively, have been included in selling, general and administrative expense on the statement of operations.

 

NOTE 12 — MEMBERS’ EQUITY

 

In connection with the sale of the Company discussed in Note 13, the major member of the Company elected to award $2.1 million of the sales proceeds to three key employees and two nonemployees. These awards of sales proceeds were based on services these individuals provided to the Company. As the amount is known as of August 1, 2010 and the award was based on services provided and no future services were required from these individuals, the Company recorded the $2.1 million as an expense and as a capital contribution from the member. The capital contribution of $2.1 million is included in net distributions for the period ended August 1, 2010. The member contributed cash equal to the $2.1 million expense.

 

NOTE 13 — SUBSEQUENT EVENTS

 

On July 12, 2010, the Company signed an agreement and plan of merger and asset purchase agreement (the “Agreement”) with the Kilgore Companies, LLC formerly known as Harper-Kilgore, LLC that became effective after the close of business on August 1, 2010. The Agreement calls for Kilgore Companies, LLC to acquire the membership units of the Company less cash and other excluded items for approximately $42.5 million.

 

These financial statements have been presented as though the Company was continuing on, no adjustments or reclasses have been recorded to reflect that certain liabilities were paid shortly after the period end or for any effects of the sale, except as disclosed.

 

Also in connection with the sale of the Company, the Company incurred legal fees of $152,409. This amount is included in selling, general and administrative expenses on the statement of operations.

 

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Independent Auditor’s Report

 

Board of Directors

Norris Asphalt Paving Co.

Ottumwa, Iowa

 

We have audited the accompanying balance sheets of Norris Aggregate Products, a division of Norris Asphalt Paving Co., as of February 28, 2012 and December 31, 2011 and the related statements of operations, stockholders’ equity, and cash flows for the two month period and year then ended. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Norris Aggregate Products, a division of Norris Asphalt Paving Co., as of February 28, 2012 and December 31, 2011, and the results of its operations and its cash flows for the two month period and year then ended in conformity with accounting principles generally accepted in the United States of America.

 

/s/ CliftonLarsonAllen LLP

 

West Des Moines, Iowa

October 23, 2012

 

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NORRIS AGGREGATE PRODUCTS

 

BALANCE SHEETS

February 28, 2012 and December 31, 2011

 

ASSETS

 

     2012      2011  

CURRENT ASSETS

     

Cash

   $ 92,123       $ 8,477   

Accounts and contracts receivable

     945,183         2,055,930   

Accounts receivable — related party

     3,241,672         2,045,144   

Inventories

     8,462,461         9,079,143   

Prepaid stripping

     1,111,360         1,161,355   

Prepaid expenses

     415,906         390,520   
  

 

 

    

 

 

 

Total current assets

     14,268,705         14,740,569   
  

 

 

    

 

 

 

PROPERTY AND EQUIPMENT

     

Cost

     23,611,303         23,645,302   

Less accumulated depreciation

     17,034,716         16,820,001   
  

 

 

    

 

 

 

Total property and equipment

     6,576,587         6,825,301   
  

 

 

    

 

 

 

OTHER ASSETS

     

Prepaid stripping — noncurrent

     1,071,689         664,099   

Other

     169,167         180,834   
  

 

 

    

 

 

 

Total other assets

     1,240,856         844,933   
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 22,086,148       $ 22,410,803   
  

 

 

    

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY   

LIABILITIES

     

Checks written in excess of bank balance

   $ —          $ 28,373   

Accounts payable — trade

     202,715         285,281   

Other liabilities

     880,504         836,833   
  

 

 

    

 

 

 

Total liabilities

     1,083,219         1,150,487   
  

 

 

    

 

 

 

STOCKHOLDERS’ EQUITY

     

Retained earnings

     21,002,929         21,260,316   
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 22,086,148       $ 22,410,803   
  

 

 

    

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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NORRIS AGGREGATE PRODUCTS

 

STATEMENTS OF OPERATIONS

Two Month Period Ended February 28, 2012 and Year Ended December 31, 2011

 

     2012     2011  

SALES

    

Aggregates

   $ 1,912,298      $ 32,145,782   

Trucking

     158,665        3,147,383   
  

 

 

   

 

 

 

Total sales

     2,070,963        35,293,165   
  

 

 

   

 

 

 

COST OF SALES

    

Aggregates

     1,728,480        20,468,923   

Trucking

     162,143        3,156,011   
  

 

 

   

 

 

 

Total cost of sales

     1,890,623        23,624,934   
  

 

 

   

 

 

 

Gross profit

     180,340        11,668,231   

OPERATING EXPENSES

     424,514        3,640,997   

GAIN ON SALE OF PROPERTY AND EQUIPMENT

     3,900        158,471   
  

 

 

   

 

 

 

(Loss) income from operations

     (240,274     8,185,705   

OTHER (EXPENSE) INCOME

    

Interest expense

     (1,622     (130,996

Other

     (15,491     114,510   
  

 

 

   

 

 

 

Total other expense

     (17,113     (16,486
  

 

 

   

 

 

 

NET (LOSS) INCOME

   $ (257,387   $ 8,169,219   
  

 

 

   

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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NORRIS AGGREGATE PRODUCTS

 

STATEMENTS OF STOCKHOLDERS’ EQUITY

Two Month Period Ended February 28, 2012 and Year Ended December 31, 2011

 

     Retained
Earnings
 

BALANCE, DECEMBER 31, 2010

   $ 13,091,097   

Net income

     8,169,219   
  

 

 

 

BALANCE, DECEMBER 31, 2011

     21,260,316   

Net loss

     (257,387
  

 

 

 

BALANCE, FEBRUARY 28, 2012

   $ 21,002,929   
  

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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NORRIS AGGREGATE PRODUCTS

 

STATEMENT OF CASH FLOWS

Two Month Period Ended February 28, 2012 and Year Ended December 31, 2011

 

     2012     2011  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net (loss) income

   $ (257,387   $ 8,169,219   

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

    

Depreciation and amortization

     260,381        1,656,201   

Gain on sale of property and equipment

     (3,900     (158,471

Effects of changes in operating assets and liabilities:

    

Accounts and contracts receivable

     1,110,747        (704,632

Accounts receivable — related party

     (1,196,528     (9,035,563

Inventories

     616,682        986,280   

Prepaid stripping

     (357,595     (94,694

Prepaid expenses

     (25,386     (31,697

Accounts payable

     (82,566     (234,244

Other liabilities

     43,671        68,313   
  

 

 

   

 

 

 

Net cash provided by operating activities

     108,119        620,712   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

    

Purchases of property and equipment

     —          (994,343

Proceeds from sale of property and equipment

     3,900        344,905   
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     3,900        (649,438
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Checks written in excess of bank balance

     (28,373     28,373   
  

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH

   $ 83,646      $ (353

CASH, BEGINNING OF YEAR

     8,477        8,830   
  

 

 

   

 

 

 

CASH, END OF YEAR

   $ 92,123      $ 8,477   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

    

Interest paid

   $ 1,622      $ 130,996   

 

The accompanying notes are an integral part of the financial statements.

 

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NORRIS AGGREGATE PRODUCTS

 

NOTES TO FINANCIAL STATEMENTS

February 28, 2012 AND December 31, 2011

 

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Norris Aggregate Products (the Company) is an aggregates producer that operates quarries in northern Missouri. The Company is a division of Norris Asphalt Paving Co. (NAPCO). NAPCO also operates an asphalt division (Asphalt) that specializes in the placement of asphalt paving and sales of asphalt mix in southeastern Iowa and northern Missouri. The accounting policies of both divisions are identical and further described in this Note 1.

 

On February 29, 2012, NAPCO entered into an agreement to sell the Company. See Note 9.

 

Basis of presentation

 

The accompanying financial statements present the financial position, results of operations, stockholders’ equity and cash flows as if the Company operated as a separate, stand-alone entity. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The financial position and results of operations of the Company are accounted for as division within the combined NAPCO financial statements and, therefore, reflect the portion of the assets, liabilities and operations directly associated with the Company. In addition, on a basis determined by NAPCO management, shared expenses, generally administrative in nature, have been allocated between the Company and Asphalt. Management believes these estimates are reasonable and appropriate in the circumstances.

 

Use of estimates in preparing financial statements

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Receivables and credit policies

 

Accounts receivable are uncollateralized customer obligations which generally require payment within thirty days from the invoice date. Accounts receivable are stated at the invoice amount plus accrued interest. Account balances with invoices over ninety days old are considered delinquent. Payments of accounts receivable are applied to the specific invoices identified on the customer’s remittance advice or, if unspecified, to the earliest unpaid invoices.

 

The carrying amount of accounts receivable is reduced by an allowance for doubtful accounts that reflects management’s best estimate of amounts that will not be collected. Management reviews individual accounts receivable balances that exceed ninety days from the invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts. No allowance for doubtful accounts was deemed necessary at February 28, 2012 and December 31, 2011.

 

Revenue recognition

 

Revenues are recognized when risks associated with ownership have passed to unaffiliated customers. Typically this occurs when products are shipped. Product revenues generally include sales of aggregates to customers, net of discounts or allowances, if any, and include freight and delivery charges billed to customers.

 

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NORRIS AGGREGATE PRODUCTS

 

NOTES TO FINANCIAL STATEMENTS

February 28, 2012 AND December 31, 2011

 

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Inventories

 

Inventories consist of mined aggregate material and are stated at the lower of cost or market with cost determined on a first-in, first-out (FIFO) basis.

 

Property and equipment

 

The Company’s buildings are depreciated on the straight-line method over their estimated useful lives of thirty-nine years. Equipment consists of various manufacturing equipment, vehicles, computer equipment, and office furniture. These assets are depreciated on the straight-line method over their estimated useful lives, which range from three to seven years.

 

Prepaid stripping

 

Prepaid stripping is allocated to aggregate reserves based on the costs to remove the overburden to allow those reserves to be mined. Stripping cost is charged to the production process as aggregate reserves are mined. The current portion of the prepayment was determined utilizing the estimated aggregate tonnage to be mined in the following year.

 

Impairment of long-lived assets

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or the fair value less costs to sell.

 

Sales taxes collected and remitted

 

The Company presents sales taxes collected from customers and remitted to governmental authorities on a net basis, excluding such amounts from sales and cost of sales.

 

Advertising

 

Advertising costs are charged to operations when incurred.

 

Income taxes

 

Income taxes have not been provided as NAPCO has elected to be treated as a Subchapter S corporation for federal and state income tax purposes. Under this election, the net income or loss of NAPCO is passed through to the stockholders and reported on their individual income tax returns.

 

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NORRIS AGGREGATE PRODUCTS

 

NOTES TO FINANCIAL STATEMENTS

February 28, 2012 AND December 31, 2011

 

NOTE 2 — PROPERTY AND EQUIPMENT

 

Property and equipment cost consists of the following as of February 28, 2012 and December 31, 2011:

 

     2012      2011  

Land

   $ 2,599,467       $ 2,599,467   

Buildings & office equipment

     578,148         578,148   

Quarry equipment

     19,093,710         19,093,710   

Vehicles

     1,339,978         1,373,977   
  

 

 

    

 

 

 

Total property and equipment

   $ 23,611,303       $ 23,645,302   
  

 

 

    

 

 

 

 

Depreciation expense for the two months ended February 28, 2012 and the year ended December 31, 2011 was $248,714 and $1,586,201, respectively.

 

NOTE 3 — FINANCIAL INSTRUMENT RISK

 

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes the Company is not exposed to any significant credit risk on its cash.

 

NOTE 4 — PROFIT SHARING PLAN

 

NAPCO has a profit sharing plan that covers all Company employees upon hire that are age nineteen or older. The Company’s contributions to the plan are based on years of service and allow for a maximum annual contribution of $2,500 per employee. The contributions may be limited by the employee’s contribution to the plan. Plan expense for the two months ended February 28, 2012 and the year ended December 31, 2011 was $4,784 and $57,410, respectively.

 

NOTE 5 — RELATED PARTIES

 

A summary of the transactions between the Company and NAPCO is as follows:

 

     Sales      Purchases      Accounts
Receivable
     Fees
Paid
 

February 28, 2012

   $ —         $ —         $ 3,241,672       $ 24,000   

December 31, 2011

   $ 1,604,902       $ 118,038       $ 2,045,144       $ 144,000   

 

Purchases from NAPCO are recorded in cost of sales. Fees paid are for management services provided by NAPCO and are included in operating expenses.

 

The Company incurred $1,622 and $130,996 in interest for the two month period and year ended February 28, 2012 and December 31, 2011, respectively, for its portion of debt service incurred by NAPCO, as determined by management.

 

Related party commitments

 

NAPCO has a revolving line of credit agreement with a financial institution. Maximum borrowings under the line of credit agreement, which matures on September 5, 2012, are $8,500,000 in the months of March to

 

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NORRIS AGGREGATE PRODUCTS

 

NOTES TO FINANCIAL STATEMENTS

February 28, 2012 AND December 31, 2011

 

NOTE 5 — RELATED PARTIES (CONTINUED)

 

November and $4,500,000 for December through February. Interest is payable monthly at the 1 month London Interbank Offered Rate (LIBOR) rate plus 2.00% (2.25% at February 28, 2012). As of February 28, 2012 and December 31, 2011, there were no borrowings on this line of credit. The loan is secured by both NAPCO’s and the Company’s accounts receivable, equipment, inventory and certain other assets.

 

In 2011, NAPCO obtained a revolving reducing term loan agreement with the same financial institution. The revolving reducing term loan has a maximum amount of $5,666,667 at December 31, 2011 with the borrowing base decreasing at a rate of $188,889 per month. Interest is payable monthly at the 1 month LIBOR plus 2.00% (2.25% at February 28, 2012). The loan is secured by both NAPCO’s and the Company’s accounts receivable, inventory and equipment and matures on September 5, 2012. No advances were made on the note in 2011 or during the two months ended February 28, 2012.

 

The loan agreement with the financial institution requires NAPCO to pay a fee of 0.25% per year on the average daily unused amount of the revolving line of credit, calculated on a quarterly basis. The loan agreement with the financial institution contains various covenants pertaining to, among other things, cash flow coverage, debt to tangible net worth, levels of tangible net worth, capital expenditures, and dividend restrictions. Management believes NAPCO met all debt covenants at February 28, 2012 and December 31, 2011.

 

NOTE 6 — COMMITMENTS

 

The Company has agreements to pay royalties on aggregate sold from certain leased quarries. The agreements expire at various dates through December 31, 2099. The agreements require that the following minimum annual royalty amounts be remitted:

 

2012 (remaining 10 months)

   $ 113,750   

2013

     135,500   

2014

     125,500   

2015

     125,500   

2016

     120,500   

2017

     94,000   

Thereafter

     2,709,000   
  

 

 

 

Total

   $ 3,423,750   
  

 

 

 

 

Royalties paid for the two month period ended February 28, 2012 and year ended December 31, 2011 were $46,587 and $572,782, respectively, and are recorded as a cost of sales.

 

NOTE 7 — CONTINGENCIES

 

The Company is party to certain legal actions arising in the normal course of business. While the ultimate outcome of these matters is uncertain, management believes that the effect, if any, will not be significant to the financial statements. Nevertheless, it is at least reasonably possible that management’s view of the outcome in legal matters that involve considerable uncertainty could change materially in the near term.

 

The Company is subject to various federal and state regulations regarding the care, delivery, and containment of various products, which the Company either does or has handled. The Company could be contingently liable for any associated costs, which could arise from the handling, delivery, and containment of these products.

 

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NORRIS AGGREGATE PRODUCTS

 

NOTES TO FINANCIAL STATEMENTS

February 28, 2012 AND December 31, 2011

 

NOTE 8 — INCOME TAXES

 

NAPCO files income tax returns in the U.S. federal jurisdiction and two states. NAPCO is a pass through entity for income tax purposes whereby any income tax liabilities or benefits are attributable to NAPCO’s owners. Any amounts paid by NAPCO for income taxes are accounted for as dividend transactions with NAPCO’s owners.

 

The federal and state income tax returns of NAPCO for 2008 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after filing.

 

The Company follows the requirements for accounting for uncertain tax positions. The Company has determined no liability related to uncertain tax positions was required at February 28, 2012 and December 31, 2011.

 

NOTE 9 — SUBSEQUENT EVENTS

 

On February 29, 2012, NAPCO sold all the assets, liabilities and ongoing operations of the Company. NAPCO management has determined that the proceeds exceeded the bases of the net assets sold.

 

Management evaluated subsequent events through October 23, 2012, the date the financial statements were available to be issued. Events or transactions occurring after February 28, 2012, but prior to October 23, 2012 that provided additional evidence about conditions that existed at February 28, 2012, have been recognized in the financial statements for the period ended February 28, 2012. Events or transactions that provided evidence about conditions that did not exist at February 28, 2012 but arose before the financial statements were available to be issued have not been recognized in the financial statements for the two months ended February 28, 2012.

 

 

 

This information is an integral part of the accompanying financial statements.

 

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INDEPENDENT AUDITOR’S REPORT

 

To the Partners and Members

R.K. Hall Construction, Ltd. and Affiliates

Paris, Texas

 

We have audited the accompanying combined balance sheets of R.K. Hall Construction, Ltd. and affiliates as of December 31, 2009 and 2008, and the related combined statements of operations and equity and cash flows for the years ended December 31, 2009, 2008 and 2007. The combined financial statements are the responsibility of the Companies’ management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 audit provides a reasonable basis for our opinion.

 

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of R.K. Hall Construction, Ltd. and affiliates as of December 31, 2009 and 2008, and the results of operations and cash flows for the years ended December 31, 2009, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Perryman Chaney Russell, LLP

 

September 21, 2011

 

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R.K. HALL CONSTRUCTION, LTD.

AND AFFILIATES

 

Combined Balance Sheets

December 31

 

     2009      2008  
Assets      

Current assets:

     

Cash

   $ 10,016,193       $ 7,582,598   

Receivables

     8,259,171         11,465,007   

Inventory

     4,940,793         3,618,341   

Cost and estimated earnings in excess of billings on contracts in progress

     889,919         4,027,730   

Prepaid expenses

     226,378         255,710   
  

 

 

    

 

 

 

Total current assets

     24,332,454         26,949,386   
  

 

 

    

 

 

 

Property and equipment:

     

Land

     2,065,334         2,065,334   

Buildings and improvements

     1,532,903         1,498,256   

Plants

     12,344,109         11,969,382   

Machinery, equipment, vehicles and tools

     19,776,471         16,115,143   

Office furniture, equipment and software

     491,320         360,032   
  

 

 

    

 

 

 
     36,210,137         32,008,147   

Less accumulated depreciation

     9,876,453         6,489,642   
  

 

 

    

 

 

 
     26,333,684         25,518,505   
  

 

 

    

 

 

 

Other assets

     1,000         1,000   
  

 

 

    

 

 

 
   $ 50,667,138       $ 52,468,891   
  

 

 

    

 

 

 
Liabilities and Equity      

Current liabilities:

     

Current portion of long-term debt

   $ 5,991,424       $ 8,373,559   

Accounts payable

     5,638,529         6,282,437   

Accrued liabilities

     538,378         763,307   

Billings in excess of costs and estimated earnings on contracts in progress

     3,185,041         1,665,666   

State income tax payable

     123,984         65,446   
  

 

 

    

 

 

 

Total current liabilities

     15,477,356         17,150,415   
  

 

 

    

 

 

 

Long-term debt

     17,559,708         21,803,599   

Deferred state income tax

     73,604         60,910   
  

 

 

    

 

 

 
     17,633,312         21,864,509   
  

 

 

    

 

 

 

Equity

     17,556,470         13,453,967   
  

 

 

    

 

 

 
   $ 50,667,138       $ 52,468,891   
  

 

 

    

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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R.K. HALL CONSTRUCTION, LTD.

AND AFFILIATES

 

Combined Statements of Operations and Equity

For the Years Ended December 31

 

     2009     2008     2007  

Income from construction:

      

Revenue earned

   $ 128,514,888      $ 141,528,394      $ 97,558,425   

Job costs

     (115,407,218     (132,947,706     (88,825,589
  

 

 

   

 

 

   

 

 

 

Gross profit on construction

     13,107,670        8,580,688        8,732,836   

General and administrative expenses

     (7,084,438     (6,841,727     (5,259,417

Gain on sale of assets

     230,615        78,248        7,343   
  

 

 

   

 

 

   

 

 

 

Income from operations

     6,253,847        1,817,209        3,480,762   

Other income and (expenses):

      

Interest income

     280,841        279,691        243,900   

Other income

     49,484        113,806        202,818   

Interest expense

     (2,037,097     (2,222,811     (1,743,210
  

 

 

   

 

 

   

 

 

 

Net income (loss) before provision for state income tax

     4,547,075        (12,105     2,184,270   

Provision for state income tax

     (87,768     (82,961     (93,834
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     4,459,307        (95,066     2,090,436   

Equity:

      

Beginning of year

     13,453,967        14,266,913        9,721,721   

Contributions

     130,000        —          3,000,000   

Distributions

     (486,804     (717,880     (545,244
  

 

 

   

 

 

   

 

 

 

End of year

   $ 17,556,470      $ 13,453,967      $ 14,266,913   
  

 

 

   

 

 

   

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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R.K. HALL CONSTRUCTION, LTD.

AND AFFILIATES

 

Combined Statements of Cash Flows

For the Years Ended December 31

 

     2009     2008     2007  

Cash flows from operating activities:

      

Net income (loss)

   $ 4,459,307      $ (95,066   $ 2,090,436   

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

      

Depreciation

     3,450,406        3,668,025        3,617,109   

Gain on sale of assets

     (230,615     (78,248     (7,343

(Increase) decrease in:

      

Receivables

     3,205,836        2,872,000        (5,733,654

Inventory

     (1,322,452     362,042        (1,250,338

Costs and estimated earnings in excess of billings

     3,137,811        (3,288,291     788,956   

Prepaid expenses

     29,332        (98,324     (147,607

Increase (decrease) in:

      

Accounts payable

     (643,908     (1,796,983     3,591,745   

Accrued liabilities

     (224,929     56,035        337,715   

Billings in excess of costs and estimated earnings

     1,519,375        261,685        (363,249

Income taxes

     71,232        24,487        93,834   
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     13,451,395        1,887,362        3,017,604   
  

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

      

Proceeds from sale of equipment

     290,205        1,071,295        80,000   

Purchases of property and equipment

     (4,325,175     (4,386,049     (10,890,152
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (4,034,970     (3,314,754     (10,810,152
  

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

      

Proceeds from borrowings

     2,316,852        5,336,766        11,118,953   

Payment on principal of notes payable

     (8,942,878     (5,702,674     (4,108,279

Partner contributions

     130,000        —          3,000,000   

Partner withdrawals

     (486,804     (636,646     (545,244

Contribution of additional paid-in capital

     —          —          26,092   
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (6,982,830     (1,002,554     9,491,522   
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     2,433,595        (2,429,946     1,698,974   

Beginning cash and cash equivalents

     7,582,598        10,012,544        8,313,570   
  

 

 

   

 

 

   

 

 

 

Ending cash and cash equivalents

   $ 10,016,193      $ 7,582,598      $ 10,012,544   
  

 

 

   

 

 

   

 

 

 

Supplemental cash flow information:

      

Partner withdrawals of non-cash assets

   $ —        $ 81,234      $ —     

 

The accompanying notes are an integral part of the financial statements.

 

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R.K. HALL CONSTRUCTION, LTD. AND AFFILIATES

 

Notes to the Combined Financial Statements

For the Years Ended

December 31, 2009, 2008 and 2007

 

Note 1 — Summary of Significant Accounting Policies

 

The combined financial statements include the accounts of R.K. Hall Construction, Ltd. and affiliates through common ownership (the Companies) and have been prepared in accordance with accounting principals generally accepted in the United States of America (U.S. GAAP). All significant intercompany transactions and balances have been eliminated in combination. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements in accordance with U.S. GAAP have been recorded.

 

History

 

The Companies are engaged in road and bridge construction and the related sale and manufacturing of hot mix asphalt concrete. The Companies are organized in the states of Texas and Arkansas.

 

The Companies operate eleven asphalt plant facilities and one concrete plant facility located throughout Northeast Texas. Job sites are located in Texas, Arkansas and Oklahoma. The length of the Companies’ contracts varies but typically averages less than one year.

 

Use of estimates

 

Management uses estimates and assumptions in preparing these financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

 

Recognition of income and costs on construction contracts

 

The Companies use the percentage-of-completion method of reporting profits on major construction contracts. Under this method, the percentage of the cost incurred to date to the total estimated costs is used to determine the portion of the contract amount which is considered earned to date. At the time a loss on a contract becomes known, the full amount of the projected loss is recognized. Contract costs include all direct material and labor costs as well as indirect construction costs. Selling, general and administrative costs are charged to expense as incurred.

 

On contracts in progress where costs and estimated earnings are in excess of billings, the excess is treated as a current asset. Where billings are in excess of costs and estimated earnings, this excess is shown as a current liability. These amounts are as follows at December 31:

 

     2009     2008  

Costs and estimated earnings on contracts in progress

   $ 131,474,992      $ 87,373,998   

Billings on contracts in progress

     133,770,114        85,011,934   
  

 

 

   

 

 

 
   $ (2,295,122   $ 2,362,064   
  

 

 

   

 

 

 

 

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R.K. HALL CONSTRUCTION, LTD. AND AFFILIATES

 

Notes to the Combined Financial Statements

For the Years Ended

December 31, 2009, 2008 and 2007

 

Note 1 — Summary of Significant Accounting Policies (Continued)

 

Recognition of income and costs on construction contracts (Continued)

 

These amounts are shown in the accompanying financial statements as follows at December 31:

 

     2009     2008  

Current assets

   $ 889,919      $ 4,027,730   

Current liabilities

     3,185,041        1,665,666   
  

 

 

   

 

 

 
   $ (2,295,122   $ 2,362,064   
  

 

 

   

 

 

 

 

Property and equipment

 

Property and equipment are stated at cost and depreciated over estimated useful lives using the straight-line method, ranging from three to thirty-nine years. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. Depreciation expense is included in job costs and general and administrative expenses on the statements of operations and equity.

 

     2009      2008      2007  

Depreciation expense for the years ended December 31:

   $ 3,450,406       $ 3,668,025       $ 3,617,109   

 

Statements of cash flows

 

For purposes of the statements of cash flows, the Companies consider all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.

 

     2009      2008      2007  

The Companies paid the following during the years ended December 31:

        

Interest expense

   $ 2,256,366       $ 2,000,461       $ 1,746,999   

Income taxes

     16,536         58,474         —     

The Companies had exposure related to cash balances with financial institutions in excess of federally insured amounts before outstanding items not yet cleared at December 31:

     5,311,909         9,101,772      

 

Management monitors these balances to insure funds are not at risk.

 

Inventory

 

Inventory, consisting of stone, sand, asphalt and diesel fuel, is stated at the lower of cost or market. The Companies value all inventory utilizing the first-in, first-out method.

 

Presentation of taxes

 

The Companies collect various taxes from customers and remit these amounts to applicable taxing authorities. The Companies’ accounting policy is to exclude these taxes from revenues and job costs.

 

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R.K. HALL CONSTRUCTION, LTD. AND AFFILIATES

 

Notes to the Combined Financial Statements

For the Years Ended

December 31, 2009, 2008 and 2007

 

Note 2 — Receivables

 

Receivables consist of the following at December 31:

 

     2009     2008  

Contract billings

   $ 5,707,256      $ 8,286,918   

Contract retainage

     2,610,762        3,168,355   

Allowance for doubtful accounts

     (60,000     —     

Employees

     1,153        9,734   
  

 

 

   

 

 

 
   $ 8,259,171      $ 11,465,007   
  

 

 

   

 

 

 

 

Note 3 — Accounts Payable

 

     2009      2008  

Amounts due to subcontractors have been retained pending the completion and customer acceptance of jobs at December 31:

   $ 1,855,461       $ 1,264,324   

 

These amounts are included in accounts payable.

 

Note 4 — Long-term Debt

 

Long-term debt consists of the following at December 31:

 

     2009      2008  

Notes payable to bank, payable in monthly installments of $418,922 including interest ranging from 5% to 7.6%; secured by machinery, equipment, vehicles, plants and partners’ guaranty

   $ 10,043,220       $ 13,822,542   

Notes payable to finance companies, payable in monthly installments of $75,024 including interest ranging from 0% to 7.82%; secured by machinery, equipment and vehicles

     2,094,368         1,171,129   

Note payable to bank, payable in monthly installments of $87,500 plus interest at 7.5%; secured by equipment and partners’ guaranty

     8,414,255         9,467,480   

Note payable to bank, payable in monthly installments of $12,500 plus interest at 7.5%; secured by real estate and members’ guaranty

     1,237,500         1,387,500   

Note payable to finance company, payable in semi-annual installments of $71,864.58 including interest at 4.25%; secured by real estate and members’ guaranty

     1,761,789         1,828,507   

Note payable to bank, line of credit up to $4,500,000, interest at 5.75%, maturing May 25, 2010; secured by inventory and equipment and partners’ guaranty

     —           2,500,000   
  

 

 

    

 

 

 
     23,551,132         30,177,158   

Less current maturities

     5,991,424         8,373,559   
  

 

 

    

 

 

 
   $ 17,559,708       $ 21,803,599   
  

 

 

    

 

 

 

 

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R.K. HALL CONSTRUCTION, LTD. AND AFFILIATES

 

Notes to the Combined Financial Statements

For the Years Ended

December 31, 2009, 2008 and 2007

 

Note 4 — Long-term Debt (Continued)

 

Future maturities of long-term debt are as follows:

 

For the years ending December 31:

  

2010

   $ 5,991,424   

2011

     5,266,114   

2012

     3,748,646   

2013

     2,101,079   

2014

     1,409,448   

Thereafter

     5,034,421   

 

Note 5 — Operating Leases

 

The Companies are obligated under operating leases for asphalt plants and equipment. The lease payments amount to $125,761 per month and are guaranteed by the partners and members.

 

     2009      2008      2007  

Lease expense for the years ended December 31:

   $ 783,809       $ 379,656       $ 379,655   

 

Lease expense is included in job costs on the statements of operations and equity.

 

Minimum future lease payments are as follows:

 

For the years ending December 31:

  

2010

   $ 1,509,130   

2011

     1,509,130   

2012

     1,509,130   

2013

     1,088,402   

2014

     558,603   

Thereafter

     228,956   

 

Note 6 — Related Party Transactions

 

The Companies lease equipment from entities owned by its partners. The equipment leases are on a month-to-month basis.

 

     2009      2008      2007  

Lease expense during the years ended December 31:

   $ 1,274,583       $ 1,124,179       $ 681,202   

Included in accounts payable at December 31:

     298,886         155,894      

 

The Companies also purchased materials from an entity owned by one of its partners.

 

     2009      2008      2007  

Material purchased during the years ended December 31:

   $ 2,465,334       $ 2,182,187       $ —     

Included in accounts payable at December 31:

     99,524         97,810      

 

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R.K. HALL CONSTRUCTION, LTD. AND AFFILIATES

 

Notes to the Combined Financial Statements

For the Years Ended

December 31, 2009, 2008 and 2007

 

Note 6 — Related Party Transactions (Continued)

 

All of these related party expenses are included in job costs and general and administrative expenses on the statements of operations and equity.

 

Partner/member guaranties are included in long-term debt and in operating leases (Note 4 and Note 5).

 

Note 7 — Concentrations

 

Concentrations of business with a single entity (Texas Department of Transportation) subjects the Companies to the potential for credit risk.

 

     Accounts Receivable     Revenue  
     Amount      Percent     Amount      Percent  

Concentrations of contracts receivable and revenue as of and for the years ended December 31:

          

2009

   $ 2,955,100         36   $ 54,154,276         42

2008

     5,034,844         44     84,164,723         59

2007

          57,113,165         59

 

Note 8 — Profit Sharing Plan

 

The Companies have a profit sharing plan for the primary purpose of providing retirement benefits to all eligible employees. The Companies’ contributions each year are subject to the discretion of management.

 

     2009      2008      2007  

The Companies made contributions to the plan as follows for the years ended December 31:

   $ 61,532       $ —         $ 7,986   

 

Note 9 — Income Taxes

 

The Companies are not tax paying entities for Federal income tax purposes and, accordingly, does not incur Federal income tax. Instead, the partners and members are liable for individual Federal income tax on the Companies’ income or loss.

 

The income tax provision includes deferred state income tax attributable to temporary differences between income reported for financial purposes versus income tax purposes resulting from the Companies’ use of the accelerated method of computing tax depreciation.

 

The provision for income tax consists of the following for the years ended December 31:

 

     2009      2008      2007  

Current state income tax

   $ 75,074       $ 64,337       $ 59,583   

Deferred state income tax

     12,694         18,624         34,251   
  

 

 

    

 

 

    

 

 

 
   $ 87,768       $ 82,961       $ 93,834   
  

 

 

    

 

 

    

 

 

 

 

The Companies do not have any unrecognized tax benefit which could significantly change its provision for income tax. The Companies are subject to examination for the prior three years by Federal taxing authorities and the prior four years for state taxing authorities.

 

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R.K. HALL CONSTRUCTION, LTD. AND AFFILIATES

 

Notes to the Combined Financial Statements

For the Years Ended

December 31, 2009, 2008 and 2007

 

Note 10 — Subsequent Events

 

Management has evaluated subsequent events through September 21, 2011, the date the financial statements were available to be issued.

 

In November, 2010, RK Hall, LLC (an indirect, wholly-owned subsidiary of Summit Materials, LLC) was formed to effect the acquisition of the business and partner/member interests of the Companies. On November 12, 2010, the Companies and its partners/members entered into an Interest Purchase Agreement with RK Hall, LLC, pursuant to which the business and partner/member interests of the Companies were acquired by RK Hall, LLC. The effective date of the transaction was November 30, 2010.

 

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R.K. HALL CONSTRUCTION, LTD.

AND AFFILIATES

 

Unaudited Combined Balance Sheets

 

     September 30,
2010
     December 31,
2009
 
Assets      

Current assets:

     

Cash

   $ 11,501,871       $ 10,016,193   

Receivables

     18,468,757         8,259,171   

Inventory

     5,271,623         4,940,793   

Cost and estimated earnings in excess of billings on contracts in progress

     1,942,309         889,919   

Prepaid expenses

     380,342         226,378   
  

 

 

    

 

 

 

Total current assets

     37,564,902         24,332,454   
  

 

 

    

 

 

 

Property and equipment:

     

Land

     2,065,334         2,065,334   

Buildings and improvements

     1,552,281         1,532,903   

Plants

     15,249,887         12,344,109   

Machinery, equipment, vehicles and tools

     22,824,487         19,776,471   

Office furniture, equipment and software

     514,767         491,320   
  

 

 

    

 

 

 
     42,206,756         36,210,137   

Less accumulated depreciation

     12,874,176         9,876,453   
  

 

 

    

 

 

 
     29,332,580         26,333,684   
  

 

 

    

 

 

 

Other assets

     1,000         1,000   
  

 

 

    

 

 

 
   $ 66,898,482       $ 50,667,138   
  

 

 

    

 

 

 
Liabilities and Equity      

Current liabilities:

     

Current portion of long-term debt

   $ 7,206,571       $ 5,991,424   

Accounts payable

     17,309,949         5,638,529   

Accrued liabilities

     1,515,942         538,378   

Billings in excess of costs and estimated earnings on contracts in progress

     2,729,902         3,185,041   

State income tax payable

     104,808         123,984   
  

 

 

    

 

 

 

Total current liabilities

     28,867,172         15,477,356   
  

 

 

    

 

 

 

Long-term debt

     15,228,840         17,559,708   

Deferred state income tax

     75,000         73,604   
  

 

 

    

 

 

 
     15,303,840         17,633,312   
  

 

 

    

 

 

 

Equity

     22,727,470         17,556,470   
  

 

 

    

 

 

 
   $ 66,898,482       $ 50,667,138   
  

 

 

    

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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Table of Contents

R.K. HALL CONSTRUCTION, LTD.

AND AFFILIATES

 

Unaudited Combined Statements of Operations and Equity

For the Nine Months Ended September 30

 

     2010     2009  

Income from construction:

    

Revenue earned

   $ 105,283,347      $ 102,440,270   

Job costs

     (92,204,521     (92,261,985
  

 

 

   

 

 

 

Gross profit on construction

     13,078,826        10,178,285   

General and administrative expenses

     (5,829,467     (5,064,343

Gain on sale of assets

     51,796        200,108   
  

 

 

   

 

 

 

Income from operations

     7,301,155        5,314,050   

Other income and (expenses):

    

Interest income

     68,856        210,630   

Other income

     53,218        34,857   

Interest expense

     (1,493,101     (1,564,809
  

 

 

   

 

 

 

Net income before provision for income tax

     5,930,128        3,994,728   

Provision for state income tax

     (59,920     (116,505
  

 

 

   

 

 

 

Net income

     5,870,208        3,878,223   

Equity:

    

Beginning of period

     17,556,471        13,453,967   

Contributions

     —          —     

Distributions

     (699,209     (380,931
  

 

 

   

 

 

 

End of period

   $ 22,727,470      $ 16,951,259   
  

 

 

   

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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R.K. HALL CONSTRUCTION, LTD.

AND AFFILIATES

 

Unaudited Combined Statements of Cash Flows

For the Nine Months Ended September 30

 

     2010     2009  

Cash flows from operating activities:

    

Net income

   $ 5,870,208      $ 3,878,223   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

     3,087,390        2,480,672   

Gain on sale of assets

     (51,796     (200,108

(Increase) decrease in:

    

Receivables

     (10,209,586     (3,375,967

Inventory

     (330,830     (1,044,597

Costs and estimated earnings in excess of billings

     (1,052,390     3,330,544   

Prepaid expenses

     (153,964     (99,691

Increase (decrease) in:

    

Accounts payable

     11,671,420        7,133,210   

Accrued liabilities

     977,564        646,778   

Billings in excess of costs and estimated earnings

     (455,139     2,140,446   

Income taxes

     (17,780     56,755   
  

 

 

   

 

 

 

Net cash provided by operating activities

     9,335,097        14,946,265   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Proceeds from sale of property and equipment

     116,457        254,801   

Purchases of property and equipment

     (6,150,946     (4,027,144
  

 

 

   

 

 

 

Net cash used in investing activities

     (6,034,489     (3,772,343
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from borrowings

     4,756,215        2,316,852   

Payment on principal of notes payable

     (5,871,936     (7,272,665

Partner contributions

     —          —     

Partner withdrawals

     (699,209     (380,931
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,814,930     (5,336,744
  

 

 

   

 

 

 

Net increase in cash

     1,485,678        5,837,178   

Beginning cash and cash equivalents

     10,016,193        7,582,598   
  

 

 

   

 

 

 

Ending cash and cash equivalents

   $ 11,501,871      $ 13,419,776   
  

 

 

   

 

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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R.K. HALL CONSTRUCTION, LTD.

 

Notes to the Unaudited Combined Financial Statements

At September 30, 2010 and December 31, 2009 and

For the Nine Months Ended

September 30, 2010 and 2009

 

Note 1 — Summary of Significant Accounting Policies

 

The combined financial statements include the accounts of R.K. Hall Construction, Ltd. and affiliates through common ownership (the Companies) and have been prepared in accordance with accounting principals generally accepted in the United States of America (U.S. GAAP). All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements in accordance with U.S. GAAP have been recorded.

 

History

 

The Companies are engaged in road and bridge construction and the related sale and manufacturing of hot mix asphalt concrete. The Companies are organized in the state of Texas and Arkansas.

 

The Companies operate eleven asphalt plant facilities and one concrete plant facility located throughout Northeast Texas. Job sites are located in Texas, Arkansas and Oklahoma. The length of the Companies’ contracts varies but typically average less than one year.

 

Use of estimates

 

Management uses estimates and assumptions in preparing these financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

 

Recognition of income and costs on construction contracts

 

The Companies use the percentage-of-completion method of reporting profits on major construction contracts. Under this method, the percentage of the cost incurred to date to the total estimated costs is used to determine the portion of the contract amount which is considered earned to date. At the time a loss on a contract becomes known, the full amount of the projected loss is recognized. Contract costs include all direct material and labor costs as well as indirect construction costs. Selling, general and administrative costs are charged to expense as incurred.

 

On contracts in progress where costs and estimated earnings are in excess of billings, the excess is treated as a current asset. Where billings are in excess of costs and estimated earnings, this excess is shown as a current liability. These amounts are as follows at:

 

     September 30,
2010
    December 31,
2009
 

Costs and estimated earnings on contracts in progress

   $ 134,037,362      $ 131,474,992   

Billings on contracts in progress

     134,824,955        133,770,114   
  

 

 

   

 

 

 
   $ (787,593   $ (2,295,122
  

 

 

   

 

 

 

 

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R.K. HALL CONSTRUCTION, LTD.

 

Notes to the Unaudited Combined Financial Statements

At September 30, 2010 and December 31, 2009 and

For the Nine Months Ended

September 30, 2010 and 2009

 

Note 1 — Summary of Significant Accounting Policies (Continued)

 

These amounts are shown in the accompanying financial statements as follows at:

 

     September 30,
2010
    December 31,
2009
 

Current assets

   $ 1,942,309      $ 889,919   

Current liabilities

     2,729,902        3,185,041   
  

 

 

   

 

 

 
   $ (787,593   $ (2,295,122
  

 

 

   

 

 

 

 

Property and equipment

 

Property and equipment are stated at cost and depreciated over estimated useful lives using the straight-line method, ranging from three to thirty-nine years. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. Depreciation expense amounted to $3,087,390 and $2,480,672 for the nine months ended September 30, 2010 and 2009, respectively, and is included in job costs and general and administrative expenses on the statements of operations and equity.

 

Statements of cash flows

 

For purposes of the statements of cash flows, the Companies consider all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.

 

     September 30,
2010
     September 30,
2009
 

The Companies paid the following during the nine months ended:

     

Interest expense

   $ 1,668,502       $ 1,564,809   

Income taxes

     77,700         59,150   

 

     September 30,
2010
     December 31,
2009
 

The Companies had exposure related to cash balances with financial institutions in excess of federally insured amounts before outstanding items not yet cleared:

   $ 5,818,075       $ 5,311,909   

 

Management monitors these balances to insure funds are not at risk.

 

Inventories

 

Inventory, consisting of stone, sand, asphalt and diesel fuel, is stated at the lower of cost or market. The Companies value all inventory utilizing the first-in, first-out method.

 

Presentation of taxes

 

The Companies collect various taxes from customers and remit these amounts to applicable taxing authorities. The Companies’ accounting policy is to exclude these taxes from revenues and job costs.

 

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R.K. HALL CONSTRUCTION, LTD.

 

Notes to the Unaudited Combined Financial Statements

At September 30, 2010 and December 31, 2009 and

For the Nine Months Ended

September 30, 2010 and 2009

 

Note 2 — Receivables

 

Receivables consist of the following at:

 

     September 30,
2010
    December 31,
2009
 

Contract billings

   $ 16,623,182      $ 5,707,256   

Contract retainage

     1,872,559        2,610,762   

Allowance for doubtful accounts

     (30,000     (60,000

Employees

     3,016        1,153   
  

 

 

   

 

 

 
   $ 18,468,757      $ 8,259,171   
  

 

 

   

 

 

 

 

Note 3 — Accounts Payable

 

Amounts due to subcontractors that have been retained pending the completion and customer acceptance of jobs amounted to $1,302,672 and $1,855,461 at September 30, 2010 and December 31, 2009, respectively. These amounts are included in accounts payable.

 

Note 4 — Long-term Debt

 

Long-term debt consists of the following at:

 

     September 30,
2010
     December 31,
2009
 

Notes payable to bank, payable in monthly installments of $345,090 including interest ranging from 5% to 7.6%; secured by machinery, equipment, vehicles, plants and partners’ guaranty

   $ 7,745,377       $ 10,043,220   

Notes payable to finance companies, payable in monthly installments of $127,457 including interest ranging from 0% to 7.46%; secured by machinery, equipment and vehicles

     3,272,974         2,094,368   

Note payable to bank, payable in monthly installments of $87,500 plus interest at 7.5%; secured by equipment and partners’ guaranty

     7,511,796         8,414,255   

Note payable to bank, payable in monthly installments of $12,500 plus interest at 7.5%; secured by real estate and members’ guaranty

     1,125,000         1,237,500   

Note payable to finance company, payable in semi-annual installments of $71,865 including interest at 4.25%; secured by real estate and members’ guaranty

     1,727,362         1,761,789   

Note payable to finance company, payable in quarterly installments of $284,955 including interest at 13.00%; secured by equipment

     1,052,902         —     
  

 

 

    

 

 

 
     22,435,411         23,551,132   

Less current maturities

     7,206,571         5,991,424   
  

 

 

    

 

 

 
   $ 15,228,840       $ 17,559,708   
  

 

 

    

 

 

 

 

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R.K. HALL CONSTRUCTION, LTD.

 

Notes to the Unaudited Combined Financial Statements

At September 30, 2010 and December 31, 2009 and

For the Nine Months Ended

September 30, 2010 and 2009

 

Note 4 — Long-term Debt (Continued)

 

Future maturities of long-term debt are as follows:

 

For the years ending December 31:

  

2010 (Three months)

   $ 1,564,021   

2011

     7,051,262   

2012

     4,799,877   

2013

     2,613,266   

2014

     1,487,524   

2015

     1,285,869   

Thereafter

     3,633,592   

 

Note 5 — Operating Leases

 

The Companies are obligated under operating leases for asphalt plants and equipment. The lease payments amount to $125,761 per month and are guaranteed by the partners and members.

 

     2010      2009  

Lease expense for the nine months ended September 30:

   $ 1,131,847       $ 549,943   

 

Lease expense is included in job costs on the statements of operations and equity.

 

Minimum future lease payments are as follows:

 

 

For the years ending December 31:

  

2010 (Three months)

   $ 377,282   

2011

     1,509,130   

2012

     1,509,130   

2013

     1,088,402   

2014

     558,603   

2015

     228,956   

 

Note 6 — Related Party Transactions

 

The Companies lease equipment from entities owned by its partners. The equipment leases are on a month-to-month basis.

 

     September 30,
2010
     September 30,
2009
 

Lease expense during the nine months ended:

   $ 677,595       $ 1,011,888   

 

     September 30,
2010
     December 31,
2009
 

Included in accounts payable at:

   $ —         $ 298,886   

 

The Companies also purchased materials from an entity owned by one of its partners.

 

     September 30,
2010
     September 30,
2009
 

Material purchased during the nine months ended:

   $ 524,685       $ 2,108,760   

 

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R.K. HALL CONSTRUCTION, LTD.

 

Notes to the Unaudited Combined Financial Statements

At September 30, 2010 and December 31, 2009 and

For the Nine Months Ended

September 30, 2010 and 2009

 

Note 6 — Related Party Transactions (Continued)

 

     September 30,
2010
     December 31,
2009
 

Included in accounts payable at:

   $ 203,459       $ 99,524   

 

All of these related party expenses are included in job costs and general and administrative expenses on the statements of operations and equity.

 

Partner/member guaranties are included in long-term debt and in operating leases (Note 4 and Note 5).

 

Note 7 — Concentrations

 

Concentrations of business with a single entity (Texas Department of Transportation) subjects the Companies to the potential for credit risk.

 

     Accounts Receivable     Revenue  
     Amount      Percent     Amount      Percent  

Concentrations of contracts receivable and revenue as of and/or for the nine months ended:

          

September 30, 2010

   $ 7,738,018         39   $ 51,373,696         49

September 30, 2009

          42,678,971         42

December 31, 2009

   $ 2,955,100         36     

 

Note 8 — Profit Sharing Plan

 

The Companies have a profit sharing plan for the primary purpose of providing retirement benefits to all eligible employees. The Companies’ contributions each year are subject to the discretion of management.

 

     2010      2009  

The Companies made contributions to the plan as follows for the nine months ended September 30:

   $ 98,576       $ 35,393   

 

Note 9 — Income Taxes

 

The Companies are not tax paying entities for Federal income tax purposes and, accordingly, does not incur Federal income tax. Instead, the partners and members are liable for individual Federal income tax on the Companies’ income or loss.

 

The income tax provision includes deferred state income tax attributable to temporary differences between income reported for financial purposes versus income tax purposes resulting from the Companies’ use of the accelerated method of computing tax depreciation.

 

The provision for income tax consists of the following for the nine months ended September 30:

 

     2010      2009  

Current state income tax

   $ 58,524       $ 105,970   

Deferred state income tax

     1,396         10,535   
  

 

 

    

 

 

 
   $ 59,920       $ 116,505   
  

 

 

    

 

 

 

 

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R.K. HALL CONSTRUCTION, LTD.

 

Notes to the Unaudited Combined Financial Statements

At September 30, 2010 and December 31, 2009 and

For the Nine Months Ended

September 30, 2010 and 2009

 

Note 9 — Income Taxes (Continued)

 

The Companies do not have any unrecognized tax benefit which could significantly change its provision for income tax. The Companies are subject to examination for the prior three years by Federal taxing authorities and the prior four years for state taxing authorities.

 

Note 10 — Subsequent Events

 

Management has evaluated subsequent events through September 29, 2011, the date the financial statements were available to be issued.

 

In November, 2010, RK Hall, LLC (an indirect, wholly-owned subsidiary of Summit Materials, LLC) was formed to effect the acquisition of the business and partner/member interests of the Companies. On November 12, 2010, the Companies and its partners/members entered into an Interest Purchase Agreement with RK Hall, LLC, pursuant to which the business and partner/member interests of the Companies were acquired by RK Hall, LLC. The effective date of the transaction was November 30, 2010.

 

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.

(a) The following entities are incorporated under the laws of the State of Delaware: Summit Materials Finance Corp. and Summit Materials Corporations I, Inc. (collectively, the “Delaware Corporations”).

Delaware General Corporation Law

Section 145(a) of the Delaware General Corporation Law provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

Section 145(b) of the Delaware General Corporation Law provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.

Section 145(c) of the Delaware General Corporation Law provides that to the extent that a present or former director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 145(a) and (b), or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

Section 145(d) of the Delaware General Corporation Law provides that any indemnification under Section 145(a) and (b) (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 145(a) and (b). Such determination shall be made, with respect to a person who is a director or officer of the

 

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corporation at the time of such determination (1) by a majority vote of the directors who were not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum; or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.

Section 145(e) of the Delaware General Corporation Law provides that expenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in Section 145. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate.

Section 145(f) of the Delaware General Corporation Law provides that the indemnification and advancement of expenses provided by, or granted pursuant to, Section 145 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to the certificate of incorporation or the bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

Section 145(g) of the Delaware General Corporation Law provides that a corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under Section 145.

Section 174 of the Delaware General Corporation Law provides, among other things, that a director, who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption, may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered in the books containing the minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.

Organizational Documents of Delaware Registrants

The articles of incorporation and/or bylaws of each of the Delaware Corporations provide that, to the fullest extent permitted by the Delaware General Corporation Law, the corporation shall indemnify any current or former Director or officer of the corporation and may, at the discretion of the Board of Directors, indemnify any current or former employee or agent of the corporation against all expenses, liabilities and losses reasonably incurred or suffered by him or her in connection with any action, suit or proceeding brought by or in the right of the corporation or otherwise, to which he or she was or is a party or is threatened to be made a party by reason of his or her current or former position with the corporation or by reason of the fact that he or she is or was serving, at the request of the corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.

 

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(b) Summit Materials, LLC, Austin Materials, LLC, Continental Cement Company, L.L.C., Kilgore Companies, LLC, Norris Quarries, LLC, RK Hall LLC, Summit Materials Companies I, LLC, Summit Materials Holdings I, LLC and Summit Materials Holdings II, LLC, are limited liability companies organized under the laws of the State of Delaware (collectively, the “Delaware Limited Liability Companies”).

Delaware Limited Liability Company Act

Section 18-108 of the Delaware Limited Liability Company Act empowers a Delaware limited liability company to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever.

In accordance with these provisions, the Limited Liability Company Agreements of each of the Delaware Limited Liability Companies state that to the fullest extent permitted by applicable law, the company shall indemnify a member, manager, an officer, a person to whom the managers delegate management responsibilities, any affiliate, officer, director or shareholder of a member, or manager, or any employee or agent of the company or of the indemnified party from any loss, damage or claim incurred by the indemnified party by reason of any act performed or omitted to be performed by the indemnified party in good faith in connection with the business of the company including expenses (including legal fees) incurred by such indemnified person in defending any claim, demand, action, suit or proceeding; provided however , that an indemnified party shall not be indemnified for any loss, damage or claim incurred by such party by reason of gross negligence or willful misconduct with such acts or omissions.

(c) The following entity is incorporated under the laws of the State of Colorado: Elam Construction, Inc. (the “Colorado Corporation”).

Colorado Business Corporation Act

Section 7-109-102 and Section 7-109-107 of the Colorado Business Corporation Act provide that a corporation may indemnify a person made party to a proceeding because the person is or was a director, officer, employee, fiduciary or agent if (a) such person’s conduct was in good faith; and (b) such person reasonably believed (i) in the case of conduct in such person’s official capacity with the corporation, that such conduct was in the corporation’s best interests; and (ii) in all other cases (other than criminal cases), that such conduct was at least not opposed to the corporation’s best interests; and (c) in the case of any criminal proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent is not, in itself, determinative that such person did not meet the standard of care under Section 7-109-102. A corporation may not indemnify a director, officer, employee, fiduciary or agent under Section 7-109-102 of the Colorado Business Corporation Act in connection with any proceeding (y) by or in the right of the corporation in which such person was adjudged liable to the corporation; or (z) charging that such person derived an improper personal benefit, whether or not involving an action in an official capacity, in which proceeding such person was adjudged liable on the basis that such person derived an improper personal benefit. Indemnification under Section 7-109-102 of the Colorado Business Corporation Act shall be limited to reasonable expenses incurred in connection with such proceeding.

Section 7-109-103 and Section 7-109-107 of the Colorado Business Corporation Act provide that, unless limited by a corporation’s articles of incorporation, a corporation shall indemnify directors and officers of the corporation, and may indemnify an employee, fiduciary or agent of the corporation, who are wholly successful, on the merits or otherwise, in the defense of any proceeding to which such director, officer, employee, fiduciary or agent was a party because the person was a director, officer, employee, fiduciary or agent against reasonable expenses incurred by such person in connection with the proceeding. The Colorado Corporation’s articles of incorporation do not contain a contrary provision.

 

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Section 7-109-104 and Section 7-109-107 of the Colorado Business Corporation Act permit a corporation to advance reasonable expenses incurred by a director, officer, employee, fiduciary or agent who is a party to a proceeding in advance of final disposition of the proceeding if: (a) the director, officer, employee, fiduciary or agent furnishes to the corporation a written affirmation of such director, officer, employee, fiduciary or agent’s good faith belief that he or she has met the standard of conduct set forth in Section 7-109-102 of the Colorado Business Corporation Act; (b) the director, officer, employee, fiduciary or agent furnishes to the corporation a written undertaking to repay the advance if it is ultimately determined that he or she did not meet the standard of conduct set forth in Section 7-109-102 of the Colorado Business Corporation Act; and (c) a determination is made that the facts then known to those making the determination would not preclude indemnification under the Colorado Business Corporation Act. Section 7-109-107 of the Colorado Business Corporation Act permits a corporation to indemnify and advance expenses to officers, employees, fiduciaries or agents who are not directors, to a greater extent than directors if not inconsistent with public policy, and if provided for by the corporation’s bylaws, general or specific action of its board of directors or shareholders, or contract.

Section 7-109-106 of the Colorado Business Corporation Act provides that a corporation may not indemnify a director, officer, employee, fiduciary or agent under Section 7-109-102 of the Colorado Business Corporation Act unless authorized in the specific case after a determination has been made that indemnification of such person is permissible in the circumstances because such person has met the standard of conduct set forth in Section 7-109-102 of the Colorado Business Corporation Act. Such determination shall be made, (a) by a majority vote of the directors who are not parties to such action, (b) by a committee of such directors designated by the board of directors, even though less than a quorum, (c) if there are no such directors, or if such directors so direct, by independent legal counsel, or (d) by the shareholders.

Section 7-109-108 of the Colorado Business Corporation Act provides that a corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, fiduciary or agent of the corporation, or who, while a director, officer, employee, fiduciary, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary or agent of another entity, against liability asserted against or incurred by the person in that capacity or arising from the person’s status as a director, officer, employee, fiduciary or agent, whether or not the corporation would have the power to indemnify the person against the same liability under the Colorado Business Corporation Act.

Organizational Documents of the Colorado Corporation

The articles of incorporation and bylaws of the Colorado Corporation provide that, to the fullest extent permitted by the Colorado Business Corporation Act, the Colorado Corporation shall indemnify any current or former director or officer of the Colorado Corporation and may, at the discretion of the Board of Directors of the Colorado Corporation, indemnify any current or former employee, fiduciary or agent of the Colorado Corporation against expenses, liabilities and losses reasonably incurred or suffered by such person in connection with any action, suit, or proceeding, to which such person is a party or is threatened to be made a party by reason of such person’s current or former position with the Colorado Corporation, as a director, officer, employee, fiduciary or agent or by reason of the fact that such person is or was serving, at the request of the Colorado Corporation as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise; provided, however, prior to such indemnification, the Board of Directors of the Colorado Corporation or a committee thereof must determine that such indemnitee conducted himself or herself in good faith and reasonably believed, (i) in such person’s official capacity that such conduct was in the Colorado Corporation’s best interests, (ii) in all other cases (other than criminal cases), that such conduct was not opposed to the Colorado Corporation’s best interests, or (iii) in the case of any criminal action, that such conduct was not unlawful.

(d) The following entity is incorporated under the laws of the State of Kansas: Hamm, Inc. (the “Kansas Corporation”).

 

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Kansas General Corporation Code

The Kansas General Corporation Code, Chapter 17, Articles 60 to 74 of the Kansas Statutes Annotated, provides in K.S.A. 17-6305(a) that a corporation shall have power to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, including attorney fees, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

The Kansas General Corporation Code provides in K.S.A. 17-6305(b) that a corporation shall have power to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, including attorney fees, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

The Kansas General Corporation Code provides in K.S.A. 17-6305(c) that to the extent that a present or former director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of K.S.A. 17-6305, or in defense of any claim, issue or matter therein, such director, officer, employee or agent shall be indemnified against expenses actually and reasonably incurred by such person in connection therewith, including attorney fees.

The Kansas General Corporation Code provides in K.S.A. 17-6305(d) that any indemnification under subsections (a) and (b) of K.S.A. 17-6305, unless ordered by a court, shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because such director, officer, employee or agent has met the applicable standard of conduct set forth in subsections (a) and (b) of K.S.A. 17-6305. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination: (1) by a majority vote of the directors who were not parties to such action, suit or proceeding, even though less than a quorum; (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum; (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion; or (4) by the stockholders.

The Kansas General Corporation Code provides in K.S.A. 17-6305(e) that expenses, including attorney fees, incurred by a director or officer in defending a civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it is ultimately

 

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determined that the director or officer is not entitled to be indemnified by the corporation as authorized in K.S.A. 17-6305. Such expenses, including attorney fees, incurred by former directors and officers or incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate.

The Kansas General Corporation Code provides in K.S.A. 17-6305(f) that the indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of K.S.A. 17-6305 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in a person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the articles of incorporation or a bylaw shall not be eliminated or impaired by an amendment to such provision after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

The Kansas General Corporation Code provides in K.S.A. 17-6305(g) that a corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of K.S.A. 17-6305.

Organizational Documents of the Kansas Corporation

The articles of incorporation of the Kansas Corporation provide that each person who is or was a director or officer of the corporation, and each director, officer, employee or agent of the corporation who is or was serving at the request of the corporation as a director or officer of another corporation (including the heirs, executors, administrators and estate of such person) shall be indemnified by the corporation as of right to the full extent permitted or authorized by the laws of the State of Kansas, as now in effect and as hereafter amended, against any expenses, judgments, fines and amounts paid in settlement (including attorneys’ fees) actually and reasonably incurred by such person in his capacity as or arising out of his status as a director or officer of the corporation or if serving at the request of the corporation as a director or officer of another corporation. The indemnification provided by this provision shall not be exclusive of any other rights to which those indemnified may be entitled under the articles of incorporation, under any other bylaw or under any agreement, vote of stockholders or disinterested directors or otherwise, and shall not limit in any way any right which the corporation may have to make different or further indemnifications with respect to the same or different persons or classes of persons.

The bylaws of the Kansas Corporation provide that when a person is sued, either alone or with others, because he is or was a director or officer of the corporation, or of another corporation serving at the request of the corporation, in any proceeding arising out of his alleged misfeasance or nonfeasance in the performance of his duties or out of any alleged wrongful act against the corporation or by the corporation, he shall be indemnified for his reasonable expenses, including attorneys’ fees incurred in the defense of the proceeding, if both of the following conditions exist: (a) the person sued is successful in whole or in part, or the proceeding against him is settled with the approval of the court and (b) the court finds that his conduct fairly and equitably merits such indemnity.

(e) Cornejo & Sons, L.L.C., Hamm Asphalt, LLC, N.R. Hamm Contractor, LLC and N.R. Hamm Quarry, LLC are limited liability companies organized under the laws of the State of Kansas (collectively, the “Kansas Limited Liability Companies”).

 

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Kansas Revised Limited Liability Company Act

The Kansas Revised Limited Liability Company Act, K.S.A. 17-7662 through K.S.A. 17-76,142, as amended, provides in K.S.A. 17-7670(a) that subject to such standards and restrictions, if any, as are set forth in its operating agreement, a limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. To the extent that a member, manager, officer, employee or agent has been successful on the merits or otherwise or the defenses of any action, suits or proceeding, or in defense of any issue or matter therein, such director, officer, employee or agent shall be indemnified against expenses actually and reasonably incurred by such person in connection therewith, including attorney fees.

Organizational Documents of the Kansas Limited Liability Companies

The operating agreement of each of the Kansas Limited Liability Companies provides that to the fullest extent permitted by the laws of the State of Kansas and except in the case of bad faith, gross negligence or willful misconduct, no member or officer shall be liable to the company or any other member for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such member or officer in good faith on behalf of the company and in a manner reasonably believed to be within the scope of the authority conferred on such member or officer by the operating agreement. Except in the case of bad faith, gross negligence or willful misconduct, each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a member or officer, shall be indemnified and held harmless by the company to the same extent as permitted by the laws of the State of Kansas for directors and officers of corporations organized under the laws of the State of Kansas. Any indemnity under the operating agreement shall be provided out of and to the extent of company assets only, and no member shall have personal liability on account thereof.

(f) The following entities are incorporated under the laws of the Commonwealth of Kentucky: Bourbon Limestone Company and Kentucky Hauling, Inc. (together, the “Kentucky Corporations”).

Kentucky Business Corporations Act

Section 8-510 of KRS Chapter 271B (the “Kentucky Business Corporations Act”) provides that a corporation may indemnify an individual made a party to a proceeding because he is or was a directors against liability incurred in the proceeding if he conducted himself in good faith and he reasonably believed in the case of conduct in his official capacity with the corporation that his conduct was in its best interests and in all other cases, that his conduct was at least not opposed to its best interests and in the case of any criminal proceeding, he has no reasonable cause to believe his conduct was unlawful. A director’s conduct with respect to an employee benefit plan for a purpose he reasonable believed to be in the interests of the participants in and beneficiaries of the plan shall be conduct that satisfies the requirement that he reasonably believed that his conduct was at least not opposed to the corporation’s best interests. The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not be, of itself, determinative that the director did not meet the standard of conduct described herein. A corporation may not indemnify a director in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation or in connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him. Indemnification permitted under Section 8-510 of the Kentucky Business Corporations Act in connection with a proceeding by or in the right of the corporation shall be limited to reasonable expenses incurred in connection with the proceeding.

Section 8-520 of the Kentucky Business Corporations Act provides that unless limited by its articles of incorporation, a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he is or was a director of the corporation against reasonable expenses incurred by him in connection with the proceeding.

 

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Section 8-530 of the Kentucky Business Corporations Act provides that a corporation may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding if the director furnishes the corporation a written affirmation of his good faith belief that he has met the standard of conduct described in Section 8-510 of the Kentucky Business Corporations Act, the director furnishes the corporation a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet the standard of conduct and a determination is made that the facts then known to those making the determination would not preclude indemnification under Sections 8-500 to 8-580 of the Kentucky Business Corporations Act. The written undertaking shall be an unlimited general obligation of the director but shall not be required to be secured and may be accepted without reference to financial ability to make repayment. Determinations and authorizations of payments under this section shall be made in the manner specified in 8-550 of the Kentucky Business Corporations Act.

Section 8-540 of the Kentucky Business Corporations Act provides that unless a corporation’s articles of incorporation provide otherwise, a director of the corporation who is a party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. On receipt of an application, the court after giving any notice the court considers necessary may order indemnification if it determines the director is entitled to mandatory indemnification under Section 8-520 of the Kentucky Business Corporations Act, in which case the court shall also order the corporation to pay the director’s reasonable expenses incurred to obtain court-ordered indemnification, or the director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he met the standard of conduct set forth in Section 8-510 of the Kentucky Business Corporations Act or was adjudged liable as described in subsection (4) of Section 8-510 of the Kentucky Business Corporations Act, but if he was adjudged so liable his indemnification shall be limited to reasonable expenses incurred.

Section 8-550 of the Kentucky Business Corporations Act provides that a corporation shall not indemnify a director under Section 8-510 of the Kentucky Business Corporations Act unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because he met the standard of conduct set forth in Section 8-510 of the Kentucky Business Corporations Act. The determination shall be made by the board of directors by majority vote of a quorum consisting of directors not at that time parties to the proceeding, or, if a quorum cannot be obtained, by majority vote of a committee duly designated by the board of directors (in which designation directors who are parties may participate), consisting solely of two (2) or more directors not at the time parties to the proceeding, or by special legal counsel selected by the board of directors or its committee in the manner prescribed above, or if a quorum of the board of directors cannot be obtained, selected by a majority vote of the full board of directors (in which selection directors who are parties may participate), or by the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the proceeding shall not be voted on the determination. Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled to select special legal counsel as set forth above.

Section 8-560 of the Kentucky Business Corporations Act provides that unless the articles of incorporation provide otherwise, an officer of the corporation who is not a director shall be entitled to mandatory indemnification under Section 8-520 of the Kentucky Business Corporations Act, and is entitled to apply for court-ordered indemnification under Section 8-540 of the Kentucky Business Corporations Act, in each case to the same extent as a director, the corporation may indemnify and advance expenses under Sections 8-500 to 8-580 of the Kentucky Business Corporations Act to an officer, employee, or agent of the corporation who is not a director to the same extent as to a director and a corporation may also indemnify and advance expenses to an officer, employee, or agent who is not a director to the extent, consistent with public policy, that may be provided by its articles of incorporation, bylaws, general or specific actions of its board of directors, or contract.

 

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Section 8-570 of the Kentucky Business Corporations Act provides that a corporation may purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee, or agent of the corporation, or who, while a director, officer, employee or agent of the corporation, is or was serving at the request of the corporation as a director, officer, manager, partner, trustee, employee, or agent of another entity, or of an employee benefit plan or other enterprise, against liability asserted against or incurred in that capacity or arising from the status as a director, officer, manager, employee, or agent, whether or not the corporation would have power to indemnify against the same liability under Sections 8-510 or 8-520 of the Kentucky Business Corporations Act.

Section 8-580 of the Kentucky Business Corporations Act provides that the indemnification and advancement of expenses provided by, or granted pursuant to, Sections 8-500 to 8-580 of the Kentucky Business Corporations Act shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Sections 8-500 to 8-580 of the Kentucky Business Corporations Act shall not limit a corporation’s power to pay or reimburse expenses incurred by a director in connection with his appearance as a witness at a proceeding at a time when he has not been made a named defendant or responded to the proceeding.

Section 8-330 of the Kentucky Business Corporations Act provides, among other things, that a director who votes for or who assents to a distribution made in violation of Section 6-400 of the Kentucky Business Corporations Act or the articles of incorporation shall be personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating Section 6-400 of the Kentucky Business Corporations Act or the articles of incorporation if it is established that he did not perform his duties in compliance with Section 8-300 of the Kentucky Business Corporations Act.

Organizational Documents of Kentucky Corporations

The articles of incorporation of Bourbon Limestone Company state that the corporation shall, to the fullest extent permitted by Kentucky law, indemnify any director of the corporation from and against any and all reasonable costs and expenses (including, but not limited to, attorneys’ fees) and any liabilities (including, but not limited to, judgments, fines, penalties and reasonable settlements) paid by or on behalf of, or imposed against, such person in connection with any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative, investigative or other (including any appeal relating thereto), whether formal or informal, and whether made or brought by or in the right of the corporation or otherwise, in which such person is, was or at any time becomes a party or witness, or is threatened to be made a party or witness, or otherwise, by reason of the fact that such person is, was or at any time becomes a director of the corporation or, at the corporation’s request, a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

The bylaws of Kentucky Hauling, Inc. state that any person who was or is a party or is threatened to be made a party to any threatened or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by the corporation against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted I good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Provided, however, that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

 

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(g) Glass Aggregates, LLC, Hinkle Contracting Company, LLC and South Central Kentucky Limestone, LLC are limited liability companies organized under the laws of the Commonwealth of Kentucky (together, the “Kentucky Limited Liability Companies”).

Section 180 of KRS Chapter 275 (the “Kentucky Limited Liability Company Act”) provides that a written operating agreement may eliminate the personal liability of a member of manager for monetary damages for breach of any duty provided for in Section 170 of the Kentucky Limited Liability Company Act and provide for indemnification of a member or manager for judgments, settlements, penalties, fines, or expenses incurred in a proceeding to which a person is a party because the person is or was a member or manager.

The Operating Agreement of Hinkle Contracting Company, LLC states that, except in cases of bad faith, gross negligence or willful misconduct, each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a member or officer, shall be indemnified and held harmless by the company to the same extent as permitted by the laws of the Commonwealth of Kentucky for directors and officers of corporations organized under the laws of the Commonwealth of Kentucky.

The Operating Agreement of South Central Kentucky Limestone, LLC states that, to the greatest extent allowed by the laws of the Commonwealth of Kentucky, the company will indemnify the member if made a party to any proceeding because the member is or was a member against all liability incurred by the member in accordance with any proceeding and pay for or reimburse the reasonable expenses incurred by the member in connection with any such proceeding in advance of final disposition thereof. The company will have the power but not the obligation to indemnify any person who is or was an employee or agent of the company to the same extent as if such person was a member.

The Articles of Organization of Glass Aggregates, LLC state that the company shall indemnify any member, officer and or manager for any judgments, settlements, penalties, fines or expenses incurred in a proceeding to which a person is a party because the person is or was a member of the limited liability company.

The Operating Agreement of Glass Aggregates, LLC states that the company shall indemnify and hold harmless, to the fullest extent permitted by the Kentucky Limited Liability Company Act as it presently exists or as it may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a manager, member, officer, employee or agent of the company or is or was serving at the request of the company as a director, trustee, officer, manager, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise, limited liability company, or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The company shall be required to indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the board of managers of the company.

(h) Con-Agg of MO, L.L.C., Fischer Quarries, L.L.C. and Quarry Properties, L.L.C. are limited liability companies organized under the laws of the State of Missouri (collectively, the “Missouri Limited Liability Companies”).

Missouri Limited Liability Company Act

The Missouri Limited Liability Company Act, Sections 347.010 to 347.187 of the Revised Statutes of Missouri, provides in Section 347.057, RSMo., that a person who is a member, manager, or both, of a limited liability company is not liable, solely by reason of being a member or manager, or both, under a judgment, decree or order of a court, or in any other manner, for a debt, obligation or liability of the limited liability company, whether arising in contract, tort or otherwise or for the acts or omissions of any other member, manager, agent or employee of the limited liability company.

 

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The Missouri Limited Liability Company Act provides in Section 347.088.1, RSMo., that except as otherwise provided in the operating agreement an authorized person shall discharge his or her duty under the Missouri Limited Liability Company Act and the operating agreement in good faith, with the care a corporate officer of like position would exercise under similar circumstances, in the manner a reasonable person would believe to be in the best interest of the limited liability company, and shall not be liable for any such action so taken or any failure to take such action, if he or she performs such duties in compliance with such subsection.

The Missouri Limited Liability Company Act provides in Section 347.088.2, RSMo., that to the extent that, at law or equity, a member or manager or other person has duties, including fiduciary duties, and liabilities relating to those duties to the limited liability company or to another member, manager, or other person that is party to or otherwise bound by an operating agreement: (1) any such member, manager, or other person acting under the operating agreement shall not be liable to the limited liability company or to any such other member, manager, or other person for the member’s, manager’s, or other person’s good faith reliance on the provisions of the operating agreement; and (2) the member’s, manager’s or other person’s duties and liabilities may be expanded or restricted by provision in the operating agreement.

Organizational Documents of the Missouri Limited Liability Companies

The operating agreement of Con-Agg of MO, L.L.C., contains no indemnification provisions. The operating agreement of Fischer Quarries, L.L.C. provides that no member shall be liable under a judgment, decree or order of a court, or in any other manner, for any debt, obligation or liability of the company. A member of the company shall not be personally liable to the company or its members for any monetary damages for breach of fiduciary duty, except for liability for any acts or omissions which involve intentional misconduct, fraud or knowing violation of law or for a distribution, redemption or purchase of or with respect to a member’s ownership interest in the company in violation of Missouri law. Any repeal or modification of such provisions of the operating agreement by the members of the company shall be prospective only, and shall not adversely affect any limitation on the personal liability of a member of the company existing at the time of such repeal or modification or thereafter arising as a result of the acts or omissions prior to the time of such repeal or modification. The company shall indemnify, save and hold harmless a member from any loss, damage, liability or expense incurred or sustained by him by reason of any act performed by him or on behalf of the company and in furtherance of its interest; provided, however, that such right to indemnification shall not apply to relieve the member from liability for gross negligence or willful malfeasance.

The operating agreement of Quarry Properties, L.L.C. provides that no person shall be liable to the company or its members for any loss, damage, liability or expense suffered by the company or its members on account of any action taken or omitted to be taken by such person as a member or as manager of the company or by such person while serving at the request of the company as a director, officer or in any other comparable position of any other enterprise, if such person discharges such person’s duties in good faith, exercising the same degree of care and skill that a prudent person would have exercised under the circumstances in the conduct of such prudent person’s own affairs, and in a manner such person reasonably believes to be in the best interest of the company. A member’s liability under such provision shall be so limited for those actions taken or omitted to be taken by such member in connection with the management of the business and affairs of the company. Such operating agreement further provides that the company shall indemnify each person who has been or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or appellate by reason of the fact that such person is or was a member or manager of the company, or is or was serving at the request of the company as a director, officer or in any other comparable position of any other enterprise, such indemnity shall apply against all liabilities and expenses, including, without limitation, judgments, amounts paid in settlement, attorneys’ fees, ERISA excise taxes or penalties, fines and other expenses, actually and reasonably incurred by such person in connection with any such action, suit or proceeding; provided, however, that the company shall not be required to indemnify or advance expenses to any person from or on account of such person’s conduct that was finally adjudged to have been knowingly fraudulent, deliberately dishonest, or willful misconduct; provided further that the company shall not

 

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be required to indemnify or advance expenses to any person in connection with an action, suit or proceeding initiated by such person unless the initiation of such action, suit or proceeding was authorized in advance by the members of the company; provided further that a member shall be indemnified under the operating agreement only for those actions taken or omitted to be taken by such member in connection with the management of the business and affairs of the company.

(i) The following entity is incorporated under the laws of the State of New Mexico: Elam Paving, Inc. (the “New Mexico Corporation”).

New Mexico Business Corporation Act

Section 53-11-4.1 of the New Mexico Business Corporation Act provides that a corporation shall have power to indemnify any person made (or threatened to be made) a party to any proceeding (whether threatened, pending or completed) by reason of the fact that the person is or was a director (or, while a director, is or was serving in any of certain other capacities) if: (1) the person acted in good faith; (2) the person reasonably believed: (a) in the case of conduct in the person’s official capacity with the corporation, that the person’s conduct was in its best interests; and (b) in all other cases, that the person’s conduct was at least not opposed to its best interests; and (3) in the case of any criminal proceeding, the person had no reasonable cause to believe the person’s conduct was unlawful. Indemnification may be made against judgments, penalties, fines, settlements and reasonable expenses actually incurred by the person in connection with the proceeding, but may be limited or unavailable with respect to certain proceedings. In some instances, indemnification of a director may be mandatory or, upon the application of a director, may be ordered by a court. Reasonable expenses incurred by a director may, under certain circumstances, be paid or reimbursed in advance of a final disposition of a proceeding. Unless limited by its articles of incorporation, a corporation may (or, as the case may be, shall) indemnify and advance expenses to an officer of the corporation to the same extent as to a director under Section 53-11-4.1. Also, unless limited by its articles of incorporation, a corporation has: (1) the power to indemnify and to advance expenses to an employee or agent of the corporation to the same extent that it may indemnify and advance expenses to directors under the statute; and (2) additional power to indemnify and to advance reasonable expenses to an officer, employee or agent who is not a director to such further extent, consistent with law, as may be provided by its articles of incorporation, by-laws, general or specific action of its Board of Directors, or contract.

Section 53-11-4.1 also provides that the indemnification authorized thereunder shall not be deemed exclusive of any rights to which those seeking indemnification may be entitled under the articles of incorporation, the by-laws, an agreement, a resolution of shareholders or directors or otherwise.

Organizational Documents of the New Mexico Corporation

The bylaws of the New Mexico Corporation provide that, to the fullest extent permitted by the New Mexico Business Corporation Act, the New Mexico Corporation shall indemnify any current or former director or officer of the New Mexico Corporation and may, at the discretion of the Board of Directors of the New Mexico Corporation, indemnify any current or former employee, fiduciary or agent of the New Mexico Corporation against expenses, liabilities and losses reasonably incurred or suffered by such person in connection with any action, suit, or proceeding, to which such person is a party or is threatened to be made a party by reason of such person’s current or former position with the New Mexico Corporation, as a director, officer, employee, fiduciary or agent or by reason of the fact that such person is or was serving, at the request of the New Mexico Corporation as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise.

(j) Industrial Asphalt, LLC and RKH Capital, L.L.C. are limited liability companies organized under the laws of the State of Texas (collectively, the “Texas Limited Liability Companies”).

 

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Texas Business Organizations Code

Section 8.002(a) of the Texas Business Organizations Code provides that except as provided by Section 8.002(b), Chapter 8 of the Texas Business Organizations Code does not apply to a (1) general partnership; or (2) limited liability company.

Section 8.002(b) of the Texas Business Organizations Code provides that the governing documents of a general partnership or a limited liability company may adopt provisions of Chapter 8 of the Texas Business Organizations Code or may contain other provisions, which will be enforceable, relating to: (1) indemnification; (2) advancement of expenses; (3) insurance or another arrangement to indemnify or hold harmless a governing person.

Section 101.402 of the Texas Business Organizations Code provides that a limited liability company may indemnify, pay in advance or reimburse expenses incurred by a person, and purchase or procure or establish and maintain insurance or another arrangement to indemnify or hold harmless a person.

Organizational Documents of Texas Limited Liability Companies

In accordance with the above provisions, the company agreement of Industrial Asphalt, LLC provides that, to the fullest extent permitted by law, the company shall indemnify and hold harmless each member and manager of the company and its officers, directors, shareholders, managers, members, employees, agents, subsidiaries and assigns from and against any and all losses, claims, demands, liabilities, expenses, judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which the indemnitee may be involved, or threatened to be involved, as a party or otherwise, which relates to or arises out of the company or its property, business or affairs; provided, however, that an indemnitee shall not be entitled to indemnification under the indemnification provisions of the company agreement with respect to (a) any claim with respect to which the indemnitee has engaged in fraud, willful misconduct, bad faith or gross negligence or (b) any claim initiated by an indemnitee unless that claim (or any part thereof) was brought to enforce that an indemnitee’s rights to indemnification under the company agreement. The company shall pay in advance of the final disposition of any such claim expenses incurred by an indemnitee in defending that claim if, but only if, that indemnitee so requests and delivers to the company of an undertaking by or on behalf of that indemnitee to repay amounts so advanced if it ultimately is determined that the indemnitee is not entitled indemnification under the indemnification provisions of the company agreement.

In accordance with the above provisions, the company agreement of RKH Capital, L.L.C. provides that the company may indemnify any person who was or is a party defendant or is threatened to be made a party defendant, in any pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the company) by reason of the fact that he or she is or was the member of the company, employee or agent of the company, or is or was serving at the request of the company, for expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding if the member determines that he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

(k) B&H Contracting, L.P., SCS Materials, L.P. and R.K. Hall Construction, Ltd. are limited partnerships formed under the laws of the State of Texas (collectively, the “Texas Limited Partnerships”).

Texas Business Organizations Code

Section 8.003(a) of the Texas Business Organizations Code provides that the certificate of formation of an enterprise may restrict the circumstances under which the enterprise must or may indemnify or may advance expenses to a person under Chapter 8 of the Texas Business Organizations Code.

 

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Section 8.003(b) of the Texas Business Organizations Code provides that the written partnership agreement of a limited partnership may restrict the circumstances in the same manner as the certificate of formation under Section 8.003(a).

Section 8.004 of the Texas Business Organizations Code provides that except as provided in Section 8.151, a provision for an enterprise to indemnify or advance expenses to a governing person is valid only to the extent it is consistent with Chapter 8 of the Texas Business Organizations Code.

Section 8.051(a) of the Texas Business Organizations Code provides that an enterprise shall indemnify a governing person, former governing person, or delegate against reasonable expenses actually incurred by the person in connection with a proceeding in which the person is a respondent because the person is or was a governing person or delegate if the person is wholly successful, on the merits or otherwise, in the defense of the proceeding.

Section 8.051(b) of the Texas Business Organizations Code provides that a court that determines, in a suit for indemnification, that a governing person, former governing person, or delegate is entitled to indemnification under Section 8.051 shall order indemnification and award to the person the expenses incurred in securing the indemnification.

Section 8.052(a) of the Texas Business Organizations Code provides that on application of a governing person, former governing person, or delegate and after notice is provided as required by the court, a court may order an enterprise to indemnify the person to the extent the court determines that the person is fairly and reasonably entitled to indemnification in view of all the relevant circumstances.

Section 8.052(b) of the Texas Business Organizations Code provides that Section 8.052 applies without regard to whether the governing person, former governing person, or delegate applying to the court satisfies the requirements of Section 8.101, has been found liable (1) to the enterprise; or (2) because the person improperly received a personal benefit, without regard to whether the benefit resulted from an action taken in the person’s official capacity.

Section 8.052(c) of the Texas Business Organizations Code provides that the indemnification ordered by the court under Section 8.052 is limited to reasonable expenses if the governing person, former governing person, or delegate is found liable (1) to the enterprise; or (2) because the person improperly received a personal benefit, without regard to whether the benefit resulted from an action taken in the person’s official capacity.

Section 8.101(a) of the Texas Business Organizations Code provides that an enterprise may indemnify a governing person, former governing person, or delegate who was, is, or is threatened to be made a respondent in a proceeding to the extent permitted by Section 8.102 if it is determined in accordance with Section 8.103 that: (1) the person: (A) acted in good faith; (B) reasonably believed: (i) in the case of conduct in the person’s official capacity, that the person’s conduct was in the enterprise’s best interests; and (ii) in any other case, that the person’s conduct was not opposed to the enterprise’s best interests; and (C) in the case of a criminal proceeding, did not have a reasonable cause to believe the person’s conduct was unlawful; (2) with respect to expenses, the amount of expenses other than a judgment is reasonable; and (3) indemnification should be paid.

Section 8.101(b) of the Texas Business Organizations Code provides that action taken or omitted by a governing person or delegate with respect to an employee benefit plan in the performance of the person’s duties for a purpose reasonably believed by the person to be in the interest of the participants and beneficiaries of the plan is for a purpose that is not opposed to the best interests of the enterprise.

Section 8.101(c) of the Texas Business Organizations Code provides that action taken or omitted by a delegate to another enterprise for a purpose reasonably believed by the delegate to be in the interest of the other enterprise or its owners or members is for a purpose that is not opposed to the best interests of the enterprise.

 

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Section 8.101(d) of the Texas Business Organizations Code provides that a person does not fail to meet the standard under Section 8.101(a)(1) solely because of the termination of a proceeding by: (1) judgment; (2) order; (3) settlement; (4) conviction; or (5) a plea of nolo contendere or its equivalent.

Section 8.102(a) of the Texas Business Organizations Code provides that, subject to Section 8.102(b), an enterprise may indemnify a governing person, former governing person, or delegate against: (1) a judgment; and(2) expenses, other than a judgment, that are reasonable and actually incurred by the person in connection with a proceeding.

Section 8.102(b) of the Texas Business Organizations Code provides that indemnification under Section 8.102 of a person who is found liable to the enterprise or is found liable because the person improperly received a personal benefit: (1) is limited to reasonable expenses actually incurred by the person in connection with the proceeding; (2) does not include a judgment, a penalty, a fine, and an excise or similar tax, including an excise tax assessed against the person with respect to an employee benefit plan; and (3) may not be made in relation to a proceeding in which the person has been found liable for: (A) wilful or intentional misconduct in the performance of the person’s duty to the enterprise; (B) breach of the person’s duty of loyalty owed to the enterprise; or (C) an act or omission not committed in good faith that constitutes a breach of a duty owed by the person to the enterprise.

Section 8.102(c) of the Texas Business Organizations Code provides that a governing person, former governing person, or delegate is considered to have been found liable in relation to a claim, issue, or matter only if the liability is established by an order, including a judgment or decree of a court, and all appeals of the order are exhausted or foreclosed by law.

Section 8.103(a) of the Texas Business Organizations Code provides that except as provided by Sections 8.103(b) and (c), the determinations required under Section 8.101(a) must be made by: (1) a majority vote of the governing persons who at the time of the vote are disinterested and independent, regardless of whether the governing persons who are disinterested and independent constitute a quorum; (2) a majority vote of a committee of the governing authority of the enterprise if the committee: (A) is designated by a majority vote of the governing persons who at the time of the vote are disinterested and independent, regardless of whether the governing persons who are disinterested and independent constitute a quorum; and (B) is composed solely of one or more governing persons who are disinterested and independent; (3) special legal counsel selected by the governing authority of the enterprise, or selected by a committee of the governing authority, by vote in accordance with Section 8.103(a)(1) or Section 8.103(a)(2); (4) the owners or members of the enterprise in a vote that excludes the ownership or membership interests held by each governing person who is not disinterested and independent; or (5) a unanimous vote of the owners or members of the enterprise.

Section 8.103(b) of the Texas Business Organizations Code provides that if special legal counsel determines under Section 8.103(a)(3) that a person meets the standard under Section 8.101(a)(1), the special legal counsel shall determine whether the amount of expenses other than a judgment is reasonable under Section 8.101(a)(2) but may not determine whether indemnification should be paid under Section 8.101(a)(3). The determination whether indemnification should be paid must be made in a manner specified by Section 8.103(a)(1), (2), (4), or (5).

Section 8.103(c) of the Texas Business Organizations Code provides that a provision contained in the governing documents of the enterprise, a resolution of the owners, members, or governing authority, or an agreement that requires the indemnification of a person who meets the standard under Section 8.101(a)(1) constitutes a determination under Section 8.101(a)(3) that indemnification should be paid even though the provision may not have been adopted or authorized in the same manner as the determinations required under Section 8.101(a). The determinations required under Sections 8.101(a)(1) and (2) must be made in a manner provided by Section 8.103 (a).

 

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Section 8.103(d) of the Texas Business Organizations Code provides that with respect to a limited partnership, a vote of a majority-in-interest of the limited partners in a vote that excludes the interest held by each general partner who is not disinterested and independent constitutes a determination under Section 8.103(a)(4). For purposes of Section 8.103(d), “majority-in-interest” means, with respect to limited partners, limited partners who own more than 50 percent of the current percentage or other interest in the profits of the partnership that is owned by all of the limited partners.

Section 8.104(a) of the Texas Business Organizations Code provides that an enterprise may pay or reimburse reasonable expenses incurred by a present governing person or delegate who was, is, or is threatened to be made a respondent in a proceeding in advance of the final disposition of the proceeding without making the determinations required under Section 8.101(a) after the enterprise receives: (1) a written affirmation by the person of the person’s good faith belief that the person has met the standard of conduct necessary for indemnification under Chapter 8 of the Texas Business Organizations Code; and (2) a written undertaking by or on behalf of the person to repay the amount paid or reimbursed if the final determination is that the person has not met that standard or that indemnification is prohibited by Section 8.102.

Section 8.104(b) of the Texas Business Organizations Code provides that a provision in the governing documents of the enterprise, a resolution of the owners, members, or governing authority, or an agreement that requires the payment or reimbursement permitted under Section 8.104 authorizes that payment or reimbursement after the enterprise receives an affirmation and undertaking described by Section 8.104(a).

Section 8.104(c) of the Texas Business Organizations Code provides that the written undertaking required by Section 8.104(a)(2) must be an unlimited general obligation of the person but need not be secured and may be accepted by the enterprise without regard to the person’s ability to make repayment.

Section 8.104(d) of the Texas Business Organizations Code provides that with respect to a limited partnership, a vote of a majority-in-interest of the limited partners in a vote that excludes the interest held by each general partner who is not disinterested and independent constitutes an authorization under Section 8.104(b). For purposes of Section 8.104(b), “majority-in-interest” means, with respect to limited partners, limited partners who own more than 50 percent of the current percentage or other interest in the profits of the partnership that is owned by all of the limited partners.

Section 8.105(a) of the Texas Business Organizations Code provides that notwithstanding any other provision of Chapter 8 of the Texas Business Organizations Code but subject to Section 8.003 and to the extent consistent with other law, an enterprise may indemnify and advance expenses to a person who is not a governing person, including an officer, employee, or agent, as provided by: (1) the enterprise’s governing documents; (2) general or specific action of the enterprise’s governing authority; (3) resolution of the enterprise’s owners or members; (4) contract; or (5) common law.

Section 8.105(b) of the Texas Business Organizations Code provides that an enterprise shall indemnify an officer to the same extent that indemnification is required under Chapter 8 of the Texas Business Organizations Code for a governing person.

Section 8.105(c) of the Texas Business Organizations Code provides that a person described by Section 8.105(a) may seek indemnification or advancement of expenses from an enterprise to the same extent that a governing person may seek indemnification or advancement of expenses under Chapter 8 of the Texas Business Organizations.

Section 8.105(d) of the Texas Business Organizations Code provides that notwithstanding any authorization or determination specified in Chapter 8 of the Texas Business Organizations Code, an enterprise may pay or reimburse, in advance of the final disposition of a proceeding and on terms the enterprise considers appropriate, reasonable expenses incurred by: (1) a former governing person or delegate who was, is, or is threatened to be

 

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made a respondent in the proceeding; or (2) a present or former employee, agent, or officer who is not a governing person of the enterprise and who was, is, or is threatened to be made a respondent in the proceeding.

Section 8.105(e) of the Texas Business Organizations Code provides that a determination of indemnification for a person who is not a governing person of an enterprise, including an officer, employee, or agent, is not required to be made in accordance with Section 8.103.

Section 8.106 of the Texas Business Organizations Code provides that notwithstanding any other provision of Chapter 8 of the Texas Business Organizations Code, an enterprise may pay or reimburse reasonable expenses incurred by a governing person, officer, employee, agent, delegate, or other person in connection with that person’s appearance as a witness or other participation in a proceeding at a time when the person is not a respondent in the proceeding.

Section 8.151(a) of the Texas Business Organizations Code provides that notwithstanding any other provision of Chapter 8 of the Texas Business Organizations Code, an enterprise may purchase or procure or establish and maintain insurance or another arrangement to indemnify or hold harmless an existing or former governing person, delegate, officer, employee, or agent against any liability: (1) asserted against and incurred by the person in that capacity; or (2) arising out of the person’s status in that capacity.

Section 8.151(b) of the Texas Business Organizations Code provides that the insurance or other arrangement established under Section 8.151(a) may insure or indemnify against the liability described by Section 8.151(a) without regard to whether the enterprise otherwise would have had the power to indemnify the person against that liability under Chapter 8 of the Texas Business Organizations Code.

Section 8.151(c) of the Texas Business Organizations Code provides that insurance or another arrangement that involves self-insurance or an agreement to indemnify made with the enterprise or a person that is not regularly engaged in the business of providing insurance coverage may provide for payment of a liability with respect to which the enterprise does not otherwise have the power to provide indemnification only if the insurance or arrangement is approved by the owners or members of the enterprise.

Section 8.151(c-1) of the Texas Business Organizations Code provides that with respect to a limited partnership, a vote of a majority-in-interest of the limited partners constitutes approval of the owners for purposes of Section 8.151(c).

Section 8.151(d) of the Texas Business Organizations Code provides that for the benefit of persons to be indemnified by the enterprise, an enterprise may, in addition to purchasing or procuring or establishing and maintaining insurance or another arrangement: (1) create a trust fund; (2) establish any form of self-insurance, including a contract to indemnify; (3) secure the enterprise’s indemnity obligation by grant of a security interest or other lien on the assets of the enterprise; or (4) establish a letter of credit, guaranty, or surety arrangement.

Section 8.151(e) of the Texas Business Organizations Code provides that insurance or another arrangement established under Section 8.151 may be purchased or procured or established and maintained: (1) within the enterprise; or (2) with any insurer or other person considered appropriate by the governing authority, regardless of whether all or part of the stock, securities, or other ownership interest in the insurer or other person is owned in whole or in part by the enterprise.

Section 8.151(f) of the Texas Business Organizations Code provides that the governing authority’s decision as to the terms of the insurance or other arrangement and the selection of the insurer or other person participating in an arrangement is conclusive. The insurance or arrangement is not voidable and does not subject the governing persons approving the insurance or arrangement to liability, on any ground, regardless of whether the governing persons participating in approving the insurance or other arrangement are beneficiaries of the insurance or arrangement. Section 8.151(f) does not apply in case of actual fraud.

 

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Section 8.152(a) of the Texas Business Organizations Code provides that an enterprise shall report in writing to the owners or members of the enterprise an indemnification of or advance of expenses to a governing person.

Section 8.152(b) of the Texas Business Organizations Code provides that subject to Section 8.152(c), the report must be made with or before: (1) the notice or waiver of notice of the next meeting of the owners or members of the enterprise; or (2) the next submission to the owners or members of a consent to action without a meeting.

Section 8.152(c) of the Texas Business Organizations Code provides that the report must be made not later than the first anniversary of the date of the indemnification or advance.

Organizational Documents of Texas Limited Partnerships

The partnership agreement for each of the Texas Limited Partnerships provides that the partners, and their affiliates, officers, directors, employees and agents or any person performing a similar function on behalf of the partnership may be indemnified and held harmless by the partnership from and against any and all judgments, penalties, settlements and reasonable expenses actually incurred by any indemnitee who was, is or is threatened to be made a named defendant or respondent in any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which the indemnitee may be involved, or threatened to be involved, as a party or otherwise, by reason of its status as a partner or an affiliate thereof or an officer, director, employee or agent of the partnership, or a partner or affiliate thereof, if the indemnitee acted in good faith and in a manner it reasonably believed to be in, or not opposed to, the best interest of the partnership. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the indemnitee acted in a manner contrary to that specified above.

The partnership agreement for each of the Texas Limited Partnerships further provides that the partnership, through its general partner, in its sole discretion, may purchase and maintain insurance on behalf of the general partner and such other persons as the general partner shall determine, in its sole discretion, against any liability that may be asserted against or expense that may be incurred by such person in connection with the partnership’s activities, regardless of whether the partnership would have the power to indemnify such person against such liability under the provisions of the partnership agreement.

The partnership agreement for each of the Texas Limited Partnerships further provides that expenses incurred by an indemnitee in defending any claim, demand, action, suit or proceeding subject to the indemnification provisions of the partnership agreement may, from time to time, be advanced by the partnership prior to the final disposition of such claim, demand, action, suit or proceeding (i) upon written affirmation by the indemnitee of its good faith belief that it has met the standard of conduct necessary for indemnification and (ii) upon receipt by the partnership of any undertaking by or on behalf of the indemnitee to repay such amount if it shall be determined that such person is not entitled to be indemnified as authorized under the indemnification provisions of the partnership agreement. The indemnification provided in the indemnification provisions of the partnership agreement is for the benefit of the indemnitees and shall not be deemed to create any right to indemnification for any other persons.

(l) The following entities are incorporated under the laws of the State of Utah: B&B Resources, Inc., Salt Lake Valley Sand & Gravel, Inc. and Valley Ready Mix, Inc. (collectively, the “Utah Corporations”).

Utah Revised Business Corporation Act

Section 16-10a-902 (“Section 902”) of the Utah Revised Business Corporation Act provides that a corporation may indemnify any individual who was, is, or is threatened to be made a named defendant or respondent (a “Party”) in any threatened, pending or completed action, suit or proceeding, whether civil,

 

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criminal, administrative or investigative and whether formal or informal (a “Proceeding”), because he is or was a director of the corporation or is or was serving at its request as a director, officer, partner, trustee, employee, fiduciary or agent of another corporation or other person or of an employee benefit plan against any obligation incurred with respect to a Proceeding, including any judgment, settlement, penalty, fine or reasonable expenses (including attorneys’ fees), incurred in the Proceeding if his conduct was in good faith, he reasonably believed that his conduct was in, or not opposed to, the best interests of the corporation, and, in the case of any criminal Proceeding, he had no reasonable cause to believe his conduct was unlawful; except that (i) indemnification under Section 902 in connection with a Proceeding by or in the right of the corporation is limited to payment of reasonable expenses (including attorneys’ fees) incurred in connection with the Proceeding and (ii) the corporation may not indemnify a director in connection with a Proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation, or in connection with any other Proceeding charging that the director derived an improper personal benefit, whether or not involving action in his official capacity, in which Proceeding he was adjudged liable on the basis that he derived an improper personal benefit.

Section 16-10a-903 (“Section 903”) of the Utah Revised Business Corporation Act provides that, unless limited by its articles of incorporation, a corporation shall indemnify a director who was successful, on the merits or otherwise, in the defense of any Proceeding, or in the defense of any claim, issue or matter in the proceeding, to which he was a Party because he is or was a director of the corporation, against reasonable expenses (including attorneys’ fees) incurred by him in connection with the Proceeding or claim with respect to which he has been successful.

In addition to the indemnification provided by Sections 902 and 903, Section 16-10a-905 (“Section 905”) of the Utah Revised Business Corporation Act provides that, unless otherwise limited by a corporation’s articles of incorporation, a director may apply for indemnification to the court conducting the Proceeding or to another court of competent jurisdiction. On receipt of an application and after giving any notice the court considers necessary, (i) the court may order mandatory indemnification under Section 903, in which case the court shall also order the corporation to pay the director’s reasonable expenses to obtain court-ordered indemnification, or (ii) upon the court’s determination that the director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances and regardless of whether the director met the applicable standard of conduct set forth in Section 902, the court may order indemnification as the court determines to be proper, except that indemnification with respect to certain Proceedings resulting in a director being found liable for certain actions against the corporation may be limited to reasonable expenses (including attorneys’ fees) incurred by the director.

The Utah Revised Business Corporation Act provides that a corporation may pay for or reimburse the reasonable expenses (including attorneys’ fees) incurred by a director who is a Party to a Proceeding in advance of the final disposition of the Proceeding if (i) the director furnishes the corporation a written affirmation of his good faith belief that he has met the applicable standard of conduct described in Section 902, (ii) the director furnishes to the corporation a written undertaking, executed personally or in his behalf, to repay the advance if it is ultimately determined that he did not meet the required standard of conduct, and (iii) a determination is made that the facts then known to those making the determination would not preclude indemnification under Section 904.

Unless a corporation’s articles of incorporation provide otherwise, (i) an officer of the corporation is entitled to mandatory indemnification and is entitled to apply for court ordered indemnification, in each case to the same extent as a director, (ii) the corporation may indemnify and advance expenses to an officer, employee, fiduciary or agent of the corporation to the same extent as a director, and (iii) a corporation may also indemnify and advance expenses to an officer, employee, fiduciary or agent who is not a director to a greater extent than the right of indemnification granted to directors, if not inconsistent with public policy, and if provided for by its articles of incorporation, bylaws, general or specific action of its board of directors or contract.

 

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Organizational Documents of Utah Corporations

The articles of incorporation and/or bylaws of each of the Utah Corporations provide that, to the fullest extent permitted by the Utah Revised Business Corporation Act, the corporation shall indemnify any current or former director or officer of the corporation and may, at the discretion of the board of directors, indemnify any current or former employee or agent of the corporation against all expenses, liabilities and losses reasonably incurred or suffered by him or her in connection with any action, suit or proceeding brought by or in the right of the corporation or otherwise, to which he or she is a party or is threatened to be made a party by reason of his or her current or former position with the corporation or by reason of the fact that he or she is or was serving, at the request of the corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture or other enterprise.

(m) Altaview Concrete, LLC, Kilgore Equipment, LLC, Kilgore Trucking, LLC, Peak Construction Materials, LLC, Peak Management, L.C. and Wasatch Concrete Pumping, LLC are limited liability companies organized under the laws of the State of Utah (collectively, the “Utah Limited Liability Companies”).

Utah Revised Limited Liability Company Act

Sections 48-2c-1802 and 48-2c-1807 of the Utah Revised Limited Liability Company Act empowers a Utah limited liability company to indemnify any manager or other person from and against liability incurred in any proceeding if (i) his conduct was in good faith, (ii) he reasonably believed that his conduct was in, or not opposed to, the company’s best interests, and (iii) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. A company may not indemnify a manager under Section 48-2c-1802 in connection with a proceeding by or in the right of the company in which the manager was adjudged liable to the company or in connection with any other proceeding charging that the manager derived an improper personal benefit, whether or not involving action in his official capacity, in which proceeding he was adjudged liable on the basis that he derived an improper personal benefit.

In accordance with this provision, the Operating Agreements of the Utah Limited Liability Companies each states that the company has the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that the person is or was, or is or was serving at the request of, a manager, member, or authorized representative of the company. Such indemnification shall be against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if the indemnified person acted in good faith and in a manner the indemnified person reasonably believed to be not opposed to the best interests of the company and, with respect to any criminal action or proceeding, had no reasonable cause to believe the indemnified person’s conduct was unlawful.

(n) Wind River Materials, LLC was organized as a limited liability company under the laws of the State of Wyoming (the “Wyoming Limited Liability Company”).

Wyoming Limited Liability Company Act

Section 17-29-408 of the Wyoming Limited Liability Company Act empowers a Wyoming limited liability company to indemnify any member of a member-manager company or any manager of a manager-managed company for any debt, obligation or other liability incurred by such member or manager in the course of the member’s or manager’s activities on behalf of the Wyoming limited liability company, if in making the payment or incurring the debt, obligation or other liability, the member or manager was acting within the scope of his or her duties.

 

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In accordance with this provision, the Operating Agreement of the Wyoming Limited Liability Company states that the company has the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that the person is or was, or is or was serving at the request of, a manager, member, or authorized representative of the company. Such indemnification shall be against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if the indemnified person acted in good faith and in a manner the indemnified person reasonably believed to be not opposed to the best interests of the company and, with respect to any criminal action or proceeding, had no reasonable cause to believe the indemnified person’s conduct was unlawful.

 

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Item 21. Exhibits and Financial Statement Schedules.

(a) Exhibits

 

Exhibit No.

  

Description

3.1*    Certificate of Formation of Summit Materials, LLC, as amended.
3.2*    Amended and Restated Limited Liability Company Agreement of Summit Materials, LLC.
3.3*    Certificate of Incorporation of Summit Materials Finance Corp.
3.4*    By-laws of Summit Materials Finance Corp.
3.5*    Certificate of Formation of Austin Materials, LLC.
3.6*    Limited Liability Company Agreement of Austin Materials, LLC.
3.7*    Certificate of Formation of Continental Cement Company, L.L.C., as amended.
3.8*    Amended and Restated Limited Liability Company Agreement of Continental Cement Company, L.L.C.
3.9*    First Amendment to Amended and Restated Limited Liability Company Agreement of Continental Cement Company, L.L.C.
3.10*    Certificate of Formation of Kilgore Companies, LLC, as amended.
3.11*    Limited Liability Company Agreement of Kilgore Companies, LLC, as amended.
3.12*    Certificate of Formation of Norris Quarries, LLC.
3.13*    Limited Liability Company Agreement of Norris Quarries, LLC.
3.14*    Certificate of Formation of RK Hall, LLC.
3.15*    Limited Liability Company Agreement of RK Hall, LLC.
3.16*    Certificate of Formation of Summit Materials Companies I, LLC, as amended.
3.17*    Limited Liability Company Agreement of Summit Materials KY Acquisition LLC, as amended.
3.18*    Certificate of Incorporation of Summit Materials Corporations I, Inc.
3.19*    By-laws of Summit Materials Corporations I, Inc.
3.20*    Certificate of Formation of Summit Materials Holdings I, LLC, as amended.
3.21*    Limited Liability Company Agreement of Summit Materials Holdings I, LLC, as amended.
3.22*    Certificate of Formation of Summit Materials Holdings II, LLC, as amended.
3.23*    Limited Liability Company Agreement of Summit Materials Holdings II, LLC.
3.24*    Amended and Restated Articles of Incorporation of Elam Construction, Inc.
3.25*    Amended and Restated By-laws of Elam Construction, Inc.
3.26*    Articles of Organization of Cornejo & Sons, L.L.C., as amended.
3.27*    Amended and Restated Limited Liability Company Operating Agreement of Cornejo & Sons, L.L.C.
3.28*    Articles of Organization of Hamm Asphalt, LLC.
3.29*    Limited Liability Company Operating Agreement of Hamm Asphalt, LLC.
3.30*    Articles of Incorporation of Hamm, Inc., as amended.

 

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Exhibit No.

  

Description

3.31*    By-laws of Hamm, Inc.
3.32*    Articles of Organization of N.R. Hamm Contractor, LLC.
3.33*    Limited Liability Company Operating Agreement of N.R. Hamm Contractor, LLC.
3.34*    Articles of Organization of N.R. Hamm Quarry, LLC.
3.35*    Limited Liability Company Operating Agreement of N.R. Hamm Quarry, LLC.
3.36*    Articles of Incorporation of Bourbon Limestone Company, as amended.
3.37*    By-laws of Bourbon Limestone Company.
3.38*    Articles of Organization of Glass Aggregates, LLC, as amended.
3.39*    Limited Liability Company Operating Agreement of Glass Aggregates, LLC.
3.40*    Articles of Organization of Hinkle Contracting Company, LLC.
3.41*    Limited Liability Company Agreement of Hinkle Contracting Company, LLC.
3.42*    Articles of Incorporation of Kentucky Hauling, Inc., as amended.
3.43*    By-laws of Kentucky Hauling, Inc., as amended.
3.44*    Articles of Organization of South Central Kentucky Limestone, LLC.
3.45*    Amended and Restated Operating Agreement of South Central Kentucky Limestone, LLC.
3.46*    Articles of Organization of Con-Agg of MO, L.L.C., as amended.
3.47*    Second Amended and Restated Operating Agreement of Con-Agg of MO, L.L.C.
3.48*    Articles of Organization of Fischer Quarries, L.L.C.
3.49*    Operating Agreement of Fischer Quarries, L.L.C.
3.50*    Articles of Organization of Quarry Properties, L.L.C.
3.51*    Operating Agreement of Quarry Properties, L.L.C.
3.52*    Articles of Incorporation of Elam Paving, Inc.
3.53*    By-laws of Elam Paving, Inc.
3.54*    Certificate of Formation of B&H Contracting, L.P.
3.55*    Amended and Restated Partnership Agreement of B&H Contracting, L.P.
3.56*    Certificate of Formation of Industrial Asphalt, LLC.
3.57*    Company Agreement of Industrial Asphalt, LLC, as amended.
3.58*    Certificate of Formation of R.K. Hall Construction, Ltd.
3.59*    Second Amended and Restated Partnership Agreement of R.K. Hall Construction, Ltd.
3.60*    Certificate of Formation of RKH Capital, L.L.C.
3.61*    Second Amended and Restated Company Agreement of RKH Capital, L.L.C.
3.62*    Certificate of Limited Partnership of SCS Materials, L.P.
3.63*    Second Amended and Restated Partnership Agreement of SCS Materials, L.P.
3.64*    Articles of Organization of Altaview Concrete, LLC, as amended.

 

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Exhibit No.

 

Description

3.65*   Amended and Restated Operating Agreement of Altaview Concrete, LLC.
3.66*   Amended Articles of Incorporation of B&B Resources, Inc.
3.67*   By-laws of B&B Resources, Inc.
3.68*   Articles of Organization of Kilgore Equipment, LLC.
3.69*   Operating Agreement of Kilgore Equipment, LLC.
3.70*   Articles of Organization of Kilgore Trucking, LLC.
3.71*   Operating Agreement of Kilgore Trucking, LLC.
3.72*   Articles of Organization of Peak Construction Materials, LLC, as amended.
3.73*   Amended and Restated Operating Agreement of Peak Construction Materials, LLC.
3.74*   Articles of Organization of Peak Management, L.C.
3.75*   Amended and Restated Operating Agreement of Peak Management, L.C.
3.76*   Articles of Incorporation of Salt Lake Valley Sand & Gravel, Inc.
3.77*   By-laws of Salt Lake Valley Sand & Gravel, Inc.
3.78*   Articles of Incorporation of Valley Ready Mix, Inc.
3.79*   By-laws of Valley Ready Mix, Inc.
3.80*   Articles of Organization of Wasatch Concrete Pumping, LLC, as amended.
3.81*   Amended and Restated Operating Agreement of Wasatch Concrete Pumping, LLC.
3.82*   Articles of Organization of Wind River Materials, LLC, as amended.
3.83*   Operating Agreement of Wind River Materials, LLC.
4.1*   Indenture, dated as of January 30, 2012, among Summit Materials, LLC, Summit Materials Finance Corp., the guarantors named therein and Wilmington Trust, National Association, as trustee.
4.2*   First Supplemental Indenture, dated as of March 13, 2012, among Norris Quarries, LLC and Wilmington Trust, National Association, as trustee.
4.3*   Form of Note (attached as exhibit to Exhibit 4.1).
4.4*   Registration Rights Agreement, dated as of January 30, 2012, among Summit Materials, LLC, Summit Materials Finance Corp., the guarantors named therein, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and the several other initial purchasers.
5.1*   Opinion of Simpson Thacher & Bartlett LLP.
5.2*   Opinion of Holland & Hart LLP.
5.3**   Opinion of Kutak Rock LLP.
5.4**   Opinion of Kutak Rock LLP.
5.5*   Opinion of Stites & Harbison PLLC.
5.6*   Opinion of Bell Nunnally & Martin LLP.

 

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Exhibit No.

 

Description

10.1**   Credit Agreement, dated as of January 30, 2012, by and among Summit Materials, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc., as joint lead arrangers, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Barclays Capital, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as joint bookrunners, Bank of America, N.A., as administrative agent, collateral agent and swing line lender, Bank of America, N.A., as letter of credit issuer, and Citigroup Global Markets Inc., as syndication agent.
10.2*   Amendment No. 1, dated as of February 5, 2013, to the Credit Agreement, dated as of January 30, 2012, by and among Summit Materials, LLC, Bank of America, N.A. as sole lead arranger, and Bank of America, N.A. and Citigroup Global Markets Inc., as joint bookrunners.
10.3*   Tranche A Revolving Credit Commitment Conversion Agreement, dated as of February 11, 2013, under the Credit Agreement, dated as of January 30, 2012, among Summit Materials, LLC, the guarantors party thereto, the several banks and other financial institutions or entities from time to time parties to the Credit Agreement, Bank of America, N.A., as administrative agent, collateral agent, L/C issuer and swing line lender and the other parties thereto.
10.4*   Security Agreement, dated as of January 30, 2012, by and among the grantors identified therein and Bank of America, N.A., as collateral agent.
10.5*†   Employment Agreement, dated July 30, 2009, by and between Summit Materials Holdings L.P. and Thomas Hill.
10.6*†   Employment Agreement, dated December 29, 2011, by and between Summit Materials Holdings L.P. and Douglas Rauh.
12*   Computation of Ratio of Earnings to Fixed Charges.
16*   Letter regarding change in certifying accountant.
21*   Subsidiaries of Summit Materials, LLC.
23.1**   Consent of KPMG LLP, Independent Registered Public Accounting Firm.
23.2**   Consent of KPMG LLP, Independent Registered Public Accounting Firm.
23.3**   Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
23.4**   Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
23.5**   Consent of Allen, Gibbs & Houlik, L.C., Independent Registered Public Accounting Firm.
23.6**   Consent of Wisan, Smith, Racker & Prescott, LLP, Independent Registered Public Accounting Firm.
23.7**   Consent of CliftonLarsonAllen LLP, Independent Registered Public Accounting Firm.
23.8**   Consent of Perryman Chaney Russell, LLP, Independent Auditors.
23.9*   Consent of Simpson Thacher & Bartlett LLP (included as part of its opinion filed as Exhibit 5.1 hereto).
23.10*   Consent of Holland & Hart LLP (included as part of its opinion filed as Exhibit 5.2 hereto).
23.11**   Consent of Kutak Rock LLP (included as part of its opinion filed as Exhibit 5.3 hereto).
23.12**   Consent of Kutak Rock LLP (included as part of its opinion filed as Exhibit 5.4 hereto).
23.13*   Consent of Stites & Harbison PLLC (included as part of its opinion filed as Exhibit 5.5 hereto).

 

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Exhibit No.

  

Description

23.14*    Consent of Bell Nunnally & Martin LLP (included as part of its opinion filed as Exhibit 5.6 hereto).
24*    Power of Attorney (included in signature pages of this registration statement).
25.1*    Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Wilmington Trust, National Association as trustee under the Indenture, dated January 30, 2013, among Summit Materials, LLC, Summit Materials Finance Corp., the guarantors named therein and Wilmington Trust, National Association, as trustee.
99.1*    Form of Letter of Transmittal.
99.2*    Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.3*    Form of Letter to Clients.
99.4*    Form of Notice of Guaranteed Delivery.

 

* Previously filed.
** Filed herewith.
Management contract or compensatory plan or arrangement.

Item 22. Undertakings.

(a) Each of the undersigned registrants hereby undertakes:

(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(2) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

(3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;

(4) that, for the purpose of determining liability under the Securities Act to any purchaser, if the registrants are subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a

 

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registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use; and

(5) that, for the purpose of determining liability of the registrants under the Securities Act to any purchaser in the initial distribution of the securities, each of the undersigned registrants undertakes that in a primary offering of securities of the undersigned registrants pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrants will be sellers to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(b) Each of the undersigned registrants hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(c) Each of the undersigned registrants hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

(d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, or controlling persons of each of the registrants pursuant to the foregoing provisions, or otherwise, each of the registrants has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person of the registrants in connection with the securities being registered, the registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, D.C., on May 3, 2013.

 

SUMMIT MATERIALS, LLC
By:  

SUMMIT MATERIALS

INTERMEDIATE HOLDINGS, LLC, its Sole Member

 

By: Summit Materials Holdings, LLC,

its sole member

 

By: Summit Materials Holdings L.P.,

its sole member

 

By: Summit Materials Holdings GP, Ltd.,

its general partner (the “Parent”)

 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title(s)

 

Date

/s/ THOMAS HILL

Thomas Hill

   President and Chief
Executive Officer (Principal Executive Officer);
Director of Parent
  May 3, 2013

*

John Murphy

   Interim Chief Financial Officer
(Principal Financial
and Accounting Officer);
Director of Parent
 

May 3, 2013

 

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Signature

  

Title(s)

 

Date

*

Howard Lance

   Director of Parent   May 3, 2013

*

Neil Simpkins

   Director of Parent   May 3, 2013

*

Ted Gardner

   Director of Parent   May 3, 2013

*

Julia Kahr

   Director of Parent   May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, D.C., on May 3, 2013.

 

SUMMIT MATERIALS FINANCE CORP.
By:   /s/ DAPHNE TONG
  Name:    Daphne Tong
  Title:   President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ DAPHNE TONG

Daphne Tong

   President (Principal Executive Officer)   May 3, 2013

*

John R. Murphy

   Treasurer (Principal Financial and Accounting Officer)   May 3, 2013

*

Thomas Hill

   Director   May 3, 2013

*

Neil Simpkins

   Director   May 3, 2013

*

Julia Kahr

   Director   May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Austin, State of Texas, on May 3, 2013.

 

AUSTIN MATERIALS, LLC
By:  

SUMMIT MATERIALS

COMPANIES I, LLC, its Sole Member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

 

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

John Ramming

   President (Principal Executive Officer)   May 3, 2013

*

Clint Pulley

   Treasurer (Principal Financial and Accounting Officer)   May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chesterfield, State of Missouri, on May 3, 2013.

 

CONTINENTAL CEMENT COMPANY, L.L.C.
By:   /s/ THOMAS BECK
  Name: Thomas Beck
  Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ THOMAS BECK

Thomas Beck

   President and Director (Principal Executive Officer)   May 3, 2013

*

Mark Strieker

   Vice President of Finance and Administration (Principal Financial and Accounting Officer)   May 3, 2013

*

Thomas Hill

   Director   May 3, 2013

*

Julia Kahr

   Director   May 3, 2013

*

Michael Brady

   Director   May 3, 2013

*

Damian Murphy

   Director   May 3, 2013

*

Michael Farmer

   Director   May 3, 2013

*

Elliot Farmer

   Director   May 3, 2013
*By:    /s/ JENNIFER ROSE     
  Name: Jennifer Rose     
  Title: Attorney-in-Fact     

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

KILGORE COMPANIES, LLC
By:  

SUMMIT MATERIALS

COMPANIES I, LLC, its Sole Member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

 

Name: Thomas Hill

Title: President

 

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Jason Kilgore

   President (Principal Executive Officer)  

May 3, 2013

*

Brian Hall

   Treasurer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:  

/s/ JENNIFER ROSE

 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Colombia, State of Missouri, on May 3, 2013.

 

NORRIS QUARRIES, LLC
By:  

CON-AGG OF MO, LLC, its Sole Member

 

By: Summit Materials Companies, I, LLC,

its sole member

 

By: /s/ THOMAS HILL

 

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

George Barnes

   General Manager (Principal Executive Officer)  

May 3, 2013

*

C. Scott Anderson

   Treasurer (Principal
Financial and Accounting Officer)
 

May 3, 2013

*By:  

/s/ JENNIFER ROSE

 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Texas, on May 3, 2013.

 

RK HALL, LLC

By:

 

SUMMIT MATERIALS

COMPANIES I, LLC, its Sole Member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Robert Hall

   President (Principal Executive Officer)  

May 3, 2013

*

Lex Huie

   Vice President and Treasurer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:  

/s/ JENNIFER ROSE

 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, D.C., on May 3, 2013.

 

SUMMIT MATERIALS COMPANIES I, LLC
By:   SUMMIT MATERIALS HOLDINGS I, LLC, its Sole Member
  By: Summit Materials, LLC, its sole member
 

By: /s/ THOMAS HILL

Name: Thomas Hill

 

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ THOMAS HILL

Thomas Hill

   President (Principal Executive Officer)  

May 3, 2013

*

John Murphy

   Interim Chief Financial Officer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, D.C., on May 3, 2013.

 

SUMMIT MATERIALS CORPORATIONS I, INC.
By:   /s/ THOMAS HILL
  Name: Thomas Hill
  Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ THOMAS HILL

Thomas Hill

   President (Principal Executive Officer)   May 3, 2013

*

John Murphy

  

Interim Chief Financial Officer

(Principal Financial and Accounting Officer)

 

May 3, 2013

*

Michael Brady

   Director  

May 3, 2013

*

Anthony Keenan

   Director  

May 3, 2013

*

Anya Fonina

   Director  

May 3, 2013

*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, D.C., on May 3, 2013.

 

SUMMIT MATERIALS HOLDINGS I, LLC

By:

 

SUMMIT MATERIALS HOLDINGS I, LLC, its Sole Member

  By: Summit Materials, LLC, its sole member
 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ THOMAS HILL

Thomas Hill

   President (Principal Executive Officer)  

May 3, 2013

*

John Murphy

   Interim Chief Financial Officer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, D.C., on May 3, 2013.

 

SUMMIT MATERIALS HOLDINGS II, LLC
By:   SUMMIT MATERIALS, LLC, its sole member
 

B Y : / S / THOMAS HILL

 

Name: Thomas Hill

Title: President

 

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ THOMAS HILL

Thomas Hill

   President (Principal Executive Officer)  

May 3, 2013

*

John Murphy

   Interim Chief Financial Officer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Grand Junction, State of Colorado, on May 3, 2013.

 

ELAM CONSTRUCTION, INC.
By:   /s/ LANE BYBEE
  Name: Lane Bybee
  Title: Chief Executive Officer

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ LANE BYBEE

Lane Bybee

   Chief Executive Officer (Principal Executive Officer)  

May 3, 2013

*

Chase Vernieuw

   Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)  

May 3, 2013

*

Shane Evans

   Director  

May 3, 2013

*

Anthony Keenan

   Director  

May 3, 2013

*

Anya Fonina

   Director  

May 3, 2013

*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wichita, State of Kansas, on May 3, 2013.

 

CORNEJO & SONS, L.L.C.
By:  

SUMMIT MATERIALS

COMPANIES I, LLC, its Sole Member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Ronald Cornejo

   Chief Executive Officer (Principal Executive Officer)  

May 3, 2013

*

C. Scott Anderson

   Treasurer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Perry, State of Kansas, on May 3, 2013.

 

HAMM ASPHALT, LLC
By:   HAMM, INC., its Sole Member
 

By: /s/ GARY HAMM

 

Name: Gary Hamm

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ GARY HAMM

Gary Hamm

   President (Principal Executive Officer)  

May 3, 2013

*

C. Scott Anderson

   Treasurer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Perry, State of Kansas, on May 3, 2013.

 

HAMM, INC.
By:   /s/ GARY HAMM
  Name: Gary Hamm
  Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ GARY HAMM

Gary Hamm

   President (Principal Executive Officer)  

May 3, 2013

*

C. Scott Anderson

   Treasurer and Director (Principal Financial and Accounting Officer)  

May 3, 2013

*

Thomas Hill

   Director  

May 3, 2013

*

Michael Brady

   Director  

May 3, 2013

*

Anthony Keenan

   Director  

May 3, 2013

*

N. Rodney Hamm

   Director  

May 3, 2013

*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Perry, State of Kansas, on May 3, 2013.

 

N.R. HAMM CONTRACTOR, LLC
By:   Hamm, Inc., its Sole Member
 

By: /s/ GARY HAMM

Name: Gary Hamm

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ GARY HAMM

Gary Hamm

   President (Principal Executive Officer)  

May 3, 2013

*

C. Scott Anderson

   Treasurer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:  

/s/ JENNIFER ROSE

 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Perry, State of Kansas, on May 3, 2013.

 

N.R. HAMM QUARRY, LLC
By:   Hamm, Inc., its Sole Member
 

By: /s/ GARY HAMM

Name: Gary Hamm

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ GARY HAMM

Gary Hamm

   President (Principal Executive Officer)  

May 3, 2013

*

C. Scott Anderson

   Treasurer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Kentucky, on May 3, 2013.

 

BOURBON LIMESTONE COMPANY
By:   /s/ THOMAS HINKLE
  Name: Thomas Hinkle
  Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ THOMAS HINKLE

Thomas Hinkle

   President and Director (Principal Executive Officer)  

May 3, 2013

*

Steve Hullett

   Chief Financial Officer, Secretary and Director (Principal Financial and Accounting Officer)  

May 3, 2013

*

Anthony Keenan

   Director  

May 3, 2013

*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Kentucky, on May 3, 2013.

 

GLASS AGGREGATES, LLC
By:  

/s/ LARRY GLASS

  Name: Larry Glass
  Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ LARRY GLASS

Larry Glass

   President (Principal Executive Officer)   May 3, 2013

*

Steve Hullett

   Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)   May 3, 2013

*

Michael Brady

   Vice President and Manager   May 3, 2013

*

Anthony Keenan

   Assistant Secretary and Manager   May 3, 2013

*

Thomas Hinkle

   Manager   May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Kentucky, on May 3, 2013.

 

HINKLE CONTRACTING COMPANY, LLC
By:  

SUMMIT MATERIALS

COMPANIES I, LLC, its Sole Member

  By: Summit Materials Holdings I, LLC,
its sole member
  By: Summit Materials, LLC,
its sole member
 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Thomas Hinkle

   President (Principal Executive Officer)   May 3, 2013

*

Steve Hullett

   Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)   May 3, 2013
*By:  

/s/ JENNIFER ROSE

  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Kentucky, on May 3, 2013.

 

KENTUCKY HAULING, INC.
By:   /s/ THOMAS HINKLE
  Name: Thomas Hinkle
  Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ THOMAS HINKLE

Thomas Hinkle

   President and Director (Principal Executive Officer)   May 3, 2013

*

Steve Hullett

   Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)   May 3, 2013

*

Michael Brady

   Director   May 3, 2013

*

Anthony Keenan

   Director   May 3, 2013

*

Doug Rauh

   Director   May 3, 2013
*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Kentucky, on May 3, 2013.

 

SOUTH CENTRAL KENTUCKY LIMESTONE, LLC
By:   GLASS AGGREGATES, LLC, its Sole Member
 

By: /s/ LARRY GLASS

 

Name: Larry Glass

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Thomas Hinkle

  

President

(Principal Executive Officer)

  May 3, 2013

*

Steve Hullett

  

Chief Financial Officer

(Principal Financial and Accounting Officer)

  May 3, 2013
*By:  

/s/ JENNIFER ROSE

  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Columbia, State of Missouri, on May 3, 2013.

 

CON-AGG OF MO, L.L.C.
By:  

SUMMIT MATERIALS
COMPANIES I, LLC, its Sole Member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

 

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

George Barnes

  

President

(Principal Executive Officer)

  May 3, 2013

*

C. Scott Anderson

   Treasurer (Principal Financial and Accounting Officer)   May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Columbia, State of Missouri, on May 3, 2013.

 

FISCHER QUARRIES, L.L.C.
By:  

CON-AGG OF MO, L.L.C., its Sole Member

  By: Summit Materials Companies I, LLC,
its sole member
  By: Summit Materials Holdings I, LLC,
its sole member
  By: Summit Materials, LLC,
its sole member
 

By: /s/ THOMAS HILL

 

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ THOMAS HILL

Thomas Hill

  

President (Principal Executive

Officer)

  May 3, 2013

*

C. Scott Anderson

  

Treasurer (Principal Financial and

Accounting Officer)

  May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Columbia, State of Missouri, on May 3, 2013.

 

QUARRY PROPERTIES, L.L.C.
By:   /s/ DAMIAN MURPHY
  Name:    Damian Murphy
  Title:  

Regional President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ DAMIAN MURPHY

Damian Murphy

  

Regional President and Manager

(Principal Executive Officer)

  May 3, 2013

*

C. Scott Anderson

   Treasurer (Principal Financial and Accounting Officer)   May 3, 2013

*

Michael Brady

   Manager   May 3, 2013

*

Anya Fonina

   Manager   May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Grand Junction, State of Colorado, on May 3, 2013.

 

ELAM PAVING, INC.
By:   /s/ LANE BYBEE
  Name:    Lane Bybee
  Title:   Chief Executive Officer

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ LANE BYBEE

Lane Bybee

   Chief Executive Officer (Principal Executive Officer)   May 3, 2013

*

Chase Vernieuw

   Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)   May 3, 2013

*

Shane Evans

   Director   May 3, 2013

*

Anthony Keenan

   Director   May 3, 2013

*

Anya Fonina

   Director   May 3, 2013
*By:   

/s/ JENNIFER ROSE

    
  Name: Jennifer Rose     
  Title: Attorney-in-Fact     

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Texas, on May 3, 2013.

 

B&H CONTRACTING, L.P.
By:   RKH CAPITAL, L.L.C., its General Partner
  By: RK Hall, LLC, its sole member
 

By: Summit Materials Companies I, LLC,

its sole member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

  By: /s/ THOMAS HILL
 

Name: Thomas Hill

Title:   President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Robert Hall

  

President

(Principal Executive Officer)

  May 3, 2013

*

Lex Huie

  

Vice President and Treasurer

(Principal Financial and Accounting Officer)

  May 3, 2013
*By:    /s/ JENNIFER ROSE     
  Name: Jennifer Rose     
  Title: Attorney-in-Fact     

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Austin, State of Texas, on May 3, 2013.

 

INDUSTRIAL ASPHALT, LLC
By:   /s/ JOHN RAMMING
  Name:    John Ramming
  Title:   General Manager

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ JOHN RAMMING

John Ramming

  

General Manager

(Principal Executive Officer)

  May 3, 2013

*

Clint Pulley

   Treasurer and Manager (Principal Financial and Accounting Officer)   May 3, 2013

*

Anya Fonina

   Manager   May 3, 2013

*

Shane Evans

   Manager   May 3, 2013
*By:   

/s/ JENNIFER ROSE

    
  Name: Jennifer Rose     
  Title: Attorney-in-Fact     

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Texas, on May 3, 2013.

 

R.K. HALL CONSTRUCTION, LTD.
By:   RKH CAPITAL, L.L.C., its General Partner
  By: RK Hall, LLC, its sole member
 

By: Summit Materials Companies I, LLC,

its sole member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Robert Hall

  

President
(Principal Executive Officer)

  May 3, 2013

*

Lex Huie

  

Vice President and Treasurer (Principal Accounting and Financial Officer)

  May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Texas, on May 3, 2013.

 

RKH CAPITAL, L.L.C.
By:   /s/ ROBERT HALL
  Name: Robert Hall
  Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ ROBERT HALL

Robert Hall

  

President
(Principal Executive Officer)

  May 3, 2013

*

Lex Huie

  

Vice President and Treasurer

(Principal Accounting and Financial Officer)

  May 3, 2013
*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paris, State of Texas, on May 3, 2013.

 

SCS MATERIALS, L.P.
By:   RKH CAPITAL, L.L.C., its General Partner
 

By: Summit Materials Companies I, LLC,

its sole member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Robert Hall

  

President

(Principal Executive Officer)

  May 3, 2013

*

Lex Huie

  

Vice President and Treasurer (Principal Accounting and Financial Officer)

  May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

ALTAVIEW CONCRETE, LLC
By:   KILGORE COMPANIES, LLC, its Sole Member
 

By: Summit Materials Companies I, LLC,

its sole member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

 

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Jason Kilgore

   President (Principal Executive Officer)   May 3, 2013

*

Clint Pulley

   Assistant Treasurer (Principal Accounting and Financial Officer)   May 3, 2013
*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

B&B RESOURCES, INC.
By:   /s/ JASON KILGORE
  Name: Jason Kilgore
  Title: General Manager

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ JASON KILGORE

Jason Kilgore

  

General Manager

(Principal Executive Officer)

  May 3, 2013

*

Brian Hall

   Treasurer (Principal Accounting and Financial Officer)   May 3, 2013

*

Michael Brady

   Director   May 3, 2013

*

Shane Evans

   Director   May 3, 2013

*

Anthony Keenan

   Director   May 3, 2013
*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

KILGORE EQUIPMENT, LLC
By:   /s/ JASON KILGORE
  Name: Jason Kilgore
  Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ JASON KILGORE

Jason Kilgore

   President (Principal Executive Officer)  

May 3, 2013

*

Brian Hall

   Treasurer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

KILGORE TRUCKING, LLC
By:   /s/ JASON KILGORE
  Name: Jason Kilgore
  Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ JASON KILGORE

Jason Kilgore

   President (Principal Executive Officer)  

May 3, 2013

*

Brian Hall

   Chief Financial Officer (Principal Financial and Accounting Officer)  

May 3, 2013

*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

PEAK CONSTRUCTION MATERIALS, LLC
By:  

KILGORE COMPANIES, LLC, its Sole Member

 

By: Summit Materials Companies I, LLC,

its sole member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Jason Kilgore

   President (Principal Executive Officer)  

May 3, 2013

*

Clint Pulley

   Treasurer (Principal Accounting and Financial Officer)  

May 3, 2013

*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

PEAK MANAGEMENT, L.C.
By:  

KILGORE COMPANIES, LLC, its Sole Member

 

By: Summit Materials Companies I, LLC,

its sole member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

  By: /s/ THOMAS HILL
 

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

*

Jason Kilgore

   President (Principal Executive Officer)   May 3, 2013

*

Clint Pulley

   Treasurer (Principal Accounting and Financial Officer)   May 3, 2013
*By:   /s/ JENNIFER ROSE
 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

SALT LAKE VALLEY SAND & GRAVEL, INC.
By:   /s/ JASON KILGORE
  Name: Jason Kilgore
  Title: General Manager

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ JASON KILGORE

Jason Kilgore

   General Manager (Principal Executive Officer)  

May 3, 2013

*

Brian Hall

   Treasurer (Principal Accounting and Financial Officer)  

May 3, 2013

*

Michael Brady

   Director  

May 3, 2013

*

Shane Evans

   Director  

May 3, 2013

*

Anthony Keenan

   Director  

May 3, 2013

*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

VALLEY READY MIX, INC.
By:  

/s/ JASON KILGORE

Name: Jason Kilgore

Title: General Manager

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ JASON KILGORE

Jason Kilgore

   General Manager (Principal Executive Officer)  

May 3, 2013

*

Brian Hall

   Treasurer (Principal Accounting and Financial Officer)  

May 3, 2013

*

Michael Brady

   Director  

May 3, 2013

*

Shane Evans

   Director  

May 3, 2013

*

Anthony Keenan

   Director  

May 3, 2013

*By:  

/s/ JENNIFER ROSE

 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

WASATCH CONCRETE PUMPING, LLC
By:   KILGORE COMPANIES, LLC, its Sole Member
 

By: Summit Materials Companies I, LLC,

its sole member

 

By: Summit Materials Holdings I, LLC,

its sole member

 

By: Summit Materials, LLC,

its sole member

 

By: /s/ THOMAS HILL

Name: Thomas Hill

Title: President

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

     

Signature

  

Title

 

Date

*

Jason Kilgore

  

President (Principal Executive Officer)

 

May 3, 2013

*

Clint Pulley

   Treasurer (Principal Accounting and Financial Officer)  

May 3, 2013

*By:  

/s/ JENNIFER ROSE

 

Name: Jennifer Rose

Title: Attorney-in-Fact

 

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Valley, State of Utah, on May 3, 2013.

 

WIND RIVER MATERIALS, LLC

By:   /s/ JASON KILGORE
  Name: Jason Kilgore
  Title: General Manager and Manager

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ JASON KILGORE

Jason Kilgore

   General Manager and Manager (Principal Executive Officer)  

May 3, 2013

*

Clint Pulley

   Treasurer (Principal Accounting and Financial Officer)  

May 3, 2013

*

Shane Evans

   Manager  

May 3, 2013

*

Brian Hall

   Manager  

May 3, 2013

*

Richard Barrett

   Manager  

May 3, 2013

*By:   /s/ JENNIFER ROSE
  Name: Jennifer Rose
  Title: Attorney-in-Fact

 

II-69


Table of Contents

EXHIBIT INDEX

 

Exhibit No.

  

Description

  3.1*    Certificate of Formation of Summit Materials, LLC, as amended.
  3.2*    Amended and Restated Limited Liability Company Agreement of Summit Materials, LLC.
  3.3*    Certificate of Incorporation of Summit Materials Finance Corp.
  3.4*    By-laws of Summit Materials Finance Corp.
  3.5*    Certificate of Formation of Austin Materials, LLC.
  3.6*    Limited Liability Company Agreement of Austin Materials, LLC.
  3.7*    Certificate of Formation of Continental Cement Company, L.L.C., as amended.
  3.8*    Amended and Restated Limited Liability Company Agreement of Continental Cement Company, L.L.C.
  3.9*    First Amendment to Amended and Restated Limited Liability Company Agreement of Continental Cement Company, L.L.C.
  3.10*    Certificate of Formation of Kilgore Companies, LLC, as amended.
  3.11*    Limited Liability Company Agreement of Kilgore Companies, LLC, as amended.
  3.12*    Certificate of Formation of Norris Quarries, LLC.
  3.13*    Limited Liability Company Agreement of Norris Quarries, LLC.
  3.14*    Certificate of Formation of RK Hall, LLC.
  3.15*    Limited Liability Company Agreement of RK Hall, LLC.
  3.16*    Certificate of Formation of Summit Materials Companies I, LLC, as amended.
  3.17*    Limited Liability Company Agreement of Summit Materials KY Acquisition LLC, as amended.
  3.18*    Certificate of Incorporation of Summit Materials Corporations I, Inc.
  3.19*    By-laws of Summit Materials Corporations I, Inc.
  3.20*    Certificate of Formation of Summit Materials Holdings I, LLC, as amended.
  3.21*    Limited Liability Company Agreement of Summit Materials Holdings I, LLC, as amended.
  3.22*    Certificate of Formation of Summit Materials Holdings II, LLC, as amended.
  3.23*    Limited Liability Company Agreement of Summit Materials Holdings II, LLC.
  3.24*    Amended and Restated Articles of Incorporation of Elam Construction, Inc.
  3.25*    Amended and Restated By-laws of Elam Construction, Inc.
  3.26*    Articles of Organization of Cornejo & Sons, L.L.C., as amended.
  3.27*    Amended and Restated Limited Liability Company Operating Agreement of Cornejo & Sons, L.L.C.
  3.28*    Articles of Organization of Hamm Asphalt, LLC.
  3.29*    Limited Liability Company Operating Agreement of Hamm Asphalt, LLC.
  3.30*    Articles of Incorporation of Hamm, Inc., as amended.
  3.31*    By-laws of Hamm, Inc.


Table of Contents

Exhibit No.

  

Description

  3.32*    Articles of Organization of N.R. Hamm Contractor, LLC.
  3.33*    Limited Liability Company Operating Agreement of N.R. Hamm Contractor, LLC.
  3.34*    Articles of Organization of N.R. Hamm Quarry, LLC.
  3.35*    Limited Liability Company Operating Agreement of N.R. Hamm Quarry, LLC.
  3.36*    Articles of Incorporation of Bourbon Limestone Company, as amended.
  3.37*    By-laws of Bourbon Limestone Company.
  3.38*    Articles of Organization of Glass Aggregates, LLC, as amended.
  3.39*    Limited Liability Company Operating Agreement of Glass Aggregates, LLC.
  3.40*    Articles of Organization of Hinkle Contracting Company, LLC.
  3.41*    Limited Liability Company Agreement of Hinkle Contracting Company, LLC.
  3.42*    Articles of Incorporation of Kentucky Hauling, Inc., as amended.
  3.43*    By-laws of Kentucky Hauling, Inc., as amended.
  3.44*    Articles of Organization of South Central Kentucky Limestone, LLC.
  3.45*    Amended and Restated Operating Agreement of South Central Kentucky Limestone, LLC.
  3.46*    Articles of Organization of Con-Agg of MO, L.L.C., as amended.
  3.47*    Second Amended and Restated Operating Agreement of Con-Agg of MO, L.L.C.
  3.48*    Articles of Organization of Fischer Quarries, L.L.C.
  3.49*    Operating Agreement of Fischer Quarries, L.L.C.
  3.50*    Articles of Organization of Quarry Properties, L.L.C.
  3.51*    Operating Agreement of Quarry Properties, L.L.C.
  3.52*    Articles of Incorporation of Elam Paving, Inc.
  3.53*    By-laws of Elam Paving, Inc.
  3.54*    Certificate of Formation of B&H Contracting, L.P.
  3.55*    Amended and Restated Partnership Agreement of B&H Contracting, L.P.
  3.56*    Certificate of Formation of Industrial Asphalt, LLC.
  3.57*    Company Agreement of Industrial Asphalt, LLC, as amended.
  3.58*    Certificate of Formation of R.K. Hall Construction, Ltd.
  3.59*    Second Amended and Restated Partnership Agreement of R.K. Hall Construction, Ltd.
  3.60*    Certificate of Formation of RKH Capital, L.L.C.
  3.61*    Second Amended and Restated Company Agreement of RKH Capital, L.L.C.
  3.62*    Certificate of Limited Partnership of SCS Materials, L.P.
  3.63*    Second Amended and Restated Partnership Agreement of SCS Materials, L.P.
  3.64*    Articles of Organization of Altaview Concrete, LLC, as amended.
  3.65*    Amended and Restated Operating Agreement of Altaview Concrete, LLC.


Table of Contents

Exhibit No.

 

Description

  3.66*   Amended Articles of Incorporation of B&B Resources, Inc.
  3.67*   By-laws of B&B Resources, Inc.
  3.68*   Articles of Organization of Kilgore Equipment, LLC.
  3.69*   Operating Agreement of Kilgore Equipment, LLC.
  3.70*   Articles of Organization of Kilgore Trucking, LLC.
  3.71*   Operating Agreement of Kilgore Trucking, LLC.
  3.72*   Articles of Organization of Peak Construction Materials, LLC, as amended.
  3.73*   Amended and Restated Operating Agreement of Peak Construction Materials, LLC.
  3.74*   Articles of Organization of Peak Management, L.C.
  3.75*   Amended and Restated Operating Agreement of Peak Management, L.C.
  3.76*   Articles of Incorporation of Salt Lake Valley Sand & Gravel, Inc.
  3.77*   By-laws of Salt Lake Valley Sand & Gravel, Inc.
  3.78*   Articles of Incorporation of Valley Ready Mix, Inc.
  3.79*   By-laws of Valley Ready Mix, Inc.
  3.80*   Articles of Organization of Wasatch Concrete Pumping, LLC, as amended.
  3.81*   Amended and Restated Operating Agreement of Wasatch Concrete Pumping, LLC.
  3.82*   Articles of Organization of Wind River Materials, LLC, as amended.
  3.83*   Operating Agreement of Wind River Materials, LLC.
  4.1*   Indenture, dated as of January 30, 2012, among Summit Materials, LLC, Summit Materials Finance Corp., the guarantors named therein and Wilmington Trust, National Association, as trustee.
  4.2*   First Supplemental Indenture, dated as of March 13, 2012, among Norris Quarries, LLC and Wilmington Trust, National Association, as trustee.
  4.3*   Form of Note (attached as exhibit to Exhibit 4.1).
  4.4*   Registration Rights Agreement, dated as of January 30, 2012, among Summit Materials, LLC, Summit Materials Finance Corp., the guarantors named therein, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and the several other initial purchasers.
  5.1*   Opinion of Simpson Thacher & Bartlett LLP.
  5.2*   Opinion of Holland & Hart LLP.
  5.3**   Opinion of Kutak Rock LLP.
  5.4**   Opinion of Kutak Rock LLP.
  5.5*   Opinion of Stites & Harbison PLLC.
  5.6*   Opinion of Bell Nunnally & Martin LLP.
10.1**   Credit Agreement, dated as of January 30, 2012, by and among Summit Materials, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc., as joint lead arrangers, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Barclays Capital, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as joint bookrunners, Bank of America, N.A., as administrative agent, collateral agent and swing line lender, Bank of America, N.A., as letter of credit issuer, and Citigroup Global Markets Inc., as syndication agent.


Table of Contents

Exhibit No.

 

Description

10.2*   Amendment No. 1, dated as of February 5, 2013, to the Credit Agreement, dated as of January 30, 2012, by and among Summit Materials, LLC, Bank of America, N.A. as sole lead arranger, and Bank of America, N.A. and Citigroup Global Markets Inc., as joint bookrunners.
10.3*   Tranche A Revolving Credit Commitment Conversion Agreement, dated as of February 11, 2013, under the Credit Agreement, dated as of January 30, 2012, among Summit Materials, LLC, the guarantors party thereto, the several banks and other financial institutions or entities from time to time parties to the Credit Agreement, Bank of America, N.A., as administrative agent, collateral agent, L/C issuer and swing line lender and the other parties thereto.
10.4*   Security Agreement, dated as of January 30, 2012, by and among the grantors identified therein and Bank of America, N.A., as collateral agent.
10.5*†   Employment Agreement, dated July 30, 2009, by and between Summit Materials Holdings L.P. and Thomas Hill.
10.6*†   Employment Agreement, dated December 29, 2011, by and between Summit Materials Holdings L.P. and Douglas Rauh.
12*   Computation of Ratio of Earnings to Fixed Charges.
16*   Letter regarding change in certifying accountant.
21*   Subsidiaries of Summit Materials, LLC.
23.1**   Consent of KPMG LLP, Independent Registered Public Accounting Firm.
23.2**   Consent of KPMG LLP, Independent Registered Public Accounting Firm.
23.3**   Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
23.4**   Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
23.5**   Consent of Allen, Gibbs & Houlik, L.C., Independent Registered Public Accounting Firm.
23.6**   Consent of Wisan, Smith, Racker & Prescott, LLP, Independent Registered Public Accounting Firm.
23.7**   Consent of CliftonLarsonAllen LLP, Independent Registered Public Accounting Firm.
23.8**   Consent of Perryman Chaney Russell, LLP, Independent Auditors.
23.9*   Consent of Simpson Thacher & Bartlett LLP (included as part of its opinion filed as Exhibit 5.1 hereto).
23.10*   Consent of Holland & Hart LLP (included as part of its opinion filed as Exhibit 5.2 hereto).
23.11**   Consent of Kutak Rock LLP (included as part of its opinion filed as Exhibit 5.3 hereto).
23.12**   Consent of Kutak Rock LLP (included as part of its opinion filed as Exhibit 5.4 hereto).
23.13*   Consent of Stites & Harbison PLLC (included as part of its opinion filed as Exhibit 5.5 hereto).
23.14*   Consent of Bell Nunnally & Martin LLP (included as part of its opinion filed as Exhibit 5.6 hereto).
24*   Power of Attorney (included in signature pages of this registration statement).
25.1*   Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Wilmington Trust, National Association as trustee under the Indenture, dated January 30, 2013, among Summit Materials, LLC, Summit Materials Finance Corp., the guarantors named therein and Wilmington Trust, National Association, as trustee.
99.1*   Form of Letter of Transmittal.


Table of Contents

Exhibit No.

  

Description

99.2*    Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.3*    Form of Letter to Clients.
99.4*    Form of Notice of Guaranteed Delivery.

 

* Previously filed.
** Filed herewith.
Management contract or compensatory plan or arrangement.

Exhibit 5.3

May 3, 2013

Summit Materials, LLC

Summit Materials Finance Corp.

2900 K Street NW, Suite 100

Harbourside North Tower Building

Washington, D.C. 20007

 

  Re: Registration Statement on Form S-4

Ladies and Gentlemen:

We have acted as special Missouri counsel to Con-Agg of MO, L.L.C., a Missouri limited liability company, Fischer Quarries, L.L.C., a Missouri limited liability company, and Quarry Properties, L.L.C., a Missouri limited liability company (each individually, a “ Missouri Guarantor ” and collectively, the “ Missouri Guarantors ”) in connection with the Registration Statement on Form S-4 (the “ Registration Statement ) filed by Summit Materials, LLC, a Delaware limited liability company (the “ Issuer ”), Summit Materials Finance Corp., a Delaware corporation (together with the Issuer, the “ Issuers ”), the Missouri Guarantors and certain other guarantors named therein (collectively with the Missouri Guarantors, the “ Guarantors ”) with the Securities and Exchange Commission (the “ Commission ”), under the Securities Act of 1933, as amended (the “ Act ), and the rules and regulations under the Act. The Registration Statement relates to the registration under the Act of up to $250,000,000 aggregate principal amount of the Issuers’ 10.5% Senior Notes due 2020 to be issued in connection with the pending transaction (the “ Exchange Notes ”) and the guarantees of the Exchange Notes by the Guarantors (the “ Exchange Guarantees ”). Capitalized terms used and not otherwise defined in this opinion have the respective meanings given them in the Registration Statement.

The Exchange Notes and the Exchange Guarantees are to be offered in exchange for the Issuers’ outstanding $250,000,000 aggregate principal amount of 10.5% Senior Notes due 2020 issued on or about January 30, 2012 (the “ Initial Notes ”) and the guarantees of the Initial Notes by the Guarantors. The Exchange Notes and the Exchange Guarantees will be issued by the Issuers and the Guarantors in accordance with the terms of the Indenture dated as of January 30, 2012 (as amended by the First Supplemental Indenture dated as of March 13, 2012, the “ Indenture ”), by and among the Issuers, the Guarantors and Wilmington Trust, National Association, as trustee.

In connection with this opinion, we have examined the originals or copies, certified to our satisfaction, of the Registration Statement and the Indenture, which has been filed with the Commission as an exhibit to the Registration Statement (collectively, the “ Documents ”), and of the Missouri Guarantors’ enabling resolutions, each dated January 17, 2012 (the “ Enabling Resolutions ”). We also have examined such other records, agreements, documents and other instruments and have made such other investigations as we have deemed relevant and necessary in connection with the opinions hereinafter set forth. As to questions of fact material to this opinion, we have relied upon certificates or comparable documents of public officials and of officers and representatives of the Issuers and the Missouri Guarantors.


May 3, 2013

Page 2

 

We have not made or undertaken to make any investigation as to factual matters or as to the accuracy or completeness of any representation, warranty, data or any other information, whether written or oral, that may have been made by or on behalf of the parties to the Documents or otherwise.

In rendering this opinion, we have assumed, without investigation, verification or inquiry, (a) the genuineness of all signatures, (b) the authenticity of all documents submitted to us as originals, (c) the legal capacity of natural persons executing such documents, (d) the authenticity and conformity to original documents of documents submitted to us as certified photostatic, facsimile or electronically transmitted copies, (e) the completeness and accuracy of all corporate records provided to us, and (f) that the Enabling Resolutions of each of the Missouri Guarantors are in full force and effect and have not been amended, rescinded or superseded.

Based upon the foregoing, and subject to the assumptions, limitations and qualifications set forth herein, we are of the following opinion:

 

  1. The Indenture has been duly authorized, executed and delivered by each of the Missouri Guarantors.

 

  2. Each of the Missouri Guarantors has duly authorized its Exchange Guarantee.

 

  3. The execution and delivery of the Indenture, including the Exchange Guarantees, by the Missouri Guarantors and the performance by the Missouri Guarantors of their respective obligations thereunder do not violate any Missouri law, rule or regulation or administrative or court decree applicable to such Missouri Guarantor.

The opinions set forth herein are limited to matters governed by the laws of the State of Missouri, and we express no opinion with regard to any matter which may be governed by the law of any other jurisdiction, including the laws of the United States. Our opinions herein contained are subject to the following qualifications and limitations:

 

  A. We express no opinion as to the validity or enforceability of any provision in the Documents. We express no opinion as to any choice of law or choice of judicial forum provisions contained in any of the Documents.

 

  B. We express no opinion with respect to any state or federal securities laws, rules or regulations or any “blue sky” laws, rules or regulations, including, without limitation, the Act, the Securities Act of 1934, as amended, and the Investment Company Act of 1940, as amended, in connection with any Document or the offering, sale or issuance of the Exchange Notes. We express no opinion with regard to the tax effect or tax implication of any provision of the Documents or the interest on the Exchange Notes.


May 3, 2013

Page 3

 

This opinion covers only the specific issues regarding the transaction that are expressly described in this letter and no additional opinions should be implied or inferred with respect to any other aspects of the transaction.

Our opinions are intended to apply only to those facts and circumstances that exist as of the date hereof, and we assume no obligation or responsibility to update or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, any changes in laws that may hereafter occur, or to inform the addressee or any other party of any change in circumstances occurring after the date of this opinion that would alter the opinions rendered herein.

This opinion shall not be construed as or deemed to be a guaranty or insuring agreement that a court considering such matters would not rule in a manner contrary to the opinions set forth herein.

We consent to the use of our name in the Registration Statement and in the prospectus in the Registration Statement as it appears in the caption “Legal Matters” and to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we come within the category of persons who are considered “experts” within the meaning of Section 11 of the Act or whose consent is required by the Act or by the rules and regulations under the Act. We consent to the reliance on this opinion by Simpson Thacher & Bartlett LLP for purposes of their opinion to you and filed as Exhibit 5.3 to the Registration Statement.

 

Very truly yours,
/s/ Kutak Rock LLP

Exhibit 5.4

May 3, 2013

Summit Materials, LLC

Summit Materials Finance Corp.

2900 K Street NW, Suite 100

Harbourside North Tower Building

Washington, D.C. 20007

 

  Re: Registration Statement on Form S-4

Ladies and Gentlemen:

We have acted as special Kansas counsel to Hamm, Inc., a Kansas corporation, Hamm Asphalt, LLC, a Kansas limited liability company, N. R. Hamm Contractor, LLC, a Kansas limited liability company, N. R. Hamm Quarry, LLC, a Kansas limited liability company, and Cornejo & Sons, L.L.C., a Kansas limited liability company (each individually, a “ Kansas Guarantor ” and collectively, the “ Kansas Guarantors ”) in connection with the Registration Statement on Form S-4 (the “ Registration Statement ) filed by Summit Materials, LLC, a Delaware limited liability company (the “ Issuer ”), Summit Materials Finance Corp., a Delaware corporation (together with the Issuer, the “ Issuers ”), the Kansas Guarantors and certain other guarantors named therein (collectively with the Kansas Guarantors, the “ Guarantors ”) with the Securities and Exchange Commission (the “ Commission ”), under the Securities Act of 1933, as amended (the “ Act ), and the rules and regulations under the Act. The Registration Statement relates to the registration under the Act of up to $250,000,000 aggregate principal amount of the Issuers’ 10.5% Senior Notes due 2020 to be issued in connection with the pending transaction (the “ Exchange Notes ”) and the guarantees of the Exchange Notes by the Guarantors (the “ Exchange Guarantees ”). Capitalized terms used and not otherwise defined in this opinion have the respective meanings given them in the Registration Statement.

The Exchange Notes and the Exchange Guarantees are to be offered in exchange for the Issuers’ outstanding $250,000,000 aggregate principal amount of 10.5% Senior Notes due 2020 issued on or about January 30, 2012 (the “ Initial Notes ”) and the guarantees of the Initial Notes by the Guarantors. The Exchange Notes and the Exchange Guarantees will be issued by the Issuers and the Guarantors in accordance with the terms of the Indenture dated as of January 30, 2012 (as amended by the First Supplemental Indenture dated as of March 13, 2012, the “ Indenture ”), by and among the Issuers, the Guarantors and Wilmington Trust, National Association, as trustee.

In connection with this opinion, we have examined the originals or copies, certified to our satisfaction, of the Registration Statement and the Indenture, which has been filed with the Commission as an exhibit to the Registration Statement (collectively, the “ Documents ”), and of the Kansas Guarantors’ enabling resolutions, each dated January 17, 2012 (the “ Enabling Resolutions ”). We also have examined such other records, agreements, documents and other instruments and have made such other investigations as we have deemed relevant and necessary in connection with the opinions hereinafter set forth. As to questions of fact material to this opinion, we have relied upon certificates or comparable documents of public officials and of officers and representatives of the Issuers and the Kansas Guarantors.


May 3, 2013

Page 2

 

We have not made or undertaken to make any investigation as to factual matters or as to the accuracy or completeness of any representation, warranty, data or any other information, whether written or oral, that may have been made by or on behalf of the parties to the Documents or otherwise.

In rendering this opinion, we have assumed, without investigation, verification or inquiry, (a) the genuineness of all signatures, (b) the authenticity of all documents submitted to us as originals, (c) the legal capacity of natural persons executing such documents, (d) the authenticity and conformity to original documents of documents submitted to us as certified photostatic, facsimile or electronically transmitted copies, (e) the completeness and accuracy of all corporate records provided to us, and (f) that the Enabling Resolutions of each of the Kansas Guarantors are in full force and effect and have not been amended, rescinded or superseded.

Based upon the foregoing, and subject to the assumptions, limitations and qualifications set forth herein, we are of the following opinion:

 

  1. The Indenture has been duly authorized, executed and delivered by each of the Kansas Guarantors.

 

  2. Each of the Kansas Guarantors has duly authorized its Exchange Guarantee.

 

  3. The execution and delivery of the Indenture, including the Exchange Guarantees, by the Kansas Guarantors and the performance by the Kansas Guarantors of their respective obligations thereunder do not violate any Kansas law, rule or regulation or administrative or court decree applicable to such Kansas Guarantor.

The opinions set forth herein are limited to matters governed by the laws of the State of Kansas, and we express no opinion with regard to any matter which may be governed by the law of any other jurisdiction, including the laws of the United States. Our opinions herein contained are subject to the following qualifications and limitations:

 

  A. We express no opinion as to the validity or enforceability of any provision in the Documents. We express no opinion as to any choice of law or choice of judicial forum provisions contained in any of the Documents.

 

  B. We express no opinion with respect to any state or federal securities laws, rules or regulations or any “blue sky” laws, rules or regulations, including, without limitation, the Act, the Securities Act of 1934, as amended, and the Investment Company Act of 1940, as amended, in connection with any Document or the offering, sale or issuance of the Exchange Notes. We express no opinion with regard to the tax effect or tax implication of any provision of the Documents or the interest on the Exchange Notes.


May 3, 2013

Page 3

 

This opinion covers only the specific issues regarding the transaction that are expressly described in this letter and no additional opinions should be implied or inferred with respect to any other aspects of the transaction.

Our opinions are intended to apply only to those facts and circumstances that exist as of the date hereof, and we assume no obligation or responsibility to update or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, any changes in laws that may hereafter occur, or to inform the addressee or any other party of any change in circumstances occurring after the date of this opinion that would alter the opinions rendered herein.

This opinion shall not be construed as or deemed to be a guaranty or insuring agreement that a court considering such matters would not rule in a manner contrary to the opinions set forth herein.

We consent to the use of our name in the Registration Statement and in the prospectus in the Registration Statement as it appears in the caption “Legal Matters” and to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we come within the category of persons who are considered “experts” within the meaning of Section 11 of the Act or whose consent is required by the Act or by the rules and regulations under the Act. We consent to the reliance on this opinion by Simpson Thacher & Bartlett LLP for purposes of their opinion to you and filed as Exhibit 5.4 to the Registration Statement.

 

Very truly yours,
/s/ Kutak Rock LLP

Exhibit 10.1

EXECUTION VERSION

 

 

 

CREDIT AGREEMENT

Dated as of January 30, 2012

among

SUMMIT MATERIALS, LLC,

as the Borrower,

THE GUARANTORS PARTY HERETO FROM TIME TO TIME,

BANK OF AMERICA, N.A.,

as Administrative and Collateral Agent,

BANK OF AMERICA, N.A.,

as L/C Issuer and Swing Line Lender,

THE OTHER LENDERS PARTY HERETO FROM TIME TO TIME,

CITIGROUP GLOBAL MARKETS INC.,

as Syndication Agent,

and

BARCLAYS BANK PLC

and

REGIONS BANK,

as Co-Documentation Agents

 

 

BANK OF AMERICA, N.A.,

and

CITIGROUP GLOBAL MARKETS INC.,

as Joint Lead Arrangers,

and

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

CITIGROUP GLOBAL MARKETS INC.,

UBS SECURITIES LLC,

BARCLAYS CAPITAL,

CREDIT SUISSE SECURITIES (USA) LLC

and

DEUTSCHE BANK SECURITIES INC.,

as Joint Bookrunners

 

 

 


TABLE OF CONTENTS

 

         Page  
  ARTICLE I   
  Definitions and Accounting Terms   

Section 1.01.

 

Defined Terms.

     1   

Section 1.02.

 

Other Interpretive Provisions.

     42   

Section 1.03.

 

Accounting Terms.

     42   

Section 1.04.

 

Rounding.

     42   

Section 1.05.

 

References to Agreements, Laws, Etc.

     43   

Section 1.06.

 

Times of Day.

     43   

Section 1.07.

 

Timing of Payment of Performance.

     43   

Section 1.08.

 

Pro Forma Calculations.

     43   

Section 1.09.

 

Letter of Credit Amounts.

     44   

Section 1.10.

 

Cumulative Credit Transactions.

     44   
  ARTICLE II   
  The Commitments and Credit Extensions   

Section 2.01.

 

The Loans.

     45   

Section 2.02.

 

Borrowings, Conversions and Continuations of Loans.

     45   

Section 2.03.

 

Letters of Credit.

     46   

Section 2.04.

 

Swing Line Loans.

     53   

Section 2.05.

 

Prepayments.

     56   

Section 2.06.

 

Termination or Reduction of Commitments.

     59   

Section 2.07.

 

Repayment of Loans.

     59   

Section 2.08.

 

Interest.

     60   

Section 2.09.

 

Fees.

     60   

Section 2.10.

 

Computation of Interest and Fees.

     61   

Section 2.11.

 

Evidence of Indebtedness.

     61   

Section 2.12.

 

Payments Generally.

     61   

Section 2.13.

 

Sharing of Payments.

     63   

Section 2.14.

 

Incremental Credit Extensions.

     63   

Section 2.15.

 

Defaulting Lender.

     65   

Section 2.16.

 

Refinancing Amendments.

     66   

Section 2.17.

 

Extension of Term Loans; Extension of Revolving Credit Loans.

     67   
  ARTICLE III   
  Taxes, Increased Costs Protection and Illegality   

Section 3.01.

 

Taxes.

     70   

Section 3.02.

 

Illegality.

     72   

Section 3.03.

 

Inability to Determine Rates.

     72   

Section 3.04.

 

Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans.

     73   

Section 3.05.

 

Funding Losses.

     74   

Section 3.06.

 

Matters Applicable to All Requests for Compensation.

     74   

Section 3.07.

 

Replacement of Lenders Under Certain Circumstances.

     75   

Section 3.08.

 

Survival.

     76   

 

-i-


         Page  
  ARTICLE IV   
  Conditions Precedent to Credit Extensions   

Section 4.01.

 

All Credit Events After the Closing Date.

     76   

Section 4.02.

 

First Credit Event.

     77   
  ARTICLE V   
  Representations and Warranties   

Section 5.01.

 

Existence, Qualification and Power; Compliance with Laws.

     78   

Section 5.02.

 

Authorization; No Contravention.

     79   

Section 5.03.

 

Governmental Authorization; Other Consents.

     79   

Section 5.04.

 

Binding Effect.

     79   

Section 5.05.

 

Financial Statements; No Material Adverse Effect.

     79   

Section 5.06.

 

Litigation.

     80   

Section 5.07.

 

No Default.

     80   

Section 5.08.

 

Ownership of Property; Liens.

     80   

Section 5.09.

 

Environmental Matters.

     80   

Section 5.10.

 

Taxes.

     81   

Section 5.11.

 

ERISA Compliance.

     81   

Section 5.12.

 

Subsidiaries; Equity Interests.

     81   

Section 5.13.

 

Margin Regulations; Investment Company Act.

     82   

Section 5.14.

 

Disclosure.

     82   

Section 5.15.

 

Labor Matters.

     82   

Section 5.16.

 

Intellectual Property; Licenses, Etc.

     82   

Section 5.17.

 

Solvency.

     83   

Section 5.18.

 

Security Documents.

     83   

Section 5.19.

 

Senior Debt.

     83   
  ARTICLE VI   
  Affirmative Covenants   

Section 6.01.

 

Financial Statements.

     84   

Section 6.02.

 

Certificates; Other Information.

     86   

Section 6.03.

 

Notices.

     87   

Section 6.04.

 

Payment of Obligations.

     87   

Section 6.05.

 

Preservation of Existence, Etc.

     87   

Section 6.06.

 

Maintenance of Properties.

     87   

Section 6.07.

 

Maintenance of Insurance.

     87   

Section 6.08.

 

Compliance with Laws.

     88   

Section 6.09.

 

Books and Records.

     88   

Section 6.10.

 

Inspection Rights.

     88   

Section 6.11.

 

Additional Collateral; Additional Guarantors.

     89   

Section 6.12.

 

Compliance with Environmental Laws.

     90   

Section 6.13.

 

Further Assurances and Post-Closing Conditions.

     91   

Section 6.14.

 

Maintenance of Ratings.

     91   
  ARTICLE VII   
  Negative Covenants   

Section 7.01.

 

Liens.

     91   

Section 7.02.

 

Investments.

     95   

Section 7.03.

 

Indebtedness.

     97   

Section 7.04.

 

Fundamental Changes.

     99   

Section 7.05.

 

Dispositions.

     100   

Section 7.06.

 

Restricted Payments.

     102   

Section 7.07.

 

Change in Nature of Business.

     104   

Section 7.08.

 

Transactions with Affiliates.

     104   

 

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         Page  

Section 7.09.

 

Burdensome Agreements.

     105   

Section 7.10.

 

Use of Proceeds.

     106   

Section 7.11.

 

Financial Covenants.

     106   

Section 7.12.

 

Accounting Changes.

     106   

Section 7.13.

 

Prepayments, Etc. of Indebtedness.

     106   

Section 7.14.

 

Permitted Activities.

     107   
  ARTICLE VIII   
  Events of Default and Remedies   

Section 8.01.

 

Events of Default.

     107   

Section 8.02.

 

Remedies upon Event of Default.

     109   

Section 8.03.

 

Exclusion of Immaterial Subsidiaries.

     110   

Section 8.04.

 

Application of Funds.

     110   

Section 8.05.

 

Borrower’s Right to Cure.

     111   
  ARTICLE IX   
  Administrative Agent and Other Agents   

Section 9.01.

 

Appointment and Authorization of Agents.

     111   

Section 9.02.

 

Delegation of Duties.

     112   

Section 9.03.

 

Liability of Agents.

     112   

Section 9.04.

 

Reliance by Agents.

     112   

Section 9.05.

 

Notice of Default.

     113   

Section 9.06.

 

Credit Decision; Disclosure of Information by Agents.

     113   

Section 9.07.

 

Indemnification of Agents.

     114   

Section 9.08.

 

Agents in Their Individual Capacities.

     114   

Section 9.09.

 

Successor Agents.

     114   

Section 9.10.

 

Administrative Agent May File Proofs of Claim.

     115   

Section 9.11.

 

Collateral and Guaranty Matters.

     116   

Section 9.12.

 

Other Agents; Arrangers and Managers.

     117   

Section 9.13.

 

Appointment of Supplemental Agents.

     117   

Section 9.14.

 

Withholding Tax Indemnity.

     118   
  ARTICLE X   
  Miscellaneous   

Section 10.01.

 

Amendments, Etc.

     118   

Section 10.02.

 

Notices and Other Communications; Facsimile Copies.

     121   

Section 10.03.

 

No Waiver; Cumulative Remedies.

     122   

Section 10.04.

 

Attorney Costs and Expenses.

     122   

Section 10.05.

 

Indemnification by the Borrower.

     122   

Section 10.06.

 

Payments Set Aside.

     123   

Section 10.07.

 

Successors and Assigns.

     124   

Section 10.08.

 

Confidentiality.

     129   

Section 10.09.

 

Setoff.

     130   

Section 10.10.

 

Interest Rate Limitation.

     130   

Section 10.11.

 

Counterparts.

     130   

Section 10.12.

 

Integration; Termination.

     131   

Section 10.13.

 

Survival of Representations and Warranties.

     131   

Section 10.14.

 

Severability.

     131   

Section 10.15.

 

GOVERNING LAW.

     131   

Section 10.16.

 

WAIVER OF RIGHT TO TRIAL BY JURY.

     131   

Section 10.17.

 

Binding Effect.

     132   

Section 10.18.

 

USA Patriot Act.

     132   

Section 10.19.

 

No Advisory or Fiduciary Responsibility.

     132   

 

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         Page  
  ARTICLE XI   
  Guarantee   

Section 11.01.

 

The Guarantee.

     133   

Section 11.02.

 

Obligations Unconditional.

     133   

Section 11.03.

 

Reinstatement.

     134   

Section 11.04.

 

Subrogation; Subordination.

     134   

Section 11.05.

 

Remedies.

     134   

Section 11.06.

 

Instrument for the Payment of Money.

     135   

Section 11.07.

 

Continuing Guarantee.

     135   

Section 11.08.

 

General Limitation on Guarantee Obligations.

     135   

Section 11.09.

 

Release of Guarantors.

     135   

Section 11.10.

 

Right of Contribution.

     135   

SCHEDULES

 

1.01A    Commitments
1.01B    Existing Letters of Credit
4.02(c)    Local Counsel Opinions
5.05    Certain Liabilities
5.08    Ownership of Property
5.09(a)    Environmental Matters
5.12    Subsidiaries and Other Equity Investments
7.01(b)    Existing Liens
7.02(f)    Existing Investments
7.03(b)    Existing Indebtedness
7.05(k)    Dispositions
7.08    Transactions with Affiliates
7.09    Certain Contractual Obligations
10.02    Administrative Agent’s Office, Certain Addresses for Notices

EXHIBITS

Form of

 

A    Committed Loan Notice
B    Swing Line Loan Notice
C-1    Term Note
C-2    Revolving Credit Note
C-3    Swing Line Note
D    Compliance Certificate
E    Assignment and Assumption
F    Security Agreement
G    Intercompany Note
H    Holdings Pledge Agreement
I    United States Tax Compliance Certificates
J    Mortgage
K    First Lien Intercreditor Agreement
L    Affiliated Lender Assignment and Assumption
M    Affiliated Lender Notice

 

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CREDIT AGREEMENT

This CREDIT AGREEMENT (this “ Agreement ”) is entered into as of January 30, 2012, among SUMMIT MATERIALS, LLC, a Delaware limited liability company (the “ Borrower ”), the Guarantors party hereto from time to time, BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent, each lender from time to time party hereto (collectively, the “ Lenders ” and individually, a “ Lender ”), BANK OF AMERICA, N.A., as L/C Issuer and Swing Line Lender, Citigroup Global Markets Inc., as Syndication Agent, and BARCLAYS BANK PLC and REGIONS BANK, as Co-Documentation Agents.

PRELIMINARY STATEMENTS

The Borrower, Holdings, certain of the Lenders and Citibank, N.A., as administrative agent for such lenders, are parties to the Existing Credit Agreement pursuant to which certain term loan, revolving credit and letter of credit facilities have been made available to the Borrower.

The proceeds of the term loan borrowings hereunder together with the proceeds of the Senior Notes (as defined below) will be used (i) to repay in full the term loans of Summit Materials Companies I, LLC under the Existing Credit Agreement, (ii) to repay and terminate the revolving credit loans and commitments under the Existing Credit Agreement, as the case may be, and (iii) to repay the existing Indebtedness of Continental Cement Company, L.L.C., in each such case, simultaneously herewith.

In furtherance of the foregoing, the Borrower has requested that the Lenders extend credit to the Borrower in the form of (i) Term Loans in an initial aggregate amount of $400,000,000 and (ii) Revolving Credit Commitments in an initial aggregate amount of $150,000,000. The Revolving Credit Facility may include one or more Swing Line Loans and one or more Letters of Credit from time to time.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I

Definitions and Accounting Terms

Section 1.01. Defined Terms .

As used in this Agreement (including in the preliminary statements hereto), the following terms shall have the meanings set forth below:

Additional Lender ” has the meaning set forth in Section 2.14(a).

Additional Refinancing Lender ” means, at any time, any bank, financial institution or other institutional lender or investor (other than any such bank, financial institution or other institutional lender or investor that is a Lender at such time) that agrees to provide any portion of Refinancing Term Loans pursuant to a Refinancing Amendment in accordance with Section 2.16, provided that each Additional Refinancing Lender shall be subject to the approval of (i) the Administrative Agent, such approval not to be unreasonably withheld or delayed, to the extent such consent would be required for an assignment to such Person pursuant to Section 10.07.

Administrative Agent ” means Bank of America, in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

Administrative Agent’s Office ” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders.

Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent.


Affiliate ” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. “ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

Affiliated Lender ” means, at any time, any Lender that is the Sponsor (including portfolio companies of the Sponsor) (other than Holdings, the Borrower or any of its Subsidiaries and other than any Debt Fund Affiliate) or a Non-Debt Fund Affiliate of the Sponsor at such time.

Affiliated Lender Cap ” has the meaning set forth in Section 10.07(k)(iv).

Agent-Related Persons ” means the Agents, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

Agents ” means, collectively, the Administrative Agent, the Collateral Agent, the Syndication Agent, the Co-Documentation Agents and the Supplemental Agents (if any).

Aggregate Commitments ” means the Commitments of all the Lenders.

Agreement ” means this Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

Applicable ECF Percentage ” means, for any fiscal year, (a) 50% if the Consolidated First Lien Net Leverage Ratio as of the last day of the applicable Excess Cash Flow Period is greater than 2.50:1.00, (b) 25% if the Consolidated First Lien Net Leverage Ratio as of the last day of the applicable Excess Cash Flow Period is greater than 1.75:1.00 and less than or equal to 2.50 to 1.00 and (c) 0% if the Consolidated First Lien Net Leverage Ratio as of the last day of the applicable Excess Cash Flow Period is less than or equal to 1.75:1.00.

Applicable Rate ” means a percentage per annum equal to:

(a) with respect to Term Loans, (i) for Eurocurrency Rate Loans, 4.75% and (ii) for Base Rate Loans, 3.75%.

(b) with respect to Revolving Credit Loans, commitment fees on the unused Revolving Credit Commitments and Letter of Credit fees, (i) until delivery of financial statements for the first full fiscal quarter ending after the Closing Date pursuant to Section 6.01, (A) for Eurocurrency Rate Loans and Letter of Credit fees, 4.50%, (B) for Base Rate Loans, 3.50% and (C) for commitment fees, 0.50% and (ii) thereafter, the following percentages per annum, based upon the Consolidated First Lien Net Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(a):

 

Applicable Rate  
Pricing
Level
  Consolidated
First Lien
Net
Leverage
Ratio
  Eurocurrency
Rate and
Letter of
Credit Fees
    Base
Rate
    Commitment
Fee Rate
 
1   >2.50:1     4.50     3.50     0.50
2   £ 2.50:1     4.25     3.25     0.50

Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated First Lien Net Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a); provided that at the option of the Administrative Agent or the Required Lenders, “Pricing Level 1” (immediately above) shall apply (x) as of the first Business Day after the date on which a Compliance Certificate was required to have been delivered but was not delivered, and shall continue to so apply to and including the date on which such Compliance Certificate

 

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is so delivered (and thereafter the pricing level otherwise determined in accordance with this definition shall apply) and (y) as of the first Business Day after an Event of Default under Section 8.01(a) shall have occurred and be continuing, and shall continue to so apply to but excluding the date on which such Event of Default is cured or waived (and thereafter the pricing level otherwise determined in accordance with this definition shall apply).

In the event that any financial statements under Section 6.01 or a Compliance Certificate is shown to be inaccurate at any time that this Agreement is in effect and any Loans or Commitments are outstanding hereunder when such inaccuracy is discovered or within 91 days after the date on which all Loans have been repaid and all Commitments have been terminated, and such inaccuracy, if corrected, would have led to a higher Applicable Rate for any period (an “ Applicable Period ”) than the Applicable Rate applied for such Applicable Period, then (i) the Borrower shall promptly (and in no event later than five (5) Business Days thereafter) deliver to the Administrative Agent a correct Compliance Certificate for such Applicable Period, (ii) the Applicable Rate shall be determined by reference to the corrected Compliance Certificate (but in no event shall the Lenders owe any amounts to the Borrower), and (iii) the Borrower shall pay to the Administrative Agent promptly upon demand (and in no event later than five (5) Business Days after demand) any additional interest owing as a result of such increased Applicable Rate for such Applicable Period, which payment shall be promptly applied by the Administrative Agent in accordance with the terms hereof. Notwithstanding anything to the contrary in this Agreement, any additional interest hereunder shall not be due and payable until demand is made for such payment pursuant to clause (iii) above and accordingly, any nonpayment of such interest as result of any such inaccuracy shall not constitute a Default (whether retroactively or otherwise), and no such amounts shall be deemed overdue (and no amounts shall accrue interest at the Default Rate), at any time prior to the date that is five (5) Business Days following such demand.

Appropriate Lender ” means, at any time, (a) with respect to Loans of any Class, the Lenders of such Class, (b) with respect to Letters of Credit, (i) the relevant L/C Issuer and (ii) the Revolving Credit Lenders and (c) with respect to the Swing Line Facility, (i) the relevant Swing Line Lender and (ii) if any Swing Line Loans are outstanding pursuant to Section 2.04(a), the Revolving Credit Lenders.

Approved Bank ” has the meaning set forth in clause (c) of the definition of “Cash Equivalents.”

Approved Fund ” means any Fund that is administered, advised or managed by a Lender or an Affiliate of the entity that administers, advises or manages any Fund that is a Lender.

Arrangers ” means Bank of America, N.A. and Citigroup Global Markets Inc.

Assignees ” has the meaning set forth in Section 10.07(b).

Assignment and Assumption ” means an Assignment and Assumption substantially in the form of Exhibit E hereto or such other form as may be approved by the Administrative Agent.

Attorney Costs ” means and includes all reasonable and documented fees, expenses and disbursements of any law firm or other external legal counsel.

Attributable Indebtedness ” means, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.

Audited Financial Statements ” means the audited consolidated balance sheets and the related audited consolidated statements of operations and of cash flows for the Borrower and its Subsidiaries for the fiscal year ended December 31, 2010.

Auto-Extension Letter of Credit ” has the meaning set forth in Section 2.03(b)(iii).

Bank of America ” means Bank of America, N.A., a national banking association, acting in its individual capacity, and its successors and assigns.

 

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Base Rate ” means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus  1 / 2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate” and (c) the Eurocurrency Rate plus 1.00%; provided that in no event shall the Base Rate be less than 2.25% per annum with respect to the Term Loans. The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

Base Rate Loan ” means a Loan that bears interest based on the Base Rate.

Borrower ” has the meaning set forth in the preamble hereto.

Borrower Materials ” has the meaning set forth in Section 6.01.

Borrowing ” means a Revolving Credit Borrowing, a Swing Line Borrowing, or a Term Borrowing, as the context may require.

Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of the state of New York or, or are in fact closed in, the state where the Administrative Agent’s Office is located and if such day relates to any Eurocurrency Rate Loan, means any such day on which dealings in deposits are conducted by and between banks in the London interbank eurodollar market.

Capital Expenditures ” means, for any period, the aggregate, without duplication, of (a) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower and its Subsidiaries during such period that, in conformity with GAAP, are or are required to be included as additions during such period to property, plant or equipment and other deferred charges included in Capital Expenditures reflected in the consolidated balance sheet of the Borrower and its Subsidiaries, (b) the value of all assets under Capitalized Leases incurred by the Borrower and its Subsidiaries during such period (other than as a result of purchase accounting) and (c) Capitalized Software Expenditures; provided that the term “Capital Expenditures” shall not include (i) expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (x) insurance proceeds paid on account of the loss of or damage to the assets being replaced, restored or repaired or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (ii) the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment solely to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iii) the purchase of plant, property or equipment or software to the extent financed with the proceeds of Dispositions outside the ordinary course of business that are not required to be applied to prepay Term Loans pursuant to Section 2.05(b), (iv) expenditures that are accounted for as capital expenditures by the Borrower or any Subsidiary and that actually are paid for by a Person other than the Borrower or any Subsidiary and for which neither the Borrower nor any Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such Person or any other Person (whether before, during or after such period), (v) expenditures that constitute any part of expenses of any Capitalized Lease, (vi) expenditures that constitute Permitted Acquisitions, (vii) any capitalized interest expense reflected as additions to property, plant or equipment in the consolidated balance sheet of the Borrower and the Subsidiaries or (viii) any non-cash compensation or other non-cash costs reflected as additions to property, plant or equipment in the consolidated balance sheet of the Borrower and its Subsidiaries.

Capitalized Leases ” means all leases that have been or are required to be, in accordance with GAAP, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability on a balance sheet (excluding the notes thereto) in accordance with GAAP; provided that for purposes of calculations made pursuant to the terms of this Agreement, GAAP will be deemed to treat leases in a manner consistent with its current treatment under generally accepted accounting principles as of the Closing Date, notwithstanding any modifications or interpretive changes thereto that may occur thereafter.

 

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Capitalized Software Expenditures ” means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by the Borrower and its Subsidiaries during such period in respect of purchased software or internally developed software and software enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of the Borrower and its Subsidiaries.

Cash Collateral ” has the meaning set forth in Section 2.03(g).

Cash Collateral Account ” means a blocked account at Bank of America (or another commercial bank selected in compliance with Section 9.09) in the name of the Administrative Agent and under the sole dominion and control of the Administrative Agent, and otherwise established in a manner satisfactory to the Administrative Agent.

Cash Collateralize ” has the meaning set forth in Section 2.03(g).

Cash Equivalents ” means any of the following types of Investments, to the extent owned by the Borrower or any Subsidiary:

(a) Dollars;

(b) readily marketable obligations issued or directly and fully guaranteed or insured by the government or any agency or instrumentality of the United States having average maturities of not more than 24 months from the date of acquisition thereof; provided that the full faith and credit of the United States is pledged in support thereof;

(c) time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) is a Lender or (ii) (A) is organized under the Laws of the United States, any state thereof, the District of Columbia or any member nation of the Organization for Economic Cooperation and Development or is the principal banking Subsidiary of a bank holding company organized under the Laws of the United States, any state thereof, the District of Columbia or any member nation of the Organization for Economic Cooperation and Development, and is a member of the Federal Reserve System, and (B) has combined capital and surplus of at least $250,000,000 (any such bank in the foregoing clause (i) or (ii) being an “ Approved Bank ”), in each case with maturities not exceeding 24 months from the date of acquisition thereof;

(d) commercial paper and variable or fixed rate notes issued by an Approved Bank (or by the parent company thereof) or any variable or fixed rate note issued by, or guaranteed by, a corporation (other than structured investment vehicles and other than corporations used in structured financing transactions) rated A-2 (or the equivalent thereof) or better by S&P or P-2 (or the equivalent thereof) or better by Moody’s, in each case with average maturities of not more than 24 months from the date of acquisition thereof;

(e) marketable short-term money market and similar funds having a rating of at least P-2 or A-2 from either Moody’s or S&P, respectively (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency selected by the Borrower);

(f) repurchase agreements entered into by any Person with a bank or trust company (including any of the Lenders) or recognized securities dealer, in each case, having capital and surplus in excess of $250,000,000 for direct obligations issued by or fully guaranteed or insured by the government or any agency or instrumentality of the United States, in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations;

(g) securities with average maturities of 24 months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government having an investment grade rating from either S&P or Moody’s (or the equivalent thereof);

 

-5-


(h) Investments (other than in structured investment vehicles and structured financing transactions) with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moody’s;

(i) euros or any other foreign currency comparable in credit quality and tenor to those referred to above and instruments equivalent to those referred to in clauses (a) through (h) above denominated in euros or any other foreign currency comparable in credit quality and tenor to those referred to above, in each case, customarily used by corporations for cash management purposes in any jurisdiction outside the United States in the ordinary course of business of the Borrower and its Subsidiaries;

(j) Investments, classified in accordance with GAAP as current assets of the Borrower or any Subsidiary, in money market investment programs which are registered under the Investment Company Act of 1940 or which are administered by financial institutions having capital of at least $250,000,000, and, in either case, the portfolios of which are limited such that substantially all of such Investments are of the character, quality and maturity described in clauses (a) through (h) of this definition; and

(k) investment funds investing at least 95% of their assets in securities of the types (including as to credit quality and maturity) described in clauses (a) through (j) above.

Cash Management Obligations ” means obligations owed by the Borrower or any Subsidiary to any Lender or any Affiliate of a Lender (or Person that was a Lender or an Affiliate of a Lender at the time such arrangement was entered into) (a “ Cash Management Bank ”) in respect of any overdraft and related liabilities arising from treasury, depository, credit card, debit card and cash management services or any automated clearing house transfers of funds.

Casualty Event ” means any event that gives rise to the receipt by the Borrower or any Subsidiary of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or real property (including any improvements thereon) to replace or repair such equipment, fixed assets or real property.

Change of Control ” shall be deemed to occur if:

(a) at any time prior to a Qualified IPO, any combination of Permitted Holders shall fail to own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate Equity Interests representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings;

(b) at any time after a Qualified IPO, (i) any person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Closing Date), other than any combination of the Investors or any “group” including any Permitted Holders ( provided that, in the case of any such “group,” the Permitted Holders hold a majority of all voting interest in Holdings’ Equity Interests held by all members of such “group”), shall have acquired beneficial ownership of 35% or more on a fully diluted basis of the voting interest in Holdings’ Equity Interests and the Permitted Holders shall own, directly or indirectly, less than such person or “group” on a fully diluted basis of the voting interest in Holdings’ Equity Interests or (ii) during each period of twelve consecutive months, the board of directors of Holdings shall not consist of a majority of the Continuing Directors;

(c) a “change of control” (or similar event) shall occur under the Senior Notes or any Junior Financing, in each case, with an aggregate principal amount in excess of the Threshold Amount or any Permitted Refinancing Indebtedness in respect of any of the foregoing with an aggregate principal amount in excess of the Threshold Amount; or

(d) Holdings shall cease to own 100% of the Equity Interests of the Borrower.

 

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Class ” (a) when used with respect to any Lender, refers to whether such Lender has a Loan or Commitment with respect to a particular Class of Loans or Commitments, (b) when used with respect to Commitments, refers to whether such Commitments are Revolving Credit Commitments, Extended Revolving Credit Commitments of a given Extension Series, Revolving Commitment Increases, Other Revolving Credit Commitments, Term Commitments, Other Term Loan Commitments or Refinancing Term Commitments of a given Refinancing Series and (c) when used with respect to Loans or a Borrowing, refers to whether such Loans, or the Loans comprising such Borrowing, are Revolving Credit Loans, Revolving Credit Loans under Extended Revolving Credit Commitments of a given Extension Series, Revolving Credit Loans under Other Revolving Credit Commitments, Incremental Term Loans, Other Term Loans, Refinancing Term Loans of a given Refinancing Series or Extended Term Loans of a given Extension Series. Revolving Credit Commitments, Other Term Loan Commitments, Other Revolving Credit Commitments, Extended Revolving Credit Commitments, Term Commitments (and in each case, the Loans made pursuant to such Commitments) that have different terms and conditions shall be construed to be in different Classes. Commitments (and, in each case, the Loans made pursuant to such Commitments) that have the same terms and conditions shall be construed to be in the same Class.

Closing Date ” means the first date on which all the conditions precedent in Section 4.02 are satisfied or waived in accordance with Section 4.02.

Closing Fee ” has the meaning set forth in Section 2.09(c).

Co-Documentation Agents ” means Barclays Bank PLC and Regions Bank, as co-documentation agents under this Agreement.

Code ” means the U.S. Internal Revenue Code of 1986, as amended from time to time.

Collateral ” means the “Collateral” as defined in the Security Agreement and all the “Collateral” or “Pledged Assets” as defined in any other Collateral Document and any other assets pledged or in which a Lien is granted pursuant to any Collateral Document, including, without limitation, the Mortgaged Property.

Collateral Agent ” means Bank of America, in its capacity as collateral agent or pledgee in its own name under any of the Loan Documents, or any successor collateral agent.

Collateral and Guarantee Requirement ” means, at any time, the requirement that:

(a) the Administrative Agent shall have received each Collateral Document to the extent required to be delivered on the Closing Date pursuant to Section 4.02(e), subject to the limitations and exceptions of this Agreement, duly executed by each Loan Party party thereto;

(b) the Obligations shall have been secured by a first-priority security interest in (i) all the Equity Interests of the Borrower and (ii) all Equity Interests of each Subsidiary of the Borrower that is not an Excluded Subsidiary directly owned by any Loan Party, in each case, subject to exceptions and limitations otherwise set forth in this Agreement and the Collateral Documents (to the extent appropriate in the applicable jurisdiction); provided that notwithstanding anything to the contrary herein, the security interest in the Equity Interests of Continental Cement Company, L.L.C. shall be limited to the units owned by Summit Materials Holdings II, LLC;

(c) the Obligations shall have been secured by a perfected security interest in, and Mortgages on, substantially all tangible and intangible assets of the Borrower and each Subsidiary Guarantor (including Equity Interests and intercompany debt, accounts, inventory, equipment, investment property, contract rights, intellectual property in the United States, other general intangibles, Material Real Property and proceeds of the foregoing), in each case, subject to exceptions and limitations otherwise set forth in this Agreement and the Collateral Documents (to the extent appropriate in the applicable jurisdiction);

(d) subject to limitations and exceptions of this Agreement (for the avoidance of doubt, including the limitations and exceptions set forth in the proviso of Section 4.02(e)) and the Collateral Documents,

 

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to the extent a security interest in and Mortgages on any Material Real Property is required pursuant to clause (c) above or Section 6.11 or 6.13 (each, a “ Mortgaged Property ”), the Administrative Agent shall have received (i) counterparts of a Mortgage with respect to such Mortgaged Property duly executed and delivered by the record owner of such property in form suitable for filing or recording in all filing or recording offices that the Administrative Agent may reasonably deem necessary or desirable in order to create a valid and subsisting perfected first-priority Lien (subject only to Liens described in clause (ii) below) on the property and/or rights described therein in favor of the Collateral Agent for the benefit of the Secured Parties, and evidence that all filing and recording taxes and fees have been paid or otherwise provided for in a manner reasonably satisfactory to the Administrative Agent (it being understood that if a mortgage tax will be owed on the entire amount of the indebtedness evidenced hereby, then the amount secured by the Mortgage shall be limited to 100% of the fair market value of the property at the time the Mortgage is entered into if such limitation results in such mortgage tax being calculated based upon such fair market value), (ii) fully paid policies of title insurance (or marked-up title insurance commitments having the effect of policies of title insurance) on the Mortgaged Property naming the Collateral Agent as the insured for its benefit and that of the Secured Parties and their respective successors and assigns (the “ Mortgage Policies ”) issued by a nationally recognized title insurance company reasonably acceptable to the Administrative Agent in form and substance and in an amount reasonably acceptable to the Administrative Agent (not to exceed 100% of the fair market value of the real properties covered thereby), insuring the Mortgages to be valid subsisting first-priority Liens on the property described therein, free and clear of all Liens other than Liens permitted pursuant to Section 7.01 and other Liens reasonably acceptable to the Administrative Agent, each of which shall (A) to the extent reasonably necessary, include such reinsurance arrangements (with provisions for direct access, if reasonably necessary) as shall be reasonably acceptable to the Collateral Agent, (B) contain a “tie-in” or “cluster” endorsement, if available under applicable law ( i.e. , policies which insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount), (C) have been supplemented by such endorsements (or where such endorsements are not available after the applicable Loan Party has used commercially reasonable efforts to obtain the same, opinions of special counsel, architects or other professionals reasonably acceptable to the Collateral Agent) as shall be reasonably requested by the Collateral Agent (including endorsements on matters relating to usury, first loss, last dollar, zoning, contiguity, revolving credit, doing business, non-imputation, public road access, variable rate, environmental lien, subdivision, mortgage recording tax, separate tax lot and so-called comprehensive coverage over covenants and restrictions; provided , however , that the applicable Loan Party shall not be obligated to obtain a “creditor’s rights” endorsement); provided , further , that the Borrower shall use commercially reasonable efforts (provided such commercially reasonable efforts shall not require Borrower to incur any material additional costs or liabilities) to cause the title company to (A) remove any survey exceptions from the Mortgage Policies and (B) deliver such endorsements to the Mortgage Policies as would typically require the delivery of a survey (including, without limitation, access to public road, access via easement, location, contiguity, address, and encroachment endorsements) notwithstanding that no surveys have been delivered with respect to such Mortgaged Properties, (iii) legal opinions, addressed to the Administrative Agent, the Collateral Agent and the other Secured Parties, reasonably acceptable to the Administrative Agent and the Collateral Agent as to such matters as the Administrative Agent and the Collateral Agent may reasonably request, and (iv) a completed “Life of Loan” Federal Emergency Management Agency Standard Flood Hazard Determination with respect to each Mortgaged Property on which any “building” (as defined in the Flood Insurance Laws) is located, duly executed and acknowledged by the appropriate Loan Parties together with evidence of flood insurance as and to the extent required under Section 6.07(c) hereof; and

(e) after the Closing Date, each Subsidiary of the Borrower that is not an Excluded Subsidiary shall become a Guarantor and signatory to this Agreement pursuant to a joinder agreement in accordance with Section 6.11 and a party to the applicable Collateral Documents in accordance with Section 6.11.

Notwithstanding the foregoing provisions of this definition or anything in this Agreement or any other Loan Document to the contrary:

(A) the foregoing definition shall not require, unless otherwise stated in this clause (A), the creation or perfection of pledges of, security interests in, Mortgages on, or the obtaining of title insurance

 

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or taking other actions with respect to, (i) (x) any fee owned real property other than Material Real Properties or (y) any leasehold rights or interests in real property (including landlord waivers, estoppels and collateral access letters), (ii) motor vehicles and other assets subject to certificates of title, letters of credit with a face value of less than $5,000,000 and commercial tort claims where the amount of damages claimed by the applicable Loan Party is less than $5,000,000 except to the extent that perfection may be achieved by the filing of financing statements, (iii) any particular asset, if the pledge thereof or the security interest therein is prohibited by Law other than to the extent such prohibition is expressly deemed ineffective under the Uniform Commercial Code or other applicable Law notwithstanding such prohibition, (iv) Margin Stock and, solely to the extent prohibited by the Organization Documents or any shareholders agreement with shareholders that are Excluded Subsidiaries of the Borrower, Equity Interests in any Person other than Subsidiaries of the Borrower that are not Excluded Subsidiaries, (v) any rights of any Loan Party with respect to any lease, license or other agreement to the extent a grant of security interest therein is prohibited by such lease, license or other agreement, would result in an invalidation thereof or would create a right of termination in favor of any other party thereto (other than a Loan Party) after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code or other applicable Laws or principle of equity notwithstanding such prohibition, (vi) the creation or perfection of pledges of, or security interests in, any property or assets that would result in material adverse tax consequences to Holdings, the Borrower or any of its Subsidiaries, as reasonably determined by the Borrower with the consent of the Administrative Agent (not to be unreasonably withheld or delayed) (it being understood that the Lenders shall not require the Borrower or any of its Subsidiaries to enter into any security agreements or pledge agreements governed under foreign law), (vii) intellectual property to the extent a security interest is not perfected by filing of a UCC financing statement or in respect of registered intellectual property, a filing in the USPTO (if required) or the U.S. Copyright Office (it being understood that such assets are intended to constitute Collateral, though perfection beyond UCC, USPTO and U.S. Copyright Office filings is not required) and (viii) any particular assets if, in the reasonable determination of the Administrative Agent evidenced in writing, determined in consultation with the Borrower, the burden or cost of creating or perfecting such pledges or security interests in such assets is excessive in relation to the benefits to be obtained therefrom by the Lenders under the Loan Documents;

(B) (i) the foregoing definition shall not require control agreements and perfection by “control” with respect to any Collateral (including deposit accounts, securities accounts, etc.) other than certificated Equity Interests of (x) the Borrower, (y) to the extent constituting Collateral, its Subsidiaries that are Domestic Subsidiaries and (z) other Subsidiaries to the extent permitted by the terms of such Subsidiaries’ organizational or joint venture documents; (ii) no actions in any non-U.S. jurisdiction or required by the laws of any non-U.S. jurisdiction shall be required in order to create any security interests in assets located or titled outside of the U.S. or to perfect such security interests (it being understood that there shall be no security agreements or pledge agreements governed under the laws of any non-U.S. jurisdiction); and (iii) except to the extent that perfection and priority may be achieved by the filing of a financing statement under the Uniform Commercial Code with respect to the Borrower or a Guarantor, or, with respect to real property and the recordation of Mortgages in respect thereof, as contemplated by clauses (c) and (d) above, the Loan Documents shall not contain any requirements as to perfection or priority with respect to any assets or property a security interest in which can be perfected by control described in this clause (B);

(C) the Administrative Agent in its discretion may grant extensions of time for the creation or perfection of security interests in, and Mortgages on, or obtaining of title insurance or taking other actions with respect to, particular assets (including extensions beyond the Closing Date) or any other compliance with the requirements of this definition where it reasonably determines in writing, in consultation with the Borrower, that the creation or perfection of security interests and Mortgages on, or obtaining of title insurance or taking other actions, or any other compliance with the requirements of this definition cannot be accomplished without undue delay, burden or expense by the time or times at which it would otherwise be required by this Agreement or the Collateral Documents; provided that the Collateral Agent shall have received on or prior to the Closing Date, (i) UCC financing statements in appropriate form for filing under the UCC in the jurisdiction of incorporation or organization of each Loan Party, and (ii) any certificates or instruments representing or evidencing Equity Interests of the Borrower and any Subsidiary Guarantors accompanied by instruments of transfer and stock powers undated and endorsed in blank; and

(D) Liens required to be granted from time to time pursuant to the Collateral and Guarantee Requirement shall be subject to exceptions and limitations set forth in this Agreement and the Collateral Documents.

 

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Collateral Documents ” means, collectively, the Security Agreement, the Holdings Pledge Agreement, each of the Mortgages, collateral assignments, security agreements, pledge agreements, intellectual property security agreements or other similar agreements delivered to the Administrative Agent or the Collateral Agent pursuant to Section 4.02, Section 6.11 or Section 6.13, and each of the other agreements, instruments or documents that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties.

Commitment ” means a Revolving Credit Commitment, Extended Revolving Credit Commitment of a given Extension Series, Other Revolving Credit Commitment, Term Commitment, Other Term Loan Commitment, Refinancing Term Commitment of a given Refinancing Series or Extended Term Loan of a given Extension Series, as the context may require.

Committed Loan Notice ” means a notice of (a) a Borrowing, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurocurrency Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A hereto.

Company ” means the Borrower, together with its successors and assigns.

Compensation Period ” has the meaning set forth in Section 2.12(c)(ii).

Compliance Certificate ” means a certificate substantially in the form of Exhibit D hereto.

Consolidated EBITDA ” means, for any period, the Consolidated Net Income for such period, plus :

(a) without duplication and, except with respect to clauses (viii) and (xi) below, to the extent deducted (and not added back) in arriving at such Consolidated Net Income, the sum of the following amounts for such period with respect to the Borrower and its Subsidiaries:

(i) total interest expense determined in accordance with GAAP (including, to the extent deducted and not added back in computing Consolidated Net Income, (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers’ acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in mark-to-market valuation of Swap Contracts or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Leases, (e) net payments, if any, pursuant to interest rate Swap Contracts with respect to Indebtedness, (f) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses and (g) any expensing of bridge, commitment and other financing fees) and, to the extent not reflected in such total interest expense, any losses on hedging obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, net of interest income and gains on such hedging obligations, and costs of surety bonds in connection with financing activities (whether amortized or immediately expensed),

(ii) provision for taxes based on income, profits or capital gains of the Borrower and its Subsidiaries, including, without limitation, federal, state and local income, franchise and similar taxes and foreign withholding taxes paid or accrued during such period including penalties and interest related to such taxes or arising from any tax examinations,

(iii) depletion, depreciation and amortization (including amortization of intangible assets, including Capitalized Software Expenditures),

 

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(iv) (A) severance, relocation costs and expenses, Original Transaction Expenses, integration costs, transition costs, pre-opening, opening, consolidation and closing costs for facilities, costs incurred in connection with any non-recurring strategic initiatives, costs incurred in connection with acquisitions and non-recurring product and intellectual property development after the Original Closing Date, other business optimization expenses (including costs and expenses relating to business optimization programs and new systems design and implementation costs), project start-up costs and other restructuring charges, accruals or reserves (including restructuring costs related to acquisitions after the Original Closing Date and to closure/consolidation of facilities, retention charges, systems establishment costs and excess pension charges) in an aggregate amount of all items added pursuant to this clause (iv)(A) for any Test Period (other than Original Transaction Expenses incurred, accrued or paid no later than the end of the first full fiscal quarter ending after the Original Closing Date) not to exceed, with respect to transactions (other than the Original Transactions), when added to the amount of add backs made pursuant to clause (viii) below and pursuant to Section 1.08(c), 25% of Consolidated EBITDA (prior to giving effect to this clause (iv)(A) or clause (viii) below or Section 1.08(c) for such Test Period), (B) without duplication of amounts under subclause (A) of this clause (iv) or clause (viii) below, the amount of any losses, costs or costs inefficiencies related to plant disruptions or shutdowns to the extent such losses, costs and/or costs inefficiencies do not exceed $5,000,000 in any period of four consecutive fiscal quarters and (C) without duplication of amounts under clause (iii) above, the portion of any earn-out, non-compete payments relating to such period or other contingent purchase price obligations and adjustments thereof and purchase price adjustments to the extent such payment is permitted to be paid pursuant to this Agreement and is deducted from net income under GAAP;

(v) the amount of net income (loss) attributable to minority interests or non-controlling interests of third parties in any non-wholly owned Subsidiary,

(vi) the amount of management, monitoring, consulting and advisory fees and related expenses and indemnities paid or accrued to the Investors or their Affiliates (or management companies) under the Investor Management Agreement (for avoidance of doubt, no termination fee paid under the Investor Management Agreement may be included in this clause (vi)),

(vii) any costs or expenses incurred pursuant to any individual equity grant or award, management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of the Borrower or net cash proceeds of an issuance of Equity Interests of the Borrower (other than Disqualified Equity Interests),

(viii) the amount of cost savings, operating expense reductions and synergies projected by the Borrower in good faith to be realized as a result of specified actions taken or with respect to which substantial steps have been taken (in the good faith determination of the Borrower) during such period, including in connection with any Specified Transaction (calculated on a Pro Forma Basis as though such cost savings, operating expense reductions and synergies had been realized on the first day of such period and as if such cost savings, operating expense reductions and synergies were realized during the entirety of such period), net of the amount of actual benefits realized during such period from such actions; provided that (A) a duly completed certificate signed by a Responsible Officer of the Borrower shall be delivered to the Administrative Agent together with the Compliance Certificate required to be delivered pursuant to Section 6.02(a), certifying that (x) such cost savings, operating expense reductions and synergies are reasonably expected and factually supportable in the good faith judgment of the Borrower, (y) such actions are to be taken within 18 months after the consummation of the acquisition, Disposition, restructuring or the implementation of an initiative, which is expected to result in such cost savings, expense reductions or synergies, (B) no cost savings, operating expense reductions and synergies shall be added pursuant to this clause (viii) to the extent duplicative of any expenses or charges otherwise added to Consolidated EBITDA, whether through a pro forma adjustment or otherwise, for such period, (C) the aggregate amount of cost savings and operating expense reductions added pursuant

 

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to this clause (viii) for any Test Period, when added to the aggregate amount of add backs made pursuant to clause (iv)(A) above and pursuant to Section 1.08(c) does not exceed 25% of Consolidated EBITDA (prior to giving effect to this clause (viii), clause (iv)(A) above or Section 1.08(c) for such Test Period and (D) projected amounts (and not yet realized) may no longer be added in calculating Consolidated EBITDA pursuant to this clause (viii) to the extent occurring more than four full fiscal quarters after the specified action taken in order to realize such projected cost savings, operating expense reductions and synergies,

(ix) any net loss from disposed, abandoned or discontinued operations,

(x) accretion of asset retirement obligations in accordance with Accounting Standards Codification, section 410, accounting for asset retirement obligations,

(xi) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing Consolidated EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant to paragraph (b) below for any previous period and not added back,

(xii) non-cash expenses, charges and losses (including reserves, impairment charges or asset write-offs, losses from investments recorded using the equity method, stock-based awards compensation expense), in each case other than (A) any non-cash charge representing amortization of a prepaid cash item that was paid and not expensed in a prior period and (B) any non-cash charge relating to write-offs, write-downs or reserves with respect to accounts receivable or inventory; provided that if any non-cash charges referred to in this clause (xii) represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA in such future period to such extent paid,

(xiii) the amount of loss on the sale of receivables and related assets as part of a receivables financing,

less (b) without duplication and to the extent included in arriving at such Consolidated Net Income, (i) non-cash gains (excluding any non-cash gain to the extent it represents the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period), (ii) any net gain from disposed, abandoned or discontinued operations and (iii) the amount of any minority interest income consisting of Subsidiary losses attributable to minority interests or non-controlling interests of third parties in any non-wholly owned Subsidiary; provided that, for the avoidance of doubt, any gain representing the reversal of any non-cash charge referred to in clause (a)(xii)(B) above for a prior period shall be added (together with, without duplication, any amounts received in respect thereof to the extent not increasing Consolidated Net Income) to Consolidated EBITDA in any subsequent period to such extent so reversed (or received);

provided that:

(A) to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA (x) currency translation gains and losses related to currency remeasurements of Indebtedness (including the net loss or gain (i) resulting from Swap Contracts for currency exchange risk and (ii) resulting from intercompany indebtedness) and (y) gains or losses on Swap Contracts,

(B) to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA for any period any adjustments resulting from the application of Accounting Standards Codification, section 815 and International Accounting Standard No. 39 and their respective related pronouncements and interpretations,

(C) to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA for any period any income (loss) for such period attributable to the early extinguishment of (i) Indebtedness, (ii) obligations under any Swap Contracts or (iii) other derivative instruments, and

(D) there shall be excluded in determining Consolidated EBITDA for any period any after-tax effect of non-recurring items (including gains or losses and all fees and expenses relating thereto) relating to curtailments or modifications to pension and post-retirement employee benefit plans for such period.

 

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Notwithstanding anything to the contrary contained herein but subject to pro forma adjustments for events occurring following the Closing Date (and pursuant to the next succeeding sentence), for purposes of determining Consolidated EBITDA under this Agreement for any period that includes (x) any of the fiscal quarters ended December 31, 2010, March 31, 2011, June 30, 2011 and September 30, 2011, Consolidated EBITDA for such fiscal quarters shall be $37,046,000, $(10,802,000), $40,531,000 and $66,381,000, respectively, or (y) any other period occurring prior to the Closing Date, Consolidated EBITDA shall be calculated on a Pro Forma Basis to give effect to the Original Transactions. For the period of four fiscal quarters ended on September 30, 2011, the amount of adjustments pursuant to clause (viii) above and Section 1.08, net of the amount of actual benefits realized in such period from such actions, was $11,198,000.

Consolidated First Lien Net Debt ” means, as of any date of determination, any Indebtedness described in clause (a) of the definition of “Consolidated Total Net Debt” outstanding on such date that is secured by a Lien on any asset or property of the Borrower or any Subsidiary but excluding any such Indebtedness in which the applicable Liens are expressly subordinated or junior to the Liens securing the Obligations minus the aggregate amount of cash and Cash Equivalents (other than Restricted Cash), in each case, that is held by the Borrower and its Subsidiaries as of such date, free and clear of all Liens (other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(a), Section 7.01(p), Section 7.01(q), clauses (i) and (ii) of Section 7.01(r), 7.01(ee) and 7.01(ff)); provided that Consolidated First Lien Net Debt shall not include Indebtedness in respect of letters of credit (including Letters of Credit), except to the extent of unreimbursed amounts thereunder; provided that any unreimbursed amount under commercial letters of credit shall not be counted as Consolidated First Lien Net Debt until 3 Business Days after such amount is drawn; it being understood, for the avoidance of doubt, that obligations under Swap Contracts entered into for non-speculative purposes, deferred consideration, earn-out payments and non-compete payments do not constitute Consolidated First Lien Net Debt.

Consolidated First Lien Net Leverage Ratio ” means, with respect to any Test Period, the ratio of (a) Consolidated First Lien Net Debt as of the last day of such Test Period to (b) Consolidated EBITDA for such Test Period.

Consolidated Interest Expense ” means, for any period, the sum, without duplication, of (i) the cash interest expense (including that attributable to Capitalized Leases), net of cash interest income, of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net cash costs under Swap Contracts, and (ii) any cash payments made during such period in respect of obligations referred to in clause (b) below relating to Funded Debt that were amortized or accrued in a previous period, but excluding, however, (a) amortization of deferred financing costs and any other amounts of non-cash interest, (b) the accretion or accrual of discounted liabilities and any prepayment premium or penalty during such period, (c) non-cash interest expense attributable to the movement of the mark-to-market valuation of obligations under Swap Contracts or other derivative instruments pursuant to Accounting Standards Codification, section 815, (d) any cash costs associated with breakage in respect of hedging agreements for interest rates, (e) all non-recurring cash interest expense consisting of liquidated damages for failure to timely comply with registration rights obligations and financing fees, all as calculated on a consolidated basis in accordance with GAAP, (f) fees and expenses associated with the consummation of the Original Transactions, (g) annual agency fees paid to the Administrative Agent and/or Collateral Agent, and (h) costs associated with obtaining Swap Contracts. Notwithstanding anything to the contrary contained herein, for purposes of determining Consolidated Interest Expense (i) for any period ending prior to the first anniversary of the Closing Date, Consolidated Interest Expense shall be an amount equal to actual Consolidated Interest Expense from the Closing Date through the date of determination multiplied by a fraction the numerator of which is 365 and the denominator of which is the number of days from the Closing Date through the date of determination and (ii) shall exclude the purchase accounting effects described in the last sentence of the definition of “Consolidated Net Income.”

 

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Consolidated Net Income ” means, for any period, the net income (loss) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, provided , however , that, without duplication,

(a) any after-tax effect of extraordinary, non-recurring or unusual items (including gains or losses and all fees and expenses relating thereto) for such period shall be excluded,

(b) the cumulative effect of a change in accounting principles during such period to the extent included in Consolidated Net Income shall be excluded,

(c) any fees and expenses incurred during such period (including, without limitation, any premiums, make whole or penalty payments), or any amortization thereof for such period, in connection with any acquisition, investment, asset disposition, issuance or repayment of debt, issuance of equity securities, refinancing transaction or amendment or other modification of any debt instrument (in each case, including any such transaction consummated on or prior to the Closing Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful (including, for the avoidance of doubt the effects of expensing all transaction related expenses in accordance with Financial Accounting Standards No. 141(R) and gains or losses associated with FASB Interpretation No. 45) shall be excluded,

(d) accruals and reserves that are established or adjusted within twelve months after the Closing Date that are so required to be established or adjusted as a result of the Original Transactions in accordance with GAAP or changes as a result of adoption or modification of accounting policies in accordance with GAAP shall be excluded,

(e) any net after-tax gains or losses on disposal of abandoned, disposed or discontinued operations shall be excluded,

(f) any net after-tax effect of gains or losses (less all fees, expenses and charges) attributable to asset dispositions or abandonments or the sale or other disposition of any Equity Interests of any Person in each case other than in the ordinary course of business, as determined in good faith by the Borrower, shall be excluded,

(g) the amount of proportionate Consolidated EBITDA above the net income (loss) for such period of any Person that is not a Subsidiary of the Borrower and that is accounted for by the equity method of accounting, shall be included,

(h) any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP shall be excluded,

(i) any non-cash compensation charge or expense, including any such charge or expense arising from the grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity incentive programs shall be excluded, and any cash charges associated with the rollover, acceleration or payout of Equity Interests by management of the Borrower or any of its direct or indirect parents in connection with the Original Transactions, shall be excluded,

(j) any expenses, charges or losses that are covered by indemnification or other reimbursement provisions in connection with any Investment, Permitted Acquisition or any sale, conveyance, transfer or other disposition of assets permitted under this Agreement, to the extent actually reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days), shall be excluded,

 

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(k) to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is in fact reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such 365 days), expenses, charges or losses with respect to liability or casualty events or business interruption shall be excluded,

(l) any net pension or other post-employment benefit costs representing amortization of unrecognized prior service costs, actuarial losses, including amortization of such amounts arising in prior periods, amortization of the unrecognized net obligation (and loss or cost) existing at the date of initial application of Accounting Standards Codification, section 715, and any other items of a similar nature, shall be excluded, and

(m) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Borrower or is merged into or consolidated with Borrower or any of its Subsidiaries or that Person’s assets are acquired by Borrower or any of its Subsidiaries shall be excluded (except to the extent required for any calculation of Consolidated EBITDA on a Pro Forma Basis in accordance with Section 1.08).

For the avoidance of doubt revenue will be accounted for on a GAAP basis and the recognition of any deferred revenue will be included in Consolidated Net Income in the same period as recognized for GAAP.

There shall be excluded from Consolidated Net Income for any period the purchase accounting effects of adjustments (including the effects of such adjustments pushed down to the Borrower and its Subsidiaries) in component amounts required or permitted by GAAP (including in the inventory, property and equipment, software, goodwill, intangible assets, in-process research and development, deferred revenue, mineral reserves, landfill airspace and debt line items thereof) and related authoritative pronouncements (including the effects of such adjustments pushed down to the Borrower and its Subsidiaries), as a result of the Original Transactions, any acquisition consummated prior to the Closing Date, any Permitted Acquisitions, or the amortization or write-off of any amounts thereof.

Consolidated Secured Net Debt ” means, as of any date of determination, any Indebtedness described in clause (a) of the definition of “Consolidated Total Net Debt” outstanding on such date that is secured by a Lien on any asset or property of the Borrower or any Subsidiary minus the aggregate amount of cash and Cash Equivalents (other than Restricted Cash), in each case, that is held by the Borrower and its Subsidiaries as of such date, free and clear of all Liens (other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(a), Section 7.01(p), Section 7.01(q), clauses (i) and (ii) of Section 7.01(r), 7.01 (ee) and 7.01(ff)); provided that Consolidated Secured Net Debt shall not include Indebtedness in respect of letters of credit (including Letters of Credit), except to the extent of unreimbursed amounts thereunder; provided that any unreimbursed amount under commercial letters of credit shall not be counted as Consolidated Secured Net Debt until 3 Business Days after such amount is drawn; it being understood, for the avoidance of doubt, that obligations under Swap Contracts entered into for non-speculative purposes, deferred consideration, earn-out payments and non-compete payments do not constitute Consolidated Secured Net Debt.

Consolidated Total Assets ” of any Person means, at any date, the total assets of such Person and its Subsidiaries as of the last day of the most recently ended Test Period for which financial statements were required to have been delivered pursuant to Section 6.01(a) determined on a consolidated basis in accordance with GAAP.

Consolidated Total Net Debt ” means, as of any date of determination, (a) the aggregate principal amount of Indebtedness of the Borrower and its Subsidiaries outstanding on such date, in an amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP (but (x) excluding the effects of any discounting of Indebtedness resulting from the application of purchase accounting in connection with the Original Transactions or any Permitted Acquisition and (y) any Indebtedness that is issued at a discount to its initial principal amount shall be calculated based on the entire principal amount thereof), consisting of Indebtedness for borrowed money, Attributable Indebtedness, and debt obligations evidenced by promissory notes or similar instruments, minus (b) the aggregate amount of cash and Cash Equivalents (other than Restricted Cash), in each case, that is held by the Borrower and its Subsidiaries as of such date free and clear of all Liens, other than nonconsensual

 

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Liens permitted by Section 7.01 and Liens permitted by Section 7.01(a), Section 7.01(p), Section 7.01(q), clauses (i) and (ii) of Section 7.01(r), 7.01 (ee) and 7.01(ff)); provided that Consolidated Total Net Debt shall not include Indebtedness in respect of letters of credit (including Letters of Credit), except to the extent of unreimbursed amounts thereunder; provided that any unreimbursed amount under commercial letters of credit shall not be counted as Consolidated Total Net Debt until 3 Business Days after such amount is drawn; it being understood, for the avoidance of doubt, that obligations under Swap Contracts entered into for non-speculative purposes, deferred consideration, earn-out payments and non-compete payments (to the extent such earn-out payments would not become a liability on the balance sheet of such Person in accordance with GAAP as GAAP existed on December 31, 2008) do not constitute Consolidated Total Net Debt.

Consolidated Working Capital ” means, with respect to the Borrower and its Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of determination minus Current Liabilities at such date of determination; provided that increases or decreases in Consolidated Working Capital shall be calculated without regard to any changes in Current Assets or Current Liabilities as a result of (a) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent or (b) the effects of purchase accounting.

Continental Cement Indebtedness ” means each of (i) that certain Second Amended and Restated Credit Agreement, dated as of May 27, 2010, among Continental Cement Company, L.L.C., as borrower, Wells Fargo Bank, National Association, as agent and a syndicate of lenders, as amended or supplemented and in effect on the date hereof, (ii) that certain Second Amended and Restated Second Lien Credit Agreement, dated as of May 27, 2010, among Continental Cement Company, L.L.C., as borrower, Sankaty Advisors, LLC, as agent and a syndicate of lenders, as amended or supplemented and in effect on the date hereof and (iii) that certain Promissory Note, dated as of May 27, 2010, made by Continental Cement Company, L.L.C. in favor of Farmer Holding Company, Inc., as amended or supplemented and in effect on the date hereof.

Continuing Directors ” means the directors of the Borrower on the Closing Date and each other director, if, in each case, such other director’s nomination for election to the board of directors of the Borrower is recommended by a majority of the then Continuing Directors or such other director receives the vote of the Permitted Holders in his or her election by the stockholders of the Borrower.

Contract Consideration ” has the meaning set forth in the definition of “Excess Cash Flow.”

Contractual Obligation ” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

Control ” has the meaning set forth in the definition of “Affiliate.”

Credit Extension ” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

Cumulative Credit ” means, at any date, an amount, not less than zero in the aggregate, determined on a cumulative basis equal to, without duplication:

(a) the Cumulative Retained Excess Cash Flow Amount at such time, plus

(b) the cumulative amount of cash and Cash Equivalent proceeds from (i) the sale of Equity Interests of the Borrower or of any direct or indirect parent of the Borrower after the Closing Date and on or prior to such time (including upon exercise of warrants or options) which proceeds have been contributed as common equity to the capital of the Borrower and (ii) the common Equity Interests of the Borrower (or of Holdings or of any direct or indirect parent of Holdings) (other than Disqualified Equity Interests of the Borrower) issued upon conversion of Indebtedness (other than Indebtedness that is contractually subordinated to the Obligations) of the Borrower or any Subsidiary of the Borrower owed to a Person other than a Loan Party or a Subsidiary of a Loan Party, in the case of each of subclause (i) and subclause (ii), not previously applied for a purpose (including a Specified Equity Contribution) other than use in the Cumulative Credit, plus

 

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(c) 100% of the aggregate amount of contributions to the common capital of the Borrower (other than from a Subsidiary) received in cash and Cash Equivalents after the Closing Date other than from a Specified Equity Contribution, plus

(d) an amount equal to any returns in cash and Cash Equivalents (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received by the Borrower or any Subsidiary in respect of any Investments made pursuant to Section 7.02(n), minus

(e) any amount of the Cumulative Credit used to make Investments pursuant to Section 7.02(i) after the Closing Date and prior to such time, minus

(f) any amount of the Cumulative Credit used to make Investments pursuant to Section 7.02(n) after the Closing Date and prior to such time, minus

(g) any amount of the Cumulative Credit used to make Restricted Payments pursuant to Section 7.06(j)(y) after the Closing Date and prior to such time, minus

(h) any amount of the Cumulative Credit used to make payments or distributions in respect of Junior Financings pursuant to Section 7.13 after the Closing Date and prior to such time.

Cumulative Retained Excess Cash Flow Amount ” means, at any date, an amount, not less than zero in the aggregate, determined on a cumulative basis equal to the aggregate cumulative sum of the Retained Percentage of Excess Cash Flow, less the amount of Excess Cash Flow of Foreign Subsidiaries to the extent and for so long as such Excess Cash Flow is excluded from Excess Cash Flow prepayments pursuant to Section 2.05(b)(viii), for each Excess Cash Flow Period ending after the Closing Date and prior to such date.

Current Assets ” means, with respect to the Borrower and its Subsidiaries on a consolidated basis at any date of determination, all assets (other than cash and Cash Equivalents) that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower and its Subsidiaries as current assets at such date of determination, other than amounts related to current or deferred Taxes based on income or profits (but excluding assets held for sale, loans (permitted) to third parties, Pension Plan assets, deferred bank fees and derivative financial instruments).

Current Liabilities ” means, with respect to the Borrower and its Subsidiaries on a consolidated basis at any date of determination, all liabilities that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower and its Subsidiaries as current liabilities at such date of determination, other than (a) the current portion of any Indebtedness, (b) the current portion of interest, (c) accruals for current or deferred Taxes based on income or profits, (d) accruals of any costs or expenses related to restructuring reserves, (e) deferred revenue and (f) any Revolving Credit Exposure or Revolving Credit Loans.

Debt Fund Affiliate ” means (i) any fund managed by, or under common management with, GSO Capital Partners LP, (ii) any fund managed by GSO Debt Funds Management LLC, Blackstone Debt Advisors L.P., Blackstone Distressed Securities Advisors L.P., Blackstone Mezzanine Advisors L.P. or Blackstone Mezzanine Advisors II L.P. and (iii) any other Affiliate of Holdings that is a bona fide diversified debt fund or an investment vehicle that is engaged in the making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course and with respect to which Blackstone Capital Partners V L.P. does not, directly or indirectly, direct or cause the direction of the investment policies of such entity.

Debtor Relief Laws ” means the Bankruptcy Code of the United States and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

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Declined Proceeds ” has the meaning set forth in Section 2.05(b)(vi).

Default ” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

Default Rate ” means an interest rate equal to (a) the Base Rate plus (b) the Applicable Rate, if any, applicable to Base Rate Loans plus (c) 2.0% per annum; provided that with respect to a Eurocurrency Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2.0% per annum, in each case, to the fullest extent permitted by applicable Laws.

Defaulting Lender ” means, at any time, a Lender as to which the Administrative Agent has notified the Borrower that (i) such Lender has failed for three or more Business Days to comply with its obligations under this Agreement to make a Loan unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied , make a payment to the L/C Issuer in respect of an LC Advance and/or make a payment to the Swing Line Lender in respect of a Swing Line Loan (each a “ funding obligation ”), (ii) such Lender has notified the Administrative Agent, or has stated publicly, that it will not comply with any such funding obligation hereunder (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (iii) such Lender has, for three or more Business Days, failed, in good faith, to confirm in writing to the Administrative Agent, in response to a written request of the Administrative Agent, that it will comply with its funding obligations hereunder ( provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (iii) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (iv) a Lender Insolvency Event has occurred and is continuing with respect to such Lender ( provided that neither the reallocation of funding obligations provided for in Section 2.15(a) as a result of a Lender’s being a Defaulting Lender nor the performance by Non-Defaulting Lenders of such reallocated funding obligations will by themselves cause the relevant Defaulting Lender to become a Non-Defaulting Lender). Any determination that a Lender is a Defaulting Lender under clauses (i) through (iv) above will be made by the Administrative Agent in its reasonable discretion acting in good faith. The Administrative Agent will promptly send to all parties hereto a copy of any notice to the Borrower provided for in this definition.

Disposition ” or “ Dispose ” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and any sale or issuance of Equity Interests in a Subsidiary) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

Disqualified Equity Interests ” means any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one (91) days after the Latest Maturity Date at the time of issuance of such Equity Interests; provided that if such Equity Interests are issued pursuant to a plan for the benefit of employees of Holdings (or any direct or indirect parent thereof), the Borrower or its Subsidiaries or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Equity Interests solely because it may be required to be repurchased by the Borrower or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations.

 

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Dollar ” and “ $ ” mean lawful money of the United States.

Domestic Subsidiary ” means any Subsidiary that is organized under the Laws of the United States, any state thereof or the District of Columbia.

Effective Yield ” means, as to any Loans of any Class, the effective yield on such Loans, taking into account the applicable interest rate margins, any interest rate floors or similar devices and all upfront or similar fees or original issue discount (based on an assumed four year life to maturity) payable generally to Lenders making such Loans, but excluding any arrangement, structuring or other fees payable in connection therewith that are not generally shared ratably with all relevant Lenders and consent fees paid generally to consenting Lenders.

Eligible Assignee ” has the meaning set forth in Section 10.07(a).

Environment ” means indoor air, ambient air, surface water, groundwater, drinking water, land surface, subsurface strata, and natural resources such as wetlands, flora and fauna.

Environmental Laws ” means the common law and any applicable Laws, in any case, relating to pollution or the protection of the Environment, or the protection of human health (to the extent relating to exposure to Hazardous Materials) and safety as it relates to the environment, including any applicable provisions of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq ., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq ., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq ., the Clean Water Act, 33 U.S.C. § 1251 et seq ., the Clean Air Act, 42 U.S.C. § 7401 et seq ., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq ., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq ., Mine Safety and Health Act, 30 U.S.C. § 801 et seq , and the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq ., and all analogous state or local statutes, and the regulations promulgated pursuant thereto.

Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of investigation and remediation, fines, penalties or indemnities), of the Loan Parties or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage or treatment of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any order, decree or contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

Environmental Permit ” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

Equity Interests ” means, with respect to any Person, all of the shares, interests, rights, participations or other equivalents (however designated) of capital stock of (or other ownership or profit interests or units in) such Person and all of the warrants, options or other rights for the purchase, acquisition or exchange from such Person of any of the foregoing (including through convertible securities).

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

ERISA Affiliate ” means any trade or business (whether or not incorporated) that is under common control with a Loan Party or any Subsidiary within the meaning of Section 414 of the Code or Section 4001 of ERISA.

ERISA Event ” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by a Loan Party, any Subsidiary or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by a Loan Party, any Subsidiary or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of

 

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ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) with respect to a Pension Plan, the failure to satisfy the minimum funding standard of Section 412 of the Code, whether or not waived; (g) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could result in liability to a Loan Party or any Subsidiary; or (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon a Loan Party, any Subsidiary or any ERISA Affiliate.

Eurocurrency Rate ” means:

(a) for any Interest Period with respect to any Eurocurrency Rate Loan, the rate per annum equal to (i) the British Bankers Association LIBOR Rate (“ BBA LIBOR ”), as published by Reuters (or such other commercially available source providing quotations of BBA LIBOR as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two London Banking Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period or (ii) if such rate is not available at such time for any reason, then the “Eurocurrency Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurocurrency Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two London Banking Days prior to the commencement of such Interest Period; and

(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) BBA LIBOR, at approximately 11:00 a.m., London time determined two London Banking Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one month would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two London Banking Days prior to such date and time of determination;

provided that in all cases (a) or (b) the Eurocurrency Rate shall not be less than 1.25% per annum with respect to the Term Loans.

Eurocurrency Rate Loan ” means a Loan that bears interest at a rate based on the Eurocurrency Rate.

Event of Default ” has the meaning set forth in Section 8.01.

Excess Cash Flow ” means, for any period, an amount equal to (a) the sum, without duplication, of (i) Consolidated Net Income for such period, (ii) an amount equal to the amount of all non-cash charges (including depreciation and amortization) to the extent deducted in arriving at such Consolidated Net Income, (iii) decreases in Consolidated Working Capital and long-term accounts receivable of the Borrower and its Subsidiaries for such period (other than any such decreases arising from acquisitions or dispositions by the Borrower and its Subsidiaries completed during such period) and (iv) an amount equal to the aggregate net non-cash loss on Dispositions by the Borrower and its Subsidiaries during such period (other than sales in the ordinary course of business) to the extent deducted in arriving at such Consolidated Net Income minus (b) the sum, without duplication, of (i) an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income and cash charges included in clauses (a) through (m) of the definition of “Consolidated Net Income,” (ii) without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Capital Expenditures or acquisitions of intellectual property to the extent not expensed and Capitalized Software Expenditures accrued or made in cash or accrued during such period, to the extent that such Capital Expenditures or acquisitions were financed with internally generated cash or borrowings under the Revolving Credit Facility and were not made by utilizing the Cumulative Retained Excess Cash Flow Amount, (iii) the aggregate amount of all principal payments of Indebtedness of the Borrower or its Subsidiaries (including (A) the principal component of payments in respect of Capitalized Leases, (B) the amount of any scheduled repayment of Term Loans pursuant to Section 2.07 and (C) any mandatory

 

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prepayment of Term Loans pursuant to Section 2.05(b)(ii) to the extent required due to a Disposition that resulted in an increase to Consolidated Net Income and not in excess of the amount of such increase but excluding (X) all other voluntary and mandatory prepayments of Term Loans, (Y) all prepayments of Revolving Credit Loans and Swing Line Loans made during such period and (Z) all payments in respect of any other revolving credit facility made during such period, except in the case of clause (Z) to the extent there is an equivalent permanent reduction in commitments thereunder), to the extent financed with internally generated cash, (iv) an amount equal to the aggregate net non-cash gain on Dispositions by the Borrower and its Subsidiaries during such period (other than Dispositions in the ordinary course of business) to the extent included in arriving at such Consolidated Net Income, (v) increases in Consolidated Working Capital and long-term accounts receivable of the Borrower and its Subsidiaries for such period (other than any such increases arising from acquisitions or dispositions by the Borrower and its Subsidiaries during such period), (vi) cash payments by the Borrower and its Subsidiaries during such period in respect of long-term liabilities of the Borrower and its Subsidiaries other than Indebtedness, (vii) without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Investments and acquisitions made during such period by the Borrower and its Subsidiaries on a consolidated basis pursuant to Section 7.02 to the extent that such Investments and acquisitions were financed with internally generated cash and were not made by utilizing the Cumulative Retained Excess Cash Flow Amount, (viii) the amount of Restricted Payments paid during such period pursuant to Section 7.06(f), Section 7.06(h) or Section 7.06(j)(x) to the extent such Restricted Payments were financed with internally generated cash or borrowings under the Revolving Credit Facility, (ix) the aggregate amount of expenditures actually made by the Borrower and its Subsidiaries in cash during such period (including expenditures for the payment of financing fees) to the extent that such expenditures are not expensed during such period, (x) the aggregate amount of any premium, make-whole or penalty payments actually paid in cash by the Borrower and its Subsidiaries during such period that are required to be made in connection with any prepayment of Indebtedness, (xi) without duplication of amounts deducted from Excess Cash Flow in prior periods, the aggregate consideration required to be paid in cash by the Borrower and its Subsidiaries pursuant to binding contracts (the “ Contract Consideration ”) entered into prior to or during such period relating to Permitted Acquisitions, Capital Software Expenditures or Capital Expenditures or acquisitions of intellectual property to the extent not expected to be consummated or made, plus any restructuring cash expenses, pension payments or tax contingency payments that have been added to Excess Cash Flow pursuant to clause (a)(ii) above required to be made, in each case during the period of four consecutive fiscal quarters of the Borrower following the end of such period, provided that to the extent the aggregate amount of internally generated cash not utilizing the Cumulative Retained Excess Cash Flow Amount actually utilized to finance such Permitted Acquisitions, Capital Expenditures, Capitalized Software Expenditures or acquisitions of intellectual property during such period of four consecutive fiscal quarters is less than the Contract Consideration, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters, (xii) the amount of cash taxes paid in such period to the extent they exceed the amount of tax expense deducted in determining Consolidated Net Income for such period, (xiii) cash expenditures in respect of Swap Contracts during such fiscal year to the extent not deducted in arriving at such Consolidated Net Income, (xiv) any payment of cash to be amortized or expensed over a future period and recorded as a long-term asset and (xv) without duplication of amounts deducted from Excess Cash Flow in prior periods, earn-out payments and non-compete payments actually made and that are permitted to be made under this Agreement. Notwithstanding anything in the definition of any term used in the definition of Excess Cash Flow to the contrary, all components of Excess Cash Flow shall be computed for the Borrower and its Subsidiaries on a consolidated basis.

Excess Cash Flow Period ” means each fiscal year of the Borrower commencing with the fiscal year ending December 31, 2012, but in all cases for purposes of calculating the Cumulative Retained Excess Cash Flow Amount shall only include such fiscal years for which financial statements and a Compliance Certificate have been delivered in accordance with Sections 6.01(a) and 6.02(a) and for which any prepayments required by Section 2.05(b)(i) (if any) have been made (it being understood that the Retained Percentage of Excess Cash Flow for any Excess Cash Flow Period shall be included in the Cumulative Retained Excess Cash Flow Amount regardless of whether a prepayment is required by Section 2.05(b)(i)).

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

Excluded Subsidiary ” means (a) any Subsidiary that is not directly or indirectly a wholly owned Subsidiary of the Borrower, (b) any Subsidiary that does not have total assets or annual revenues in excess of 3.5% of Consolidated Total Assets of the Borrower and its Subsidiaries individually or in the aggregate with all other Subsidiaries excluded via this clause (b), (c) any Subsidiary acquired following the Closing Date that is prohibited by applicable

 

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Law or Contractual Obligations that are in existence at the time of acquisition and not entered into in contemplation thereof from guaranteeing the Obligations or if guaranteeing the Obligation would require material or non-ministerial governmental (including regulatory) consent, approval, license or authorization (unless such consent, approval, license or authorization has been obtained), (d) any other Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent, in consultation with the Borrower, the burden or cost or other consequences (including any material adverse tax consequences) of providing a Guarantee shall be excessive in view of the benefits to be obtained by the Lenders therefrom, (e) any Foreign Subsidiary, (f) any not-for-profit Subsidiaries, (g) joint ventures, (h) any special purpose securitization vehicle or a captive insurance subsidiary, (i) any direct or indirect Domestic Subsidiary (x) that is treated as a disregarded entity for federal income tax purposes and (y) substantially all of the assets of which include the Equity Interests of one or more Foreign Subsidiaries and (j) any Domestic Subsidiary that is a Subsidiary of a Foreign Subsidiary; provided that no Subsidiary that guarantees any Junior Financing shall be deemed to be an Excluded Subsidiary at any time any such guarantee is in effect.

Excluded Taxes ” means, with respect to any Agent, any Lender (including any L/C Issuer), or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder or under any other Loan Document, (a) any Taxes imposed on (or measured by) its net income or net profits (or any franchise or similar Taxes in lieu thereof) by the jurisdiction under the laws of which such recipient is organized, in which its principal office is located or in which it is otherwise doing business (other than a business deemed to arise solely by virtue of any of the transactions contemplated by this Agreement) or, in the case of any Lender, in which its Lending Office is located, (b) any Taxes in the nature of branch profits tax within the meaning of section 884(a) of the Code imposed by any jurisdiction described in (a), (c) other than in the case of an assignee pursuant to a request by the Borrower under Section 3.07, any United States federal withholding tax that is imposed on any interest payable to such Person pursuant to any Law in effect at the time such Person becomes a party to this Agreement (or designates a new Lending Office), except to the extent that such Person (or its assignor, if any) was entitled, at the time of designation of a new applicable Lending Office (or assignment), to receive additional amounts or indemnification payments with respect to such United States federal withholding Tax pursuant to Section 3.01(a), (d) a United States federal withholding tax (including backup withholding tax) that is attributable to such Person’s failure to comply with Section 3.01(d) or (e), or (e) any United States federal withholding tax imposed pursuant to FATCA.

Existing Credit Agreement ” means that certain Credit Agreement dated as of January 31, 2010, as amended and restated as of December 17, 2010, among Summit Materials Companies I, LLC, as borrower, Summit Materials Holdings I, LLC, Citibank, N.A., as agent, certain other co-syndication agents and co-documentation agents, and a syndicate of lenders, as amended or supplemented and in effect on the date hereof.

Existing Letters of Credit ” means those letters of credit in existence on the Closing Date and listed on Schedule 1.01B hereto.

Existing Revolver Tranche ” has the meaning provided in Section 2.17(b).

Existing Term Loan Tranche ” has the meaning provided in Section 2.17(a).

Expiring Credit Commitment ” has the meaning provided in Section 2.04(g).

Extended Revolving Credit Commitments ” has the meaning provided in Section 2.17(b).

Extended Term Loans ” has the meaning provided in Section 2.17(a).

Extending Revolving Credit Lender ” has the meaning provided in Section 2.17(c).

Extending Term Lender ” has the meaning provided in Section 2.17(c).

Extension ” means the establishment of an Extension Series by amending a Loan pursuant to Section 2.17 and the applicable Extension Amendment.

Extension Amendment ” has the meaning provided in Section 2.17(d).

 

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Extension Election ” has the meaning provided in Section 2.17(c).

Extension Request ” means any Term Loan Extension Request or a Revolver Extension Request, as the case may be.

Extension Series ” means any Term Loan Extension Series or a Revolver Extension Series, as the case may be.

Facility ” means the Term Loans, the Revolving Credit Facility, a given Extension Series of Extended Revolving Credit Commitments, a given Refinancing Series of Refinancing Term Loans, a given Extension Series of Extended Term Loans, a given Class of Incremental Term Loans, a given Class of Revolving Commitment Increases, or any Other Term Loan (or Commitment) as the context may require.

FATCA ” means current Sections 1471 through 1474 of the Code (and any amended or successor version thereof that is substantively comparable and not materially more onerous to comply with) and any current or future Treasury Regulations or other official administrative guidance promulgated thereunder.

Federal Funds Rate ” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

Fee Letters ” mean (i) the Amended and Restated Engagement Letter, dated as of January 13, 2012, among the Borrower, and the Joint Bookrunners, (ii) that certain Fee Letter dated as of January 30, 2012 between the Borrower and the Administrative Agent and (iii) that certain Administrative Agent Fee Letter dated as of January 30, 2012 between the Borrower and the Administrative Agent.

FIRREA ” means the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended.

First Lien Intercreditor Agreement ” means an intercreditor agreement substantially in the form of Exhibit K hereto between the Collateral Agent and one or more collateral agents or representatives for the holders of Permitted Notes issued pursuant to Section 7.03(r) or Permitted Ratio Debt issued or incurred pursuant to Section 7.03(s), in each case, that are intended to be secured on a pari passu basis with the Obligations.

Foreign Disposition ” has the meaning set forth in Section 2.05(b)(viii).

Foreign Subsidiary ” means any direct or indirect Subsidiary of the Borrower which is not a Domestic Subsidiary.

Flood Insurance Laws ” means, collectively, (i) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (ii) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statue thereto, (iii) the National Flood Insurance Reform Act of 1994 as now or hereafter in effect or any successor statute thereto and (iv) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statute thereto.

Fund ” means any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.

Funded Debt ” means all Indebtedness of the Borrower and its Subsidiaries for borrowed money that matures more than one year from the date of its creation or matures within one year from such date that is renewable or extendable, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including Indebtedness in respect of the Loans.

 

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funding obligation ” has the meaning set forth in the definition of “Defaulting Lender.”

GAAP ” means generally accepted accounting principles in the United States of America, as in effect from time to time; provided , however , that if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Original Closing Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

Governmental Authority ” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

Granting Lender ” has the meaning set forth in Section 10.07(h).

Guarantee ” means, as to any Person, without duplication, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

Guaranteed Obligations ” has the meaning set forth in Section 11.01.

Guarantors ” means Holdings and the Subsidiaries of the Borrower (other than any Excluded Subsidiary) and any other Domestic Subsidiary that is required hereby to issue a Guarantee of the Obligations or otherwise, at the option of the Borrower, issues a Guarantee of the Obligations after the Closing Date.

Guaranty ” means, collectively, the guaranty of the Obligations by the Guarantors pursuant to this Agreement.

Hazardous Materials ” means all materials, pollutants, contaminants, chemicals, compounds, constituents, substances or wastes, in any form, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas or mold, that are regulated pursuant to, or which could give rise to liability under, applicable Environmental Law.

 

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Hedge Bank ” has the meaning set forth in the definition of “Secured Hedge Agreement.”

Holdings ” means Summit Materials Intermediate Holdings, LLC or any Domestic Subsidiary of Summit Materials Intermediate Holdings, LLC that directly owns 100% of the issued and outstanding Equity Interests in the Borrower, and issues a Guarantee of the Obligations and agrees to assume the obligations of “Holdings” pursuant to this Agreement and the other Loan Documents pursuant to one or more instruments in form and substance reasonably satisfactory to the Administrative Agent.

Holdings Pledge Agreement ” means that certain Holdings Pledge Agreement substantially in the form of Exhibit H hereto.

Honor Date ” has the meaning set forth in Section 2.03(c)(i).

Immaterial Subsidiary ” has the meaning set forth in Section 8.03.

Incremental Amendment ” has the meaning set forth in Section 2.14(a).

Incremental Facility ” means any Incremental Term Loan or Revolving Commitment Increase, as applicable.

Incremental Term Loans ” has the meaning set forth in Section 2.14(a).

Indebtedness ” means, as to any Person at a particular time, without duplication, all of the following:

(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b) the maximum amount (after giving effect to any prior drawings or reductions which may have been reimbursed) of all outstanding letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;

(c) net obligations of such Person under any Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade accounts payable in the ordinary course of business, (ii) any earn-out or non-compete obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and (iii) liabilities accrued in the ordinary course);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f) all Attributable Indebtedness;

(g) all obligations of such Person in respect of Disqualified Equity Interests;

if and to the extent that the foregoing would constitute indebtedness or a liability in accordance with GAAP; and

(h) to the extent not otherwise included above, all Guarantees of such Person in respect of any of the foregoing.

 

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For all purposes hereof, the Indebtedness of any Person shall (A) include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner, except to the extent such Person’s liability for such Indebtedness is otherwise limited and only to the extent such Indebtedness would be included in the calculation of Consolidated Total Net Debt, and (B) in the case of the Borrower and its Subsidiaries, exclude all intercompany Indebtedness among the Borrower and its Subsidiaries having a term not exceeding 364 days (inclusive of any rollover or extensions of terms) and made in the ordinary course of business. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of Indebtedness of any Person for purposes of clause (e) shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith.

Indemnified Liabilities ” has the meaning set forth in Section 10.05.

Indemnified Taxes ” means any Taxes other than Excluded Taxes.

Indemnitees ” has the meaning set forth in Section 10.05.

Information ” has the meaning set forth in Section 10.08.

Intellectual Property Security Agreement ” has the meaning set forth in the Security Agreement.

Intercompany Note ” means a promissory note substantially in the form of Exhibit G hereto.

Intercreditor Agreements ” means the First Lien Intercreditor Agreement and the Second Lien Intercreditor Agreement, collectively, in each case to the extent then in effect.

Interest Coverage Ratio ” means, with respect to the Borrower and its Subsidiaries on a consolidated basis, as of the end of any fiscal quarter of the Borrower for the Test Period ending on such date, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense.

Interest Payment Date ” means, (a) as to any Eurocurrency Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date of the Facility under which such Loan was made; provided that if any Interest Period for a Eurocurrency Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date of the Facility under which such Loan was made (with Swing Line Loans being deemed made under the Revolving Credit Facility for purposes of this definition).

Interest Period ” means, as to each Eurocurrency Rate Loan, the period commencing on the date such Eurocurrency Rate Loan is disbursed or converted to or continued as a Eurocurrency Rate Loan and ending on the date one, two, three or six months thereafter or, to the extent agreed by each Lender of such Eurocurrency Rate Loan, nine or twelve months or less than one month thereafter, as selected by the Borrower in its Committed Loan Notice; provided that:

(i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(iii) no Interest Period shall extend beyond the Maturity Date of the Facility under which such Loan was made.

 

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Investment ” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person (excluding, in the case of the Borrower and its Subsidiaries, intercompany loans, advances or Indebtedness among the Borrower and its Subsidiaries having a term not exceeding 364 days (inclusive of any rollover or extensions of terms) and made in the ordinary course of business consistent with past practice) or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

Investor Management Agreement ” means the Transaction and Management Fee Agreement among Holdings and Affiliates of (or management entities associated with) one or more of the Investors as in effect on the Original Closing Date and as the same may be amended, supplemented or otherwise modified in a manner not materially adverse to the Lenders; provided that any management, monitoring, consulting and advisory fees payable in advance by the Borrower and its Subsidiaries shall not exceed an amount equal to (x) with respect to the period from the Original Closing Date to December 31, 2010, 2% of Consolidated EBITDA for such period and (y) with respect to any fiscal year thereafter, 2% of Consolidated EBITDA for such fiscal year; provided , further , that in each case, such amounts shall be subject to any adjustments made pursuant to Section 3(c) of the Investor Management Agreement.

Investors ” means (i) Blackstone Capital Partners V L.P. and its Affiliates and any investment funds advised or managed by any of the foregoing (other than any portfolio operating companies of Blackstone Capital Partners V L.P.) and (ii) Silverhawk Summit, L.P. and its Affiliates and any investment funds advised or managed by any of the foregoing (other than any portfolio operating companies of Silverhawk Summit, L.P.).

IP Rights ” has the meaning set forth in Section 5.16.

ISP ” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).

Issuer Documents ” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrower (or any Subsidiary) or in favor of the L/C Issuer and relating to such Letter of Credit.

Joint Bookrunners ” means Merrill Lynch, Pierce, Fenner & Smith Incorporated., Citigroup Global Markets Inc., UBS Securities LLC, Barclays Capital, the investment banking division of Barclays Bank PLC, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc.

Junior Financing ” has the meaning set forth in Section 7.13(a).

Junior Financing Documentation ” means any documentation governing any Junior Financing.

Latest Maturity Date ” means, at any date of determination, the latest Maturity Date applicable to any Loan or Commitment hereunder at such time, including the latest maturity date of any Refinancing Term Loan, any Refinancing Term Commitment, any Extended Term Loan, any Extended Revolving Credit Commitment, any Incremental Term Loans, any Revolving Commitment Increases or any Other Term Loan, Other Term Loan Commitment, Other Revolving Credit Loan or Other Revolving Credit Commitments, in each case as extended in accordance with this Agreement from time to time.

 

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Laws ” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority.

L/C Advance ” means, with respect to each Revolving Credit Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Pro Rata Share.

L/C Borrowing ” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Revolving Credit Borrowing.

L/C Credit Extension ” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof.

L/C Issuer ” means (a) solely with respect to the Existing Letter of Credit, Citibank, N.A., and (b) Bank of America, N.A. and any other Lender that becomes an L/C Issuer in accordance with Section 2.03(l) or 10.07(j), in each case, in its capacity as an issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder.

L/C Obligations ” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.09. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

Lender ” has the meaning set forth in the introductory paragraph to this Agreement and, as the context requires, includes an L/C Issuer and a Swing Line Lender, and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a “Lender.”

Lender Insolvency Event ” means that (i) a Lender or its Parent Company is insolvent, or is generally unable to pay its debts as they become due, or admits in writing its inability to pay its debts as they become due, or makes a general assignment for the benefit of its creditors, or (ii) such Lender or its Parent Company is the subject of a bankruptcy, insolvency, reorganization, liquidation or similar proceeding, or a receiver, trustee, conservator, intervenor or sequestrator or the like has been appointed for such Lender or its Parent Company, or such Lender or its Parent Company has taken any action in furtherance of or indicating its consent to or acquiescence in any such proceeding or appointment; provided that a Lender Insolvency Event shall not be deemed to have occurred solely by virtue of the ownership or acquisition of any Equity Interest in any Lender or any person that directly or indirectly controls such Lender by a Governmental Authority or an instrumentality thereof.

Lending Office ” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

Letter of Credit ” means any letter of credit issued hereunder. A Letter of Credit may be a commercial letter of credit or a standby letter of credit.

Letter of Credit Application ” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

Letter of Credit Expiration Date ” means the day that is five (5) Business Days prior to the scheduled Maturity Date then in effect for the Revolving Credit Facility (or, if such day is not a Business Day, the next preceding Business Day); provided that the Letter of Credit Expiration Date shall be extended past the date that is five Business Days prior to the Maturity Date then in effect for the Revolving Credit Facility for so long as such Letters of Credit are Cash Collateralized by the Borrower.

 

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Letter of Credit Sublimit ” means an amount equal to the lesser of (a) $50,000,000 and (b) the aggregate amount of the Revolving Credit Commitments. The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Credit Facility.

Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to Real Property, and any Capitalized Lease having substantially the same economic effect as any of the foregoing).

Loan ” means an extension of credit by a Lender to the Borrower under Article II in the form of a Term Loan, a Revolving Credit Loan or a Swing Line Loan (including any Incremental Term Loan and any extensions of credit under any Revolving Commitment Increase).

Loan Documents ” means, collectively, (i) this Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each Letter of Credit Application and (v) any amendment, supplement or other modification to any of the foregoing from time to time (including any Incremental Amendment, Refinancing Amendment or Extension Amendment).

Loan Parties ” means, collectively, the Borrower and each Guarantor.

London Banking Day ” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

Management Stockholders ” means the members of management of Holdings, the Borrower or any of its Subsidiaries who are investors in Holdings or any direct or indirect parent thereof.

Margin Stock ” has the meaning set forth in Regulation U.

Master Agreement ” has the meaning set forth in the definition of “Swap Contract.”

Material Adverse Effect ” means a (a) material adverse effect on the business, operations, assets, liabilities (actual or contingent) or financial condition of the Borrower and its Subsidiaries, taken as a whole; (b) material adverse effect on the ability of the Loan Parties (taken as a whole) to fully and timely perform any of their payment obligations under any Loan Document to which the Borrower or any of the Loan Parties is a party; or (c) material adverse effect on the rights and remedies available to the Secured Parties or the Collateral Agent under any Loan Document.

Material Real Property ” means any fee owned real property owned by any Loan Party (other than fee owned real property owned by Hamm, Inc. and its subsidiaries on the Closing Date or any other owned real property subject to a Lien permitted by clause (u) or (w) of Section 7.01 to the extent and for so long as the documentation governing such Lien prohibits the granting of a Mortgage thereon to secure the Obligations) with a fair market value in excess of $5,000,000, at the time of acquisition, as reasonably estimated by the Borrower in good faith).

Maturity Date ” means (i) with respect to the Term Loans, January 30, 2019, (ii) with respect to the Revolving Credit Facility and the Swing Line Facility, January 30, 2017, (iii) with respect to any tranche of Extended Term Loans, Extended Revolving Credit Commitments, the final maturity date as specified in the applicable Extension Request accepted by the respective Lender or Lenders, (iv) with respect to any Other Term Loans or Other Revolving Credit Loans, the final maturity date as specified in the applicable Refinancing Amendment and (v) with respect to any Incremental Term Loans or Revolving Commitment Increases, the final maturity date as specified in the applicable Incremental Amendment; provided that if any such day is not a Business Day, the Maturity Date shall be the Business Day immediately succeeding such day.

 

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Maximum Rate ” has the meaning set forth in Section 10.10.

Moody’s ” means Moody’s Investors Service, Inc. and any successor thereto.

Mortgage Policies ” has the meaning set forth in the definition of “Collateral and Guarantee Requirement.”

Mortgaged Properties ” has the meaning set forth in the definition of “Collateral and Guarantee Requirement.”

Mortgages ” means, collectively, the deeds of trust, trust deeds, deeds to secure debt, hypothecs and mortgages made by the Loan Parties in favor or for the benefit of the Collateral Agent on behalf of the Secured Parties creating and evidencing a Lien on a Mortgaged Property, substantially in the form attached as Exhibit J hereto with such local law and other changes thereto as shall be reasonably satisfactory to the Collateral Agent, and any other mortgages executed and delivered pursuant to Sections 6.11 and 6.13, in each case, as the same is amended from time to time and be further amended, restated, supplemented or otherwise modified.

Multiemployer Plan ” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Loan Party, any Subsidiary or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

Net Proceeds ” means:

(a) 100% of the cash proceeds actually received by the Borrower or any of its Subsidiaries (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but in each case only as and when received) from any Disposition or Casualty Event, net of (i) attorneys’ fees, accountants’ fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith, (ii) any amount required to repay (x) Indebtedness (other than pursuant to the Loan Documents) that is secured by a Lien on the assets disposed of and which ranks prior to the Lien securing the Obligations or (y) Indebtedness or other obligations of any Subsidiary that is disposed of in such transaction, (iii) in the case of any Disposition or Casualty Event by a non-wholly owned Subsidiary, the pro rata portion of the Net Proceeds thereof (calculated without regard to this clause (iii)) attributable to minority interests and not available for distribution to or for the account of the Borrower or a wholly owned Subsidiary as a result thereof, (iv) taxes paid or reasonably estimated to be payable as a result thereof, and (v) the amount of any reasonable reserve established in accordance with GAAP against any adjustment to the sale price or any liabilities (other than any taxes deducted pursuant to clause (i) above) (x) related to any of the applicable assets and (y) retained by the Borrower or any of its Subsidiaries including, without limitation, Pension Plan and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations (however, the amount of any subsequent reduction of such reserve (other than in connection with a payment in respect of any such liability) shall be deemed to be Net Proceeds of such Disposition or Casualty Event occurring on the date of such reduction); provided that, if no Default exists, the Borrower or the applicable Subsidiary may reinvest any portion of such proceeds in assets useful for its business within 12 months of such receipt, such portion of such proceeds shall not constitute Net Proceeds except to the extent not, within 12 months of such receipt, so used or contractually committed pursuant to a legally binding agreement to be so used (it being understood that if any portion of such proceeds are not so used within such 12-month period but within such 12-month period are contractually committed pursuant to a legally binding agreement to be used, then upon the termination of such contract or if such Net Proceeds are not so used within the later of such 12 month period and 18 months of initial receipt, such remaining portion shall constitute Net Proceeds as of the date of such termination or expiry without giving effect to this proviso; it being understood that such proceeds shall constitute Net Proceeds notwithstanding any investment notice if there is a Specified Default at the time of a proposed reinvestment unless such proposed reinvestment is made pursuant to a binding commitment entered into at a time when no Specified Default was continuing); provided , further , that no proceeds realized in a single

 

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transaction or series of related transactions shall constitute Net Proceeds unless (x) such proceeds shall exceed $10,000,000 or (y) the aggregate net proceeds exceed $20,000,000 in any fiscal year (and thereafter only net cash proceeds in excess of such amount shall constitute Net Proceeds under this clause (a)), and

(b) 100% of the cash proceeds from the incurrence, issuance or sale by the Borrower or any of its Subsidiaries of any Indebtedness, net of all taxes paid or reasonably estimated to be payable as a result thereof and fees (including investment banking fees and discounts), commissions, costs and other expenses, in each case incurred in connection with such issuance or sale.

For purposes of calculating the amount of Net Proceeds, fees, commissions and other costs and expenses payable to the Borrower or any Subsidiary shall be disregarded.

Non-Consenting Lender ” has the meaning set forth in Section 3.07(d).

Non-Debt Fund Affiliate ” means any Affiliate of the Sponsor other than (a) Holdings or any Subsidiary of Holdings, (b) any Debt Fund Affiliate and (c) any natural person.

Non-Defaulting Lender ” means, at any time, a Lender that is not a Defaulting Lender.

non-Expiring Credit Commitment ” has the meaning provided in Section 2.04(g).

Non-extension Notice Date ” has the meaning set forth in Section 2.03(b)(iii).

Not Otherwise Applied ” means, with reference to any amount of Net Proceeds of any transaction or event, that such amount (a) was not required to be applied to prepay the Loans pursuant to Section 2.05(b), and (b) was not previously applied in determining the permissibility of a transaction under the Loan Documents where such permissibility was (or may have been) contingent on receipt of such amount or utilization of such amount for a specified purpose. The Borrower shall promptly notify the Administrative Agent of any application of such amount as contemplated by (b) above.

Note ” means a Term Note, a Revolving Credit Note or a Swing Line Note, as the context may require.

Obligations ” means all (x) advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party and its Subsidiaries arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or Subsidiary of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding and (y) obligations of the Borrower or any Subsidiary arising under Cash Management Obligations or any Secured Hedge Agreement. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents (and of their Subsidiaries to the extent they have obligations under the Loan Documents) include (a) the obligation (including guarantee obligations) to pay principal, interest, Letter of Credit fees, reimbursement obligations, charges, expenses, fees, Attorney Costs, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party.

Organization Documents ” means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

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Original Acquisition ” has the meaning set forth in the definition of “Original Acquisition Agreement.”

Original Acquisition Agreement ” means that certain membership interest purchase agreement dated November 24, 2009 (together with schedules and exhibits thereto) by and among the Borrower and the sellers party thereto, pursuant to which the Borrower agreed to acquire (the “Original Acquisition”) all of the outstanding equity interests of Hinkle Contracting Company LLC, a Kentucky limited liability company.

Original Closing Date ” means January 31, 2010.

Original Equity Contribution ” means the cash equity contribution by the Investors and certain other investors and associated entities in the amount of $88,278,528.04, together with up to $2,500,000 of rollover equity, made on the Original Closing Date to fund a portion of the Original Acquisition.

Original Funding Date ” means February 1, 2010.

Original Transaction Expenses ” means any fees or expenses incurred or paid by the Investors, Holdings, the Borrower or any of its (or their) Subsidiaries in connection with the Original Transactions (including expenses in connection with hedging transactions), this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby.

Original Transactions ” means, collectively, (a) the Original Acquisition and other related transactions contemplated by the Original Acquisition Agreement, (b) the Original Equity Contribution, (c) the funding of the Loans on the Original Funding Date and the execution and delivery of Loan Documents entered into on the Original Closing Date, (d) the repayment of certain Indebtedness existing on the Original Funding Date and (e) the payment of Original Transaction Expenses.

Other Revolving Credit Commitments ” shall mean one or more Classes of revolving credit commitments hereunder that result from a Refinancing Amendment.

Other Revolving Credit Loans ” shall mean one or more Classes of Revolving Credit Loans that result from a Refinancing Amendment.

Other Taxes ” has the meaning specified in Section 3.01(b).

Other Term Loan Commitments ” shall mean one or more Classes of term loan commitments hereunder that result from a Refinancing Amendment.

Other Term Loans ” shall mean one or more Classes of Term Loans that result from a Refinancing Amendment.

Outstanding Amount ” means (a) with respect to Term Loans, Revolving Credit Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Term Loans, Revolving Credit Loans (including any refinancing of outstanding unpaid drawings under Letters of Credit or L/C Credit Extensions as a Revolving Credit Borrowing) and Swing Line Loans, as the case may be, occurring on such date; and (b) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes thereto as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit (including any refinancing of outstanding unpaid drawings under Letters of Credit or L/C Credit Extensions as a Revolving Credit Borrowing) or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date.

Parent Company ” means, with respect to a Lender, the bank holding company (as defined in Federal Reserve Board Regulation Y), if any, of such Lender, and/or any Person owning, beneficially or of record, directly or indirectly, a majority of the shares of such Lender.

 

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Participant ” has the meaning set forth in Section 10.07(e).

PBGC ” means the Pension Benefit Guaranty Corporation.

Pension Plan ” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or any ERISA Affiliate or to which any Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five (5) plan years.

Perfection Certificate ” means a certificate in the form of Exhibit II to the Security Agreement or any other form reasonably approved by the Collateral Agent, as the same shall be supplemented from time to time.

Permitted Acquisition ” has the meaning set forth in Section 7.02(i).

Permitted Asset Swap ” means the concurrent purchase and sale, trade-in or exchange of equipment or other property of a nature or type that is used or useful in a Permitted Business or a combination of such equipment or property and cash or Cash Equivalents between the Borrower or any of its Restricted Subsidiaries and another Person; provided , that (x) any cash or Cash Equivalents received must be applied in accordance with Section 2.05(b) and (y) the fair market value of the equipment or property received is at least as great as the fair market value of the equipment or other property being traded-in or exchanged.

Permitted Business ” means any business that is related, ancillary or complementary to the businesses of the Borrower and its Subsidiaries on the Closing Date.

Permitted Holders ” means each of the Investors and the Management Stockholders; provided that if the Management Stockholders own beneficially or of record more than fifteen percent (15%) of the outstanding voting Equity Interests of Holdings in the aggregate, they shall be treated as Permitted Holders of only fifteen percent (15%) of the outstanding voting Equity Interests of Holdings at such time.

Permitted Notes ” means (i) unsecured senior or senior subordinated debt securities of the Borrower, (ii) debt securities of the Borrower that are secured by a Lien on the Collateral ranking junior to the Liens securing the Obligations pursuant to a Second Lien Intercreditor Agreement or (iii) debt securities of the Borrower that are secured by a Lien ranking pari passu with the Liens securing the Obligations pursuant to a First Lien Intercreditor Agreement; provided that (a) in the case of debt securities issued in reliance on Section 7.03(r)(i), such debt securities are issued for cash consideration, (b) the terms of such debt securities do not provide for any scheduled repayment, mandatory redemption or sinking fund obligations prior to the Maturity Date of the Term Facility (other than customary offers to repurchase upon a change of control, asset sale or event of loss and customary acceleration rights after an event of default), (c) the covenants, events of default, guarantees, collateral and other terms of which (other than interest rate and redemption premiums), taken as a whole, are not more restrictive to the Borrower and the Subsidiaries than those in this Agreement; provided that a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent at least three Business Days (or such shorter period as the Administrative Agent may reasonably agree) prior to the incurrence of such debt securities, together with a reasonably detailed description of the material terms and conditions of such debt securities or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement, (d) at the time that any such Permitted Notes are issued (and after giving effect thereto) no Event of Default shall exist, (e) the Borrower shall be in compliance with the covenants set forth in Section 7.11 determined on a Pro Forma Basis as of the last day of the most recently ended Test Period for which financial statements were required to have been delivered pursuant to Section 6.01(a) or (b), as applicable (or if no Test Period cited in Section 7.11 has passed, the covenants in Section 7.11 for the first Test Period cited in such Section shall be satisfied as of the last four quarters ended), in each case, as if such Permitted Notes had been outstanding on the last day of such four quarter period, and (f) no Subsidiary of the Borrower (other than a Guarantor) shall be an obligor and no Permitted Notes shall be secured by any collateral other than the Collateral.

 

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Permitted Ratio Debt ” means Indebtedness of the Borrower or any of its Subsidiaries, provided that (a) immediately after giving Pro Forma Effect thereto and to the use of the proceeds thereof (and for purposes of any calculations under this definition, the cash proceeds of such incurrence shall not be permitted to reduce the Consolidated Total Net Debt, Consolidated First Lien Net Debt or Consolidated Secured Net Debt), (i) no Event of Default shall be continuing or result therefrom, (ii) the Borrower and its Subsidiaries will be in Pro Forma Compliance with the covenants set forth in Section 7.11, (iii) the Total Leverage Ratio is no greater than 4.50 to 1.00 (excluding, for purposes of calculating such ratio under this clause (iii), Revolving Credit Loans borrowed for seasonal working capital requirements in an amount not to exceed $50,000,000), (iv) if such Indebtedness is secured (1) the Secured Leverage Ratio is no greater than 3.00 to 1.00 (excluding, for purposes of calculating such ratio under this clause (iv), Revolving Credit Loans borrowed for seasonal working capital requirements in an amount not to exceed $50,000,000), (2) if such Indebtedness is incurred or guaranteed on a secured basis by a Loan Party, such Indebtedness shall be in the form of debt securities or Indebtedness that is not a credit facility that could have been incurred as an Incremental Term Loan or Revolving Commitment Increase, (3) it shall have terms and conditions (other than pricing, rate floors, discounts, fees, premiums and optional prepayment or redemption provisions) that in the good faith determination of the Borrower are not materially less favorable (when taken as a whole) to the Borrower than the terms and conditions of the Loan Documents (when taken as a whole) and (4) such Indebtedness is subject to an Intercreditor Agreement, (v) such Indebtedness does not mature or have scheduled amortization payments prior to the date that is ninety-one (91) days after the Latest Maturity Date at the time such Indebtedness is incurred or the maturity date of such Indebtedness can be extended subject to any customary conditions to a date that is ninety-one (91) days after the Latest Maturity Date at the time such Indebtedness is incurred and (vi) any such Indebtedness incurred by a Subsidiary that is not a Loan Party, together with any other Indebtedness incurred by a Subsidiary that is not a Loan Party pursuant to Section 7.03, does not exceed in the aggregate at any time outstanding the greater of $35,000,000 and 2.50% of Consolidated Total Assets, in each case determined at the time of incurrence.

Permitted Refinancing ” means, with respect to any Person, any modification, refinancing, refunding, renewal, replacement or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed, replaced or extended except by an amount equal to unpaid accrued interest and premium thereon plus other amounts paid, and fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal, replacement or extension and by an amount equal to any existing commitments unutilized thereunder, (b) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 7.03(e), such modification, refinancing, refunding, renewal, replacement or extension has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended, (c) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 7.03(e) or (f), at the time thereof, no Event of Default shall have occurred and be continuing and (d) if such Indebtedness being modified, refinanced, refunded, renewed, replaced or extended is Indebtedness permitted pursuant to Section 7.03(b), 7.03(r), 7.03(s), 7.03(t) or 7.13(a) or is otherwise a Junior Financing, (i) to the extent such Indebtedness being modified, refinanced, refunded, renewed, replaced or extended is subordinated in right of payment to the Obligations, such modification, refinancing, refunding, renewal, replacement or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended, (ii) the terms and conditions (including, if applicable, as to collateral but excluding as to subordination, interest rate and redemption premium) of any such modified, refinanced, refunded, renewed, replaced or extended Indebtedness, taken as a whole, are not materially less favorable to the Loan Parties or the Lenders than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended, taken as a whole; provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees) and (iii) such modification, refinancing, refunding, renewal, replacement or extension is incurred by the Person who is the obligor of the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended.

 

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Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

Plan ” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established, maintained or contributed to by any Loan Party or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

Platform ” has the meaning set forth in Section 6.01.

Principal L/C Issuer ” means Bank of America, any other L/C Issuer that has issued Letters of Credit having an aggregate Outstanding Amount in excess of $4,000,000.

Pro Forma Basis or Pro Forma Effect ” means, with respect to compliance with any test or covenant or calculation of any ratio hereunder, the determination or calculation of such test, covenant or ratio (including in connection with Specified Transactions) in accordance with Section 1.08.

Pro Forma Compliance ” means, with respect to any covenant in Section 7.11, compliance on a Pro Forma Basis with such covenant in accordance with Section 1.08.

Pro Rata Share ” means, with respect to each Lender at any time a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitments of such Lender under the applicable Facility or Facilities at such time and the denominator of which is the amount of the Aggregate Commitments under the applicable Facility or Facilities at such time; provided that if such Commitments have been terminated, then the Pro Rata Share of each Lender shall be determined based on the Pro Rata Share of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof.

Projections ” has the meaning set forth in Section 6.01(c).

Public Lender ” has the meaning set forth in Section 6.01.

Qualified Equity Interests ” means any Equity Interests that are not Disqualified Equity Interests.

Qualified IPO ” means the issuance by Holdings or any direct or indirect parent of Holdings of its common Equity Interests in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) (i) pursuant to an effective registration statement filed with the U.S. Securities and Exchange Commission in accordance with the Securities Act (whether alone or in connection with a secondary public offering) or (ii) after which the common Equity Interests of Holdings or any direct or indirect parent of Holdings are listed on an internationally recognized securities exchange or dealer quotation system.

Real Property ” means, collectively, all right, title and interest (including any leasehold, mineral or other estate) in and to any and all parcels of or interests in real property owned or leased by any Person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, all general intangibles and contract rights and other property and rights incidental to the ownership, lease or operation thereof.

Refinancing Amendment ” means an amendment to this Agreement executed by each of (a) the Borrower, (b) the Administrative Agent, (c) each Additional Refinancing Lender and (d) each Lender that agrees to provide any portion of Refinancing Term Loans, Other Term Loans, Other Term Loan Commitments, Other Revolving Credit Commitments or Other Revolving Credit Loans incurred pursuant thereto, in accordance with Section 2.16.

Refinancing Series ” means all Refinancing Term Loans or Refinancing Term Commitments that are established pursuant to the same Refinancing Amendment (or any subsequent Refinancing Amendment to the extent such Refinancing Amendment expressly provides that the Refinancing Term Loans or Refinancing Term Commitments provided for therein are intended to be a part of any previously established Refinancing Series) and that provide for the same Effective Yield and amortization schedule.

 

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Refinancing Term Commitments ” means one or more term loan commitments hereunder that fund Refinancing Term Loans of the applicable Refinancing Series hereunder pursuant to a Refinancing Amendment.

Refinancing Term Loans ” means one or more term loans hereunder that result from a Refinancing Amendment.

Register ” has the meaning set forth in Section 10.07(d).

Registered Equivalent Notes ” means, with respect to any notes originally issued in an offering pursuant to Rule 144A under the Securities Act or other private placement transaction under the Securities Act, substantially identical notes (having the same guarantees) issued in a dollar-for-dollar exchange therefor pursuant to an exchange offer registered with the SEC.

Rejection Notice ” has the meaning set forth in Section 2.05(b)(vi).

Release ” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing or migrating in, into, onto or through the Environment or from or through any occupied facility or structure.

Replacement Term Loans ” has the meaning set forth in Section 10.01.

Reportable Event ” means any of the events set forth in Section 4043(c) of ERISA or the regulations issued thereunder, other than events for which the thirty (30) day notice period has been waived.

Repricing Transaction ” means the prepayment, refinancing, substitution or replacement of all or a portion of the Term Loans with the incurrence by the Borrower or any Subsidiary of any debt financing (including, without limitation, any new or additional term loans under this Agreement (including Replacement Term Loans) whether incurred directly or by way of the conversion of Term Loans into a new tranche of replacement term loans under this Agreement) having an Effective Yield that is less than the Effective Yield of such Term Loans so repaid, refinanced, substituted or replaced, (with the comparative determinations to be made in the reasonable judgment of the Administrative Agent consistent with generally accepted financial practices) including without limitation, as may be effected through any amendment to this Agreement relating to the interest rate for, or weighted average yield of, such Term Loans or the incurrence of any Replacement Term Loans. Any determination by the Administrative Agent under this definition shall be conclusive and binding on all Lenders holding Term Loans absent manifest error.

Request for Credit Extension ” means (a) with respect to a Borrowing, continuation or conversion of Term Loans or Revolving Credit Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

Required Class Lenders ” means, as of any date of determination, Term Lenders having more than 50% of the aggregate principal amount of outstanding Term Loans of all Term Lenders; provided that, to the same extent set forth in Section 10.07(m) with respect to determination of Required Lenders, the Loans of any Affiliated Lender shall in each case be excluded for purposes of making a determination of Required Class Lenders.

Required Facility Lenders ” mean, as of any date of determination, with respect to any Facility, Lenders having more than 50% of the sum of (a) the Total Outstandings under such Facility (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans, as applicable, under such Facility being deemed “held” by such Lender for purposes of this definition) and (b) the aggregate unused Commitments under such Facility; provided that the unused Commitments of, and the portion of the Total Outstandings under such Facility held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of the Required Facility Lenders; provided , further , that, to the same extent set forth in Section 10.07(m) with respect to determination of Required Lenders, the Loans of any Affiliated Lender shall in each case be excluded for purposes of making a determination of Required Facility Lenders.

 

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Required Lenders ” means, as of any date of determination, Lenders having more than 50% of the sum of the (a) Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition), (b) aggregate unused Term Commitments and (c) aggregate unused Revolving Credit Commitments; provided that the unused Term Commitment and unused Revolving Credit Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders; provided , further , that, to the same extent set forth in Section 10.07(m) with respect to determination of Required Lenders, the Loans of any Affiliated Lender shall in each case be excluded for purposes of making a determination of Required Lenders.

Responsible Officer ” means the chief executive officer, president, vice president, chief financial officer, treasurer or assistant treasurer or other similar officer of a Loan Party and, as to any document delivered on the Closing Date, any secretary or assistant secretary of such Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

Restricted Cash ” means cash and Cash Equivalents held by Subsidiaries that is contractually restricted from being distributed to the Borrower.

Restricted Payment ” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to the Borrower’s or a Subsidiary’s stockholders, partners or members (or the equivalent Persons thereof).

Retained Percentage ” means, with respect to any Excess Cash Flow Period, (a) 100% minus (b) the Applicable ECF Percentage with respect to such Excess Cash Flow Period.

Revolver Extension Request ” has the meaning provided in Section 2.17(b).

Revolver Extension Series ” has the meaning provided in Section 2.17(b).

Revolving Commitment Increase ” has the meaning set forth in Section 2.14(a).

Revolving Commitment Increase Lender ” has the meaning set forth in Section 2.14(a).

Revolving Credit Borrowing ” means a borrowing consisting of simultaneous Revolving Credit Loans of the same Type and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Revolving Credit Lenders pursuant to Section 2.01(b).

Revolving Credit Commitment ” means, as to each Revolving Credit Lender, its obligation to (a) make Revolving Credit Loans to the Borrower hereunder, (b) purchase participations in L/C Obligations in respect of Letters of Credit and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 1.01A under the caption “Revolving Credit Commitment” or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be (i) reduced from time to time in accordance with Section 2.06 and (ii) reduced or increased from time to time pursuant to (w) assignments by or to such Revolving Credit Lender pursuant to an Assignment and Assumption, (x) an Incremental Amendment, (y) a Refinancing Amendment or (z) an Extension. The aggregate Revolving Credit Commitments of all Revolving Credit Lenders shall be $150,000,000 on the Closing Date, as such amount may be adjusted from time to time in accordance with the terms of this Agreement.

 

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Revolving Credit Exposure ” means, as to each Revolving Credit Lender, the sum of the amount of the outstanding principal amount of such Revolving Credit Lender’s Revolving Credit Loans and its Pro Rata Share of the L/C Obligations and the Swing Line Obligations at such time.

Revolving Credit Facility ” means, at any time, the aggregate amount of the Revolving Credit Lenders’ Revolving Credit Commitments at such time.

Revolving Credit Lender ” means, at any time, any Lender that has a Revolving Credit Commitment at such time or, if the Revolving Credit Commitments have terminated, Revolving Credit Exposure.

Revolving Credit Loans ” means any Revolving Credit Loan made pursuant to Section 2.01(b), Revolving Commitment Increases, Other Revolving Credit Loans or Extended Revolving Credit Loans, as the context may require.

Revolving Credit Note ” means a promissory note of the Borrower payable to any Revolving Credit Lender or its registered assigns, in substantially the form of Exhibit C-2 hereto, evidencing the aggregate Indebtedness of the Borrower to such Revolving Credit Lender resulting from the Revolving Credit Loans made by such Revolving Credit Lender to the Borrower.

S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.

Same Day Funds ” means immediately available funds.

SEC ” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

Second Lien Intercreditor Agreement ” means an intercreditor agreement by and among the Collateral Agent and the collateral agents or other representatives for the holders of Indebtedness secured by Liens that are intended to rank junior to the Liens securing the Obligations and that are otherwise permitted pursuant to Section 7.01 providing that all proceeds of Collateral shall first be applied to repay the Obligations in full prior to being applied to any obligations under the Indebtedness secured by such junior Liens and that until the termination of the Aggregate Commitments and the repayment in full (or cash collateralization of Letters of Credit) of all Obligations outstanding under this Agreement, the Collateral Agent shall have the sole right to exercise remedies against the Collateral (subject to customary exceptions for limited protective actions that may be taken by the holders of such junior Lien Indebtedness) and otherwise in form and substance reasonably satisfactory to the Collateral Agent.

Secured Hedge Agreement ” means any Swap Contract permitted under Article VII that is entered into by and between the Borrower or any Subsidiary and any Person that is a Lender or an Affiliate of a Lender (or was a Lender or an Affiliate of a Lender at the time such Swap Contract was entered into (a “ Hedge Bank ”)).

Secured Leverage Ratio ” means, with respect to any Test Period, the ratio of (a) Consolidated Secured Net Debt as of the last day of such Test Period to (b) Consolidated EBITDA for such Test Period.

Secured Parties ” means, collectively, the Administrative Agent, the Collateral Agent, the Lenders, the Hedge Banks, the Cash Management Banks, the Supplemental Agents and each co-agent or sub-agent appointed by the Administrative Agent or Collateral Agent from time to time pursuant to Section 9.02.

Securities Act ” means the Securities Act of 1933, as amended.

Security Agreement ” means that certain Security Agreement substantially in the form of Exhibit F hereto.

Security Agreement Supplement ” has the meaning set forth in the Security Agreement.

 

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Senior Notes ” means $250,000,000 in aggregate principal amount of the Borrower’s senior unsecured notes due 2020 and any Registered Equivalent Notes having substantially identical terms and issued pursuant to the Senior Notes Indenture in exchange for the initial unregistered senior unsecured notes.

Senior Notes Indenture ” means the Indenture for the Senior Notes, dated January 30, 2012, between the Borrower and Wilmington Trust, National Association, as trustee, as the same may be amended, modified, supplemented, replace or refinanced to the extent not prohibited by this Agreement.

Solvent ” and “ Solvency ” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

SPC ” has the meaning set forth in Section 10.07(h).

Specified Default ” means a Default under Section 8.01(a), (f) or (g).

Specified Equity Contribution ” means any cash contribution to the common equity of Holdings and/or any purchase or investment in an Equity Interest of Holdings other than Disqualified Equity Interests (or other equity on terms and conditions reasonably satisfactory to the Arrangers).

Specified Transaction ” means any incurrence or repayment of Indebtedness (other than for working capital purposes) or Incremental Term Loan or Revolving Commitment Increase or Investment that results in a Person becoming a Subsidiary, any Permitted Acquisition or any Disposition that results in a Subsidiary ceasing to be a Subsidiary of the Borrower, any Investment constituting an acquisition of assets constituting a business unit, line of business or division of another Person or any Disposition of a business unit, line of business or division of the Borrower or a Subsidiary, in each case whether by merger, consolidation, amalgamation or otherwise.

Sponsor ” means Blackstone Capital Partners V L.P. and any of its Affiliates and funds or partnerships managed or advised by it or its Affiliates.

Subsidiary ” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which (i) a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, (ii) more than half of the issued share capital is at the time beneficially owned or (iii) the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

Subsidiary Guarantor ” means any Guarantor other than Holdings.

Successor Company ” has the meaning set forth in Section 7.04(d).

Supplemental Agent ” has the meaning set forth in Section 9.13(a) and “ Supplemental Agents ” shall have the corresponding meaning.

Swap Contract ” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price

 

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or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “ Master Agreement ”), including any such obligations or liabilities under any Master Agreement.

Swap Termination Value ” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

Swing Line Borrowing ” means a borrowing of a Swing Line Loan pursuant to Section 2.04.

Swing Line Facility ” means the swing line loan facility made available by the Swing Line Lenders pursuant to Section 2.04.

Swing Line Lender ” means Bank of America, in its capacity as provider of Swing Line Loans or any successor swing line lender hereunder.

Swing Line Loan ” has the meaning set forth in Section 2.04(a).

Swing Line Loan Notice ” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B hereto.

Swing Line Note ” means a promissory note of the Borrower payable to any Swing Line Lender or its registered assigns, in substantially the form of Exhibit C-3 hereto, evidencing the aggregate Indebtedness of the Borrower to such Swing Line Lender resulting from the Swing Line Loans.

Swing Line Obligations ” means, as at any date of determination, the aggregate principal amount of all Swing Line Loans outstanding.

Swing Line Sublimit ” means an amount equal to the lesser of (a) $5,000,000 and (b) the aggregate amount of the Revolving Credit Commitments. The Swing Line Sublimit is part of, and not in addition to, the Revolving Credit Commitments.

Syndication Agent ” means Citigroup Global Markets Inc., as syndication agent under this Agreement.

Taxes ” means any and all present or future taxes, duties, levies, imposts, assessments, deductions, withholdings or other charges imposed by any Governmental Authority, whether computed on a separate, consolidated, unitary, combined or other basis, and any and all liabilities (including interest, fines, penalties or additions to tax) with respect to the foregoing.

Term Borrowing ” means a borrowing consisting of simultaneous Term Loans of the same Type and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Term Lenders pursuant to Section 2.01(a).

Term Commitment ” means, as to each Term Lender, its obligation to make a Term Loan to the Borrower hereunder, expressed as an amount representing the maximum principal amount of the Term Loan to be made by

 

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such Term Lender under this Agreement, as such commitment may be (a) reduced from time to time pursuant to Section 2.06 and (b) reduced or increased from time to time pursuant to (i) assignments by or to such Term Lender pursuant to an Assignment and Assumption, (ii) an Incremental Amendment, (iii) a Refinancing Amendment or (iv) an Extension. The initial amount of each Term Lender’s Commitment is set forth on Schedule 1.01A hereto under the caption “Term Commitment” or, otherwise, in the Assignment and Assumption, Incremental Amendment or Refinancing Amendment pursuant to which such Lender shall have assumed its Commitment, as the case may be. The initial aggregate amount of the Term Commitments on the Closing Date is $400,000,000.

Term Lender ” means, at any time, any Lender that has a Term Commitment or a Term Loan at such time.

Term Loan ” means any Term Loan made pursuant to Section 2.01(a), Incremental Term Loan, Other Term Loan or Extended Term Loan, as the context may require.

Term Loan Extension Request ” has the meaning provided in Section 2.17(a).

Term Loan Extension Series ” has the meaning provided in Section 2.17(a).

Term Note ” means a promissory note of the Borrower payable to any Term Lender or its registered assigns, in substantially the form of Exhibit C-1 hereto, evidencing the aggregate Indebtedness of the Borrower to such Term Lender resulting from the Term Loans made by such Term Lender.

Test Period ” means, for any date of determination under this Agreement, the latest four consecutive fiscal quarters of the Borrower for which financial statements have been delivered to the Administrative Agent on or prior to the Closing Date and/or for which financial statements are required to be delivered pursuant to Section 6.01, as applicable.

Threshold Amount ” means $20,000,000.

Total Leverage Ratio ” means, with respect to any Test Period, the ratio of (a) Consolidated Total Net Debt as of the last day of such Test Period to (b) Consolidated EBITDA for such Test Period.

Total Outstandings ” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

Transferred Guarantor ” has the meaning set forth in Section 11.09.

Type ” means, with respect to a Loan, its character as a Base Rate Loan or a Eurocurrency Rate Loan.

Unaudited Financial Statements ” means the financial statements provided pursuant to Section 6.01(b) of the Existing Credit Agreement prior to the Closing Date.

Uniform Commercial Code ” or “ UCC ” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

United States ” and “ U.S. ” mean the United States of America.

United States Tax Compliance Certificate ” has the meaning set forth in Section 3.01(d)(ii)(C) and is in substantially the form of Exhibit I hereto.

unreallocated portion ” has the meaning set forth in Section 2.15(a)(ii).

Unreimbursed Amount ” has the meaning set forth in Section 2.03(c)(i).

 

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USA Patriot Act ” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

Weighted Average Life to Maturity ” means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness.

wholly owned ” means, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (x) director’s qualifying shares and (y) shares issued to foreign nationals to the extent required by applicable Law) are owned by such Person and/or by one or more wholly owned Subsidiaries of such Person.

Section 1.02. Other Interpretive Provisions .

With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

(b) The words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.

(c) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears.

(d) The term “including” is by way of example and not limitation.

(e) The term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.

(f) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”; and the word “through” means “to and including.”

(g) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

Section 1.03. Accounting Terms .

All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, except as otherwise specifically prescribed herein.

Section 1.04. Rounding .

Any financial ratios required to be maintained by the Borrower pursuant to this Agreement (or required to be satisfied in order for a specific action to be permitted under this Agreement) shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding up if there is no nearest number).

 

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Section 1.05. References to Agreements, Laws, Etc .

Unless otherwise expressly provided herein, (a) references to Organization Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are permitted by the Loan Documents; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.

Section 1.06. Times of Day .

Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

Section 1.07. Timing of Payment of Performance .

When the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment (other than as described in the definition of Interest Period) or performance shall extend to the immediately succeeding Business Day.

Section 1.08. Pro Forma Calculations .

(a) Notwithstanding anything to the contrary herein, the Total Leverage Ratio, Consolidated First Lien Net Leverage Ratio, the Secured Leverage Ratio, and the Interest Coverage Ratio shall be calculated in the manner prescribed by this Section 1.08; provided that notwithstanding anything to the contrary in clause (b), (c) or (d) of this Section 1.08, when calculating the Consolidated First Lien Net Leverage Ratio and the Interest Coverage Ratio, as applicable, for purposes of (i) the Applicable ECF Percentage of Excess Cash Flow and (ii) determining actual compliance (and not Pro Forma Compliance or compliance on a Pro Forma Basis) with any covenant pursuant to Section 7.11, the events described in this Section 1.08 that occurred subsequent to the end of the applicable Test Period shall not be given pro forma effect.

(b) For purposes of calculating the Total Leverage Ratio, Consolidated First Lien Net Leverage Ratio, the Secured Leverage Ratio and the Interest Coverage Ratio, Specified Transactions (and the incurrence or repayment of any Indebtedness in connection therewith to be subject to clause (d) of this Section 1.08) that have been made (i) during the applicable Test Period and (ii) if applicable as described in clause (a) above, subsequent to such Test Period and prior to or simultaneously with the event for which the calculation of any such ratio is made shall be calculated on a pro forma basis assuming that all such Specified Transactions (and any increase or decrease in Consolidated EBITDA and the component financial definitions used therein attributable to any Specified Transaction) had occurred on the first day of the applicable Test Period. If since the beginning of any applicable Test Period any Person that subsequently became a Subsidiary or was merged, amalgamated or consolidated with or into the Borrower or any of its Subsidiaries since the beginning of such Test Period shall have made any Specified Transaction that would have required adjustment pursuant to this Section 1.08, then the Total Leverage Ratio, Consolidated First Lien Net Leverage Ratio, the Secured Leverage Ratio and the Interest Coverage Ratio shall be calculated to give pro forma effect thereto in accordance with this Section 1.08.

(c) Whenever pro forma effect is to be given to a Specified Transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Borrower and include, for the avoidance of doubt, the amount of cost savings, operating expense reductions and synergies projected by the Borrower in good faith to be realized as a result of specified actions taken or with respect to which the Borrower in good faith expects that substantial steps will have been taken within the time frame set forth in clause (B) below (calculated on a pro forma basis as though such cost savings, operating expense reductions and synergies had been realized

 

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on the first day of such period as if such cost savings, operating expense reductions and synergies were realized during the entirety of such period) relating to such Specified Transaction, net of the amount of actual benefits realized during such period from such actions and any such adjustments shall be included in the initial pro forma calculations of such financial ratios or tests and during any subsequent Test Period in which the effects thereof are expected to be realized relating to such Specified Transaction; provided that (A) such amounts are reasonably identifiable and factually supportable in the good faith judgment of the Borrower, (B) such actions are taken, committed to be taken or expected to be taken no later than eighteen (18) months after the date of such Specified Transaction, and (C) no amounts shall be added pursuant to this clause (c) to the extent duplicative of any amounts that are otherwise added back in computing Consolidated EBITDA, whether through a pro forma adjustment or otherwise, with respect to such period; provided that any increase in Consolidated EBITDA as a result of cost savings, operating expense reductions and synergies shall be subject to the limitations set forth in the definition of “Consolidated EBITDA.”

(d) In the event that the Borrower or any Subsidiary incurs (including by assumption or guarantees) or repays (including by redemption, repayment, retirement or extinguishment) any Indebtedness included in the calculations of the Total Leverage Ratio, the Secured Leverage Ratio, Consolidated First Lien Net Leverage Ratio and the Interest Coverage Ratio, as the case may be (in each case, other than Indebtedness incurred or repaid under any revolving credit facility in the ordinary course of business for working capital purposes), (i) during the applicable Test Period and (ii) subsequent to the end of the applicable Test Period and prior to or simultaneously with the event for which the calculation of any such ratio is made, then the Total Leverage Ratio, the Secured Leverage Ratio, Consolidated First Lien Net Leverage Ratio and the Interest Coverage Ratio shall be calculated giving pro forma effect to such incurrence or repayment of Indebtedness, to the extent required, as if the same had occurred on (A) the last day of the applicable Test Period in the case of the Total Leverage Ratio, the Secured Leverage Ratio or the Consolidated First Lien Net Leverage Ratio and (B) the first day of the applicable Test Period in the case of the Interest Coverage Ratio. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of the event for which the calculation of the Interest Coverage Ratio is made had been the applicable rate for the entire period (taking into account any hedging obligations applicable to such Indebtedness); provided , in the case of repayment of any Indebtedness, to the extent actual interest related thereto was included during all or any portion of the applicable Test Period, the actual interest may be used for the applicable portion of such Test Period. Interest on Capitalized Leases shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Borrower to be the rate of interest implicit in such Capitalized Leases in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a London interbank offered rate, or other rate, shall be determined to have been based upon the rate actually chose, or if none, then based upon such optional rate chosen as the Borrower or such Subsidiary may designate.

Section 1.09. Letter of Credit Amounts .

Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided , however , that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

Section 1.10. Cumulative Credit Transactions .

If more than one action occurs on any given date, the permissibility of the taking of which is determined hereunder by reference to the amount of the Cumulative Credit immediately prior to the taking of such action, the permissibility of the taking of each such action shall be determined independently and in no event may any two or more such actions be treated as occurring simultaneously.

 

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ARTICLE II

The Commitments and Credit Extensions

Section 2.01. The Loans .

(a) The Term Borrowings . Subject to the terms and conditions set forth herein, each Term Lender severally agrees to make to the Borrower on the Closing Date loans denominated in Dollars in an aggregate amount not to exceed the amount of such Term Lender’s Term Commitment. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. Term Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.

(b) The Revolving Credit Borrowings . Subject to the terms and conditions set forth herein, each Revolving Credit Lender severally agrees to make Revolving Credit Loans denominated in Dollars pursuant to Section 2.02 to the Borrower from its applicable Lending Office from time to time, on any Business Day during the period from the Closing Date until the Maturity Date of the Revolving Credit Facility, in an aggregate principal amount not to exceed at any time outstanding the amount of such Lender’s Revolving Credit Commitment; provided that after giving effect to any Revolving Credit Borrowing, the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Pro Rata Share of the Outstanding Amount of all L/C Obligations, plus such Lender’s Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Revolving Credit Commitment. Within the limits of each Lender’s Revolving Credit Commitments and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(b), prepay under Section 2.05, and reborrow under this Section 2.01(b). Revolving Credit Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.

Section 2.02. Borrowings, Conversions and Continuations of Loans .

(a) Each Term Borrowing, each Revolving Credit Borrowing, each conversion of Term Loans or Revolving Credit Loans from one Type to the other, and each continuation of Eurocurrency Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than (i) 11:00 a.m. (New York City time) three (3) Business Days prior to the requested date of any Borrowing or continuation of Eurocurrency Rate Loans or any conversion of Base Rate Loans to Eurocurrency Rate Loans, and (ii) 10:00 a.m. (New York City time) on the Business Day prior to any Borrowing of Base Rate Loans. Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Except as provided in Section 2.14(a), each Borrowing of, conversion to or continuation of Eurocurrency Rate Loans shall be in a minimum principal amount of $2,000,000 or a whole multiple of $500,000 in excess thereof. Except as provided in Section 2.03(c), 2.04(c), 2.14(a) or the last sentence of this paragraph, each Borrowing of or conversion to Base Rate Loans shall be in a minimum principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Term Borrowing, a Revolving Credit Borrowing, a conversion of Term Loans or Revolving Credit Loans from one Type to the other, or a continuation of Eurocurrency Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Term Loans or Revolving Credit Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Loan in a Committed Loan Notice or fails to give a timely notice requesting a conversion or continuation, then the applicable Term Loans or Revolving Credit Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurocurrency Rate Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurocurrency Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one (1) month.

(b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Pro Rata Share of the applicable Class of Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details

 

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of any automatic conversion to Base Rate Loans or continuation described in Section 2.02(a). In the case of each Borrowing, each Appropriate Lender shall make the amount of its Loan available to the Administrative Agent in Same Day Funds at the Administrative Agent’s Office not later than 11:00 a.m. (New York City time) on the Business Day specified in the applicable Committed Loan Notice. The Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided that if, on the date the Committed Loan Notice with respect to such Borrowing is given by the Borrower, there are Swing Line Loans or L/C Borrowings outstanding, then the proceeds of such Borrowing shall be applied, first, to the payment in full of any such L/C Borrowing, second, to the payment in full of any such Swing Line Loans, and third, to the Borrower as provided above.

(c) Except as otherwise provided herein, a Eurocurrency Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurocurrency Rate Loan unless the Borrower pays the amount due, if any, under Section 3.05 in connection therewith. During the existence of an Event of Default, the Administrative Agent or the Required Lenders may require that no Loans may be converted to or continued as Eurocurrency Rate Loans.

(d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurocurrency Rate Loans upon determination of such interest rate. The determination of the Eurocurrency Rate by the Administrative Agent shall be conclusive in the absence of manifest error. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

(e) After giving effect to all Term Borrowings, all Revolving Credit Borrowings, all conversions of Term Loans or Revolving Credit Loans from one Type to the other, and all continuations of Term Loans or Revolving Credit Loans as the same Type, there shall not be more than fifteen (15) Interest Periods in effect; provided that after the establishment of any new Class of Loans pursuant to a Refinancing Amendment or Extension Amendment, the number of Interest Periods otherwise permitted by this Section 2.02(e) shall increase by three (3) Interest Periods for each applicable Class so established.

(f) The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing.

Section 2.03. Letters of Credit .

(a) The Letter of Credit Commitment . (i) Subject to the terms and conditions set forth herein, (A)each L/C Issuer agrees, in reliance upon the agreements of the other Revolving Credit Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit denominated in Dollars for the account of the Borrower ( provided that any Letter of Credit may be for the benefit of any Subsidiary of the Borrower) and to amend or renew Letters of Credit previously issued by it, in accordance with Section 2.03(b), and (2) to honor drafts under the Letters of Credit and (B) the Revolving Credit Lenders severally agree to participate in Letters of Credit issued pursuant to this Section 2.03; provided that no L/C Issuer shall be obligated to make any L/C Credit Extension with respect to any Letter of Credit, and no Lender shall be obligated to participate in any Letter of Credit if as of the date of such L/C Credit Extension, (x) the Revolving Credit Exposure of any Revolving Credit Lender would exceed such Lender’s Revolving Credit Commitment or (y) the Outstanding Amount of the L/C Obligations would exceed the Letter of Credit Sublimit. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. All Existing Letters of Credit shall be deemed to be issued hereunder in the name of the Borrower for the benefit of the Subsidiary of the Borrower in whose name such Existing Letter of Credit is outstanding immediately prior to the Closing Date and shall constitute Letters of Credit subject to the terms hereof.

 

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(ii) An L/C Issuer shall be under no obligation to issue any Letter of Credit if:

(A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such L/C Issuer from issuing such Letter of Credit, or any Law applicable to such L/C Issuer or any directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such L/C Issuer shall prohibit, or direct that such L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date (for which such L/C Issuer is not otherwise compensated hereunder);

(B) the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last renewal, unless the Lenders holding a majority of the Revolving Credit Commitments have approved such expiry date;

(C) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Revolving Credit Lenders have approved such expiry date;

(D) the issuance of such Letter of Credit would violate any Laws binding upon such L/C Issuer;

(E) such Letter of Credit is denominated in a currency other than Dollars;

(F) any Revolving Credit Lender is at such time a Defaulting Lender, unless such L/C Issuer has received (as set forth in clause (a)(iv) below) Cash Collateral or similar security satisfactory to such L/C Issuer (in its sole discretion) from either the Borrower or such Defaulting Lender or such Defaulting Lender’s Pro Rata Share of the L/C Obligations has been reallocated pursuant to clause (a)(iv) below in respect of such Defaulting Lender’s obligation to fund under Section 2.03(c);

(G) such Letter of Credit is in an initial amount less than $100,000;

(H) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer applicable to letters of credit generally; or

(I) with respect to any commercial Letter of Credit, the Borrower shall not have established an account with the L/C Issuer for the payment of fees and any drawings thereunder, as set forth in Section 2.03(h) below.

(iii) An L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) such L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

(iv) In the case where any Revolving Credit Lender is at any time a Defaulting Lender, the Borrower and such Defaulting Lender each agree, within one Business Day following notice by the Administrative Agent, to cause to be deposited with the Administrative Agent for the benefit of the L/C Issuer, Cash Collateral in the full amount of such Defaulting Lender’s Pro Rata Share of the outstanding L/C Obligations; provided that, at the Borrower’s option, the Borrower may, by notice to the Administrative Agent, elect to reallocate all or any part of the Defaulting Lender’s Pro Rata Share of the L/C Obligations among all Revolving Credit Lenders that are not Defaulting Lenders but only to the extent (x) the total Revolving Credit Exposure of all Revolving Credit Lenders that are not Defaulting Lenders plus such Defaulting Lender’s Pro Rata Share of the L/C Obligations and any Swing Line Loans, in each case, except to the extent Cash Collateralized, does not exceed the aggregate Revolving Credit Commitments (excluding the Revolving Credit Commitment of any Defaulting Lender except to the extent of any outstanding Revolving Credit Loans of such Defaulting Lender) and (y) the conditions set forth in Section 4.02 are satisfied at such time (in which case the Revolving Credit Commitments of all Defaulting Lenders shall be deemed

 

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to be zero (except to the extent Cash Collateral has been posted in respect of any portion of such Defaulting Lender’s L/C Obligations or participations in Swing Line Loans) for purposes of any determination of the Revolving Credit Lenders’ respective Pro Rata Shares of L/C Obligations (including for purposes of all fee calculations hereunder). The Borrower and/or such Defaulting Lender hereby grant to the Administrative Agent, for the benefit of such L/C Issuer, a security interest in any Cash Collateral and all proceeds of the foregoing with respect to such Defaulting Lender’s participations in Letters of Credit deposited hereunder. Such Cash Collateral shall be maintained in blocked deposit accounts at Bank of America and may be invested in Cash Equivalents reasonably acceptable to the Administrative Agent. If at any time the Administrative Agent determines that any funds held as Cash Collateral under this clause (a)(iv) are subject to any right or claim of any Person other than the Administrative Agent for the benefit of such L/C Issuer or that the total amount of such funds is less than such Defaulting Lender’s Pro Rata Share of all L/C Obligations that has not been reallocated as provided above, the Borrower and/or such Defaulting Lender will, promptly upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (I) such Defaulting Lender’s Pro Rata Share of all L/C Obligations that have not been so reallocated over (II) the total amount of funds, if any, then held as Cash Collateral in respect thereof under this clause (a)(iv) that the Administrative Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Laws, to reimburse such L/C Issuer. If the Lender that triggers the Cash Collateral requirement under this clause (a)(iv) ceases to be a Defaulting Lender (as determined by such L/C Issuer in good faith), or if there are no L/C Obligations outstanding, any funds held as Cash Collateral pursuant to the foregoing provisions shall thereafter be returned to the Borrower or the Defaulting Lender, whichever provided the funds for the Cash Collateral, and the Pro Rata Share of the L/C Obligations of each Revolving Credit Lender shall thereafter take into account such Revolving Credit Lender’s Revolving Credit Commitment.

(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit . (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to an L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower. Such Letter of Credit Application must be received by the relevant L/C Issuer and the Administrative Agent not later than 11:00 a.m. (New York City time) at least two (2) Business Days prior to the proposed issuance date or date of amendment, as the case may be; or, in each case, such later date and time as the relevant L/C Issuer may agree in a particular instance in its sole discretion. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the relevant L/C Issuer: (a) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (b) the amount thereof; (c) the expiry date thereof; (d) the name and address of the beneficiary thereof; (e) the documents to be presented by such beneficiary in case of any drawing thereunder; (f) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (g) such other matters as the relevant L/C Issuer may reasonably request. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the relevant L/C Issuer (1) the Letter of Credit to be amended; (2) the proposed date of amendment thereof (which shall be a Business Day); (3) the nature of the proposed amendment; and (4) such other matters as the relevant L/C Issuer may reasonably request.

(ii) Promptly after receipt of any Letter of Credit Application, the relevant L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such L/C Issuer will provide the Administrative Agent with a copy thereof. Upon receipt by the relevant L/C Issuer of confirmation from the Administrative Agent that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to the terms and conditions hereof, such L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be. Immediately upon the issuance of each Letter of Credit, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the relevant L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Letter of Credit.

(iii) If the Borrower so requests in any applicable Letter of Credit Application relating to a standby Letter of Credit, the relevant L/C Issuer shall agree to issue a standby Letter of Credit that has automatic extension provisions (each, an “ Auto-Extension Letter of Credit ”); provided that any such Auto-Extension Letter of Credit

 

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must permit the relevant L/C Issuer to prevent any such extension at least once in each twelve month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “ Non-extension Notice Date ”) in each such twelve month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the relevant L/C Issuer, the Borrower shall not be required to make a specific request to the relevant L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the relevant L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided that the relevant L/C Issuer shall (A) not be required to permit any such extension if the relevant L/C Issuer has determined that it would have no obligation at such time to issue such Letter of Credit in its extended form under the terms hereof (by reason of the provisions of Section 2.03(a)(ii) or otherwise), and (B) not permit any such extension if it has received notice (which may be by telephone or in writing) on or before the day that is five (5) Business Days before the Non-extension Notice Date from the Administrative Agent, any Revolving Credit Lender or the Borrower that one or more of the applicable conditions specified in Section 4.01 are not then satisfied.

(iv) Promptly after issuance of any Letter of Credit or any amendment to a Letter of Credit, the relevant L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

(c) Drawings and Reimbursements; Funding of Participations . (i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the relevant L/C Issuer shall notify promptly the Borrower and the Administrative Agent thereof. Not later than 12:00 Noon (New York City time) on the Business Day immediately following any payment by an L/C Issuer under a Letter of Credit with notice to the Borrower (each such date, an “ Honor Date ”), the Borrower shall reimburse such L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing in Dollars. The L/C Issuer shall notify the Borrower of the amount of the drawing promptly following the determination or revaluation thereof. If the Borrower fails to so reimburse such L/C Issuer by such time, the Administrative Agent shall promptly notify each Appropriate Lender of the Honor Date, the amount of the unreimbursed drawing (the “ Unreimbursed Amount ”), and the amount of such Appropriate Lender’s Pro Rata Share thereof. In such event, the Borrower shall be deemed to have requested a Revolving Credit Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans but subject to the amount of the unutilized portion of the Revolving Credit Commitments of the Appropriate Lenders and the conditions set forth in Section 4.01 (other than the delivery of a Committed Loan Notice). Any notice given by an L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. Any Unreimbursed Amount that is not reimbursed on or prior the Honor Date shall bear interest at the rate applicable to Revolving Credit Loans that are Base Rate Loans for the first Business Day after the Honor Date and thereafter in accordance with Section 2.03(c)(iii).

(ii) Each Appropriate Lender (including any Lender acting as an L/C Issuer) shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the relevant L/C Issuer in Dollars at the Administrative Agent’s Office for payments in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 1:00 p.m. (New York City time) on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Appropriate Lender that so makes funds available shall be deemed to have made a Revolving Credit Loan that is a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the relevant L/C Issuer.

(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Revolving Credit Borrowing of Base Rate Loans because the conditions set forth in Section 4.01 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the relevant L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate for Revolving Credit Loans. In such event, each Appropriate Lender’s payment to the Administrative Agent for the account of the relevant L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.

 

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(iv) Until each Appropriate Lender funds its Revolving Credit Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the relevant L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Pro Rata Share of such amount shall be solely for the account of the relevant L/C Issuer.

(v) Each Revolving Credit Lender’s obligation to make Revolving Credit Loans or L/C Advances to reimburse an L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the relevant L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided that each Revolving Credit Lender’s obligation to make Revolving Credit Loans (but not L/C Advances) pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.01 (other than delivery by the Borrower of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the relevant L/C Issuer for the amount of any payment made by such L/C Issuer under any Letter of Credit, together with interest as provided herein.

(vi) If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the relevant L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), such L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing. A certificate of the relevant L/C Issuer submitted to any Revolving Credit Lender (through the Administrative Agent) with respect to any amounts owing under this Section 2.03(c)(vi) shall be conclusive absent manifest error.

(d) Repayment of Participations . (i) If, at any time after an L/C Issuer has made a payment under any Letter of Credit and has received from any Revolving Credit Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), the Administrative Agent receives for the account of such L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in the amount received by the Administrative Agent.

(ii) If any payment received by the Administrative Agent for the account of an L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by such L/C Issuer in its discretion), each Appropriate Lender shall pay to the Administrative Agent for the account of such L/C Issuer its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

(e) Obligations Absolute . The obligation of the Borrower to reimburse the relevant L/C Issuer for each drawing under each Letter of Credit issued by it and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

(i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;

(ii) the existence of any claim, counterclaim, setoff, defense or other right that any Loan Party may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the relevant L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

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(iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

(iv) any payment by the relevant L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the relevant L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;

(v) any exchange, release or non-perfection of any Collateral, or any release or amendment or waiver of or consent to departure from the Guaranty or any other guarantee, for all or any of the Obligations of any Loan Party in respect of such Letter of Credit; or

(vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Loan Party;

provided that the foregoing shall not excuse any L/C Issuer from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are waived by the Borrower to the extent permitted by applicable Law) suffered by the Borrower that are caused by such L/C Issuer’s gross negligence or willful misconduct as determined in a final and non-appealable judgment by a court of competent jurisdiction when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.

(f) Role of L/C Issuers . Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the relevant L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuers, any Agent-Related Person nor any of the respective correspondents, participants or assignees of any L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Lenders holding a majority of the Revolving Credit Commitments, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct as determined in a final and non-appealable judgment by a court of competent jurisdiction; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuers, any Agent-Related Person, nor any of the respective correspondents, participants or assignees of any L/C Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (vi) of Section 2.03(e); provided that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against an L/C Issuer, and such L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such L/C Issuer’s willful misconduct or gross negligence or such L/C Issuer’s willful or grossly negligent failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit, in each case as determined in a final and non-appealable judgment by a court of competent jurisdiction. In furtherance and not in limitation of the foregoing, each L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and no L/C Issuer shall be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

 

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(g) Cash Collateral . (i) If, as of the Letter of Credit Expiration Date, any Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, (ii) if any Event of Default occurs and is continuing and the Administrative Agent or the Lenders holding a majority of the Revolving Credit Commitments, as applicable, require the Borrower to Cash Collateralize the L/C Obligations pursuant to Section 8.02 or (iii) an Event of Default set forth under Section 8.01(f) occurs and is continuing, the Borrower shall Cash Collateralize the then Outstanding Amount of all L/C Obligations (in an amount equal to such Outstanding Amount determined as of the date of such L/C Borrowing or the Letter of Credit Expiration Date, as the case may be), and shall do so not later than 2:00 p.m., New York City time, on (x) in the case of the immediately preceding clauses (i) through (iii), (1) the Business Day that the Borrower receives notice thereof, if such notice is received on such day prior to 12:00 Noon, New York City time, or (2) if clause (1) above does not apply, the Business Day immediately following the day that the Borrower receives such notice and (y) in the case of the immediately preceding clause (iii), the Business Day on which an Event of Default set forth under Section 8.01(f) occurs or, if such day is not a Business Day, the Business Day immediately succeeding such day. For purposes hereof, “ Cash Collateralize ” means, in respect of an obligation, to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the relevant L/C Issuer and the Lenders, (as a first priority perfected security interest) cash collateral for the L/C Obligations, cash or deposit account balances (“ Cash Collateral ”) pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the relevant L/C Issuer (which documents are hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuers and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked accounts at the Administrative Agent and may be invested in readily available Cash Equivalents. If at any time the Administrative Agent determines that any funds held as Cash Collateral are expressly subject to any right or claim of any Person other than the Administrative Agent (on behalf of the Secured Parties) or that the total amount of such funds is less than the aggregate Outstanding Amount of all L/C Obligations, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the deposit accounts at the Administrative Agent as aforesaid, an amount equal to the excess of (a) such aggregate Outstanding Amount over (b) the total amount of funds, if any, then held as Cash Collateral that the Administrative Agent reasonably determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Law, to reimburse the relevant L/C Issuer. To the extent the amount of any Cash Collateral exceeds the then Outstanding Amount of such L/C Obligations and so long as no Event of Default has occurred and is continuing, the excess shall be refunded to the Borrower. To the extent any Event of Default giving rise to the requirement to Cash Collateralize any Letter of Credit pursuant to this Section 2.03(g) is cured or otherwise waived by the Required Lenders, then so long as no other Event of Default has occurred and is continuing, all Cash Collateral pledged to Cash Collateralize such Letter of Credit shall be refunded to the Borrower.

(h) Letter of Credit Fees . The Borrower shall pay to the Administrative Agent for the account of each Revolving Credit Lender in accordance with its Pro Rata Share a Letter of Credit fee for each Letter of Credit issued pursuant to this Agreement equal to the Applicable Rate times the daily maximum amount then available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Letter of Credit); provided that (x) if any portion of a Defaulting Lender’s Pro Rata Share of any Letter of Credit is Cash Collateralized by the Borrower or reallocated to the other Revolving Credit Lenders pursuant to Section 2.03(a)(iv), then the Borrower shall not be required to pay a Letter of Credit fee with respect to such portion of such Defaulting Lender’s Pro Rata Share so long as it is Cash Collateralized by the Borrower or reallocated to the other Revolving Credit Lenders and (y) if any portion of a Defaulting Lender’s Pro Rata Share is not Cash Collateralized or reallocated pursuant to Section 2.03(a)(iv), then the Letter of Credit fee with respect to such Defaulting Lender’s Pro Rata Share shall be payable to the applicable L/C Issuer until such Pro Rata Share is Cash Collateralized or such Lender ceases to be a Defaulting Lender. Such Letter of Credit fees shall be computed on a quarterly basis in arrears. Such Letter of Credit fees shall be due and payable in Dollars on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. If there is any change in the Applicable Rate during any quarter, the daily maximum amount of each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect. With respect to any commercial Letter of Credit, the Borrower shall have set up an account with the relevant L/C Issuer prior to the issuance of any such commercial Letter of Credit from which such L/C Issuer shall be permitted to debit any amounts required to be paid as fees or as a result of any drawing thereunder.

 

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(i) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuers . The Borrower shall pay directly to each L/C Issuer for its own account a fronting fee with respect to each Letter of Credit issued by it to the Borrower equal to the greater of (x) 0.125% per annum (or such other amount as may be mutually agreed by the Borrower and the applicable L/C Issuer) of the daily maximum amount then available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Letter of Credit) and (y) to the extent the L/C Issuer is the Administrative Agent or an Affiliate thereof, $1,500 per annum. Such fronting fees shall be computed on a quarterly basis in arrears. Such fronting fees shall be due and payable in Dollars on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. In addition, the Borrower shall pay directly to each L/C Issuer for its own account with respect to each Letter of Credit issued to the Borrower the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable within ten (10) Business Days of demand and are nonrefundable.

(j) Applicability of ISP and UCP . Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each commercial Letter of Credit.

(k) Conflict with Letter of Credit Application . Notwithstanding anything else to the contrary in this Agreement, in the event of any conflict between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall control.

(l) Addition of an L/C Issuer . A Revolving Credit Lender may become an additional L/C Issuer hereunder pursuant to a written agreement among the Borrower, the Administrative Agent and such Revolving Credit Lender (which, among other things, shall identify the appropriate contact for notices to obtain any necessary consents to assignments under Section 10.07). The Administrative Agent shall notify the Revolving Credit Lenders of any such additional L/C Issuer.

(m) Letter of Credit Reporting . On a monthly basis, each L/C Issuer shall deliver to the Administrative Agent a complete list of all outstanding Letter of Credit issued by such L/C Issuer.

(n) Existing Letters of Credit . The parties hereto agree that the Existing Letters of Credit shall be deemed Letters of Credit for all purposes under this Agreement, without any further action by the Borrower.

(o) Provisions Related to Extended Revolving Credit Commitments . In connection with the establishment of any Extended Revolving Credit Commitments or Other Revolving Credit Commitments and subject to the availability of unused Commitments with respect to such Class and the satisfaction of the conditions set forth in Section 4.02, the Borrower may with the written consent of the applicable L/C Issuer designate any outstanding Letter of Credit to be a Letter of Credit issued pursuant to such Class of Extended Revolving Credit Commitments or Other Revolving Credit Commitments. Upon such designation such Letter of Credit shall no longer be deemed to be issued and outstanding under such prior Class and shall instead be deemed to be issued and outstanding under such Class of Extended Revolving Commitments or Other Revolving Credit Commitments.

Section 2.04. Swing Line Loans .

(a) The Swing Line . Subject to the terms and conditions set forth herein, Bank of America, in its capacity as Swing Line Lender, may in its sole discretion, agree to make loans in Dollars to the Borrower (each such loan, a “ Swing Line Loan ”), from time to time on any Business Day during the period beginning on the Closing Date and until the Maturity Date of the Revolving Credit Facility in an aggregate amount not to exceed at any time

 

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outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Pro Rata Share of the Outstanding Amount of Revolving Credit Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Swing Line Lender’s Revolving Credit Commitment; provided that, after giving effect to any Swing Line Loan, (i) the Revolving Credit Exposure shall not exceed the aggregate Revolving Credit Commitment and (ii) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender (other than the relevant Swing Line Lender), plus such Lender’s Pro Rata Share of the Outstanding Amount of all L/C Obligations, plus such Lender’s Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Revolving Credit Commitment then in effect; provided , further , that the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04. Each Swing Line Loan shall be a Base Rate Loan. Immediately upon the making of a Swing Line Loan, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Swing Line Loan.

Notwithstanding the foregoing, before making any Swing Line Loans (if at such time any Revolving Credit Lender is a Defaulting Lender), the applicable Swing Line Lender may condition the provision of any Swing Line Loans on its receipt of Cash Collateral or similar security satisfactory to such Swing Line Lender (in its sole discretion) from either the Borrower or such Defaulting Lender in respect of such Defaulting Lender’s risk participation in such Swing Line Loans as set forth below. The Borrower and/or such Defaulting Lender hereby grants to the Administrative Agent, for the benefit of the Swing Line Lender, a security interest in all such Cash Collateral and all proceeds of the foregoing. Such Cash Collateral shall be maintained in blocked deposit accounts at Bank of America and may be invested in Cash Equivalents reasonably acceptable to the Administrative Agent. If at any time the Administrative Agent determines that any funds held as Cash Collateral under this paragraph are subject to any right or claim of any Person other than the Administrative Agent for the benefit of the Swing Line Lender or that the total amount of such funds is less than the aggregate risk participation of such Defaulting Lender in the applicable Swing Line Loan, the Borrower and/or such Defaulting Lender will, promptly upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate risk participation over (y) the total amount of funds, if any, then held as Cash Collateral under this paragraph that the Administrative Agent determines to be free and clear of any such right and claim. If the Revolving Credit Lender that triggers the Cash Collateral requirement under this paragraph ceases to be a Defaulting Lender (as determined by the Swing Line Lender in good faith), or if the Swing Line Loans have been permanently reduced to zero, the funds held as Cash Collateral shall thereafter be returned to the Borrower or the Defaulting Lender, whichever provided the funds for the Cash Collateral.

(b) Borrowing Procedures . Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 12:00 Noon (New York City time) on the requested borrowing date and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000 and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the relevant Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by the Swing Line Lender of any Swing Line Loan Notice (by telephone or in writing), the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, such Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless (x) the relevant Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Revolving Credit Lender) prior to 2:00 p.m. (New York City time) on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the first proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Section 4.01 is not then satisfied or (y) such Swing Line Lender has determined in its sole discretion not to make such Swing Line Loan, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 5:00 p.m. (New York City time) on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower.

 

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(c) Refinancing of Swing Line Loans . (i) The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes such Swing Line Lender to so request on its behalf), that each Revolving Credit Lender make a Base Rate Loan in an amount equal to such Lender’s Pro Rata Share of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the aggregate Revolving Credit Commitments and the conditions set forth in Section 4.01. The relevant Swing Line Lender shall furnish the Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent. Each Revolving Credit Lender shall make an amount equal to its Pro Rata Share of the amount specified in such Committed Loan Notice available to the Administrative Agent in Same Day Funds for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. (New York City time) on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Swing Line Lender.

(ii) If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Credit Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate Loans submitted by the relevant Swing Line Lender as set forth herein shall be deemed to be a request by such Swing Line Lender that each of the Revolving Credit Lenders fund its risk participation in the relevant Swing Line Loan and each Revolving Credit Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.

(iii) If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by the Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing. A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

(iv) Each Revolving Credit Lender’s obligation to make Revolving Credit Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided that each Revolving Credit Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.04(c) (but not to purchase and fund risk participations in Swing Line Loans) is subject to the conditions set forth in Section 4.01. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.

(d) Repayment of Participations . (i) At any time after any Revolving Credit Lender has purchased and funded a risk participation in a Swing Line Loan, if the relevant Swing Line Lender receives any payment on account of such Swing Line Loan, such Swing Line Lender will distribute to such Lender its Pro Rata Share of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s risk participation was funded) in the same funds as those received by such Swing Line Lender.

(ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Revolving Credit Lender shall pay to the Swing Line Lender its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the applicable Federal Funds Rate. The Administrative Agent will make such demand upon the request of a Swing Line Lender. The obligations of the Revolving Credit Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

 

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(e) Interest for Account of Swing Line Lender . The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Revolving Credit Lender funds its Base Rate Loan, Eurocurrency Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Lender’s Pro Rata Share of any Swing Line Loan, interest in respect of such Pro Rata Share shall be solely for the account of the Swing Line Lender.

(f) Payments Directly to Swing Line Lender . The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

(g) Provisions Related to Extended Revolving Credit Commitments . If the maturity date shall have occurred in respect of any tranche of Revolving Credit Commitments (the “ Expiring Credit Commitment ”) at a time when another tranche or tranches of Revolving Credit Commitments is or are in effect with a longer maturity date (each a “ non-Expiring Credit Commitment ” and collectively, the “ non-Expiring Credit Commitments ”), then with respect to each outstanding Swing Line Loan, if consented to by the applicable Swing Line Lender, on the earliest occurring maturity date such Swing Line Loan shall be deemed reallocated to the tranche or tranches of the non-Expiring Credit Commitments on a pro rata basis; provided that (x) to the extent that the amount of such reallocation would cause the aggregate credit exposure to exceed the aggregate amount of such non-Expiring Credit Commitments, immediately prior to such reallocation the amount of Swing Line Loans to be reallocated equal to such excess shall be repaid or Cash Collateralized and (y) notwithstanding the foregoing, if a Default or Event of Default has occurred and is continuing, the Borrower shall still be obligated to pay Swing Line Loans allocated to the Revolving Credit Lenders holding the Expiring Credit Commitments at the maturity date of the Expiring Credit Commitment or if the Loans have been accelerated prior to the maturity date of the Expiring Credit Commitment. Commencing with the maturity date of any tranche of Revolving Credit Commitments, the sublimit for Swing Line Loans shall be agreed solely with the Swing Line Lender.

Section 2.05. Prepayments .

(a) Optional . (i) The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Term Loans and Revolving Credit Loans in whole or in part without premium or penalty; provided that (1) such notice must be received by the Administrative Agent not later than 11:00 a.m. (New York City time) (A) three (3) Business Days prior to any date of prepayment of Eurocurrency Rate Loans and (B) on the date of prepayment of Base Rate Loans; (2) any prepayment of Eurocurrency Rate Loans shall be in a minimum principal amount of $2,000,000 or a whole multiple of $500,000 in excess thereof; and (3) any prepayment of Base Rate Loans shall be in a minimum principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Class(es) and Type(s) of Loans and the order of Borrowing(s) to be prepaid. The Administrative Agent will promptly notify each Appropriate Lender of its receipt of each such notice, and of the amount of such Lender’s Pro Rata Share. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurocurrency Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. In the case of each prepayment of the Loans pursuant to this Section 2.05(a), the Borrower may in its sole discretion select the Borrowing or Borrowings (and the order of maturity of principal payments) to be repaid, and such payment shall be paid to the Appropriate Lenders in accordance with their respective Pro Rata Shares).

(ii) The Borrower may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (1) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 11:00 a.m. (New York City time) on the date of the prepayment, and (2) any such prepayment shall be in a minimum principal amount of $100,000 or a whole multiple of $100,000 in excess thereof or, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

 

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Notwithstanding anything to the contrary contained in this Agreement, the Borrower may rescind any notice of prepayment under Section 2.05(a)(i) or 2.05(a)(ii) if such prepayment would have resulted from a refinancing of all of the Facilities, which refinancing shall not be consummated or shall otherwise be delayed. Each prepayment of Term Loans pursuant to this Section 2.05(a) shall be applied in an order of priority to repayments thereof required pursuant to Section 2.07(a) as directed by the Borrower and, absent such direction, shall be applied in direct order of maturity to repayments thereof required pursuant to Section 2.07(a).

(b) Mandatory . (i) Within six (6) Business Days after financial statements have been delivered pursuant to Section 6.01(a) (commencing with the fiscal year ended December 31, 2012) and the related Compliance Certificate has been delivered pursuant to Section 6.02(a), the Borrower shall cause to be prepaid an aggregate amount of Term Loans in an amount equal to (A) the Applicable ECF Percentage of Excess Cash Flow, if any, for the Excess Cash Flow Period covered by such financial statements minus (B) the sum of (1) all voluntary prepayments of Term Loans during such fiscal year pursuant to Section 2.05(a) and (2) all voluntary prepayments of Revolving Credit Loans and Swing Line Loans during such fiscal year to the extent the Revolving Credit Commitments are permanently reduced by the amount of such payments, in the case of each of the immediately preceding clauses (1) and (2), to the extent such prepayments are not funded with the proceeds of Indebtedness.

(ii) If (1) the Borrower or any Subsidiary of the Borrower Disposes of any property or assets (other than any Disposition of any property or assets permitted by Section 7.05(a)(i), (b), (c), (d), (e), (f), (g), (h), (l), (m), (n), (o) or (p)), or (2) any Casualty Event occurs, which results in the realization or receipt by the Borrower or any Subsidiary of Net Proceeds, the Borrower shall cause to be offered to be prepaid on or prior to the date which is ten (10) Business Days after the date of the realization or receipt by the Borrower or any Subsidiary of such Net Proceeds an aggregate principal amount of Term Loans in an amount equal to 100% of all Net Proceeds received; provided that if any Permitted Notes have been issued in compliance with Sections 7.01 and 7.03 with Liens ranking pari passu with the Liens securing the Obligations pursuant to the First Lien Intercreditor Agreement, then the Borrower may, to the extent required pursuant to the terms of the documentation governing such Permitted Notes, prepay Term Loans and purchase such Permitted Notes (at a purchase price no greater than par plus accrued and unpaid interest) on a pro rata basis in accordance with the respective principal amounts thereof.

(iii) If the Borrower or any Subsidiary incurs or issues any Indebtedness after the Closing Date (x) pursuant to Section 7.03(r)(i) or (y) that is not otherwise permitted to be incurred pursuant to Section 7.03, the Borrower shall cause to be prepaid an aggregate principal amount of Term Loans in an amount equal to 100% of all Net Proceeds received therefrom on or prior to the date which is six (6) Business Days after the receipt by the Borrower or such Subsidiary of such Net Proceeds.

(iv) If for any reason the aggregate Revolving Credit Exposures at any time exceeds the aggregate Revolving Credit Commitments then in effect, the Borrower shall promptly prepay or cause to be promptly prepaid Revolving Credit Loans and Swing Line Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(b)(iv) unless after the prepayment in full of the Revolving Credit Loans and Swing Line Loans such aggregate Outstanding Amount exceeds the aggregate Revolving Credit Commitments then in effect.

(v) Except with respect to Loans incurred in connection with any Refinancing Amendment (which shall be applied as provided in Section 2.16), (A) each prepayment of Term Loans pursuant to this Section 2.05(b) shall be applied ratably to each Class of Term Loans then outstanding ( provided that any Class of Incremental Term Loans or Other Term Loans may specify that one or more other Classes of Term Loans may be prepaid prior to such Class of Incremental Term Loans or Other Term Loans); (B) with respect to each Class of Term Loans, each prepayment pursuant to clauses (i) through (iii) of this Section 2.05(b) shall be applied to the scheduled installments of principal thereof following the date of prepayment pursuant to Section 2.07(a) in direct order of maturity and (C) each such prepayment shall be paid to the Lenders in accordance with their respective Pro Rata Shares of such prepayment subject to clause (vi) of this Section 2.05(b).

(vi) The Borrower shall notify the Administrative Agent in writing of any mandatory prepayment of Term Loans required to be made pursuant to clause (i) or (ii) of this Section 2.05(b) at least four (4) Business Days prior to the date of such prepayment. Each such notice shall specify the date of such prepayment and provide a reasonably

 

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detailed calculation of the amount of such prepayment. The Administrative Agent will promptly notify each Appropriate Lender of the contents of the Borrower’s prepayment notice and of such Appropriate Lender’s Pro Rata Share of the prepayment. Each Term Lender may reject all or a portion of its Pro Rata Share of any mandatory prepayment (such declined amounts, the “ Declined Proceeds ”) of Term Loans required to be made pursuant to clauses (i) and (ii) of this Section 2.05(b) by providing written notice (each, a “ Rejection Notice ”) to the Administrative Agent and the Borrower no later than 5:00 p.m. one (1) Business Day after the date of such Lender’s receipt of notice from the Administrative Agent regarding such prepayment. Each Rejection Notice from a given Lender shall specify the principal amount of the mandatory repayment of Term Loans to be rejected by such Lender. If a Term Lender fails to deliver a Rejection Notice to the Administrative Agent within the time frame specified above or such Rejection Notice fails to specify the principal amount of the Term Loans to be rejected, any such failure will be deemed an acceptance of the total amount of such mandatory prepayment of Term Loans. Any Declined Proceeds shall be retained by the Borrower.

(vii) Funding Losses, Etc . All prepayments under this Section 2.05 shall be made together with, in the case of any such prepayment of a Eurocurrency Rate Loan on a date other than the last day of an Interest Period therefor, any amounts owing in respect of such Eurocurrency Rate Loan pursuant to Section 3.05. Notwithstanding any of the other provisions of Section 2.05(b), so long as no Event of Default shall have occurred and be continuing, if any prepayment of Eurocurrency Rate Loans is required to be made under this Section 2.05(b), prior to the last day of the Interest Period therefor, the Borrower may, in its sole discretion, deposit the amount of any such prepayment otherwise required to be made thereunder into a Cash Collateral Account until the last day of such Interest Period, at which time the Administrative Agent shall be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of such Loans in accordance with this Section 2.05(b). Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent shall also be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of the outstanding Loans in accordance with this Section 2.05(b).

(viii) Foreign Dispositions . Notwithstanding any other provisions of this Section 2.05, (i) to the extent that any of or all the Net Proceeds of any Disposition by a Foreign Subsidiary (“ Foreign Disposition ”) or Excess Cash Flow attributable to Foreign Subsidiaries are prohibited or delayed by applicable local law from being repatriated to the United States, the portion of such Net Proceeds or Excess Cash Flow so affected will not be required to be applied to repay Term Loans at the times provided in this Section 2.05 but may be retained by the applicable Foreign Subsidiary so long, but only so long, as the applicable local law will not permit repatriation to the United States (the Borrower hereby agreeing to cause the applicable Foreign Subsidiary to promptly take all actions required by the applicable local law to permit such repatriation), and once such repatriation of any of such affected Net Proceeds or Excess Cash Flow is permitted under the applicable local law, such repatriation will be immediately effected and such repatriated Net Proceeds or Excess Cash Flow will be promptly (and in any event not later than two Business Days after such repatriation) applied (net of additional taxes payable or reserved against as a result thereof) to the repayment of the Term Loans pursuant to this Section 2.05 and (ii) to the extent that the Borrower has determined in good faith that repatriation of any of or all the Net Proceeds of any Foreign Disposition or Foreign Subsidiary Excess Cash Flow would have material adverse tax cost consequences with respect to such Net Proceeds or Excess Cash Flow, such Net Proceeds or Excess Cash Flow so affected may be retained by the applicable Foreign Subsidiary; provided that, in the case of this clause (ii), on or before the date on which any such Net Proceeds so retained would otherwise have been required to be applied to reinvestments or prepayments pursuant to Section 2.05(b) or any such Excess Cash Flow would have been required to be applied to prepayments pursuant to Section 2.05(b), the Borrower applies an amount equal to such Net Proceeds or Excess Cash Flow to such reinvestments or prepayments, as applicable, as if such Net Proceeds or Excess Cash Flow had been received by the Borrower rather than such Foreign Subsidiary, less the amount of additional taxes that would have been payable or reserved against if such Net Proceeds or Excess Cash Flow had been repatriated (or, if less, the Net Proceeds or Excess Cash Flow that would be calculated if received by such Foreign Subsidiary).

(ix) Prepayment Premium . At the time of the effectiveness of any Repricing Transaction that is consummated prior to the first anniversary of the Closing Date, the Borrower agrees to pay to the Administrative Agent, for the ratable account of each Term Lender with outstanding Term Loans which are repaid, prepaid or amended pursuant to such Repricing Transaction (including each Term Lender that withholds its consent (to the extent such consent is required) to such Repricing Transaction and is replaced pursuant to Section 3.07), a fee in an amount equal to 1.0% of (x) in the case of a Repricing Transaction of the type described in clause (a) of the definition

 

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thereof, the aggregate principal amount of all Term Loans prepaid (or replaced) in connection with such Repricing Transaction and (y) in the case of a Repricing Transaction described in clause (b) of the definition thereof, the aggregate principal amount of all Term Loans outstanding on such date that are subject to an effective reduction of the Applicable Rate pursuant to such Repricing Transaction. Such fees shall be due and payable upon the date of the effectiveness of such Repricing Transaction.

Section 2.06. Termination or Reduction of Commitments .

(a) Optional . The Borrower may, upon written notice to the Administrative Agent, terminate the unused Commitments of any Class, or from time to time permanently reduce the unused Commitments of any Class, in each case without premium or penalty; provided that (i) any such notice shall be received by the Administrative Agent three (3) Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in a minimum aggregate amount of $100,000, as applicable, or any whole multiple of $100,000 in excess thereof and (iii) if, after giving effect to any reduction of the Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Revolving Credit Facility, such sublimit shall be automatically reduced by the amount of such excess. The amount of any such Commitment reduction shall not otherwise be applied to the Letter of Credit Sublimit or the Swing Line Sublimit unless otherwise specified by the Borrower. Notwithstanding the foregoing, the Borrower may rescind or postpone any notice of termination of the Commitments if such termination would have resulted from a refinancing of all of the Facilities, which refinancing shall not be consummated or otherwise shall be delayed.

(b) Mandatory . The Term Commitment of each Term Lender shall be automatically and permanently reduced to $0 upon the funding of Term Loans to be made by it on the Closing Date or if the Closing Date does not occur on or prior to 5:00 p.m. (New York, New York time) on January 30, 2012. The Revolving Credit Commitment of each Revolving Credit Lender shall automatically and permanently terminate on the Maturity Date of the Revolving Credit Facility.

(c) Application of Commitment Reductions; Payment of Fees . The Administrative Agent will promptly notify the Lenders of any termination or reduction of unused portions of the Letter of Credit Sublimit or the Swing Line Sublimit or the unused Commitments of any Class under this Section 2.06. Upon any reduction of unused Commitments of any Class, the Commitment of each Lender of such Class shall be reduced by such Lender’s Pro Rata Share of the amount by which such Commitments are reduced (other than the termination of the Commitment of any Lender as provided in Section 3.07). All commitment fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination.

Section 2.07. Repayment of Loans .

(a) Term Loans . The Borrower shall repay to the Administrative Agent for the ratable account of the Term Lenders (i) on the last Business Day of each March, June, September and December, commencing with the first full quarter after the Closing Date, an aggregate amount equal to 0.25% of the aggregate principal amount of all Term Loans outstanding on the Closing Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.05) and (ii) on the Maturity Date for the Term Loans, the aggregate principal amount of all Term Loans outstanding on such date.

(b) Revolving Credit Loans . The Borrower shall repay to the Administrative Agent for the ratable account of the Appropriate Lenders on the Maturity Date for the Revolving Credit Facility the aggregate principal amount of all of the Borrower’s Revolving Credit Loans under such Facility outstanding on such date.

(c) Swing Line Loans . The Borrower shall repay the aggregate principal amount of its Swing Line Loans on the earlier to occur of (i) the date five (5) Business Days after such Loan is made and (ii) the Maturity Date for the Revolving Credit Facility.

 

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Section 2.08. Interest .

(a) Subject to the provisions of Section 2.08(b), (i) each Eurocurrency Rate Loan (which shall not include any Swing Line Loan) shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurocurrency Rate, for such Interest Period plus the Applicable Rate; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate for Revolving Credit Loans.

(b) During the continuance of a Default under Section 8.01(a), the Borrower shall pay interest on past due amounts owing by it hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws; provided that no interest at the Default Rate shall accrue or be payable to a Defaulting Lender so long as such Lender shall be a Defaulting Lender. Accrued and unpaid interest on such amounts (including interest on past due interest) shall be due and payable upon demand.

(c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

Section 2.09. Fees .

In addition to certain fees described in Sections 2.03(h) and (i):

(a) Commitment Fee . The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender under each Facility in accordance with its Pro Rata Share, a commitment fee equal to the Applicable Rate with respect to commitment fees times the actual daily amount by which the aggregate Revolving Credit Commitment exceeds the sum of (A) the Outstanding Amount of Revolving Credit Loans (which shall exclude, for the avoidance of doubt, any Swing Line Loans) and (B) the Outstanding Amount of L/C Obligations; provided that (x) any commitment fee accrued with respect to any of the Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such commitment fee shall otherwise have been due and payable by the Borrower prior to such time and (y) no commitment fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. The commitment fee on the Revolving Credit Facility shall accrue at all times from the Closing Date until the Maturity Date for the Revolving Credit Facility with respect to such Commitments, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date during the first full fiscal quarter to occur after the Closing Date, and on the Maturity Date for the Revolving Credit Facility. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

(b) Other Fees . The Borrower shall pay to the Agents such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever (except as expressly agreed between the Borrower and the applicable Agent).

(c) Closing Fees . The Borrower agrees to pay on the Closing Date to the Administrative Agent, for the account of each Lender party to this Agreement on the Closing Date, as fee compensation for the funding of such Lender’s Term Loan and/or providing a Revolving Credit Commitment, as applicable, a closing fee (the “ Closing Fee ”) in an amount equal to 1% of the stated principal amount of such Lender’s Term Loan made on the Closing Date and, with respect to the Revolving Credit Commitments, the amount

 

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that is set forth in the Fee Letters described in clause (ii) in the definition of “Fee Letters.” Such Closing Fee will be in all respects fully earned, due and payable on the Closing Date and non-refundable and non-creditable thereafter and, in the case of the Term Loans, such Closing Fee shall be netted against Term Loans made by such Lender.

Section 2.10. Computation of Interest and Fees .

All computations of interest for Base Rate Loans shall be made on the basis of a year of three hundred sixty-five (365) days, or three hundred sixty-six (366) days, as applicable, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a three hundred and sixty (360) day year and actual days elapsed. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one (1) day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

Section 2.11. Evidence of Indebtedness .

(a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and evidenced by one or more entries in the Register maintained by the Administrative Agent, acting solely for purposes of Treasury Regulation Section 5f.103-1(c), as non-fiduciary agent for the Borrower, in each case in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be prima facie evidence absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note payable to such Lender, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

(b) In addition to the accounts and records referred to in Section 2.11(a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records and, in the case of the Administrative Agent, entries in the Register, evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

(c) Entries made in good faith by the Administrative Agent in the Register pursuant to Sections 2.11(a) and (b), and by each Lender in its account or accounts pursuant to Sections 2.11(a) and (b), shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement and the other Loan Documents, absent manifest error; provided that the failure of the Administrative Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement and the other Loan Documents.

Section 2.12. Payments Generally .

(a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agent’s Office in Same Day Funds not later than 11:00 a.m. (New York City time) on the date specified herein. The Administrative Agent will promptly distribute to each

 

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Lender its Pro Rata Share (or other applicable share as provided in Section 2.05(b)(vi) or as otherwise provided herein) of such payment in like funds as received by wire transfer to such Lender’s applicable Lending Office. All payments received by the Administrative Agent after 11:00 a.m. (New York City time), shall in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.

(b) If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be; provided that, if such extension would cause payment of interest on or principal of Eurocurrency Rate Loans to be made in the next succeeding calendar month, such payment shall be made on the immediately preceding Business Day.

(c) Unless the Borrower or any Lender has notified the Administrative Agent, prior to the date any payment is required to be made by it to the Administrative Agent hereunder, that the Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in Same Day Funds, then:

(i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in Same Day Funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in Same Day Funds at the applicable Federal Funds Rate from time to time in effect; and

(ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in Same Day Funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the Borrower to the date such amount is recovered by the Administrative Agent (the “ Compensation Period ”) at a rate per annum equal to the greater of (x) the applicable Federal Funds Rate from time to time in effect and (y) a rate determined by the Administrative Agent in accordance with banking rules governing interbank compensation. When such Lender makes payment to the Administrative Agent (together with all accrued interest thereon), then such payment amount (excluding the amount of any interest which may have accrued and been paid in respect of such late payment) shall constitute such Lender’s Loan included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder.

A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this Section 2.12(c) shall be conclusive, absent manifest error.

(d) If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

(e) The obligations of the Lenders hereunder to make Loans and to fund participations in Letters of Credit and Swing Line Loans are several and not joint. The failure of any Lender to make any Loan or to fund any such participation on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or purchase its participation.

 

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(f) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

(g) Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Administrative Agent and the Lenders under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent and the Lenders in the order of priority set forth in Section 8.04. If the Administrative Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the manner in which such funds are to be applied, the Administrative Agent may (to the fullest extent permitted by mandatory provisions of applicable Law), but shall not be obligated to, elect to distribute such funds to each of the Lenders in accordance with such Lender’s Pro Rata Share of the sum of (a) the Outstanding Amount of all Loans outstanding at such time and (b) the Outstanding Amount of all L/C Obligations outstanding at such time, in repayment or prepayment of such of the outstanding Loans or other Obligations then owing to such Lender.

(h) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.02(b), 2.03(c), 2.04(c), 2.12(c) or 2.13, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

Section 2.13. Sharing of Payments .

If, other than as expressly provided in Section 2.05(b)(vi), Section 7.03(r)(ii) or as otherwise provided elsewhere herein, any Lender shall obtain on account of the Loans made by it, or the participations in L/C Obligations and Swing Line Loans held by it, any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them and/or such subparticipations in the participations in L/C Obligations or Swing Line Loans held by them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans or such participations, as the case may be, pro rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), 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 ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) 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, without further interest thereon. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by applicable Law, exercise all its rights of payment (including the right of setoff, but subject to Section 10.09) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.13 and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section 2.13 shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.

Section 2.14. Incremental Credit Extensions .

(a) The Borrower may at any time or from time to time after the Closing Date, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request (a) one or more additional tranches or additions to an existing tranche of term loans (the “ Incremental Term Loans ”) and/or (b) one or more increases in the amount of the Revolving Credit Commitments on the same terms as the Revolving Credit Facility (except for interest rate margins and commitment fees as set forth below) (a “ Revolving

 

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Commitment Increase ”), in an aggregate principal amount not to exceed (x) $135,000,000 and (y) such additional amount so long as on a Pro Forma Basis after giving effect to the incurrence of such Incremental Term Loan or any borrowing under such Revolving Commitment Increase (and for purposes of any calculations under this Section 2.14 (A) the cash proceeds of such Incremental Term Loans shall be excluded for purposes of calculating Consolidated First Lien Net Debt and (B) all Revolving Commitment Increase shall be deemed to be fully drawn), the Borrower’s Consolidated First Lien Net Leverage Ratio would be no greater than 3.00 to 1.00 (excluding, for purposes of calculating such ratio under this clause (y), Revolving Credit Loans borrowed for seasonal working capital requirements in an amount not to exceed $50,000,000); provided that (i) both at the time of any such request and upon the effectiveness of any Incremental Amendment referred to below, no Event of Default shall exist and at the time that any such Incremental Term Loan is made (and after giving effect thereto) no Event of Default shall exist and (ii) the Borrower shall be in compliance with the covenants set forth in Section 7.11 determined on a Pro Forma Basis as of the date of the most recently ended Test Period (or, if no Test Period cited in Section 7.11 has passed, the covenants in Section 7.11 for the first Test Period cited in such Section shall be satisfied as of the last four quarters ended), in each case, as if such Incremental Term Loans or any borrowings under any such Revolving Commitment Increases, as applicable, had been outstanding on the last day of such fiscal quarter of the Borrower for testing compliance therewith. Each tranche of (i) Incremental Term Loans shall be in an aggregate principal amount that is not less than $10,000,000 and shall be in an increment of $1,000,000 in excess thereof ( provided that such amount may be less than $1,000,000 if such amount represents all remaining availability under the limit set forth in the next sentence and (ii) Revolving Commitment Increases shall be in an aggregate principal amount that is not less than $5,000,000 and shall be in an increment of $1,000,000 in excess thereof ( provided that such amount may be less than $1,000,000 if such amount represents all remaining availability under the limit set forth in the next sentence). The Incremental Term Loans (a) shall rank pari passu in right of payment and of security with the Revolving Credit Loans and the Term Loans, (b) shall not mature earlier than the Maturity Date with respect to the Term Loans and (c) shall have a Weighted Average Life to Maturity not shorter than the remaining Weighted Average Life to Maturity of then-existing Term Loans, and the Applicable Rate for any Incremental Facility and, subject to clause (c) above, amortization for the Incremental Term Loans shall be determined by the Borrower and the applicable new Lenders; provided , however , that the Effective Yield for any Incremental Facility, shall not be greater than the Effective Yield with respect to Term Loans or Revolving Credit Loans, as the case may be plus 50 basis points (unless the interest rate margins applicable to the Term Loans or Revolving Credit Loans, respectively, are increased to the extent necessary to achieve the foregoing); provided that except as provided above, the terms and conditions applicable to Incremental Term Loans may be materially different from those of the Term Loans to the extent such differences are reasonably satisfactory to the Administrative Agent. Each notice from the Borrower pursuant to this Section 2.14 shall set forth the requested amount and proposed terms of the relevant Incremental Term Loans or Revolving Commitment Increases. Incremental Term Loans may be made, and Revolving Commitment Increases may be provided, by any existing Lender (but each existing Lender will not have an obligation to make a portion of any Incremental Term Loan or any portion of any Revolving Commitment Increase) or by any other bank or other financial institution (any such other bank or other financial institution being called an “ Additional Lender ”), provided that the Administrative Agent, L/C Issuer and/or Swing Line Lender, as applicable, shall have consented (not to be unreasonably withheld, conditioned or delayed) to such Lender’s or Additional Lender’s making such Incremental Term Loans or providing such Revolving Commitment Increases to the extent any such consent would be required under Section 10.07(b) for an assignment of Loans or Revolving Credit Commitments, as applicable, to such Lender or Additional Lender. Commitments in respect of Incremental Term Loans and Revolving Commitment Increases shall become Commitments (or in the case of a Revolving Commitment Increase to be provided by an existing Revolving Credit Lender, an increase in such Lender’s applicable Revolving Credit Commitment) under this Agreement pursuant to an amendment (an “ Incremental Amendment ”) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Lender agreeing to provide such Commitment, if any, each Additional Lender, if any, and the Administrative Agent. The Incremental Amendment may, without the consent of Borrower, or any other Loan Party, Agents or Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.14. No Lender shall be obligated to provide any Incremental Term Loans or Revolving Commitment Increases, unless it so agrees. Upon each increase in the Revolving Credit Commitments pursuant to this Section 2.14, (a) if the increase relates to the Revolving Credit Facility, each Revolving Credit Lender immediately prior to such increase will automatically and without further act be deemed to have assigned to each Lender providing a portion of the Revolving Commitment Increase (each, a “ Revolving Commitment Increase Lender ”), and each such Revolving Commitment Increase Lender will automatically and without further act be deemed to have assumed (in the case of an increase to the Revolving Credit Facility only), a

 

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portion of such Revolving Credit Lender’s participations hereunder in outstanding Letters of Credit and Swing Line Loans such that, after giving effect to each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding (i) participations hereunder in Letters of Credit and (ii) participations hereunder in Swing Line Loans held by each Revolving Credit Lender (including each such Revolving Commitment Increase Lender) will equal the percentage of the aggregate Revolving Credit Commitments of all Revolving Credit Lenders represented by such Revolving Credit Lender’s Revolving Credit Commitment and (b) if, on the date of such increase, there are any Revolving Credit Loans under the applicable Facility outstanding, such Revolving Credit Loans shall on or prior to the effectiveness of such Revolving Commitment Increase be prepaid from the proceeds of additional Revolving Credit Loans made hereunder (reflecting such increase in Revolving Credit Commitments), which prepayment shall be accompanied by accrued interest on the Revolving Credit Loans being prepaid and any costs incurred by any Lender in accordance with Section 3.05. The Administrative Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.

(b) This Section 2.14 shall supersede any provisions in Section 2.13 or 10.01 to the contrary.

Section 2.15. Defaulting Lender .

(a) Reallocation of Defaulting Lender Commitment . If a Lender becomes, and during the period it remains, a Defaulting Lender, the following provisions shall apply with respect to any outstanding L/C Obligations and any outstanding Swing Line Loans:

(i) the Pro Rata Share of such Defaulting Lender with respect to any L/C Obligations and any outstanding Swing Line Loans will, subject to the limitation in the first proviso below, automatically be reallocated (effective on the date such Lender becomes a Defaulting Lender) among the Revolving Credit Lenders that are Non-Defaulting Lenders pro rata in accordance with their respective Revolving Credit Commitments; provided that (A) the sum of each Non-Defaulting Lender’s Pro Rata Share of the Revolving Credit Exposure may not in any event exceed the Revolving Credit Commitment of such Non-Defaulting Lender as in effect at the time of such reallocation and (B) neither such reallocation nor any payment by a Non-Defaulting Lender pursuant thereto will constitute a waiver or release of any claim any Borrower, the Administrative Agent, any L/C Issuer, any Swing Line Lender or any other Lender may have against such Defaulting Lender or cause such Defaulting Lender to be a Non-Defaulting Lender;

(ii) to the extent that any portion (the “ unreallocated portion ”) of the Pro Rata Share of such Defaulting Lender with respect to any L/C Obligations and any outstanding Swing Line Loans cannot be so reallocated, the Borrower will promptly, and in no event later than 1 Business Day after any demand by the Administrative Agent (at the direction of the L/C Issuer and/or the Swing Line Lender, as the case may be), (A)(x) cash collateralize the obligations of the Borrower to the L/C Issuer in respect of such L/C Obligations, in an amount at least equal to the aggregate amount of the unreallocated portion of such L/C Obligations on terms acceptable to the Administrative Agent and the L/C Issuer and (y) in the case of such outstanding Swing Line Loans, prepay (subject to clause (iii) below) and/or cash collateralize (on terms reasonably acceptable to the Administrative Agent and such Swing Line Lender) in full the unreallocated portion thereof, or (B) make other arrangements reasonably satisfactory to the Administrative Agent, and to the L/C Issuer and the Swing Line Lender, as the case may be, in their sole discretion to protect them against the risk of non-payment by such Defaulting Lender; and

(iii) any amount paid by the Borrower for the account of a Defaulting Lender under this Agreement (whether on account of principal, interest, fees, indemnity payments or other amounts) will not be paid or distributed to such Defaulting Lender, but will instead be retained by the Administrative Agent in a segregated, non-interest bearing account until (subject to Section 2.14) the termination of the Commitments and payment in full of all Obligations of the Borrower hereunder and will be applied by the Administrative Agent, to the fullest extent permitted by law, to the making of payments from time to time in the following order of priority: first to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent under this Agreement, second to the payment of any amounts owing by such Defaulting Lender to the L/C Issuer or the Swing Line Lender (pro rata as to the respective amounts owing to each of them) under this Agreement, third to the payment of post-default interest and then current interest due

 

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and payable to the Lenders hereunder other than Defaulting Lenders, ratably among them in accordance with the amounts of such interest then due and payable to them, fourth to the payment of fees then due and payable to the Non-Defaulting Lenders hereunder, ratably among them in accordance with the amounts of such fees then due and payable to them, fifth to pay principal and Reimbursement Obligations then due and payable to the Non-Defaulting Lenders hereunder ratably in accordance with the amounts thereof then due and payable to them, sixth to the ratable payment of other amounts then due and payable to the Non-Defaulting Lenders, and seventh after the termination of the Commitments and payment in full of all Obligations of the Borrower hereunder, to pay amounts owing under this Agreement to such Defaulting Lender or as a court of competent jurisdiction may otherwise direct.

(b) Termination of Defaulting Lender Commitments . The Borrower may terminate the unused amount of the Commitment of a Defaulting Lender upon not less than 3 Business Days’ prior notice to the Administrative Agent (which will promptly notify the Lenders thereof), and in such event the provisions of Sections 2.10 and 2.12 will apply to all amounts thereafter paid by the Borrower for the account of such Defaulting Lender under this Agreement (whether on account of principal, interest, fees, indemnity or other amounts); provided that such termination will not be deemed to be a waiver or release of any claim the Borrower, the Administrative Agent, the L/C Issuer, the Swing Line Lender or any Lender may have against such Defaulting Lender.

(c) Cure . If the Borrower, Administrative Agent, the L/C Issuer and the Swing Line Lender agree in writing that a Lender that is a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the closing date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any amounts then held in the segregated account referred to in Section 2.15(a)), (i) such Lender will, to the extent applicable, purchase such portion of outstanding Loans of the other Lenders and/or make such other adjustments as the Administrative Agent may determine to be necessary to cause such Lender’s Pro Rata Share to be on a pro rata basis in accordance with their respective Commitment, whereupon such Lender will cease to be a Defaulting Lender and will be a Non-Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender and (ii) the cash collateral requirements set forth in this Section 2.15 will terminate and the L/C Issuer and Swing Line Lender will cause any cash collateral posted with respect to their respective L/C Obligations or Swing Line Loans, as the case may be, to be returned to the Borrower subject to any terms relating to such cash collateral; and provided , further , that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender having been a Defaulting Lender.

(d) Notices . The Administrative Agent will promptly send to each Lender and L/C Issuer a copy of any notice to the Borrower provided for in this Section 2.15.

Section 2.16. Refinancing Amendments .

(a) On one or more occasions after the Closing Date, the Borrower may obtain, from any Lender or any Additional Refinancing Lender, Indebtedness to refinance or replace all or any portion of the Term Loans and the Revolving Credit Loans (or unused Revolving Credit Commitments) then outstanding under this Agreement (which for all purposes of this clause (a) will be deemed to include any then outstanding Other Term Loans, Incremental Term Loans, Other Revolving Credit Commitments or Other Revolving Credit Loans), in the form of Other Term Loans, Other Term Loan Commitments, Other Revolving Credit Commitments, or Other Revolving Credit Loans pursuant to a Refinancing Amendment; provided that notwithstanding anything to the contrary in this Section 2.16 or otherwise, (i) the Other Term Loans and Other Revolving Credit Loans shall rank pari passu in right of payment and of security with the Term Loans and Revolving Credit Loans, respectively, (ii) the Other Term Loans shall not mature earlier than the Maturity Date with respect to the Term Loans being refinanced and shall have a Weighted Average Life to Maturity not shorter than the remaining Weighted Average Life to Maturity of the Term Loans being refinanced and (iii) the other terms and conditions of such Other Term Loans, Other Revolving Credit Commitments and Other Revolving Loans (excluding pricing, fees, rate floors and optional prepayment or redemption terms) shall, taken as a whole, be not materially more favorable to the lenders providing such Other Term Loans, Other Revolving Credit Commitments and Other Revolving Loans, as applicable, than, those applicable to the Term Loans or Revolving Credit Commitments being refinanced (except for covenants or other provisions applicable only to periods after the Latest Maturity Date).

 

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(b) The effectiveness of any Refinancing Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.01 and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of (i) customary legal opinions, board resolutions and officers’ certificates consistent with those delivered on the Closing Date other than changes to such legal opinion resulting from a change in law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent and (ii) reaffirmation agreements and/or such amendments to the Collateral Documents (which may be on a post-closing basis if agreed to by the Administrative Agent in its sole discretion) as may be reasonably requested by the Administrative Agent in order to ensure that such Indebtedness is provided with the benefit of the applicable Loan Documents.

(c) Each issuance of Indebtedness under Section 2.16(a) shall be in an aggregate principal amount that is (x) not less than $10,000,000 and (y) an integral multiple of $1,000,000 in excess thereof.

(d) Each of the parties hereto hereby agrees that this Agreement and the other Loan Documents may be amended pursuant to a Refinancing Amendment, without the consent of any other Lenders, to the extent (but only to the extent) necessary to (i) reflect the existence and terms of the Indebtedness incurred pursuant thereto and (ii)make such other changes to this Agreement and the other Loan Documents consistent with the provisions and intent of the third paragraph of Section 10.01 (without the consent of the Required Lenders called for therein) and (iii) effect such other amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.16, and the Required Lenders hereby expressly authorize the Administrative Agent to enter into any such Refinancing Amendment.

Section 2.17. Extension of Term Loans; Extension of Revolving Credit Loans .

(a) Extension of Term Loans . The Borrower may at any time and from time to time request that all or a portion of the Term Loans of a given Class (each, an “ Existing Term Loan Tranche ”) be amended to extend the scheduled maturity date(s) with respect to all or a portion of any principal amount of such Term Loans (any such Term Loans which have been so amended, “ Extended Term Loans ”) and to provide for other terms consistent with this Section 2.17. In order to establish any Extended Term Loans, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders under the applicable Existing Term Loan Tranche) (each, a “ Term Loan Extension Request ”) setting forth the proposed terms of the Extended Term Loans to be established, which shall (x) be identical as offered to each Lender under such Existing Term Loan Tranche (including as to the proposed interest rates and fees payable) and offered pro rata to each Lender under such Existing Term Loan Tranche and (y) be identical to the Term Loans under the Existing Term Loan Tranche from which such Extended Term Loans are to be amended, except that: (i) all or any of the scheduled amortization payments of principal of the Extended Term Loans may be delayed to later dates than the scheduled amortization payments of principal of the Term Loans of such Existing Term Loan Tranche, to the extent provided in the applicable Extension Amendment; provided , however , that at no time shall there be Classes of Term Loans hereunder (including Incremental Term Loans, Other Term Loans and Extended Term Loans) with more than five (5) different Maturity Dates; (ii) the Effective Yield with respect to the Extended Term Loans (whether in the form of interest rate margin, upfront fees, original issue discount or otherwise) may be different than the Effective Yield for the Term Loans of such Existing Term Loan Tranche, in each case, to the extent provided in the applicable Extension Amendment; (iii) the Extension Amendment may provide for other covenants and terms that apply solely to any period after the Latest Maturity Date that is in effect on the effective date of the Extension Amendment (immediately prior to the establishment of such Extended Term Loans); (iv) Extended Term Loans may have call protection as may be agreed by the Borrower and the Lenders thereof; provided that no Extended Term Loans may be optionally prepaid prior to the date on which all Term Loans with an earlier final stated maturity (including Term Loans under the Existing Term Loan Tranche from which they were amended) are repaid in full, unless such optional prepayment is accompanied by a pro rata optional prepayment of such other Term Loans and (v) any Extended Term Loans may participate on a pro rata basis or less than a pro rata basis (but not greater than a pro rata basis) in any voluntary or mandatory repayments or prepayments hereunder, in each case as specified in the respective Term Loan Extension Request; provided , however , that (A) no Default shall have occurred and be continuing at the time a Term Loan Extension

 

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Request is delivered to Lenders, (B) any such Extended Term Loans (and the Liens securing the same) shall be permitted by the terms of the Intercreditor Agreements (to the extent any Intercreditor Agreement is then in effect), and (C) all documentation in respect of such Extension Amendment shall be consistent with the foregoing. Any Extended Term Loans amended pursuant to any Term Loan Extension Request shall be designated a series (each, a “ Term Loan Extension Series ”) of Extended Term Loans for all purposes of this Agreement; provided that any Extended Term Loans amended from an Existing Term Loan Tranche may, to the extent provided in the applicable Extension Amendment, be designated as an increase in any previously established Term Loan Extension Series with respect to such Existing Term Loan Tranche. Each Term Loan Extension Series of Extended Term Loans incurred under this Section 2.17 shall be in an aggregate principal amount that is not less than $25,000,000.

(b) Extension of Revolving Credit Commitments . The Borrower may, on behalf of the Borrowers, at any time and from time to time request that all or a portion of the Revolving Credit Commitments of a given Class (each, an “ Existing Revolver Tranche ”) be amended to extend the Maturity Date with respect to all or a portion of any principal amount of such Revolving Credit Commitments (any such Revolving Credit Commitments which have been so amended, “ Extended Revolving Credit Commitments ”) and to provide for other terms consistent with this Section 2.17. In order to establish any Extended Revolving Credit Commitments, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders under the applicable Existing Revolver Tranche) (each, a “ Revolver Extension Request ”) setting forth the proposed terms of the Extended Revolving Credit Commitments to be established, which shall (x) be identical as offered to each Lender under such Existing Revolver Tranche (including as to the proposed interest rates and fees payable) and offered pro rata to each Lender under such Existing Revolver Tranche and (y) be identical to the Revolving Credit Commitments under the Existing Revolver Tranche from which such Extended Revolving Credit Commitments are to be amended, except that: (i) the Maturity Date of the Extended Revolving Credit Commitments may be delayed to a later date than the Maturity Date of the Revolving Credit Commitments of such Existing Revolver Tranche, to the extent provided in the applicable Extension Amendment; provided , however , that at no time shall there be Classes of Revolving Credit Commitments hereunder (including Extended Revolving Credit Commitments) which have more than five (5) different Maturity Dates; (ii) the Effective Yield with respect to extensions of credit under the Extended Revolving Credit Commitments (whether in the form of interest rate margin, upfront fees, original issue discount or otherwise) may be different than the Effective Yield for extensions of credit under the Revolving Credit Commitments of such Existing Revolver Tranche, in each case, to the extent provided in the applicable Extension Amendment and (iii) the Extension Amendment may provide for other covenants and terms that apply solely to any period after the Latest Maturity Date that is in effect on the effective date of the Extension Amendment (immediately prior to the establishment of such Extended Revolving Credit Commitments); provided , further , that (A) no Default shall have occurred and be continuing at the time a Revolver Extension Request is delivered to Lenders, (B) in no event shall the final maturity date of any Extended Revolving Credit Commitments of a given Revolver Extension Series at the time of establishment thereof be earlier than the then Latest Maturity Date of any other Revolving Credit Commitments hereunder, (C) any such Extended Revolving Credit Commitments (and the Liens securing the same) shall be permitted by the terms of the Intercreditor Agreements (to the extent any Intercreditor Agreement is then in effect) and (D) all documentation in respect of such Extension Amendment shall be consistent with the foregoing. Any Extended Revolving Credit Commitments amended pursuant to any Revolver Extension Request shall be designated a series (each, a “ Revolver Extension Series ”) of Extended Revolving Credit Commitments for all purposes of this Agreement; provided that any Extended Revolving Credit Commitments amended from an Existing Revolver Tranche may, to the extent provided in the applicable Extension Amendment, be designated as an increase in any previously established Revolver Extension Series with respect to such Existing Revolver Tranche. Each Revolver Extension Series of Extended Revolving Credit Commitments incurred under this Section 2.17 shall be in an aggregate principal amount that is not less than $5,000,000.

(c) Extension Request . The Borrower shall provide the applicable Extension Request at least five (5) Business Days prior to the date on which Lenders under the Existing Term Loan Tranche or Existing Revolver Tranche, as applicable, are requested to respond, and shall agree to such procedures, if any, as may be established by, or acceptable to, the Administrative Agent, in each case acting reasonably to accomplish the purposes of this Section 2.17. No Lender shall have any obligation to agree to have any of its Term Loans of any Existing Term Loan Tranche amended into Extended Term Loans or any of its Revolving Credit Commitments amended into Extended Revolving Credit Commitments, as applicable, pursuant to any Extension Request. Any Lender holding a Loan under an Existing Term Loan Tranche (each, an “ Extending Term Lender ”) wishing to have all or a portion of its Term Loans under the Existing Term Loan Tranche subject to such Extension Request amended into Extended

 

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Term Loans and any Revolving Credit Lender (each, an “ Extending Revolving Credit Lender ”) wishing to have all or a portion of its Revolving Credit Commitments under the Existing Revolver Tranche subject to such Extension Request amended into Extended Revolving Credit Commitments, as applicable, shall notify the Administrative Agent (each, an “ Extension Election ”) on or prior to the date specified in such Extension Request of the amount of its Term Loans under the Existing Term Loan Tranche or Revolving Credit Commitments under the Existing Revolver Tranche, as applicable, which it has elected to request be amended into Extended Term Loans or Extended Revolving Credit Commitments, as applicable (subject to any minimum denomination requirements imposed by the Administrative Agent). In the event that the aggregate principal amount of Term Loans under the Existing Term Loan Tranche or Revolving Credit Commitments under the Existing Revolver Tranche, as applicable, in respect of which applicable Term Lenders or Revolving Credit Lenders, as the case may be, shall have accepted the relevant Extension Request exceeds the amount of Extended Term Loans or Extended Revolving Credit Commitments, as applicable, requested to be extended pursuant to the Extension Request, Term Loans or Revolving Credit Commitments, as applicable, subject to Extension Elections shall be amended to Extended Term Loans or Revolving Credit Commitments, as applicable, on a pro rata basis (subject to rounding by the Administrative Agent, which shall be conclusive) based on the aggregate principal amount of Term Loans or Revolving Credit Commitments, as applicable, included in each such Extension Election.

(d) Extension Amendment . Extended Term Loans and Extended Revolving Credit Commitments shall be established pursuant to an amendment (each, a “ Extension Amendment ”) to this Agreement among the Borrower, the Administrative Agent and each Extending Term Lender or Extending Revolving Credit Lender, as applicable, providing an Extended Term Loan or Extended Revolving Credit Commitment, as applicable, thereunder, which shall be consistent with the provisions set forth in Section 2.17(a) or (b) above, respectively (but which shall not require the consent of any other Lender). The effectiveness of any Extension Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.01 and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of (i) legal opinions, board resolutions and officers’ certificates consistent with those delivered on the Closing Date other than changes to such legal opinion resulting from a change in law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent and (ii) reaffirmation agreements and/or such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent in order to ensure that the Extended Term Loans or Extended Revolving Credit Commitments, as applicable, are provided with the benefit of the applicable Loan Documents (which may, if agreed to by the Administrative Agent, be done on a post-closing basis). The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Extension Amendment. Each of the parties hereto hereby agrees that this Agreement and the other Loan Documents may be amended pursuant to an Extension Amendment, without the consent of any other Lenders, to the extent (but only to the extent) necessary to (i) reflect the existence and terms of the Extended Term Loans or Extended Revolving Credit Commitments, as applicable, incurred pursuant thereto, (ii) modify the scheduled repayments set forth in Section 2.07 with respect to any Existing Term Loan Tranche subject to an Extension Election to reflect a reduction in the principal amount of the Term Loans thereunder in an amount equal to the aggregate principal amount of the Extended Term Loans amended pursuant to the applicable Extension (with such amount to be applied ratably to reduce scheduled repayments of such Term Loans required pursuant to Section 2.07), (iii) modify the prepayments set forth in Section 2.05 to reflect the existence of the Extended Term Loans and the application of prepayments with respect thereto, (iv) make such other changes to this Agreement and the other Loan Documents consistent with the provisions and intent of the second paragraph of Section 10.01 (without the consent of the Required Lenders called for therein) and (v) effect such other amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.17, and the Required Lenders hereby expressly authorize the Administrative Agent to enter into any such Extension Amendment.

(e) No conversion of Loans pursuant to any Extension in accordance with this Section 2.17 shall constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.

 

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ARTICLE III

Taxes, Increased Costs Protection and Illegality

Section 3.01. Taxes .

(a) Unless required by applicable Laws (as determined in good faith by the applicable withholding agent), any and all payments made by or on account of any Loan Party under any Loan Document shall be made free and clear of and without deduction for Taxes. If the Loan Party or other applicable withholding agent shall be required by any Laws to withhold or deduct any Indemnified Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to any Agent or any Lender, (i) the sum payable by such Loan Party shall be increased as necessary so that after all required deductions (including deductions applicable to additional sums payable under this Section 3.01) have been made, each of such Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable withholding agent shall make such deductions, (iii) the applicable withholding agent shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within thirty (30) days after the date of such payment (or, if receipts or evidence are not available within thirty (30) days, as soon as possible thereafter), if the relevant Loan Party is the applicable withholding agent, shall furnish to such Agent or Lender (as the case may be) the original or a copy of a receipt evidencing payment thereof or other evidence acceptable to such Agent or Lender.

(b) In addition, the Borrower agrees to pay any and all present or future stamp, court or documentary Taxes and any other excise, property, intangible or mortgage recording Taxes, or charges or levies of the same character, imposed by any Governmental Authority, which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document, other than any such Taxes that are imposed as a result of a Lender’s voluntary assignment in such Lender’s interest in the Loan hereunder, but only to the extent such assignment-related Taxes are imposed as a result of such Lender’s current or former connection with the jurisdiction imposing such Taxes (other than any connections arising from such Lender having executed, delivered, enforced, become a party to, performed its obligations or received payments under, received or perfected a security interest under, or engaged in any other transaction pursuant to, any Loan Document) (the “ Other Taxes ”).

(c) Each of the Loan Parties agrees to indemnify each Agent and each Lender for (i) the full amount of Indemnified Taxes and Other Taxes payable by such Agent or such Lender (whether or not such Taxes are correctly or legally imposed) and (ii) any expenses arising therefrom or with respect thereto, provided such Agent or Lender, as the case may be, provides the relevant Loan Party with a written statement thereof setting forth in reasonable detail the basis and calculation of such amounts. If the Borrower reasonably believes that such Indemnified Taxes or Other Taxes were not correctly or legally asserted, the Administrative Agent and each Lender and L/C Issuer will use reasonable efforts to cooperate with Borrower for the Borrower to file for and obtain a refund of such Indemnified Taxes or Other Taxes so long as such efforts would not, in the sole determination of the Administrative Agent, such Lender, or such L/C Issuer, result in any additional costs, expenses or risks or be otherwise disadvantageous to it.

(d) Each Lender shall, at such times as are reasonably requested by the Borrower or the Administrative Agent, provide the Borrower and the Administrative Agent with any documentation prescribed by Law certifying as to any entitlement of such Lender to an exemption from, or reduction in, withholding tax with respect to any payments to be made to such Lender under the Loan Documents. Each such Lender shall, whenever a lapse in time or change in circumstances renders such documentation obsolete, expired or inaccurate in any material respect, deliver promptly to the Borrower and the Administrative Agent updated or other appropriate documentation (including any new documentation reasonably requested by the applicable withholding agent) or promptly notify the Borrower and the Administrative Agent in writing of its inability to do so. Unless the applicable withholding agent has received forms or other documents satisfactory to it indicating that payments under any Loan Document to or for a Lender are not subject to withholding tax or are subject to such Tax at a rate reduced by an applicable tax treaty, the Borrower, the Administrative Agent or other applicable withholding agent shall withhold amounts required to be withheld by applicable Law from such payments at the applicable statutory rate. Without limiting the foregoing:

(i) Each Lender that is a United States person (as defined in Section 7701(a)(30) of the Code) shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement two properly completed and duly signed original copies of Internal Revenue Service Form W-9 (or any successor forms) certifying that such Lender is exempt from federal backup withholding.

 

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(ii) Each Lender that is not a United States person (as defined in Section 7701(a)(30) of the Code) shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent) whichever of the following is applicable:

(A) two properly completed and duly signed original copies of Internal Revenue Service Form W-8BEN (or any successor forms) claiming eligibility for the benefits of an income tax treaty to which the United States is a party, and such other documentation as required under the Code,

(B) two properly completed and duly signed original copies of Internal Revenue Service Form W-8ECI (or any successor forms),

(C) in the case of a Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (A) a certificate substantially in the form of Exhibit I hereto (any such certificate a “ United States Tax Compliance Certificate ”) to the effect that such Lender is not (1) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (2) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, (3) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (4) no payments in connection with any Loan Document are effectively connected with a United States trade or business conducted by such Lender and (B) two properly completed and duly signed original copies of Internal Revenue Service Form W-8BEN (or any successor forms),

(D) to the extent a Lender is not the beneficial owner (for example, where the Lender is a partnership, or is a Participant holding a participation granted by a participating Lender), two properly completed and duly signed original copies of Internal Revenue Service Form W-8IMY (or any successor forms) of the Lender, accompanied by a Form W-8ECI, W-8BEN, United States Tax Compliance Certificate, Form W-9, Form W-8IMY or any other required information from each beneficial owner, as applicable ( provided that, if the Lender is a partnership (and not a participating Lender) and one or more beneficial owners are claiming the portfolio interest exemption, the United States Tax Compliance Certificate may be provided by such Lender on behalf of such beneficial owner), or

(E) two properly completed and duly signed original copies of any other form prescribed by applicable U.S. federal income tax laws (including the Treasury Regulations) as a basis for claiming a complete exemption from, or a deduction in, United States federal withholding tax on any payments to such Lender under the Loan Documents.

Notwithstanding any other provision of this clause (d), a Lender shall not be required to deliver any form that such Lender is not legally eligible to deliver.

Each Lender shall deliver to the Borrower and the Administrative Agent two further original copies of any previously delivered form or certification (or any applicable successor form) on or before the date that any such form or certification expires or becomes obsolete or inaccurate and promptly after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower or the Administrative Agent, or promptly notify the Borrower and the Administrative Agent in writing that it is unable to do so. Each Lender shall promptly notify the Administrative Agent in writing at any time it determines that it is no longer in a position to provide any previously delivered form or certification to the Borrower or the Administrative Agent.

 

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(e) If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA, such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by Laws and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable Laws and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA, to determine whether such Lender has or has not complied with such Lender’s obligations under FATCA and, if necessary, to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this clause (e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

(f) Any Lender claiming any additional amounts payable pursuant to this Section 3.01 shall use its reasonable efforts to change the jurisdiction of its Lending Office (or take any other measures reasonably requested by the Borrower) if such a change or other measures would reduce any such additional amounts (or any similar amount that may thereafter accrue) and would not, in the sole determination of such Lender, result in any unreimbursed cost or expense or be otherwise materially disadvantageous to such Lender.

(g) If any Lender or Agent determines, in its sole discretion, that it has received a refund in respect of any Indemnified Taxes or Other Taxes as to which indemnification or additional amounts have been paid to it by any Loan Party pursuant to this Section 3.01, it shall promptly remit such refund to the Loan Party, net of all out-of-pocket expenses of the Lender or Agent, as the case may be and without interest (other than any interest paid by the relevant taxing authority with respect to such refund net of any Taxes payable by any Agent or Lender on such interest); provided that the Loan Party, upon the request of the Lender or Agent, as the case may be, agrees promptly to return such refund (plus any penalties, interest or other charges imposed by the relevant taxing authority) to such party in the event such party is required to repay such refund to the relevant taxing authority. This section shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to Taxes that it deems confidential) to the Borrower or any other person.

(h) For the avoidance of doubt, a “Lender” shall include, for all purposes of this Section 3.01, any L/C Issuer and any Swing Line Lender.

Section 3.02. Illegality .

If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurocurrency Rate Loans, or to determine or charge interest rates based upon the Eurocurrency Rate, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurocurrency Rate Loans or to convert Base Rate Loans to Eurocurrency Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all applicable Eurocurrency Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Rate Loans to such day, or promptly, if such Lender may not lawfully continue to maintain such Eurocurrency Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted and all amounts due, if any, in connection with such prepayment or conversion under Section 3.05. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.

Section 3.03. Inability to Determine Rates .

If the Administrative Agent or the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the applicable Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan, or that the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, or that Dollar deposits are not being offered to banks in the London interbank eurodollar, or other applicable,

 

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market for the applicable amount and the Interest Period of such Eurocurrency Rate Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurocurrency Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of such Eurocurrency Rate Loans or, failing that, will be deemed to have converted such request, if applicable, into a request for a Borrowing of Base Rate Loans in the amount specified therein.

Section 3.04. Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans .

(a) If any Lender reasonably determines that as a result of the introduction of or any change in or in the interpretation of any Law, in each case after the Closing Date, or such Lender’s compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Eurocurrency Rate Loans (or in the case of Taxes, any Loan) or (as the case may be) issuing or participating in Letters of Credit, or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this Section 3.04(a) any such increased costs or reduction in amount resulting from (i) Indemnified Taxes or Other Taxes for which additional amounts would be payable under Section 3.01(a) or which are indemnifiable under Section 3.01(c), or any Excluded Taxes or (ii) reserve requirements contemplated by Section 3.04(c)) and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining the Eurocurrency Rate Loan (or of maintaining its obligations to make any Loan), or to reduce the amount of any sum received or receivable by such Lender, then from time to time within fifteen (15) days after demand by such Lender setting forth in reasonable detail such increased costs (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction.

(b) If any Lender determines that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, in each case after the Closing Date, or compliance by such Lender (or its Lending Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender’s obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender’s desired return on capital), then from time to time upon demand of such Lender setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction within fifteen (15) days after receipt of such demand.

(c) The Borrower shall pay to each Lender, (i) as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Rate funds or deposits, additional interest on the unpaid principal amount of each applicable Eurocurrency Rate Loan of the Borrower equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive in the absence of manifest error), and (ii) as long as such Lender shall be required to comply with any reserve ratio requirement or analogous requirement of any other central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of any Eurocurrency Rate Loans of the Borrower, such additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to the actual costs allocated to such Commitment or Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error) which in each case shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least fifteen (15) days’ prior notice (with a copy to the Administrative Agent) of such additional interest or cost from such Lender. If a Lender fails to give notice fifteen (15) days prior to the relevant Interest Payment Date, such additional interest or cost shall be due and payable fifteen (15) days from receipt of such notice.

(d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section 3.04 shall not constitute a waiver of such Lender’s right to demand such compensation.

 

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(e) If any Lender requests compensation under this Section 3.04, then such Lender will, if requested by the Borrower and at the Borrower’s expense, use commercially reasonable efforts to designate another Lending Office for any Loan or Letter of Credit affected by such event; provided that such efforts are made on terms that, in the reasonable judgment of such Lender, cause such Lender and its Lending Office(s) to suffer no material economic, legal or regulatory disadvantage, and provided , further , that nothing in this Section 3.04(e) shall affect or postpone any of the Obligations of the Borrower or the rights of such Lender pursuant to Section 3.04(a), (b), (c) or (d).

Notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case, be deemed to have been introduced or adopted after the date hereof, regardless of the date enacted or adopted.

Section 3.05. Funding Losses .

Upon written demand of any Lender (with a copy to the Administrative Agent) from time to time, which demand shall set forth in reasonable detail the basis for requesting such amount, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense actually incurred by it as a result of:

(a) any continuation, conversion, payment or prepayment of any Eurocurrency Rate Loan of the Borrower on a day other than the last day of the Interest Period for such Loan; or

(b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Eurocurrency Rate Loan of the Borrower on the date or in the amount notified by the Borrower;

including any loss or expense (excluding loss of anticipated profits) arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.

Section 3.06. Matters Applicable to All Requests for Compensation .

(a) Any Agent or any Lender claiming compensation under this Article III shall deliver a certificate to the Borrower setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Agent or such Lender may use any reasonable averaging and attribution methods.

(b) With respect to any Lender’s claim for compensation under Section 3.01, 3.02, 3.03 or 3.04, the Borrower shall not be required to compensate such Lender for any amount incurred more than one hundred and eighty (180) days prior to the date that such Lender notifies the Borrower of the event that gives rise to such claim; provided that, if the circumstance giving rise to such claim is retroactive, then such 180-day period referred to above shall be extended to include the period of retroactive effect thereof. If any Lender requests compensation by the Borrower under Section 3.04, the Borrower may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or continue from one Interest Period to another applicable Eurocurrency Rate Loan, or, if applicable, to convert Base Rate Loans into Eurocurrency Rate Loans, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 3.06(c) shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested.

(c) If the obligation of any Lender to make or continue any Eurocurrency Rate Loan, or to convert Base Rate Loans into Eurocurrency Rate Loans shall be suspended pursuant to Section 3.06(b) hereof, such Lender’s applicable Eurocurrency Rate Loans shall be automatically converted into Base Rate Loans (or, if such conversion is not possible, repaid) on the last day(s) of the then current Interest Period(s) for such Eurocurrency Rate

 

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Loans (or, in the case of an immediate conversion required by Section 3.02, on such earlier date as required by Law) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 3.02, 3.03 or 3.04 hereof that gave rise to such conversion no longer exist:

(i) to the extent that such Lender’s Eurocurrency Rate Loans have been so converted, all payments and prepayments of principal that would otherwise be applied to such Lender’s applicable Eurocurrency Rate Loans shall be applied instead to its Base Rate Loans; and

(ii) all Loans that would otherwise be made or continued from one Interest Period to another by such Lender as Eurocurrency Rate Loans shall be made or continued instead as Base Rate Loans (if possible), and all Base Rate Loans of such Lender that would otherwise be converted into Eurocurrency Rate Loans shall remain as Base Rate Loans.

(d) If any Lender gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances specified in Section 3.02, 3.03 or 3.04 hereof that gave rise to the conversion of any of such Lender’s Eurocurrency Rate Loans pursuant to this Section 3.06 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurocurrency Rate Loans made by other Lenders under the applicable Facility are outstanding, if applicable, such Lender’s Base Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurocurrency Rate Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurocurrency Rate Loans under such Facility and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Commitments for the applicable Facility.

Section 3.07. Replacement of Lenders Under Certain Circumstances .

(a) If at any time (i) the Borrower becomes obligated to pay additional amounts or indemnity payments described in Section 3.01 or 3.04 as a result of any condition described in such Sections or any Lender ceases to make any Eurocurrency Rate Loans as a result of any condition described in Section 3.02 or Section 3.04, (ii) any Lender becomes a Defaulting Lender or (iii) any Lender becomes a Non-Consenting Lender, then the Borrower may, on ten (10) Business Days’ prior written notice to the Administrative Agent and such Lender, (x) replace such Lender by causing such Lender to (and such Lender shall be obligated to) assign pursuant to Section 10.07(b) (with the assignment fee to be paid by the Borrower in such instance) all of its rights and obligations under this Agreement (in respect of any applicable Facility only in the case of clause (i) or, with respect to a Class vote, clause (iii)) to one or more Eligible Assignees; provided that neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender or other such Person; and provided , further , that (A) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments and (B) in the case of any such assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable Eligible Assignees shall have agreed to, and shall be sufficient (together with all other consenting Lenders) to cause the adoption of, the applicable departure, waiver or amendment of the Loan Documents; or (y) terminate the Commitment of such Lender or L/C Issuer, as the case may be, and (1) in the case of a Lender (other than an L/C Issuer), repay all Obligations of the Borrower owing to such Lender relating to the Loans and participations held by such Lender as of such termination date and (2) in the case of an L/C Issuer, repay all Obligations of the Borrower owing to such L/C Issuer relating to the Loans and participations held by the L/C Issuer as of such termination date and cancel or backstop on terms satisfactory to such L/C Issuer any Letters of Credit issued by it; provided that in the case of any such termination of a Non-Consenting Lender such termination shall be sufficient (together with all other consenting Lenders) to cause the adoption of the applicable departure, waiver or amendment of the Loan Documents and such termination shall be in respect of any applicable facility only in the case of clause (i) or, with respect to a Class vote, clause (iii).

(b) Any Lender being replaced pursuant to Section 3.07(a) above shall (i) execute and deliver an Assignment and Assumption with respect to such Lender’s applicable Commitment and outstanding Loans and participations in L/C Obligations and Swing Line Loans in respect thereof, and (ii) deliver any Notes evidencing such Loans to the Borrower or Administrative Agent. Pursuant to such Assignment and Assumption, (A) the assignee Lender shall acquire all or a portion, as the case may be, of the assigning Lender’s Commitment and outstanding Loans and participations in L/C Obligations and Swing Line Loans, (B) all obligations of the Borrower owing to the

 

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assigning Lender relating to the Loans, Commitments and participations so assigned shall be paid in full by the assignee Lender to such assigning Lender concurrently with such Assignment and Assumption and (C) upon such payment and, if so requested by the assignee Lender, delivery to the assignee Lender of the appropriate Note or Notes executed by the Borrower, the assignee Lender shall become a Lender hereunder and the assigning Lender shall cease to constitute a Lender hereunder with respect to such assigned Loans, Commitments and participations, except with respect to indemnification provisions under this Agreement, which shall survive as to such assigning Lender. In connection with any such replacement, if any such Non-Consenting Lender or Defaulting Lender does not execute and deliver to the Administrative Agent a duly executed Assignment and Assumption reflecting such replacement within five (5) Business Days of the date on which the assignee Lender executes and delivers such Assignment and Assumption to such Non-Consenting Lender or Defaulting Lender, then such Non-Consenting Lender or Defaulting Lender shall be deemed to have executed and delivered such Assignment and Assumption without any action on the part of the Non-Consenting Lender or Defaulting Lender.

(c) Notwithstanding anything to the contrary contained above, any Lender that acts as an L/C Issuer may not be replaced hereunder at any time that it has any Letter of Credit outstanding hereunder unless arrangements reasonably satisfactory to such L/C Issuer (including the furnishing of a back-up standby letter of credit in form and substance, and issued by an issuer reasonably satisfactory to such L/C Issuer or the depositing of Cash Collateral into a Cash Collateral account in amounts and pursuant to arrangements reasonably satisfactory to such L/C Issuer) have been made with respect to each such outstanding Letter of Credit and the Lender that acts as the Administrative Agent may not be replaced hereunder except in accordance with the terms of Section 9.09.

(d) In the event that (i) the Borrower or the Administrative Agent has requested that the Lenders consent to a departure or waiver of any provisions of the Loan Documents or agree to any amendment thereto, (ii) the consent, waiver or amendment in question requires the agreement of all affected Lenders in accordance with the terms of Section 10.01 or all the Lenders with respect to a certain Class of the Loans and (iii) the Required Lenders (or, in the case of a consent, waiver or amendment involving all affected Lenders of a certain Class, the Required Class Lenders) have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a “ Non-Consenting Lender .”

Section 3.08. Survival .

All of the Borrower’s obligations under this Article III shall survive any assignment of rights by, or the replacement of, a Lender (including any L/C Issuer) and termination of the Aggregate Commitments and repayment, satisfaction and discharge of all other Obligations hereunder.

ARTICLE IV

Conditions Precedent to Credit Extensions

Section 4.01. All Credit Events After the Closing Date .

The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type, or a continuation of Eurocurrency Rate Loans) is subject to the following conditions precedent:

(i) The representations and warranties of each Loan Party set forth in Article V and in each other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be correct in all respects as so qualified) on and as of the date of such Credit Extension with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date.

(ii) No Default shall exist or would result from such proposed Credit Extension or from the application of the proceeds therefrom.

(iii) The Administrative Agent and, if applicable, the relevant L/C Issuer or the relevant Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

 

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Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type, or a continuation of Eurocurrency Rate Loans) submitted by the Borrower after the Closing Date shall be deemed to be a representation and warranty that the conditions specified in Sections 4.01(i) and (ii) have been satisfied on and as of the date of the applicable Credit Extension.

Section 4.02. First Credit Event .

Each Lender shall make the Credit Extension to be made by it on the Closing Date subject only to the following conditions precedent, unless otherwise waived by the Arrangers in their sole discretion:

(a) This Agreement shall have been duly executed and delivered by the Borrower and each Guarantor.

(b) The Administrative Agent and, if applicable, the relevant L/C Issuer or the relevant Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

(c) The Administrative Agent shall have received, on behalf of itself, the Collateral Agent, the Lenders and each L/C Issuer, an opinion of (i) Simpson Thacher & Bartlett LLP, special counsel for the Loan Parties, and (ii) from each local counsel for the Loan Parties listed on Schedule 4.02(c), in each case, dated the Closing Date and addressed to each L/C Issuer, the Administrative Agent, the Collateral Agent and the Lenders, in each case in form and substance customary for senior secured credit facilities in transactions of this kind.

(d) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation or organization, including all amendments thereto, of each Loan Party, certified, if applicable, as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing (where relevant) of each Loan Party as of a recent date, from such Secretary of State or similar Governmental Authority and (ii) a certificate of a Responsible Officer of Borrower, Holdings and each other Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws or operating (or limited liability company) agreement of such Loan Party as in effect on the Closing Date, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the member (or equivalent governing body) of the Borrower or such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation or organization of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document on behalf of such Loan Party and countersigned by another officer as to the incumbency and specimen signature of the Responsible Officer, Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above.

(e) (i) The Administrative Agent shall have received the (x) results of searches of the Uniform Commercial Code filings (or equivalent filings) and (y) judgment and tax lien searches, made with respect to the Loan Parties in the states or other jurisdictions of formation of such Person and with respect to such other locations and names listed on the Perfection Certificate, together with (in the case of clause (y)) copies of the financing statements (or similar documents) disclosed by such search and (ii) the Security Agreement and the Holdings Pledge Agreement shall have been duly executed and delivered by each Loan Party that is to be a party thereto, together with (x) certificates, if any, representing the Equity Interests of the Borrower and the Domestic Subsidiaries accompanied by undated stock powers executed in blank and (y) documents and instruments to be recorded or filed that the Administrative Agent may deem reasonably necessary to satisfy the Collateral and Guarantee Requirement.

 

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(f) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by the Chief Financial Officer of the Borrower, certifying that the Borrower and its Subsidiaries, on a consolidated basis after giving effect to the transactions on the Closing Date, are Solvent as of the Closing Date.

(g) On the Closing Date, the representations and warranties made by the Loan Parties in Article V shall be true and correct in all material respects.

(h) The Lenders shall have received all documentation and other information required by regulatory authorities with respect to the Borrower reasonably requested by the Lenders under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the USA Patriot Act; provided that the Lenders shall use commercially reasonable efforts to ensure that such requests are delivered at least 5 Business Days prior to the Closing Date and are not unduly burdensome on any person unless required by applicable Law.

(i) The Arrangers shall have received the Audited Financial Statements and the Unaudited Financial Statements.

(j) All fees required to be paid on the Closing Date pursuant to the Fee Letters and reasonable out-of-pocket expenses, to the extent invoiced at least three Business Days prior to the Closing Date, shall have been paid.

(k) The Senior Notes shall have been issued or shall be issued simultaneously with the initial funding of Loans on the Closing Date

(l) Immediately following the execution of this Agreement, neither Holdings nor any of its subsidiaries will have any Indebtedness other than the Obligations and Indebtedness permitted under Section 7.03(b), Capitalized Leases permitted under Section 7.03(e)(i) and Indebtedness permitted under Section 7.03(t).

(m) The Administrative Agent shall have received evidence that each of the Existing Credit Facility and the Continental Cement Indebtedness have been, or concurrently with the Closing Date is being, terminated and all Liens securing obligations under the Existing Credit Facility and the Continental Cement Indebtedness have been, or concurrently with the Closing Date are being released.

ARTICLE V

Representations and Warranties

The Borrower and each of the Subsidiary Guarantors party hereto represent and warrant to the Agents and the Lenders at the time of each Credit Extension that:

Section 5.01. Existence, Qualification and Power; Compliance with Laws .

Each Loan Party and each Subsidiary (a) is a Person duly organized or formed, validly existing and in good standing (where relevant) under the Laws of the jurisdiction of its incorporation or organization to the extent such concept exists in such jurisdiction, (b) has all requisite power and authority to (i) own or lease its assets and carry on its business as currently conducted and (ii) in the case of the Loan Parties, execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and in good standing (where relevant) under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, (d) is in compliance with all Laws, orders, writs and injunctions and (e) has all requisite governmental licenses, authorizations, consents and approvals to operate its business as currently conducted; except in the case of clause (a) (other than with respect to the Borrower), (b)(i) (other than with respect to the Borrower), (c), (d) or (e), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

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Section 5.02. Authorization; No Contravention .

The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party are within such Loan Party’s corporate or other powers, (a) have been duly authorized by all necessary corporate or other organizational action, and (b) do not (i) contravene the terms of any of such Person’s Organization Documents, (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under (other than as permitted by Section 7.01), or require any payment to be made under (x) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (y) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (iii) violate any material Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause (b)(ii)(x), to the extent that such violation, conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect.

Section 5.03. Governmental Authorization; Other Consents .

No material approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (c) the perfection or maintenance of the Liens created under the Collateral Documents (including the priority thereof) or (d) the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for (i) filings and registrations that are necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties, (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect (except to the extent not required to obtained, taken, given or made or in full force and effect pursuant to the Collateral and Guarantee Requirement) and (iii) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make could not reasonably be expected to have a Material Adverse Effect.

Section 5.04. Binding Effect .

This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is a party thereto. This Agreement and each other Loan Document constitute legal, valid and binding obligations of such Loan Party, enforceable against each Loan Party that is a party thereto in accordance with its terms, except as such enforceability may be limited by (i) Debtor Relief Laws and by general principles of equity, (ii) the need for filings and registrations necessary to create or perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties and (iii) the effect of foreign Laws, rules and regulations as they relate to pledges, if any, of Equity Interests in Foreign Subsidiaries.

Section 5.05. Financial Statements; No Material Adverse Effect .

(a) (i) The Audited Financial Statements fairly present in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as of the dates thereof and its consolidated results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein.

(ii) The Unaudited Financial Statements fairly present in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as of the dates thereof and its results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein and subject to normal year-end audit adjustments.

(b) The forecasts of income statements of the Borrower and its Subsidiaries which have been furnished to the Administrative Agent prior to the Closing Date have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such forecasts, it being understood that actual results may vary from such forecasts and that such variations may be material.

 

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(c) Since December 31, 2010, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

(d) As of the Closing Date, neither Holdings nor any of its Subsidiaries has any Indebtedness or other obligations or liabilities, direct or contingent (other than (i) the liabilities reflected on Schedule 5.05, (ii) obligations arising under the Loan Documents and (iii) liabilities incurred in the ordinary course of business) that, either individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.

Section 5.06. Litigation .

There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower, threatened in writing or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Section 5.07. No Default .

Neither the Borrower nor any of its Subsidiaries is in default under or with respect to, or a party to, any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 5.08. Ownership of Property; Liens .

(a) The Borrower and each of its Subsidiaries has good record title to, or valid leasehold interests in, or easements or other limited property interests in, all Real Property necessary in the ordinary conduct of its business, free and clear of all Liens except as set forth on Schedule 5.08 hereto and except for minor defects in title that in the aggregate do not materially interfere with its ability to conduct its business or to utilize such assets for their intended purposes and Liens permitted by Section 7.01 and except where the failure to have such title could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) As of the Closing Date, Schedule 5.08 contains a true and complete list of each Material Real Property owned by the Borrower and the Subsidiaries as of the Closing Date.

(c) No Casualty Event . As of the Closing Date, except as otherwise disclosed to the Administrative Agent, (i) no Loan Party has received any notice of, nor has any knowledge of, the occurrence (and still pending as of the Closing Date) or pendency or contemplation of any Casualty Event affecting all or any portion of a Mortgaged Property, and (ii) no Mortgage encumbers improved Mortgaged Property that is located in an area that has been identified by the Federal Emergency Management Act as an area having special flood hazards within the meaning of the National Flood Insurance Act of 1968 unless flood insurance available under such Act or otherwise sufficient to comply with Flood Insurance Laws has been obtained in accordance with Section 6.07.

Section 5.09. Environmental Matters .

Except as specifically disclosed in Schedule 5.09(a) or except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:

(a) each Loan Party and its operation, business, properties and facilities are and have been in material compliance with all Environmental Laws, which includes obtaining and maintaining all applicable Environmental Permits;

(b) the Loan Parties have not received any written notice that alleges any of them is in violation of or actually or potentially liable under any Environmental Laws, and none of the Loan Parties nor

 

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any of their properties or facilities is the subject of any claims, investigations, liens, demands, requests for information or judicial, administrative or arbitral proceedings pending or, to the knowledge of the Borrower, threatened under any Environmental Law or to revoke or modify any Environmental Permit held by any of the Loan Parties;

(c) there are no facts, circumstances, occurrences or conditions, including the Release or threat of Release of Hazardous Materials arising out of or relating to the operations of the Loan Parties or any property or facility owned, leased or operated by any of the Loan Parties or, to the knowledge of the Borrower, any property or facility formerly owned, operated or leased by the Loan Parties or any of their predecessors in interest, that could reasonably be expected to result in violation by any Loan Party or in any of the Loan Parties incurring liability, under, Environmental Laws; and

(d) none of the Loan Parties are conducting or paying for, in whole or in part, any investigation, response or other corrective action under any Environmental Law at any location.

Section 5.10. Taxes .

Except as would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each of the Loan Parties and their Subsidiaries have filed all tax returns required to be filed, and have paid all Taxes levied or imposed upon them or their properties, that are due and payable (including in their capacity as a withholding agent) and taking into account applicable extensions, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed Tax audit, deficiency or assessment known to any Loan Parties against the Loan Parties that would, individually or in the aggregate, have a Material Adverse Effect.

Section 5.11. ERISA Compliance .

(a) Except as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws.

(b) (i) No ERISA Event has occurred during the five year period prior to the date on which this representation is made or deemed made; (ii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iv) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA, except, with respect to each of the foregoing clauses of this Section 5.11(b), as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

(c) The Pension Plans of the Loan Parties and the Subsidiaries are funded to the extent required by Law, in each case, except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

Section 5.12. Subsidiaries; Equity Interests .

As of the Closing Date, no Loan Party has any material Subsidiaries other than those specifically disclosed in Schedule 5.12, and all of the outstanding Equity Interests owned by the Loan Parties (or a Subsidiary of any Loan Party) in such material Subsidiaries have been validly issued and are fully paid and all Equity Interests owned by a Loan Party (or a Subsidiary of any Loan Party) in such material Subsidiaries are owned free and clear of all Liens except (i) those created under the Collateral Documents and (ii) any Lien that is permitted under Section 7.01. As of the Closing Date, Schedule 5.12 (a) sets forth the name and jurisdiction of each Domestic Subsidiary that is a Loan Party and (b) sets forth the ownership interest of the Borrower and any other Subsidiary thereof in each Subsidiary, including the percentage of such ownership.

 

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Section 5.13. Margin Regulations; Investment Company Act .

(a) The Borrower is not engaged nor will it engage, principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Borrowings or drawings under any Letter of Credit will be used for any purpose that violates Regulation U.

(b) None of the Borrower, any Person Controlling the Borrower, or any of its Subsidiaries is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

Section 5.14. Disclosure .

To the best of the Borrower’s knowledge, no report, financial statement, certificate or other written information furnished by or on behalf of any Loan Party (other than projected financial information and information of a general economic or industry nature) to any Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan Document (as modified or supplemented by other information so furnished) when taken as a whole contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein (when taken as a whole), in the light of the circumstances under which they were made, not materially misleading. With respect to projected financial information, the Borrower represents that such information was prepared in good faith based upon assumptions believed to be reasonable at the time of preparation; it being understood that such projections may vary from actual results and that such variances may be material.

Section 5.15. Labor Matters .

Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against the Borrower or any of its Subsidiaries pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees of the Borrower or any of its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Laws dealing with such matters; and (c) all payments due from the Borrower or any of its Subsidiaries on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant party.

Section 5.16. Intellectual Property; Licenses, Etc .

Except as, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, the Borrower and its Subsidiaries own, license or possess the right to use all of the trademarks, service marks, trade names, domain names, copyrights, patents, patent rights, licenses, technology, software, know-how, rights in databases, design rights and other intellectual property rights (collectively, “ IP Rights ”) that are reasonably necessary for the operation of their respective businesses as currently conducted, and, to the knowledge of the Borrower and its Subsidiaries, such IP Rights do not conflict with the rights of any Person, except to the extent such failure to own, license or possess or such conflicts, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. No advertisement, product, process, method or substance used by any Loan Party or any of its Subsidiaries in the operation of their respective businesses as currently conducted infringes upon any IP Rights held by any Person except for such infringements which individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any of the IP Rights is filed and presently pending or, to the knowledge of the Borrower, presently threatened against any Loan Party or any of its Subsidiaries, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Except pursuant to written licenses and other user agreements entered into by each Loan Party in the ordinary course of business, as of the Closing Date, all registrations listed in Schedule 8(a) or 8(b) to the Perfection Certificate are valid and in full force and effect, except, in each individual case, to the extent that such a registration is not valid and in full force and effect could not reasonably be expected to have a Material Adverse Effect.

 

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Section 5.17. Solvency .

On the Closing Date after giving effect to the use of proceeds hereunder, the Borrower and its Subsidiaries, on a consolidated basis, are Solvent.

Section 5.18. Security Documents .

(a) Valid Liens . Each Collateral Document delivered pursuant to Sections 4.02, 6.11 and 6.13 will, upon execution and delivery thereof, be effective to create in favor of the Collateral Agent for the benefit of the Secured Parties, legal, valid and enforceable Liens on, and security interests in, the Collateral described therein to the extent intended to be created thereby and (i) when financing statements and other filings in appropriate form are filed in the offices specified on Schedule 4 to the Perfection Certificate and (ii) upon the taking of possession or control by the Collateral Agent of such Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by the Security Agreement), the Liens created by the Collateral Documents shall constitute fully perfected Liens on, and security interests in (to the extent intended to be created thereby), all right, title and interest of the grantors in such Collateral to the extent perfection can be obtained by filing financing statements, in each case subject to no Liens other than Liens permitted hereunder.

(b) PTO Filing; Copyright Office Filing . When the Security Agreement or a short form thereof is properly filed in the United States Patent and Trademark Office and the United States Copyright Office, to the extent such filings may perfect such interests, the Liens created by such Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in Patents and Trademarks (each as defined in the Security Agreement) registered or applied for with the United States Patent and Trademark Office or Copyrights (as defined in such Security Agreement) registered or applied for with the United States Copyright Office, as the case may be, in each case free and clear of Liens other than Liens permitted under Section 7.01 hereof (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to establish a Lien on registered Patents, Trademarks and Copyrights (each as defined in the Security Agreement) registered or applied for by the grantors thereof after the Closing Date).

(c) Mortgages . Upon recording thereof in the appropriate recording office, each Mortgage is effective to create, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, legal, valid and enforceable perfected first-priority Liens on, and security interest in, all of the Loan Parties’ right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, subject only to Liens permitted hereunder, and when the Mortgages are filed in the offices specified on Schedule 4 to the Perfection Certificate dated the Closing Date (or, in the case of any Mortgage executed and delivered after the date thereof in accordance with the provisions of Sections 6.11 and 6.13, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of Sections 6.11 and 6.13), the Mortgages shall constitute fully perfected first-priority Liens on, and security interests in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than Liens permitted by hereunder.

Notwithstanding anything herein (including this Section 5.18) or in any other Loan Document to the contrary, neither the Borrower nor any other Loan Party makes any representation or warranty as to (A) the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest in any Equity Interests of any Foreign Subsidiary, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign Law, (B) the pledge or creation of any security interest, or the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest to the extent such pledge, security interest, perfection or priority is not required pursuant to the Collateral and Guarantee Requirement or the Collateral Documents or (C) on the Closing Date and until required pursuant to Section 6.13, the pledge or creation of any security interest, or the effects of perfection or non-perfection the priority or enforceability of any pledge or security interest.

Section 5.19. Senior Debt . The Obligations constitute senior indebtedness of the Borrower and each other Loan Party.

 

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ARTICLE VI

Affirmative Covenants

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation (other than Cash Management Obligations or obligations under Secured Hedge Agreements) hereunder which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless the Outstanding Amount of the L/C Obligations related thereto has been Cash Collateralized or a backstop letter of credit reasonably satisfactory to the applicable L/C Issuer is in place), then from and after the Closing Date, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02 and 6.03) cause each of its Subsidiaries to:

Section 6.01. Financial Statements .

(a) Deliver to the Administrative Agent for prompt further distribution to each Lender as soon as available, but in any event within one hundred thirty-five (135) days after the end of the fiscal year ending December 31, 2011 and within ninety (90) days after the end of each subsequent fiscal year, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, stockholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of an independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

(b) Deliver to the Administrative Agent for prompt further distribution to each Lender, as soon as available, but in any event within ninety (90) days, seventy-five (75) days and sixty (60) days after the end of each of the first three (3) fiscal quarters, respectively, following the Closing Date and within forty-five (45) days after the end of each the first three (3) fiscal quarters of each fiscal year of the Borrower thereafter, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter and the related (i) consolidated statements of income or operations for such fiscal quarter and for the portion of the fiscal year then ended and (ii) consolidated statements of cash flows for such fiscal quarter and the portion of the fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the financial condition, results of operations, stockholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; and

(c) Deliver to the Administrative Agent for prompt further distribution to each Lender, as soon as available, and in any event no later than sixty (60) days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal year on a quarterly basis (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow and projected income and a summary of the material underlying assumptions applicable thereto) (collectively, the “ Projections ”), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such Projections, it being understood that actual results may vary from such Projections and that such variations may be material.

Notwithstanding the foregoing, the obligations in paragraphs (a) and (b) of this Section 6.01 may be satisfied with respect to financial information of the Borrower and its Subsidiaries by furnishing (A) the applicable financial statements of the Borrower (or any direct or indirect parent of the Borrower) or (B) the Borrower’s (or any direct or indirect parent thereof), as applicable, Form l0-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to clauses (A) and (B), (i) to the extent such information relates to a parent of the Borrower, such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to the Borrower (or such parent), on the one hand, and the information relating to the Borrower and its Subsidiaries on a standalone basis, on the other hand, and (ii) to the extent such information is in lieu

 

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of information required to be provided under Section 6.01(a), such materials are accompanied by a report and opinion of an independent registered public accounting firm of nationally recognized standing, with respect to the Borrower and its Subsidiaries, in each case, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualifications or exception as to the scope of such audit.

Documents required to be delivered pursuant to Section 6.01 and Sections 6.02(c) and (d) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower (or any direct or indirect parent of the Borrower) posts such documents, or provides a link thereto on the website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) upon written request by the Administrative Agent, the Borrower shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions ( i.e. , soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(a) to the Administrative Agent; provided , however , that if such Compliance Certificate is first delivered by electronic means, the date of such delivery by electronic means shall constitute the date of delivery for purposes of compliance with Section 6.02(a). Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.

The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arrangers will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “ Borrower Materials ”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “ Platform ”) and (b) certain of the Lenders (each, a “ Public Lender ”) may have personnel who do not wish to receive material non-public information with respect to the Borrower or its Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities. The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously marked “PUBLIC,” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws; provided that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.08; (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side Information”; and (z) the Administrative Agent and each Arranger shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Side Information.” Notwithstanding the foregoing, the Borrower shall not be under any obligation to mark any Borrower Materials “PUBLIC.”

THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY LENDER OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL,

 

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INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

Section 6.02. Certificates; Other Information .

Deliver to the Administrative Agent for prompt further distribution to each Lender:

(a) no later than five (5) days after the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower;

(b) no later than five (5) days after the delivery of the financial statements referred to in Section 6.01(a), but only if available after the use of commercially reasonable efforts, a certificate (or other appropriate reporting means in accordance with applicable auditing standards) of an independent registered public accounting firm of nationally recognized standing, with respect to the Borrower and its Subsidiaries, stating that in making the examination necessary therefor no knowledge was obtained of any Event of Default under Section 7.11 or, if any such Event of Default shall exist, stating the nature and status of such event;

(c) promptly after the same are publicly available, copies of all annual, regular, periodic and special reports and registration statements which the Borrower or any Subsidiary files with the SEC or with any Governmental Authority that may be substituted therefor (other than amendments to any registration statement (to the extent such registration statement, in the form it became effective, is delivered), exhibits to any registration statement and, if applicable, any registration statement on Form S-8) and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

(d) promptly after the furnishing thereof, copies of any material requests or material notices received by any Loan Party (other than in the ordinary course of business) or material statements or material reports furnished to any holder of debt securities (other than in connection with any board observer rights) of any Loan Party or of any of its Subsidiaries pursuant to the terms of the Senior Notes Indenture and any Permitted Refinancing thereof or any Junior Financing Documentation, in each case in a principal amount in excess of the Threshold Amount and not otherwise required to be furnished to the Lenders pursuant to any clause of this Section 6.02;

(e) together with the delivery of each Compliance Certificate pursuant to Section 6.02(a), (i)in the case of annual Compliance Certificates only, a report setting forth the information required by sections describing the legal name and the jurisdiction of formation of each Loan Party and the location of the Chief Executive Office of each Loan Party of the Perfection Certificate or confirming that there has been no change in such information since the Closing Date or the date of the last such report, (ii) a description of each event, condition or circumstance during the last fiscal quarter covered by such Compliance Certificate requiring a mandatory prepayment under Section 2.05(b) and (iii) a list of each Subsidiary of the Borrower (to the extent that there have been any changes in the identity of such Subsidiaries since the Closing Date or the most recent list provided); and

(f) promptly, such additional customary information regarding the business, legal, financial or corporate affairs of the Loan Parties or any of their respective Subsidiaries, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request.

 

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Section 6.03. Notices .

Promptly after a Responsible Officer of the Borrower or any Subsidiary Guarantor has obtained knowledge thereof, notify the Administrative Agent:

(a) of the occurrence of any Default;

(b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect; and

(c) of the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit, litigation or proceeding, whether at law or in equity by or before any Governmental Authority with respect to any Loan Document.

Each notice pursuant to this Section shall be accompanied by a written statement of a Responsible Officer of the Borrower (x) that such notice is being delivered pursuant to Section 6.03(a), (b) or (c) (as applicable) and (y) setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.

Section 6.04. Payment of Obligations .

(a) Pay, discharge or otherwise satisfy as the same shall become due and payable in the normal conduct of its business, all its Taxes (whether or not shown on a Tax return), except, in each case, to the extent any such Tax is being contested in good faith and by appropriate proceedings for which appropriate reserves have been established in accordance with GAAP or the failure to pay or discharge the same would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) Timely and correctly file all Tax returns required to be filed, except for failures to file that could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

Section 6.05. Preservation of Existence, Etc .

(a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization and (b) take all reasonable action to maintain all rights, privileges (including its good standing where applicable in the relevant jurisdiction), permits, licenses and franchises necessary or desirable in the normal conduct of its business, except, in the case of (a) or (b), (i) (other than with respect to the Borrower) to the extent that failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) pursuant to a transaction permitted by Section 7.04 or 7.05.

Section 6.06. Maintenance of Properties .

Except if the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and fire, casualty or condemnation excepted, and (b) make all necessary renewals, replacements, modifications, improvements, upgrades, extensions and additions thereof or thereto in accordance with prudent industry practice and in the normal conduct of its business.

Section 6.07. Maintenance of Insurance .

(a) Generally . Maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Borrower and its Subsidiaries) as are customarily carried under similar circumstances by such other Persons.

 

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(b) Requirements of Insurance . On the Closing Date (or the date any such insurance is obtained, in the case of insurance obtained after the Closing Date), the Borrower shall use commercially reasonable efforts to ensure that (i) all such insurance with respect to any Collateral shall provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 10 days (or, to the extent reasonably available, 30 days) after receipt by the Collateral Agent of written notice thereof (the Borrower shall deliver a copy of the policy (and to the extent any such policy is renewed, a renewal policy) or other evidence thereof to the Administrative Agent and the Collateral Agent, or insurance certificate with respect thereto) and (ii) all such insurance with respect to any Collateral shall name the Collateral Agent as mortgagee (in the case of property insurance) or additional insured on behalf of the Secured Parties (in the case of liability insurance) and loss payee (in the case of property insurance), as applicable.

(c) Flood Insurance . With respect to each Mortgaged Property, (i) if at any time any “building” (as defined in the Flood Insurance Laws) is located in an area designated as a “Special Flood Hazard Area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance with a financially sound and reputable insurer in such total amount as the Administrative Agent or the Required Lenders may from time to time reasonably require, (ii) otherwise comply with the Flood Insurance Laws and (ii) deliver to Administrative Agent evidence of such insurance.

Section 6.08. Compliance with Laws .

Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except if the failure to comply therewith could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 6.09. Books and Records .

Maintain proper books of record and account, in which entries that are full, true and correct in all material respects and are in conformity with GAAP consistently applied and which reflect all material financial transactions and matters involving the assets and business of the Borrower or a Subsidiary, as the case may be (it being understood and agreed that Foreign Subsidiaries may maintain individual books and records in conformity with generally accepted accounting principles that are applicable in their respective countries of organization and that such maintenance shall not constitute a breach of the representations, warranties or covenants hereunder).

Section 6.10. Inspection Rights .

Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom (other than records of the Board of Directors of such Loan Party or such Subsidiary), and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants (subject to such accountants’ customary policies and procedures), all at the reasonable expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided that, excluding any such visits and inspections during the continuation of an Event of Default, only the Administrative Agent on behalf of the Lenders may exercise rights of the Administrative Agent and the Lenders under this Section 6.10 and the Administrative Agent shall not exercise such rights more often than two (2) times during any calendar year and only one (1) such time shall be at the Borrower’s expense; provided , further , that when an Event of Default exists, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and upon reasonable advance notice. The Administrative Agent and the Lenders shall give the Borrower the opportunity to participate in any discussions with the Borrower’s independent public accountants. Notwithstanding anything to the contrary in this Section 6.10, neither the Borrower nor any Subsidiary shall be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter that (i) constitutes non-financial trade secrets or non-financial proprietary information, (ii) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is prohibited by Law or (iii) is subject to attorney client or similar privilege or constitutes attorney work-product.

 

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Section 6.11. Additional Collateral; Additional Guarantors .

At the Borrower’s expense, take all action necessary or reasonably requested by the Administrative Agent or the Collateral Agent to ensure that the Collateral and Guarantee Requirement continues to be satisfied, including:

(a) Upon (x) the formation or acquisition of any new direct or indirect wholly owned Domestic Subsidiary (in each case, other than an Excluded Subsidiary) by the Borrower or (y) any Excluded Subsidiary ceasing to constitute an Excluded Subsidiary:

(i) within sixty (60) days after such formation, acquisition, cessation or designation, or such longer period as the Administrative Agent may agree in writing in its discretion:

(A) cause each such Domestic Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement to duly execute and deliver to the Administrative Agent or the Collateral Agent (as appropriate) joinders to this Agreement as Guarantors, Security Agreement Supplements, Intellectual Property Security Agreements, a counterpart of the Intercompany Note and other security agreements and documents (including, with respect to such Mortgages, the documents listed in Section 6.13(b)), as reasonably requested by and in form and substance reasonably satisfactory to the Administrative Agent (consistent, subject to local law requirements, with the Mortgages, Security Agreement, Intellectual Property Security Agreements and other security agreements in effect on the Closing Date), in each case granting first-priority Liens required by the Collateral and Guarantee Requirement;

(B) cause each such Domestic Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement (and the parent of each such Domestic Subsidiary that is a Guarantor) to deliver any and all certificates representing Equity Interests (to the extent certificated) and intercompany notes (to the extent certificated) that are required to be pledged pursuant to the Collateral and Guarantee Requirement, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank;

(C) take and cause such Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement and each direct or indirect parent of such Subsidiary to take whatever action (including the recording of Mortgages, the filing of UCC financing statements and delivery of stock and membership interest certificates) as may be necessary in the reasonable opinion of the Collateral Agent to vest in the Collateral Agent (or in any representative of the Collateral Agent designated by it) valid and perfected Liens to the extent required by the Collateral and Guarantee Requirement or the Collateral Documents, and to otherwise comply with the requirements of the Collateral and Guarantee Requirement or the Collateral Documents;

(ii) if reasonably requested by the Administrative Agent or the Collateral Agent, within sixty (60) days after such request (or such longer period as the Administrative Agent may agree in writing in its sole discretion), deliver to the Administrative Agent a signed copy of an opinion, addressed to the Administrative Agent and the Lenders, of counsel for the Loan Parties reasonably acceptable to the Administrative Agent as to such matters set forth in this Section 6.11(a) as the Administrative Agent may reasonably request;

(iii) as promptly as practicable after the request therefor by the Administrative Agent or Collateral Agent, deliver to the Collateral Agent with respect to each Material Real Property, any existing title reports, abstracts or environmental assessment reports, to the extent available and in the possession or control of the Borrower; provided , however , that there shall be no obligation to deliver to the Administrative Agent any existing environmental assessment report whose disclosure to the Administrative Agent would require the consent of a Person other than the Borrower or one of its Subsidiaries, where, despite the commercially reasonable efforts of the Borrower to obtain such consent, such consent cannot be obtained; and

 

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(iv) if reasonably requested by the Administrative Agent or the Collateral Agent, within sixty (60) days after such request (or such longer period as the Administrative Agent may agree in writing in its sole discretion), deliver to the Collateral Agent any other items necessary from time to time to satisfy the Collateral and Guarantee Requirement with respect to perfection and existence of security interests with respect to property of any Guarantor acquired after the Closing Date and subject to the Collateral and Guarantee Requirement or the Collateral Documents, but not specifically covered by the preceding clause (i), (ii) or (iii) or clause (b) below.

(b) Not later than ninety (90) days after the acquisition by any Loan Party of Material Real Property as determined by the Borrower (acting reasonably and in good faith) (or such longer period as the Administrative Agent may agree in writing in its sole discretion) that is required to be provided as Collateral pursuant to the Collateral and Guarantee Requirement, which property would not be automatically subject to another Lien in favor of the Collateral Agent for the benefit of the Secured Parties pursuant to pre-existing Collateral Documents, (A) cause such property to be subject to a first-priority Lien and Mortgage in favor of the Collateral Agent for the benefit of the Secured Parties, (B) take, or cause the relevant Loan Party to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect or record such Lien, in each case to the extent required by, and subject to the limitations and exceptions of, the Collateral and Guarantee Requirement and (C) otherwise comply with the requirements of the Collateral and Guarantee Requirement with respect to such Material Real Property.

(c) Always ensuring that the Obligations are secured by a first-priority security interest in all the Equity Interests of the Borrower.

Section 6.12. Compliance with Environmental Laws .

(a) Except, in each case, to the extent that the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, comply, and take all reasonable actions to cause all lessees and other Persons operating or occupying its properties and facilities to comply with all applicable Environmental Laws and Environmental Permits; obtain and renew all applicable Environmental Permits; and, in each case to the extent the Loan Parties are required by Environmental Laws, conduct any investigation, remedial or other corrective action necessary to address Hazardous Materials at any property or facility in accordance with applicable Environmental Laws.

(b) If a Default caused by reason of a breach of Section 5.09 or Section 6.12(a) shall have occurred or be continuing for more than 20 days after notice thereof by the Administrative Agent to the Borrower without Borrower or its Subsidiaries commencing activities reasonably likely to cure such Default in accordance with Environmental Laws, at the written request of the Administrative Agent and the Required Lenders through the Administrative Agent, provide to the Administrative Agent within 45 days after such request, at the sole expense of the Borrower and its Subsidiaries, a commercially reasonable environmental assessment report regarding the matters which are the subject of such Default, including, where appropriate and subject to any third party consent requirements, soil and/or groundwater sampling, prepared by an environmental consulting firm and, in the form and substance, reasonably acceptable to the Administrative Agent or Required Lenders making the request and evaluating any alleged violation of Environmental Law, and when appropriate indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or action necessary to address such Hazardous Materials.

(c) On the Closing Date, provide a certificate of a Responsible Officer certifying that the Borrower has implemented commercially reasonable measures designed to insure that (i) the Borrower, its Subsidiaries and their respective operations at the facilities and properties owned, leased or otherwise operated by any of them attain and remain in material compliance with all Environmental Laws, and (ii) each of the Borrower and its Subsidiaries undertakes reasonable efforts to identify and evaluate issues of compliance with and liability under Environmental Laws prior to acquiring any ownership or leasehold interest in any real property that could reasonably be expected to give rise to any material liability under any Environmental Law on the part of the Borrower or any Subsidiary.

 

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Section 6.13. Further Assurances and Post-Closing Conditions .

(a) Within ninety (90) days after the Closing Date (subject to extension by the Administrative Agent in its reasonable discretion), deliver each Collateral Document required to satisfy the Collateral and Guarantee Requirement or required pursuant to the terms of any Collateral Document, duly executed by each Loan Party required to be party thereto, together with all documents and instruments required to perfect the security interest or Lien of the Collateral Agent in the Collateral (if any) free of any other pledges, security interests or mortgages, except Liens permitted under the Collateral and Guarantee Requirement, to the extent required pursuant to the Collateral and Guarantee Requirement or the Collateral Documents.

(b) Within ninety (90) days after the Closing Date (subject to extension by the Administrative Agent in its reasonable discretion), deliver to the Administrative Agent, with respect to each Mortgaged Property on which any “building” (as defined in the Flood Insurance Laws) is located, a completed “Life of Loan” Federal Emergency Management Agency Standard Flood Hazard Determination and, if the area in which any such building is located on any Mortgaged Property is designated a “special flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), a notice with respect to special flood hazard area status, duly executed by the Borrower and the applicable Loan Party and a certificate evidencing the flood insurance policies required by Section 6.07(c) hereof, endorsed or otherwise amended to include a “standard” lender’s mortgagee endorsement naming the Collateral Agent, on behalf of the Secured Parties, as loss payee/mortgagee, in form and substance satisfactory to the Administrative Agent.

(c) Promptly upon reasonable request by the Administrative Agent (i) correct any material defect or error that may be discovered in the execution, acknowledgment, filing or recordation of any Collateral Document or other document or instrument relating to any Collateral, and (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent may reasonably request from time to time in order to carry out more effectively the purposes of the Collateral Documents, to the extent required pursuant to the Collateral and Guarantee Requirement or the Collateral Documents. If the Administrative Agent or the Collateral Agent reasonably determines that it is required by applicable Law to have appraisals prepared in respect of the Real Property of any Loan Party subject to a mortgage constituting Collateral, the Borrower shall provide to the Administrative Agent appraisals that satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of FIRREA.

Section 6.14. Maintenance of Ratings .

The Borrower shall use commercially reasonable efforts to maintain a public corporate rating from S&P and a public corporate family rating from Moody’s, in each case in respect of the Borrower, and a public rating of the Facilities by each of S&P and Moody’s.

ARTICLE VII

Negative Covenants

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder (other than Cash Management Obligations or obligations under Secured Hedge Agreements) which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless the Outstanding Amount of the L/C Obligations related thereto has been Cash Collateralized or a backstop letter of credit reasonably satisfactory to the applicable L/C Issuer is in place), then from and after the Closing Date:

Section 7.01. Liens .

Neither the Borrower nor its Subsidiaries shall, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:

(a) Liens pursuant to any Loan Document;

 

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(b) Liens existing on the Closing Date; provided that any Lien securing Indebtedness shall only be permitted to the extent such Lien is listed on Schedule 7.01(b), and any modifications, replacements, renewals, refinancings or extensions thereof; provided that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien or financed by Indebtedness permitted under Section 7.03, and (B) proceeds and products thereof, and (ii) the replacement, renewal, extension or refinancing of the obligations secured or benefited by such Liens, to the extent constituting Indebtedness, is permitted by Section 7.03;

(c) Liens for Taxes that are not overdue for a period of more than thirty (30) days or that are being contested in good faith and by appropriate actions, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP to the extent required by GAAP;

(d) statutory or common law Liens of landlords, sublandlords, carriers, warehousemen, mechanics, materialmen, repairmen, construction contractors or other like Liens arising in the ordinary course of business that secure amounts not overdue for a period of more than thirty (30) days or if more than thirty (30) days overdue, that are unfiled and no other action has been taken to enforce such Lien or that are being contested in good faith and by appropriate actions, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP to the extent required by GAAP;

(e) (i) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Borrower or any of its Subsidiaries;

(f) deposits to secure the performance of bids, trade contracts, governmental contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including (i) those to secure health, safety and environmental obligations and (ii) letters of credit and bank guarantees required or requested by any Governmental Authority) incurred in the ordinary course of business;

(g) easements, rights-of-way, restrictions (including zoning restrictions), encroachments, protrusions and other similar encumbrances and minor title defects affecting Real Property that do not in the aggregate materially interfere with the ordinary conduct of the business of the Borrower and its Subsidiaries, taken as a whole, and any exceptions on the Mortgage Policies issued in connection with the Mortgaged Properties;

(h) Liens securing judgments or orders for the payment of money not constituting an Event of Default under Section 8.01(h);

(i) leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which (i) do not interfere in any material respect with the business of the Borrower and its Subsidiaries, taken as a whole, (ii) do not secure any Indebtedness or (iii) are permitted by Section 7.05;

(j) Liens (i) in favor of customs and revenue authorities arising as a matter of Law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business or (ii) on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business;

(k) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodities brokerage accounts incurred in the ordinary course of business and (iii) in favor of a banking or other financial institution arising as a matter of Law or under customary general terms and conditions encumbering

 

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deposits or other funds maintained with a financial institution (including the right of setoff) and that are within the general parameters customary in the banking industry or arising pursuant to such banking institutions general terms and conditions;

(l) Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Section 7.02(i) or (n) or, to the extent related to any of the foregoing, Section 7.02(r) to be applied against the purchase price for such Investment, and (ii) consisting of an agreement to Dispose of any property in a Disposition permitted under Section 7.05, in each case, solely to the extent such Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;

(m) Liens (i) in favor of the Borrower or a Subsidiary on assets of a Subsidiary that is not a Guarantor or (ii) in favor of the Borrower or any Subsidiary Guarantor;

(n) any interest or title of a lessor, sublessor, licensor or sublicensor under leases, subleases, licenses or sublicenses entered into by the Borrower or any of its Subsidiaries in the ordinary course of business;

(o) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Borrower or any of its Subsidiaries in the ordinary course of business permitted by this Agreement;

(p) Liens deemed to exist in connection with Investments in repurchase agreements under Section 7.02;

(q) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(r) Liens that are contractual rights of setoff or rights of pledge (i) relating to the establishment of depository relations with banks or other financial institutions not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Borrower or any of its Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower or any of its Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Borrower or any of its Subsidiaries in the ordinary course of business;

(s) Liens solely on any cash earnest money deposits made by the Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;

(t) ground leases in respect of Real Property on which facilities owned or leased by the Borrower or any of its Subsidiaries are located;

(u) Liens to secure Indebtedness permitted under Section 7.03(e); provided that (i) such Liens are created within 270 days of the acquisition, construction, repair, lease or improvement of the property subject to such Liens, (ii) such Liens do not at any time encumber property (except for replacements, additions and accessions to such property) other than the property financed by such Indebtedness and the proceeds and products thereof and customary security deposits and (iii) with respect to Capitalized Leases, such Liens do not at any time extend to or cover any assets (except for replacements, additions and accessions to such assets) other than the assets subject to such Capitalized Leases and the proceeds and products thereof and customary security deposits; provided that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender;

(v) Liens on property of any Subsidiary that is not a Loan Party securing Indebtedness of Holdings, the Borrower or the applicable Subsidiary permitted under Section 7.03;

 

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(w) Liens existing on property at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Subsidiary, in each case after the Closing Date (including Capitalized Leases); provided that (i) such Lien was not created in contemplation of such acquisition or such Person becoming a Subsidiary, (ii) such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and other than after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that require, pursuant to their terms at such time, a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), and (iii) (a) the obligations secured thereby would not cause the Secured Leverage Ratio to be greater than 3.00:1.00 (excluding, for purposes of calculating such ratio under this clause (w), Revolving Credit Loans borrowed for seasonal working capital requirements in an amount not to exceed $50,000,000), determined on a Pro Forma Basis and (b) the Indebtedness secured thereby is permitted under Section 7.03(g);

(x) (i) zoning, building, entitlement and other land use regulations by Governmental Authorities with which the normal operation of the business complies, and (ii) any zoning or similar law or right reserved to or vested in any Governmental Authority to control or regulate the use of any real property that does not materially interfere with the ordinary conduct of the business of the Borrower and its Subsidiaries, taken as a whole;

(y) Liens arising from precautionary Uniform Commercial Code financing statement or similar filings;

(z) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;

(aa) the modification, replacement, renewal or extension of any Lien permitted by clauses (b), (u) and (w) of this Section 7.01; provided that (i) the Lien does not extend to any additional property, other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by Section 7.03 (to the extent constituting Indebtedness);

(bb) Liens (which may be Liens on the Collateral so long as any such Liens securing Indebtedness for money borrowed are junior to the Liens securing the Obligations and any such obligations secured by junior Lien on the Collateral shall be expressly subject to a Second Lien Intercreditor Agreement) securing obligations in an aggregate principal amount outstanding at any time not to exceed the greater of (x) $50,000,000 and (y) 4.00% of the Consolidated Total Assets of the Borrower and its Subsidiaries;

(cc) Liens in favor of the Borrower or a Subsidiary securing Indebtedness (other than Indebtedness of a Loan Party to a Subsidiary that is not a Loan Party) permitted under Section 7.03(d);

(dd) Liens on specific items of inventory or other goods and the proceeds thereof securing such Person’s obligations in respect of documentary letters of credit or bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or goods;

(ee) Liens securing Permitted Notes issued pursuant to Section 7.03(r) and any Permitted Refinancings thereof so long as such Liens are subject to the First Lien Intercreditor Agreement or a Second Lien Intercreditor Agreement; and

(ff) Liens on the Collateral securing Indebtedness permitted under Section 7.03(s) to the extent such Liens are subject to (i) a First Lien Intercreditor Agreement if such Indebtedness is secured by the Collateral on a pari passu basis (but without regard to the control of remedies) with the Obligations or (ii) a Second Lien Intercreditor Agreement if such Indebtedness is secured by the Collateral on a second priority (or other junior priority) basis to the liens securing the Obligations.

 

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Section 7.02. Investments .

Neither the Borrower nor the Subsidiaries shall directly or indirectly, make or hold any Investments, except:

(a) Investments by the Borrower or any of its Subsidiaries in assets that were Cash Equivalents when such Investment was made;

(b) loans or advances to officers, directors and employees of any Loan Party (or any direct or indirect parent thereof) or any of its Subsidiaries (i) for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) in connection with such Person’s purchase of Equity Interests of Holdings or any direct or indirect parent thereof ( provided that the amount of such loans and advances shall be contributed to the Borrower in cash as common equity) and (iii) for any other purposes not described in the foregoing clauses (i) and (ii); provided that the aggregate principal amount outstanding at any time under clause (iii) above shall not exceed $10,000,000;

(c) Investments (i) by the Borrower or any Subsidiary in any Loan Party and (ii) by any Subsidiary that is not a Loan Party in any other Subsidiary that is not a Loan Party;

(d) Investments (i) consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and (ii) received in satisfaction or partial satisfaction thereof from financially troubled account debtors and other credits to suppliers in the ordinary course of business;

(e) Investments consisting of (x) transactions permitted under Sections 7.01, 7.03 (other than 7.03(c) and (d)), 7.04 (other than 7.04(d) and (e)) and 7.05 (other than 7.05(e)), (y) Restricted Payments permitted by Section 7.06 and (z) repayments or other acquisitions of Indebtedness of the Company or a Subsidiary Guarantor not prohibited by Section 7.13;

(f) Investments (i) existing or contemplated on the Closing Date and set forth on Schedule 7.02(f) and any modification, replacement, renewal, reinvestment or extension thereof and (ii) existing on the Closing Date by the Borrower or any Subsidiary in the Borrower or any other Subsidiary and any modification, renewal or extension thereof; provided that the amount of any original Investment under this clause (f) is not increased except by the terms of such Investment as of the Closing Date or as otherwise permitted by Section 7.02;

(g) Investments in Swap Contracts permitted under Section 7.03(f);

(h) promissory notes, securities and other non-cash consideration received in connection with Dispositions permitted by Section 7.05;

(i) any acquisition of all or substantially all the assets of, or all the Equity Interests (other than directors’ qualifying shares or any options for Equity Interests that cannot, as a matter of law, be cancelled, redeemed or otherwise extinguished without the express agreement of the holder thereof at or prior to acquisition) in, a Person or division or line of business of a Person (or any subsequent investment made in a Person, division or line of business previously acquired in a Permitted Acquisition), in a single transaction or series of related transactions, if immediately after giving effect thereto: (i) no Event of Default shall have occurred and be continuing or would result therefrom (other than in respect of any Permitted Acquisition made pursuant to a legally binding commitment entered into at a time when no Default exists or would result therefrom); (ii) the Borrower would be in Pro Forma Compliance with the covenants set forth in Section 7.11 after giving effect to such acquisition or investment and any related transaction; (iii) except as set forth in clause (iv) below, the acquired company and its domestic Subsidiaries (subject to the limitations set forth in Section 6.11) will become Guarantors; and (iv) the aggregate amount of Investments made pursuant to this Section 7.02(i) in Persons that do not become Guarantors shall not exceed at any time outstanding the sum of (1) the greater of $35,000,000 and 2.50% of Consolidated Total Assets and (2) the portion,

 

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if any, of the Cumulative Credit on the date of such election that the Borrower elects to apply to this subsection (i), such election to be specified in a written notice of a Responsible Officer of the Borrower calculating in reasonable detail the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied (any such acquisition, a “ Permitted Acquisition ”);

(j) [RESERVED];

(k) Investments in the ordinary course of business consisting of UCC Article 3 endorsements for collection or deposit and UCC Article 4 customary trade arrangements with customers consistent with past practices;

(l) Investments (including debt obligations and Equity Interests) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment;

(m) loans and advances to the Borrower and any other direct or indirect parent of the Borrower, and not in excess of the amount of (after giving effect to any other loans, advances or Restricted Payments in respect thereof) Restricted Payments permitted to be made to such parent in accordance with Section 7.06(f), (g) or (j);

(n) Investments in an aggregate amount outstanding pursuant to this clause (n) (valued at the time of the making thereof, and without giving effect to any write downs or write offs thereof) at any time not to exceed the greater of (x) $75,000,000 and (y) 5.50% of the Consolidated Total Assets of the Borrower and its Subsidiaries (net of any return in respect of such initial Investment, including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) plus (z) the portion, if any, of the Cumulative Credit on the date of such election that the Borrower elects to apply to this subsection (z), such election to be specified in a written notice of a Responsible Officer of the Borrower calculating in reasonable detail the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied;

(o) advances of payroll payments to employees in the ordinary course of business;

(p) (i) Investments made in the ordinary course of business and consistent with past practice in connection with obtaining, maintaining or renewing client contracts and loans or advances made to distributors in the ordinary course of business and consistent with past practice and (ii) Investments to the extent that payment for such Investments is made solely with Equity Interests of the Borrower (or any direct or indirect parent of the Borrower);

(q) Investments of a Subsidiary acquired after the Closing Date or of a corporation merged or amalgamated or consolidated into the Borrower or merged, amalgamated or consolidated with a Subsidiary, in each case in accordance with Section 7.04 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger, amalgamation or consolidation, do not constitute a material portion of the aggregate assets acquired by the Borrower and its Subsidiaries in such transaction and were in existence on the date of such acquisition, merger or consolidation;

(r) Investments made by any Subsidiary that is not a Loan Party to the extent such Investments are financed with the proceeds received by such Subsidiary from an Investment in such Subsidiary contemplated pursuant to Section 7.02(n) or permitted by the proviso under Section 7.02(i); and

(s) Guarantees by the Borrower or any of its Subsidiaries of leases (other than Capitalized Leases) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business.

 

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Section 7.03. Indebtedness .

Neither the Borrower nor any of the Subsidiaries shall directly or indirectly, create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness of any Loan Party under the Loan Documents;

(b) Indebtedness (i) outstanding on the Closing Date and listed on Schedule 7.03(b) and any Permitted Refinancing thereof and (ii) intercompany Indebtedness outstanding on the Closing Date and any refinancing thereof, of which any amount owed by a Subsidiary that is not a Loan Party to a Loan Party shall be evidenced by an Intercompany Note; provided that all such Indebtedness of any Loan Party owed to any Subsidiary that is not a Loan Party shall be unsecured and subordinated to the Obligations pursuant to an Intercompany Note;

(c) Guarantees by the Borrower and any Subsidiary in respect of Indebtedness of the Borrower or any Subsidiary of the Borrower otherwise permitted hereunder; provided that (A) no Guarantee of any Junior Financing or any Permitted Refinancing thereof shall be permitted unless such guaranteeing party shall have also provided a Guarantee of the Obligations on the terms set forth herein and (B) if the Indebtedness being Guaranteed is subordinated to the Obligations, such Guarantee shall be subordinated to the Guarantee of the Obligations on terms at least as favorable to the Lenders as those contained in the subordination of such Indebtedness;

(d) Indebtedness of the Borrower or any Subsidiary owing to any Loan Party or any other Subsidiary (or issued or transferred to any direct or indirect parent of a Loan Party which is substantially contemporaneously transferred to a Loan Party or any Subsidiary of a Loan Party) to the extent constituting an Investment permitted by Section 7.02; provided that all such Indebtedness shall be evidenced by an Intercompany Note;

(e) (i) Attributable Indebtedness and other Indebtedness (including Capitalized Leases) financing an acquisition, construction, repair, replacement, lease or improvement of a fixed or capital asset incurred by the Borrower or any Subsidiary prior to or within 270 days after the acquisition, construction, repair, replacement, lease or improvement of the applicable asset and any Permitted Refinancing thereof in an aggregate amount not to exceed the greater of (x) $30,000,000 and (y) 2.25% of Consolidated Total Assets of the Borrower and its Subsidiaries (together with any Permitted Refinancing thereof) at any time outstanding, (ii) Attributable Indebtedness arising out of sale-leaseback transactions permitted by Section 7.05(m) and (iii) any Permitted Refinancing of any of the foregoing;

(f) Indebtedness in respect of Swap Contracts designed to hedge against the Borrower’s or any Subsidiary’s exposure to interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes and Guarantees thereof;

(g) Indebtedness of the Borrower or any Subsidiary assumed in connection with any Permitted Acquisition, provided that such Indebtedness is not incurred in contemplation of such Permitted Acquisition, and any Permitted Refinancing thereof; provided that (x) such Indebtedness and all Indebtedness resulting from a Permitted Refinancing thereof is unsecured (except for Liens permitted by Section 7.01(w) securing Indebtedness (together with Permitted Refinancings thereof)) and (y) both immediately prior and after giving effect thereto, (1) no Default shall exist or result therefrom (other than a Permitted Acquisition made pursuant to a legally binding commitment entered into at a time when no Default exists or would result therefrom), and (2) the Borrower and its Subsidiaries will be in Pro Forma Compliance with the covenants set forth in Section 7.11;

(h) Indebtedness representing deferred compensation to employees of the Borrower or any of its Subsidiaries incurred in the ordinary course of business;

 

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(i) Indebtedness to current or former officers, managers, consultants, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of the Borrower or any direct or indirect parent of the Borrower permitted by Section 7.06;

(j) Indebtedness incurred by the Borrower or any of its Subsidiaries in a Permitted Acquisition, any other Investment expressly permitted hereunder or any Disposition, in each case, constituting indemnification obligations or obligations in respect of purchase price (including customary earnouts) or other similar adjustments;

(k) Indebtedness consisting of obligations of the Borrower or any of its Subsidiaries under deferred compensation or other similar arrangements incurred by such Person in connection with the Original Transactions, and Permitted Acquisitions or any other Investment expressly permitted hereunder;

(l) Cash Management Obligations and other Indebtedness in respect of netting services, automatic clearinghouse arrangements, overdraft protections and similar arrangements in each case in connection with deposit accounts in the ordinary course of business and any Guarantees thereof;

(m) Indebtedness of the Borrower or any of its Subsidiaries, in an aggregate principal amount that at the time of, and after giving effect to, the incurrence thereof, would not exceed the greater of (x) $75,000,000 and (y) 5.50% of the Consolidated Total Assets of the Borrower and its Subsidiaries; provided that no more than the greater of $35,000,000 and 2.50% of Consolidated Total Assets of such Indebtedness shall be incurred under this clause (m) by Subsidiaries of the Borrower that are not Loan Parties;

(n) Indebtedness consisting of (a) the financing of insurance premiums or (b) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

(o) Indebtedness incurred by the Borrower or any of its Subsidiaries in respect of letters of credit, bank guarantees, bankers’ acceptances, warehouse receipts or similar instruments issued or created in the ordinary course of business, including in respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers compensation claims; provided that any reimbursement obligations in respect thereof are reimbursed within 30 days following the due date thereof;

(p) obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Borrower or any of its Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business or consistent with past practice;

(q) Indebtedness supported by a Letter of Credit, in a principal amount not to exceed the face amount of such Letter of Credit;

(r) (i) Permitted Notes, the Net Proceeds of which are applied to the permanent repayment of Term Loans pursuant to Section 2.05(b)(iii), (ii) Permitted Notes that are offered and sold on a pro rata basis to all Lenders that are “Qualified Institutional Buyers” (as defined in Rule 144A under the Securities Act of 1933, as amended) holding Term Loans and in a principal amount not to exceed the amount of Term Loans exchanged for such Permitted Notes pursuant to procedures reasonably acceptable to the Administrative Agent (including procedures designed to comply with securities laws); provided that any Term Loans exchanged for such Permitted Notes shall be deemed to have been repaid immediately upon the effectiveness of such exchange, and (iii) in the case of Permitted Notes incurred under any of the foregoing clauses (i) and (ii), Permitted Refinancings thereof;

(s) Permitted Ratio Debt and any Permitted Refinancings thereof;

 

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(t) Indebtedness in respect of the Senior Notes (including, in each case, any guarantees thereof) and, in each case, any Permitted Refinancing thereof; and

(u) all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (t) above.

For purposes of determining compliance with this Section 7.03, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Indebtedness described in clauses (a) through (u) above, the Borrower shall, in its sole discretion, classify and reclassify or later divide, classify or reclassify such item of Indebtedness (or any portion thereof) and will only be required to include the amount and type of such Indebtedness in one or more of the above clauses; provided that all Indebtedness outstanding under the Loan Documents will at all times be deemed to be outstanding in reliance only on the exception in clause (a) of Section 7.03.

Section 7.04. Fundamental Changes .

Neither the Borrower nor any of the Subsidiaries shall merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person (other than as part of the Original Transactions), except that:

(a) any Subsidiary may merge, amalgamate or consolidate with (i) the Borrower (including a merger, the purpose of which is to reorganize the Borrower into a new jurisdiction in the United States); provided that the Borrower shall be the continuing or surviving Person or (ii) one or more other Subsidiaries; provided that when any Person that is a Loan Party is merging with a Subsidiary, a Loan Party shall be the continuing or surviving Person;

(b) (i) any Subsidiary that is not a Loan Party may merge, amalgamate or consolidate with or into any other Subsidiary that is not a Loan Party and (ii) any Subsidiary may liquidate or dissolve or the Borrower or any Subsidiary may change its legal form if the Borrower determines in good faith that such action is in the best interest of the Borrower and its Subsidiaries and if not materially disadvantageous to the Lenders (it being understood that in the case of any change in legal form, a Subsidiary that is a Guarantor will remain a Guarantor unless such Guarantor is otherwise permitted to cease being a Guarantor hereunder);

(c) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the transferor in such a transaction is a Guarantor, then (i) the transferee must be a Guarantor or the Borrower or (ii) to the extent constituting an Investment, such Investment must be a permitted Investment in or Indebtedness of a Subsidiary which is not a Loan Party in accordance with Sections 7.02 (other than Section 7.02(e)) and 7.03, respectively;

(d) so long as no Default exists or would result therefrom, the Borrower may merge or consolidate with any other Person; provided that (i) the Borrower shall be the continuing or surviving corporation or (ii) if the Person formed by or surviving any such merger or consolidation is not the Borrower (any such Person, the “ Successor Company ”), (A) the Successor Company shall be an entity organized or existing under the Laws of the United States, any state thereof, the District of Columbia or any territory thereof, (B) the Successor Company shall expressly assume all the obligations of the Borrower under this Agreement and the other Loan Documents to which the Borrower is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent, (C) each Guarantor, unless it is the other party to such merger or consolidation, shall have confirmed that its Guarantee shall apply to the Successor Company’s obligations under the Loan Documents, (D) each Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Security Agreement and other applicable Collateral Documents confirmed that its obligations thereunder shall apply to the Successor Company’s obligations under the Loan Documents, (E) if requested by the Administrative Agent, each mortgagor of a Mortgaged Property, unless it is the other party to such merger or consolidation, shall have by an amendment to or restatement of the applicable Mortgage (or other instrument reasonably satisfactory to the Administrative

 

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Agent) confirmed that its obligations thereunder shall apply to the Successor Company’s obligations under the Loan Documents, and (F) the Borrower shall have delivered to the Administrative Agent an officer’s certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Collateral Document comply with this Agreement; provided , further , that if the foregoing are satisfied, the Successor Company will succeed to, and be substituted for, the Borrower under this Agreement;

(e) so long as no Default exists or would result therefrom (in the case of a merger involving a Loan Party), any Subsidiary may merge or consolidate with any other Person in order to effect an Investment permitted pursuant to Section 7.02; provided that the continuing or surviving Person shall be a Subsidiary or the Borrower, which together with each of its Subsidiaries, shall have complied with the requirements of Section 6.11 to the extent required pursuant to the Collateral and Guarantee Requirement; and

(f) so long as no Default exists or would result therefrom, a merger, dissolution, liquidation, consolidation or Disposition, the purpose of which is to effect a Disposition permitted pursuant to Section 7.05.

Section 7.05. Dispositions .

Neither the Borrower nor any of the Subsidiaries shall, directly or indirectly, make any Disposition or enter into any agreement to make any Disposition (other than as part of or in connection with the Original Transactions), except:

(a) (i) Dispositions of obsolete, surplus or worn out property, whether now owned or hereafter acquired, in the ordinary course of business and Dispositions in the ordinary course of business of property no longer used or useful in the conduct of the business of the Borrower or any of its Subsidiaries and (ii) Dispositions outside the ordinary course of business of property no longer used or useful in the conduct of the business of the Borrower and its Subsidiaries (and for consideration complying with the requirements applicable to Dispositions pursuant to clause (j) below) in an aggregate amount not to exceed $15,000,000;

(b) Dispositions of inventory, goods held for sale in the ordinary course of business and immaterial assets (including allowing any registrations or any applications for registration of any intellectual property to lapse or go abandoned) in the ordinary course of business;

(c) Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are promptly applied to the purchase price of such replacement property;

(d) Dispositions of property to the Borrower or any Subsidiary; provided that if the transferor of such property is a Loan Party, (i) the transferee thereof must be a Loan Party or (ii) if such transaction constitutes an Investment, such transaction is permitted under Section 7.02;

(e) to the extent constituting Dispositions, the granting of Liens permitted by Section 7.01, the making of Investments permitted by Section 7.02, mergers, consolidations and liquidations permitted by Section 7.04 (other than Section 7.04(f)) and Restricted Payments permitted by Section 7.06;

(f) [RESERVED];

(g) Dispositions of Cash Equivalents;

(h) leases, subleases, licenses or sublicenses (including the provision of software or the licensing of other intellectual property rights), in each case in the ordinary course of business and which do not materially interfere with the business of the Borrower and its Subsidiaries, taken as a whole;

 

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(i) transfers of property subject to Casualty Events;

(j) Dispositions of property; provided that (i) at the time of such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at a time when no Default exists), no Default shall exist or would result from such Disposition, (ii) with respect to any Disposition pursuant to this clause (j) for a purchase price in excess of $5,000,000, the Borrower or any of its Subsidiaries shall receive not less than 75% of such consideration in the form of cash or Cash Equivalents (in each case, free and clear of all Liens at the time received, other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Sections 7.01(a), (f), (k), (p), (q), (r)(i), (r)(ii), (s), (bb), (ee) and (ff)); provided , however , that for the purposes of this clause (j)(ii), the following shall be deemed to be cash: (A) any liabilities (as shown on the Borrower’s most recent balance sheet provided hereunder or in the footnotes thereto) of the Borrower or such Subsidiary associated with the assets or Subsidiary sold in such Disposition that are assumed by the transferee with respect to the applicable Disposition and for which the Borrower and all of its Subsidiaries shall have been validly released by all applicable creditors in writing, (B) any securities received by the Borrower or the applicable Subsidiary from such transferee that are converted by the Borrower or such Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 180 days following the closing of the applicable Disposition, and (C) aggregate non-cash consideration received by the Borrower or the applicable Subsidiary having an aggregate fair market value (determined as of the closing of the applicable Disposition for which such non-cash consideration is received) not to exceed $5,000,000 at any time (net of any non-cash consideration converted into cash and Cash Equivalents) and (iii) to the extent the aggregate amount of Net Proceeds received by the Borrower or its Subsidiaries from Dispositions made pursuant to this Section 7.05(j) in the aggregate exceeds $75,000,000 in any fiscal year, with unused amounts in any fiscal year being carried over to the next succeeding fiscal year only after the amount available in such subsequent fiscal year has been fully used), plus any amount available pursuant to this clause (iii) in the next succeeding fiscal year only (which amount will be permanently reduced if used in the current fiscal year) subject to a maximum of $150,000,000 in any fiscal year, all Net Proceeds in excess of such amount in such fiscal year shall be applied to prepay Term Loans in accordance with Section 2.05(b) and may not be reinvested in the business of the Borrower or such Subsidiary;

(k) Dispositions listed on Schedule 7.05(k);

(l) Dispositions or discounts without recourse of accounts receivable in connection with the compromise or collection thereof in the ordinary course of business;

(m) Dispositions of property pursuant to sale-leaseback transactions; provided that the fair market value of all property so Disposed of after the Closing Date shall not exceed $50,000,000;

(n) any swap of assets in exchange for services or other assets in the ordinary course of business of comparable or greater value or usefulness to the business of the Borrower and its Subsidiaries as a whole, as determined in good faith by the management of the Borrower;

(o) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements;

(p) the unwinding of any Swap Contracts pursuant to its terms; and

(q) Permitted Asset Swaps;

provided that any Disposition of any property pursuant to Section 7.05(j) or (m) shall be for no less than the fair market value of such property at the time of such Disposition as determined by the Borrower in good faith. To the extent any Collateral is Disposed of as expressly permitted by this Section 7.05 to any Person other than a Loan Party, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and the Administrative Agent or the Collateral Agent, as applicable, shall be authorized to take any actions deemed appropriate in order to effect the foregoing.

 

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Section 7.06. Restricted Payments .

Neither the Borrower shall, nor shall the Borrower permit any of its Subsidiaries to, directly or indirectly, declare or make, directly or indirectly, any Restricted Payment, except:

(a) each Subsidiary may make Restricted Payments to the Borrower, and other Subsidiaries of the Borrower (and, in the case of a Restricted Payment by a non-wholly owned Subsidiary, to the Borrower and any other Subsidiary and to each other owner of Equity Interests of such Subsidiary based on their relative ownership interests of the relevant class of Equity Interests);

(b) the Borrower and each Subsidiary may declare and make dividend payments or other Restricted Payments payable solely in Equity Interests (other than Disqualified Equity Interests not otherwise permitted by Section 7.03) of such Person;

(c) Restricted Payments made (i) in respect of working capital adjustments or purchase price adjustments pursuant to the Original Acquisition Agreement and any earn-out payments so long as the Total Leverage Ratio, on a Pro Forma Basis, would be no greater than 4.00 to 1.00, (II) in order to satisfy indemnity and other similar obligations under the Original Acquisition Agreement and (III) non-compete payments so long as the Borrower is in Pro Forma Compliance with the covenants set forth in Section 7.11;

(d) to the extent constituting Restricted Payments, the Borrower and its Subsidiaries may enter into and consummate transactions expressly permitted by any provision of Section 7.02 (other than 7.02(e)), 7.04 or Section 7.08 (other than Section 7.08(f));

(e) repurchases of or redemptions by the Borrower or any Subsidiary of the Borrower of either (i) Equity Interests in Continental Cement Company, L.L.C., pursuant to the exercise of any option to “put” such Equity Interests or right of redemption of any holder of such Equity Interests or (ii) Equity Interests in the Borrower (or any direct or indirect parent thereof) or any Subsidiary of the Borrower which are deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;

(f) the Borrower and each Subsidiary may pay (or make Restricted Payments to allow the Borrower or any other direct or indirect parent thereof to pay) for the repurchase, retirement or other acquisition or retirement for value of Equity Interests of such Subsidiary (or of the Borrower or any other such direct or indirect parent thereof) by any future, present or former employee, officer, director, manager or consultant of such Subsidiary (or the Borrower or any other direct or indirect parent of such Subsidiary) or any of its Subsidiaries upon the death, disability, retirement or termination of employment of any such Person or pursuant to any employee, manager or director equity plan, employee, manager or director stock option plan or any other employee, manager or director benefit plan or any agreement (including any stock subscription or shareholder agreement) with any employee, director, officer or consultant of such Subsidiary (or the Borrower or any other direct or indirect parent thereof) or any of its Subsidiaries; provided that the aggregate amount of Restricted Payments made pursuant to this clause (f) shall not exceed $15,000,000 in any calendar year (which shall increase to $25,000,000 subsequent to the consummation of a Qualified IPO of Holdings or any direct or indirect parent thereof, as the case may be) (with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $30,000,000 in any calendar year (which shall increase to $50,000,000 subsequent to the consummation of a Qualified IPO of Holdings or any direct or indirect parent thereof, as the case may be)); provided , further , that such amount in any calendar year may be increased by an amount not to exceed:

(i) to the extent contributed to the Borrower, the Net Proceeds from the sale of Equity Interests of any of the Borrower’s direct or indirect parent companies, in each case to members of management, managers, directors or consultants of Holdings, the Borrower, any of its Subsidiaries or any of its direct or indirect parent companies that occurs after the Closing Date; plus

 

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(ii) the cash proceeds of key man life insurance policies received by the Borrower or its Subsidiaries; less

(iii) the amount of any Restricted Payments previously made with the cash proceeds described in clauses (i) and (ii) of this Section 7.06(f);

(g) the Borrower may make Restricted Payments to any direct or indirect parent of the Borrower:

(i) to pay its operating expenses incurred in the ordinary course of business and other corporate overhead costs and expenses (including administrative, legal, accounting and similar expenses provided by third parties), which are reasonable and customary and incurred in the ordinary course of business and attributable to the ownership or operations of the Borrower and its Subsidiaries so long as allocable to such entity in accordance with GAAP, Original Transaction Expenses and any reasonable and customary indemnification claims made by directors or officers of such parent attributable to the ownership or operations of the Borrower and its Subsidiaries;

(ii) the proceeds of which shall be used by such parent to pay franchise taxes and other fees, taxes and expenses required to maintain its (or any of its direct or indirect parents’) corporate existence;

(iii) with respect to any taxable year (or portion thereof) with respect to which the Borrower is treated as a disregarded entity or partnership for U.S. federal, state and/or local income tax purposes, to fund the income tax liabilities of the Borrower’s direct owner(s) (or, if a direct owner is a pass-through entity, of an indirect owner) for such taxable year (or portion thereof) resulting from the Borrower being a disregarded entity or partnership for U.S. federal, state and/or local income tax purposes in an aggregate amount assumed to equal the product of (i) the portion of the Borrower’s net taxable income for such taxable year (or portion thereof) reduced by any cumulative net taxable loss with respect to all prior taxable years (or portions thereof) beginning after the date hereof (determined as if all such periods were one period) to the extent such cumulative net taxable loss is of a character (ordinary or capital) that would permit such loss to be deducted against the income of the taxable year in question (or portion thereof) and (ii) the highest combined marginal federal and applicable state and/or local income tax rate (taking into account the deductibility of state and local income taxes for U.S. federal income tax purposes and the character of the taxable income in question ( i.e. , long term capital gain, qualified dividend income, etc.)) applicable to any such direct or indirect owner of the Borrower for the taxable year in question (or portion thereof);

(iv) to finance any Investment that would be permitted to be made pursuant to Section 7.02 if such parent were subject to such section; provided that (A) such Restricted Payment shall be made substantially concurrently with the closing of such Investment and (B) such parent shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the Borrower or its Subsidiaries or (2) the merger (to the extent permitted in Section 7.04) of the Person formed or acquired into the Borrower or its Subsidiaries in order to consummate such Permitted Acquisition or Investment, in each case, in accordance with the requirements of Section 6.11;

(v) the proceeds of which shall be used to pay customary salary, bonus and other benefits payable to officers and employees of Holdings or any direct or indirect parent company of Holdings to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Borrower and its Subsidiaries;

 

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(vi) the proceeds of which shall be used by Holdings to pay (or to make Restricted Payments to allow any direct or indirect parent thereof to pay fees and expenses (other than to Affiliates) related to any unsuccessful equity or debt offering by Holdings (or any direct or indirect parent thereof) that is directly attributable to the operations of the Borrower and its Subsidiaries; and

(vii) the proceeds of which shall be used to pay customary costs, fees and expenses (other than to Affiliates) related to any unsuccessful equity or debt offering permitted by this Agreement; and

(h) payments made or expected to be made by the Borrower or any of its Subsidiaries in respect of withholding or similar Taxes payable by any future, present or former employee, director, manager or consultant (or any spouses, former spouses, successors, executors, administrators, heirs, legatees or distributees of any of the foregoing) and any repurchases of Equity Interests in consideration of such payments including deemed repurchases in connection with the exercise of stock options;

(i) after a Qualified IPO, (i) any Restricted Payment by the Borrower or any other direct or indirect parent of the Borrower to pay listing fees and other costs and expenses attributable to being a publicly traded company which are reasonable and customary and (ii) Restricted Payments of up to 6% per annum of the net proceeds received by (or contributed to) the Borrower and its Subsidiaries from such Qualified IPO; and

(j) so long as no Default has occurred and is continuing or would result therefrom, the Borrower may make Restricted Payments in an aggregate amount not to exceed when combined with the amount applied to make prepayments of Junior Financing (or any Permitted Refinancing in respect thereof) pursuant to Section 7.13(a)(v) (x) $50,000,000, plus (y) if the Total Leverage Ratio, determined on a Pro Forma Basis as of the last day of the most recently ended Test Period for which financial statements were required to have been delivered pursuant to Section 6.01(a) or (b), as applicable (or, if no Test Period has passed, as of the last four quarters ended), as if such Restricted Payment had been made on the last day of such four quarter period, is less than or equal to 4.00 to 1.00, the portion, if any, of the Cumulative Credit on such date that the Borrower elects to apply to this paragraph, such election to be specified in a written notice of a Responsible Officer of the Borrower calculating in reasonable detail the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied.

Section 7.07. Change in Nature of Business .

The Borrower shall not, nor shall the Borrower permit any of its Subsidiaries to, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the Closing Date or any business reasonably related, complementary, synergistic or ancillary thereto (including related, complementary, synergistic or ancillary technologies) or reasonable extensions thereof.

Section 7.08. Transactions with Affiliates .

Neither the Borrower shall, nor shall the Borrower permit any of its Subsidiaries to, directly or indirectly, enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than (a) transactions among the Borrower and its Subsidiaries or any entity that becomes a Subsidiary as a result of such transaction, (b) on terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s-length transaction with a Person other than an Affiliate, (c) the Original Transactions and the payment of fees and expenses (including Original Transaction Expenses) as part of or in connection with the Original Transactions, (d) the issuance of Equity Interests to any officer, director, employee or consultant of the Borrower or any of its Subsidiaries in connection with the Original Transactions, (e) if no Event of Default is occurring or would result therefrom, the payment of management, monitoring, consulting, transaction and advisory fees (but for avoidance of doubt, excluding termination fees) in an aggregate amount not to exceed the amount payable pursuant to the terms of the Investor Management Agreement and related indemnities and reasonable expenses, (f) Restricted Payments permitted under Section 7.06, (g) loans and other transactions among the Borrower and its Subsidiaries and joint ventures (to the extent any such

 

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joint venture is only an Affiliate as a result of Investments by the Borrower and its Subsidiaries in such joint venture) to the extent otherwise permitted under this Article VII, (h) employment and severance arrangements between the Borrower and its Subsidiaries and their respective officers and employees in the ordinary course of business and transactions pursuant to stock option plans and employee benefit plans and arrangements in the ordinary course of business, (i) the payment of customary fees and reasonable out of pocket costs to, and indemnities provided on behalf of, directors, managers, officers, employees and consultants of the Borrower and its Subsidiaries (or any direct or indirect parent of the Borrower) in the ordinary course of business to the extent attributable to the ownership or operation of the Borrower and its Subsidiaries, (j) transactions pursuant to agreements in existence on the Closing Date and set forth on Schedule 7.08 or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect, (k) customary payments by the Borrower and any of its Subsidiaries to the Investors made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities (including in connection with acquisitions or divestitures), which payments are approved by the majority of the members of the board of directors or managers or a majority of the disinterested members of the board of directors or managers of the Borrower, in good faith, (l) payments by the Borrower or any of its Subsidiaries pursuant to any tax sharing agreements with any direct or indirect parent of the Borrower to the extent attributable to the ownership or operation of the Borrower and the Subsidiaries, but only to the extent permitted by Section 7.06(g)(iii), (m) the issuance or transfer of Equity Interests (other than Disqualified Equity Interests) of Holdings to any Permitted Holder or to any former, current or future director, manager, officer, employee or consultant (or any Affiliate of any of the foregoing) of the Borrower, any of its Subsidiaries or any direct or indirect parent thereof, (n) transactions with customers, clients, joint venture partners, suppliers or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Agreement that are fair to the Borrower and its Subsidiaries, in the reasonable determination of the board of directors or the senior management of the Borrower, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party, (o) any payments required to be made pursuant to the Original Acquisition Agreement and (p) any termination fees payable pursuant to the Investor Management Agreement not to exceed the amount set forth in the Investor Management Agreement as in effect on the Original Closing Date.

Section 7.09. Burdensome Agreements .

The Borrower shall not, nor shall the Borrower permit any of its Subsidiaries to, enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that limits the ability of (a) any Subsidiary of the Borrower that is not a Guarantor to make Restricted Payments to the Borrower or any Guarantor or (b) any Loan Party to create, incur, assume or suffer to exist Liens on property of such Person for the benefit of the Lenders with respect to the Facilities and the Obligations or under the Loan Documents; provided that the foregoing clauses (a) and (b) shall not apply to Contractual Obligations which (i) (x) exist on the Closing Date and (to the extent not otherwise permitted by this Section 7.09) are listed on Schedule 7.09 hereto and (y) to the extent Contractual Obligations permitted by clause (x) are set forth in an agreement evidencing Indebtedness, are set forth in any agreement evidencing any permitted modification, replacement, renewal, extension or refinancing of such Indebtedness so long as such modification, replacement, renewal, extension or refinancing does not expand the scope of such Contractual Obligation, (ii) are binding on a Subsidiary at the time such Subsidiary first becomes a Subsidiary of the Borrower, so long as such Contractual Obligations were not entered into solely in contemplation of such Person becoming a Subsidiary of the Borrower, (iii) represent Indebtedness of a Subsidiary of the Borrower which is not a Loan Party which is permitted by Section 7.03, (iv) arise in connection with any Disposition permitted by Section 7.04 or 7.05 and relate solely to the assets or Person subject to such Disposition, (v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under Section 7.02 and applicable solely to such joint venture entered into in the ordinary course of business, (vi) are negative pledges and restrictions on Liens in favor of any holder of Indebtedness permitted under Section 7.03 but solely to the extent any negative pledge relates to the property financed by such Indebtedness, (vii) are customary restrictions on leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto, (viii) comprise restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to Section 7.03(e), (g) or (m) and to the extent that such restrictions apply only to the property or assets securing such Indebtedness or to the Subsidiaries incurring or guaranteeing such Indebtedness, (ix) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Subsidiary, (x) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business, (xi) are restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business, (xii) arise in connection with cash or other deposits permitted under

 

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Sections 7.01 and 7.02 and limited to such cash or deposit or (xiii) comprise restrictions imposed by any agreement governing Indebtedness entered into on or after the Closing Date and permitted under Section 7.03 (including, without limitation, the Senior Notes or any Junior Financing, and, in each case, any Permitted Refinancing in respect thereof) that are, taken as a whole, in the good faith judgment of the Borrower, no more restrictive with respect to the Borrower or any of its Subsidiaries than customary market terms for Indebtedness of such type (and, in any event, are no more restrictive than the restrictions contained in this Agreement), so long as the Borrower shall have determined in good faith that such restrictions will not affect its obligation or ability to make any payments required hereunder.

Section 7.10. Use of Proceeds .

The proceeds of the Term Loans shall be used together with the proceeds of the Senior Notes to repay the term loans under the Existing Credit Agreement and to repay the Continental Cement Indebtedness. The proceeds of the Revolving Credit Loans and Swing Line Loans, shall be used to repay the revolving credit loans under the Existing Credit Agreement and terminate all revolving commitments under the Existing Credit Agreement and for working capital, general corporate purposes, and any other purpose not prohibited by this Agreement including Permitted Acquisitions, and other Investments. The Letters of Credit shall be used solely to support obligations of the Borrower and its Subsidiaries incurred for working capital, general corporate purposes and any other purpose not prohibited by this Agreement.

Section 7.11. Financial Covenants .

(a) Consolidated First Lien Net Leverage Ratio . The Borrower shall not permit the Consolidated First Lien Net Leverage Ratio as of the last day of any Test Period ending during any period set forth in the table below (commencing with the first fiscal quarter completed after the Closing Date) to be greater than the ratio set forth below opposite such period:

 

Test Period Ending

   Consolidated First Lien
Net Ratio
 

April 1, 2012 - December 31, 2012

     4.75 to 1.0   

January 1, 2013 - September 30, 2013

     4.25 to 1.0   

October 1, 2013 - December 31, 2014

     4.00 to 1.0   

January 1, 2015 and thereafter

     3.85 to 1.0   

(b) Interest Coverage Ratio . The Borrower shall not permit the Interest Coverage Ratio for any Test Period set forth below to be less than the ratio set forth below opposite such period:

 

Test Period Ending

   Interest Coverage Ratio  

April 1, 2012 - December 31, 2012

     1.75 to 1.0   

January 1, 2013 - December 31, 2013

     1.85 to 1.0   

Any Test Period ending after January 1, 2014

     2.00 to 1.0   

Section 7.12. Accounting Changes .

The Borrower shall not make any change in its fiscal year; provided , however , that the Borrower may, upon written notice to the Administrative Agent, change its fiscal year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, the Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary to reflect such change in fiscal year.

Section 7.13. Prepayments, Etc. of Indebtedness .

(a) The Borrower shall not, nor shall the Borrower permit any of its Subsidiaries to, directly or indirectly, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner

 

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(it being understood that payments of regularly scheduled principal, interest and mandatory prepayments shall be permitted) any subordinated Indebtedness incurred under Section 7.03 or any other Indebtedness that is required to be subordinated to the Obligations pursuant to the terms of the Loan Documents (collectively, “ Junior Financing ”) or make any payment in violation of any subordination terms of any Junior Financing Documentation, except (i) the refinancing thereof with the Net Proceeds of any Indebtedness constituting a Permitted Refinancing; provided that if such Indebtedness was originally incurred under Section 7.03, such Permitted Refinancing is permitted pursuant to Section 7.03, (ii) the conversion or exchange of any Junior Financing to Equity Interests (other than Disqualified Equity Interests) of Holdings or any of its direct or indirect parents, (iii) the prepayment of Indebtedness of the Borrower or any Subsidiary to the Borrower or any Subsidiary to the extent not prohibited by the subordination provisions contained in the Intercompany Note, (iv) prepayments or purchases of Junior Financing with Declined Proceeds as required pursuant to the Junior Financing Documentation and (v) so long as no Default has occurred and is continuing or would result therefrom, prepayments, redemptions, purchases, defeasances and other payments in respect of Junior Financings (or any Permitted Refinancings in respect thereof) prior to their scheduled maturity in an aggregate amount not to exceed when combined with the amount of Restricted Payments pursuant to Section 7.06(j), $50,000,000 plus, if the Total Leverage Ratio, determined on a Pro Forma Basis as of the last day of the most recently ended Test Period for which financial statements were required to have been delivered pursuant to Section 6.01(a) or (b), as applicable (or, if no Test Period has passed, as of the last four quarters ended), as if such prepayment, redemption, purchase, defeasance or other payment in respect of Junior Financings had been made on the last day of such four quarter period, is less than or equal to 4.00 to 1.00, the portion, if any, of the Cumulative Credit on such date that the Borrower elects to apply to this paragraph, such election to be specified in a written notice of a Responsible Officer of the Borrower calculating in reasonable detail the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied.

(b) The Borrower shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, amend, modify or change in any manner materially adverse to the interests of the Lenders any term or condition of any Junior Financing Documentation in respect of any Junior Financing having an aggregate outstanding principal amount in excess of the Threshold Amount without the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed).

Section 7.14. Permitted Activities .

Holdings shall not engage in any material operating or business activities; provided that the following shall be permitted in any event: (i) its ownership of the Equity Interests of Borrower and activities incidental thereto, including payment of dividends and other amounts in respect of its Equity Interests, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (iii) the performance of its obligations with respect to the Loan Documents and any other Indebtedness, (iv) any public offering of its common stock or any other issuance or sale of its Equity Interests, (v) financing activities, including the issuance of securities, incurrence of debt, payment of dividends, making contributions to the capital of the Borrower and guaranteeing the obligations of the Borrower, (vi) participating in tax, accounting and other administrative matters, (vii) holding any cash or property (but not operating any property), (viii) providing indemnification to officers, managers and directors and (ix) any activities incidental to the foregoing. Holdings shall not incur any Liens on Equity Interests of the Borrower other than those for the benefit of the Obligations and Holdings shall not own any Equity Interests other than those of the Borrower.

ARTICLE VIII

Events of Default and Remedies

Section 8.01. Events of Default .

Any of the following from and after the Closing Date shall constitute an event of default (an “ Event of Default ”):

(a) Non-Payment . Any Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five (5) Business Days after the same becomes due, any interest on any Loan or any other amount payable hereunder or with respect to any other Loan Document; or

 

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(b) Specific Covenants . The Borrower fails to perform or observe any term, covenant or agreement contained in any of Sections 6.03(a) or 6.05(a) (solely with respect to the Borrower) or Article VII; provided that the covenants in Section 7.11 are subject to cure pursuant to Section 8.05; or

(c) Other Defaults . Any Loan Party fails to perform or observe any other covenant or agreement (not specified in Section 8.01(a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after notice thereof by the Administrative Agent or the Required Lenders to the Borrower; or

(d) Representations and Warranties . Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document required to be delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

(e) Cross-Default . Any Loan Party or any Subsidiary (A) fails to make any payment beyond the applicable grace period with respect thereto, if any, (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness (other than Indebtedness hereunder) having an outstanding aggregate principal amount of not less than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness, or any other event occurs (other than, with respect to Indebtedness consisting of Swap Contracts, termination events or equivalent events pursuant to the terms of such Swap Contracts), the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity; provided that this clause (e)(B) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; provided , further , that such failure is unremedied and is not waived by the holders of such Indebtedness prior to any termination of the Revolving Credit Commitments or acceleration of the Loans pursuant to Section 8.02; or

(f) Insolvency Proceedings, Etc . Any Loan Party or any Subsidiary institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or

(g) Inability to Pay Debts; Attachment . (i) Any Loan Party or any Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of the Borrower and its Subsidiaries, taken as a whole, and is not released, vacated or fully bonded within sixty (60) days after its issue or levy; or

(h) Judgments . There is entered against any Loan Party or any Subsidiary a final judgment or order for the payment of money in an aggregate amount exceeding the Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied coverage) and such judgment or order shall not have been satisfied, vacated, discharged or stayed or bonded pending an appeal for a period of sixty (60) consecutive days; or

(i) Invalidity of Loan Documents . Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder

 

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(including as a result of a transaction permitted under Section 7.04 or 7.05) or as a result of acts or omissions by the Administrative Agent or Collateral Agent or any Lender or the satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party contests in writing the validity or enforceability of any provision of any Loan Document; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of the Obligations and termination of the Aggregate Commitments), or purports in writing to revoke or rescind any Loan Document; or

(j) Change of Control . There occurs any Change of Control; or

(k) Collateral Documents . Any Collateral Document after delivery thereof pursuant to Section 4.02, 6.11 or 6.13 shall for any reason (other than pursuant to the terms thereof including as a result of a transaction not prohibited under this Agreement) cease to create a valid and perfected Lien, with the priority required by the Collateral Documents on and security interest in any material portion of the Collateral purported to be covered thereby, subject to Liens permitted under Section 7.01, (i) except to the extent that any such perfection or priority is not required pursuant to the Collateral and Guarantee Requirement or results from the failure of the Administrative Agent or the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents or to file Uniform Commercial Code continuation statements and (ii) except as to Collateral consisting of Real Property to the extent that such losses are covered by a lender’s title insurance policy and such insurer has not denied coverage; or

(l) ERISA . (i) An ERISA Event occurs which has resulted or could reasonably be expected to result in liability of a Loan Party or a Subsidiary in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect, or (ii) a Loan Party, any Subsidiary or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect.

Section 8.02. Remedies upon Event of Default .

If any Event of Default occurs and is continuing, the Administrative Agent may and, at the request of the Required Lenders, shall take any or all of the following actions:

(a) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;

(c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and

(d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable Law;

provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

 

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Section 8.03. Exclusion of Immaterial Subsidiaries .

Solely for the purpose of determining whether a Default or Event of Default has occurred under clause (f) or (g) of Section 8.01, any reference in any such clause to any Subsidiary or Loan Party shall be deemed not to include any Subsidiary (an “ Immaterial Subsidiary ”) affected by any event or circumstances referred to in any such clause that did not, as of the last day of the most recent completed fiscal quarter of the Borrower, have assets with a fair market value in excess of 5% of the Consolidated Total Assets of the Borrower and its Subsidiaries (it being agreed that all Subsidiaries affected by any event or circumstance referred to in any such clause shall be considered together, as a single consolidated Subsidiary, for purposes of determining whether the condition specified above is satisfied).

Section 8.04. Application of Funds .

After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order (to the fullest extent permitted by mandatory provisions of applicable Law):

First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (other than principal and interest, but including Attorney Costs payable under Section 10.04 and amounts payable under Article III) payable to the Administrative Agent or the Collateral Agent in its capacity as such;

Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including Attorney Costs payable under Section 10.04 and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;

Third , to payment of that portion of the Obligations constituting accrued and unpaid interest and fees on the Loans, Commitments, Letters of Credit and L/C Borrowings, and any fees, premiums and scheduled periodic payments due under Cash Management Obligations or Secured Hedge Agreements, ratably among the Secured Parties in proportion to the respective amounts described in this clause Third payable to them;

Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings (including to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit), and any breakage, termination or other payments under Cash Management Obligations or Secured Hedge Agreements, ratably among the Secured Parties in proportion to the respective amounts described in this clause Fourth held by them;

Fifth , to the payment of all other Obligations of the Borrower that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date; and

Last , the balance, if any, after all of the Obligations have been paid in full, to the Borrower or as otherwise required by Law.

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above and, if no Obligations remain outstanding, to the Borrower as applicable.

 

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Section 8.05. Borrower’s Right to Cure .

(a) Notwithstanding anything to the contrary contained in Section 8.01 or 8.02, in the event of any Event of Default or potential Event of Default under the covenants set forth in Sections 7.11 and at any time until the expiration of the tenth (10th) day after the date on which financial statements are required to be delivered with respect to the applicable fiscal quarter hereunder, the Investors may make a Specified Equity Contribution to Holdings, and Holdings may apply the amount of the net cash proceeds thereof to increase Consolidated EBITDA with respect to such applicable quarter; provided that such net cash proceeds (i) are actually received by the Borrower as cash common equity (including through capital contribution of such net cash proceeds to the Borrower) no later than ten (10) days after the date on which financial statements are required to be delivered with respect to such fiscal quarter hereunder and (ii) are Not Otherwise Applied. The parties hereby acknowledge that this Section 8.05(a) may not be relied on for purposes of calculating any financial ratios other than as applicable to Section 7.11 and shall not result in any adjustment to any amounts other than the amount of the Consolidated EBITDA referred to in the immediately preceding sentence.

(b) (i) In each period of four consecutive fiscal quarters, there shall be at least two fiscal quarters in which no Specified Equity Contribution is made, (ii) no more than four Specified Equity Contributions will be made in the aggregate during the term of this Agreement, (iii) the amount of any Specified Equity Contribution shall be no more than the amount required to cause the Borrower to be in Pro Forma Compliance with Section 7.11 for any applicable period and (iv) there shall be no pro forma reduction in Indebtedness with the proceeds of any Specified Equity Contribution for determining compliance with Sections 7.11 for the fiscal quarter immediately prior to the fiscal quarter in which such Specified Equity Contribution was made.

ARTICLE IX

Administrative Agent and Other Agents

Section 9.01. Appointment and Authorization of Agents .

(a) Each Lender hereby irrevocably appoints, designates and authorizes each of the Administrative Agent and the Collateral Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Without limiting the foregoing, each Lender and each L/C Issuer hereby authorizes each of the Administrative Agent and the Collateral Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which such Administrative Agent or Collateral Agent is a party, to exercise all rights, powers and remedies that such Administrative Agent or Collateral Agent may have under any such Loan Documents and, in the case of the Collateral Documents, to act as agent for the Lenders, L/C Issuers and the other Secured Parties under such Collateral Documents. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, neither the Administrative Agent nor the Collateral Agent shall have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent or the Collateral Agent have or be deemed to have any fiduciary relationship with any Lender or Participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent or the Collateral Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

(b) Each L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each such L/C Issuer shall have all of the benefits and immunities (i) provided to the Agents in this Article IX with respect to any acts taken or omissions suffered by such L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term “Agent” as used in this Article IX and in the definition of “Agent-Related Person” included such L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to such L/C Issuer.

 

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(c) Each of the Secured Parties hereby irrevocably appoints and authorizes the Collateral Agent to act as the agent of (and to hold any security interest created by the Collateral Documents for and on behalf of or in trust for) such Secured Party for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent (and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to Section 9.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Collateral Agent), shall be entitled to the benefits of all provisions of this Article IX (including, Section 9.07, as though such co-agents, sub-agents and attorneys-in-fact were the Collateral Agent under the Loan Documents) as if set forth in full herein with respect thereto.

(d) In performing its functions and duties hereunder and under the other Loan Documents, each of the Administrative Agent and the Collateral Agent is acting solely on behalf of the Lenders and the L/C Issuers and its duties are entirely administrative in nature. Each of the Administrative Agent and the Collateral Agent does not assume and shall not be deemed to have assumed any obligation other than as expressly set forth herein and in the other Loan Documents or any other relationship as the agent, fiduciary or trustee of or for any Lender, L/C Issuer or holder of any other Obligation. The Administrative Agent may perform any of its duties under any Loan Document by or through its agents or employees. In the event the Administrative Agent calculates the aggregate amount outstanding under Letters of Credit upon the request of any Lender or L/C Issuer, the Administrative Agent may make such calculation based on the face amount of all outstanding Letters of Credit.

Section 9.02. Delegation of Duties .

Each of the Administrative Agent and the Collateral Agent may execute any of its duties under this Agreement or any other Loan Document (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents or of exercising any rights and remedies thereunder) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or sub-agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct (as determined in the final non-appealable judgment of a court of competent jurisdiction).

Section 9.03. Liability of Agents .

No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct, as determined by the final non-appealable judgment of a court of competent jurisdiction, in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or Participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent or the Collateral Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or the perfection or priority of any Lien or security interest created or purported to be created under the Collateral Documents, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant 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 Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof.

Section 9.04. Reliance by Agents .

(a) Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it 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 (including counsel to any Loan Party), independent accountants and other experts

 

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selected by such Agent. Each Agent shall be fully justified in failing or refusing to take any action under any Loan 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 taking or continuing to take any such action. Without limiting the foregoing, each Agent (a) may treat the payee of any Note as its holder until such Note has been assigned in accordance with Section 10.07, (b) may rely on the Register to the extent set forth in Section 10.07, (c) may consult with legal counsel (including counsel to the Borrower or any other Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (d) makes no warranty or representation to any Lender or L/C Issuer and shall not be responsible to any Lender or L/C Issuer for any statements, warranties or representations made by or on behalf of Holdings or any of its Subsidiaries in or in connection with this Agreement or any other Loan Document, (e) shall not have any duty to ascertain or to inquire either as to the performance or observance of any term, covenant or condition of this Agreement or any other Loan Document, as to the financial condition of any Loan Party or as to the existence or possible existence of any Default or Event of Default, (f) shall not be responsible to any Lender or L/C Issuer for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto and (g) shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which writing may be a facsimile or electronic mail) or any telephone message believed by it to be genuine and signed or sent by the proper party or parties. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) 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 with respect to Credit Extensions on the Closing Date or Section 4.02, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

Section 9.05. Notice of Default .

The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any 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, describing such Default and stating that such notice is a “notice of default.” The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to any Event of Default as may be directed by the Required Lenders in accordance with Article VIII; provided that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable or in the best interest of the Lenders.

Section 9.06. Credit Decision; Disclosure of Information by Agents .

Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by any Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to each Agent that it has, independently and without reliance upon any Agent-Related Person 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 Loan Parties and their Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently

 

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and without reliance upon any Agent-Related Person 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 Loan 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 Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any Agent herein, such 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 any of the Loan Parties or any of their Affiliates which may come into the possession of any Agent-Related Person.

Section 9.07. Indemnification of Agents .

Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting from such Agent-Related Person’s own gross negligence or willful misconduct, as determined by the final non-appealable judgment of a court of competent jurisdiction; provided that no action taken in accordance with the directions of the Required Lenders (or such other number or percentage of the Lenders as shall be required by the Loan Documents) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 9.07; provided , further , that any obligation to indemnify an L/C Issuer pursuant to this Section 9.07 shall be limited to Revolving Credit Lenders only. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Liabilities, this Section 9.07 applies whether any such investigation, litigation or proceeding is brought by any Lender or any other Person. Without limitation of the foregoing, each Lender shall reimburse each of the Administrative Agent and the Collateral Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent or the Collateral Agent, as the case may be, in connection with the preparation, execution, delivery, administration, 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 Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent or the Collateral Agent, as the case may be, is not reimbursed for such expenses by or on behalf of the Loan Parties. The undertaking in this Section 9.07 shall survive termination of the Aggregate Commitments, the payment of all other Obligations and the resignation of the Administrative Agent or the Collateral Agent, as the case may be.

Section 9.08. Agents in Their Individual Capacities .

Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire Equity Interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Borrower and its respective Affiliates as though Bank of America were not the Administrative Agent, the Collateral Agent or an L/C Issuer hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding the Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower or such Affiliate) and acknowledge that neither the Administrative Agent nor the Collateral Agent shall be under any obligation to provide such information to them. With respect to its Loans, Bank of America and its Affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent, the Collateral Agent or an L/C Issuer, and the terms “Lender” and “Lenders” include Bank of America in its individual capacity. Any successor to Bank of America as the Administrative Agent or the Collateral Agent shall also have the rights attributed to Bank of America under this paragraph.

Section 9.09. Successor Agents .

Each of the Administrative Agent and the Collateral Agent may resign as the Administrative Agent or the Collateral Agent, as applicable, upon ten (10) days’ notice to the Lenders and the Borrower and if either the Administrative Agent or the Collateral Agent is a Defaulting Lender pursuant to clause (iv) of the definition thereof, the Borrower may remove such Defaulting Lender from such role upon ten (10) days’ notice to the Lenders. If the Administrative

 

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Agent or the Collateral Agent resigns under this Agreement or is removed by the Borrower, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default under Section 8.01(f) or (g) (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor agent is appointed prior to the effective date of the resignation or removal of the Administrative Agent or the Collateral Agent, as applicable, the Administrative Agent or the Collateral Agent, as applicable in the case of a resignation, and the Borrower, in the case of a removal, may appoint, after consulting with the Lenders and the Borrower (in the case of a resignation), a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, the Person acting as such successor agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent or retiring Collateral Agent and the term “Administrative Agent” or “Collateral Agent” shall mean such successor administrative agent or collateral agent and/or Supplemental Agent, as the case may be, and the retiring Administrative Agent’s or Collateral Agent’s appointment, powers and duties as the Administrative Agent or Collateral Agent shall be terminated. After the retiring Administrative Agent’s or the Collateral Agent’s resignation or removal hereunder as the Administrative Agent or Collateral Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent or Collateral Agent under this Agreement. If no successor agent has accepted appointment as the Administrative Agent or the Collateral Agent by the date which is ten (10) days following the retiring Administrative Agent’s or Collateral Agent’s notice of resignation or ten (10) days following the Borrower’s notice of removal, the retiring Administrative Agent’s or the retiring Collateral Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent or Collateral Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above (except that in the case of any collateral security held by a resigning Collateral Agent under any of the Loan Documents, the retiring Collateral Agent shall continue to hold such collateral security until such time as a successor Collateral Agent is appointed). Upon the acceptance of any appointment as the Administrative Agent or Collateral Agent hereunder by a successor and upon the execution and filing or recording of such financing statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to (a) continue the perfection of the Liens granted or purported to be granted by the Collateral Documents or (b) otherwise ensure that Section 6.11 is satisfied, the Administrative Agent or Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Administrative Agent or Collateral Agent, and the retiring Administrative Agent or Collateral Agent shall be discharged from its duties and obligations under the Loan Documents. After the retiring Administrative Agent’s or Collateral Agent’s resignation hereunder as the Administrative Agent or the Collateral Agent, the provisions of this Article IX shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent or the Collateral Agent.

Section 9.10. Administrative Agent May File Proofs of Claim .

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower or the Collateral Agent) shall be (to the fullest extent permitted by mandatory provisions of applicable Law) entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Collateral Agent and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Collateral Agent and the Administrative Agent and their respective agents and counsel and all other amounts due to the Lenders, the Collateral Agent and the Administrative Agent under Sections 2.03(h) and (i), 2.09 and 10.04) allowed in such judicial proceeding; and

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

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and any custodian, curator, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent or the Collateral Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent or the Collateral Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and their respective agents and counsel, and any other amounts due the Administrative Agent or the Collateral Agent under Sections 2.09 and 10.04.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

Section 9.11. Collateral and Guaranty Matters .

The Lenders irrevocably agree:

(a) that any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent under any Loan Document shall be automatically released (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (x) Cash Management Obligations or obligations under Secured Hedge Agreements not yet due and payable and (y) contingent obligations not yet accrued and payable) and the expiration or termination or Cash Collateralization of all Letters of Credit, (ii) at the time the property subject to such Lien is Disposed or to be substantially simultaneously Disposed as part of or in connection with any Disposition permitted hereunder or under any other Loan Document to any Person other than a Person required to grant a Lien to the Administrative Agent or the Collateral Agent under the Loan Documents (or, if such transferee is a Person required to grant a Lien to the Administrative Agent or the Collateral Agent on such asset, at the option of the applicable Loan Party, such Lien on such asset may still be released in connection with the transfer so long as (x) the transferee grants a new Lien to the Administrative Agent or Collateral Agent on such asset substantially concurrently with the transfer of such asset, (y) the transfer is between parties organized under the laws of different jurisdictions and the transferee is a Foreign Subsidiary and (z) the priority of the new Lien is the same as that of the original Lien), (iii) subject to Section 10.01, if the release of such Lien is approved, authorized or ratified in writing by the Required Lenders or (iv) if the property subject to such Lien is owned by a Guarantor, upon release of such Guarantor from its obligations under its Guaranty pursuant to clause (c) below;

(b) the Collateral Agent is authorized to release any Lien on any property granted to or held by the Collateral Agent under any Loan Document on any assets that are excluded from the Collateral;

(c) that any Guarantor shall be automatically released from its obligations under the Guaranty if such Person ceases to be a Subsidiary or becomes an Excluded Subsidiary (other than pursuant to clause (b) of the definition thereof unless the Borrower delivers a written request to the Administrative Agent for such release and no Default has occurred and is continuing at such time) as a result of a transaction or designation permitted hereunder; provided that no such release shall occur if such Guarantor continues to be a guarantor in respect of any Junior Financing; and

(d) (x) the Collateral Agent may, without any further consent of any Lender, enter into or amend (i) a First Lien Intercreditor Agreement with the collateral agent or other representative of the holders of Permitted Notes issued pursuant to Section 7.03(r) or Permitted Ratio Debt issued or incurred pursuant to Section 7.03(s), in each case, that are intended to be secured on a pari passu basis with the Obligations and/or (ii) a Second Lien Intercreditor Agreement with the collateral agent or other representatives of the holders of Permitted Ratio Debt or other Indebtedness that is permitted to be secured by a Lien on the Collateral ranking junior to the Lien securing the Obligations that is permitted by Section 7.03, (y) the Collateral Agent may rely exclusively on a certificate of a Responsible Officer of the Borrower as to whether any such other Liens are permitted and (z) any First Lien Intercreditor Agreement or Second Lien Intercreditor Agreement entered into by the Collateral Agent shall be binding on the Secured Parties.

 

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Upon request by the Administrative Agent or the Collateral Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s or the Collateral Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.11. In each case as specified in this Section 9.11, the Administrative Agent or the Collateral Agent will (and each Lender irrevocably authorizes the Administrative Agent and the Collateral Agent to), at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as the Borrower may reasonably request to evidence the release or subordination of such item of Collateral from the assignment and security interest granted under the Collateral Documents, or to evidence the release of such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.11.

Section 9.12. Other Agents; Arrangers and Managers .

None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “joint bookrunner” or “arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

Section 9.13. Appointment of Supplemental Agents .

(a) It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any Law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case the Administrative Agent or the Collateral Agent deems that by reason of any present or future Law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, the Administrative Agent and the Collateral Agent are hereby authorized to appoint an additional individual or institution selected by the Administrative Agent or the Collateral Agent in its sole discretion as a separate trustee, co-trustee, administrative agent, collateral agent, administrative sub-agent or administrative co-agent (any such additional individual or institution being referred to herein individually as a “ Supplemental Agent ” and collectively as “ Supplemental Agents ”).

(b) In the event that the Collateral Agent appoints a Supplemental Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to the Collateral Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Agent to the extent, and only to the extent, necessary to enable such Supplemental Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Agent shall run to and be enforceable by either the Collateral Agent or such Supplemental Agent, and (ii) the provisions of this Article IX and of Sections 10.04 and 10.05 that refer to the Administrative Agent shall inure to the benefit of such Supplemental Agent and all references therein to the Collateral Agent shall be deemed to be references to the Collateral Agent and/or such Supplemental Agent, as the context may require.

(c) Should any instrument in writing from any Loan Party be required by any Supplemental Agent so appointed by the Administrative Agent or the Collateral Agent for more fully and certainly vesting in and confirming to it or its such rights, powers, privileges and duties, such Loan Party shall execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent or the Collateral Agent. In case any Supplemental Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Agent, to the extent permitted by Law, shall vest in and be exercised by the Administrative Agent until the appointment of a new Supplemental Agent.

 

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Section 9.14. Withholding Tax Indemnity .

To the extent required by any applicable Law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding tax. If the Internal Revenue Service or any other authority of the United States or any other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender for any reason (including, without limitation, because the appropriate form was not delivered or not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstance that rendered the exemption from, or reduction of, withholding tax ineffective), such Lender shall indemnify and hold harmless the Administrative Agent (to the extent that the Administrative Agent has not already been reimbursed by the Borrower pursuant to Section 3.01 and Section 3.04 and without limiting or expanding the obligation of the Borrower to do so) for all amounts paid, directly or indirectly, by the Administrative Agent as Taxes or otherwise, together with all expenses incurred, including legal expenses and any other out-of-pocket expenses, whether or not such tax was correctly or legally imposed or asserted by the relevant governmental authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. The agreements in this Section 9.14 shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Agreement and the repayment, satisfaction or discharge of all other Obligations. Each Lender authorizes the Administrative Agent to set off and apply any and all amounts owing to such Lender under any Loan Document against any amount due to the Administrative Agent under this Section 9.14. For the avoidance of doubt, a “Lender” shall, for all purposes of this Section 9.14, include any L/C Issuer and any Swing Line Lender.

ARTICLE X

Miscellaneous

Section 10.01. Amendments, Etc .

Except as otherwise set forth in this Agreement, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders (other than with respect to any amendment or waiver contemplated in clauses (i) or (j) below, which shall only require the consent of the Required Facility Lenders under the applicable Facility, as applicable) (or by the Administrative Agent with the consent of the Required Lenders) and the Borrower and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, no such amendment, waiver or consent shall:

(a) extend or increase the Commitment of any Lender without the written consent of each Lender holding such Commitment (it being understood that a waiver of any condition precedent or of any Default, mandatory prepayment or mandatory reduction of the Commitments shall not constitute an extension or increase of any Commitment of any Lender);

(b) postpone any date scheduled for, or reduce or forgive the amount of, any payment of principal or interest under Section 2.07 or 2.08 (other than pursuant to Section 2.08(b)) without the written consent of each Lender holding the applicable Obligation (it being understood that the waiver of (or amendment to the terms of) any mandatory prepayment of the Term Loans shall not constitute a postponement of any date scheduled for the payment of principal or interest and it further being understood that any change to the definition of “Consolidated First Lien Net Leverage Ratio,” “Interest Coverage Ratio,” “Total Leverage Ratio” or “Secured Leverage Ratio” or, in each case, in the component definitions thereof shall not constitute a reduction or forgiveness in any rate of interest;

(c) reduce or forgive the principal of, or the rate of interest specified herein on, any Loan, or L/C Borrowing, or (subject to clause (iii) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document (or change the timing of payments of such fees or other amounts) without the written consent of each Lender holding such Loan, L/C Borrowing or to whom such fee or other amount is owed, it further being understood that any change to the definition of “Consolidated First Lien Net Leverage Ratio,” “Interest Coverage Ratio,” “Total Leverage Ratio” or “Secured Leverage Ratio” or, in each case, in the component definitions thereof shall not constitute a reduction

 

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or forgiveness in any rate of interest; provided that, only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

(d) change any provision of this Section 10.01, the definition of “Required Lenders,” “Required Facility Lenders,” “Required Class Lenders,” Section 8.04 or the definition of “Pro Rata Share” or Section 2.12(a), 2.12(g) or 2.13 without the written consent of each Lender directly affected thereby;

(e) other than in connection with a transaction permitted under Section 7.04 or 7.05, release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender;

(f) other than in connection with a transaction permitted under Section 7.04 or 7.05, release all or substantially all of the aggregate value of the Guarantees, without the written consent of each Lender;

(g) without the written consent of each Lender adversely affected thereby, amend the portion of the definition of “Interest Period” that reads as follows: “one, two, three or six months thereafter or, to the extent agreed by each Lender of such Eurocurrency Rate Loan, nine or twelve months or less than one month thereafter”; or

(h) waive or modify any mandatory prepayment of the Term Loans required under Section 2.05 without the written consent of the Required Class Lenders;

(i) (1) waive any condition set forth in Section 4.01 as to any Credit Extension under one or more Revolving Credit Facilities or (2) amend, waive or otherwise modify any term or provision which directly affects Lenders under one or more Revolving Credit Facilities and does not directly affect Lenders under any other Facility, in each case, without the written consent of the Required Facility Lenders under such applicable Revolving Credit Facility or Facilities (and in the case of multiple Facilities which are affected, such Required Facility Lenders shall consent together as one Facility); provided , however , that the waivers described in this clause (i) shall not require the consent of any Lenders other than the Required Facility Lenders under such Facility or Facilities; or

(j) amend, waive or otherwise modify any term or provision (including the availability and conditions to funding under Section 2.14 with respect to Incremental Term Loans and Revolving Commitment Increases and the rate of interest applicable thereto) which directly affects Lenders of one or more Incremental Term Loans or Revolving Commitment Increases and does not directly affect Lenders under any other Facility, in each case, without the written consent of the Required Facility Lenders under such applicable Incremental Term Loans or Revolving Commitment Increases (and in the case of multiple Facilities which are affected, such Required Facility Lenders shall consent together as one Facility); provided , however , that the waivers described in this clause (j) shall not require the consent of any Lenders other than the Required Facility Lenders under such applicable Incremental Term Loans or Revolving Commitment Increases;

and provided , further , that (i) no amendment, waiver or consent shall, unless in writing and signed by each L/C Issuer in addition to the Lenders required above, affect the rights or duties of an L/C Issuer under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by a Swing Line Lender in addition to the Lenders required above, affect the rights or duties of such Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent or the Collateral Agent, as applicable, in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, the Administrative Agent or the Collateral Agent, as applicable, under this Agreement or any other Loan Document; and (iv) Section 10.07(h) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such amendment, waiver or other modification.

 

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Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and the Borrower (a) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and the Revolving Credit Loans and the accrued interest and fees in respect thereof and (b) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders. Notwithstanding the foregoing, this Agreement may be amended to adjust the borrowing mechanics related to Swing Line Loans with only the written consent of the Administrative Agent, the applicable Swing Line Lender(s) and the Borrower so long as the obligations of the Revolving Credit Lenders and, if applicable, the other Swing Line Lender are not affected thereby.

In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, the Borrower and the Lenders providing the Replacement Term Loans (as defined below) to permit the refinancing of all outstanding Term Loans (“ Refinanced Term Loans ”) with a replacement term loan tranche denominated in Dollars (“ Replacement Term Loans ”) hereunder; provided that (a) the aggregate principal amount of such Replacement Term Loans shall not exceed the aggregate principal amount of such Refinanced Term Loans, (b) the Applicable Rate for such Replacement Term Loans shall not be higher than the Applicable Rate for such Refinanced Term Loans, (c) the Weighted Average Life to Maturity of Replacement Term Loans shall not be shorter than the Weighted Average Life to Maturity of such Refinanced Term Loans, at the time of such refinancing (except to the extent of nominal amortization for periods where amortization has been eliminated as a result of prepayment of the applicable Term Loans) and (d) all other terms applicable to such Replacement Term Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Term Loans than, those applicable to such Refinanced Term Loans except to the extent necessary to provide for covenants and other terms applicable to any period after the Latest Maturity Date in effect immediately prior to such refinancing.

Anything herein to the contrary notwithstanding, during such period as a Lender is a Defaulting Lender, to the fullest extent permitted by applicable law, such Lender will not be entitled to vote in respect of amendments, waivers and consents hereunder and the Commitment and the outstanding Loans or other extensions of credit of such Lender hereunder will not be taken into account in determining whether the Required Class Lenders, the Required Lenders or all of the Lenders, as required, have approved any such amendment, waiver or consent (and the definitions of “Required Class Lenders” and “Required Lenders” will automatically be deemed modified accordingly for the duration of such period); provided that any such amendment or waiver that would increase or extend the term of the Commitment of such Defaulting Lender, extend the date fixed for the payment of principal or interest owing to such Defaulting Lender hereunder, reduce the principal amount of any obligation owing to such Defaulting Lender, reduce the amount of or the rate or amount of interest on any amount owing to such Defaulting Lender or of any fee payable to such Defaulting Lender hereunder, or alter the terms of this proviso, will require the consent of such Defaulting Lender.

Notwithstanding anything to the contrary contained in this Section 10.01, the Borrower and the Administrative Agent may without the input or consent of the Lenders, effect amendments to this Agreement and the other Loan Documents as may be necessary or appropriate in the opinion of the Administrative Agent to effect the provisions of Section 2.14.

Notwithstanding anything to the contrary contained in this Section 10.01, guarantees, collateral security documents and related documents executed by Subsidiaries in connection with this Agreement may be in a form reasonably determined by the Administrative Agent and may be, together with this Agreement, amended, supplemented and waived with the consent of the Administrative Agent at the request of the Borrower without the need to obtain the consent of any other Lender if such amendment, supplement or waiver is delivered in order (i) to comply with local Law or advice of local counsel, (ii) to cure ambiguities, omissions, mistakes or defects or (iii) to cause such guarantee, collateral security document or other document to be consistent with this Agreement and the other Loan Documents.

Notwithstanding anything to the contrary contained in this Section 10.01, no Lender consent is required to effect any amendment or supplement to any First Lien Intercreditor Agreement, any Second Lien Intercreditor Agreement or other intercreditor agreement or arrangement permitted under this Agreement that is for the purpose of adding the holders of Permitted Notes or Permitted Ratio Debt and, in each case, any Permitted Refinancings thereof,

 

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as expressly contemplated by the terms of such First Lien Intercreditor Agreement, such Second Lien Intercreditor Agreement or such other intercreditor agreement or arrangement permitted under this Agreement, as applicable (it being understood that any such amendment or supplement may make such other changes to the applicable intercreditor agreement as, in the good faith determination of the Administrative Agent, are required to effectuate the foregoing and provided that such other changes are not adverse, in any material respect, to the interests of the Lenders); provided , further , that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent.

Section 10.02. Notices and Other Communications; Facsimile Copies .

(a) General . Unless otherwise expressly provided herein, all notices and other communications provided for hereunder or under any other Loan Document shall be in writing (including by facsimile transmission). All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or electronic mail address, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

(i) if to the Borrower or the Administrative Agent, the Collateral Agent, an L/C Issuer or a Swing Line Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 10.02 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties; and

(ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Borrower and the Administrative Agent, the Collateral Agent, an L/C Issuer or a Swing Line Lender.

All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of Section 10.02(d)), when delivered; provided that notices and other communications to the Administrative Agent, the Collateral Agent, an L/C Issuer and a Swing Line Lender pursuant to Article II shall not be effective until actually received by such Person. In no event shall a voice mail message be effective as a notice, communication or confirmation hereunder.

(b) Effectiveness of Facsimile Documents and Signatures . Loan Documents may be transmitted and/or signed by facsimile or other electronic communication. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually signed originals and shall be binding on all Loan Parties, the Agents and the Lenders.

(c) Reliance by Agents and Lenders . The Administrative Agent, the Collateral Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower in the absence of gross negligence or willful misconduct as determined in a final and non-appealable judgment by a court of competent jurisdiction. All telephonic notices to the Administrative Agent or Collateral Agent may be recorded by the Administrative Agent or the Collateral Agent, and each of the parties hereto hereby consents to such recording.

(d) Electronic Communications . Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has

 

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notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

Section 10.03. No Waiver; Cumulative Remedies .

No failure by any Lender or the Administrative Agent or the Collateral Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.

Section 10.04. Attorney Costs and Expenses .

The Borrower agrees (a) to pay or reimburse the Administrative Agent, the Collateral Agent, the Syndication Agent, the Joint Bookrunners and the Arrangers for all reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents, and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby (including all Attorney Costs, which shall be limited to Cahill Gordon & Reindel LLP (and one local counsel in each applicable jurisdiction and, in the event of a conflict of interest, one additional counsel of each type to the affected parties)) and (b) from and after the Closing Date, to pay or reimburse the Administrative Agent, the Collateral Agent, the Syndication Agent, the Joint Bookrunners, the Arrangers and each Lender for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all respective Attorney Costs, which shall be limited to Attorney Costs of one counsel to the Administrative Agent and Joint Bookrunners (and one local counsel in each applicable jurisdiction and, in the event of any conflict of interest, one additional counsel of each type to the affected parties)). The foregoing costs and expenses shall include all reasonable search, filing, recording and title insurance charges and fees related thereto, and other reasonable out-of-pocket expenses incurred by any Agent. The agreements in this Section 10.04 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. All amounts due under this Section 10.04 shall be paid within ten (10) Business Days of receipt by the Borrower of an invoice relating thereto setting forth such expenses in reasonable detail; provided that, with respect to the Closing Date, all amounts due under this Section 10.04 shall be paid on the Closing Date solely to the extent invoiced to the Borrower within three (3) Business Days of the Closing Date. If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its sole discretion.

Section 10.05. Indemnification by the Borrower .

Whether or not the transactions contemplated hereby are consummated, from and after the Closing Date, the Borrower shall indemnify and hold harmless each Agent-Related Person, each Lender and their respective Affiliates, and directors, officers, employees, counsel, agents, trustees, investment advisors and attorneys-in-fact of each of the foregoing (collectively, the “ Indemnitees ”) from and against any and all liabilities, obligations, losses, damages,

 

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penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs which shall be limited to Attorney Costs of one counsel to the Administrative Agent and the Joint Bookrunners and one counsel to the other Lenders (and one local counsel in each applicable jurisdiction and, in the event of any actual conflict of interest, one additional counsel of each type to the affected parties)) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom including any refusal by an L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit, or (c) any actual or alleged presence or Release of Hazardous Materials at, on, under or from any property or facility currently or formerly owned, leased or operated by the Loan Parties or any Subsidiary, or any Environmental Liability related in any way to any Loan Parties or any Subsidiary, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “ Indemnified Liabilities ”) in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that, notwithstanding the foregoing, such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements resulted from (x) the gross negligence, bad faith or willful misconduct of such Indemnitee or of any affiliate, director, officer, employee, counsel, agent or attorney-in-fact of such Indemnitee, as determined by the final non-appealable judgment of a court of competent jurisdiction or (y) a material breach of its obligations under the Loan Documents by such Indemnitee or of any affiliate, director, officer, employee, counsel, agent or attorney-in-fact of such Indemnitee as determined by the final non-appealable judgment of a court of competent jurisdiction. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement, nor shall any Indemnitee or the Borrower or any Subsidiary have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 10.05 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, any Subsidiary of any Loan Party, any Loan Party’s directors, stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents are consummated. All amounts due under this Section 10.05 shall be paid within ten (10) Business Days after demand therefor; provided , however , that such Indemnitee shall promptly refund such amount to the extent that there is a final judicial or arbitral determination that such Indemnitee was not entitled to indemnification rights with respect to such payment pursuant to the express terms of this Section 10.05. The agreements in this Section 10.05 shall survive the resignation of the Administrative Agent or the Collateral Agent, the replacement of, or assignment of rights by, any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. For the avoidance of doubt, any indemnification relating to Taxes, other than Taxes resulting from any non-Tax claim, shall be covered by Sections 3.01 and 3.04 and shall not be covered by this Section 10.05.

Section 10.06. Payments Set Aside .

To the extent that any payment by or on behalf of the Borrower is made to any Agent or any Lender, or any Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall, to the fullest extent possible under provisions of applicable Law, be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by any Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Federal Funds Rate from time to time in effect.

 

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Section 10.07. Successors and Assigns .

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (except as permitted by Section 7.04) and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Assignee pursuant to an assignment made in accordance with the provisions of Section 10.07(b) (such an assignee, an “ Eligible Assignee ”) and (A) in the case of any Assignee that, immediately prior to or upon giving effect to such assignment, is an Affiliated Lender, Section 10.07(k), (B) in the case of any Assignee that is Holdings or any of its Subsidiaries, Section 10.07(l), or (C) in the case of any Assignee that, immediately prior to or upon giving effect to such assignment, is a Debt Fund Affiliate, Section 10.07(o), (ii) by way of participation in accordance with the provisions of Section 10.07(e), (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.07(g) or (iv) to an SPC in accordance with the provisions of Section 10.07(h) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 10.07(e) and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (“ Assignees ”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this Section 10.07(b), participations in L/C Obligations and in Swing Line Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

(A) the Borrower, provided that no consent of the Borrower shall be required for (i) an assignment of all or a portion of a Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund, (ii) an assignment related to Revolving Credit Commitments or Revolving Credit Exposure to a Revolving Credit Lender, (iii) if an Event of Default under Section 8.01(a), (f) or (g) has occurred and is continuing, any Assignee and (iv) an assignment of a Term Loan to any institution that committed during the primary syndication of the Loans or its Affiliates; provided that the Borrower shall be deemed to have consented to any assignment of a Term Loan unless it shall have objected thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof;

(B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Term Loan to a Lender with a Commitment in respect of the applicable Facility or an Approved Fund;

(C) each Principal L/C Issuer at the time of such assignment, provided that no consent of the Principal L/C Issuers shall be required for any assignment not related to Revolving Credit Commitments or Revolving Credit Exposure; and

(D) the Swing Line Lenders; provided that no consent of a Swing Line Lender shall be required for any assignment not related to Revolving Credit Commitments or Revolving Credit Exposure or any assignment to an Agent or an Affiliate of an Agent.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered

 

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to the Administrative Agent) shall not be less than an amount of $2,500,000 (in the case of each Revolving Credit Loan) or $1,000,000 (in the case of a Term Loan), and shall be in increments of an amount of $1,000,000 in excess thereof unless each of the Borrower and the Administrative Agent otherwise consents, provided that such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds, if any;

(B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; provided that the Administrative Agent, in its sole discretion, may elect to waive such processing and recordation fee; and

(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

This paragraph (b) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis among such Facilities.

(c) Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 10.07(d), from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, and the surrender by the assigning Lender of its Note, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this clause (c) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.07(e).

(d) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption and each Affiliated Lender Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and related interest amounts) of the Loans, L/C Obligations (specifying the Unreimbursed Amounts), L/C Borrowings and the amounts due under Section 2.03, owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Agents and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Agent, at any reasonable time and from time to time upon reasonable prior notice. This Section 10.07(d) and Section 2.11 shall be construed so that all Loans are at all times maintained in “registered form” within the meaning of Section 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations (or any other relevant or successor provisions of the Code or of such Treasury regulations). Notwithstanding the foregoing, in no event shall the Administrative Agent be obligated to ascertain, monitor or inquire as to whether any Lender is an Affiliated Lender nor shall the Administrative Agent be obligated to monitor the aggregate amount of Term Loans held by Affiliated Lenders. Upon request by the Administrative Agent, the Borrower shall (i) promptly (and in any case, not less than 5 Business Days (or shorter period as agreed to by the Administrative Agent) prior to the proposed effective date of any amendment, consent or waiver pursuant to Section 10.01) provide to the Administrative Agent, a complete list of all Affiliated Lenders holding Term Loans at such time and (ii) not less than 5 Business Days (or shorter period as agreed to by the Administrative Agent) prior to the proposed effective date of any amendment, consent or waiver pursuant to Section 10.01, provide to the Administrative Agent, a complete list of all Debt Fund Affiliates holding Term Loans at such time.

(e) Any Lender may at any time sell participations to any Person (other than a natural person, Holdings or any of its Subsidiaries) (each, a “ Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations

 

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in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or the other Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that requires the affirmative vote of such Lender. Subject to Section 10.07(f), the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 (subject to the requirements and limitations of such Sections, including the requirement to provide the forms and certificates pursuant to Section 3.01(d)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.07(c). To the extent permitted by applicable Law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and related interest amounts) of each participant’s interest in the Loans or other Obligations under this Agreement (the “ Participant Register ”). The entries in the Participant Register shall be conclusive, absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. No Lender shall have any obligation to disclose all or any part of a Participant Register (including the identity of any Participant or any information relating to the Participant’s interest in any Commitments, Loans, Letters of Credit or other Obligation under this Agreement) to any Person except to the extent that such disclosure is necessary to establish in connection with a Tax audit that any such Commitment, Loan, Letter of Credit or other Obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.

(f) A Participant shall not be entitled to receive any greater payment under Section 3.01, 3.04 or 3.05 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent, not to be unreasonably withheld or delayed (for the avoidance of doubt, the Borrower shall have a reasonable basis for withholding consent if there would be materially increased indemnification obligations immediately after the participation.

(g) Any Lender may, without the consent of the Borrower or the Administrative Agent, at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(h) Notwithstanding anything to the contrary contained herein, any Lender (a “ Granting Lender ”) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an “ SPC ”) the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. Each party hereto hereby agrees that (i) an SPC shall be entitled to the benefit of Sections 3.01, 3.04 and 3.05 (subject to the requirements and the limitations of such Sections, including the requirement to provide the forms and certificates pursuant to Section 3.01(d)), but neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement, unless the grant to the SPC was made with the prior written consent of the Borrower, not to be unreasonably withheld or delayed (for the avoidance of doubt, the Borrower shall have a reasonable basis for withholding consent if an exercise by SPC immediately after the grant would result in materially increased indemnification obligation to the Borrower at such time), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of

 

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any Loan Document, remain the lender of record hereunder. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Administrative Agent and with the payment of a processing fee of $3,500, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.

(i) Notwithstanding anything to the contrary contained herein, without the consent of the Borrower or the Administrative Agent, (1) any Lender may in accordance with applicable Law create a security interest in all or any portion of the Loans owing to it and the Note, if any, held by it and (2) any Lender that is a Fund may create a security interest in all or any portion of the Loans owing to it and the Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities; provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 10.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

(j) Notwithstanding anything to the contrary contained herein, any L/C Issuer or Swing Line Lender may, upon thirty (30) days’ notice to the Borrower and the Lenders, resign as an L/C Issuer or Swing Line Lender, respectively; provided that on or prior to the expiration of such 30-day period with respect to such resignation, the relevant L/C Issuer or Swing Line Lender shall have identified a successor L/C Issuer or Swing Line Lender reasonably acceptable to the Borrower willing to accept its appointment as successor L/C Issuer or Swing Line Lender, as applicable. In the event of any such resignation of an L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders willing to accept such appointment a successor L/C Issuer or Swing Line Lender hereunder; provided that no failure by the Borrower to appoint any such successor shall affect the resignation of the relevant L/C Issuer or the Swing Line Lender, as the case may be, except as expressly provided above. If an L/C Issuer resigns as an L/C Issuer, it shall retain all the rights and obligations of an L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as an L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). If the Swing Line Lender resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans, Eurocurrency Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).

(k) Any Lender may, so long as no Default or Event of Default has occurred and is continuing, at any time, assign all or a portion of its rights and obligations with respect to Term Loans under this Agreement to a Person who is or will become, after such assignment, an Affiliated Lender through (x) Dutch auctions open to all Lenders on a pro rata basis or (y) open market purchase on a non-pro rata basis, in each case subject to the following limitations:

(i) the assigning Lender and the Affiliated Lender purchasing such Lender’s Term Loans shall execute and deliver to the Administrative Agent an assignment agreement substantially in the form of Exhibit L hereto (an “ Affiliated Lender Assignment and Assumption ”);

(ii) Affiliated Lenders will not receive information provided solely to Lenders by the Administrative Agent or any Lender and will not be permitted to attend or participate in conference calls or meetings attended solely by the Lenders and the Administrative Agent, other than the right to receive notices of prepayments and other administrative notices in respect of its Loans or Commitments required to be delivered to Lenders pursuant to Article II;

(iii) each Affiliated Lender that purchases any Term Loans pursuant to clause (x) above shall represent and warrant to the seller, or shall make a statement that such representation cannot be made, that it does not possess material non-public information with respect to Holdings and its Subsidiaries or the securities of any of them that has not been disclosed to the Lenders generally (other than Lenders who elect not to receive such information);

 

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(iv) the aggregate principal amount of Term Loans held at any one time by Affiliated Lenders at the time of any assignment to an Affiliated Lender shall not exceed 20% of the principal amount of all Term Loans at such time outstanding (the “ Affiliated Lender Cap ”); provided that to the extent any assignment to an Affiliated Lender would result in the aggregate principal amount of all Loans held by Affiliated Lenders exceeding the Affiliated Lender Cap, the assignment of such excess amount will be void ab initio ; and

(v) as a condition to each assignment pursuant to this clause (k), the Administrative Agent shall have been provided a notice in the form of Exhibit M (an “ Affiliated Lender Notice ”) to this Agreement in connection with each assignment to an Affiliated Lender or a Person that upon effectiveness of such assignment would constitute an Affiliated Lender pursuant to which such Affiliated Lender shall waive any right to bring any action in connection with such Term Loans against the Administrative Agent, in its capacity as such.

Each Affiliated Lender agrees to notify the Administrative Agent promptly (and in any event within 10 Business Days) if it acquires any Person who is also a Lender, and each Lender agrees to notify the Administrative Agent promptly (and in any event within ten (10) Business Days) if it becomes an Affiliated Lender. Such notice shall contain the type of information required and be delivered to the same addressee as set forth in Exhibit M .

(l) Any Lender may, so long as no Default or Event of Default has occurred and is continuing, at any time, assign all or a portion of its rights and obligations with respect to Term Loans under this Agreement to Holdings, the Borrower or any other Subsidiary of Holdings through (x) Dutch auctions open to all Lenders on a pro rata basis or (y) notwithstanding Sections 2.12 and 2.13 or any other provision in this Agreement, open market purchase on a non-pro rata basis; provided , that, in connection with assignments pursuant to clause (y) above:

(i) if Holdings is the assignee, upon such assignment, transfer or contribution, Holdings shall automatically be deemed to have contributed the principal amount of such Term Loans, plus all accrued and unpaid interest thereon, to the Borrower; or

(ii) if the assignee is the Borrower or any other Subsidiary of Holdings (including through any deemed contribution pursuant to clause (i) above), (a) the principal amount of such Term Loans, along with all accrued and unpaid interest thereon, so contributed, assigned or transferred to the Borrower or such Subsidiary shall be deemed automatically cancelled and extinguished on the date of such contribution, assignment or transfer, (b) the aggregate outstanding principal amount of Term Loans of the remaining Lenders shall reflect such cancellation and extinguishing of the Term Loans then held by the Borrower and (c) the Borrower shall promptly provide notice to the Administrative Agent of such contribution, assignment or transfer of such Term Loans, and the Administrative Agent, upon receipt of such notice, shall reflect the cancellation of the applicable Term Loans in the Register.

(m) Notwithstanding anything in Section 10.01 or the definition of “Required Lenders,” “Required Class Lenders,” or “Required Facility Lenders” to the contrary, for purposes of determining whether the Required Lenders and Required Class Lenders (in respect of a Class of Term Loans) have (i) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom, or subject to Section 10.07(n), any plan of reorganization pursuant to the U.S. Bankruptcy Code, (ii) otherwise acted on any matter related to any Loan Document, or (iii) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, no Affiliated Lender shall have any right to consent (or not consent), otherwise act or direct or require the Administrative Agent or any Lender to take (or refrain from taking) any such action and:

(A) all Term Loans held by any Affiliated Lenders shall be deemed to be not outstanding for all purposes of calculating whether the Required Lenders and Required Class Lenders (in respect of a Class of Term Loans) have taken any actions; and

(B) all Term Loans held by Affiliated Lenders shall be deemed to be not outstanding for all purposes of calculating whether all Lenders have taken any action unless the action in question affects such Affiliated Lender in a disproportionately adverse manner than its effect on other Lenders.

 

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(n) Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, each Affiliated Lender hereby agrees that and each Affiliated Lender Assignment and Assumption shall provide a confirmation that, if a proceeding under any Debtor Relief Law shall be commenced by or against the Borrower or any other Loan Party at a time when such Lender is an Affiliated Lender, such Affiliated Lender irrevocably authorizes and empowers the Administrative Agent to vote on behalf of such Affiliated Lender with respect to the Term Loans held by such Affiliated Lender in any manner in the Administrative Agent’s sole discretion, unless the Administrative Agent instructs such Affiliated Lender to vote, in which case such Affiliated Lender shall vote with respect to the Term Loans held by it as the Administrative Agent directs; provided that such Affiliated Lender shall be entitled to vote in accordance with its sole discretion (and not in accordance with the direction of the Administrative Agent) in connection with any plan of reorganization to the extent any such plan of reorganization proposes to treat any Obligations held by such Affiliated Lender in a disproportionately adverse manner to such Affiliated Lender than the proposed treatment of similar Obligations held by Term Lenders that are not Affiliated Lenders.

(o) Although Debt Fund Affiliates shall be Eligible Assignees and shall not be subject to the provisions of Section 10.07(m) or (n), any Lender may, at any time, assign all or a portion of its rights and obligations with respect to Term Loans under this Agreement to a Person who is or will become, after such assignment, a Debt Fund Affiliate only through (x) Dutch auctions open to all Lenders on a pro rata basis (for the avoidance of doubt, without requiring any representation as to the possession of material non-public information by such Affiliate and without regard to whether a Default or an Event of Default has occurred and is continuing) or (y) open market purchase on a non-pro rata basis. Notwithstanding anything in Section 10.01 or the definition of “Required Lenders” to the contrary, for purposes of determining whether the Required Lenders have (i) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom, (ii) otherwise acted on any matter related to any Loan Document or (iii) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, all Term Loans, Revolving Credit Commitments and Revolving Credit Loans held by Debt Fund Affiliates may not account for more than 50% (pro rata among such Debt Fund Affiliates) of the Term Loans, Revolving Credit Commitments and Revolving Credit Loans of consenting Lenders included in determining whether the Required Lenders have consented to any action pursuant to Section 10.01.

Section 10.08. Confidentiality .

Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information, except that Information may be disclosed (a) to its Affiliates and its and its Affiliates’ managers, administrators, directors, officers, employees, trustees, partners, investors, investment advisors and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any Governmental Authority or self-regulatory authority having or asserting jurisdiction over such Person (including any Governmental Authority regulating any Lender or its Affiliates); (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) subject to an agreement containing provisions substantially the same as those of this Section 10.08 (or as may otherwise be reasonably acceptable to the Borrower), to any pledgee referred to in Section 10.07(g), counterparty to a Swap Contract, Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in any of its rights or obligations under this Agreement; (f) with the written consent of the Borrower; (g) to the extent such Information becomes publicly available other than as a result of a breach of this Section 10.08 or becomes available to the Administrative Agent, any Arranger, any Lender, the L/C Issuer or any of their respective Affiliates on a non-confidential basis from a source other than a Loan Party or any Investor or their respective related parties (so long as such source is not known to the Administrative Agent, such Arranger, such Lender, the L/C Issuer or any of their respective Affiliates to be bound by confidentiality obligations to any Loan Party); (h) to any Governmental Authority or examiner (including the National Association of Insurance Commissioners or any other similar organization and including any self-regulatory body having or claiming oversight over the Administrative Agent’s, any Arranger’s, any Lender’s, the L/C Issuer’s or any of their respective Affiliates’ businesses or operations) regulating any Lender; (i) to any rating agency when required by it (it being understood that, prior to any such disclosure, such rating

 

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agency shall undertake to preserve the confidentiality of any Information relating to Loan Parties and their Subsidiaries received by it from such Lender) or to the CUSIP Service Bureau or any similar organization; or (j) in connection with the exercise of any remedies hereunder, under any other Loan Document or the enforcement of its rights hereunder or thereunder. In addition, the Agents and the Lenders may disclose the existence of this Agreement and publicly available information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Agents and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Commitments, and the Credit Extensions. For the purposes of this Section 10.08, “ Information ” means all information received from the Loan Parties relating to any Loan Party, its Affiliates or its Affiliates’ directors, managers, officers, employees, trustees, investment advisors or agents, relating to Holdings, the Borrower or any of their Subsidiaries or its business, other than any such information that is publicly available to any Agent, any L/C Issuer or any Lender prior to disclosure by any Loan Party other than as a result of a breach of this Section 10.08; provided that, in the case of information received from a Loan Party after the Closing Date, such information is clearly identified at the time of delivery as confidential or is delivered pursuant to Section 6.01, 6.02 or 6.03 hereof.

Section 10.09. Setoff .

In addition to any rights and remedies of the Lenders provided by Law, upon the occurrence and during the continuance of any Event of Default, each Lender and its Affiliates (and the Collateral Agent, in respect of any unpaid fees, costs and expenses payable hereunder) is authorized at any time and from time to time, without prior notice to the Borrower, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party and each of its Subsidiaries) to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Lender and its Affiliates or the Collateral Agent to or for the credit or the account of the respective Loan Parties and their Subsidiaries against any and all Obligations owing to such Lender and its Affiliates or the Collateral Agent hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not such Agent or such Lender or Affiliate shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Administrative Agent, the Collateral Agent and each Lender under this Section 10.09 are in addition to other rights and remedies (including other rights of setoff) that the Administrative Agent, the Collateral Agent and such Lender may have at Law.

Section 10.10. Interest Rate Limitation .

Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “ Maximum Rate ”). If any Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by an Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

Section 10.11. Counterparts .

This Agreement and each other Loan Document may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by facsimile of an executed counterpart of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document. The Agents may also require that any such documents and signatures delivered by facsimile be confirmed by a manually signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature delivered by facsimile.

 

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Section 10.12. Integration; Termination .

This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Agents or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

Section 10.13. Survival of Representations and Warranties .

All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by each Agent and each Lender, regardless of any investigation made by any Agent or any Lender or on their behalf and notwithstanding that any Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

Section 10.14. Severability .

If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 10.15. GOVERNING LAW .

(a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

(b) ANY LEGAL ACTION OR PROCEEDING ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY, EACH AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH LOAN PARTY, EACH AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS IN THE MANNER PROVIDED FOR NOTICES (OTHER THAN FACSIMILE) IN SECTION 10.02. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

Section 10.16. WAIVER OF RIGHT TO TRIAL BY JURY .

TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION

 

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OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.16 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

Section 10.17. Binding Effect .

This Agreement shall become effective when it shall have been executed by the Loan Parties and the Administrative Agent shall have been notified by each Lender, the Swing Line Lenders and L/C Issuer that each such Lender, Swing Line Lender and L/C Issuer has executed it and thereafter shall be binding upon and inure to the benefit of the Loan Parties, each Agent and each Lender and their respective successors and assigns, in each case in accordance with Section 10.07 (if applicable) and except that no Loan Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders except as permitted by Section 7.04.

Section 10.18. USA Patriot Act .

Each Lender that is subject to the USA Patriot Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name, address and tax identification number of the Borrower and other information regarding the Borrower that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the USA Patriot Act. The Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act. This notice is given in accordance with the requirements of the USA Patriot Act and is effective as to the Lenders and the Administrative Agent.

Section 10.19. No Advisory or Fiduciary Responsibility .

In connection with all aspects of each transaction contemplated hereby, each Loan Party acknowledges and agrees, and acknowledges its Affiliates’ understanding, that (i) the facilities provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower and its Affiliates, on the one hand, and the Agents, the Arrangers, the Joint Bookrunners and the Lenders, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof), (ii) in connection with the process leading to such transaction, each of the Agents, the Arrangers, the Joint Bookrunners and the Lenders is and has been acting solely as a principal and except as expressly agreed in writing by the relevant parties, is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person, (iii) none of the Agents, the Arrangers, the Joint Bookrunners or the Lenders has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto except as expressly agreed in writing by the relevant parties, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any Agent or Lender has advised or is currently advising the Borrower or any of its Affiliates on other matters) and none of the Agents, the Arrangers, the Joint Bookrunners or the Lenders has any obligation to the Borrower or any of its Affiliates with respect to the financing transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents, (iv) the Agents, the Arrangers, the Joint Bookrunners and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from, and may conflict with, those of the Borrower and its Affiliates, and none of the Agents, the Arrangers,

 

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the Joint Bookrunners or the Lenders has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship and (v) the Agents, the Arrangers, the Joint Bookrunners and the Lenders have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Loan Parties have consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate.

ARTICLE XI

Guarantee

Section 11.01. The Guarantee .

Each Guarantor hereby jointly and severally with the other Guarantors guarantees, as a primary obligor and not as a surety to each Secured Party and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of (i) the Title 11 of the United States Code after any bankruptcy or insolvency petition under Title 11 of the United States Code and (ii) any other Debtor Relief Laws) on the Loans made by the Lenders to, and the Notes, if any, held by each Lender of, the Borrower (other than such Guarantor), and all other Obligations from time to time owing to the Secured Parties by any Loan Party under any Loan Document or the Borrower or any Subsidiary under any Secured Hedge Agreement or any Cash Management Obligations, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the “ Guaranteed Obligations ”). The Guarantors hereby jointly and severally agree that if the Borrower or other Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

Section 11.02. Obligations Unconditional .

The obligations of the Guarantors under Section 11.01 shall constitute a guaranty of payment and to the fullest extent permitted by applicable Law, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of the Borrower under this Agreement, the Notes, if any, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above:

(i) at any time or from time to time, without notice to the Guarantors, to the extent permitted by Law, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;

(ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein shall be done or omitted;

(iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Loan Documents or any other agreement or instrument referred to herein or therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or except as permitted pursuant to Section 11.09, any security therefor shall be released or exchanged in whole or in part or otherwise dealt with;

 

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(iv) any Lien or security interest granted to, or in favor of, an L/C Issuer or any Lender or Agent as security for any of the Guaranteed Obligations shall fail to be perfected; or

(v) the release of any other Guarantor pursuant to Section 11.09 or otherwise.

The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and, to the extent permitted by Law, all notices whatsoever, and any requirement that any Secured Party exhaust any right, power or remedy or proceed against the Borrower under this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive, to the extent permitted by Law, any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Secured Party upon this Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between the Borrower and the Secured Parties shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. This Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by Secured Parties, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Secured Parties or any other person at any time of any right or remedy against the Borrower or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Lenders, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding.

Section 11.03. Reinstatement .

The obligations of the Guarantors under this Article XI shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or other Loan Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.

Section 11.04. Subrogation; Subordination .

Each Guarantor hereby agrees that until the payment and satisfaction in full in cash of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement it shall waive any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in Section 11.01, whether by subrogation or otherwise, against the Borrower or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. Any Indebtedness of any Loan Party permitted pursuant to Section 7.03(b)(ii) or 7.03(d) shall be subordinated to such Loan Party’s Obligations in the manner set forth in the Intercompany Note evidencing such Indebtedness.

Section 11.05. Remedies .

The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of the Borrower under this Agreement and the Notes, if any, may be declared to be forthwith due and payable as provided in Section 8.02 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 8.02) for purposes of Section 11.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 11.01.

 

-134-


Section 11.06. Instrument for the Payment of Money .

Each Guarantor hereby acknowledges that the guarantee in this Article XI constitutes an instrument for the payment of money, and consents and agrees that any Lender or Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213.

Section 11.07. Continuing Guarantee .

The guarantee in this Article XI is a continuing guarantee of payment, and shall apply to all Guaranteed Obligations whenever arising.

Section 11.08. General Limitation on Guarantee Obligations .

In any action or proceeding involving any state corporate limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other Law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 11.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 11.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount (after giving effect to the right of contribution established in Section 11.10) that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

Section 11.09. Release of Guarantors .

If, in compliance with the terms and provisions of the Loan Documents, Equity Interests of any Subsidiary Guarantor (a “ Transferred Guarantor ”) are sold or otherwise transferred, following which transfer such Subsidiary Guarantor ceases to be a Subsidiary, such Transferred Guarantor shall, upon the consummation of such sale or transfer, be automatically released from its obligations under this Agreement (including under Section 10.05 hereof) and the other Loan Documents and, so long as the Borrower shall have provided the Agents such certifications or documents as any Agent shall reasonably request, the Collateral Agent shall take such actions as are necessary to effect the releases described in this Section 11.09.

When all Commitments hereunder have terminated, and all Loans or other Obligation hereunder which are accrued and payable have been paid or satisfied, and no Letter of Credit remains outstanding (except any Letter of Credit the Outstanding Amount of which the Obligations related thereto has been Cash Collateralized or for which a backstop letter of credit reasonably satisfactory to the applicable L/C Issuer has been put in place), this Agreement and the Guarantees made herein shall terminate with respect to all Obligations, except with respect to Obligations that expressly survive such repayment pursuant to the terms of this Agreement.

Section 11.10. Right of Contribution .

Each Guarantor hereby agrees that to the extent that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Subsidiary Guarantor’s right of contribution shall be subject to the terms and conditions of Section 11.04. The provisions of this Section 11.10 shall in no respect limit the obligations and liabilities of any Subsidiary Guarantor to the Administrative Agent, the L/C Issuer, the Swing Line Lender and the Lenders, and each Subsidiary Guarantor shall remain liable to the Administrative Agent, the L/C Issuer, the Swing Line Lender and the Lenders for the full amount guaranteed by such Subsidiary Guarantor hereunder.

 

-135-


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

SUMMIT MATERIALS INTERMEDIATE HOLDINGS, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
SUMMIT MATERIALS, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
SUMMIT MATERIALS HOLDINGS I, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
SUMMIT MATERIALS HOLDINGS II, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
SUMMIT MATERIALS COMPANIES I, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President

 

S-1


SUMMIT MATERIALS CORPORATIONS I, INC.
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
CONTINENTAL CEMENT COMPANY, L.L.C.
By:  

/s/ R. Michael Johnson

  Name:   R. Michael Johnson
  Title:   Chief Executive Officer
B&B RESOURCES, INC.
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
VALLEY READY MIX, INC.
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
SALT LAKE VALLEY SAND & GRAVEL, INC.
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
ELAM CONSTRUCTION, INC.
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President

 

S-2


ELAM PAVING, INC.
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
HAMM, INC.
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
HAMM ASPHALT, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
N.R. HAMM CONTRACTOR, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
N.R. HAMM QUARRY, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
RK HALL, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President

 

S-3


R.K. HALL CONSTRUCTION, LTD.
By:   RKH Capital, L.L.C., its general partner
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
SCS MATERIALS, L.P.
By:   RKH Capital, L.L.C., its general partner
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
B&H CONTRACTING, L.P.
By:   RKH Capital, L.L.C., its general partner
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
RKH CAPITAL, L.L.C.
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
CON-AGG OF MO, L.L.C.
By:   Summit Materials Companies I, LLC, its sole member
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President

 

S-4


QUARRY PROPERTIES, L.L.C.
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Manager
FISCHER QUARRIES, L.L.C.
By:   Con-Agg of MO, L.L.C., its sole member
  By:   Summit Materials Companies I, LLC, its sole member
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
HINKLE CONTRACTING COMPANY, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
BOURBON LIMESTONE COMPANY
By:  

/s/ Thomas Hinkle

  Name:   Thomas Hinkle
  Title:   Vice President
KENTUCKY HAULING, INC.
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President

 

S-5


GLASS AGGREGATES, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
SOUTH CENTRAL KENTUCKY LIMESTONE, LLC
By:   Glass Aggregates, LLC, its sole member
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
KILGORE COMPANIES, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
ALTAVIEW CONCRETE, LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
PEAK CONSTRUCTION MATERIALS, LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
PEAK MANAGEMENT, L.C.
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President

 

S-6


WASATCH CONCRETE PUMPING, LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
KILGORE TRUCKING, LLC
By:  

/s/ Jason T. Kilgore

  Name:   Jason T. Kilgore
  Title:   Manager
KILGORE EQUIPMENT, LLC
By:  

/s/ Jason T. Kilgore

  Name:   Jason T. Kilgore
  Title:   Manager
WIND RIVER MATERIALS, LLC
By:  

/s/ Jason T. Kilgore

  Name:   Jason T. Kilgore
  Title:   Manager
CORNEJO & SONS, L.L.C.
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
CORNEJO QUALITY STONE LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President

 

S-7


AUSTIN MATERIALS, LLC
By:  

/s/ Michael Brady

  Name:   Michael Brady
  Title:   Vice President
INDUSTRIAL ASPHALT, LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Manager
ASPHALT PAVING COMPANY OF AUSTIN, LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Manager
KBDJ, L.P.
By:   KBDJ Materials, LLC, its general partner
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
KBDJ MATERIALS, LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
RTI HOT MIX, LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President

 

S-8


RTI EQUIPMENT CO., LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
J.D. RAMMING PAVING CO., LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President
RAMMING TRANSPORATION CO., LLC
By:  

/s/ Anya Fonina

  Name:   Anya Fonina
  Title:   Vice President

 

S-9


BANK OF AMERICA, N.A., as Administrative Agent, Collateral Agent, L/C Issuer, Swing Line Lender and as a Lender
By:  

/s/ Joon Koo

  Name:   Joon Ko
  Title:   Vice President

 

S-10


CITIBANK, N.A., as a Lender
By:  

/s/ David Leland

  Name:   David Leland
  Title:   Vice President

 

S-11


BARCLAYS BANK PLC, as a Lender
By:  

/s/ Kevin Cullen

  Name:   Kevin Cullen
  Title:   Director

 

S-12


UBS LOAN FINANCE LLC, as a Lender
By:  

/s/ Mary E. Evans

  Name:   Mary E. Evans
  Title:   Associate Director
By:  

/s/ Irja R. Otsa

  Name:   Irja R. Otsa
  Title:   Associate Director

 

S-13


CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as a Lender
By:  

/s/ Judith E. Smith

  Name:   Judith E. Smith
  Title:   Managing Director
By:  

/s/ Tyler R. Smith

  Name:   Tyler R. Smith
  Title:   Associate

 

S-14


DEUTSCHE BANK TRUST COMPANY AMERICAS, as a Lender
By:  

/s/ Omayra Laucella

  Name:   Omayra Laucella
  Title:   Vice President
By:  

/s/ Marguerite Sutton

  Name:   Marguerite Sutton
  Title:   Director

 

S-15


Regions Bank, as a Lender
By:  

/s/ Anne D. Silvestri

  Name:   Anne D. Silvestri
  Title:   Senior Vice President

 

S-16


Citigroup Global Markets Inc., as Syndication Agent
By:  

/s/ David Leland

  Name:   David Leland
  Title:   Managing Director

 

S-17


BARCLAYS BANK PLC , as Co-Documentation Agent
By:  

/s/ Kevin Cullen

  Name:   Kevin Cullen
  Title:   Director

 

S-18


REGIONS BANK, as Co-Documentation Agent
By:  

/s/ Anne D. Silvestri

  Name:   Anne D. Silvestri
  Title:   Senior Vice President

 

S-19


Schedule 1.01A

Commitments

 

Total Commitments of Revolving Credit Facility

   $ 150,000,000   

Total Commitments of Term Loan B

   $ 400,000,000   

Allocations on file with the Administrative Agent.


Schedule 1.01B

Existing Letters of Credit

LC #3100602 / Beneficiary – Liberty Mutual Insurance Company


Schedule 4.02(c)

Local Counsel Opinions

Bell Nunnally & Martin, LLP, Texas counsel to the Loan Parties.

Holland & Hart LLP, Utah counsel to the Loan Parties.

Kutak Rock LLP, Kansas counsel to the Loan Parties.

Stites & Harbison, PLLC, Kentucky counsel to the Loan Parties.


Schedule 5.05

Certain Liabilities

None.


Schedule 5.08

Ownership of Property

List of Material Properties :

 

Entity of Record

  

Address

  

Common Names

(if available)

  

Purpose/Use

(if available)

  

To be Encumbered by
Mortgage or Fixture Filing

Cornejo & Sons, L.L.C.    See next page    Cornejo Landfill    Landfill    Yes
Con-Agg of MO, L.L.C.   

2510 Stadium Blvd, Columbia, MO

Parcel #: 11-804-00-00-003.00

   Con-Agg Underground Storage    Storage    Yes
Con-Agg of MO, L.L.C.    Parcel # 11-802-27-00-010.00, 11-804-00-00-001.00, 11-804-00-00-002.00, 11-804-34-00-001.00, 11-800-00-00-003.00   

Akeman Farm (West Quarry)

Quarry Farm (West Quarry)

   Quarry    Yes
Kilgore Companies, LLC (formerly Harper-Kilgore, LLC)    6200 West 5400 South, Kearns, UT 84118    Pit 10    Quarry    Yes
B & B Resources, Inc.    16102 South Pony Express Road, Bluffdale, UT    Valley Gravel Pit    Gravel Pit    Yes
RTI Hot Mix, LLC    1153 County Road 239, Florence, TX 75627    Ramming Pit Quarry    Quarry    Yes
Continental Cement Company, L.L.C.   

10107 Highway 79

Hannibal, MO 63401

   Continental Cement Plant    Cement Plant    Yes
Continental Cement Company, L.L.C.   

21 Brooklyn Street

St. Louis, MO 63102

   St. Louis Terminal    Shipping, storage and distribution facility    Yes


Cornejo Landfill:

Parcel 20:

A tract of land in the Northeast Quarter of Section 10, Township 28 South, Range 1 East of the 6 th P.M., Sedgwick County, Kansas, further described as follows: Beginning at a point on the Westerly right-of-way line of the AT&SF Railroad North 89°47’ West 1526.15 feet and south 37°31’ East, 859.98 feet from the Northeast Corner of the said Northeast Quarter of said Section 10; thence along said Westerly right-of-way line South 37°31” East, 1499.21 feet to the East line of said Northeast Quarter; thence along said East line South 02°46’ West, 242.34 feet to the centerline of the Chisholm Creek; thence along said centerline the following bearings and distances, North 26°46’ West, 46.59 feet, North 13°16’ West, 213.50 feet, North 43°01’ West, 349.10 feet, North 28°53’ West, 472.42 feet, North 49°23’ West, 417.83 feet, South 25°00’ West, 138.42 feet, South 78°24’ West, 96.58 feet, North 31°05’ West, 209.45 feet, North 05°10’ West, 194.00 feet, North 47°00’ West, 25.48 feet, thence South 89°47’ East, 248.34 feet to the point of beginning.


Title Defects :

 

   

Certain property in Tooele County, UT at 555 North Highway 36, Stockton, UT 84080 (informally known as the Stockton Pit) owned by Peak Management, L.C. is mortgaged as follows:

 

   

JPMorgan has a first lien pursuant to a Deed of Trust with Peak Management, L.C. as trustor, in favor of First American Title Company as trustee, for the benefit of JP Morgan Chase Bank, N.A. and recorded in the official records of Tooele County on April 16, 2007 as Entry No. 282361.

 

   

R. Scott Reynolds has a second lien pursuant to a Deed of Trust and Fixture Filing with Peak Management, L.C. as trustor, in favor of First American Title Company as trustee, for the benefit of R. Scott Reynolds and recorded in the official records of Tooele County on September 15, 2010 as Entry No. 347028.

 

   

Kilgore Companies, LLC (formerly Harper-Kilgore, LLC) granted to Rulon Harper a first lien security interest in and to all of Harper-Kilgore, LLC’s rights, title, and interest in that certain property located in Tooele County, Utah, at West of Hwy 36 on Bauer Road, West Jordan, UT 84118 (informally known as Pit 34) which first lien security interest shall automatically terminate upon the full, complete and final payment of certain amounts due to Rulon Harper.


Schedule 5.09(a)

Environmental Matters

None.


Schedule 5.12

Subsidiaries and Other Equity Investments

Subsidiaries

 

Current Legal Entities Owned

  

Record Owner

  

Jurisdiction

   Percent of
Ownership/Interest
 
Summit Materials Intermediate Holdings, LLC    Summit Materials Holdings, LLC    Delaware      100
Summit Materials, LLC    Summit Materials Intermediate Holdings, LLC    Delaware      100
Summit Materials Holdings I, LLC    Summit Materials, LLC    Delaware      100
Summit Materials Holdings II, LLC    Summit Materials, LLC    Delaware      100
Summit Materials Finance Corp. 1    Summit Materials, LLC    Delaware      100
Summit Materials Companies I, LLC    Summit Materials Holdings I, LLC    Delaware      100
Summit Materials Corporations I, Inc.    Summit Materials Companies I, LLC    Delaware      100
RK Hall, LLC    Summit Materials Companies I, LLC    Delaware      100
Con-Agg of MO, L.L.C.    Summit Materials Companies I, LLC    Missouri      100
Hinkle Contracting Company, LLC    Summit Materials Companies I, LLC    Kentucky      100
Kilgore Companies, LLC    Summit Materials Companies I, LLC    Delaware      100
Cornejo & Sons, L.L.C.    Summit Materials Companies I, LLC    Kansas      100
Austin Materials, LLC    Summit Materials Companies I, LLC    Delaware      100
B & B Resources, Inc.    Summit Materials Corporations I, Inc.    Utah      100
Elam Construction, Inc.    Summit Materials Corporations I, Inc.    Colorado      100
Hamm, Inc.    Summit Materials Corporations I, Inc.    Kansas      100
Salt Lake Valley Sand & Gravel, Inc.    B & B Resources, Inc.    Utah      100
Valley Ready Mix, Inc.    B & B Resources, Inc.    Utah      100
Elam Paving, Inc.    Elam Construction, Inc.    New Mexico      100
Hamm Asphalt, LLC    Hamm, Inc.    Kansas      100
N. R. Hamm Contractor, LLC    Hamm, Inc.    Kansas      100
N. R. Hamm Quarry, LLC    Hamm, Inc.    Kansas      100

 

1  

Immaterial subsidiary.


Current Legal Entities Owned

  

Record Owner

  

Jurisdiction

   Percent of
Ownership/Interest
 
R. K. Hall Construction, Ltd.    RK Hall, LLC    Texas      100
SCS Materials, L.P.    RK Hall, LLC    Texas      100
B&H Contracting, L.P.    RK Hall, LLC    Texas      100
RKH Capital, L.L.C.    RK Hall, LLC    Texas      100
Quarry Properties, L.L.C.    Con-Agg of MO, L.L.C.    Missouri      100
Fischer Quarries, L.L.C.    Con-Agg of MO, L.L.C.    Missouri      100
Bourbon Limestone Company    Hinkle Contracting Company, LLC    Kentucky      100
Glass Aggregates, LLC    Hinkle Contracting Company, LLC    Kentucky      100
Kentucky Hauling, Inc.    Hinkle Contracting Company, LLC (f/k/a Hinkle Contracting Corporation)    Kentucky      100
South Central Kentucky Limestone, LLC    Glass Aggregates, LLC    Kentucky      100
Altaview Concrete, LLC    Kilgore Companies, LLC    Utah      100
Peak Construction Materials, LLC    Kilgore Companies, LLC    Utah      100
Peak Management, L.C.    Kilgore Companies, LLC    Utah      100
Wasatch Concrete Pumping, LLC    Kilgore Companies, LLC    Utah      100
Kilgore Trucking, LLC    Kilgore Companies, LLC    Utah      100
Kilgore Equipment, LLC    Kilgore Companies, LLC    Utah      100
Wind River Materials, LLC    Kilgore Companies, LLC    Wyoming      100
Cornejo Quality Stone LLC    Cornejo & Sons, L.L.C.    Delaware      100
Industrial Asphalt, LLC    Austin Materials, LLC    Texas      100
Asphalt Paving Company of Austin, LLC    Austin Materials, LLC    Texas      100
KBDJ, L.P.    Austin Materials, LLC    Texas      100
KBDJ Materials, LLC    Austin Materials, LLC    Delaware      100
J.D. Ramming Paving Co., LLC    Austin Materials, LLC    Texas      100
RTI Hot Mix, LLC    Austin Materials, LLC    Texas      100
RTI Equipment Co., LLC    Austin Materials, LLC    Texas      100
Ramming Transportation Co., LLC    Austin Materials, LLC    Texas      100
Continental Cement Company, L.L.C.    Summit Materials Holdings II, LLC    Delaware     

 

-100% of Class A Units

-0% of Class B Units

  

  

Green America Recycling, LLC 2    Continental Cement Company, L.L.C.    Missouri      100

 

2  

Immaterial subsidiary.


Other Equity Investments

 

Current Legal Entities Owned

  

Record Owner

  

Jurisdiction

   Percent of
Ownership/Interest
 
The Rock Group, LLC    Hinkle Contracting Company, LLC    Kentucky      50
Nally & Gibson Georgetown, LLC    Hinkle Contracting Company, LLC    Kentucky      50
Hinkle-Meyer Environmental Services, LLC    Hinkle Contracting Company, LLC    Kentucky      50
Carrollton River Terminal, LLC    Ohio Valley Asphalt, LLC    Kentucky      50
   Hinkle Contracting Company, LLC         40
Commonwealth Crushing Company 3    Hinkle Contracting Company, LLC    Kentucky      50
Ohio Valley Asphalt, LLC    Hinkle Contracting Company, LLC    Kentucky      80

 

3   This company is no longer active.


Schedule 7.01(b)

Existing Liens

 

Type of Filing

  

Entity

  

Filing Office

Deed of Trust in favor of JPMorgan    Peak Management, L.C.    Tooele County Recorder
Deed of Trust and Fixture Filing in favor of R. Scott Reynolds    Peak Management, L.C.    Tooele County Recorder
First Lien Security Interest    Kilgore Companies, LLC (formerly Harper-Kilgore, LLC)    Tooele County Recorder
Revolving Security Interest    Bourbon Limestone Company    Kentucky - SoS


Schedule 7.02(f)

Existing Investments

 

Current Legal Entities Owned

  

Record Owner

  

Certificate No.

  

No. Shares/Interest

The Rock Group, LLC    Hinkle Contracting Company, LLC    N/A    50% of interests
Nally & Gibson Georgetown, LLC    Hinkle Contracting Company, LLC    N/A    50% of interests
Hinkle-Meyer Environmental Services, LLC    Hinkle Contracting Company, LLC    N/A    50% of interests
Carrollton River Terminal, LLC    Ohio Valley Asphalt, LLC    N/A    50% of interests
Carrollton River Terminal, LLC    Hinkle Contracting Company, LLC    N/A    40% of interests
Commonwealth Crushing Company 4    Hinkle Contracting Company, LLC    N/A    50% of interests
Ohio Valley Asphalt, LLC    Hinkle Contracting Company, LLC    N/A    80% of interests
Continental Cement Company, L.L.C.    Summit Materials Holdings II, LLC    N/A   

-100% of Class A Units

-0% of Class B Units

Alvamar, Inc.    N. R. Hamm Quarry, LLC    252    100 Shares
The Farmers Co-Operative Elevator    N. R. Hamm Quarry, LLC    2235    4 Shares
The Berwick Co-operative Oil Company    N. R. Hamm Quarry, LLC    2554    1 Share
Boulder Insurance Ltd.    Altaview Concrete, LLC    N/A    1 Redeemable Preferred Share (1/25 of interests)
Boulder Insurance Ltd.    Altaview Concrete, LLC    N/A    1 Share (1/25 of interests)
Everest Property Insurance Company    Altaview Concrete, LLC    N/A    1 Redeemable Preferred Share (1/468 of interests)
Everest Property Insurance Company    Altaview Concrete, LLC    N/A    1 Share (1/468 of interests)
East Jordan Irrigation Co.    B &B Resources, Inc.    C 6032    18 shares

 

4   This company is no longer active.


Schedule 7.03(b)

Existing Indebtedness

OHIO VALLEY ASPHALT, LLC

 

   

Guarantee of $2,750,000 Secured Draw Note, made by Carrollton River Terminal, LLC in favor of Fifth Third Bank maturing April 1, 2013.

BOURBON LIMESTONE COMPANY

 

   

Revolving note with Fifth Third Bank ($1,000,000) maturing March 15, 2012

 

   

Revolving credit facility with Fifth Third Bank ($900,000)

CONTINENTAL CEMENT COMPANY, L.L.C.

 

   

Continental Cement Company, L.L.C. is party to a Change Order Agreement with R.K. Ruthledge Consulting, LLC, dated September 30, 2008, whereby Continental Cement Company, L.L.C. agreed to make twelve quarterly payments of $175,000 starting in 2010 and ending before December 31, 2012 for a total amount of $2,100,000. These payments represent compensation for construction management services as contemplated by the Construction Management Agreement between the parties dated July 12, 2006. As of December 2011, the outstanding balance was $1,025,000.


Schedule 7.05(k)

Dispositions

None.


Schedule 7.08

Transactions with Affiliates

 

 

Service Agreement between Ohio Valley Asphalt, Inc. and Hinkle Contracting Company, LLC dated May 13, 1994.


Schedule 7.09

Certain Contractual Obligations

 

 

Operating Agreement for Carrollton River Terminal, LLC prohibits the pledge by a Member of any of its membership interest in the Company without the consent of the Board of Directors.

 

 

Operating Agreement for Hinkle-Meyer Environmental Services, LLC prohibits the pledge or grant of a security interest by a Member of any of its membership interest in the Company without the consent of the other Members.

 

 

Operating Agreement for Nally and Gibson Georgetown, LLC prohibits the pledge or grant of a security interest by a Member of any of its membership interest in the Company without the consent of the other Member.

 

 

Operating Agreement for Ohio Valley Asphalt, LLC prohibits the pledge or grant of a security interest by a Member of any of its membership interest in the Company without the consent of the other Member.

 

 

60% of Carrollton River Terminal’s $2.75 million Secured Draw Note in favor of Fifth Third Bank (LIBOR + 250bps) maturing April 1, 2013 (guaranteed by Hinkle Contracting Corporation and Ohio Valley Asphalt, LLC). Restricts the incurrence of liens on the Borrower’s assets, and thus the incurrence by the Borrower of a secured guarantee of Hinkle’s indebtedness.

 

 

Ohio Valley Asphalt’s guarantee of $2.75 million Secured Draw Note, made by Carrollton River Terminal, LLC in favor of Fifth Third Bank maturing April 1, 2013. Restricts the incurrence of liens by the Guarantor, and thus the pledging of Ohio Valley’s equity interests in its subsidiaries as well as the incurrence by Ohio Valley of a secured guarantee of Hinkle’s indebtedness.

 

 

Landfill service contracts prohibiting the pledge of the actual contract include those between N. R. Hamm Quarry, LLC and the following parties:

 

   

City of Maryville, Missouri

 

   

Marshall County, Kansas

 

   

Franklin County, Kansas

 

   

Leavenworth County, Kansas

 

   

Morris County, Kansas

 

   

Washington County, Kansas

 

   

Pottawatomie County, Kansas

 

   

Geary County, Kansas


Schedule 10.02

Administrative Agent’s Office, Certain Addresses for Notices

Administrative Agent & Swingline Lender Office:

(For financial/loan activity – advances, pay down, interest/fee billing and payments, rollovers, rate-settings):

Attention: Robert Garvey

One Independence Center

101 N Tryon St

Mail Code: NC1-002-15-36

Charlotte NC 28255-0001

Phone: 980-387-9468

Fax: 617-310-3288

Electronic Mail: robert.garvey@baml.com

Remittance Instructions :

Bank of America, N.A.

New York, NY

ABA #: 026009593

Account #: 1366212250600

Attn: Corporate Credit Services

Ref: Summit Materials LLC

LC Issuer’s Office:

(For fee payments due LC Issuer only and new LC requests and amendments):

Trade Operations

1 Fleet Way

Mail Code: PA6-580-02-30

Scranton, PA 18507

Attention: Mary J. Cooper

Telephone: 570.330.4235

Telecopier: 570.330.4186

Electronic Mail: mary.j.cooper@baml.com

Remittance Instructions :

Bank of America, N.A. Charlotte, NC

ABA #: 026-009-593 New York, NY

Account #: 04535-883980

Attn: Scranton Standby

Ref: Summit Materials LLC & LC #

Other Notices as Administrative Agent:

( For financial statements, compliance certificates, maturity extension and commitment change notices, amendments, consents, vote taking, etc)

Bank of America Plaza

101 S Tryon St

Mail Code: NC1-002-15-36

Charlotte NC 28255-0001

Attention: Darleen R Parmelee

Telephone: 980.388.5001

Telecopier: 704.409.0645

Electronic Mail: darleen.r.parmelee@baml.com


EXHIBIT A

[FORM OF]

COMMITTED LOAN NOTICE

 

To:   

Bank of America, N.A., as Administrative Agent

One Independence Center

   101 N. Tryon St.
   Mail Code: NC1-002-15-36
   Charlotte, NC 28255-0001
   Phone: 980-387-9468
   Fax: 617-310-3288
   Electronic Mail: robertgarvey@baml.com
   Attention: Robert Garvey

[Date]

Ladies and Gentlemen:

Reference is made to the Credit Agreement, dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC, a Delaware limited liability company, the Guarantors party thereto from time to time, the lenders and other parties thereto from time to time and Bank of America, N.A., as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

The undersigned Borrower hereby requests (select one):

 

¨    A Borrowing of new Loans   

 

¨    A conversion of Loans made on   

 

¨    A continuation of Eurocurrency Rate Loans made on   

 

 

A-1


to be made on the terms set forth below:

 

(A)    Class of Borrowing 1   

 

(B)    Date of Borrowing, conversion or continuation (which is a Business Day)   

 

(C)    Principal amount 2   

 

(D)    Type of Loan 3   

 

(E)    Interest Period and the last day thereof 4   

 

(F)    Location and number of Borrower’s account to which proceeds of Borrowings are to be disbursed:   

 

The above request complies with the notice requirements set forth in the Credit Agreement.

[The undersigned Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, on the date of this Committed Loan Notice and on the date of the related Borrowing, the conditions to lending specified in Section 4.01 of the Credit Agreement will be satisfied as of the date of the Borrowing set forth above.] 5

 

1   Term or Revolving Credit.
2   Eurocurrency borrowing minimum of $2,000,000 and whole multiples of $500,000 in excess thereof. Base Rate borrowing minimum of $500,000 and borrowings also allowed in whole multiples of $100,000 in excess thereof.
3   Specify Eurocurrency or Base Rate.
4   Applicable for Eurocurrency Borrowings/Loans only.
5   Insert bracketed language if the Borrower is making a Request for Credit Extension after the Closing Date.

 

A-2


SUMMIT MATERIALS, LLC
By:  

 

  Name:
  Title:

 

A-3


EXHIBIT B

[FORM OF]

SWING LINE LOAN NOTICE

 

To:   

Bank of America, N.A., as Administrative Agent

One Independence Center

   101 N. Tryon St.
   Mail Code: NC1-002-15-36
   Charlotte, NC 28255-0001
   Phone: 980-387-9468
   Fax: 617-310-3288
   Electronic Mail: robertgarvey@baml.com
   Attention: Robert Garvey
   Bank of America, N.A., as Swing Line Lender
   One Independence Center
   101 N. Tryon St.
   Mail Code: NC1-002-15-36
   Charlotte, NC 28255-0001
   Phone: 980-387-9468
   Fax: 617-310-3288
   Electronic Mail: robertgarvey@baml.com
   Attention: Robert Garvey

[Date]

Ladies and Gentlemen:

Reference is made to the Credit Agreement, dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC, a Delaware limited liability company, the Guarantors party thereto from time to time, the lenders and other parties thereto from time to time and Bank of America, N.A., as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such

 

B-1


terms in the Credit Agreement. The undersigned Borrower hereby gives you notice pursuant to Section 2.04(b) of the Credit Agreement that it requests a Swing Line Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Swing Line Borrowing is requested to be made:

 

(A)    Principal Amount to be Borrowed 1   

 

(B)    Date of Borrowing (which is a Business Day)   

 

 

1   Shall be a minimum of $100,000.

 

B-2


The above request complies with the notice requirements set forth in the Credit Agreement.

[The undersigned Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, on the date of this Swing Line Loan Notice and on the date of the related Swing Line Borrowing, the conditions to lending specified in Section 4.01 of the Credit Agreement will be satisfied as of the date of the Borrowing set forth above.] 2

 

SUMMIT MATERIALS, LLC
By:  

 

  Name:
  Title:

 

2   Insert bracketed language after the Closing Date.

 

B-3


EXHIBIT C-1

LENDER: [ ]

PRINCIPAL AMOUNT: $[ ]

[FORM OF]

TERM NOTE

New York, New York

[Date]

FOR VALUE RECEIVED, the undersigned, Summit Materials, LLC, a Delaware limited liability company (“ Borrower ”), hereby promises to pay to the Lender set forth above (the “ Lender ”) or its registered assigns, in lawful money of the United States of America in immediately available funds at the Administrative Agent’s Office (such term, and each other capitalized term used but not defined herein, having the meaning assigned to it in the Credit Agreement dated as of January 30, 2012 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC, a Delaware limited liability company, the Guarantors party thereto from time to time, the lenders and other parties thereto from time to time and Bank of America, N.A., as Administrative Agent) (i) on the dates set forth in the Credit Agreement, the principal amounts set forth in the Credit Agreement with respect to Term Loans made by the Lender to Borrower pursuant to the Credit Agreement and (ii) on each Interest Payment Date, interest at the rate or rates per annum as provided in the Credit Agreement on the unpaid principal amount of all Term Loans made by the Lender to Borrower pursuant to the Credit Agreement.

 

C-1-1


Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at the rate or rates provided in the Credit Agreement.

Borrower hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The nonexercise by the holder hereof of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.

All borrowings evidenced by this note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided , however , that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of Borrower under this note.

This note is one of the Term Notes referred to in the Credit Agreement that, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified.

THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE CREDIT AGREEMENT.

THIS TERM NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL INCOME TAX PURPOSES. BEGINNING NO LATER THAN TEN (10) DAYS AFTER THE ISSUE DATE OF THIS TERM NOTE, THE HOLDER OF THIS TERM NOTE MAY REQUEST, AND WILL PROMPTLY BE MADE AVAILABLE

 

C-1-2


UPON REQUEST, THE FOLLOWING INFORMATION WITH RESPECT TO THE TERM NOTE: ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY. ANY REQUEST SHALL BE MADE TO SUMMIT MATERIALS, LLC, 2900 K STREET NW, SUITE 450, WASHINGTON, DC 20007, ATTENTION: GENERAL COUNSEL AND CHIEF FINANCIAL OFFICER.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

C-1-3


SUMMIT MATERIALS, LLC
By:  

 

  Name:
  Title:

 

C-1-4


LOANS AND PAYMENTS

 

Date

  

Amount of Loan

  

Maturity Date

  

Payments of
Principal/Interest

  

Principal

Balance of Note

  

Name of Person
Making the
Notation

              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              

 

C-1-5


EXHIBIT C-2

LENDER: [ ]

PRINCIPAL AMOUNT: $[ ]

[FORM OF]

REVOLVING CREDIT NOTE

New York, New York

[Date]

FOR VALUE RECEIVED, the undersigned, Summit Materials, LLC, a Delaware limited liability company (together with its successors and assigns, the “ Borrower ”), hereby severally promises to pay to the Lender set forth above (the “ Lender ”) or its registered assigns, in immediately available funds at the Administrative Agent’s Office (such term, and each other capitalized term used but not defined herein, having the meaning assigned to it in the Credit Agreement dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC, a Delaware limited liability company, the Guarantors party thereto from time to time, the lenders and other parties thereto from time to time and Bank of America, N.A., as Administrative Agent) (A) on the dates set forth in the Credit Agreement, the lesser of (i) the principal amount set forth above and (ii) the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and (B) interest from the date hereof on the principal amount from time to time outstanding on each such Revolving Credit Loan at the rate or rates per annum and payable on such dates, as provided in the Credit Agreement.

 

C-2-1


The Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at a rate or rates provided in the Credit Agreement.

The Borrower hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The nonexercise by the holder hereof of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.

All borrowings evidenced by this note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided , however , that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower under this note.

This note is one of the Revolving Credit Notes referred to in the Credit Agreement that, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified.

THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE CREDIT AGREEMENT.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

C-2-2


SUMMIT MATERIALS, LLC
By:  

 

  Name:
  Title:

 

C-2-3


LOANS AND PAYMENTS

 

Date

  

Amount of Loan

  

Maturity Date

  

Payments of
Principal/Interest

  

Principal
Balance of Note

  

Name of Person
Making the
Notation

              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              

 

C-2-4


EXHIBIT C-3

LENDER: [ ]

PRINCIPAL AMOUNT: $[ ]

[FORM OF]

SWING LINE NOTE

New York, New York

[Date]

FOR VALUE RECEIVED, the undersigned, Summit Materials, LLC, a Delaware limited liability company (together with its successors and assigns, the “ Borrower ”), hereby severally promises to pay to the Lender set forth above (the “ Lender ”) or its registered assigns, in immediately available funds at the Administrative Agent’s Office (such term, and each other capitalized term used but not defined herein, having the meaning assigned to it in the Credit Agreement dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC, a Delaware limited liability company, the Guarantors party thereto from time to time, the lenders and other parties thereto from time to time and Bank of America, N.A., as Administrative Agent) (A) on the dates set forth in the Credit Agreement, the lesser of (i) the principal amount set forth above and (ii) the aggregate unpaid principal amount of all Swing Line Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and (B) interest from the date hereof on the principal amount from time to time outstanding on each such Swing Line Loan at the rate or rates per annum and payable on such dates as provided in the Credit Agreement.

 

C-3-1


The Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at a rate or rates provided in the Credit Agreement.

The Borrower hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The nonexercise by the holder hereof of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.

All borrowings evidenced by this note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided , however , that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower under this note.

This note is one of the Swing Line Notes referred to in the Credit Agreement that, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified.

THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE CREDIT AGREEMENT.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

C-3-2


SUMMIT MATERIALS, LLC
By:  

 

  Name:
  Title:

 

C-3-3


LOANS AND PAYMENTS

 

Date

   Amount of Loan    Maturity Date    Payments of
Principal/Interest
   Principal
Balance of Note
   Name of Person
Making  the

Notation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              

 

C-3-4


EXHIBIT D

[FORM OF]

COMPLIANCE CERTIFICATE

Reference is made to the Credit Agreement dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC, a Delaware limited liability company (the “ Borrower ”), the Guarantors party thereto from time to time, the lenders and other parties thereto from time to time and Bank of America, N.A., as Administrative Agent (capitalized terms used herein have the meanings attributed thereto in the Credit Agreement unless otherwise defined herein). Pursuant to Section 6.02(a) of the Credit Agreement, the undersigned, solely in his/her capacity as a Responsible Officer of the Borrower, certifies as follows:

 

  1. [Attached hereto as Exhibit A is the consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 20[    ] and the related consolidated statements of income or operations, stockholders’ equity and cash flows for the fiscal year then ended, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of an independent registered public accounting firm of nationally recognized standing, which report and opinion has been prepared in accordance with generally accepted auditing standards and not subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit.] 1

 

  2. [Attached hereto as Exhibit A is the consolidated balance sheet of the Borrower and its Subsidiaries as of [            ] and the related (i) consolidated statements of income or operations for such fiscal quarter and for the portion of the fiscal year then ended and (ii) consolidated statements of cash flows for such fiscal quarter and the portion of the fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail. These present fairly in all material respects the financial

 

1  

To be included if accompanying annual financial statements only.

 

D-1


  condition, results of operations, stockholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes.] 2

 

  3. [Attached as Exhibit B hereto is a detailed consolidated budget for 20[    ] (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of 20[    ], the related consolidated statements of projected cash flow and projected income and a summary of the material underlying assumptions applicable thereto) (collectively, the “ Projections ”), which Projections are prepared in good faith and are based on the reasonable assumptions at the time of preparation of such Projections. Actual results may vary from such Projections and such variations may be material.] 3

 

  4. [To my knowledge, except as otherwise disclosed to the Administrative Agent pursuant to the Credit Agreement, no Default has occurred. [If unable to provide the foregoing certification, describe in reasonable detail the reasons therefor and circumstances thereof and any action taken or proposed to be taken with respect thereto on Annex A attached hereto.][Attached as Exhibit C hereto is the certificate of an independent registered public accounting firm of nationally recognized standing certifying that to their knowledge after making the necessary examination, there is no Event of Default under Section 7.11 of the Credit Agreement.]

 

  5. [The following represent true and accurate calculations, as of [                    ], to be used to determine compliance with the covenants set forth in Section 7.11 of the Credit Agreement:

Consolidated First Lien Net Leverage Ratio:

 

Consolidated Total Net Debt pursuant to clause (a) of the definition thereof that is secured by a Lien=

   [                    ]

Consolidated EBITDA=

   [                    ]

Actual Ratio=

   [                    ] to 1.0

Required Ratio=

   [                    ] to 1.0

Interest Coverage Ratio:

 

Consolidated EBITDA=

   [                    ]

Consolidated Interest Expense=

   [                    ]

Actual Ratio=

   [                    ] to 1.0

Required Ratio=

   [                    ] to 1.0

 

2   To be included if accompanying quarterly financial statements only.
3   To be included only in annual compliance certificate.

 

D-2


  Supporting detail showing the calculation of Consolidated First Lien Net Leverage Ratio and Consolidated Interest Expense is attached hereto as Schedule 1.] 4

 

  6. [Attached hereto as Schedule 2 are detailed calculations setting forth Excess Cash Flow.] 5

 

  7. [Attached hereto is the information required by Section 6.02(e) of the Credit Agreement.] 6 ] 7

 

4   Insert if Section 7.11 is applicable for the reporting period.
5   To be included only in annual compliance certificate.
6   Information required by Section 6.02(e)(i) to be included only in annual compliance certificate.
7   Items 4-6 may be disclosed in a separate certificate no later than 5 business days after delivery of the financial statements pursuant to Section 6.02(a) of the Credit Agreement.

 

D-3


SCHEDULE 1

 

(A) Consolidated First Lien Net Leverage Ratio: Consolidated First Lien Net Debt to Consolidated EBITDA

(1)    

 

ConsolidatedFirst Lien Net Debt as of [            ], 20[    ]:

 
 

(a)    

  Any Indebtedness described in clause (a) of the definition of “Consolidated Total Net Debt” outstanding on such date that is secured by a Lien on any asset or property of the Borrower or any Subsidiary but excluding any such Indebtedness in which the applicable Liens are expressly subordinated or junior to the Liens securing the Obligations 1  

           

 

1   “Consolidated Total Net Debt” means, as of any date of determination, (a) the aggregate principal amount of Indebtedness of the Borrower and its Subsidiaries outstanding on such date, in an amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP (but (x) excluding the effects of any discounting of Indebtedness resulting from the application of purchase accounting in connection with the Original Transactions or any Permitted Acquisition and (y) any Indebtedness that is issued at a discount to its initial principal amount shall be calculated based on the entire principal amount thereof), consisting of Indebtedness for borrowed money, Attributable Indebtedness, and debt obligations evidenced by promissory notes or similar instruments, minus (b) the aggregate amount of cash and Cash Equivalents (other than Restricted Cash), in each case, that is held by the Borrower and its Subsidiaries as of such date free and clear of all Liens, other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(a), Section 7.01(p) and Section 7.01(q) and clauses (i) and (ii) of Section 7.01(r), 7.01 (ee) and 7.01(ff)); provided that Consolidated Total Net Debt shall not include Indebtedness in respect of letters of credit (including Letters of Credit), except to the extent of unreimbursed amounts thereunder; provided that any unreimbursed amount under commercial letters of credit shall not be counted as Consolidated Total Net Debt until 3 Business Days after such amount is drawn; it being understood, for the avoidance of doubt, that obligations under Swap Contracts entered into for non-speculative purposes, deferred consideration, earn-out payments and non-compete payments (to the extent such earn-out payments would not become a liability on the balance sheet of such Person in accordance with GAAP as GAAP existed on December 31, 2008) do not constitute Consolidated Total Net Debt.

 

Schedule 1-1


     

minus

 
 

(b)    

    the aggregate amount of cash and Cash Equivalents (other than Restricted Cash), in each case, that is held by the Borrower and its Subsidiaries as of such date, free and clear of all Liens (other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(a), Section 7.01(p) and Section 7.01(q) and clauses (i) and (ii) of Section 7.01(r)), 7.01(ee) and 7.01(ff));  

 

Consolidated First Lien Net Debt shall not include Indebtedness in respect of letters of credit (including Letters of Credit), except to the extent of unreimbursed amounts thereunder; provided that any unreimbursed amount under commercial letters of credit shall not be counted as Consolidated First Lien Net Debt until 3 Business Days after such amount is drawn; it being understood, for the avoidance of doubt, that obligations under Swap Contracts entered into for non-speculative purposes, deferred consideration, earn-out payments and non-compete payments do not constitute Consolidated First Lien Net Debt  
      Consolidated First Lien Net Debt  

 

(2)   Consolidated EBITDA:  
     

(a)    Consolidated Net Income:

 
     

(i)     the net income (loss) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including:

 

 

     

the amount of proportionate Consolidated EBITDA above the net income (loss) for such period of any Person that is not a Subsidiary of the Borrower and that is accounted for by the equity method of accounting

 

 

 

Schedule 1-2


     

and excluding, without duplication:

 
     

(A)    after-tax effect of extraordinary, non-recurring or unusual items (including gains or losses and all fees and expenses relating thereto) for such period

 

 

     

(B)    the cumulative effect of a change in accounting principles during such period to the extent included in Consolidated Net Income

 

 

     

(C)    any fees and expenses incurred during such period (including, without limitation, any premiums, make whole or penalty payments), or any amortization thereof for such period, in connection with any acquisition, investment, asset disposition, issuance or repayment of debt, issuance of equity securities, refinancing transaction or amendment or other modification of any debt instrument (in each case, including any such transaction consummated on or prior to the Closing Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful (including, for the avoidance of doubt the effects of expensing all transaction related expenses in accordance with Financial Accounting Standards No. 141(R) and gains or losses associated with FASB Interpretation No. 45)

 

 

 

Schedule 1-3


     

(D)    accruals and reserves that are established or adjusted within twelve months after the Closing Date that are so required to be established or adjusted as a result of the Original Transactions in accordance with GAAP or changes as a result of adoption or modification of accounting policies in accordance with GAAP

 

 

     

(E)    any net after-tax gains or losses on disposal of abandoned, disposed or discontinued operations

 

 

     

(F)     any net after-tax effect of gains or losses (less all fees, expenses and charges) attributable to asset dispositions or abandonments or the sale or other disposition of any Equity Interests of any Person in each case other than in the ordinary course of business, as determined in good faith by the Borrower

 

 

     

(G)    any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP

 

 

     

(H)    any non-cash compensation charge or expense, including any such charge or expense arising from the grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity incentive programs, and any cash charges associated with the rollover, acceleration or payout of Equity Interests by management of the Borrower or any of its direct or indirect parents in connection with the Original Transactions

 

 

 

Schedule 1-4


     

(I)      any expenses, charges or losses that are covered by indemnification or other reimbursement provisions in connection with any Investment, Permitted Acquisition or any sale, conveyance, transfer or other disposition of assets permitted under the Credit Agreement, to the extent actually reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days)

 

 

     

(J)     to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is in fact reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such 365 days), expenses, charges or losses with respect to liability or casualty events or business interruption

 
     

(K)    any net pension or other post-employment benefit costs representing amortization of unrecognized prior service costs, actuarial losses, including amortization of such amounts arising in prior periods, amortization of the unrecognized net obligation (and loss or cost) existing at the date of initial application of Accounting Standards Codification, section 715, and any other items of a similar nature

 

 

     

(L)    the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Borrower or is merged into or consolidated with Borrower or any of its Subsidiaries or that Person’s assets are acquired by Borrower or any of its Subsidiaries (except to the extent required for any calculation of Consolidated EBITDA on a Pro Forma Basis in accordance with Section 1.08)

 

 

 

Schedule 1-5


For the avoidance of doubt revenue will be accounted for on a GAAP basis and the recognition of any deferred revenue will be included in Consolidated Net Income in the same period as recognized for GAAP.  
There shall be excluded from Consolidated Net Income for any period the purchase accounting effects of adjustments (including the effects of such adjustments pushed down to the Borrower and its Subsidiaries) in component amounts required or permitted by GAAP (including in the inventory, property and equipment, software, goodwill, intangible assets, in-process research and development, deferred revenue, mineral reserves, landfill airspace and debt line items thereof) and related authoritative pronouncements (including the effects of such adjustments pushed down to the Borrower and its Subsidiaries), as a result of the Original Transactions, any acquisition consummated prior to the Closing Date, any Permitted Acquisitions, or the amortization or write-off of any amounts thereof.  

 

Schedule 1-6


     

(b)     plus, without duplication and, except with respect to clauses (viii) and (xi) below, to the extent deducted (and not added back) in arriving at such Consolidated Net Income, the sum of the following:

 

 

     

(i)      total interest expense determined in accordance with GAAP (including, to the extent deducted and not added back in computing Consolidated Net Income, (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers’ acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in mark-to-market valuation of Swap Contracts or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Leases, (e) net payments, if any, pursuant to interest rate Swap Contracts with respect to Indebtedness, (f) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses and (g) any expensing of bridge, commitment and other financing fees) and, to the extent not reflected in such total interest expense, any losses on hedging obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, net of interest income and gains on such hedging obligations, and costs of surety bonds in connection with financing activities (whether amortized or immediately expensed),

 

 

 

Schedule 1-7


     

(ii)     provision for taxes based on income, profits or capital gains of the Borrower and its Subsidiaries, including, without limitation, federal, state and local income, franchise and similar taxes and foreign withholding taxes paid or accrued during such period including penalties and interest related to such taxes or arising from any tax examinations,

 

 

     

(iii)   depletion, depreciation and amortization (including amortization of intangible assets, including Capitalized Software Expenditures),

 

 

 

Schedule 1-8


     

(iv)    (A) severance, relocation costs and expenses, Original Transaction Expenses, integration costs, transition costs, pre-opening, opening, consolidation and closing costs for facilities, costs incurred in connection with any non-recurring strategic initiatives, costs incurred in connection with acquisitions and non-recurring product and intellectual property development after the Original Closing Date, other business optimization expenses (including costs and expenses relating to business optimization programs and new systems design and implementation costs), project start-up costs and other restructuring charges, accruals or reserves (including restructuring costs related to acquisitions after the Original Closing Date and to closure/consolidation of facilities, retention charges, systems establishment costs and excess pension charges) in an aggregate amount of all items added pursuant to this clause (iv)(A) for any Test Period (other than Original Transaction Expenses incurred, accrued or paid no later than the end of the first full fiscal quarter ending after the Original Closing Date) not to exceed, with respect to transactions (other than the Original Transactions), when added to the amount of add backs made pursuant to clause (viii) below and pursuant to Section 1.08(c), 25% of Consolidated EBITDA (prior to giving effect to this clause (iv)(A) or clause (viii) below or Section 1.08(c)

 

 

 

Schedule 1-9


     

for such Test Period), (B) without duplication of amounts under subclause (A) of this clause (iv) or clause (viii) below, the amount of any losses, costs or costs inefficiencies related to plant disruptions or shutdowns to the extent such losses, costs and/or costs inefficiencies do not exceed $5,000,000 in any period of four consecutive fiscal quarters and (C) without duplication of amounts under clause (iii) above, the portion of any earn-out, non-compete payments relating to such period or other contingent purchase price obligations and adjustments thereof and purchase price adjustments to the extent such payment is permitted to be paid pursuant to the Credit Agreement and is deducted from net income under GAAP,

 
     

(v)     the amount of net income (loss) attributable to minority interests or non-controlling interests of third parties in any non-wholly owned Subsidiary,

 

 

 

Schedule 1-10


     

(vi)   (A) the amount of management, monitoring, consulting and advisory fees and related expenses and indemnities paid or accrued to the Investors or their Affiliates (or management companies) under the Investor Management Agreement (for avoidance of doubt, no termination fee paid under the Investor Management Agreement may be included in this clause (vi)),

 

 

     

(vii)   any costs or expenses incurred pursuant to any individual equity grant or award management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of the Borrower or net cash proceeds of an issuance of Equity Interests of the Borrower (other than Disqualified Equity Interests),

 

 

     

(viii)  the amount of cost savings, operating expense reductions and synergies projected by the Borrower in good faith to be realized as a result of specified actions taken or with respect to which substantial steps have been taken (in the good faith determination of the Borrower) during

 

 

 

Schedule 1-11


     

such period, including in connection with any Specified Transaction (calculated on a Pro Forma Basis as though such cost savings, operating expense reductions and synergies had been realized on the first day of such period and as if such cost savings, operating expense reductions and synergies were realized during the entirety of such period), net of the amount of actual benefits realized during such period from such actions; provided that (A) a duly completed certificate signed by a Responsible Officer of the Borrower shall be delivered to the Administrative Agent together with the Compliance Certificate required to be delivered pursuant to Section 6.02(a), certifying that (x) such cost savings, operating expense reductions and synergies are reasonably expected and factually supportable in the good faith judgment of the Borrower, (y) such actions are to be taken within 18 months after the consummation of the acquisition, Disposition, restructuring or the implementation of an initiative, which is expected to result in such cost savings, expense reductions or synergies, (B) no

 

 

Schedule 1-12


     

cost savings, operating expense reductions and synergies shall be added pursuant to this clause (viii) to the extent duplicative of any expenses or charges otherwise added to Consolidated EBITDA, whether through a pro forma adjustment or otherwise, for such period, (C) the aggregate amount of cost savings and operating expense reductions added pursuant to this clause (viii) for any Test Period, when added to the aggregate amount of add backs made pursuant to clause (iv)(A) above and pursuant to Section 1.08(c) does not exceed 25% of Consolidated EBITDA (prior to giving effect to this clause (viii), clause (iv)(A) above or Section 1.08(c) for such Test Period (D) projected amounts (and not yet realized) may no longer be added in calculating Consolidated EBITDA pursuant to this clause (viii) to the extent occurring more than four full fiscal quarters after the specified action taken in order to realize such projected cost savings, operating expense reductions and synergies,

 
     

(ix)    any net loss from disposed, abandoned or discontinued operations,

 

 

 

Schedule 1-13


     

(x)     accretion of asset retirement obligations in accordance with Accounting Standards Codification, section 410, accounting for asset retirement obligations,

 
     

(xi)    cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing Consolidated EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant to paragraph (c) below for any previous period and not added back,

 

 

     

(xii)   non-cash expenses, charges and losses (including reserves, impairment charges or asset write-offs, losses from investments recorded using the equity method, stock-based awards compensation expense), in each case other than (A) any non-cash charge representing amortization of a prepaid cash item that was paid and not expensed in a prior period and (B) any non-cash charge relating to write-offs, write-downs or reserves with respect to accounts receivable or inventory;

 

 

 

Schedule 1-14


     

provided that if any non-cash charges referred to in this clause (xii) represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA in such future period to such extent paid,

 
     

(xiii) the amount of loss on the sale of receivables and related assets as part of a receivables financing,

 

 

     

(c)      minus, without duplication and to the extent included in arriving at such Consolidated Net Income, the sum of the following:

 
     

(i)      non-cash gains (excluding any non-cash gain to the extent it represents the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period),

 

 

     

(ii)    any net gain from disposed, abandoned or discontinued operations,

 

 

     

(iii)   the amount of any minority interest income consisting of Subsidiary losses attributable to minority interests or non-controlling interests of third parties in any non-wholly owned Subsidiary; provided that, for the avoidance of doubt, any gain representing the reversal of any non-cash charge referred to in clause (b)(xii)(B) above for a prior period shall be added (together with, without duplication, any amounts received in respect thereof to the extent not increasing Consolidated Net Income) to Consolidated EBITDA in any subsequent period to such extent so reversed (or received),

 

 

 

Schedule 1-15


provided that:  
     

(A)    to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA (x) currency translation gains and losses related to currency remeasurements of Indebtedness (including the net loss or gain (i) resulting from Swap Contracts for currency exchange risk and (ii) resulting from intercompany indebtedness) and (y) gains or losses on Swap Contracts,

 
     

(B)    to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA for any period any adjustments resulting from the application of Accounting Standards Codification, section 815 and International Accounting Standard No. 39 and their respective related pronouncements and interpretations,

 
     

(C)    to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA for any period any income (loss) for such period attributable to the early extinguishment of (i) Indebtedness, (ii) obligations under any Swap Contracts or (iii) other derivative instruments,

 

 

Schedule 1-16


     

(D)    there shall be excluded in determining Consolidated EBITDA for any period any after-tax effect of non-recurring items (including gains or losses and all fees and expenses relating thereto) relating to curtailments or modifications to pension and post-retirement employee benefit plans for such period.

 
Notwithstanding anything to the contrary contained herein but subject to pro forma adjustments for events occurring following the Closing Date, for purposes of determining Consolidated EBITDA under this Agreement for any period that includes (x) any of the fiscal quarters ended December 31, 2010, March 31, 2011, June 30, 2011 and September 30, 2011, Consolidated EBITDA for such fiscal quarters shall be $37,046,000, $(10,802,000), $40,531,000 and $66,381,000, respectively or (y) any other period occurring prior to the Closing Date, Consolidated EBITDA shall be calculated on a Pro Forma Basis to give effect to the Original Transactions.  

 

     

Consolidated EBITDA

 

 

     

Consolidated First Lien Net Debt to Consolidated EBITDA

  [    ]:1.00
     

Covenant Requirement

  No more than [    ]:1.00

 

Schedule 1-17


(B)    Interest Coverage Ratio: Consolidated EBITDA to Consolidated Interest Expense

(1)    

  Consolidated EBITDA  

 

(2)    

  Consolidated Interest Expense:  
 

the sum, without duplication, of:

 
 

(i)      the cash interest expense (including that attributable to Capitalized Leases), net of cash interest income, of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net cash costs under Swap Contracts,

 

 

 

(ii)     any cash payments made during such period in respect of obligations referred to in clause (b) below relating to Funded Debt that were amortized or accrued in a previous period

 

 

but excluding,  
 

(a)     amortization of deferred financing costs and any other amounts of non-cash interest, (b) the accretion or accrual of discounted liabilities and any prepayment premium or penalty during such period, (c) non-cash interest expense attributable to the movement of the mark-to-market

 

 

 

Schedule 1-18


 

valuation of obligations under Swap Contracts or other derivative instruments pursuant to Accounting Standards Codification, section 815, (d) any cash costs associated with breakage in respect of hedging agreements for interest rates, (e) all non-recurring cash interest expense consisting of liquidated damages for failure to timely comply with registration rights obligations and financing fees, all as calculated on a consolidated basis in accordance with GAAP, (f) fees and expenses associated with the consummation of the Original Transactions, (g) annual agency fees paid to the Administrative Agent and/or Collateral Agent, and (h) costs associated with obtaining Swap Contracts.

 
Notwithstanding anything to the contrary contained herein, for purposes of determining Consolidated Interest Expense (i) for any period ending prior to the first anniversary of the Closing Date, Consolidated Interest Expense shall be an amount equal to actual Consolidated Interest Expense from the Closing Date through the date of determination multiplied by a fraction the numerator of which is 365 and the denominator of which is the number of days from the Closing Date through the date of determination and (ii) shall exclude the purchase accounting effects described in the last sentence of the definition of Consolidated Net Income.  
 

Consolidated EBITDA to Consolidated Interest Expense

  [    ]:1.00
 

Covenant Requirement

  No less than [    ]:1.00

 

Schedule 1-19


SCHEDULE 2

 

Excess Cash Flow Calculation:   
(a)   the sum , without duplication of:   
  (i)        Consolidated Net Income for such period   

 

  (ii)        an amount equal to the amount of all non-cash charges (including depreciation and amortization) to the extent deducted in arriving at such Consolidated Net Income   

 

  (iii)        decreases in Consolidated Working Capital and long-term accounts receivable of the Borrower and its Subsidiaries for such period (other than any such decreases arising from acquisitions or dispositions by the Borrower and its Subsidiaries completed during such period)   

 

  (iv)        an amount equal to the aggregate net non-cash loss on Dispositions by the Borrower and its Subsidiaries during such period (other than sales in the ordinary course of business) to the extent deducted in arriving at such Consolidated Net Income   
(b)   minus the sum, without duplication, of:   
  (i)        all non-cash credits included in arriving at such Consolidated Net Income and cash charges included in the following components of the definition of Consolidated Net Income:   
    (i) any after-tax effect of extraordinary, non-recurring or unusual items (including gains or losses and all fees and expenses relating thereto) for such period, (ii) the cumulative effect of a change in accounting principles during such period to the extent included in Consolidated Net Income, (iii) any fees and expenses incurred during such period, or any amortization thereof for such period, in connection with any acquisition, investment, asset disposition, issuance or repayment of debt, issuance of equity securities, refinancing transaction or amendment or other modification of any debt instrument (in each case, including any such transaction consummated on or prior to the Closing Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such   

 

 

Schedule 2-1


    transaction, in each case whether or not successful (including, for the avoidance of doubt the effects of expensing all transaction related expenses in accordance with Financial Accounting Standards No. 141(R) and gains or losses associated with FASB Interpretation No. 45), (iv) accruals and reserves that are established or adjusted within twelve months after the Closing Date that are so required to be established as a result of the Transactions in accordance with GAAP or changes as a result of adoption or modification of accounting policies in accordance with GAAP, (v) any net after-tax gains or losses on disposal of abandoned, disposed or discontinued operations, (vi) any net after-tax effect of gains or losses (less all fees, expenses and charges) attributable to asset dispositions or the sale or other disposition of any Equity Interests of any Person in each case other than in the ordinary course of business, as determined in good faith by the Borrower, (vii) any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP, (viii) any non-cash compensation charge or expense, including any such charge or expense arising from the grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity incentive programs, and any cash charges associated with the rollover, acceleration or payout of Equity Interests by management of the Borrower or any of its direct or indirect parents in connection with the Transactions, (ix) any expenses, charges or losses that are covered by indemnification or other reimbursement provisions in connection with any Investment, Permitted Acquisition or any sale, conveyance, transfer or other disposition of assets permitted under the Credit Agreement, to the extent actually reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days), (x) to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount will in fact be   

 

Schedule 2-2


    reimbursed by the insurer and only to the extent that such amount is in fact reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such 365 days), expenses, charges or losses with respect to liability or casualty events or business interruption, (xi) any net pension or other post-employment benefit costs representing amortization of unrecognized prior service costs, actuarial losses, including amortization of such amounts arising in prior periods, amortization of the unrecognized net obligation (and loss or cost) existing at the date of initial application of Statement of Financial Accounting Standards Nos. 87, 106 and 112, and any other items of a similar nature, and (xii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Borrower or is merged into or consolidated with Borrower or any of its Subsidiaries or that Person’s assets are acquired by Borrower or any of its Subsidiaries (except to the extent required for any calculation of Consolidated EBITDA on a Pro Forma Basis in accordance with Section 1.08)   
  (ii)     without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Capital Expenditures or acquisitions of intellectual property to the extent not expensed and Capitalized Software Expenditures accrued or made in cash or accrued during such period, to the extent that such Capital Expenditures or acquisitions were financed with internally generated cash or borrowings under the Revolving Credit Facility and were not made by utilizing the Cumulative Retained Excess Cash Flow Amount   

 

 

Schedule 2-3


  (iii)        the aggregate amount of all principal payments of Indebtedness of the Borrower or its Subsidiaries (including (A) the principal component of payments in respect of Capitalized Leases, (B) the amount of any scheduled repayment of Term Loans pursuant to Section 2.07 and (C) any mandatory prepayment of Term Loans pursuant to Section 2.05(b)(ii) to the extent required due to a Disposition that resulted in an increase to Consolidated Net Income and not in excess of the amount of such increase, but excluding (X) all other voluntary and mandatory prepayments of Term Loans, (Y) all prepayments of Revolving Credit Loans and Swing Line Loans made during such period and (Z) all payments in respect of any other revolving credit facility made during such period, except in the case of clause (Z) to the extent there is an equivalent permanent reduction in commitments thereunder), to the extent financed with internally generated cash   

 

  (iv)        the aggregate net non-cash gain on Dispositions by the Borrower and its Subsidiaries during such period (other than Dispositions in the ordinary course of business) to the extent included in arriving at such Consolidated Net Income   

 

  (v)        increases in Consolidated Working Capital and long-term accounts receivable of the Borrower and its Subsidiaries for such period (other than any such increases arising from acquisitions or dispositions by the Borrower and its Subsidiaries during such period)   

 

  (vi)        cash payments by the Borrower and its Subsidiaries during such period in respect of long-term liabilities of the Borrower and its Subsidiaries other than Indebtedness   

 

  (vii)        without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Investments and acquisitions made during such period by the Borrower and its Subsidiaries on a consolidated basis pursuant to Section 7.02) to the extent that such Investments and acquisitions were financed with internally generated cash and were not made by utilizing the Cumulative Retained Excess Cash Flow Amount   

 

  (viii)        the amount of Restricted Payments paid during such period pursuant to Section 7.06(f), Section 7.06(h) or 7.06(j)(x) to the extent such Restricted Payments were financed with internally generated cash or borrowings under the Revolving Credit Facility   

 

 

Schedule 2-4


  (ix)        the aggregate amount of expenditures actually made by the Borrower and its Subsidiaries in cash during such period (including expenditures for the payment of financing fees) to the extent that such expenditures are not expensed during such period   

 

  (x)        the aggregate amount of any premium, make-whole or penalty payments actually paid in cash by the Borrower and its Subsidiaries during such period that are required to be made in connection with any prepayment of Indebtedness   

 

  (xi)        without duplication of amounts deducted from Excess Cash Flow in prior periods, the aggregate consideration required to be paid in cash by the Borrower and its Subsidiaries pursuant to binding contracts (the “ Contract Consideration ”) entered into prior to or during such period relating to Permitted Acquisitions, Capital Software Expenditures or Capital Expenditures or acquisitions of intellectual property to the extent not expected to be consummated or made, plus any restructuring cash expenses, pension payments or tax contingency payments that have been added to Excess Cash Flow pursuant to clause (a)(ii) above required to be made, in each case during the period of four consecutive fiscal quarters of the Borrower following the end of such period, provided that to the extent the aggregate amount of internally generated cash not utilizing the Cumulative Retained Excess Cash Flow Amount actually utilized to finance such Permitted Acquisitions, Capital Expenditures, Capital Software Expenditures or acquisitions of intellectual property during such period of four consecutive fiscal quarters is less than the Contract Consideration, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters   

 

  (xii)        the amount of cash taxes paid in such period to the extent they exceed the amount of tax expense deducted in determining Consolidated Net Income for such period   

 

  (xiii)        cash expenditures in respect of Swap Contracts during such fiscal year to the extent not deducted in arriving at such Consolidated Net Income   

 

 

Schedule 2-5


  (xiv)        any payment of cash to be amortized or expensed over a future period and recorded as a long-term asset   

 

  (xv)        without duplication of amounts deducted from Excess Cash Flow in prior periods, earn-out payments and non-compete payments actually made and that are permitted to be made under the Credit Agreement   

 

Notwithstanding anything in the definition of any term used in the definition of Excess Cash Flow to the contrary, all components of Excess Cash Flow shall be computed for the Borrower and its Subsidiaries on a consolidated basis.   
         Excess Cash Flow   

 

 

Schedule 2-6


IN WITNESS WHEREOF, the undersigned, solely in his/her capacity as a Responsible Officer of Summit Materials, LLC, has executed this certificate for and on behalf of Summit Materials, LLC and has caused this certificate to be delivered this      day of             , 20[    ].

 

SUMMIT MATERIALS, LLC
By:  

 

  Name:
  Title:

 

Schedule 2-7


EXHIBIT E

[FORM OF]

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (this “ Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between the Assignor (as defined below) and the Assignee (as defined below). Capitalized terms used in this Assignment and Assumption and not otherwise defined herein shall have the meanings specified in the Credit Agreement, dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC, a Delaware limited liability company, the Guarantors party thereto from time to time, the lenders and other parties thereto from time to time and Bank of America, N.A., as Administrative Agent, receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement, any other Loan Documents and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including

 

E-1


participations in any Letters of Credit or Swing Line Loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “ Assigned Interest ”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

 

  1. Assignor (the “ Assignor ”):

 

  2. Assignee (the “ Assignee ”):

Assignee is an Affiliate of: [Name of Lender]

Assignee is an Approved Fund of: [Name of Lender]

 

  3. Borrower: Summit Materials, LLC

 

  4. Administrative Agent: Bank of America, N.A.

 

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  5. Assigned Interest:

 

Facility 1

   Aggregate Amount of
Commitment/Loans of
all Lenders
     Amount of
Commitment/Loans
Assigned 2
     Percentage
Assigned of
Aggregate
Commitment/
Loans of all
Lenders 3
 

Revolving Credit Commitments

   $                    $                              

Term Loans

   $                    $                              

Effective Date of Assignment (the “ Effective Date ”): 4

 

1   Add any other facilities or tranches that may be assigned (i.e. “Other Term Loans,” “Extended Term Loan,” etc.)
2   Subject to the amount requirements set forth in Section 10.07(b)(ii)(A) of the Credit Agreement.
3   Set forth, to at least 8 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.
4   To be inserted by the Administrative Agent and which shall be the effective date of recordation of the transfer in the register therefor.

 

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The terms set forth in this Assignment and Assumption are hereby agreed to:

 

[NAME OF ASSIGNOR], as

Assignor

By:  

 

  Name:
  Title:

[NAME OF ASSIGNEE], as

Assignee

By:  

 

  Name:
  Title:
 
 
 
 

 

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[Consented to and] 5 Accepted:

BANK OF AMERICA, N.A.

as Administrative Agent

By  

 

  Name:
  Title:
Consented to:

BANK OF AMERICA, N.A.

as L/C Issuer

By:  

 

  Name:
  Title:

BANK OF AMERICA, N.A.

as Swing Line Lender

By:  

 

  Name:
  Title: 6

 

5  

No consent of the Administrative Agent shall be required for (i) an assignment to an Agent or an Affiliate of an Agent or (ii) an assignment of a Term Loan to a Lender or an Approved Fund.

6  

No consent of any Principal L/C Issuer or the Swing Line Lender shall be required for (i) an assignment to an Agent or an Affiliate of an Agent or (ii) an assignment of a Term Loan.

 

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SUMMIT MATERIALS, LLC
By:  

 

  Name:
  Title: 7

 

7  

No consent of the Borrower shall be required for (i) an assignment of all or a portion of a Term Loan to a Lender, an Affiliate of a Lender, an Approved Fund, (ii) an assignment related to Revolving Credit Commitments or Revolving Credit Exposure to a Revolving Credit Lender, (iii) if an Event of Default under Section 8.01(a), (f) or (g) of the Credit Agreement has occurred and is continuing, any other assignee and (iv) an assignment of a Term Loan to any institution that committed during the primary syndication of the Loans or its Affiliates; provided that the Borrower shall be deemed to have consented to any assignment of Term Loans unless it shall have objected thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof.

 

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Annex 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of Summit Materials, LLC, or any of its Subsidiaries or Affiliates or any other Person obligated in respect of the Credit Agreement or (iv) the performance or observance by Summit Materials, LLC, or any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2. Assignee . The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender thereunder, (iii) from and after the Effective Date, it shall be bound by the Credit Agreement and, to the extent provided in this Assignment and Assumption, have the rights and obligations of a Lender under the Credit Agreement, (iv) it is sophisticated with

 

Annex 1-1


respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Sections 5.05 or 6.01 of the Credit Agreement, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent, the Assignor or any other Lender, (vi) if it is not already a Lender under the Credit Agreement, attached to the Assignment and Assumption is an Administrative Questionnaire as required by the Credit Agreement and (vii) the Administrative Agent has received a processing and recordation fee of $3,500 as of the Effective Date and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender, including its obligations pursuant to Section 3.01 of the Credit Agreement.

2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

 

Annex 1-2


3. General Provisions .

3.1 In accordance with Section 10.07 of the Credit Agreement, upon execution, delivery, acceptance and recording of this Assignment and Assumption, from and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Assumption, have the rights and obligations of a Lender under the Credit Agreement with a Commitment as set forth herein and (b) the Assignor shall, to the extent of the Assigned Interest assigned pursuant to this Assignment and Assumption, be released from its obligations under the Credit Agreement (and, in the case that this Assignment and Assumption covers all of the Assignor’s rights and obligations under the Credit Agreement, the Assignor shall cease to be a party to the Credit Agreement but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05 thereof with respect to facts and circumstances occurring prior to the effective date of this assignment).

3.2 This Assignment and Assumption shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed by one or more of the parties to this Assignment and Assumption on any number of separate counterparts (including by facsimile or other electronic transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Assignment and Assumption and the rights and obligations of the parties hereunder shall be governed by, and construed in accordance with the law of the state of New York.

 

Annex 1-3


EXHIBIT F

[FORM OF]

SECURITY AGREEMENT

(See Attached)


 

SECURITY AGREEMENT

dated as of

January 30, 2012

among

THE GRANTORS IDENTIFIED HEREIN

and

BANK OF AMERICA, N.A.,

as Collateral Agent

 

 

 

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TABLE OF CONTENTS

 

          Page  
ARTICLE I   
DEFINITIONS   

Section 1.01

   Credit Agreement      1   

Section 1.02

   Other Defined Terms      1   
ARTICLE II   
PLEDGE OF SECURITIES   

Section 2.01

   Pledge      6   

Section 2.02

   Delivery of the Pledged Securities      6   

Section 2.03

   Representations, Warranties and Covenants      7   

Section 2.04

   Certification of Limited Liability Company and Limited Partnership Interests      8   

Section 2.05

   Registration in Nominee Name; Denominations      8   

Section 2.06

   Voting Rights; Dividends and Interest      9   
ARTICLE III   
SECURITY INTERESTS IN PERSONAL PROPERTY   

Section 3.01

   Security Interest      10   

Section 3.02

   Representations and Warranties      12   

Section 3.03

   Covenants      14   
ARTICLE IV   
REMEDIES   

Section 4.01

   Remedies Upon Default      16   

Section 4.02

   Application of Proceeds      17   

Section 4.03

   Grant of License to Use Intellectual Property      17   
ARTICLE V   
SUBORDINATION   

Section 5.01

   Subordination      18   


ARTICLE VI   
MISCELLANEOUS   

Section 6.01

   Notices      18   

Section 6.02

   Waivers; Amendment      19   

Section 6.03

   Collateral Agent’s Fees and Expenses; Indemnification      19   

Section 6.04

   Successors and Assigns      19   

Section 6.05

   Survival of Agreement      20   

Section 6.06

   Counterparts; Effectiveness; Several Agreement      20   

Section 6.07

   Severability      20   

Section 6.08

   Right of Set-Off      20   

Section 6.09

   Governing Law; Jurisdiction; Venue; Waiver of Jury Trial; Consent to Service of Process      21   

Section 6.10

   Headings      21   

Section 6.11

   Security Interest Absolute      21   

Section 6.12

   Termination or Release      21   

Section 6.13

   Additional Grantors      22   

Section 6.14

   Collateral Agent Appointed Attorney-in-Fact      22   

Section 6.15

   General Authority of the Collateral Agent      23   

Section 6.16

   Reasonable Care      24   

Section 6.17

   Delegation; Limitation      24   

Section 6.18

   Reinstatement      24   

Section 6.19

   Miscellaneous      24   

Schedule I Subsidiary Parties

  

Schedule II Pledged Equity and Pledged Debt

  

Schedule III Commercial Tort Claims

  
Exhibits      
Exhibit I    Form of Security Agreement Supplement   
Exhibit II    Form of Perfection Certificate   
Exhibit III    Form of Patent Security Agreement   
Exhibit IV    Form of Trademark Security Agreement   
Exhibit V    Form of Copyright Security Agreement   

 

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SECURITY AGREEMENT dated as of January 30, 2012, among the Grantors (as defined below) and Bank of America, N.A., as Collateral Agent for the Secured Parties (in such capacity, the “ Collateral Agent ”).

Reference is made to the Credit Agreement dated as of January 30, 2012 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC, a Delaware limited liability company (the “ Borrower ”), certain other Guarantors from time to time party thereto, Bank of America, N.A., as Administrative Agent and Collateral Agent, each lender from time to time party thereto (collectively, the “ Lenders ” and individually, a “ Lender ”), Bank of America, N.A., as L/C Issuer and Swing Line Lender, and the other agents named therein. The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Holdings and the Subsidiary Parties are affiliates of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement, and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows:

1.

Definitions

A. Credit Agreement .

1. Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Credit Agreement. All terms defined in the UCC (as defined herein) and not defined in this Agreement have the meanings specified therein; the term “instrument” shall have the meaning specified in Article 9 of the UCC.

2. The rules of construction specified in Article I of the Credit Agreement also apply to this Agreement.

B. Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:

“Account Debtor ” means any Person who is or who may become obligated to any Grantor under, with respect to or on account of an Account.

Accounts ” has the meaning specified in Article 9 of the UCC.

Agreement ” means this Security Agreement.

Article 9 Collateral ” has the meaning assigned to such term in Section 3.01(a).

Borrower ” has the meaning assigned to such term in the recitals of this Agreement.

Collateral ” means the Article 9 Collateral and the Pledged Collateral.


Collateral Agent ” has the meaning assigned to such term in the recitals of the Agreement.

Commercial Tort Claims ” has the meaning specified in Article 9 of the UCC.

Copyright License ” means any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now owned or hereafter acquired by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any Copyright now owned or hereafter acquired by any third party, and all rights of such Grantor under any such agreement.

Copyrights ” means all of the following now owned or hereafter acquired by any Person: (a) all copyright rights in any work subject to the copyright laws of the United States, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States, including registrations and pending applications for registration in the USCO.

Credit Agreement ” has the meaning assigned to such term in the preliminary statement of this Agreement.

Excluded Assets ” means:

(a) any General Intangible, Investment Property, Intellectual Property or rights of a Grantor with respect to any contract, lease, license or other agreement if (but only to the extent that) the grant of a security interest therein would (x) constitute a violation (including a breach or default) of, a restriction in respect of, or result in the abandonment, invalidation or unenforceability of, such General Intangible, Investment Property, Intellectual Property or rights in favor of a third party or in conflict with any law, regulation, permit, order or decree of any Governmental Authority, unless and until all required consents shall have been obtained (for the avoidance of doubt, the restrictions described herein shall not include negative pledges or similar undertakings in favor of a lender or other financial counterparty) or (y) expressly give any other party (other than another Grantor or its Affiliates) in respect of any such contract, lease, license or other agreement, the right to terminate its obligations thereunder, provided , however , that the limitation set forth in this clause (a) shall not affect, limit, restrict or impair the grant by a Grantor of a security interest pursuant to this Agreement in any such Collateral to the extent that an otherwise applicable prohibition or restriction on such grant is rendered ineffective by any applicable Law, including the UCC; provided , further, that, at such time as the condition causing the conditions in subclauses (x) and (y) of this clause (a) shall be remedied, whether by contract, change of law or otherwise, the contract, lease, instrument, license or other documents shall immediately cease to be an Excluded Asset, and any security interest that would otherwise be granted herein shall attach immediately to such contract, lease, instrument, license or other agreement, or to the extent severable, to any portion thereof that does not result in any of the conditions in subclauses (x) or (y) above;

(b) any assets to the extent and for so long as (i) the pledge of or security interest in such assets is prohibited by law and such prohibition is not overridden by the UCC or other applicable law or (ii) the grant of such security interest would require governmental consent, approval, license or authorization (except that the cash Proceeds of dispositions thereof in accordance with applicable law, including, without limitation, rules and regulations of any governmental authority or agency shall not be an Excluded Asset);

(c) motor vehicles and other assets subject to certificates of title, letters of credit with a face value of less than $5,000,000 and commercial tort claims where the amount of damages claimed by the applicable Grantor is less than $5,000,000, the perfection of a security interest in which cannot be perfected through the filing of financing statements under the UCC in the relevant jurisdiction;

 

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(d) Margin Stock;

(e) Excluded Security;

(f) any Intellectual Property to the extent that the attachment of the security interest of this Agreement thereto, or any assignment thereof, would result in the forfeiture, cancellation, invalidation, unenforceability, or other loss of the Grantors’ rights in such property including, without limitation, any License pursuant to which Grantor is licensee under terms which prohibit the granting of a security interest or under which granting such an interest would give rise to a breach or default by Grantor, and any Trademark applications filed in the USPTO on the basis of such Grantor’s “intent-to-use” such Trademark, unless and until acceptable evidence of use of such Trademark has been filed with and accepted by the USPTO pursuant to Section 1(c) or Section 1(d) of the Lanham Act (15 U.S.C. 1051, et seq.), to the extent that granting a lien in such Trademark application prior to such filing would adversely affect the enforceability, validity, or other rights in such Trademark application;

(g) assets (including Equity Interests) owned by any Grantor on the date hereof or hereafter acquired that are subject to (A) a Lien of the type described in Section 7.01 (u), (w) and (aa) (to the extent relating to Liens originally incurred pursuant to Section 7.01(u) or (w)) of the Credit Agreement that is permitted to be incurred pursuant to the provisions of the Credit Agreement or (B) a contract or agreement permitted under clauses (i) or (xii) of the proviso to Section 7.09 of the Credit Agreement, in each case, if and to the extent that the contract or other agreement pursuant to which such Lien is granted or to which such assets are subject (or the documentation relating thereto) prohibits the creation of any other Lien on such asset;

(h) any particular assets if, in the reasonable judgment of the Borrower evidenced in writing and with the consent of the Administrative Agent (not to be unreasonably withheld or delayed), creating a pledge thereof or security interest therein to the Collateral Agent for the benefit of the Secured Parties would result in any material adverse tax consequences to the Borrower or its Subsidiaries; and

(i) any particular assets if, in the reasonable judgment of the Administrative Agent, determined in consultation with the Borrower and evidenced in writing, the burden, cost or consequence (including any material adverse tax consequences) to the Borrower or its Subsidiaries of creating or perfecting such pledges or security interests in such assets in favor of the Collateral Agent for the benefit of the Secured Parties is excessive in relation to the benefits to be obtained therefrom by the Secured Parties.

Excluded Security ” means

(a) more than 65% of the issued and outstanding Equity Interests of any Foreign Subsidiary;

(b) more than 65% of the issued and outstanding Equity Interests of any Domestic Subsidiary that is a disregarded entity under the Code if substantially all of its assets consist of the Equity Interests of one or more Subsidiaries that are controlled foreign corporations within the meaning of Section 957 of the Code;

 

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(c) any interest in a joint venture or Excluded Subsidiary to the extent the granting of a security interest therein is prohibited by the terms of the Organizational Documents of such joint venture or Excluded Subsidiary;

(d) any Equity Interest of any Subsidiary the pledge of which is prohibited by applicable Law or by agreements permitted under the Credit Agreement containing anti-assignment clauses to the extent not over-ridden by the UCC or the pledge of which would require governmental (including regulatory) consent, approval, license or authorization;

(e) any Equity Interest of any not-for-profit Subsidiaries; and

(f) any Equity Interest of any special purpose securitization vehicle or a captive insurance subsidiary.

General Intangibles ” has the meaning specified in Article 9 of the UCC.

Grantor ” means the Borrower, each Subsidiary Guarantor that is a party hereto, and each Subsidiary Guarantor that is a Domestic Subsidiary that becomes a party to this Agreement after the Closing Date.

Immaterial Subsidiary ” means any Subsidiary that does not have total assets or annual revenues in excess of 5.0% of Consolidated Total Assets of the Borrower and its Subsidiaries individually or in the aggregate with all other Immaterial Subsidiaries.

Intellectual Property ” means all intellectual property now owned or hereafter acquired by any Person, including inventions, designs, Patents, Copyrights, Trademarks, trade secrets, the intellectual property rights in software and databases and related documentation, and all additions and improvements to the foregoing.

Intellectual Property Security Agreements ” means the short-form Patent Security Agreement, short-form Trademark Security Agreement, and short-form Copyright Security Agreement, each substantially in the form attached hereto as Exhibits III, IV and V, respectively.

License ” means any Patent License, Trademark License, Copyright License or other Intellectual Property license or sublicense agreement to which any Grantor is a party, together with any and all (i) renewals, extensions, supplements and continuations thereof, (ii) income, fees, royalties, damages, claims and payments now and hereafter due and/or payable thereunder or with respect thereto including damages and payments for past, present or future infringements or violations thereof, and (iii) rights to sue for past, present and future violations thereof.

Patent License ” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now owned or hereafter acquired by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a Patent, now owned or hereafter acquired by any third party, is in existence, and all rights of any Grantor under any such agreement.

Patents ” means all of the following now owned or hereafter acquired by any Person: (a) all letters Patent of the United States in or to which any Grantor now or hereafter has any right, title or interest therein, all registrations thereof, and all applications for letters Patent of the United States, including registrations and pending applications in the USPTO, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

 

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Perfection Certificate ” means a certificate substantially in the form of Exhibit II, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of the Borrower.

Pledged Collateral ” has the meaning assigned to such term in Section 2.01.

Pledged Debt ” has the meaning assigned to such term in Section 2.01.

Pledged Equity ” has the meaning assigned to such term in Section 2.01.

Pledged Securities ” means the Pledged Equity and Pledged Debt.

Secured Obligations ” means the “Obligations” (as defined in the Credit Agreement).

Security Agreement Supplement ” means an instrument substantially in the form of Exhibit I hereto.

Security Interest ” has the meaning assigned to such term in Section 3.01.

Subsidiary Parties ” means (a) the Subsidiaries identified on Schedule I and (b) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Party after the Closing Date.

Trademark License ” means any written agreement, now or hereafter in effect, granting to any third party any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

Trademarks ” means all of the following now owned or hereafter acquired by any Person: (a) all trademarks, service marks, trade names, corporate names, trade dress, logos, designs, fictitious business names other source or business identifiers, now owned or hereafter acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the USPTO or any similar offices in any State of the United States or any jurisdiction thereof, and all extensions or renewals thereof, and (b) all goodwill associated therewith.

UCC ” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

USCO ” means the United States Copyright Office.

USPTO ” means the United States Patent and Trademark Office.

 

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2.

Pledge of Securities

A. Pledge . As security for the payment or performance, as the case may be, in full of the Secured Obligations, including the Guarantees, each of the Grantors hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in all of such Grantors’ right, title and interest in, to and under

(a) all Equity Interests held by it that are listed on Schedule II and any other Equity Interests obtained in the future by such Grantor and the certificates representing all such Equity Interests (the “ Pledged Equity ”) of (x) any Subsidiary that is not an Excluded Subsidiary and (y) Excluded Subsidiaries to the extent permitted by the terms of the Organizational Documents of such Excluded Subsidiaries; provided that the Pledged Equity shall not include (a) Excluded Assets and (b) the Equity Interests of an Immaterial Subsidiary;

(b) (A) the debt securities owned by it and listed opposite the name of such Grantor on Schedule II , (B) any debt securities obtained in the future by such Grantor and (C) the promissory notes and any other instruments evidencing such debt securities (the “ Pledged Debt ”); provided that the Pledged Debt shall not include any Excluded Assets;

(c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 2.01;

(d) subject to Section 2.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (i) and (ii) above;

(e) subject to Section 2.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (i), (ii), (iii) and (iv) above; and

(f) all Proceeds of any of the foregoing (the items referred to in clauses (i) through (v) above being collectively referred to as the “ Pledged Collateral ”).

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, forever, subject, however, to the terms, covenants and conditions hereinafter set forth.

B. Delivery of the Pledged Securities .

1. Each Grantor agrees promptly (but in any event within 30 days after receipt by such Grantor) to deliver or cause to be delivered to the Collateral Agent, for the benefit of the Secured Parties, any and all (i) Pledged Equity to the extent certificated and (ii) to the extent required to be delivered pursuant to paragraph (b) of this Section 2.02, Pledged Debt.

2. Each Grantor will cause any Indebtedness for borrowed money having an aggregate principal amount in excess of $2,500,000 owed to such Grantor by any Person that is evidenced by a duly executed promissory note to be pledged and delivered to the Collateral Agent, for the benefit of the Secured Parties, pursuant to the terms hereof.

 

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3. Upon delivery to the Collateral Agent, any Pledged Securities shall be accompanied by stock or security powers duly executed in blank or other instruments of transfer reasonably satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be deemed to supplement Schedule II and made a part hereof; provided that failure to supplement Schedule II shall not affect the validity of such pledge of such Pledged Security. Each schedule so delivered shall supplement any prior schedules so delivered.

C. Representations, Warranties and Covenants . Each Grantor represents, warrants and covenants to and with the Collateral Agent, for the benefit of the Secured Parties, that:

1. As of the date hereof, Schedule II includes all Equity Interests, debt securities and promissory notes required to be pledged by such Grantor hereunder in order to satisfy the Collateral and Guarantee Requirement;

2. the Pledged Equity issued by the Borrower or a Subsidiary have been duly and validly authorized and issued by the issuers thereof and are fully paid and nonassessable;

3. except for the security interests granted hereunder, such Grantor (i) is, subject to any transfers made in compliance with the Credit Agreement, the direct owner, beneficially and of record, of the Pledged Equity indicated on Schedule II, (ii) holds the same free and clear of all Liens, other than Liens created by the Collateral Documents or permitted pursuant to Section 7.01 of the Credit Agreement, and (iii) if requested by the Collateral Agent, will defend its title or interest thereto or therein against any and all Liens (other than the Liens permitted pursuant to this Section 2.03(c)), however arising, of all Persons whomsoever;

4. except for restrictions and limitations (i) imposed or permitted by the Loan Documents or securities laws generally or (ii) described in the Perfection Certificate, the Pledged Collateral is freely transferable and assignable, and none of the Pledged Collateral is subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect in any manner material and adverse to the Secured Parties the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

5. the execution and performance by the Grantors of this Agreement are within each Grantor’s corporate, limited liability or limited partnership powers and have been duly authorized by all necessary corporate, limited liability or limited partnership action or other organizational action;

6. no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledge effected hereby, except for (i) filings and registrations necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties and (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect (except to the extent not required to be obtained, taken, given, or made or to be in full force and effect pursuant to the Collateral and Guarantee Requirement);

7. by virtue of the execution and delivery by each Grantor of this Agreement, and delivery of the Pledged Securities to and continued possession by the Collateral Agent in the State of New York, the Collateral Agent for the benefit of the Secured Parties has a legal, valid and perfected lien upon and security interest in such Pledged Security as security for the payment and performance of the Secured Obligations to the extent such perfection is governed by the UCC; and

 

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8. the pledge effected hereby is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral to the extent intended hereby.

Subject to the terms of this Agreement and to the extent permitted by Applicable Law, each Grantor hereby agrees that upon the occurrence and during the continuance of an Event of Default, it will comply with instructions of the Collateral Agent with respect to the Equity Interests in such Grantor that constitute Pledged Equity hereunder that are not certificated without further consent by the applicable owner or holder of such Equity Interests.

Notwithstanding anything to the contrary in this Agreement, to the extent any provision of this Agreement or the Credit Agreement excludes any assets from the scope of the Pledged Collateral, or from any requirement to take any action to perfect any security interest in favor of the Collateral Agent in the Pledged Collateral (including the Equity Interests of Immaterial Subsidiaries), the representations, warranties and covenants made by any relevant Grantor in this Agreement with respect to the creation, perfection or priority (as applicable) of the security interest granted in favor of the Collateral Agent (including, without limitation, this Section 2.03) shall be deemed not to apply to such excluded assets.

D. Certification of Limited Liability Company and Limited Partnership Interests . No interest in any limited liability company or limited partnership controlled by any Grantor that constitutes Pledged Equity shall be represented by a certificate unless (i) the limited liability company agreement or partnership agreement expressly provides that such interests shall be a “security” within the meaning of Article 8 of the UCC of the applicable jurisdiction, and (ii) such certificate shall be delivered to the Collateral Agent in accordance with Section 2.02. Any limited liability company and any limited partnership controlled by any Grantor shall either (a) not include in its operative documents any provision that any Equity Interests in such limited liability company or such limited partnership be a “security” as defined under Article 8 of the Uniform Commercial Code or (b) certificate any Equity Interests in any such limited liability company or such limited partnership. To the extent an interest in any limited liability company or limited partnership controlled by any Grantor and pledged under Section 2.01 is certificated or becomes certificated, (i) each such certificate shall be delivered to the Collateral Agent, pursuant to Section 2.02(a) and (ii) such Grantor shall fulfill all other requirements under Section 2.02 applicable in respect thereof. Such Grantor hereby agrees that if any of the Pledged Collateral are at any time not evidenced by certificates of ownership, then each applicable Grantor shall, to the extent permitted by applicable law, if necessary or desirable to perfect a security interest in such Pledged Collateral, upon the reasonable request of the Collateral Agent, cause such pledge to be recorded on the equity holder register or the books of the issuer, execute any customary pledge forms or other documents necessary or appropriate to complete the pledge and give the Collateral Agent the right to transfer such Pledged Collateral under the terms hereof.

E. Registration in Nominee Name; Denominations . If an Event of Default shall have occurred and be continuing and the Collateral Agent shall give the Borrower prior notice of its intent to exercise such rights, (a) the Collateral Agent, on behalf of the Secured Parties, shall have the right to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent and each Grantor will promptly give to the Collateral

 

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Agent copies of any notices or other communications received by it with respect to Pledged Equity registered in the name of such Grantor and (b) the Collateral Agent shall have the right to exchange the certificates representing Pledged Equity for certificates of smaller or larger denominations for any purpose consistent with this Agreement, to the extent permitted by the documentation governing such Pledged Securities.

F. Voting Rights; Dividends and Interest .

1. Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have provided prior notice to the Borrower that the rights of the Grantors under this Section 2.06 are being suspended:

(a) Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof, and each Grantor agrees that it shall exercise such rights for purposes consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents;

(b) The Collateral Agent shall promptly (after reasonable advance notice) execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above; and

(c) Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable Laws; provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Equity or Pledged Debt, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and the Secured Parties and shall be promptly (and in any event within 10 Business Days) delivered to the Collateral Agent in the same form as so received (with any necessary endorsement reasonably requested by the Collateral Agent). So long as no Default or Event of Default has occurred and is continuing, the Collateral Agent shall promptly deliver to each Grantor any Pledged Securities in its possession if requested to be delivered to the issuer thereof in connection with any exchange or redemption of such Pledged Securities permitted by the Credit Agreement in accordance with this Section 2.06(a)(iii).

2. Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Borrower of the suspension of the Grantors’ rights under paragraph (a)(iii) of this Section 2.06, then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 2.06 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall

 

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have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 2.06 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and shall be promptly (and in any event within 10 days) delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement reasonably requested by the Collateral Agent). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 4.02. After all Events of Default have been cured or waived, the Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.06 and that remain in such account.

3. Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have provided the Borrower with notice of the suspension of the rights of the Grantors under paragraph (a)(i) of this Section 2.06, then, all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 2.06, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 2.06, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights. After all Events of Default have been cured or waived, each Grantor shall have the exclusive right to exercise the voting and/or consensual rights and powers that such Grantor would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 2.06 shall be reinstated.

4. Any notice given by the Collateral Agent to the Borrower under Section 2.05 or Section 2.06 (i) shall be given in writing, (ii) may be given with respect to one or more Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) of this Section 2.06 in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

3.

Security Interests in Personal Property

A. Security Interest .

1. As security for the payment or performance, as the case may be, in full of the Secured Obligations, including the Guarantees, each Grantor hereby collaterally assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest (the “ Security Interest ”) in, all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “ Article 9 Collateral ”):

(a) all Accounts;

 

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(b) all Chattel Paper;

(c) all Documents;

(d) all Equipment;

(e) all General Intangibles;

(f) all Goods;

(g) all Instruments;

(h) all Inventory;

(i) all Investment Property;

(j) all books and records pertaining to the Article 9 Collateral;

(k) all Fixtures;

(l) all Letter of Credit and Letter-of-Credit Rights in excess of $5,000,000;

(m) all Intellectual Property;

(n) all Commercial Tort Claims listed on Schedule III and on any supplement thereto received by the Collateral Agent pursuant to Section 3.03(g); and

(o) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all supporting obligations, collateral security and guarantees given by any Person with respect to any of the foregoing;

provided that, notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a grant of a security interest in any Excluded Asset.

2. Subject to Section 3.01(e), each Grantor hereby irrevocably authorizes the Collateral Agent for the benefit of the Secured Parties at any time and from time to time to file in any relevant jurisdiction any initial financing statements with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate the Article 9 Collateral as “all assets” or “all personal property” of such Grantor or words of similar effect as being of an equal or lesser scope or with greater detail and (ii) contain the information required by Article 9 of the UCC or the analogous legislation of each applicable jurisdiction for the filing of any financing statement or amendment, including whether such Grantor is an organization, the type of organization and, if required, any organizational identification number issued to such Grantor. Each Grantor agrees to provide such information to the Collateral Agent promptly upon any reasonable request.

 

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3. The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.

4. The Collateral Agent is authorized to file with the USPTO or the USCO (or any successor office) such documents executed by any Grantor as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest in United States registered and applied for Intellectual Property of each Grantor in which a security interest has been granted by each Grantor and naming any Grantor or the Grantor as debtors and the Collateral Agent as secured party.

5. Notwithstanding anything to the contrary in the Loan Documents, none of the Grantors shall be required, nor is the Collateral Agent authorized, (i) to perfect the Security Interests granted by this Security Agreement (including Security Interests in Investment Property and Fixtures) by any means other than by (A) filings pursuant to the Uniform Commercial Code in the office of the secretary of state (or similar central filing office) of the relevant State(s), and filings in the applicable real estate records with respect to any fixtures relating to Mortgaged Property, (B) filings in United States government offices with respect to United States registered and applied for Intellectual Property of Grantor as expressly required elsewhere herein, (C) delivery to the Collateral Agent to be held in its possession of all Collateral consisting of Instruments as expressly required elsewhere herein or (D) other methods expressly provided herein, (ii) to enter into any deposit account control agreement, securities account control agreement or any other control agreement with respect to any deposit account, securities account or any other Collateral that requires perfection by “control”, (iii) to take any action (other than the actions listed in clause (i)(A) and (C) above) with respect to any assets located outside of the United States, (iv) to perfect in any assets subject to a certificate of title statute or (v) to deliver any Equity Interests except as expressly provided in Section 2.02.

B. Representations and Warranties . Each Grantor represents and warrants to the Collateral Agent and the Secured Parties that:

1. Subject to Liens permitted by Section 7.01 of the Credit Agreement, each Grantor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval that has been obtained.

2. The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein is correct and complete in all material respects (except the information therein with respect to the exact legal name of each Grantor shall be correct and complete in all respects) as of the Closing Date. Subject to Section 3.01(e), the UCC financing statements or other appropriate filings, recordings or registrations prepared by the Collateral Agent based upon the information provided to the Collateral Agent in the Perfection Certificate for filing in the applicable filing office (or specified by notice from the Borrower to the Collateral Agent after the Closing Date in the case of filings, recordings or registrations (other than filings required to be made in the USPTO and the USCO in order to perfect the Security Interest in Article 9 Collateral consisting of United States registered and applied for Patents, Trademarks and Copyrights), in each case, as required by Section 6.11 of the Credit Agreement), are all the filings, recordings and registrations that are necessary to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the benefit of the Secured Parties) in

 

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respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code, and no further or subsequent filing, re-filing, recording, rerecording, registration or re-registration is necessary in any such jurisdiction, except as provided under applicable Law with respect to the filing of continuation statements.

3. Each Grantor represents and warrants that short-form Intellectual Property Security Agreements substantially in the form attached hereto as Exhibits III, IV and V and containing a description of all Article 9 Collateral consisting of material United States registered and applied for Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending, unless it constitutes an Excluded Asset) and United States registered Copyrights, respectively, have been delivered to the Collateral Agent for recording by the USPTO and the USCO pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, (for the benefit of the Secured Parties) in respect of all Article 9 Collateral consisting of registrations and applications for United States Patents, Trademarks and Copyrights. To the extent a security interest may be perfected by filing, recording or registration in USPTO or USCO under the Federal intellectual property laws, then no further or subsequent filing, re-filing, recording, rerecording, registration or re-registration is necessary (other than (i) such filings and actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of United States registered and applied for Patents, Trademarks and Copyrights acquired or developed by any Grantor after the date hereof and (ii) the UCC financing and continuation statements contemplated in Section 3.02(b)).

4. The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Secured Obligations and (ii) subject to the filings described in Section 3.02(b), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code in the relevant jurisdiction. Subject to Section 3.01(e) of this Agreement, the Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral, other than (i) any statutory or similar Lien that has priority as a matter of Law and (ii) any Liens expressly permitted pursuant to Section 7.01 of the Credit Agreement.

5. The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 7.01 of the Credit Agreement. None of the Grantors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable Laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Article 9 Collateral owned by any Grantor or any security agreement or similar instrument covering any Article 9 Collateral owned by any Grantor with the USPTO or the USCO, or (iii) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 7.01 of the Credit Agreement and assignments permitted by the Credit Agreement.

6. As of the date hereof, no Grantor has any Commercial Tort Claim in excess of $5,000,000, other than the Commercial Tort Claims listed on Schedule III.

 

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C. Covenants .

1. The Borrower agrees to notify the Collateral Agent in writing promptly, but in any event within 60 days, after any change in (i) the legal name of any Grantor, (ii) the identity or type of organization or corporate structure of any Grantor or (iii) the jurisdiction of organization of any Grantor.

2. Subject to Section 3.01(e), each Grantor shall, at its own expense, upon the reasonable request of the Collateral Agent, take any and all commercially reasonable actions necessary to defend title to the Article 9 Collateral against all Persons and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 7.01 of the Credit Agreement; provided that, nothing in this Agreement shall prevent any Grantor from discontinuing the operation or maintenance of any of its assets or properties if such discontinuance is (x) determined by such Grantor to be desirable in the conduct of its business and (y) permitted by the Credit Agreement.

3. Subject to Section 3.01(e), each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Article 9 Collateral that is in excess of $2,500,000 shall be or become evidenced by any promissory note, other instrument or debt security, such note, instrument or debt security shall be promptly (and in any event within 30 days of its acquisition) pledged and delivered to the Collateral Agent, for the benefit of the Secured Parties, duly endorsed in a manner reasonably satisfactory to the Collateral Agent.

4. At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not permitted pursuant to Section 7.01 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or any other Loan Document and within a reasonable period of time after the Collateral Agent has requested that it do so, and each Grantor jointly and severally agrees to reimburse the Collateral Agent within 10 Business Days after demand for any payment made or any reasonable expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided , however , the Grantors shall not be obligated to reimburse the Collateral Agent with respect to any Intellectual Property that any Grantor has failed to maintain or pursue, or otherwise allowed to lapse, terminate or be put into the public domain in accordance with Section 3.03(f)(iv). Nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

5. If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person, the value of which is in excess of $2,500,000 to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent for the benefit of the Secured Parties. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.

 

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6. Intellectual Property Covenants .

(a) Other than to the extent not prohibited herein or in the Credit Agreement or with respect to registrations and applications no longer used or useful, except to the extent failure to act would not, as deemed by the applicable Grantor in its reasonable business judgment, reasonably be expected to have a Material Adverse Effect, with respect to registration or pending application of each item of its Intellectual Property for which such Grantor has standing to do so, each Grantor agrees to take, at its expense, all reasonable steps, including, without limitation, in the USPTO, the USCO and any other governmental authority located in the United States, to pursue the registration and maintenance of each Patent, Trademark, or Copyright registration or application, now or hereafter included in the Intellectual Property of such Grantor that are not Excluded Assets.

(b) Other than to the extent not prohibited herein or in the Credit Agreement, or with respect to registrations and applications no longer used or useful, or except as would not, as deemed by the applicable Grantor in its reasonable business judgment, reasonably be expected to have a Material Adverse Effect, no Grantor shall do or permit any act or knowingly omit to do any act whereby any of its Intellectual Property, excluding Excluded Assets, may prematurely lapse, be terminated, or become invalid or unenforceable or placed in the public domain (or in the case of a trade secret, become publicly known).

(c) Other than as excluded or as not prohibited herein or in the Credit Agreement, or with respect to Patents, Copyrights or Trademarks which are no longer used or useful in the applicable Grantor’s business operations or except where failure to do so would not, as deemed by the applicable Grantor in its reasonable business judgment, reasonably be expected to have a Material Adverse Effect, each Grantor shall take all reasonable steps to preserve and enforce each item of its Intellectual Property, including, without limitation, maintaining the quality of any and all products or services used or provided in connection with any of the Trademarks, consistent with the quality of the products and services as of the date hereof, and taking reasonable steps necessary to ensure that all licensed users of any of the material Trademarks abide by the applicable license’s terms with respect to standards of quality.

(d) Notwithstanding any other provision of this Agreement, nothing in this Agreement or any other Loan Document prevents or shall be deemed to prevent any Grantor from disposing of, discontinuing the use or maintenance of, failing to pursue, or otherwise allowing to lapse, expire, terminate or be put into the public domain, any of its Intellectual Property to the extent permitted by the Credit Agreement if such Grantor determines in its reasonable business judgment that such discontinuance is desirable in the conduct of its business.

(e) Within 30 days after each March 31 and September 30, the Borrower shall provide a list of any additional registrations of Intellectual Property of all Grantors with the USPTO and USCO not previously disclosed to the Collateral Agent including such information as is necessary for such Grantor to make appropriate filings in the USPTO and USCO.

7. Commercial Tort Claims . If the Grantors shall at any time hold or acquire a Commercial Tort Claim in an amount reasonably estimated by such Grantor to exceed $5,000,000 for which this clause has not been satisfied and for which a complaint in a court of competent jurisdiction has been filed, such Grantor shall within 45 days after the end of the fiscal quarter in which such complaint was filed notify the Collateral Agent thereof in a writing signed by such Grantor including a summary description of such claim and grant to the Collateral Agent, for the benefit of the Secured Parties, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement.

 

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4.

Remedies

A. Remedies Upon Default . Upon the occurrence and during the continuance of an Event of Default, it is agreed that the Collateral Agent shall have the right to exercise any and all rights afforded to a secured party with respect to the Secured Obligations, including the Guarantees, under the Uniform Commercial Code or other applicable Law and also may (i) require each Grantor to, and each Grantor agrees that it will at its expense and upon request of the Collateral Agent promptly, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place and time to be designated by the Collateral Agent that is reasonably convenient to both parties; (ii) occupy any premises owned or, to the extent lawful and permitted, leased by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under Law, without obligation to such Grantor in respect of such occupation; provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to such occupancy; (iii) exercise any and all rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral; provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to such exercise; and (iv) subject to the mandatory requirements of applicable Law and the notice requirements described below, sell or otherwise dispose of all or any part of the Collateral securing the Secured Obligations at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale of securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any sale of Collateral shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by Law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any Law now existing or hereafter enacted.

The Collateral Agent shall give the applicable Grantors 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral

 

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so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by Law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by Law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by Law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at Law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 4.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the UCC or its equivalent in other jurisdictions.

B. Application of Proceeds . The Collateral Agent shall apply the proceeds of any collection or sale of Collateral, including any Collateral consisting of cash in accordance with Section 8.04 of the Credit Agreement.

The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

The Collateral Agent shall have no liability to any of the Secured Parties for actions taken in reliance on information supplied to it as to the amounts of unpaid principal and interest and other amounts outstanding with respect to the Secured Obligations, provided that nothing in this sentence shall prevent any Grantor from contesting any amounts claimed by any Secured Party in any information so supplied. All distributions made by the Collateral Agent pursuant to this Section 4.02 shall be (subject to any decree of any court of competent jurisdiction) final (absent manifest error), and the Collateral Agent shall have no duty to inquire as to the application by the Administrative Agent of any amounts distributed to it.

C. Grant of License to Use Intellectual Property . For the exclusive purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies at any time after and during the continuance of an Event of Default, each Grantor hereby grants to the Collateral Agent a non-exclusive, royalty-free, limited license (until the termination or cure of the Event of Default) to use, license or, solely to the extent necessary to exercise those rights and remedies, sublicense any of the Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same are located, and including in such license necessary access to media

 

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in which such licensed items are recorded or stored and to computer software and programs used for the compilation or printout thereof; provided , however , that all of the foregoing rights of the Collateral Agent to use such licenses, sublicenses and other rights, and (to the extent permitted by the terms of such licenses and sublicenses) all licenses and sublicenses granted thereunder, shall expire immediately upon the termination or cure of all Events of Default and shall be exercised by the Collateral Agent solely during the continuance of an Event of Default and upon 10 Business Days’ prior written notice to the applicable Grantor; provided, further , that nothing in this Section 4.03 shall require Grantors to grant any license that is prohibited by any rule of law, statute or regulation, or is prohibited by, or constitutes a breach or default under or results in the termination of or gives rise to any right of cancellation under any contract, license, agreement, instrument or other document evidencing, giving rise to or theretofore granted, to the extent permitted by the Credit Agreement, with respect to such property or otherwise prejudices the value thereof to the relevant Grantor; provided , further , that such licenses granted hereunder with respect to Trademarks material to the business of such Grantor shall be subject to restrictions, including, without limitation restrictions as to goods or services associated with such Trademarks and the maintenance of quality standards with respect to the goods and services on which such Trademarks are used, sufficient to preserve the validity and value of such Trademarks. For the avoidance of doubt, the use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, only during the continuation of an Event of Default and upon 10 Business Days’ prior written notice to the applicable Grantor. Upon the occurrence and during the continuance of an Event of Default and upon 10 Business Days’ prior written notice to the applicable Grantor , the Collateral Agent may also exercise the rights afforded under Section 4.01 of this Agreement with respect to Intellectual Property contained in the Article 9 Collateral.

5.

Subordination

A. Subordination .

1. Notwithstanding any provision of this Agreement to the contrary, all rights of the Grantors of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the payment in full in cash of the Secured Obligations. No failure on the part of the Borrower or any Grantor to make the payments required under applicable law or otherwise shall in any respect limit the obligations and liabilities of any Grantor with respect to its obligations hereunder, and each Grantor shall remain liable for the full amount of the obligations of such Grantor hereunder.

2. Each Grantor hereby agrees that upon the occurrence and during the continuance of an Event of Default and after notice from the Collateral Agent, all Indebtedness owed to it by any other Grantor shall be fully subordinated to the payment in full in cash of the Secured Obligations.

6.

Miscellaneous

A. Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 10.02 of the Credit Agreement. All communications and notices hereunder to the Borrower or any other Grantor shall be given to it in care of the Borrower as provided in Section 10.02 of the Credit Agreement.

 

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B. Waivers; Amendment .

1. No failure or delay by any Secured Party in exercising any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges of the Secured Parties herein provided, and provided under each other Loan Document, are cumulative and are not exclusive of any rights, remedies, powers and privileges provided by Law. No waiver of any provision of this Agreement or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 6.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan, the issuance of a Letter of Credit or the provision of services under Cash Management Obligations or Secured Hedge Agreements shall not be construed as a waiver of any Default, regardless of whether any Secured Party may have had notice or knowledge of such Default at the time.

2. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 10.01 of the Credit Agreement.

C. Collateral Agent’s Fees and Expenses; Indemnification .

1. The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its reasonable out-of-pocket expenses incurred hereunder and indemnity for its actions in connection herewith, in each case, as provided in Sections 10.04 and 10.05 of the Credit Agreement.

2. Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Collateral Documents. The provisions of this Section 6.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 6.03 shall be payable within 10 days of written demand therefor.

D. Successors and Assigns . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

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E. Survival of Agreement . All covenants, agreements, representations and warranties made by the Grantors hereunder and in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the execution and delivery of the Loan Documents, the making of any Loans and issuance of any Letters of Credit and the provision of services under Cash Management Obligations or Secured Hedge Agreements, regardless of any investigation made by any Secured Party or on its behalf and notwithstanding that any Secured Party may have had notice or knowledge of any Default at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as this Agreement has not been terminated or released pursuant to Section 6.12 below.

F. Counterparts; Effectiveness; Several Agreement . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by facsimile or other electronic communication of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an original executed counterpart of this Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective permitted successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.

G. Severability . If any provision of this Agreement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

H. Right of Set-Off . In addition to any rights and remedies of the Secured Parties provided by Law, upon the occurrence and during the continuance of any Event of Default, each Secured Party and its Affiliates is authorized at any time and from time to time, without prior notice to any Grantor, any such notice being waived by each Grantor to the fullest extent permitted by applicable Law, to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Secured Party and its Affiliates to or for the credit or the account of the respective Grantors against any and all Obligations owing to such Secured Party and its Affiliates hereunder, now or hereafter existing, irrespective of whether or not such Secured Party or Affiliate shall have made demand under this Agreement and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness. Each Secured Party agrees promptly to notify the applicable Grantor and the Collateral Agent after any such set-off and application made by such Secured Party; provided , that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Secured Party under this Section 6.08 are in addition to other rights and remedies (including other rights of set-off) that such Secured Party may have at Law.

 

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I. Governing Law; Jurisdiction; Venue; Waiver of Jury Trial; Consent to Service of Process .

1. The terms of Sections 10.15 and 10.16 of the Credit Agreement with respect to governing law, submission of jurisdiction, venue and waiver of jury trial are incorporated herein by reference, mutatis mutandis , and the parties hereto agree to such terms.

2. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law.

J. Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

K. Security Interest Absolute . To the extent permitted by Law, all rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Secured Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Secured Obligations or this Agreement.

L. Termination or Release .

1. This Agreement, the Security Interest and all other security interests granted hereby shall terminate with respect to all Secured Obligations and any Liens arising therefrom shall be automatically released upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (i) Cash Management Obligations or obligations under Secured Hedge Agreements not yet due and payable and (ii) contingent obligations not yet accrued and payable) and the expiration or termination of all Letters of Credit (other than Letters of Credit in which the Outstanding Amount of the L/C Obligations related thereto have been Cash Collateralized or, if satisfactory to the relevant L/C Issuer in its reasonable discretion, for which a backstop letter of credit is in place).

 

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2. A Subsidiary Party shall automatically be released from its obligations under the Guaranty and the Security Interest in the Collateral of such Subsidiary Party shall be automatically released if such Person ceases to be a Subsidiary of the Borrower or becomes an Excluded Subsidiary (other than pursuant to clause (b) of the definition thereof unless the Borrower delivers a written request to the Administrative Agent for such release and no Default has occurred and is continuing at such time) as a result of a transaction or designation permitted under the Credit Agreement; provided that no such release shall occur if such Subsidiary Party continues to be a guarantor in respect of any Junior Financing.

3. Upon any sale or transfer by any Grantor of any Collateral that is permitted under the Credit Agreement (other than a sale or transfer to another Loan Party), or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 10.01 of the Credit Agreement, the Security Interest in such Collateral shall be automatically released.

4. In connection with any termination or release pursuant to paragraph (a), (b) or (c) of this Section 6.12, the Collateral Agent shall execute and deliver to any Grantor, at such Grantor’s expense, all documents that such Grantor shall reasonably request to evidence such termination or release and shall perform such other actions reasonably requested by such Grantor to effect such release, including delivery of certificates, securities and instruments. Any execution and delivery of documents pursuant to this Section 6.12 shall be without recourse to or warranty by the Collateral Agent.

5. Notwithstanding anything to the contrary set forth in this Agreement, each Hedge Bank and each Cash Management Bank by the acceptance of the benefits under this Agreement hereby acknowledges and agrees that (i) the Security Interests granted under this Agreement of the Obligations of any Grantor and its Subsidiaries under any Secured Hedge Agreement and any Cash Management Obligations shall be automatically released upon termination of the Commitments and payment in full of all other Obligations and the expiration or termination of all Letters of Credit (other than Letters of Credit in which the Outstanding Amount of the L/C Obligations related thereto have been Cash Collateralized or, if satisfactory to the relevant L/C Issuer in its reasonable discretion, for which a backstop letter of credit is in place), in each case, unless the Obligations under the Secured Hedge Agreement or the Cash Management Obligations are due and payable at such time (it being understood and agreed that this Agreement and Security Interests granted herein shall survive solely as to such due and payable Obligations and until such time as such due and payable Obligations have been paid in full) and (ii) any release of Collateral or of a Grantor, as the case may be, effective in the manner permitted by this Agreement shall not require the consent of any Hedge Bank or any Cash Management Bank that is not a Lender.

M. Additional Grantors . Pursuant to Section 6.11 of the Credit Agreement, certain additional Subsidiaries of the Borrower may be required to enter in this Agreement as Grantors. Upon execution and delivery by the Collateral Agent and a Subsidiary of a Security Agreement Supplement, such Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any other Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.

N. Collateral Agent Appointed Attorney-in-Fact . Each Grantor hereby appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor’s true and lawful agent (and attorney-in-fact)

 

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of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof at any time after and during the continuance of an Event of Default, which appointment is irrevocable and coupled with an interest (provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to exercising such rights). Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default and notice by the Collateral Agent to the applicable Grantor of the Collateral Agent’s intent to exercise such rights, with full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral or Mortgaged Property; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral or Mortgaged Property; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at Law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or Mortgaged Property or to enforce any rights in respect of any Collateral or Mortgaged Property; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral or Mortgaged Property; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; (h) to make, settle and adjust claims in respect of Article 9 Collateral or Mortgaged Property under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance; (i) to make all determinations and decisions with respect thereto; (j) to obtain or maintain the policies of insurance required by Section 6.07 of the Credit Agreement or paying any premium in whole or in part relating thereto; and (k) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral or Mortgaged Property, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral or Mortgaged Property for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or Mortgaged Property or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence, bad faith, or willful misconduct or that of any of their Affiliates, directors, officers, employees, counsel, agents or attorneys-in-fact, in each case, as determined by a final non-appealable judgment of a court of competent jurisdiction. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, within 10 days of demand, by the Grantors to the Collateral Agent and shall be additional Secured Obligations secured hereby.

O. General Authority of the Collateral Agent . By acceptance of the benefits of this Agreement and any other Collateral Documents, each Secured Party (whether or not a signatory hereto) shall be deemed irrevocably (a) to consent to the appointment of the Collateral Agent as its agent hereunder and under such other Collateral Documents, (b) to confirm that the Collateral Agent shall have the authority to act as the exclusive agent of such Secured Party for the enforcement of any provisions of this Agreement and such other Collateral Documents against any Grantor, the exercise of remedies hereunder or thereunder and the giving or withholding of any consent or approval hereunder or thereunder relating to any Collateral or any

 

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Grantor’s obligations with respect thereto, (c) to agree that it shall not take any action to enforce any provisions of this Agreement or any other Collateral Document against any Grantor, to exercise any remedy hereunder or thereunder or to give any consents or approvals hereunder or thereunder except as expressly provided in this Agreement or any other Collateral Document and (d) to agree to be bound by the terms of this Agreement and any other Collateral Documents.

P. Reasonable Care . The Collateral Agent is required to use reasonable care in the custody and preservation of any of the Collateral in its possession; provided , that the Collateral Agent shall be deemed to have used reasonable care in the custody and preservation of any of the Collateral or Mortgaged Property, if such Collateral or Mortgaged Property is accorded treatment substantially similar to that which the Collateral Agent accords its own property.

Q. Delegation; Limitation . The Collateral Agent may execute any of the powers granted under this Agreement or the Mortgages and perform any duty hereunder either directly or by or through agents or attorneys-in-fact, and shall not be responsible for the gross negligence or willful misconduct of any agents or attorneys-in-fact selected by it with reasonable care and without gross negligence or willful misconduct.

R. Reinstatement . The obligations of the Grantors under this Security Agreement shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or other Loan Party in respect of the Secured Obligations is rescinded or must be otherwise restored by any holder of any of the Secured Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.

S. Miscellaneous . The Collateral Agent shall not be deemed to have actual, constructive, direct or indirect notice or knowledge of the occurrence of any Event of Default unless and until the Collateral Agent shall have received a notice of Event of Default or a notice from the Grantor or the Secured Parties to the Collateral Agent in its capacity as Collateral Agent indicating that an Event of Default has occurred.

[ Signature Pages Follow ]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.

 

SUMMIT MATERIALS, LLC
By:  

 

  Name:
  Title:

 

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[SUBSIDIARY GRANTORS]
By:  

 

  Name:
  Title:

 

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BANK OF AMERICA, N.A., as Collateral Agent

By:  

 

  Name:
  Title:

 

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Schedule I to

the Security Agreement

SUBSIDIARY PARTIES

[To Come]


Schedule II to

the Security Agreement

PLEDGED EQUITY AND PLEDGED DEBT

PLEDGED EQUITY

Pledged Stock:

 

Issuer

   Record
Owner
   Certificate
No.
   No. of Shares    Percentage Ownership
           
           
           

Pledged LLC Interests:

 

Issuer

   Record
Owner
   Certificate
No.
   No. of Shares    Percentage Ownership
           
           
           


PLEDGED DEBT

[To Come]


Schedule III to

the Security Agreement

COMMERCIAL TORT CLAIMS

[To Come]


Exhibit I to the

Security Agreement

SUPPLEMENT NO.          dated as of [ ], to the Security Agreement (the “ Security Agreement ”), dated as of January 30, 2012, among the Grantors identified therein and Bank of America, N.A., as Collateral Agent.

A. Reference is made to the Credit Agreement dated as of January 30, 2012 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC, a Delaware corporation (the “ Borrower ”), the Guarantors from time to time party thereto, Bank of America, N.A., as Administrative Agent and Collateral Agent, each lender from time to time party thereto (collectively, the “ Lenders ” and individually, a “ Lender ”), Bank of America, N.A., as L/C Issuer and Swing Line Lender, and the other agents named therein.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement and the Security Agreement.

C. The Grantors have entered into the Security Agreement in order to induce the Lenders to make Loans and the L/C Issuers to issue Letters of Credit. Section 6.13 of the Security Agreement provides that additional Subsidiaries of the Borrower may become Grantors under the Security Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned (the “ New Grantor ”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under the Security Agreement in order to induce the Lenders to make additional Loans and the L/C Issuers to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued.

Accordingly, the Collateral Agent and the New Grantor agree as follows:

SECTION 1. In accordance with Section 6.13 of the Security Agreement, the New Grantor by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Grantor, as security for the payment and performance in full of the Secured Obligations, does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Grantor’s right, title and interest in and to the Collateral (as defined in the Security Agreement) of the New Grantor. Each reference to a “Grantor” in the Security Agreement shall be deemed to include the New Grantor. The Security Agreement is hereby incorporated herein by reference.

SECTION 2. The New Grantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity.

SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received a counterpart of this Supplement that bears the signature of the New Grantor


and the Collateral Agent has executed a counterpart hereof. Delivery of an executed signature page to this Supplement by facsimile transmission or other electronic communication shall be as effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. The New Grantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the information required by Schedules II and III to the Security Agreement applicable to it and its and its’ subsidiaries legal name, jurisdiction of formation and location of Chief Executive Office and (b) set forth under its signature hereto is the true and correct legal name of the New Grantor, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. If any provision of this Supplement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Supplement shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 6.01 of the Security Agreement.

SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with the execution and delivery of this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent.

[ Signature pages follow ]

 

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IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly executed this Supplement to the Security Agreement as of the day and year first above written.

 

[NAME OF NEW GRANTOR]
By:  

 

Name:  

 

Title:  

 

Legal Name:

Jurisdiction of Formation:

Location of Chief Executive office:


BANK OF AMERICA, N.A.,

as Collateral Agent

By:  

 

Name:  

 

Title:  

 


Schedule I

to the Supplement No     to the

Security Agreement

EQUITY INTERESTS

 

Issuer

   Number of
Certificate
   Registered
Owner
   Number and Class
of

Equity Interest
   Percentage
of Equity Interests

           

           

           

INSTRUMENTS AND DEBT SECURITIES

 

Issuer

   Principal
Amount
   Date of Note    Maturity Date

        

        

 


Exhibit II to the

Security Agreement

PERFECTION CERTIFICATE

Reference is hereby made to (i) that certain Security Agreement dated as of January 30, 2012 (as amended, restated, supplemented or amended and restated from time to time, the “ Security Agreement ”), between Summit Materials, LLC, a Delaware limited liability company (“ Borrower ”), the Guarantors party thereto (collectively, the “ Guarantors ”) and the Collateral Agent (as hereinafter defined) and (ii) that certain Credit Agreement dated as of January 30, 2012 (as amended, restated, supplemented or amended and restated from time to time, the “ Credit Agreement ”) among the Borrower, Summit Materials Intermediate Holdings, LLC, a Delaware limited liability company (“ Holdings ”), certain other U.S. Subsidiaries of the Borrower, certain other parties thereto and Bank of America, N.A., as Administrative Agent and Collateral Agent (in such capacity, the “ Collateral Agent ”). Capitalized terms used but not defined herein have the meanings assigned in the Credit Agreement or the Security Agreement, as applicable, unless otherwise noted herein.

As used herein, the term “ Companies ” means Holdings, Borrower and each of the other Guarantors.

The undersigned hereby certify to the Collateral Agent as follows:

1. Names .

2. The exact legal name of each Company, as such name appears in its respective certificate of incorporation or any other organizational document, is set forth in Schedule 1(a) . Each Company is (i) the type of entity disclosed next to its name in Schedule 1(a) and (ii) a registered organization except to the extent disclosed in Schedule 1(a) . Also set forth in Schedule 1(a) is the organizational identification number, if any, of each Company that is a registered organization, the Federal Taxpayer Identification Number of each Company and the jurisdiction of formation of each Company.

3. Set forth in Schedule 1(b) is a list of any other corporate or organizational names each Company has had in the past five years, together with the date of the relevant change.

4. Set forth in Schedule 1(c) is a list of all other names used by each Company, or any other business or organization to which each Company became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise, on any filings with the Internal Revenue Service, at any time between January 1, 2007 and the date hereof. Except as set forth in Schedule 1(c) , no Company has changed its jurisdiction of organization at any time during the past four months.

5. Current Locations . The chief executive office of each Company is located at the address set forth in Schedule 2 .

6. Extraordinary Transactions . Except for those purchases, acquisitions and other transactions described in Schedule 1(c) or Schedule 3 , in the past five years, all of


the Collateral with a fair market value in excess of $5,000,000 has been originated by the relevant Company in the ordinary course of business or consists of goods which have been acquired by such Company in the ordinary course of business.

7. Schedule of Filings . Attached hereto as Schedule 4 is a schedule of (i) the appropriate filing offices for the financing statements, (ii) the appropriate filing offices for the filings described in Schedule 8(c) and (iii) the appropriate filing offices for the Mortgages and fixture filings relating to the Mortgaged Property set forth in Schedule 5 .

8. Real Property . Attached hereto as Schedule 5A is a list of all real property owned or otherwise held by each Company located in the United States as of the Closing Date. Attached hereto as Schedule 5B is a list of all (i) fee owned real property with a fair market value in excess of $5.0 million owned by any Loan Party on the Closing Date and (ii) to the extent available, common names, addresses and uses of each Mortgaged Property.

9. Stock Ownership and Other Equity Interests . Attached hereto as Schedule 6(a) is a true and correct list of each of all of the authorized, and the issued and outstanding, stock, partnership interests, limited liability company membership interests or other equity interest of each Company and its Subsidiaries and the record and beneficial owners of such stock, partnership interests, membership interests or other equity interests setting forth the percentage of such equity interests pledged under the Security Agreement. Also set forth in Schedule 6(b) is each equity investment of each Company that represents 50% or less of the equity of the entity in which such investment was made setting forth the percentage of such equity interests pledged under the Security Agreement.

10. Instruments and Tangible Chattel Paper . Attached hereto as Schedule 7 is a true and correct list of all promissory notes, instruments (other than checks to be deposited in the ordinary course of business), tangible chattel paper, electronic chattel paper and other evidence of indebtedness held by each Company as of the Closing Date, the value of which is in excess of $2,500,000, including all intercompany notes between or among any two or more Companies or any of their Subsidiaries, stating if such instruments, chattel paper or other evidence of indebtedness is pledged under the Security Agreement.

11. Intellectual Property . (a) Attached hereto as Schedule 8(a ) is a schedule setting forth all of each Company’s Patents and Trademarks (each as defined in the Security Agreement) applied for or registered with the United States Patent and Trademark Office (“ USPTO ”) in the name of each Company, including the name of the registered owner or applicant and the registration, application, or publication number, as applicable, of each registered or applied for United States Patent or Trademark owned by each Company.

(b) Attached hereto as Schedule 8(b) is a schedule setting forth all of each Company’s United States Copyrights (each as defined in the Security Agreement), applied for or registered with the United States Copyright Office (the “ USCO ”), including the name of the registered owner and the registration number of each registered or applied for Copyright owned by each Company.

 

-2-


(c) Attached hereto as Schedule 8(c) is a schedule setting forth all Patent Licenses, Trademark Licenses and Copyright Licenses (each as defined in the Security Agreement) in which the applicable Company is listed as an exclusive licensee, and where the licensed intellectual property is applied for or registered with the USPTO or USCO, including the name of the registered owner and the registration, application or publication number, as applicable, of each registered or applied for United States Patent, Trademark or Copyright, as the case may be, owned by each licensor along with the date of execution thereof.

9. Commercial Tort Claims . Attached hereto as Schedule 9 is a true and correct list of all Commercial Tort Claims (as defined in the Security Agreement) in excess of $5,000,000, held by each Company, including a brief description thereof.

10. Deposit Accounts, Securities Accounts and Commodity Accounts . No information is provided with respect to the Deposit Accounts, Securities Accounts and/or Commodity Accounts since they are not required to be subject to Collateral Agent’s control pursuant to the Security Agreement.

11. Letter-of-Credit Rights . Attached hereto as Schedule 11 is a true and correct list of all Letters of Credit issued in favor of each Company, as beneficiary thereunder, stating if letter-of-credit rights with respect to such Letters of Credit are required to be subject to a control arrangement pursuant to the Security Agreement.

[The Remainder of this Page has been intentionally left blank]

 

-3-


IN WITNESS WHEREOF , we have hereunto signed this Perfection Certificate as of this             day of January [    ], 2012.

 

SUMMIT MATERIALS, LLC
By:  

 

  Name:
  Title:
SUMMIT MATERIALS INTERMEDIATE HOLDINGS, LLC
By:  

 

  Name:
  Title:
[Each of the Guarantors]
By:  

 

  Name:
  Title:

 

-4-


Schedule 1(a)

Legal Names, Etc .

 

Legal Name

  

Type of Entity

  

Registered Organization

(Yes/No)

  

Organizational
Number 27

  

Federal Taxpayer
Identification Number

  

State of Formation

              
              
              

 

27   If none, so state.

 

-5-


Schedule 1(b)

Prior Organizational Names

 

Company/Subsidiary

  

Prior Name

  

Date of Change

     
     
     
     

 

-6-


Schedule 1(c)

Changes in Corporate Identity; Other Names

 

Company/Subsidiary

  

Action

  

Date of

Action

  

State of

Formation

  

List of All Other Names Used on Any
Filings with the Internal  Revenue
Service During Past Five Years

           
           
           
           
           
           
           
           
           

[Add Information required by Section 1 to the extent required by Section 1(c) of the Perfection Certificate]

 

-7-


Schedule 2

Chief Executive Offices

 

Company/Subsidiary

 

Address

 

County

  

State

      
      
      
      
      
      

 

-8-


Schedule 3

Transactions Other Than in the Ordinary Course of Business

 

Company/Subsidiary

 

Description of Transaction Including Parties Thereto

 

Date of Transaction

   
   
   

 

-9-


Schedule 4

Filings/Filing Offices

 

Type of Filing 28

  

Entity

  

Applicable Collateral

Document

[Mortgage, Security

Agreement or Other]

  

Filing Office

        
        
        
        

 

28   UCC-1 financing statement, fixture filing, mortgage, intellectual property filing or other necessary filing.

 

-10-


Schedule 5

Real Property

 

I. Owned Real Property

 

Entity of Record

  

Purpose/

Use

  

Legal Description (if
Encumbered by

Mortgage and/or

Fixture Filing)

  

To be Encumbered by
Mortgage and Fixture

Filing

  

Option to Purchase/

Right of First Refusal

[                ]

   [                    ]    [See Schedule A to Mortgage and/or fixture filing encumbering this property.]    [YES/NO]    [YES/NO]
           

 

-11-


II. Leased Real Property

 

Entity of Record

  

Description of
Lease

  

Purpose/Use

  

Legal

Description

(if Encumbered by
Mortgage and/or
Fixture Filing)

  

To be
Encumbered
by Mortgage

  

To be
Encumbered by
Fixture Filing

  

Option to

Purchase/

Right of First

Refusal

[                    ]    [                    ]    [                    ]    [See Schedule A to Mortgage and/or fixture filing encumbering this property.]    [YES/NO]    [YES/NO]    [YES/NO]
                 

 

-12-


Schedule 6

(a) Equity Interests of Companies and Subsidiaries

 

Current Legal Entities Owned

   Record Owner    Certificate No.    No. Shares/Interest    Percent Pledged
           
           
           
           

(b) Other Equity Interests

 

Current Legal Entities Owned

   Record Owner    Certificate No.    No. Shares/Interest    Percent Pledged
           
           
           


Schedule 7

Instruments and Tangible Chattel Paper

 

1. Promissory Notes:

 

Entity

   Principal
Amount
   Date of
Issuance
   Interest Rate    Maturity Date    Pledged
[Yes/No]
              
              
              

 

2. Chattel Paper:

 

Description

  

Pledged

[Yes/No]

  
  
  

 

-2-


Schedule 8(a)

Patents and Trademarks

UNITED STATES PATENTS:

Registrations:

 

OWNER

  

REGISTRATION

NUMBER

  

DESCRIPTION

     
     

Applications:

 

OWNER

  

APPLICATION

NUMBER

  

DESCRIPTION

     
     

UNITED STATES TRADEMARKS:

Registrations:

 

OWNER

  

REGISTRATION

NUMBER

  

TRADEMARK

     
     

Applications:

 

OWNER

  

APPLICATION

NUMBER

  

TRADEMARK

     
     

 

-3-


Schedule 8(b)

Copyrights

UNITED STATES COPYRIGHTS

Registrations:

 

OWNER

  

TITLE

  

REGISTRATION NUMBER

     
     

Applications:

 

OWNER

  

APPLICATION NUMBER

 

-4-


Schedule 8(c)

Intellectual Property Licenses

Patent Licenses:

 

LICENSEE

  

LICENSOR

  

COUNTRY/STATE

  

REGISTRATION/
APPLICATION

NUMBER

  

DESCRIPTION

           
           

Trademark Licenses

 

LICENSEE

  

LICENSOR

  

COUNTRY/STATE

  

REGISTRATION/
APPLICATION

NUMBER

  

TRADEMARK

           
           

Copyright Licenses:

 

LICENSEE

  

LICENSOR

  

COUNTRY/STATE

  

REGISTRATION/
APPLICATION

NUMBER

  

DESCRIPTION

           
           

 

-5-


Schedule 9

Commercial Tort Claims

 

Description

  

Pledged

[Yes/No]

  
  
  

 

-6-


Schedule 11

Letter of Credit Rights

 

Issuer

 

Beneficiary

 

Principal

Amount

   Date of Issuance    Maturity Date    Subject to Control
Requirement

[Yes/No]
            
            
            

 

-7-


Exhibit III to the

Security Agreement

FORM OF

PATENT SECURITY AGREEMENT (SHORT FORM)

PATENT SECURITY AGREEMENT

Patent Security Agreement , dated as of [    ], by [    ] and [            ] (the “ Grantor ”), in favor of BANK OF AMERICA, N.A., in its capacity as collateral agent pursuant to the Credit Agreement (in such capacity, the “ Collateral Agent ”).

W I T N E S S E T H :

W HEREAS , the Grantor is party to a Security Agreement dated as of January 30, 2012 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Security Agreement ”) in favor of the Collateral Agent pursuant to which the Grantor is required to execute and deliver this Patent Security Agreement;

N OW , T HEREFORE , in consideration of the premises and to induce the Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Grantor hereby agrees with the Collateral Agent as follows:

SECTION 1. Defined Terms . Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

SECTION 2. Grant of Security Interest in Patent Collateral . The Grantor hereby pledges and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral (excluding any Excluded Assets) of the Grantor:

(a) Patents of the Grantor listed on Schedule I attached hereto.

SECTION 3. The Security Agreement . The security interest granted pursuant to this Patent Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the Security Agreement and the Grantor hereby acknowledges and affirms that the rights and remedies of the Collateral Agent with respect to the security interest in the Patents made and granted hereby are more fully set forth in the Security Agreement. In the event that any provision of this Patent Security Agreement is deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall control unless the Collateral Agent shall otherwise determine.

SECTION 4. Termination . Upon the termination of the Security Agreement in accordance with Section 6.12 thereof, the Collateral Agent shall, at the expense of the Grantor, execute, acknowledge, and deliver to the Grantor an instrument in writing in recordable form releasing the lien on and security interest in the Patents under this Patent Security Agreement and any other documents required to evidence the termination of the Collateral Agent’s interest in the Patents.


SECTION 5. Counterparts . This Patent Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Patent Security Agreement by signing and delivering one or more counterparts.

[Signature pages follow.]

 

-2-


[GRANTOR]
By:  

 

  Name:
  Title:

 

-3-


BANK OF AMERICA, N.A.,

as Collateral Agent

By:  

 

  Name:
  Title:

 

-4-


Schedule I

to

PATENT SECURITY AGREEMENT

UNITED STATES PATENTS AND PATENT APPLICATIONS

Patents:

 

OWNER

  

PATENT

NUMBER

  

TITLE

     

Patent Applications:

 

OWNER

  

APPLICATION

NUMBER

  

TITLE

     


Exhibit IV to the

Security Agreement

FORM OF

TRADEMARK SECURITY AGREEMENT (SHORT FORM)

TRADEMARK SECURITY AGREEMENT

Trademark Security Agreement , dated as of [    ], by [    ] and [            ] (the “ Grantor ”), in favor of BANK OF AMERICA, N.A., in its capacity as collateral agent pursuant to the Credit Agreement (in such capacity, the “ Collateral Agent ”).

W I T N E S S E T H:

W HEREAS , the Grantor is party to a Security Agreement dated as of January 30, 2012 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Security Agreement ”) in favor of the Collateral Agent pursuant to which the Grantor is required to execute and deliver this Trademark Security Agreement;

N OW , T HEREFORE , in consideration of the premises and to induce the Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Grantor hereby agrees with the Collateral Agent as follows:

SECTION 1. Defined Terms . Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

SECTION 2. Grant of Security Interest in Trademark Collateral . The Grantor hereby pledges and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral (excluding any Excluded Assets) of the Grantor:

(a) registered Trademarks of the Grantor listed on Schedule I attached hereto.

SECTION 3. The Security Agreement . The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the Security Agreement and Grantor hereby acknowledges and affirms that the rights and remedies of the Collateral Agent with respect to the security interest in the Trademarks made and granted hereby are more fully set forth in the Security Agreement. In the event that any provision of this Trademark Security Agreement is deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall control unless the Collateral Agent shall otherwise determine.

SECTION 4. Termination . Upon the termination of the Security Agreement in accordance with Section 6.12 thereof, the Collateral Agent shall, at the expense of the Grantor, execute, acknowledge, and deliver to the Grantor an instrument in writing in recordable form releasing the lien on and security interest in the Trademarks under this Trademark Security Agreement and any other documents required to evidence the termination of the Collateral Agent’s interest in the Trademarks.


SECTION 5. Counterparts . This Trademark Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Trademark Security Agreement by signing and delivering one or more counterparts.

[Signature pages follow]

 

-2-


[GRANTOR]
By:  

 

  Name:
  Title:

 

-3-


BANK OF AMERICA, N.A.,

as Collateral Agent

By:  

 

  Name:
  Title:

 

-4-


Schedule I

to

TRADEMARK SECURITY AGREEMENT

UNITED STATES TRADEMARK REGISTRATIONS AND APPLICATIONS

Trademark Registrations:

 

OWNER

  

REGISTRATION

NUMBER

  

TRADEMARK

     

Trademark Applications:

 

OWNER

  

APPLICATION

NUMBER

  

TRADEMARK

     


Exhibit V to the

Security Agreement

FORM OF

COPYRIGHT SECURITY AGREEMENT (SHORT FORM)

COPYRIGHT SECURITY AGREEMENT

Copyright Security Agreement , dated as of [    ], by [    ] and [            ] (the “ Grantor ”), in favor of BANK OF AMERICA, N.A., in its capacity as collateral agent pursuant to the Credit Agreement (in such capacity, the “ Collateral Agent ”).

W I T N E S S E T H:

W HEREAS , the Grantor is party to a Security Agreement dated as of January 30, 2012 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Security Agreement ”) in favor of the Collateral Agent pursuant to which the Grantor is required to execute and deliver this Copyright Security Agreement;

N OW , T HEREFORE , in consideration of the premises and to induce the Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Grantor hereby agrees with the Collateral Agent as follows:

SECTION 1. Defined Terms . Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

SECTION 2. Grant of Security Interest in Copyright Collateral . The Grantor hereby pledges and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral (excluding any Excluded Assets) of the Grantor:

(a) registered Copyrights of the Grantor listed on Schedule I attached hereto.

SECTION 3. The Security Agreement . The security interest granted pursuant to this Copyright Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the Security Agreement and the Grantor hereby acknowledges and affirms that the rights and remedies of the Collateral Agent with respect to the security interest in the Copyrights made and granted hereby are more fully set forth in the Security Agreement. In the event that any provision of this Copyright Security Agreement is deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall control unless the Collateral Agent shall otherwise determine.

SECTION 4. Termination . Upon termination of the Security Agreement in accordance with Section 6.12 thereof, the Collateral Agent shall, at the expense of the Grantor, execute, acknowledge, and deliver to the Grantor an instrument in writing in recordable form releasing the lien on and security interest in the Copyrights under this Copyright Security Agreement and any other documents required to evidence the termination of the Collateral Agent’s interest in the Copyrights.


SECTION 5. Counterparts . This Copyright Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Copyright Security Agreement by signing and delivering one or more counterparts.

[Signature pages follow.]

 

-2-


[GRANTOR]
By:  

 

  Name:
  Title:

 

-3-


BANK OF AMERICA, N.A., as Collateral Agent

By:  

 

  Name:
  Title:

 

-4-


Schedule I

to

COPYRIGHT SECURITY AGREEMENT

UNITED STATES COPYRIGHT REGISTRATIONS

 

OWNER   

REGISTRATION

NUMBER

   COPYRIGHT TITLE

     

 

F-1


EXHIBIT G

[FORM OF]

INTERCOMPANY NOTE

[Date]

FOR VALUE RECEIVED, each of the undersigned, to the extent a borrower from time to time from any other entity listed on the signature page hereto (each, in such capacity, an “ Issuer ”), hereby promises to pay on demand to such other entity listed below (each, in such capacity, a “ Holder ” and, together with each Issuer, a “ Note Party ”), in immediately available funds in the currencies as shall be agreed from time to time at such location as the applicable Holder shall from time to time designate, the unpaid principal amount of all loans and advances or other credit extensions (including trade payables) made by such Holder to such Issuer. Each Issuer promises also to pay interest on the unpaid principal amount of all such loans and advances or other credit extensions in like money at said location from the date of such loans and advances until paid at such rate per annum as shall be agreed upon from time to time by such Issuer and such Holder.

This note (“ Note ”) is an Intercompany Note referred to in the Credit Agreement dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) among Summit Materials, LLC, Inc., a Delaware limited liability company (together with its successors and assigns, the “ Borrower ”), the Guarantors party thereto from time to time, the lenders and other parties thereto from time to time (collectively, the “ Lenders ” and individually, a “ Lender ”) and Bank of America, N.A., as Administrative Agent and is subject to the terms

 

G-1


thereof, and shall be pledged by each Holder pursuant to the Security Agreement (as defined in the Credit Agreement), to the extent required pursuant to the terms thereof. Each Holder hereby acknowledges and agrees that the Administrative Agent may exercise all rights provided in the Credit Agreement and the Security Agreement with respect to this Note.

Anything in this Note to the contrary notwithstanding, the indebtedness evidenced by this Note owed by any Issuer that is the Borrower or a Guarantor to any Holder shall be subordinate and junior in right of payment, to the extent and in the manner hereinafter set forth, to all Obligations (as defined in the Credit Agreement) of such Issuer under the Credit Agreement, including, without limitation, where applicable, under such Issuer’s guarantee of the Obligations under the Credit Agreement (such Obligations and obligations in connection with any renewal, refunding, restructuring or refinancing of any thereof, including interest thereon accruing after the commencement of any proceedings referred to in clause (i) below, whether or not such interest is an allowed claim in such proceeding, being hereinafter collectively referred to as “ Senior Indebtedness ”):

(i) In the event of any insolvency or bankruptcy proceedings, and any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to any Issuer or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of such Issuer, whether or not involving insolvency or bankruptcy, then (x) the holders of Senior Indebtedness shall be paid in full in cash in respect of all amounts constituting Senior Indebtedness before any Holder is entitled to receive (whether directly or indirectly), or make any demands for, any payment on account of this Note and (y) until the holders of Senior Indebtedness are paid in full in cash in respect of all amounts constituting Senior Indebtedness, any payment or distribution to which such Holder would otherwise be entitled (other than (A) equity securities or (B) debt securities of such Issuer that are subordinated, to at least the same extent as this Note, to the payment of all Senior Indebtedness then outstanding (such securities being hereinafter referred to as “ Restructured Debt Securities ”)) shall be made to the holders of Senior Indebtedness;

(ii) if any Event of Default (as defined in the Credit Agreement) occurs and is continuing with respect to any Senior Indebtedness, then no payment or distribution of any kind or character to any Person that is not a Loan Party shall be made by or on behalf of the Issuer or any other Person on its behalf with respect to this Note unless otherwise agreed in writing by the Agent in its reasonable discretion; and

(iii) if any payment or distribution of any character, whether in cash, securities or other property (other than Restructured Debt Securities), in respect of this Note shall (despite these subordination provisions) be received by any Holder in violation of clause (i) or (ii) before all Senior Indebtedness shall have been paid in full in cash, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness (or their representatives), ratably according to the respective aggregate amounts remaining unpaid thereon, to the extent necessary to pay all Senior Indebtedness in full in cash.

 

G-2


To the fullest extent permitted by law, no present or future holder of Senior Indebtedness shall be prejudiced in its right to enforce the subordination of this Note by any act or failure to act on the part of any Issuer or by any act or failure to act on the part of such holder or any trustee or agent for such holder. Each Holder and each Issuer hereby agree that the subordination of this Note is for the benefit of the Administrative Agent and the Lenders and the Administrative Agent and the Lenders are obligees under this Note to the same extent as if their names were written herein as such and the Administrative Agent may, on behalf of the itself and the Lenders, proceed to enforce the subordination provisions herein.

The indebtedness evidenced by this Note owed by any Issuer that is not the Borrower or a Guarantor (as defined in the Credit Agreement) shall not be subordinated to, and shall rank pari passu in right of payment with, any other obligation of such Issuer.

Notwithstanding the foregoing, (i) nothing contained in the subordination provisions set forth above is intended to or will impair, as between each Issuer and each Holder, the obligations of such Issuer, which are absolute and unconditional, to pay to such Holder the principal of and interest on this Note as and when due and payable in accordance with its terms, or is intended to or will affect the relative rights of such Holder and other creditors of such Issuer other than the holders of Senior Indebtedness and (ii) with respect to any indebtedness owing from any Issuer to any Holder with a “works council” or other employee representative body,

 

G-3


such Indebtedness shall, unless such body has been consulted with respect to such subordination, and, if and to the extent required, unconditionally approved such subordination (by means of a prior positive advice or otherwise), not be subordinated to the Senior Indebtedness to the extent, and only to the extent, that the terms of such subordination would require the approval of or consultation with such entity before such subordination could be effective.

Each Holder is hereby authorized to record all loans and advances or other credit extensions made by it to any Issuer (all of which shall be evidenced by this Note), and all repayments or prepayments thereof, in its books and records, such books and records constituting prima facie evidence of the accuracy of the information contained therein. For the avoidance of doubt, this Note as between each Issuer and each Holder contains additional terms to any intercompany loan agreement between them and this Note does not in any way replace such intercompany loans between them nor does this Note in any way change the principal amount of any intercompany loans between them.

Upon execution and delivery after the date hereof by Summit Materials, LLC or any subsidiary of Summit Materials, LLC of a counterpart signature page hereto, such subsidiary shall become a Note Party hereunder with the same force and effect thereafter as if originally named as a Note Party hereunder. The rights and obligations of each Note Party hereunder shall remain in full force and effect notwithstanding the addition of any new Note Party as a party to this Note.

Each Issuer hereby waives presentment, demand, protest or notice of any kind in connection with this Note. All payments under this Note shall be made without offset, counterclaim or deduction of any kind.

 

G-4


THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

G-5


[SEPARATE SIGNATURE PAGES TO BE

ATTACHED

 

G-6


 

 

EXHIBIT H

[FORM OF]

HOLDINGS PLEDGE AGREEMENT

(See Attached)

 

 

 


PLEDGE AGREEMENT

dated as of

January 30, 2012

Between

SUMMIT MATERIALS INTERMEDIATE HOLDINGS, LLC

and

BANK OF AMERICA, N.A.

as Collateral Agent

 

-2-


TABLE OF CONTENTS

 

ARTICLE I Definitions

     1   

    SECTION 1.01.

 

Credit Agreement

     1   

    SECTION 1.02.

 

Other Defined Terms

     1   

ARTICLE II Pledge of Securities

     2   

    SECTION 2.01.

 

Pledge

     2   

    SECTION 2.02.

 

Delivery of the Pledged Equity

     2   

    SECTION 2.03.

 

Representations, Warranties and Covenants

     3   

    SECTION 2.04.

 

Registration in Nominee Name; Denominations

     4   

    SECTION 2.05.

 

Voting Rights; Dividends and Interest

     4   

ARTICLE III Remedies

     6   

    SECTION 3.01.

 

Remedies Upon Default

     6   

    SECTION 3.02.

 

Application of Proceeds

     7   

ARTICLE IV Miscellaneous

     7   

    SECTION 4.01.

 

Notices

     7   

    SECTION 4.02.

 

Waivers, Amendment

     7   

    SECTION 4.03.

 

Collateral Agent’s Fees and Expenses; Indemnification

     8   

    SECTION 4.04.

 

Successors and Assigns

     8   

    SECTION 4.05.

 

Survival of Agreement

     8   

    SECTION 4.06.

 

Counterparts; Effectiveness, Several Agreement

     8   

    SECTION 4.07.

 

Severability

     9   

    SECTION 4.08.

 

Right of Set-Off

     9   

    SECTION 4.09.

 

Governing Law; Jurisdiction; Venue; Waiver of Jury Trial; Consent to Service of Process

     9   

    SECTION 4.10.

 

Headings

     9   

    SECTION 4.11.

 

Security Interest Absolute

     9   

    SECTION 4.12.

 

Termination or Release

     10   

 

i


    SECTION 4.13.

 

Collateral Agent Appointed Attorney-in-Fact

     11   

    SECTION 4.14.

 

General Authority of the Collateral Agent

     11   

    SECTION 4.15.

 

Reasonable Care

     12   

    SECTION 4.16.

 

Delegation; Limitation

     12   

    SECTION 4.17.

 

Reinstatement

     12   

    SECTION 4.18.

 

Miscellaneous

     12   

Schedule I        Pledged Equity

  

 

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PLEDGE AGREEMENT dated as of January 30, 2012, among Summit Materials Intermediate Holdings, LLC, a Delaware limited liability company (“ Holdings ”) and Bank of America, N.A., as Collateral Agent for the Secured Parties (in such capacity, the “ Collateral Agent ”).

Reference is made to (i) that certain Credit Agreement dated as of January 30, 2012 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Summit Materials, LLC (the “ Borrower ”), Holdings, the other Guarantors party thereto from time to time, Bank of America, N.A., as Administrative Agent and Collateral Agent, each lender from time to time party thereto (collectively, the “ Lenders ” and individually, a “ Lender ”), Bank of America, N.A., as L/C Issuer and Swing Line Lender, and the other agents named therein and (ii) that certain Security Agreement dated as of January 30, 2012 among the grantors identified therein (the “ Grantors ”) and the Collateral Agent. The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Holdings is the direct parent of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and is willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows:

I.

Definitions

A. Credit Agreement . i. Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Credit Agreement. All terms defined in the UCC (as defined herein) and not defined in this Agreement have the meanings specified therein; the term “instrument” shall have the meaning specified in Article 9 of the UCC.

1. The rules of construction specified in Article I of the Credit Agreement also apply to this Agreement.

B. Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:

Agreement ” means this Pledge Agreement.

Borrower ” has the meaning assigned to such term in the recitals of this Agreement.

Collateral Agent ” has the meaning assigned to such terns in the recitals of this Agreement.

Credit Agreement ” has the meaning assigned to such term in the recitals of this Agreement.

Holdings ” has the meaning assigned to such term in the recitals of this Agreement.

Lenders ” has the meaning assigned to such term in the recitals of this Agreement.


Perfection Certificate ” means a certificate substantially in the form of Exhibit II to the Security Agreement, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of Holdings.

Pledged Collateral ” has the meaning assigned to such term in Section 2.01.

Pledged Equity ” has the meaning assigned to such term in Section 2.01.

Secured Obligations ” means the “Obligations” (as defined in the Credit Agreement).

Security Agreement ” has the meaning assigned to such term in the recitals of this Agreement.

UCC ” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

II.

Pledge of Securities

A. Pledge . As security for the payment or performance, as the case may be, in full of the Secured Obligations, including the Guarantees, Holdings hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in (i) all of Holdings’ right, title and interest in, to and under all Equity Interests issued by the Borrower and any successor entity (the “ Pledged Equity ”); (ii) all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the Pledged Equity; (iii) all rights and privileges of Holdings with respect to the securities and other property referred to in clauses (i) and (ii) above; and (iv) all Proceeds of any of the foregoing (the items referred to in clauses (i) through (iv) above being collectively referred to as the “ Pledged Collateral ”).

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, forever, subject , however , to the terms, covenants and conditions hereinafter set forth.

B. Delivery of the Pledged Equity . ii. Holdings agrees promptly (but in any event within 30 days after receipt by Holdings) to deliver or cause to be delivered to the Collateral Agent, for the benefit of the Secured Parties, any and all Pledged Equity to the extent certificated.

1. Upon delivery to the Collateral Agent, any Pledged Equity shall be accompanied by stock or security powers duly executed in blank or other instruments of transfer reasonably satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request. Each delivery of Pledged Equity shall be accompanied by a schedule describing the securities, which schedule shall be deemed to supplement Schedule I and made a part hereof; provided that failure to supplement Schedule I shall not affect the validity of such pledge of such Pledged Equity. Each schedule so delivered shall supplement any prior schedules so delivered.

 

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C. Representations, Warranties and Covenants . Holdings represents, warrants and covenants to and with the Collateral Agent, for the benefit of the Secured Parties, that:

1. As of the date hereof, Schedule I includes all Equity Interests required to be pledged by Holdings hereunder in order to satisfy the Collateral and Guarantee Requirement and all such Equity Interests have been delivered to the Collateral Agent;

2. the Pledged Equity has been duly and validly authorized and issued by the issuers thereof and are fully paid and nonassessable;

3. except for the security interests granted hereunder, Holdings (i) is, subject to any transfers made in compliance with the Credit Agreement, the direct owner, beneficially and of record, of the Pledged Equity indicated on Schedule I , (ii) holds the same free and clear of all Liens, other than Liens created by the Collateral Documents, and (iii) if requested by the Collateral Agent, will defend its title or interest thereto or therein against any and all Liens (other than the Liens permitted pursuant to this Section 2.03(c)), however arising, of all Persons whomsoever;

4. except for restrictions and limitations (i) imposed or permitted by the Loan Documents or securities laws generally or (ii) described in the Perfection Certificate, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect in any manner material and adverse to the Secured Parties the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

5. the execution and performance by Holdings of this Agreement are within Holdings’ corporate powers and have been duly authorized by all necessary corporate action or other organizational action;

6. no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledge effected hereby, except for (i) filing of a UCC-1 financing statement with the Delaware Secretary of State naming Holdings as debtor and the Collateral Agent as secured party and describing the Pledged Collateral and (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect;

7. by virtue of the execution and delivery by Holdings of this Agreement, and delivery of the Pledged Equity to and continued possession by the Collateral Agent in the State of New York, the Collateral Agent for the benefit of the Secured Parties has a legal, valid and perfected lien upon and security interest in such Pledged Equity as security for the payment and performance of the Secured Obligations; and

8. the pledge effected hereby is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral to the extent intended hereby.

 

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Subject to the terms of this Agreement and to the extent permitted by Applicable Law, Holdings hereby agrees that upon the occurrence and during the continuance of an Event of Default, it will comply with instructions of the Collateral Agent with respect to the Equity Interests in Holdings that constitute Pledged Equity hereunder that are not certificated without further consent by the applicable owner or holder of such Equity Interests.

D. Registration in Nominee Name; Denominations . If an Event of Default shall have occurred and be continuing and the Collateral Agent shall give Holdings prior notice of its intent to exercise such rights, (a) the Collateral Agent, on behalf of the Secured Parties, shall have the right to hold the Pledged Equity in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of Holdings, endorsed or assigned in blank or in favor of the Collateral Agent and Holdings will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Equity registered in the name of Holdings and (b) the Collateral Agent shall have the right to exchange the certificates representing Pledged Equity for certificates of smaller or larger denominations for any purpose consistent with this Agreement, to the extent permitted by the documentation governing such Pledged Equity.

E. Voting Rights; Dividends and Interest . iii. Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have provided prior notice to Holdings that its rights under this Section 2.05 are being suspended:

(a) Holdings shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Equity or any part thereof, and Holdings agrees that it shall exercise such rights for purposes consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents;

(b) The Collateral Agent shall promptly (after reasonable advance notice) execute and deliver to Holdings, or cause to be executed and delivered to Holdings, all such proxies, powers of attorney and other instruments as Holdings may reasonably request for the purpose of enabling Holdings to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above; and

(c) Holdings shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Equity to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable Laws; provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Equity, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Equity or received in exchange for Pledged Equity or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by Holdings, shall not be commingled by Holdings with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and the Secured Parties and shall be promptly (and in any event within 10 Business Days) delivered to the Collateral Agent in the same form as so received (with any necessary endorsement reasonably requested by the Collateral Agent). So long as no Default or Event of Default has occurred and is continuing, the Collateral Agent shall promptly deliver to Holdings any Pledged Equity in its possession if requested to be delivered to the issuer thereof in connection with any exchange or redemption of such Pledged Equity permitted by the Credit Agreement in accordance with this Section 2.05(a)(iii).

 

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2. Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified Holdings of the suspension of its rights under paragraph (a)(iii) of this Section 2.05, then all rights of Holdings to dividends, interest, principal or other distributions that Holdings is authorized to receive pursuant to paragraph (a)(iii) of this Section 2.05 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by Holdings contrary to the provisions of this Section 2.05 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of Holdings and shall be promptly (and in any event within 10 days) delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement reasonably requested by the Collateral Agent). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 3.02. After all Events of Default have been cured or waived, the Collateral Agent shall promptly repay to Holdings (without interest) all dividends, interest, principal or other distributions that Holdings would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.05 and that remain in such account.

3. Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have provided Holdings with notice of the suspension of its rights under paragraph (a)(i) of this Section 2.05, then all rights of Holdings to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 2.05, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 2.05, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit Holdings to exercise such rights. After all Events of Default have been cured or waived, Holdings shall have the exclusive right to exercise the voting and/or consensual rights and powers that Holdings would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 2.05 shall be reinstated.

4. Any notice given by the Collateral Agent to Holdings under Section 2.04 or Section 2.05 shall be given in writing and may suspend the rights of Holdings under paragraph (a)(i) or paragraph (a)(iii) of this Section 2.05 in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

 

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III.

Remedies

A. Remedies Upon Default . Upon the occurrence and during the continuance of an Event of Default, it is agreed that the Collateral Agent shall have the right to exercise any and all rights afforded to a secured party with respect to the Secured Obligations, including the Guarantees, under the Uniform Commercial Code or other applicable Law and also may (i) exercise any and all rights and remedies of Holdings under or in connection with the Pledged Collateral, or otherwise in respect of the Pledged Collateral; provided that the Collateral Agent shall provide Holdings with notice thereof prior to such exercise; and (ii) subject to the mandatory requirements of applicable Law and the notice requirements described below, sell or otherwise dispose of all or any part of the Pledged Collateral securing the Secured Obligations at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale of securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Pledged Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Pledged Collateral so sold. Each such purchaser at any sale of Pledged Collateral shall hold the property sold absolutely, free from any claim or right on the part of Holdings, and Holdings hereby waives (to the extent permitted by Law) all rights of redemption, stay and appraisal which Holdings now has or may at any time in the future have under any Law now existing or hereafter enacted.

The Collateral Agent shall give Holdings 10 days’ written notice (which Holdings agrees is reasonable notice within the meaning of Section 9-611 of the UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Pledged Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Pledged Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Pledged Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Pledged Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Pledged Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Pledged Collateral is made on credit or for future delivery, the Pledged Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Pledged Collateral so sold and, in case of any such failure, such Pledged Collateral may be sold again upon like notice. At any public (or, to the extent permitted by Law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by Law) from any right of redemption, stay, valuation or appraisal on the part of Holdings (all said rights being also hereby waived and released to the extent permitted by Law), the Pledged Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from Holdings as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to Holdings therefor. For purposes hereof, a written agreement to purchase the Pledged Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and Holdings shall not be entitled to the return of the Pledged Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full. As an alternative to

 

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exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at Law or in equity to foreclose this Agreement and to sell the Pledged Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 3.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the UCC or its equivalent in other jurisdictions.

B. Application of Proceeds . The Collateral Agent shall apply the proceeds of any collection or sale of Pledged Collateral, including any Pledged Collateral consisting of cash in accordance with Section 8.04 of the Credit Agreement.

The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Pledged Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Pledged Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

The Collateral Agent shall have no liability to any of the Secured Parties for actions taken in reliance on information supplied to it as to the amounts of unpaid principal and interest and other amounts outstanding with respect to the Secured Obligations, provided that nothing in this sentence shall prevent Holdings from contesting any amounts claimed by any Secured Party in any information so supplied. All distributions made by the Collateral Agent pursuant to this Section 3.02 shall be (subject to any decree of any court of competent jurisdiction) final (absent manifest error), and the Collateral Agent shall have no duty to inquire as to the application by the Administrative Agent of any amounts distributed to it.

IV.

Miscellaneous

A. Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 10.02 of the Credit Agreement.

B. Waivers, Amendment . iv. No failure or delay by any Secured Party in exercising any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges of the Secured Parties herein provided, and provided under each other Loan Document, are cumulative and are not exclusive of any rights, remedies, powers and privileges provided by Law. No waiver of any provision of this Agreement or consent to any departure by Holdings therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 4.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan, the

 

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issuance of a Letter of Credit or the provision of services under Cash Management Obligations or Secured Hedge Agreements shall not be construed as a waiver of any Default, regardless of whether any Secured Party may have had notice or knowledge of such Default at the time.

1. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and Holdings, subject to any consent required in accordance with Section 10.01 of the Credit Agreement.

C. Collateral Agent’s Fees and Expenses; Indemnification . v. The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its reasonable out-of-pocket expenses incurred hereunder and indemnity for its actions in connection herewith, in each case, as provided in Sections 10.04 and 10.05 of the Credit Agreement.

1. Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Collateral Documents. The provisions of this Section 4.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 4.03 shall be payable within 10 days of written demand therefor.

D. Successors and Assigns . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

E. Survival of Agreement . All covenants, agreements, representations and warranties made by Holdings hereunder and in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the execution and delivery of the Loan Documents, the making of any Loans and issuance of any Letters of Credit and the provision of services under Cash Management Obligations or Secured Hedge Agreements, regardless of any investigation made by any Secured Party or on its behalf and notwithstanding that any Secured Party may have had notice or knowledge of any Default at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as this Agreement has not been terminated or released pursuant to Section 4.12 below.

F. Counterparts; Effectiveness, Several Agreement . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by facsimile or other electronic communication of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an original executed counterpart of this Agreement. This Agreement shall become effective as to Holdings when a counterpart hereof executed on behalf of Holdings shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon Holdings and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of Holdings, the Collateral Agent and the other Secured Parties and their respective permitted successors and

 

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assigns, except that Holdings shall not have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Pledged Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement.

G. Severability . If any provision of this Agreement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

H. Right of Set-Off . In addition to any rights and remedies of the Secured Parties provided by Law, upon the occurrence and during the continuance of any Event of Default, each Secured Party and its Affiliates is authorized at any time and from time to time, without prior notice to Holdings, any such notice being waived by Holdings to the fullest extent permitted by applicable Law, to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Secured Party and its Affiliates to or for the credit or the account of Holdings against any and all Obligations owing to such Secured Party and its Affiliates hereunder, now or hereafter existing, irrespective of whether or not such Secured Party or Affiliate shall have made demand under this Agreement and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness. Each Secured Party agrees promptly to notify Holdings and the Collateral Agent after any such set-off and application made by such Secured Party; provided , that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Secured Party under this Section 4.08 are in addition to other rights and remedies (including other rights of set-off) that such Secured Party may have at Law.

I. Governing Law; Jurisdiction; Venue; Waiver of Jury Trial; Consent to Service of Process .

1. The terms of Sections 10.15 and 10.16 of the Credit Agreement with respect to governing law, submission of jurisdiction, venue and waiver of jury trial are incorporated herein by reference, mutatis mutandis , and the parties hereto agree to such terms.

2. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 4.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law.

J. Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

K. Security Interest Absolute . To the extent permitted by Law, all rights of the Collateral Agent hereunder, the grant of a security interest in the Pledged Collateral and all obligations of Holdings hereunder shall be absolute

 

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and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Secured Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, Holdings in respect of the Secured Obligations or this Agreement.

L. Termination or Release . vi. This Agreement and all security interests granted hereby shall terminate with respect to all Secured Obligations and any Liens arising therefrom shall be automatically released upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (i) Cash Management Obligations or obligations under Secured Hedge Agreements not yet due and payable and (ii) contingent obligations not yet accrued and payable) and the expiration or termination of all Letters of Credit (other than Letters of Credit in which the Outstanding Amount of the L/C Obligations related thereto have been Cash Collateralized or, if satisfactory to the relevant L/C Issuer in its reasonable discretion, for which a backstop letter of credit is in place).

1. Upon any sale or transfer by Holdings of any Pledged Collateral that is permitted under the Credit Agreement (other than a sale or transfer to another Grantor), or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Pledged Collateral pursuant to Section 10.01 of the Credit Agreement, the security interest in such Collateral shall be automatically released.

2. In connection with any termination or release pursuant to paragraph (a) or (b) of this Section 4.12, the Collateral Agent shall execute and deliver to Holdings, at Holdings’ expense, all documents that Holdings shall reasonably request to evidence such termination or release and shall perform such other actions reasonably requested by Holdings to effect such release, including delivery of certificates, securities and instruments. Any execution and delivery of documents pursuant to this Section 4.12 shall be without recourse to or warranty by the Collateral Agent.

3. Notwithstanding anything to the contrary set forth in this Agreement, each Hedge Bank and each Cash Management Bank by the acceptance of the benefits under this Agreement hereby acknowledges and agrees that (i) the security interests granted under this Agreement of the Obligations of Holdings under any Secured Hedge Agreement and any Cash Management Obligations shall be automatically released upon termination of the Commitments and payment in full of all other Obligations and the expiration or termination of all Letters of Credit (other than Letters of Credit in which the Outstanding Amount of the L/C Obligations related thereto have been Cash Collateralized or, if satisfactory to the relevant L/C Issuer in its reasonable discretion, for which a backstop letter of credit is in place), in each case, unless the Obligations under the Secured Hedge Agreement or the Cash Management Obligations are due and payable at such time (it being understood and agreed that this Agreement and the security interests granted herein shall survive solely as to such due and payable Obligations and until such time as such due and payable Obligations have been paid in full) and (ii) any release of Collateral effective in the manner permitted by this Agreement shall not require the consent of any Hedge Bank or any Cash Management Bank that is not a Lender.

 

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M. Collateral Agent Appointed Attorney-in-Fact . Holdings hereby appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor’s true and lawful agent (and the attorney-in-fact) of Holdings for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof at any time after and during the continuance of an Event of Default, which appointment is irrevocable and coupled with an interest ( provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to exercising such rights). Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default and notice by the Collateral Agent to Holdings of the Collateral Agent’s intent to exercise such rights, with full power of substitution either in the Collateral Agent’s name or in the name of Holdings (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Pledged Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Pledged Collateral; (c) to commence and prosecute any and all suits, actions or proceedings at Law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Pledged Collateral or to enforce any rights in respect of any Pledged Collateral; (d) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Pledged Collateral; (e) to endorse the name of Holdings on any check, draft, instrument or other item of payment representing or included in the Pledged Collateral; (f) to make all determinations and decisions with respect thereto; and (e) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Pledged Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Pledged Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Pledged Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to Holdings for any act or failure to act hereunder, except for their own gross negligence, bad faith, or willful misconduct or that of any of their Affiliates, directors, officers, employees, counsel, agents or attorneys-in-fact, in each case, as determined by a final nonappealable judgment of a court of competent jurisdiction. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, within 10 days of demand, by Holdings to the Collateral Agent and shall be additional Secured Obligations secured hereby.

N. General Authority of the Collateral Agent . By acceptance of the benefits of this Agreement and any other Collateral Documents, each Secured Party (whether or not a signatory hereto) shall be deemed irrevocably (a) to consent to the appointment of the Collateral Agent as its agent hereunder and under such other Collateral Documents, (b) to confirm that the Collateral Agent shall have the authority to act as the exclusive agent of such Secured Party for the enforcement of any provisions of this Agreement and such other Collateral Documents against Holdings, the exercise of remedies hereunder or thereunder and the giving or withholding of any consent or approval hereunder or thereunder relating to any Pledged Collateral or Holdings’ obligations with respect thereto, (c) to agree that it shall not take any action to enforce any provisions of this Agreement or any other Collateral Document against Holdings, to exercise any remedy hereunder or thereunder or to give any consents or approvals hereunder or thereunder except as expressly provided in this Agreement or any other Collateral Document and (d) to agree to be bound by the terms of this Agreement and any other Collateral Documents.

 

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O. Reasonable Care . The Collateral Agent is required to use reasonable care in the custody and preservation of any of the Pledged Collateral in its possession; provided , that the Collateral Agent shall be deemed to have used reasonable care in the custody and preservation of any of the Pledged Collateral, if such Pledged Collateral is accorded treatment substantially similar to that which the Collateral Agent accords its own property.

P. Delegation; Limitation . The Collateral Agent may execute any of the powers granted under this Agreement and perform any duty hereunder either directly or by or through agents or attorneys-in-fact, and shall not be responsible for the gross negligence or willful misconduct of any agents or attorneys-in-fact selected by it with reasonable care and without gross negligence or willful misconduct.

Q. Reinstatement . The obligations of Holdings under this Agreement shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or other Loan Party in respect of the Secured Obligations is rescinded or must be otherwise restored by any holder of any of the Secured Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.

R. Miscellaneous . The Collateral Agent shall not be deemed to have actual, constructive, direct or indirect notice or knowledge of the occurrence of any Event of Default unless and until the Collateral Agent shall have received a notice of Event of Default or a notice from Holdings or the Secured Parties to the Collateral Agent in its capacity as Collateral Agent indicating that an Event of Default has occurred.

[ Signature Pages Follow. ]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.

 

SUMMIT MATERIALS INTERMEDIATE HOLDINGS, LLC

By:  

 

  Name:
  Title:

Signature Page to Pledge Agreement


BANK OF AMERICA, N.A.,
as Collateral Agent
By:  

 

  Name:
  Title:

Signature Page to Pledge Agreement


EQUITY INTERESTS

 

Pledgor

   Pledged Interest  

[            ]

     [            

 

H-1


EXHIBIT I-1

[FORM OF]

UNITED STATES TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Credit Agreement dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) among SUMMIT MATERIALS, LLC, a Delaware limited liability company (“ Borrower ”), the Guarantors party hereto from time to time, BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent, each lender from time to time party hereto (collectively, the “ Lenders ” and individually, a “ Lender ”), BANK OF AMERICA, N.A., as L/C Issuer and Swing Line Lender and the other parties thereto. Capitalized terms used herein but not otherwise defined shall have the meaning given to such term in the Credit Agreement.

Pursuant to the provisions of Section 3.01(d) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “ Code ”), (iii) it is not a ten percent shareholder of the Borrower within the meaning of Code Section 881(c)(3)(B), (iv) it is not a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, and (v) no payments in connection with any Loan Document are effectively connected with a United States trade or business conducted by the undersigned.

 

I-1-1


The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. person status on Internal Revenue Service Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent in writing and (2) the undersigned shall furnish the Borrower and the Administrative Agent a properly completed and currently effective certificate in either the calendar year in which payment is to be made by the Borrower or the Administrative Agent to the undersigned, or in either of the two calendar years preceding such payment.

[Signature Page Follows]

 

I-1-2


[Lender]
By:  

 

  Name:
  Title:
[Address]

Dated:             , 20[    ]

 

I-1-3


EXHIBIT I-2

[FORM OF]

UNITED STATES TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Credit Agreement dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) among SUMMIT MATERIALS, LLC, a Delaware limited liability company (“ Borrower ”), the Guarantors party hereto from time to time, BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent, each lender from time to time party hereto (collectively, the “ Lenders ” and individually, a “ Lender ”), BANK OF AMERICA, N.A., as L/C Issuer and Swing Line Lender, and the other parties thereto. Capitalized terms used herein but not otherwise defined shall have the meaning given to such term in the Credit Agreement.

Pursuant to the provisions of Section 3.01(d) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) neither the undersigned nor any of its partners/members is a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “ Code ”), (iv) none of its partners/members is a ten percent shareholder of the Borrower within the meaning of Code Section 881(c)(3)(B), (v) none of its partners/members is a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, and (vi) no payments in connection with any Loan Document are effectively connected with the a United States trade or business conducted by the undersigned or its partners/members.

 

I-2-1


The undersigned has furnished the Administrative Agent and the Borrower with Internal Revenue Service Form W-8IMY accompanied by an Internal Revenue Service Form W-8BEN from each of its partners/members claiming the portfolio interest exemption, provided that, for the avoidance of doubt, the foregoing shall not limit the obligation of the Lender to provide, in the case of a partner/member not claiming the portfolio interest exemption, a Form W-8ECI, Form W-9 or Form W-8IMY (including appropriate underlying certificates from each interest holder of such partner/member), in each case establishing such partner/member’s available exemption from U.S. federal withholding tax. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent in writing with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

[Signature Page Follows]

 

I-2-2


[Lender]

By:

 

 

 

Name:

 

Title:

[Address]

Dated:             , 20[    ]

 

I-2-3


EXHIBIT I-3

[FORM OF]

UNITED STATES TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Credit Agreement dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) among SUMMIT MATERIALS, LLC, a Delaware limited liability company (“ Borrower ”), the Guarantors party hereto from time to time, BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent, each lender from time to time party hereto (collectively, the “ Lenders ” and individually, a “ Lender ”), BANK OF AMERICA, N.A., as L/C Issuer and Swing Line Lender, and the other parties thereto. Capitalized terms used herein but not otherwise defined shall have the meaning given to such term in the Credit Agreement.

Pursuant to the provisions of Section 3.01(d) and Section 10.07(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “ Code ”), (iii) it is not a ten percent share-holder of the Borrower within the meaning of Code Section 881(c)(3)(B), (iv) it is not a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, and (v) no payments in connection with any Loan Document are effectively connected with a United States trade or business conducted by the undersigned.

The undersigned has furnished its participating non-U.S. Lender with a certificate of its non-U.S. person status on Internal Revenue Service Form W-8BEN. By executing this

 

I-3-1


certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such non-U.S. Lender in writing and (2) the undersigned shall have at all times furnished such non-U.S. Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

[Signature Page Follows]

 

I-3-2


[Lender]
By:  

 

  Name:
  Title:
[Address]

Dated:             , 20[    ]

 

I-3-3


EXHIBIT I-4

[FORM OF]

UNITED STATES TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Credit Agreement dated as of January 30, 2012 (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) among SUMMIT MATERIALS, LLC, a Delaware limited liability company (“ Borrower ”), the Guarantors party hereto from time to time, BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent, each lender from time to time party hereto (collectively, the “ Lenders ” and individually, a “ Lender ”), BANK OF AMERICA, N.A., as L/C Issuer and Swing Line Lender, and the other parties thereto. Capitalized terms used herein but not otherwise defined shall have the meaning given to such term in the Credit Agreement.

Pursuant to the provisions of Section 3.01(d) and Section 10.07(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such participation, (iii) neither the undersigned nor any of its partners/members is a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “ Code ”), (iv) none of its partners/members is a ten percent shareholder of the Borrower within the meaning of Code Section 881(c)(3)(B), (v) none of its partners/members is a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, and (vi) no payments in connection with any Loan Document are effectively connected with a United States trade or business conducted by the undersigned’s or its partners/members.

 

I-4-1


The undersigned has furnished its participating non-U.S. Lender with Internal Revenue Service Form W-8IMY accompanied by an Internal Revenue Service Form W-8BEN from each of its partners/members claiming the portfolio interest exemption, provided that, for the avoidance of doubt, the foregoing shall not limit the obligation of the Lender to provide, in the case of a partner/member not claiming the portfolio interest exemption, a Form W-8ECI, Form W-9 or Form W-8IMY (including appropriate underlying certificates from each interest holder of such partner/member), in each case establishing such partner/member’s available exemption from U.S. federal withholding tax. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such non-U.S. Lender in writing and (2) the undersigned shall have at all times furnished such non-U.S. Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

[Signature Page Follows]

 

I-4-2


[Lender]
By:  

 

  Name:
  Title:
[Address]

Dated:             , 20[    ]

 

I-4-3


EXHIBIT J

[FORM OF]

MORTGAGE

[The aggregate maximum principal amount of indebtedness that may be secured hereby is $[        ].] 29

 

 

[MORTGAGE/DEED OF TRUST], ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

by

[                                         ]

as [Mortgagor/Grantor],

to

[                                         ],

as Trustee

for the use and benefit of

BANK OF AMERICA, N.A.

in its capacity as Collateral Agent, as [Mortgagee/Beneficiary]

Dated as of [            ], 2012

Relating to Premises in:

[                    ] County, [                    ]

 

 

This instrument was prepared in consultation with

counsel in the state in which the [Mortgage Property/Trust Property] is

located by the attorney named below and after

recording, please return to:

Athy A. O’Keeffe, Esq.

Cahill Gordon & Reindel LLP

80 Pine Street

New York, NY 10005

 

29   TO BE INCLUDED ONLY IN MORTGAGE RECORDING TAX STATES.


TABLE OF CONTENTS

 

          Page  

PREAMBLE

     1   

RECITALS

     1   

AGREEMENT

     2   
ARTICLE I   
DEFINITIONS AND INTERPRETATION  

SECTION 1.1.

   Definitions      2  

SECTION 1.2.

   Interpretation      6  
ARTICLE II   
GRANTS AND OBLIGATIONS  

SECTION 2.1.

   Grant of [Mortgage Property/Trust Property]      6  

SECTION 2.2.

   Assignment of Leases and Rents      7  

SECTION 2.3.

   Obligations      7  

SECTION 2.4.

   Future Advances      8  

SECTION 2.5.

   Maximum Amount of Indebtedness      8  

SECTION 2.6.

   Last Dollar Secured      8  

SECTION 2.7.

   No Release      8  
ARTICLE III   
REPRESENTATIONS AND WARRANTIES OF [MORTGAGOR/GRANTOR]  

SECTION 3.1.

   Incorporation of Credit Agreement      9  

SECTION 3.2.

   Warranty of Title      9  

SECTION 3.3.

   Reserved      9  

SECTION 3.4.

   Charges      9  
ARTICLE IV   
CERTAIN COVENANTS OF [MORTGAGOR/GRANTOR]  

SECTION 4.1.

   Payment and Performance      10  

SECTION 4.2.

   Title      10  

SECTION 4.3.

   Inspection      11  

 

-i-


          Page  

SECTION 4.4.

   Limitation on Liens; Transfer Restrictions      11  

SECTION 4.5.

   Insurance      11  
ARTICLE V   
CONCERNING ASSIGNMENT OF LEASES AND RENTS  

SECTION 5.1.

   Present Assignment; License to the [Mortgagor/Grantor]      11  

SECTION 5.2.

   Collection of Rents by the [Mortgagee/Beneficiary]      12  

SECTION 5.3.

   Irrevocable Interest      13  
ARTICLE VI   
TAXES AND CERTAIN STATUTORY LIENS  

SECTION 6.1.

   Payment of Charges      13  

SECTION 6.2.

   Stamp and Other Taxes      13  

SECTION 6.3.

   Certain Tax Law Changes      14  

SECTION 6.4.

   Proceeds of Tax Claim      14  
ARTICLE VII   
CASUALTY EVENTS AND RESTORATION  

SECTION 7.1.

   Casualty Event      14  

SECTION 7.2.

   Condemnation      14  

SECTION 7.3.

   Proceeds      15  
ARTICLE VIII   
EVENTS OF DEFAULT AND REMEDIES  

SECTION 8.1.

   Event of Default      15  

SECTION 8.2.

   Remedies in Case of an Event of Default      15  

SECTION 8.3.

   Sale of [Mortgage Property/Trust Property] if Event of Default Occurs; Proceeds of Sale      16  

SECTION 8.4.

   Additional Remedies in Case of an Event of Default      18  

SECTION 8.5.

   Legal Proceedings After an Event of Default      18  

SECTION 8.6.

   Remedies Not Exclusive      19  
ARTICLE IX   
SECURITY AGREEMENT AND FIXTURE FILING  

SECTION 9.1.

   Security Agreement      20  

SECTION 9.2.

   Fixture Filing      21  

 

-ii-


          Page  
   ARTICLE X   
   FURTHER ASSURANCES   

SECTION 10.1.

   Recording Documentation To Assure Security      21  

SECTION 10.2.

   Further Acts      22  

SECTION 10.3.

   Additions to [Mortgage Property/Trust Property]      22  

SECTION 10.4.

   Additional Security      23  
   ARTICLE XI   
   MISCELLANEOUS   

SECTION 11.1.

   Covenants To Run with the Land; Joint and Several      23  

SECTION 11.2.

   No Merger      23  

SECTION 11.3.

   Concerning [Mortgagee/Beneficiary]      23  

SECTION 11.4.

   [Mortgagee/Beneficiary] May Perform; [Mortgagee/Beneficiary] Appointed Attorney-in-Fact      25  

SECTION 11.5.

   Continuing Security Interest; Assignment      25  

SECTION 11.6.

   Termination; Release      26  

SECTION 11.7.

   Modification in Writing      26  

SECTION 11.8.

   Notices      27  

SECTION 11.9.

   GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL      27  

SECTION 11.10.

   Severability of Provisions      27  

SECTION 11.11.

   Relationship      27  

SECTION 11.12.

   No Credit for Payment of Taxes or Impositions      28  

SECTION 11.13.

   No Claims Against the [Mortgagee/Beneficiary]      28  

SECTION 11.14.

   [Mortgagee/Beneficiary]’s Right To Sever Indebtedness      28  

SECTION 11.15.

   Collateral Agent’s Fees and Expenses; Indemnification      30  

ARTICLE XII

  

[REGARDING TRUSTEE  

SECTION 12.1.

   Trustee’s Powers and Liabilities      30  
ARTICLE XIII   
LOCAL LAW PROVISIONS  

SECTION 13.1.

   State-Specific Provisions Control      31  

SCHEDULE A

   Legal Description   

 

-iii-


[MORTGAGE/DEED OF TRUST], ASSIGNMENT OF LEASES AND RENTS, SECURITY

AGREEMENT AND FIXTURE FILING

[MORTGAGE/DEED OF TRUST], ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this “ [Mortgage/Deed of Trust] ”), dated as of [            ], 2012 (the “ Effective Date ”), made by [                    ], a [                    ] having an office at [                    ], as [Mortgagor/Grantor], assignor and debtor (in such capacities and together with any successors in such capacities, the “ [Mortgagor/Grantor] ”), in favor of [[                                        ] having an office at [                                        ], as trustee under this [Mortgage/Deed of Trust] (together with any successors in such capacities, the “ Trustee ”) for the benefit of] BANK OF AMERICA, N.A., a national banking association, having an office at [                                        ], in its capacity as Collateral Agent for the benefit of the Secured Parties (each as hereinafter defined), as [Mortgagee/Beneficiary], assignee and secured party (in such capacities and together with any successors in such capacities, the “ [Mortgagee/Beneficiary] ”).

R E C I T A L S :

A. Pursuant to that certain Credit Agreement, dated as of January [    ], 2012 among among Summit Materials, LLC, a Delaware limited liability company (the “ Borrower ”), the Guarantors party thereto from time to time, Bank of America, N.A., as Administrative Agent and Collateral Agent, each lender from time to time party hereto (collectively, the “ Lenders ” and individually, a “ Lender ”), Bank of America, N.A., as L/C Issuer and Swing Line Lender, Citigroup Global Markets Inc. and [                    ], as Co-Syndication Agents, and [                    ] and [                    ], as Co-Documentation Agents (as the same may be amended, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”).

[B. The Borrower owns, directly or through its Subsidiaries, all of the issued and outstanding ownership interests in the [Mortgagor/Grantor].] 30

[C. The [Mortgagor/Grantor] has, pursuant to Article XI of the Credit Agreement, among other things, guaranteed the obligations of the Borrower under the Credit Agreement and the other Loan Documents.] 31

[D. The [Mortgagor/Grantor] will receive substantial benefits from the execution, delivery and performance of the obligations under the Credit Agreement and the other Loan Documents and is, therefore, willing to enter into this [Mortgage/Deed of Trust].] 32

 

30   INCLUDE ONLY IF THE MORTGAGOR IS NOT THE BORROWER BUT A GUARANTOR.
31   INCLUDE ONLY IF THE MORTGAGOR IS NOT THE BORROWER BUT A GUARANTOR.
32   INCLUDE ONLY IF THE MORTGAGOR IS NOT THE BORROWER BUT A GUARANTOR.


E. It is a condition to the obligations of the Lenders to extend credit under the Credit Agreement that, among other things, the [Mortgagor/Grantor] execute and deliver the applicable Loan Documents, including this [Mortgage/Deed of Trust].

F. This [Mortgage/Deed of Trust] is given by the [Mortgagor/Grantor] to the Trustee for the benefit of the [Mortgagee/Beneficiary] for its benefit and the benefit of the other Secured Parties to secure the payment and performance of all of the Obligations.

A G R E E M E N T :

NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the [Mortgagor/Grantor] hereby covenants and agrees with the [Mortgagee/Beneficiary] as follows:

Article I.

DEFINITIONS AND INTERPRETATION

Section 1.01 Definitions .

(a) Capitalized terms used but not otherwise defined herein that are defined in the Credit Agreement shall have the meanings given to them in the Credit Agreement, including the following:

Affiliate ”; “ Aggregate Commitments ”; “ Casualty Event ”; “ Collateral ”; “ Collateral Agent ”; “ Default Rate ”; “ Event of Default ”; “ Flood Insurance Laws ”; “ Governmental Authority ”; “ Guarantors ”; “ Lender ”; “ Lien ”; “ Loan ”; “ Loan Documents ”; “ Loan Parties ”; “ Material Adverse Effect ”; “ Net Proceeds ”; “ Obligations ”; “ Person ”; “ Secured Parties ”; “ Subsidiary ”; and “ Taxes ”.

(b) The following terms in this [Mortgage/Deed of Trust] shall have the following meanings:

Allocated Indebtedness ” shall have the meaning assigned to such term in Section 11.14(i) hereof.

Allocation Notice ” shall have the meaning assigned to such term in Section 11.14(i) hereof.

Bankruptcy Code ” shall have the meaning assigned to such term in Section 5.1(ii) hereof.

 

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[Mortgagee/Beneficiary] ” shall have the meaning assigned to such term in the Preamble hereof.

Charges ” shall mean any and all present and future real estate, property and other Taxes, assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges imposed upon or assessed against all or any portion of the [Mortgage Property/Trust Property] which create or may reasonably be expected to create a Lien on the [Mortgage Property/Trust Property] or any part thereof, and all claims (including, without limitation, claims for landlords’, carriers’, mechanics’, workmen’s, repairmen’s, laborer’s, materialmen’s, suppliers’ and warehousemen’s Liens and other claims arising by operation of law) judgments or demands against, all or any portion of the [Mortgage Property/Trust Property] or other amounts of any nature which, if unpaid, may reasonably be expected to result in or permit the creation of, a Lien on the [Mortgage Property/Trust Property] or which may reasonably be expected to result in foreclosure of all or any portion of the [Mortgage Property/Trust Property].

Contracts ” shall mean, collectively, any and all right, title and interest of the [Mortgagor/Grantor] in and to any and all contracts and other general intangibles relating to the [Mortgage Property/Trust Property] and all reserves, deferred payments, deposits, refunds and claims of every kind, nature or character relating thereto.

Credit Agreement ” shall have the meaning assigned to such term in Recital A hereof.

[Mortgage/Deed of Trust] ” shall have the meaning assigned to such term in the Preamble hereof.

Fixtures ” shall mean all machinery, apparatus, equipment, fittings, fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Land or any other Improvement used in connection with the use and enjoyment of the Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are real property or fixtures under the UCC or any other applicable law including, without limitation, all HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, power, waste removal, elevators, maintenance or other systems or equipment, utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Land.

[Mortgagor/Grantor] ” shall have the meaning assigned to such term in the Preamble hereof.

Improvements ” shall mean all buildings, structures and other improvements of every kind or description and any and all alterations now or hereafter located, attached or erected on the Land, including, without limitation, (i) all Fixtures, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer

 

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rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Land and to be part of the Improvements immediately upon their incorporation therein.

Insurance Policies ” shall mean the insurance policies and coverages required to be maintained by the [Mortgagor/Grantor] with respect to the [Mortgage Property/Trust Property] pursuant to the Credit Agreement.

Land ” shall mean the land described in Schedule A annexed to this [Mortgage/Deed of Trust], together with all of the [Mortgagor/Grantor]’s reversionary rights in and to any and all easements, rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto and together with any greater or additional estate therein as may be acquired by the [Mortgagor/Grantor].

Landlord ” shall mean any landlord, lessor, sublandlord, sublessor, franchisor, licensor or [Mortgagor/Grantor], as applicable.

Landlord’s Interest ” shall have the meaning assigned to such term in Section 2.2 hereof.

Leases ” shall mean, collectively, any and all interests of the [Mortgagor/Grantor], as Landlord, in all leases and subleases of space, tenancies, franchise agreements, licenses, occupancy or concession agreements now existing or hereafter entered into, whether or not of record, relating in any manner to the Premises and any and all amendments, modifications, supplements, replacements, extensions and renewals of any thereof, whether now in effect or hereafter coming into effect.

Permit ” shall mean any and all permits, certificates, approvals, authorizations, consents, licenses, variances, franchises or other instruments, however characterized, of any Governmental Authority (or any person acting on behalf of a Governmental Authority) now or hereafter acquired or held, together with all amendments, modifications, extensions, renewals and replacements of any thereof issued or in any way furnished in connection with the [Mortgage Property/Trust Property] including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation.

Premises ” shall mean, collectively, the Land and the Improvements.

Proceeds ” shall mean, collectively, except as set forth in the Credit Agreement, any and all cash proceeds and noncash proceeds and shall include all (i) proceeds of the conversion, voluntary or involuntary, of any of the [Mortgage Property/Trust Property] or any portion thereof into cash or liquidated claims, (ii) proceeds of any insurance, indemnity,

 

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warranty, guaranty or claim payable to the [Mortgagee/Beneficiary] or to the [Mortgagor/Grantor] from time to time with respect to any of the [Mortgage Property/Trust Property], (iii) payments (in any form whatsoever) made or due and payable to the [Mortgagor/Grantor] from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any portion of the [Mortgage Property/Trust Property] by any Governmental Authority (or any person acting on behalf of a Governmental Authority), (iv) products of the [Mortgage Property/Trust Property] and (v) other amounts which constitute Proceeds (as such term is defined in the UCC).

Records ” shall mean, collectively, any and all right, title and interest of the [Mortgagor/Grantor] in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating to the [Mortgage Property/Trust Property] or the construction of any alteration relating to the Premises or the maintenance of any Permit.

Rents ” shall mean, collectively, any and all rents, additional rents, royalties, cash, guaranties, letters of credit, bonds, sureties or securities deposited under any Lease to secure performance of the Tenant’s obligations thereunder, revenues, earnings, profits and income, advance rental payments, payments incident to assignment, sublease or surrender of a Lease, claims for forfeited deposits and claims for damages, now due or hereafter to become due, with respect to any Lease, any indemnification against, or reimbursement for, sums paid and costs and expenses incurred by the [Mortgagor/Grantor] under any Lease or otherwise, and any award in the event of the bankruptcy of any Tenant under or guarantor of a Lease.

Requirements of Law ” shall mean, collectively, any and all requirements of any Governmental Authority including, without limitation, any and all orders, decrees, determinations, laws, treaties, ordinances, rules, regulations or similar statutes or case law.

Security Agreement ” shall mean that certain Security Agreement dated as of January [    ], 2012 among the Borrower, certain Subsidiaries of the Borrower identified as [Mortgagor/Grantor]s therein and Collateral Agent, as the same may have been or may be further amended, amended and restated, supplemented or otherwise modified from time to time.

Tenant ” shall mean any tenant, lessee, sublessee, franchisee, licensee, grantee or obligee, as applicable.

[Mortgage Property/Trust Property] ” shall have the meaning assigned to such term in Section 2.1 hereof.

UCC ” shall mean the Uniform Commercial Code as in effect on the date hereof in the state in which the Premises are located; provided , however , that if the creation, perfection or enforcement of any security interest herein granted is governed by the laws of any other state as to the matter in question, “UCC” shall mean the Uniform Commercial Code in effect in such state.

 

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UCC Collateral ” shall mean that portion of the [Mortgage Property/Trust Property] that constitutes personal property in which a security interest may be created under Article 9 of the UCC.

Section 1.02 Interpretation . The rules of construction set forth in Section 1.02 of the Credit Agreement shall be applicable to this [Mortgage/Deed of Trust] mutatis mutandis.

Article II.

GRANTS AND OBLIGATIONS

Section 2.01 Grant of [Mortgage Property/Trust Property] . In order to secure the due and punctual payment and performance of the Obligations for the benefit of the Secured Parties, the [Mortgagor/Grantor] hereby grants, mortgages, bargains, sells, assigns, transfers and conveys to the [Trustee, its successors and assigns, in trust, with power of sale and right of entry and possession, for the use and benefit of the] [Mortgagee/Beneficiary], and hereby grants to the [Mortgagee/Beneficiary] a security interest in and upon, all of the [Mortgagor/Grantor]’s estate, right, title and interest in, to and under all the following described property (to the extent such property does not constitute Excluded Assets under the Security Agreement), whether now owned or held or hereafter acquired from time to time (collectively, the “ [Mortgage Property/Trust Property] ”):

(a) Land;

(b) Improvements;

(c) Leases;

(d) Rents;

(e) Permits;

(f) Contracts;

(g) Records; and

(h) Proceeds;

Notwithstanding the foregoing provisions of this Section 2.1 , [Mortgage Property/Trust Property] shall not include a grant of any of the [Mortgagor/Grantor]’s right, title or interest in any Contract or an assignment thereof or Permit (x) that validly prohibits the creation by the [Mortgagor/Grantor] of a security interest therein and (y) to the extent, but only to the extent that, any Requirement of Law applicable thereto prohibits the creation of a security interest therein; provided , however , that the right to receive any payment of money or any other right referred to in Sections 9-406(d), 9-407(a) or 9-408(a) of the UCC to the extent that such Sections

 

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are effective to limit the prohibitions described in clauses (x) and (y) of this Section 2.1 shall constitute [Mortgage Property/Trust Property] hereunder; and provided , further , that at such time as any Contract or Permit described in clauses (x) and (y) of this Section 2.1 is no longer subject to such prohibition, such applicable Contract or Permit shall (without any act or delivery by any person) constitute [Mortgage Property/Trust Property] hereunder;

TO HAVE AND TO HOLD the [Mortgage Property/Trust Property], together with all estate, right, title and interest of the [Mortgagor/Grantor] and anyone claiming by, through or under the [Mortgagor/Grantor] in and to the [Mortgage Property/Trust Property] and all rights and appurtenances relating thereto, unto the [Mortgagee/Beneficiary], its successors and assigns, for the benefit of the [Mortgagee/Beneficiary] (in its capacity as agent for the benefit of the Secured Parties) for the purpose of securing the payment and performance in full of all the Obligations.

Section 2.02 Assignment of Leases and Rents . As additional security for the payment and performance in full of the Obligations and subject to the provisions of Article V hereof, the [Mortgagor/Grantor] absolutely, presently, unconditionally and irrevocably assigns, transfers and sets over to the [Mortgagee/Beneficiary], and grants to the [Mortgagee/Beneficiary], all of the [Mortgagor/Grantor]’s estate, right, title, interest, claim and demand, as Landlord, under any and all of the Leases including, without limitation, the following (such assigned rights, the “ Landlord’s Interest ”):

the immediate and continuing right to receive and collect Rents payable by the Tenants pursuant to the Leases;

all claims, rights, powers, privileges and remedies of the [Mortgagor/Grantor], whether provided for in the Leases or arising by statute or at law or in equity or otherwise, consequent on any failure on the part of the Tenants to perform or comply with any term of the Leases;

all rights to take all actions upon the happening of a default under the Leases as shall be permitted by the Leases or by law including, without limitation, the commencement, conduct and consummation of proceedings at law or in equity; and

the full power and authority, in the name of the [Mortgagor/Grantor] or otherwise, to enforce, collect, receive and receipt for any and all of the foregoing and to take all other actions whatsoever which the [Mortgagor/Grantor], as Landlord, is or may be entitled to take under the Leases.

Section 2.03 Obligations . Subject to the terms of Section 2.5 , this [Mortgage/Deed of Trust] secures, and the [Mortgage Property/Trust Property] is collateral security for, the payment and performance in full when due of the Obligations.

 

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Section 2.04 Future Advances . This [Mortgage/Deed of Trust] shall secure all Obligations including, without limitation, future advances whenever hereafter made with respect to or under the Credit Agreement or the other Loan Documents and shall secure not only Obligations with respect to presently existing indebtedness under the Credit Agreement or the other Loan Documents, but also any and all other indebtedness which may hereafter be owing by the [Mortgagor/Grantor] to the Secured Parties under the Credit Agreement or the other Loan Documents, however incurred, whether interest, discount or otherwise, and whether the same shall be deferred, accrued or capitalized, including future advances and re-advances, pursuant to the Credit Agreement or the other Loan Documents, whether such advances are obligatory or to be made at the option of the Secured Parties, or otherwise, and any extensions, refinancings, modifications or renewals of all such Obligations whether or not the [Mortgagor/Grantor] executes any extension agreement or renewal instrument and, in each case, to the same extent as if such future advances were made on the date of the execution of this [Mortgage/Deed of Trust].

Section 2.05 Maximum Amount of Indebtedness . The maximum aggregate amount of all indebtedness that is, or under any contingency may be secured at the date hereof or at any time hereafter by this [Mortgage/Deed of Trust] is $[            ] 33 (the “ Secured Amount ”), plus, to the extent permitted by applicable law, collection costs, sums advanced for the payment of Taxes, assessments, maintenance and repair charges, insurance premiums and any other costs reasonably incurred to protect the security encumbered hereby or the lien hereof, expenses reasonably incurred by the [Mortgagee/Beneficiary] by reason of any default by the [Mortgagor/Grantor] under the terms hereof, together with interest thereon, all of which amount shall be secured hereby.

Section 2.06 Last Dollar Secured . So long as the aggregate amount of the Obligations exceeds the Secured Amount, any payments and repayments of the Obligations shall not be deemed to be applied against or to reduce the Obligations secured by this [Mortgage/Deed of Trust].]

Section 2.07 No Release . Nothing set forth in this [Mortgage/Deed of Trust] shall relieve the [Mortgagor/Grantor] from the performance of any term, covenant, condition or agreement on the [Mortgagor/Grantor]’s part to be performed or observed under or in respect of any of the [Mortgage Property/Trust Property] or from any liability to any person under or in respect of any of the [Mortgage Property/Trust Property] or shall impose any obligation on the [Mortgagee/Beneficiary] or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the [Mortgagor/Grantor]’s part to be so performed or observed or shall impose any liability on the [Mortgagee/Beneficiary] or any other Secured Party for any act or omission on the part of the [Mortgagor/Grantor] relating thereto or for any breach of any representation or warranty on the part of the [Mortgagor/Grantor] contained in this [Mortgage/Deed of Trust] or any other Loan Document, or under or in respect of the [Mortgage

 

33   To be confirmed with corporate.

 

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Property/Trust Property] or made in connection herewith or therewith. The obligations of the [Mortgagor/Grantor] contained in this Section 2.7 shall survive the termination hereof and the discharge of the [Mortgagor/Grantor]’s other obligations under this [Mortgage/Deed of Trust] and the other Loan Documents.

Article III.

REPRESENTATIONS AND WARRANTIES OF [MORTGAGOR/GRANTOR]

Section 3.01 Incorporation of Credit Agreement . The [Mortgagor/Grantor] represents, warrants, covenants and agrees that each of the representations, warranties, covenants and other agreements of the [Mortgagor/Grantor] (as a Loan Party) under and as contained in the Credit Agreement are hereby incorporated herein in their entirety by this reference.

Section 3.02 Warranty of Title . The [Mortgagor/Grantor] represents and warrants that:

it has good record title to the Premises, free and clear of all Liens except for Liens permitted pursuant to the Credit Agreement; and

upon recordation in the official real estate records in the county (or other applicable jurisdiction) in which the Premises are located, this [Mortgage/Deed of Trust] will create and constitute a valid and enforceable first priority Lien on the [Mortgage Property/Trust Property] in favor of the [Mortgagee/Beneficiary] for the benefit of the Secured Parties, and, to the extent any of the [Mortgage Property/Trust Property] shall consist of Fixtures or other personal property, a first priority security interest therein, which first priority Lien and first priority security interest are, as of the date hereof, subject only to Liens permitted pursuant to the Credit Agreement.

Section 3.03 Reserved .

Section 3.04 Charges . The [Mortgagor/Grantor] represents and warrants that to the [Mortgagor/Grantor]’s knowledge all Charges imposed upon or assessed against the [Mortgage Property/Trust Property] have been paid and discharged except to the extent such Charges constitute, as of the date hereof and hereafter, a Lien permitted pursuant to the Credit Agreement.

 

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Article IV.

CERTAIN COVENANTS OF [MORTGAGOR/GRANTOR]

Section 4.01 Payment and Performance . The [Mortgagor/Grantor] shall pay and perform the Obligations in full as and when the same shall become due under the Loan Documents and when they are required to be performed thereunder.

Section 4.02 Title . The [Mortgagor/Grantor] shall

(A) to the extent required by the Credit Agreement, keep in effect all rights and appurtenances to or that constitute a part of the [Mortgage Property/Trust Property] except where the failure to keep in effect the same could not result in a Material Adverse Effect and (B) protect, preserve and defend all its right, title and interest in the [Mortgage Property/Trust Property] and title thereto;

(A) comply with each of the terms, conditions and provisions of any obligation of the [Mortgagor/Grantor] (including, without limitation, the Obligations) which is secured by the [Mortgage Property/Trust Property] and the noncompliance of which may reasonably be expected to result in the imposition of a Lien on the [Mortgage Property/Trust Property] subject to Liens permitted pursuant to the Credit Agreement, (B) forever warrant and defend to the [Trustee and] [Mortgagee/Beneficiary], the Lien and security interests created and evidenced hereby and the validity and, subject to the Liens permitted pursuant to the Credit Agreement, first priority position hereof in any action or proceeding against the claims of any and all persons whomsoever affecting or purporting to affect the [Mortgage Property/Trust Property] or any of the rights of the [Trustee and] [Mortgagee/Beneficiary] hereunder and (C) maintain this [Mortgage/Deed of Trust] as a valid and enforceable first priority Lien on the [Mortgage Property/Trust Property] and, to the extent any of the [Mortgage Property/Trust Property] shall consist of Fixtures, or other personal property, a first priority security interest in such fixtures and personal property, which first priority Lien and security interest shall be subject only to the Liens permitted pursuant to the Credit Agreement;

from the occurrence of and during the continuation of any Event of Default, immediately upon receiving notice of the pendency of any proceedings for the eviction of the [Mortgagor/Grantor] from the [Mortgage Property/Trust Property] or any part thereof by paramount title or otherwise questioning the [Mortgagor/Grantor]’s right, title and interest in, to and under the [Mortgage Property/Trust Property] as warranted in this [Mortgage/Deed of Trust], or of any condition that could give rise to any such proceedings, notify the [Mortgagee/Beneficiary] thereof; provided that the [Trustee and/or] [Mortgagee/Beneficiary] may participate in such proceedings and the [Mortgagor/Grantor] will deliver or cause to be delivered to the [Mortgagee/Beneficiary] all instruments requested by the [Mortgagee/Beneficiary] to permit such participation; and provided further , that in any such proceedings, the [Trustee and] [Mortgagee/Beneficiary] may be represented by counsel satisfactory to the [Trustee and] [Mortgagee/Beneficiary] at the reasonable expense of the [Mortgagor/Grantor]; and

unless permitted by the Credit Agreement, not initiate, join in or consent to any change in the zoning or any other permitted use classification of the Premises without the prior written consent of the [Mortgagee/Beneficiary] other than those changes that would not result in a Material Adverse Effect.

 

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Section 4.03 Inspection . The [Mortgagor/Grantor] shall permit the [Mortgagee/Beneficiary], and its agents, representative and employees, to inspect the [Mortgage Property/Trust Property] and all books and records located thereon in accordance with the terms of Section 6.10 of the Credit Agreement.

Section 4.04 Limitation on Liens; Transfer Restrictions .

(a) Except for the Liens permitted pursuant to the Credit Agreement, the [Mortgagor/Grantor] may not, without the prior written consent of the [Mortgagee/Beneficiary], permit to exist or grant any Lien on all or any part of the [Mortgage Property/Trust Property] or suffer or allow any of the foregoing to occur by operation of law or otherwise.

(b) Except to the extent permitted by the Credit Agreement, the [Mortgagor/Grantor] may not, without the prior written consent of the [Mortgagee/Beneficiary], sell, convey, assign, lease or otherwise transfer all or any part of the [Mortgage Property/Trust Property].

Section 4.05 Insurance .

(a) The [Mortgagor/Grantor] shall obtain and keep in full force and effect the Insurance Policies required by Section 6.07 of the Credit Agreement pursuant to the terms thereof including, without limitation, the requirement to, with respect to each to each parcel of [Mortgage Property/Trust Property], (i) if at any time any “building” (as defined in the Flood Insurance Laws) is located in an area designated as a “Special Flood Hazard Area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance with a financially sound and reputable insurer in such total amount as the [Mortgagee/Beneficiary] or the Required Lenders may from time to time reasonably require, (ii) otherwise comply with the Flood Insurance Laws and (ii) deliver to [Mortgagee/Beneficiary] evidence of such insurance.

Article V.

CONCERNING ASSIGNMENT OF LEASES AND RENTS

Section 5.01 Present Assignment; License to the [Mortgagor/Grantor] .

(a) Section 2.2 of this [Mortgage/Deed of Trust] constitutes a present, absolute, effective, irrevocable and complete assignment by the [Mortgagor/Grantor] to the [Mortgagee/Beneficiary] of the Leases and Rents and the right, subject to applicable law, to

 

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collect all sums payable to the [Mortgagor/Grantor] thereunder and apply the same as the [Mortgagee/Beneficiary] may reasonably determine to be appropriate to protect the security afforded by this [Mortgage/Deed of Trust] (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, Taxes and upkeep of the [Mortgage Property/Trust Property]), which is not conditioned upon the [Mortgagee/Beneficiary] being in possession of the Premises. This assignment is an absolute assignment and not an assignment for additional security only. The [Mortgagee/Beneficiary] hereby grants to the [Mortgagor/Grantor], however, a license to exercise all rights extended to the Landlord under the Leases, including the rights to collect and apply the Rents and to enforce the obligations of Tenants under the Leases. Immediately upon the occurrence of and during the continuance of any Event of Default, whether or not legal proceedings have commenced and without regard to waste, adequacy of security for the Obligations or solvency of the [Mortgagor/Grantor], the license granted in the immediately preceding sentence shall automatically cease and terminate without any notice by the [Mortgagee/Beneficiary] (such notice being hereby expressly waived by the [Mortgagor/Grantor] to the extent permitted by applicable law), or any action or proceeding or the intervention of a receiver appointed by a court.

(b) The [Mortgagor/Grantor] acknowledges that the [Mortgagee/Beneficiary] has taken all reasonable actions necessary to obtain, and that upon recordation of this [Mortgage/Deed of Trust], the [Mortgagee/Beneficiary] shall have, to the extent permitted under applicable law, a valid and fully perfected, first priority, present assignment of the Rents arising out of the Leases and all security for such Leases, subject to the Liens permitted pursuant to the Credit Agreement and, in the case of security deposits, rights of depositors and Requirements of Law. The [Mortgagor/Grantor] acknowledges and agrees that upon recordation of this [Mortgage/Deed of Trust], the [Mortgagee/Beneficiary]’s interest in the Rents shall be deemed to be fully perfected, “choate” and enforced as to the [Mortgagor/Grantor] and all third parties, including, without limitation, any subsequently appointed trustee in any case under Title II of the United States Code (the “ Bankruptcy Code ”), without the necessity of commencing a foreclosure action with respect to this [Mortgage/Deed of Trust], making formal demand for the Rents, obtaining the appointment of a receiver or taking any other affirmative action.

(c) Without limitation of the absolute nature of the assignment of the Rents hereunder, the [Mortgagor/Grantor] and the [Mortgagee/Beneficiary] agree that (a) this [Mortgage/Deed of Trust] shall constitute a “security agreement” for purposes of Section 552(b) of the Bankruptcy Code, (b) the security interest created by this [Mortgage/Deed of Trust] extends to property of the [Mortgagor/Grantor] acquired before the commencement of a case in bankruptcy and to all amounts paid as Rents, and (c) such security interest shall extend to all rents acquired by the estate after the commencement of any case in bankruptcy.

Section 5.02 Collection of Rents by the [Mortgagee/Beneficiary] .

(a) Any Rents receivable by the [Mortgagee/Beneficiary] hereunder, after payment of all proper costs and expenses as the [Mortgagee/Beneficiary] may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses

 

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in connection with the maintenance, operation, improvement, insurance, Taxes and upkeep of the [Mortgage Property/Trust Property]), shall be applied in accordance with the provisions of Section 8.04 of the Credit Agreement. The [Mortgagee/Beneficiary] shall be accountable to the [Mortgagor/Grantor] only for Rents actually received by the [Mortgagee/Beneficiary]. The collection of such Rents and the application thereof shall not cure or waive any Event of Default or waive, modify or affect notice of Event of Default or invalidate any act done pursuant to such notice.

(b) Following the occurrence of and continuance of an Event of Default, the [Mortgagor/Grantor] hereby irrevocably authorizes and directs Tenant under each Lease to rely upon and comply with any and all notices or demands from the [Mortgagee/Beneficiary] for payment of Rents to the [Mortgagee/Beneficiary], and the [Mortgagor/Grantor] shall have no claim against Tenant for Rents paid by Tenant to the [Mortgagee/Beneficiary] pursuant to such notice or demand.

Section 5.03 Irrevocable Interest . All rights, powers and privileges of the [Trustee and] [Mortgagee/Beneficiary] herein set forth are coupled with an interest and are irrevocable, subject to the terms and conditions hereof, and the [Mortgagor/Grantor] shall not take any action under the Leases or otherwise which is inconsistent with this [Mortgage/Deed of Trust] or any of the terms hereof and any such action inconsistent herewith or therewith shall be void.

Article VI.

TAXES AND CERTAIN STATUTORY LIENS

Section 6.01 Payment of Charges . Unless and to the extent permitted under Section 7.01 of the Credit Agreement or contested by the [Mortgagor/Grantor] in accordance with the provisions of the Credit Agreement, the [Mortgagor/Grantor] shall pay and discharge, or cause to be paid and discharged, from time to time prior to same becoming delinquent, all Charges. The [Mortgagor/Grantor] shall, upon the [Mortgagee/Beneficiary]’s written or electronic request, deliver to the [Mortgagee/Beneficiary] receipts evidencing the payment of all such Charges.

Section 6.02 Stamp and Other Taxes . The [Mortgagor/Grantor] shall pay any United States documentary stamp Taxes, with interest and fines and penalties, and any recording Taxes, with interest and fines and penalties, that may hereafter be levied, imposed or assessed under or upon or by reason hereof or the Obligations or any instrument or transaction affecting or relating to either thereof, and in default thereof the [Mortgagee/Beneficiary] may advance the same and the amount so advanced shall be payable by the [Mortgagor/Grantor] to the [Mortgagee/Beneficiary] in accordance with the provisions of Section 10.04 of the Credit Agreement.

 

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Section 6.03 Certain Tax Law Changes . In the event of the passage after the date hereof of any law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the laws for the taxation of deeds of trust or debts secured by deeds of trust for state or local purposes (other than laws governing income, franchise and similar Taxes generally) or the manner of the collection of any Taxes, and imposing any Taxes (other than laws governing income, franchise and similar Taxes generally), either directly or indirectly, on this [Mortgage/Deed of Trust] or any other Loan Document, the [Mortgagor/Grantor] shall promptly pay to the [Mortgagee/Beneficiary] such amount or amounts as may be necessary from time to time to pay any such Taxes, assessments or other charges resulting therefrom; provided , that if any such payment or reimbursement shall be unlawful or taxable to the [Mortgagee/Beneficiary], or would constitute usury or render the indebtedness wholly or partially usurious under applicable law, the [Mortgagor/Grantor] shall pay or reimburse the [Mortgagee/Beneficiary] for payment of the lawful and non-usurious portion thereof.

Section 6.04 Proceeds of Tax Claim . In the event that the proceeds of any tax claim are paid after the [Mortgagee/Beneficiary] has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the [Mortgagee/Beneficiary] to satisfy any deficiency remaining after such foreclosure. The [Mortgagee/Beneficiary] shall retain its interest in the proceeds of any tax claim during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the [Mortgagee/Beneficiary] shall in a reasonably prompt manner be released to the [Mortgagor/Grantor].

Article VII.

CASUALTY EVENTS AND RESTORATION

Section 7.01 Casualty Event . If there shall occur any Casualty Event (or, in the case of any condemnation, taking or other proceeding in the nature thereof, upon the occurrence thereof or notice of the commencement of any proceedings therefor), which may reasonably be expected to result in Net Proceeds which, pursuant to the terms of the Credit Agreement, are required to be applied to mandatory prepayment of all or any portion of the Obligations or may materially interfere with the use and occupancy of the [Mortgage Property/Trust Property], the [Mortgagor/Grantor] shall promptly send to the [Mortgagee/Beneficiary] a written notice setting forth the nature and extent thereof.

Section 7.02 Condemnation . Following the occurrence and during the continuation of any Event of Default, in the case of any taking, condemnation or other proceeding in the nature thereof, which may reasonably be expected to result in Net Proceeds or may materially and adversely interfere with the use and occupancy of the [Mortgage Property/Trust Property], the [Mortgagee/Beneficiary] may, at its option, participate in any proceedings or negotiations which might result in any taking or condemnation and the [Mortgagor/Grantor] shall deliver or cause to be delivered to the

 

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[Mortgagee/Beneficiary] all instruments reasonably requested by it to permit such participation. The [Mortgagee/Beneficiary] may be represented by counsel satisfactory to it at the reasonable expense of the [Mortgagor/Grantor] in connection with any such participation. The [Mortgagor/Grantor] shall pay all reasonable fees, costs and expenses incurred by the [Mortgagee/Beneficiary] in connection therewith and in seeking and obtaining any award or payment on account thereof. The [Mortgagor/Grantor] shall take all steps necessary to notify the condemning authority of such participation.

Section 7.03 Proceeds . All proceeds from any Casualty Event will be distributed in accordance with the Credit Agreement.

Article VIII.

EVENTS OF DEFAULT AND REMEDIES

Section 8.01 Event of Default . The term “ Event of Default ” as used in this [Mortgage/Deed of Trust] shall have the meaning assigned to such term in the Credit Agreement and the occurrence of an Event of Default under the Credit Agreement shall constitute an Event of Default hereunder.

Section 8.02 Remedies in Case of an Event of Default . If any Event of Default shall have occurred and be continuing, the [Mortgagee/Beneficiary] may at its option, in addition to any other action permitted under this [Mortgage/Deed of Trust] or the Credit Agreement or any other Loan Document or by law, statute or in equity, take one or more of the following actions to the greatest extent permitted by local law:

personally, or by its agents or attorneys, [and where applicable law so requires, with the Trustee] (A) enter into and upon and take possession of all or any part of the Premises together with the books, records and accounts of the [Mortgagor/Grantor] relating thereto and, exclude the [Mortgagor/Grantor], its agents and servants wholly therefrom, (B) use, operate, manage and control the Premises and conduct the business thereof, (C) maintain and restore the Premises, (D) make all necessary or proper repairs, renewals and replacements and such useful alterations thereto and thereon as the [Mortgagee/Beneficiary] may deem advisable, (E) manage, lease and operate the Premises and carry on the business thereof and exercise all rights and powers of the [Mortgagor/Grantor] with respect thereto either in the name of the [Mortgagor/Grantor] or otherwise or (F) collect and receive all Rents. The [Mortgagee/Beneficiary] shall be under no liability for or by reason of any such taking of possession, entry, removal or holding, operation or management except that any amounts so received by the [Mortgagee/Beneficiary] shall be applied in accordance with the provisions of Section 8.04 of the Credit Agreement.

 

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with or without entry, personally or by its agents or attorneys, [or by the Trustee at the direction of the Beneficiary (as so required by applicable law)] (A) sell the [Mortgage Property/Trust Property] and all estate, right, title and interest, claim and demand therein at one or more sales in one or more parcels, in accordance with the provisions of Section 8.3 hereof or (B) institute and prosecute proceedings for the complete or partial foreclosure of the Lien and security interests created and evidenced hereby; or

take such steps to protect and enforce its rights whether by action, suit or proceeding at law or in equity for the specific performance of any covenant, condition or agreement in the Credit Agreement and the other Loan Documents, or in aid of the execution of any power granted in this [Mortgage/Deed of Trust], or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the [Mortgagee/Beneficiary] shall elect.

Section 8.03 Sale of [Mortgage Property/Trust Property] if Event of Default Occurs; Proceeds of Sale .

(a) If any Event of Default shall have occurred and be continuing, the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary]] (as so required by applicable law) may institute an action to foreclose this [Mortgage/Deed of Trust] or take such other action as may be permitted and available to the [Mortgagee/Beneficiary] at law or in equity for the enforcement of the Credit Agreement and realization on the [Mortgage Property/Trust Property] and proceeds thereon through power of sale (if then available under applicable law) or to final judgment and execution thereof for the Obligations, and in furtherance thereof the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary (as so required by applicable law)] may sell the [Mortgage Property/Trust Property] at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law or statute or in equity. The [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary (as so required by applicable law)] may execute and deliver to the purchaser at such sale a conveyance of the [Mortgage Property/Trust Property] in fee simple or otherwise, as appropriate, and an assignment or conveyance of all the Landlord’s Interest in the Leases and the [Mortgage Property/Trust Property], each of which conveyances and assignments shall contain recitals as to the Event of Default upon which the execution of the power of sale herein granted depends, and the [Mortgagor/Grantor] hereby constitutes and appoints the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary (as so required by applicable law)] the true and lawful attorney in fact of the [Mortgagor/Grantor] to make any such recitals, sale, assignment and conveyance, and all of the acts of the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary] as such attorney in fact are hereby ratified and confirmed. The [Mortgagor/Grantor] agrees that such recitals shall be binding and conclusive upon the [Mortgagor/Grantor] and that any assignment or conveyance to be made by the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary] shall divest the [Mortgagor/Grantor] of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the [Mortgage Property/Trust Property]. The power and agency hereby granted are coupled with an interest and are

 

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irrevocable by death or dissolution, or otherwise, and are in addition to any and all other remedies which the [Mortgagee/Beneficiary] [and Trustee at the direction of the Beneficiary] may have hereunder, at law or in equity. So long as the Obligations, or any part thereof, remain unpaid, the [Mortgagor/Grantor] agrees that possession of the [Mortgage Property/Trust Property] by the [Mortgagor/Grantor], or any person claiming under the [Mortgagor/Grantor], shall be as tenant, and, in case of a sale under power or upon foreclosure as provided in this [Mortgage/Deed of Trust], the [Mortgagor/Grantor] and any person in possession under the [Mortgagor/Grantor], as to whose interest such sale was not made subject, shall, at the option of the purchaser at such sale, then become and be tenants holding over, and shall forthwith deliver possession to such purchaser, or be summarily dispossessed in accordance with the laws applicable to tenants holding over. In case of any sale under this [Mortgage/Deed of Trust] by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the [Mortgage Property/Trust Property] may be sold as an entirety or in separate parcels in such manner or order as the [Mortgagee/Beneficiary], in its sole discretion, may elect. One or more exercises of powers herein granted shall not extinguish or exhaust such powers, until the entire [Mortgage Property/Trust Property] is sold or all amounts secured hereby are paid in full.

(b) The proceeds of any sale made under or by virtue of this Article VIII , together with any other sums which then may be held by the [Mortgagee/Beneficiary] under this [Mortgage/Deed of Trust], whether under the provisions of this Article VIII or otherwise, shall be applied in accordance with the provisions of Section 8.04 of the Credit Agreement.

(c) The [Mortgagee/Beneficiary] (on behalf of any Secured Party or on its own behalf) or any Secured Party may bid for and acquire the [Mortgage Property/Trust Property] or any part thereof at any sale made under or by virtue of this Article VIII and, if the [Mortgagee/Beneficiary] or such other Secured Party is the highest bidder may, in lieu of paying cash therefor, make settlement for the purchase price by crediting against the purchase price the unpaid amounts (whether or not then due) owing to the [Mortgagee/Beneficiary], or such Secured Party in respect of the Obligations, after deducting from the sales price the expense of the sale and the reasonable costs of the action or proceedings and any other sums that the [Mortgagee/Beneficiary], [Trustee] or such Secured Party is authorized to deduct under this [Mortgage/Deed of Trust].

(d) The [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary (as so required by applicable law)] may, in its sole discretion, adjourn from time to time any sale by it to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and, the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary (as so required by applicable law)], without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned.

(e) If the Premises are comprised of more than one parcel of land, the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary (as so required by applicable law)] may, in its sole discretion, take any of the actions authorized by this Section 8.3 in respect of any individual parcel, any number of individual parcels or all parcels collectively.

 

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Section 8.04 Additional Remedies in Case of an Event of Default .

(a) If an Event of Default shall have occurred and be continuing the [Mortgagee/Beneficiary] shall be entitled to recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the provisions hereof and, to the extent permitted by applicable law, the right of the [Mortgagee/Beneficiary] to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions hereof, or the foreclosure of, or absolute conveyance pursuant to, this [Mortgage/Deed of Trust]. In case of proceedings against the [Mortgagor/Grantor] in insolvency or bankruptcy or any proceedings for its reorganization or involving the liquidation of its assets, the [Mortgagee/Beneficiary] shall be entitled to prove the whole amount of principal and interest and other payments, charges and costs due in respect of the Obligations to the full amount thereof without deducting therefrom any proceeds obtained from the sale of the whole or any part of the [Mortgage Property/Trust Property]; provided , however , that in no case shall the [Mortgagee/Beneficiary] receive a greater amount than the aggregate of such principal, interest and such other payments, charges and costs (with interest at the Default Rate) from the proceeds of the sale of the [Mortgage Property/Trust Property] and the distribution from the estate of the [Mortgagor/Grantor].

(b) Any recovery of any judgment by the [Mortgagee/Beneficiary] and any levy of any execution under any judgment upon the [Mortgage Property/Trust Property] shall not affect in any manner or to any extent the Lien and security interests created and evidenced hereby upon the [Mortgage Property/Trust Property] or any part thereof, or any conveyances, powers, rights and remedies of the [Mortgagee/Beneficiary] hereunder, but such conveyances, powers, rights and remedies shall continue unimpaired as before.

(c) Any monies collected by the [Mortgagee/Beneficiary] under this Section 8.4 shall be applied in accordance with the provisions of Section 8.3(ii) .

Section 8.05 Legal Proceedings After an Event of Default .

(a) After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the Obligations or any part thereof, or of any proceedings to foreclose the Lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, the [Mortgagor/Grantor] shall enter its voluntary appearance in such action, suit or proceeding.

(b) Upon the occurrence and during the continuance of an Event of Default, the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary] shall be entitled forthwith as a matter of right, concurrently or independently of any other right or remedy hereunder either before or after declaring the Obligations or any part thereof to be due and payable, to the appointment of a receiver without giving notice to any party and without regard

 

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to the adequacy or inadequacy of any security for the Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Obligations or any portion thereof. The [Mortgagor/Grantor] hereby consents to the appointment of such receiver. Notwithstanding the appointment of any receiver, the [Mortgagee/Beneficiary] shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Credit Agreement to the [Mortgagee/Beneficiary].

(c) Upon the occurrence and during the continuance of an Event of Default the [Mortgagor/Grantor] shall not (A) at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of the [Mortgage Property/Trust Property] or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance hereof, (B) claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the [Mortgage Property/Trust Property], or any part thereof, prior to any sale or sales of the [Mortgage Property/Trust Property] which may be made pursuant to this [Mortgage/Deed of Trust], or pursuant to any decree, judgment or order of any court of competent jurisdiction or (C) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof. To the extent permitted by applicable law, the [Mortgagor/Grantor] hereby expressly (A) waives all benefit or advantage of any such law or laws, (B) waives any and all rights to trial by jury in any action or proceeding related to the enforcement hereof, (C) waives any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding brought in connection with this [Mortgage/Deed of Trust] and further waives and agrees not to plead that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum and (D) covenants not to hinder, delay or impede the execution of any power granted or delegated to the [Mortgagee/Beneficiary] [and/or Trustee] by this [Mortgage/Deed of Trust] but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted. The [Mortgagee/Beneficiary] shall not be liable for any incorrect or improper payment made pursuant to this Article VIII in the absence of gross negligence or willful misconduct.

Section 8.06 Remedies Not Exclusive . No remedy conferred upon or reserved to the [Mortgagee/Beneficiary] [and/or Trustee] by this [Mortgage/Deed of Trust] is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this [Mortgage/Deed of Trust] or now or hereafter existing at law or in equity. Any delay or omission of the [Mortgagee/Beneficiary] to exercise any right or power accruing on any Event of Default shall not impair any such right or power and shall not be construed to be a waiver of or acquiescence in any such Event of Default. Every power and remedy given by this [Mortgage/Deed of Trust] may be exercised from time to time concurrently or independently, when and as often as may be deemed expedient by the [Mortgagee/Beneficiary] in such order and manner as the [Mortgagee/Beneficiary], in its sole discretion, may elect. If the [Mortgagee/Beneficiary] accepts any monies required to be paid by the [Mortgagor/Grantor] under this [Mortgage/Deed of Trust] after the same become due, such acceptance shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums secured by this [Mortgage/Deed of Trust] or to declare an Event of Default with

 

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regard to subsequent defaults. If the [Mortgagee/Beneficiary] accepts any monies required to be paid by the [Mortgagor/Grantor] under this [Mortgage/Deed of Trust] in an amount less than the sum then due, such acceptance shall be deemed an acceptance on account only and on the condition that it shall not constitute a waiver of the obligation of the [Mortgagor/Grantor] to pay the entire sum then due, and the [Mortgagor/Grantor]’s failure to pay the entire sum then due shall be and continue to be a default hereunder notwithstanding acceptance of such amount on account.

Article IX.

SECURITY AGREEMENT AND FIXTURE FILING

Section 9.01 Security Agreement . To the extent the [Mortgage Property/Trust Property] consists of UCC Collateral or items of personal property which are or are to become Fixtures under applicable law, this [Mortgage/Deed of Trust] shall also be construed as a security agreement under the UCC. The [Mortgagor/Grantor], in order to secure the due and punctual payment and performance of the Obligations, hereby grants to the [Mortgagee/Beneficiary] for its benefit and for the benefit of the Secured Parties, a security interest in and to such UCC Collateral and Fixtures. Upon and during the continuance of an Event of Default, the [Mortgagee/Beneficiary] shall be entitled with respect to the UCC Collateral and Fixtures to exercise all remedies hereunder or any other Loan Document or available under the UCC with respect thereto and all other remedies available under applicable law. Without limiting the foregoing, the UCC Collateral and Fixtures may, at the [Mortgagee/Beneficiary]’s option, (i) be sold hereunder together with any sale of any portion of the [Mortgage Property/Trust Property] or otherwise, (ii) be sold separately pursuant to the UCC, or (iii) be dealt with by the [Mortgagee/Beneficiary], in its sole discretion, in any other manner permitted under applicable law. The [Mortgagee/Beneficiary] may require the [Mortgagor/Grantor] to assemble the UCC Collateral and fixtures and make it available to the [Mortgagee/Beneficiary] at the Premises. The [Mortgagor/Grantor] acknowledges and agrees that the [Mortgagee/Beneficiary] shall give the [Mortgagor/Grantor] not less than ten (10) business days’ prior notice of the time and place of any intended disposition.

 

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Section 9.02 Fixture Filing . To the extent that the [Mortgage Property/Trust Property] includes items of personal property which are or are to become Fixtures under applicable law, and to the extent permitted under applicable law, the filing hereof in the real estate records of the county in which such [Mortgage Property/Trust Property] is located shall also operate from the date of such recording as a fixture filing, with respect to such [Mortgage Property/Trust Property], and the following information is applicable for the purpose of such fixture filing, to wit:

 

Name and Address of the debtor:

 

The [Mortgagor/Grantor] having the address described in the Preamble hereof.

 

The [Mortgagor/Grantor] is a limited liability company organized under the laws of the State of [                    ] whose Organization Number is [    ].

 

  

Name and Address of the secured party:

 

The [Mortgagee/Beneficiary] having the address described in the Preamble hereof, from which address information concerning the security interest may be obtained.

This Financing Statement covers the following types or items of property:

 

The Property.

This instrument covers goods or items of personal property which are or are to become fixtures upon the Property.

 

The [Mortgagor/Grantor] is the record owner of the Land.

In addition, the [Mortgagor/Grantor] hereby authorizes the [Mortgagee/Beneficiary] to file appropriate financing and continuation statements under the UCC in effect in the jurisdiction in which the [Mortgage Property/Trust Property] is located or where the [Mortgagor/Grantor] is located/organized or any other applicable jurisdiction as may be required by law in order to create, establish, preserve and protect the liens and security interests intended to be granted to the [Mortgagee/Beneficiary] pursuant to this [Mortgage/Deed of Trust] in the [Mortgage Property/Trust Property].

Article X.

FURTHER ASSURANCES

Section 10.01 Recording Documentation To Assure Security . The [Mortgagor/Grantor] shall, after the execution and delivery hereof and thereafter, from time to time, cause this [Mortgage/Deed of Trust] and any financing statement, continuation statement or similar instrument relating to any of the [Mortgage Property/Trust Property] or to any property intended to be subject to the Lien hereof or the security interests created hereby to be filed, registered and recorded in such manner and in such places as may be required by any present or future law and shall take such actions as the [Mortgagee/Beneficiary] shall reasonably deem necessary in order to publish notice of and fully to protect the validity and priority of the Liens, assignment, and security interests purported to be created upon the [Mortgage Property/Trust Property] and the interest and rights of the [Mortgagee/Beneficiary] therein. The [Mortgagor/Grantor] shall pay or cause to be paid all Taxes and fees incident to such filing, registration and recording, and all expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp Taxes or other Taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments.

 

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Section 10.02 Further Acts . The [Mortgagor/Grantor] shall, at its sole cost and expense, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances as the [Mortgagee/Beneficiary] [or Trustee at the direction of the Beneficiary] shall from time to time reasonably request, which may be necessary in the reasonable judgment of the [Mortgagee/Beneficiary] from time to time to assure, perfect, convey, assign, mortgage, transfer and confirm unto the [Mortgagee/Beneficiary] [and Trustee], the property and rights hereby conveyed or assigned or which the [Mortgagor/Grantor] may be or may hereafter become bound to convey or assign to the [Mortgagee/Beneficiary] [and Trustee] or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. Without limiting the generality of the foregoing, in the event that the [Mortgagee/Beneficiary] [or Trustee at the direction of the Beneficiary] desires to exercise any remedies, consensual rights or attorney-in-fact powers set forth in this [Mortgage/Deed of Trust] and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other person therefor, then, upon the reasonable request of the [Mortgagee/Beneficiary] [or Trustee at the direction of the Beneficiary], the [Mortgagor/Grantor] agrees to use commercially reasonable efforts to assist and aid the [Mortgagee/Beneficiary] [and/or Trustee] to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. In the event the [Mortgagor/Grantor] shall fail after demand to execute any instrument or take any action required to be executed or taken by the [Mortgagor/Grantor] under this Section 10.2 , the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary] may execute or take the same as the attorney-in-fact for the [Mortgagor/Grantor], such power of attorney being coupled with an interest and is irrevocable.

Section 10.03 Additions to [Mortgage Property/Trust Property] . All right, title and interest of the [Mortgagor/Grantor] in and to all extensions, amendments, relocations, restakings, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the [Mortgage Property/Trust Property] hereafter acquired by or released to the [Mortgagor/Grantor] or constructed, assembled or placed by the [Mortgagor/Grantor] upon the Premises, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case without any further deed, conveyance, assignment or other act by the [Mortgagor/Grantor], shall become subject to the Lien and security interest of this [Mortgage/Deed of Trust] as fully and completely and with the same effect as though now owned by the [Mortgagor/Grantor] and specifically described in the grant of the [Mortgage Property/Trust Property] above, but at any and all times the [Mortgagor/Grantor] will execute and deliver to the [Mortgagee/Beneficiary] any and all such further assurances, deeds, conveyances or assignments thereof as the [Mortgagee/Beneficiary] may reasonably require for the purpose of expressly and specifically subjecting the same to the Lien and security interest of this [Mortgage/Deed of Trust].

 

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Section 10.04 Additional Security . Without notice to or consent of the [Mortgagor/Grantor] and without impairment of the Lien and rights created by this [Mortgage/Deed of Trust], the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary] may accept (but the [Mortgagor/Grantor] shall not be obligated to furnish) from the [Mortgagor/Grantor] or from any other person, additional security for the Secured Obligations. Neither the giving hereof nor the acceptance of any such additional security shall prevent the [Mortgagee/Beneficiary] [or Trustee at the direction of the Beneficiary] from resorting, first, to such additional security, and, second, to the security created by this [Mortgage/Deed of Trust] without affecting the [Mortgagee/Beneficiary]’s [and Trustee’s] Lien and rights under this [Mortgage/Deed of Trust].

Article XI.

MISCELLANEOUS

Section 11.01 Covenants To Run with the Land; Joint and Several . All of the grants, covenants, terms, provisions and conditions in this [Mortgage/Deed of Trust] shall run with the Land and the [Mortgagor/Grantor]’s interest therein and shall apply to, and bind the successors and assigns of, the [Mortgagor/Grantor] until this [Mortgage/Deed of Trust] is terminated in accordance with Section 11.6 hereof. If there shall be more than one [Mortgagor/Grantor] with respect to the [Mortgage Property/Trust Property], all such [Mortgagor/Grantor]s’ covenants, warranties and undertakings hereunder shall be joint and several.

Section 11.02 No Merger . The rights and estate created by this [Mortgage/Deed of Trust] shall not, under any circumstances, be held to have merged into any other estate or interest now owned or hereafter acquired by the [Mortgagee/Beneficiary] unless the [Mortgagee/Beneficiary] shall have consented to such merger in writing.

Section 11.03 Concerning [Mortgagee/Beneficiary] .

(a) The [Mortgagee/Beneficiary] has been appointed as Collateral Agent pursuant to the Credit Agreement. The actions of the [Mortgagee/Beneficiary] hereunder are subject to the provisions of the Credit Agreement. The [Mortgagee/Beneficiary] shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the [Mortgage Property/Trust Property]), in accordance with this [Mortgage/Deed of Trust] and the Credit Agreement. The [Mortgagee/Beneficiary] may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The [Mortgagee/Beneficiary] may resign and a successor [Mortgagee/Beneficiary] may be appointed in the manner provided in the Credit Agreement. Upon the acceptance of any appointment as the [Mortgagee/Beneficiary] by a successor [Mortgagee/Beneficiary], that successor

 

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[Mortgagee/Beneficiary] shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring [Mortgagee/Beneficiary] under this [Mortgage/Deed of Trust], and the retiring [Mortgagee/Beneficiary] shall thereupon be discharged from its duties and obligations under this [Mortgage/Deed of Trust]. After any retiring [Mortgagee/Beneficiary]’s resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this [Mortgage/Deed of Trust] while it was the [Mortgagee/Beneficiary].

(b) The [Mortgagee/Beneficiary] shall be deemed to have exercised reasonable care in the custody and preservation of the [Mortgage Property/Trust Property] in its possession if such [Mortgage Property/Trust Property] is accorded treatment substantially equivalent to that which the [Mortgagee/Beneficiary], in its individual capacity, accords its own property consisting of similar property, instruments or interests, it being understood that neither the [Mortgagee/Beneficiary] nor any of the Secured Parties shall have responsibility for taking any necessary steps to preserve rights against any person with respect to any [Mortgage Property/Trust Property].

(c) The [Mortgagee/Beneficiary] shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this [Mortgage/Deed of Trust] and its duties hereunder, upon advice of counsel selected by it.

(d) With respect to any of its rights and obligations as a Lender, the [Mortgagee/Beneficiary] shall have and may exercise the same rights and powers hereunder. The term “Lenders,” “Lender” or any similar terms shall, unless the context clearly otherwise indicates, include the [Mortgagee/Beneficiary] in its individual capacity as a Lender. The [Mortgagee/Beneficiary] may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the [Mortgagor/Grantor] or any Affiliate of the [Mortgagor/Grantor] to the same extent as if the [Mortgagee/Beneficiary] were not acting as Collateral Agent.

(e) If any portion of the [Mortgage Property/Trust Property] also constitutes Collateral granted by any Loan Party to the [Mortgagee/Beneficiary] to secure the Obligations under any other [Mortgage/Deed of Trust], mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other [Mortgage/Deed of Trust], mortgage, security agreement, pledge or instrument of any type in respect of such Collateral, the [Mortgagee/Beneficiary], in its sole discretion, shall select which provision or provisions shall control, unless the [Mortgage Property/Trust Property] to which such conflict relates constitutes personal property, in which a security interest is granted pursuant to the Security Agreement, in which case the provisions of the Security Agreement shall control.

 

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Section 11.04 [Mortgagee/Beneficiary] May Perform; [Mortgagee/Beneficiary] Appointed Attorney-in-Fact . If the [Mortgagor/Grantor] shall fail to perform any covenants contained in this [Mortgage/Deed of Trust] (including, without limitation, the [Mortgagor/Grantor]’s covenants to (i) pay the premiums in respect of all required Insurance Policies under the Credit Agreement, (ii) pay Charges, (iii) discharge Liens or (iv) pay or perform any obligations of the [Mortgagor/Grantor] under any [Mortgage Property/Trust Property]) or if any representation or warranty on the part of the [Mortgagor/Grantor] contained herein shall be breached, the [Mortgagee/Beneficiary] may (but shall not be obligated to), do the same or cause it to be done or remedy any such breach, and may reasonably expend funds for such purpose but only if such failure presents an imminent risk of material damage to or significant diminution of value of the [Mortgage Property/Trust Property]; provided , however , that the [Mortgagee/Beneficiary] shall in no event be bound to inquire into the validity of any tax, Lien, imposition or other obligation which the [Mortgagor/Grantor] fails to pay or perform as and when required hereby and which the [Mortgagor/Grantor] does not contest in accordance with the provisions of the Credit Agreement. Any and all amounts so expended by the [Mortgagee/Beneficiary] shall be paid by the [Mortgagor/Grantor] in accordance with the provisions of Section 10.04 of the Credit Agreement and repayment shall be secured by this [Mortgage/Deed of Trust]. Neither the provisions of this Section 11.4 nor any action taken by the [Mortgagee/Beneficiary] pursuant to the provisions of this Section 11.4 shall prevent any such failure to observe any covenant contained in this [Mortgage/Deed of Trust] nor any breach of warranty from constituting an Event of Default. The [Mortgagor/Grantor] hereby appoints the [Mortgagee/Beneficiary] [and Trustee] its attorney-in-fact, with full power and authority in the place and stead of the [Mortgagor/Grantor] and in the name of the [Mortgagor/Grantor], or otherwise, from time to time in the [Mortgagee/Beneficiary]’s discretion to take any action and to execute any instrument consistent with the terms of this Section 11.4 which the [Mortgagee/Beneficiary] may deem necessary or advisable to accomplish the purposes of this Section 11.4 (but the [Mortgagee/Beneficiary] [and Trustee] shall not be obligated to and shall have no liability to the [Mortgagor/Grantor] or any third party for failure to so do or take action). The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. The [Mortgagor/Grantor] hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof.

Section 11.05 Continuing Security Interest; Assignment . This [Mortgage/Deed of Trust] shall create a continuing Lien on and security interest in the [Mortgage Property/Trust Property] and shall (i) be binding upon the [Mortgagor/Grantor], its successors and assigns and (ii) inure, together with the rights and remedies of the [Mortgagee/Beneficiary] [and Trustee hereunder, to the benefit of the Beneficiary] for the benefit of the Secured Parties and each of their respective successors, transferees and assigns who are holders from time to time of all or any portion of the Obligations. No other persons (including, without limitation, any other creditor of any Loan Party) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Secured Party may assign or otherwise transfer any indebtedness held by it secured by this [Mortgage/Deed of Trust] to any other person, and such other person shall thereupon become vested with all the benefits in respect thereof granted to such Lender, herein or otherwise, subject, however, to the provisions of the Credit Agreement. The [Mortgagor/Grantor] agrees that its obligations hereunder and the security interest created

 

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hereunder shall continue to be effective or be reinstated, as applicable, if at any time payment, or any part thereof, of all or any part of the Obligations is rescinded or must otherwise be restored by the Secured Party upon the bankruptcy or reorganization of any Pledgor or otherwise.

Section 11.06 Termination; Release . Upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (i) Cash Management Obligations or obligations under Secured Hedge Agreements not yet due and payable and (ii) contingent obligations not yet accrued and payable) and the expiration or termination of all Letters of Credit (other than Letters of Credit in which the Outstanding Amount of the L/C Obligations related thereto have been Cash Collateralized or, if satisfactory to the relevant L/C Issuer in its reasonable discretion, for which a backstop letter of credit is in place), this [Mortgage/Deed of Trust] shall terminate. Upon a sale by the [Mortgagor/Grantor] of all or any portion of the [Mortgage Property/Trust Property], in accordance with the Credit Agreement (other than a sale or transfer to another Loan Party or upon the effectiveness of any written consent to the release of the lien and security interest granted herein in any [Mortgage Property/Trust Property] pursuant to Section 10.01 of the Credit Agreement), the lien of this [Mortgage/Deed of Trust] shall be automatically released from the applicable portion of the [Mortgage Property/Trust Property]. Upon termination hereof or any release of the [Mortgage Property/Trust Property] or any portion thereof in accordance with the provisions of the Credit Agreement, the [Mortgagee/Beneficiary] [and/or Trustee at the direction of the Beneficiary (as so required by applicable law)] shall, upon the request and at the sole cost and expense of the [Mortgagor/Grantor], assign, transfer and deliver to the [Mortgagor/Grantor], against receipt and without recourse to or warranty by the [Mortgagee/Beneficiary] [or Trustee], such of the [Mortgage Property/Trust Property] to be released (in the case of a release) as may be in possession of the [Mortgagee/Beneficiary] [or Trustee] and as shall not have been sold or otherwise applied pursuant to the terms hereof, and, with respect to any other [Mortgage Property/Trust Property], proper documents and instruments (including discharges, UCC-3 termination statements or releases) acknowledging the termination hereof or the release of such [Mortgage Property/Trust Property], as required under applicable law.

Section 11.07 Modification in Writing . No amendment, modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the [Mortgagor/Grantor] therefrom, shall be effective unless the same shall be done in accordance with the terms of the Credit Agreement and unless in writing and signed by the [Mortgagee/Beneficiary][, and, if required by applicable law, the Trustee at the direction of the Beneficiary]. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the [Mortgagor/Grantor] from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this [Mortgage/Deed of Trust] or any other Loan Document, no notice to or demand on the [Mortgagor/Grantor] in any case shall entitle the [Mortgagor/Grantor] to any other or further notice or demand in similar or other circumstances.

 

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Section 11.08 Notices . Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Credit Agreement, if to the [Mortgagor/Grantor], addressed to it in care of the Borrower as provided in Section 10.02 of the Credit Agreement and if to the [Mortgagee/Beneficiary], addressed to it at the address set forth in the Credit Agreement, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 11.8 .

Section 11.09 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL . THIS [MORTGAGE/DEED OF TRUST] SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR ITEM OR TYPE OF [MORTGAGE PROPERTY/TRUST PROPERTY] ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE TERMS OF SECTION 10.15 AND 10.16 OF THE CREDIT AGREEMENT WITH RESPECT TO SUBMISSION OF JURISDICTION, VENUE AND WAIVER OF JURY TRIAL ARE HEREIN INCORPORATED BY REFERENCE, MUTATIS MUTANDIS, AND THE [MORTGAGOR/GRANTOR] HERETO AGREES TO SUCH TERMS. [MORTGAGOR/GRANTOR] IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.8. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF [MORTGAGEE/BENEFICIARY] TO BRING PROCEEDINGS AGAINST [MORTGAGOR/GRANTOR] IN THE COURTS OF ANY OTHER JURISDICTION.

Section 11.10 Severability of Provisions . Any provision hereof which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof or affecting the validity, legality or enforceability of such provision in any other jurisdiction.

Section 11.11 Relationship . The relationship of the [Mortgagee/Beneficiary] to the [Mortgagor/Grantor] hereunder is strictly and solely that of lender and borrower and [Mortgagor/Grantor] and [Mortgagee/Beneficiary] and nothing contained in the Credit Agreement, this [Mortgage/Deed of Trust] or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the [Mortgagee/Beneficiary] and the [Mortgagor/Grantor] other than as lender and borrower and [Mortgagor/Grantor] and [Mortgagee/Beneficiary].

 

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Section 11.12 No Credit for Payment of Taxes or Impositions . The [Mortgagor/Grantor] shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Credit Agreement, and the [Mortgagor/Grantor] shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Charge on the [Mortgage Property/Trust Property] or any part thereof.

Section 11.13 No Claims Against the [Mortgagee/Beneficiary] . Nothing contained in this [Mortgage/Deed of Trust] shall constitute any consent or request by the [Mortgagee/Beneficiary], express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Premises or any part thereof, nor as giving the [Mortgagor/Grantor] any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the [Mortgagee/Beneficiary] in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof.

Section 11.14 [Mortgagee/Beneficiary]’s Right To Sever Indebtedness .

(a) The [Mortgagor/Grantor] acknowledges that (A) the [Mortgage Property/Trust Property] does not constitute the sole source of security for the payment and performance of the Obligations and that the Obligations are also secured by the Collateral of the [Mortgagor/Grantor] and its Affiliates in other jurisdictions, (B) the number of such jurisdictions and the nature of the transaction of which this instrument is a part are such that it would have been impracticable for the parties to allocate to each item of Collateral a specific loan amount and to execute in respect of such item a separate credit agreement and (C) the [Mortgagor/Grantor] intends that the [Mortgagee/Beneficiary] have the same rights with respect to the [Mortgage Property/Trust Property], in foreclosure or otherwise, that the [Mortgagee/Beneficiary] would have had if each item of Collateral had been secured, mortgaged, conveyed or pledged pursuant to a separate credit agreement, mortgage, [Mortgage/Deed of Trust] or security instrument. In furtherance of such intent, the [Mortgagor/Grantor] agrees that the [Mortgagee/Beneficiary] may at any time by notice (an “ Allocation Notice ”) to the [Mortgagor/Grantor] allocate a portion (the “ Allocated Indebtedness ”) of the Obligations to the [Mortgage Property/Trust Property] and sever from the remaining Obligations the Allocated Indebtedness. From and after the giving of an Allocation Notice with respect to the [Mortgage Property/Trust Property], the Obligations hereunder shall be limited to the extent set forth in the Allocation Notice and (as so limited) shall, for all purposes, be construed as a separate loan obligation of the [Mortgagor/Grantor] unrelated to the other transactions contemplated by the Credit Agreement, any other Loan Document or any document related to any thereof. To the extent that the proceeds on any foreclosure of the [Mortgage Property/Trust Property] shall exceed the Allocated Indebtedness, such proceeds shall belong to the [Mortgagor/Grantor] and shall not be available hereunder to satisfy any Obligations of the [Mortgagor/Grantor] other than

 

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the Allocated Indebtedness. In any action or proceeding to foreclose the Lien hereof or in connection with any power of sale, foreclosure or other remedy exercised under this [Mortgage/Deed of Trust] commenced after the giving by the [Mortgagee/Beneficiary] of an Allocation Notice, the Allocation Notice shall be conclusive proof of the limits of the Obligations hereby secured, and the [Mortgagor/Grantor] may introduce, by way of defense or counterclaim, evidence thereof in any such action or proceeding. Notwithstanding any provision of this Section 11.14 , the proceeds received by the [Mortgagee/Beneficiary] pursuant to this [Mortgage/Deed of Trust] shall be applied by the [Mortgagee/Beneficiary] in accordance with the provisions of Section 8.3(ii) hereof.

(b) The [Mortgagor/Grantor] hereby waives to the greatest extent permitted under law the right to a discharge of any of the Obligations under any statute or rule of law now or hereafter in effect which provides that foreclosure of the Lien hereof or other remedy exercised under this [Mortgage/Deed of Trust] constitutes the exclusive means for satisfaction of the Obligations or which makes unavailable a deficiency judgment or any subsequent remedy because the [Mortgagee/Beneficiary] elected to proceed with a power of sale foreclosure or such other remedy or because of any failure by the [Mortgagee/Beneficiary] to comply with laws that prescribe conditions to the entitlement to a deficiency judgment. In the event that, notwithstanding the foregoing waiver, any court shall for any reason hold that the [Mortgagee/Beneficiary] is not entitled to a deficiency judgment, the [Mortgagor/Grantor] shall not (A) introduce in any other jurisdiction such judgment as a defense to enforcement against the [Mortgagor/Grantor] of any remedy in the Credit Agreement or any other Loan Document or (B) seek to have such judgment recognized or entered in any other jurisdiction, and any such judgment shall in all events be limited in application only to the state or jurisdiction where rendered.

(c) In the event any instrument is necessary to effectuate the provisions of this Section 11.14 , including, without limitation, any amendment to this [Mortgage/Deed of Trust], any substitute promissory note or affidavit or certificate of any kind, the [Mortgagor/Grantor] agrees, at the [Mortgagor/Grantor]’s sole cost and expense, to execute all such amendments, notes, affidavits or certificates reasonably requested by the [Mortgagee/Beneficiary], provided that no such amendment, note, affidavit or certificate would modify or amend any obligation or condition under any Loan Document except as otherwise provided in Section 10.01 of the Credit Agreement and further provided that all reasonable out-of-pocket costs incurred by the [Mortgagor/Grantor], Borrower, or any Guarantor under the Credit Agreement (including reasonable attorneys’ fees) in connection with any requests made under this Section 11.14 are paid by the [Mortgagee/Beneficiary] [and/or Trustee]. The [Mortgagor/Grantor] hereby appoints the [Mortgagee/Beneficiary] as its true and lawful attorneys-in-fact to, following and during the continuance of an Event of Default, execute, deliver or record such amendments, notes, affidavits or certificates in the name and on behalf of the [Mortgagor/Grantor]. Such power of attorney is coupled with an interest and is irrevocable.

(d) Notwithstanding anything set forth herein to the contrary, the provisions of this Section 11.14 shall be effective only to the maximum extent permitted by law.

 

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Section 11.15 Collateral Agent’s Fees and Expenses; Indemnification .

(a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its reasonable out-of-pocket expenses incurred hereunder and indemnity for its actions in connection herewith as provided in Sections 10.04 and 10.05 of the Credit Agreement.

(b) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Collateral Documents. The provisions of this Section 11.15 shall remain operative and in full force and effect regardless of the termination of this [Mortgage/Deed of Trust] or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this [Mortgage/Deed of Trust] or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 11.15 shall be payable within 10 days of written demand therefor.

Article XII.

[REGARDING TRUSTEE

Section 12.01 Trustee’s Powers and Liabilities .

(a) The Trustee, by acceptance hereof, covenants faithfully to perform and fulfill the trusts herein created, being liable, however, only for gross negligence, bad faith or willful misconduct, and hereby waives any statutory fee and agrees to accept reasonable compensation, in lieu thereof, for any services rendered by it in accordance with the terms thereof. All authorities, powers and discretions given in this [Mortgage/Deed of Trust] to the Trustee and/or the [Mortgagee/Beneficiary] may be exercised by either, without the other, with the same effect as if exercised jointly;

(b) The Trustee may resign at any time upon giving thirty (30) days’ notice in writing to the [Mortgagor/Grantor] and to the [Mortgagee/Beneficiary];

(c) The [Mortgagee/Beneficiary] may remove the Trustee at any time or from time to time and select a successor trustee in the event of the death, removal, resignation, refusal to act, inability to act or absence of the Trustee from the state in which the Premises are located, or in its sole discretion for any reason whatsoever. The [Mortgagee/Beneficiary] may, without specifying the reason therefore and without applying to any court, select and appoint a successor trustee, and all powers, rights, duties and authority of the former trustee, as aforesaid, shall thereupon become vested in such successor. Such substitute trustee shall not be required to give bond for the faithful performance of his duties unless required by the [Mortgagee/Beneficiary]. Such substitute trustee shall be appointed by written instrument duly recorded in the county where the Land is located. The [Mortgagor/Grantor] hereby ratifies and confirms any and all

 

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acts that the herein named Trustee, or his successor or successors in this trust, shall do lawfully by virtue hereof. The [Mortgagor/Grantor] hereby agrees, on behalf of itself and its heirs, executors, administrators and assigns, that the recitals contained in any deed or deeds executed in due form by any Trustee or substitute trustee, acting under the provisions of this instrument, shall be prima facie evidence of the facts recited, and that it shall not be necessary to prove in any court, otherwise than by such recitals, the existence of the facts essential to authorize the execution and delivery of such deed or deeds and the passing of title thereby;

(d) The Trustee shall not be required to see that this [Mortgage/Deed of Trust] is recorded nor liable for its validity or its priority as a first [Mortgage/Deed of Trust], or otherwise, nor shall the Trustee be answerable or responsible for performance or observance of the covenants and agreements imposed upon the [Mortgagor/Grantor] or the [Mortgagee/Beneficiary] by this [Mortgage/Deed of Trust] or any other agreement. The Trustee, as well as the [Mortgagee/Beneficiary], shall have authority in their respective discretion to employ agents and attorneys in the execution of this trust and to protect the interest of the [Mortgagee/Beneficiary] hereunder, and to the fullest extent permitted by law they shall be compensated and all expenses relating to the employment of such agents and/or attorneys, including expenses of litigation, shall be paid out of the proceeds of the sale of the [Mortgage Property/Trust Property] conveyed hereby should a sale be had, but if no such sale be had, all sums so paid out shall be recoverable to the fullest extent permitted by law by all remedies at law or in equity; and

(e) At any time, or from time to time, without liability therefore and with ten (10) day’s prior written notice to the [Mortgagor/Grantor], upon written request of the [Mortgagee/Beneficiary] and without affecting the effect of this [Mortgage/Deed of Trust] upon the remainder of the [Mortgage Property/Trust Property], the Trustee may (A) reconvey any part of the [Mortgage Property/Trust Property], (B) consent in writing to the making of any map or plat thereof, so long as the [Mortgagor/Grantor] has consented thereto, (C) join in granting any easement thereon, so long as the [Mortgagor/Grantor] has consented thereto, or (D) join in any extension agreement or any agreement subordinating the lien or charge hereof.] 34

Article XIII.

LOCAL LAW PROVISIONS

Section 13.01 State-Specific Provisions Control . In the event of any conflict between the terms and provisions of this Article [XIII] and the other terms and provisions of this [Mortgage/Deed of Trust], the terms and provisions of this Article [XIII] shall govern and control.

[                                         ]

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34   ONLY FOR DEED OF TRUST STATES

 

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IN WITNESS WHEREOF, the [Mortgagor/Grantor] has caused this [Mortgage/Deed of Trust] to be duly executed and delivered under seal the day and year first above written.

 

[MORTGAGOR/GRANTOR]:
By:  

 

  Name:
  Title:

[local counsel to confirm signature requirements]

 

S-1


ACKNOWLEDGMENT

 

State of                                               )  
   )   ss.:
County of                                           )  

[Local counsel to provide appropriate acknowledgment]

 

S-1


Schedule A — Legal Description

Legal Description of premises commonly known as [COMMON NAME, IF ANY] and located at [INSERT ADDRESS]:

[to come from title policy]


EXHIBIT K

[FORM OF]

FIRST-LIEN INTERCREDITOR AGREEMENT

(See Attached)


FORM OF

FIRST-LIEN INTERCREDITOR AGREEMENT

among

SUMMIT MATERIALS, LLC,

the other Grantors party hereto,

BANK OF AMERICA, N.A.,

as Credit Agreement Collateral Agent for the Credit Agreement Secured Parties

BANK OF AMERICA, N.A.,

as Authorized Representative for the Credit Agreement Secured Parties,

[                                         ]

as the Additional First-Lien Collateral Agent

[                                         ]

as the Initial Additional Authorized Representative,

and

each additional Authorized Representative from time to time party hereto

dated as of [            ], 20[    ]

FIRST-LIEN INTERCREDITOR AGREEMENT, dated as of [            ], 20[    ] (as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time, this “ Agreement ”), among SUMMIT MATERIALS, LLC, a Delaware limited liability company (the “ Company ”), the other Grantors (as defined below) from time to time party hereto, BANK OF AMERICA, N.A. (“ Bank of America ”), as collateral agent for the Credit Agreement Secured Parties (as defined below) (in such capacity and together with its successors in such capacity, the “ Credit Agreement Collateral Agent ”), BANK OF AMERICA, N.A., as Authorized Representative for the Credit Agreement Secured Parties (as each such term is defined below), [                    ], as collateral agent for the Additional First-Lien Secured Parties (as defined below) (in such capacity and together with its successors in such capacity, the “ Additional First-Lien Collateral Agent ”), [                    ], as Authorized Representative for the Initial Additional First-Lien Secured Parties (as defined below) (in such capacity and together with its successors in such capacity, the “ Initial Additional Authorized Representative ”) and each additional Authorized Representative from time to time party hereto for the other Additional First-Lien Secured Parties of the Series (as defined below) with respect to which it is acting in such capacity.

 

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In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Collateral Agent, the Administrative Agent (for itself and on behalf of the Credit Agreement Secured Parties), the Initial Additional Authorized Representative (for itself and on behalf of the Initial Additional First-Lien Secured Parties) and each additional Authorized Representative (for itself and on behalf of the Additional First-Lien Secured Parties of the applicable Series) agree as follows:

ARTICLE I

Definitions

SECTION 1.01 Certain Defined Terms . Capitalized terms used but not otherwise defined herein have the meanings set forth in the Credit Agreement or, if defined in the New York UCC, the meanings specified therein. As used in this Agreement, the following terms have the meanings specified below:

Additional First-Lien Documents ” means, with respect to the Initial Additional First-Lien Obligations or any Series of Additional Senior Class Debt, the notes, indentures, security documents and other operative agreements evidencing or governing such indebtedness and liens securing such indebtedness, including the Initial Additional First-Lien Documents and the Additional First-Lien Security Documents and each other agreement entered into for the purpose of securing the Initial Additional First-Lien Obligations or any Series of Additional Senior Class Debt; provided that, in each case, the Indebtedness thereunder (other than the Initial Additional First-Lien Obligations) has been designated as Additional First-Lien Obligations pursuant to Section 5.13 hereto.

Additional First-Lien Obligations ” means all amounts owing to any Additional First-Lien Secured Party (including the Initial Additional First-Lien Secured Parties) pursuant to the terms of any Additional First-Lien Document (including the Initial Additional First-Lien Documents), including, without limitation, all amounts in respect of any principal, premium, interest (including any interest accruing subsequent to the commencement of a Bankruptcy Case at the rate provided for in the respective Additional First-Lien Document, whether or not such interest is an allowed claim under any such proceeding or under applicable state, federal or foreign law), penalties, fees, expenses, indemnifications, reimbursements, damages and other liabilities, and guarantees of the foregoing amounts.

Additional First-Lien Secured Party ” means the holders of any Additional First-Lien Obligations and any Authorized Representative with respect thereto, and shall include the Initial Additional First-Lien Secured Parties.

Additional First-Lien Security Document ” means any collateral agreement, security agreement or any other document now existing or entered into after the date hereof that creates Liens on any assets or properties of any Grantor to secure the Additional First-Lien Obligations.

Additional Senior Class Debt ” has the meaning assigned to such term in Section 5.13.

 

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Additional Senior Class Debt Parties ” has the meaning assigned to such term in Section 5.13.

Additional Senior Class Debt Representative ” has the meaning assigned to such term in Section 5.13.

Administrative Agent ” has the meaning assigned to such term in the definition of “Credit Agreement” and shall include any successor administrative agent (including as a result of any Refinancing or other modification of the Credit Agreement permitted by Section 2.08.

Agreement ” has the meaning assigned to such term in the introductory paragraph of this Agreement.

Applicable Authorized Representative ” means, with respect to any Shared Collateral, (i) until the earlier of (x) the Discharge of Credit Agreement Obligations and (y) the Non-Controlling Authorized Representative Enforcement Date, the Administrative Agent and (ii) from and after the earlier of (x) the Discharge of Credit Agreement Obligations and (y) the Non-Controlling Authorized Representative Enforcement Date, the Major Non-Controlling Authorized Representative.

Applicable Collateral Agent ” means (i) until the earlier of (x) Discharge of Credit Agreement Obligations and (y) the Non-Controlling Authorized Representative Enforcement Date, the Credit Agreement Collateral Agent and (ii) from and after the earlier of (x) the Discharge of Credit Agreement Obligations and (y) the Non-Controlling Authorized Representative Enforcement Date, the Additional First-Lien Collateral Agent.

Authorized Representative ” means, at any time, (i) in the case of any Credit Agreement Obligations or the Credit Agreement Secured Parties, the Administrative Agent, (ii) in the case of the Initial Additional First-Lien Obligations or the Initial Additional First-Lien Secured Parties, the Initial Additional Authorized Representative, and (iii) in the case of any other Series of Additional First-Lien Obligations or Additional First-Lien Secured Parties that become subject to this Agreement after the date hereof, the collateral agent named as authorized representative for such Series in the applicable Joinder Agreement.

Bank of America ” has the meaning assigned to such term in the introductory paragraph of this Agreement.

Bankruptcy Case ” has the meaning assigned to such term in Section 2.05(b).

Bankruptcy Code ” means Title 11 of the United States Code, as amended, or any similar federal, state or foreign law for the relief of debtors.

Bankruptcy Law ” means the Bankruptcy Code and any similar federal, state or foreign law for the relief of debtors.

Collateral ” means all assets and properties subject to Liens created pursuant to any First-Lien Security Document to secure one or more Series of First-Lien Obligations.

 

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Collateral Agent ” means (i) in the case of any Credit Agreement Obligations, the Credit Agreement Collateral Agent and (ii) in the case of the Additional First-Lien Obligations, the Additional First-Lien Collateral Agent.

Company ” has the meaning assigned to such term in the introductory paragraph of this Agreement.

Controlling Secured Parties ” means, with respect to any Shared Collateral, (i) at any time when the Credit Agreement Collateral Agent is the Applicable Collateral Agent, the Credit Agreement Secured Parties and (ii) at any other time, the Series of First-Lien Secured Parties whose Authorized Representative is the Applicable Authorized Representative for such Shared Collateral.

Credit Agreement ” means that certain Credit Agreement, dated as of [            ], 2012, among the Company, the lenders from time to time party thereto, Bank of America, as administrative agent (in such capacity and together with its successors in such capacity, the “ Administrative Agent ”) and the other parties thereto, as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time.

Credit Agreement Collateral Agent ” has the meaning assigned to such term in the introductory paragraph of this Agreement.

Credit Agreement Collateral Documents ” means the Security Agreement, the other Collateral Documents (as defined in the Credit Agreement) and each other agreement entered into in favor of the Credit Agreement Collateral Agent, or Administrative Agent for the purpose of securing any Credit Agreement Obligations.

Credit Agreement Obligations ” means all Obligations as defined in the Credit Agreement.

Credit Agreement Secured Parties ” means the “Secured Parties” as defined in the Credit Agreement.

DIP Financing ” has the meaning assigned to such term in Section 2.05(b).

DIP Financing Liens ” has the meaning assigned to such term in Section 2.05(b).

DIP Lenders ” has the meaning assigned to such term in Section 2.05(b).

Discharge ” means, with respect to any Shared Collateral and any Series of First-Lien Obligations, the date on which such Series of First-Lien Obligations is no longer secured by such Shared Collateral. The term “ Discharged ” shall have a corresponding meaning.

Discharge of Credit Agreement Obligations ” means, with respect to any Shared Collateral, the Discharge of the Credit Agreement Obligations with respect to such Shared Collateral; provided that the Discharge of Credit Agreement Obligations shall not be deemed to have occurred in connection with a Refinancing of such Credit Agreement Obligations with additional First-Lien Obligations secured by such Shared Collateral under an Additional First-Lien

 

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Document which has been designated in writing by the Administrative Agent (under the Credit Agreement so Refinanced) to the Additional First-Lien Collateral Agent and each other Authorized Representative as the “Credit Agreement” for purposes of this Agreement.

Event of Default ” means an “Event of Default” (or similarly defined term) as defined in any Secured Credit Document.

First-Lien Obligations ” means, collectively, (i) the Credit Agreement Obligations and (ii) each Series of Additional First-Lien Obligations.

First-Lien Secured Parties ” means (i) the Credit Agreement Secured Parties and (ii) the Additional First-Lien Secured Parties with respect to each Series of Additional First-Lien Obligations.

First-Lien Security Documents ” means, collectively, (i) the Credit Agreement Collateral Documents and (ii) the Additional First-Lien Security Documents.

Grantors ” means the Company and each of the Subsidiary Guarantors (as defined in the Credit Agreement) and each other Subsidiary of the Company which has granted a security interest pursuant to any First-Lien Security Document to secure any Series of First-Lien Obligations. The Grantors existing on the date hereof are set forth in Annex I hereto.

Impairment ” has the meaning assigned to such term in Section 1.03.

Initial Additional Authorized Representative ” has the meaning assigned to such term in the introductory paragraph of this Agreement.

Initial Additional First-Lien Agreement ” mean that certain [Indenture] [Other Agreement], dated as of [                    ], among the Company, [the Guarantors identified therein], and [                    ], as [trustee], as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time.

Initial Additional First-Lien Documents ” means the Initial Additional First-Lien Agreement, the [notes] [loans] issued thereunder, the Initial Additional First-Lien Security Agreement and any security documents and other operative agreements evidencing or governing the Indebtedness thereunder, and the liens securing such Indebtedness, including any agreement entered into for the purpose of securing the Initial Additional First-Lien Obligations.

Initial Additional First-Lien Obligations ” means the [Obligations] as such term is defined in the Initial Additional First-Lien Security Agreement.

Initial Additional First-Lien Secured Parties ” means the Additional First-Lien Collateral Agent, the Initial Additional Authorized Representative and the holders of the Initial Additional First-Lien Obligations issued pursuant to the Initial Additional First-Lien Agreement.

Initial Additional First-Lien Security Agreement ” means the security agreement, dated as of the date hereof, among the Company, the Additional First-Lien Collateral Agent and the other parties thereto, as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time.

 

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Insolvency or Liquidation Proceeding ” means:

(1) any case commenced by or against the Company or any other Grantor under any Bankruptcy Law, any other proceeding for the reorganization, recapitalization or adjustment or marshalling of the assets or liabilities of the Company or any other Grantor, any receivership or assignment for the benefit of creditors relating to the Company or any other Grantor or any similar case or proceeding relative to the Company or any other Grantor or its creditors, as such, in each case whether or not voluntary;

(2) any liquidation, dissolution, marshalling of assets or liabilities or other winding up of or relating to the Company or any other Grantor, in each case whether or not voluntary and whether or not involving bankruptcy or insolvency; or

(3) any other proceeding of any type or nature in which substantially all claims of creditors of the Company or any other Grantor are determined and any payment or distribution is or may be made on account of such claims.

Intervening Creditor ” has the meaning assigned to such term in Section 2.01(a).

Joinder Agreement ” means a joinder to this Agreement substantially in the form of Annex II hereof required to be delivered by an Authorized Representative to each Collateral Agent and each Authorized Representative pursuant to Section 5.13 hereof in order to establish an additional Series of Additional First-Lien Obligations and add Additional First-Lien Secured Parties hereunder.

Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to Real Property, and any Capitalized Lease having substantially the same economic effect as any of the foregoing).

Major Non-Controlling Authorized Representative ” means, with respect to any Shared Collateral, the Authorized Representative of the Series of Additional First-Lien Obligations that constitutes the largest outstanding principal amount of any then outstanding Series of First-Lien Obligations with respect to such Shared Collateral.

New York UCC ” means the Uniform Commercial Code as from time to time in effect in the State of New York.

Non-Controlling Authorized Representative ” means, at any time with respect to any Shared Collateral, any Authorized Representative that is not the Applicable Authorized Representative at such time with respect to such Shared Collateral.

 

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Non-Controlling Authorized Representative Enforcement Date ” means, with respect to any Non-Controlling Authorized Representative, the date which is 90 days (throughout which 90 day period such Non-Controlling Authorized Representative was the Major Non-Controlling Authorized Representative) after the occurrence of both (i) an Event of Default (under and as defined in the Additional First-Lien Document under which such Non-Controlling Authorized Representative is the Authorized Representative) and (ii) each Collateral Agent’s and each other Authorized Representative’s receipt of written notice from such Non-Controlling Authorized Representative certifying that (x) such Non-Controlling Authorized Representative is the Major Non-Controlling Authorized Representative and that an Event of Default (under and as defined in the Additional First-Lien Document under which such Non-Controlling Authorized Representative is the Authorized Representative) has occurred and is continuing and (y) the Additional First-Lien Obligations of the Series with respect to which such Non-Controlling Authorized Representative is the Authorized Representative are currently due and payable in full (whether as a result of acceleration thereof or otherwise) in accordance with the terms of the applicable Additional First-Lien Document; provided that the Non-Controlling Authorized Representative Enforcement Date shall be stayed and shall not occur and shall be deemed not to have occurred with respect to any Shared Collateral (1) at any time the Administrative Agent or the Credit Agreement Collateral Agent has commenced and is diligently pursuing any enforcement action with respect to such Shared Collateral or (2) at any time the Grantor which has granted a security interest in such Shared Collateral is then a debtor under or with respect to (or otherwise subject to) any Insolvency or Liquidation Proceeding.

Non-Controlling Secured Parties ” means, with respect to any Shared Collateral, the First-Lien Secured Parties which are not Controlling Secured Parties with respect to such Shared Collateral.

Possessory Collateral ” means any Shared Collateral in the possession of a Collateral Agent (or its agents or bailees), to the extent that possession thereof perfects a Lien thereon under the Uniform Commercial Code of any jurisdiction. Possessory Collateral includes, without limitation, any Certificated Securities, Promissory Notes, Instruments, and Chattel Paper, in each case, delivered to or in the possession of the Collateral Agent under the terms of the First-Lien Security Documents.

Proceeds ” has the meaning assigned to such term in Section 2.01.

Refinance ” means, in respect of any indebtedness, to refinance, extend, renew, defease, amend, increase, modify, supplement, restructure, refund, replace or repay, or to issue other indebtedness or enter into alternative financing arrangements, in exchange or replacement for such indebtedness (in whole or in part), including by adding or replacing lenders, creditors, agents, borrowers and/or guarantors, and including in each case, but not limited to, after the original instrument giving rise to such indebtedness has been terminated and including, in each case, through any credit agreement, indenture or other agreement. “ Refinanced ” and “ Refinancing ” have correlative meanings.

Secured Credit Document ” means (i) the Credit Agreement and each Loan Document (as defined in the Credit Agreement), (ii) each Initial Additional First-Lien Document, and (iii) each Additional First-Lien Document.

 

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Security Agreement ” means the Security Agreement, dated as of [            ], 2012, among the Company, the Credit Agreement Collateral Agent and the other parties thereto, as amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time.

Series ” means (a) with respect to the First-Lien Secured Parties, each of (i) the Credit Agreement Secured Parties (in their capacities as such), (ii) the Initial Additional First-Lien Secured Parties (in their capacities as such), and (iii) the Additional First-Lien Secured Parties (in their capacities as such) that become subject to this Agreement after the date hereof that are represented by a common Authorized Representative (in its capacity as such for such Additional First-Lien Secured Parties) and (b) with respect to any First-Lien Obligations, each of (i) the Credit Agreement Obligations, (ii) the Initial Additional First-Lien Obligations, and (iii) the Additional First-Lien Obligations incurred after the date hereof pursuant to any Additional First-Lien Document, which pursuant to any Joinder Agreement, are to be represented hereunder by a common Authorized Representative (in its capacity as such for such Additional First-Lien Obligations).

Shared Collateral ” means, at any time, Collateral in which the holders of two or more Series of First-Lien Obligations hold a valid and perfected security interest at such time. If more than two Series of First-Lien Obligations are outstanding at any time and the holders of less than all Series of First-Lien Obligations hold a valid and perfected security interest in any Collateral at such time, then such Collateral shall constitute Shared Collateral for those Series of First-Lien Obligations that hold a valid security interest in such Collateral at such time and shall not constitute Shared Collateral for any Series which does not have a valid and perfected security interest in such Collateral at such time.

SECTION 1.02 Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument, other document, statute or regulation herein shall be construed as referring to such agreement, instrument, other document, statute or regulation as from time to time amended, supplemented or otherwise modified, (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, but shall not be deemed to include the subsidiaries of such Person unless express reference is made to such subsidiaries, (iii) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Articles, Sections and Annexes shall be construed to refer to Articles, Sections and Annexes of this Agreement, (v) unless otherwise expressly qualified herein, 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, securities, accounts and contract rights and (vi) the term “or” is not exclusive.

SECTION 1.03 Impairments . It is the intention of the First-Lien Secured Parties of each Series that the holders of First-Lien Obligations of such Series (and not the First-Lien

 

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Secured Parties of any other Series) bear the risk of (i) any determination by a court of competent jurisdiction that (x) any of the First-Lien Obligations of such Series are unenforceable under applicable law or are subordinated to any other obligations (other than another Series of First-Lien Obligations), (y) any of the First-Lien Obligations of such Series do not have an enforceable security interest in any of the Collateral securing any other Series of First-Lien Obligations and/or (z) any intervening security interest exists securing any other obligations (other than another Series of First-Lien Obligations) on a basis ranking prior to the security interest of such Series of First-Lien Obligations but junior to the security interest of any other Series of First-Lien Obligations or (ii) the existence of any Collateral for any other Series of First-Lien Obligations that is not Shared Collateral (any such condition referred to in the foregoing clauses (i) or (ii) with respect to any Series of First-Lien Obligations, an “Impairment” of such Series); provided, that the existence of a maximum claim with respect to any real property subject to a mortgage which applies to all First-Lien Obligations shall not be deemed to be an Impairment of any Series of First-Lien Obligations. In the event of any Impairment with respect to any Series of First-Lien Obligations, the results of such Impairment shall be borne solely by the holders of such Series of First-Lien Obligations, and the rights of the holders of such Series of First-Lien Obligations (including, without limitation, the right to receive distributions in respect of such Series of First-Lien Obligations pursuant to Section 2.01) set forth herein shall be modified to the extent necessary so that the effects of such Impairment are borne solely by the holders of the Series of such First-Lien Obligations subject to such Impairment. Additionally, in the event the First-Lien Obligations of any Series are modified pursuant to applicable law (including, without limitation, pursuant to Section 1129 of the Bankruptcy Code), any reference to such First-Lien Obligations or the First-Lien Security Documents governing such First-Lien Obligations shall refer to such obligations or such documents as so modified.

ARTICLE II

Priorities and Agreements with Respect to Shared Collateral

SECTION 2.01 Priority of Claims .

(a) Anything contained herein or in any of the Secured Credit Documents to the contrary notwithstanding (but subject to Section 1.03), if an Event of Default has occurred and is continuing, and the Applicable Collateral Agent or any First-Lien Secured Party is taking action to enforce rights in respect of any Shared Collateral, or any distribution is made in respect of any Shared Collateral in any Bankruptcy Case of the Company or any other Grantor or any First-Lien Secured Party receives any payment pursuant to any intercreditor agreement (other than this Agreement) with respect to any Shared Collateral, the proceeds of any sale, collection or other liquidation of any such Collateral by any First-Lien Secured Party or received by the Applicable Collateral Agent or any First-Lien Secured Party pursuant to any such intercreditor agreement with respect to such Shared Collateral and proceeds of any such distribution (subject, in the case of any such distribution, to the sentence immediately following) to which the First-Lien Obligations are entitled under any intercreditor agreement (other than this Agreement) (all proceeds of any sale, collection or other liquidation of any Collateral and all proceeds of any such distribution being collectively referred to as “ Proceeds ”), shall be applied (i) FIRST, to the payment of all amounts owing to each Collateral Agent (in its capacity as such) pursuant to the

 

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terms of any Secured Credit Document, (ii) SECOND, subject to Section 1.03, to the payment in full of the First-Lien Obligations of each Series on a ratable basis, with such Proceeds to be applied to the First-Lien Obligations of a given Series in accordance with the terms of the applicable Secured Credit Documents and (iii) THIRD, after payment of all First-Lien Obligations, to the Company and the other Grantors or their successors or assigns, as their interests may appear, or to whosoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct. Notwithstanding the foregoing, with respect to any Shared Collateral for which a third party (other than a First-Lien Secured Party) has a lien or security interest that is junior in priority to the security interest of any Series of First-Lien Obligations but senior (as determined by appropriate legal proceedings in the case of any dispute) to the security interest of any other Series of First-Lien Obligations (such third party, an “ Intervening Creditor ”), the value of any Shared Collateral or Proceeds which are allocated to such Intervening Creditor shall be deducted on a ratable basis solely from the Shared Collateral or Proceeds to be distributed in respect of the Series of First-Lien Obligations with respect to which such Impairment exists.

(b) It is acknowledged that the First-Lien Obligations of any Series may, subject to the limitations set forth in the then extant Secured Credit Documents, be increased, extended, renewed, replaced, restated, supplemented, restructured, repaid, refunded, Refinanced or otherwise amended or modified from time to time, all without affecting the priorities set forth in Section 2.01(a) or the provisions of this Agreement defining the relative rights of the First-Lien Secured Parties of any Series.

(c) Notwithstanding the date, time, method, manner or order of grant, attachment or perfection of any Liens securing any Series of First-Lien Obligations granted on the Shared Collateral and notwithstanding any provision of the Uniform Commercial Code of any jurisdiction, or any other applicable law or the Secured Credit Documents or any defect or deficiencies in the Liens securing the First-Lien Obligations of any Series or any other circumstance whatsoever (but, in each case, subject to Section 1.03), each First-Lien Secured Party hereby agrees that the Liens securing each Series of First-Lien Obligations on any Shared Collateral shall be of equal priority.

(d) Notwithstanding anything in this Agreement or any other First-Lien Security Documents to the contrary, Collateral consisting of cash and cash equivalents pledged to secure Credit Agreement Obligations consisting of reimbursement obligations in respect of Letters of Credit or otherwise held by the Credit Agreement Collateral Agent pursuant to Section 2.03(g), 2.04(g), 2.15 or Article 8 of the Credit Agreement (or any equivalent successor provision) shall be applied as specified in the Credit Agreement and will not constitute Shared Collateral.

SECTION 2.02 Actions with Respect to Shared Collateral; Prohibition on Contesting Liens .

(a) Only the Applicable Collateral Agent shall act or refrain from acting with respect to any Shared Collateral (including with respect to any intercreditor agreement with respect to any Shared Collateral). At any time when the Credit Agreement Collateral Agent is the Applicable Collateral Agent, no Additional First-Lien Secured Party shall or shall instruct any Collateral Agent to, and no Collateral Agent that is not the Applicable Authorized Representative

 

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shall, commence any judicial or nonjudicial foreclosure proceedings with respect to, seek to have a trustee, receiver, liquidator or similar official appointed for or over, attempt any action to take possession of, exercise any right, remedy or power with respect to, or otherwise take any action to enforce its security interest in or realize upon, or take any other action available to it in respect of, any Shared Collateral (including with respect to any intercreditor agreement with respect to any Shared Collateral), whether under any Additional First-Lien Security Document, applicable law or otherwise, it being agreed that only the Credit Agreement Collateral Agent, acting in accordance with the Credit Agreement Collateral Documents, shall be entitled to take any such actions or exercise any such remedies with respect to Shared Collateral at such time.

(b) With respect to any Shared Collateral at any time when the Additional First-Lien Collateral Agent is the Applicable Collateral Agent, (i) the Additional First-Lien Collateral Agent shall act only on the instructions of the Applicable Authorized Representative, (ii) the Additional Collateral Agent shall not follow any instructions with respect to such Shared Collateral (including with respect to any intercreditor agreement with respect to any Shared Collateral) from any Non-Controlling Authorized Representative (or any other First-Lien Secured Party other than the Applicable Authorized Representative) and (iii) no Non-Controlling Authorized Representative or other First-Lien Secured Party (other than the Applicable Authorized Representative) shall or shall instruct the Additional First-Lien Collateral Agent to, commence any judicial or nonjudicial foreclosure proceedings with respect to, seek to have a trustee, receiver, liquidator or similar official appointed for or over, attempt any action to take possession of, exercise any right, remedy or power with respect to, or otherwise take any action to enforce its security interest in or realize upon, or take any other action available to it in respect of, any Shared Collateral (including with respect to any intercreditor agreement with respect to any Shared Collateral), whether under any First-Lien Security Document, applicable law or otherwise, it being agreed that only the Additional Collateral Agent, acting on the instructions of the Applicable Authorized Representative and in accordance with the Additional First-Lien Security Documents, shall be entitled to take any such actions or exercise any such remedies with respect to Shared Collateral.

(c) Notwithstanding the equal priority of the Liens securing each Series of First-Lien Obligations, the Applicable Collateral Agent (in the case of the Additional First-Lien Collateral Agent, acting on the instructions of the Applicable Authorized Representative) may deal with the Shared Collateral as if such Applicable Collateral Agent had a senior Lien on such Collateral. No Non-Controlling Authorized Representative or Non-Controlling Secured Party will contest, protest or object to any foreclosure proceeding or action brought by the Applicable Collateral Agent, the Applicable Authorized Representative or the Controlling Secured Party or any other exercise by the Applicable Collateral Agent, the Applicable Authorized Representative or the Controlling Secured Party of any rights and remedies relating to the Shared Collateral, or to cause the Applicable Collateral Agent to do so. The foregoing shall not be construed to limit the rights and priorities of any First-Lien Secured Party, the Applicable Collateral Agent or any Authorized Representative with respect to any Collateral not constituting Shared Collateral.

(d) Each of the First-Lien Secured Parties agrees that it will not (and hereby waives any right to) question or contest or support any other Person in contesting, in any proceeding (including any Insolvency or Liquidation Proceeding), the perfection, priority, validity, attachment or enforceability of a Lien held by or on behalf of any of the First-Lien Secured

 

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Parties in all or any part of the Collateral, or the provisions of this Agreement; provided that nothing in this Agreement shall be construed to prevent or impair the rights of any Collateral Agent or any Authorized Representative to enforce this Agreement.

SECTION 2.03 No Interference; Payment Over .

(a) Each First-Lien Secured Party agrees that (i) it will not challenge or question in any proceeding the validity or enforceability of any First-Lien Obligations of any Series or any First-Lien Security Document or the validity, attachment, perfection or priority of any Lien under any First-Lien Security Document or the validity or enforceability of the priorities, rights or duties established by or other provisions of this Agreement; (ii) it will not take or cause to be taken any action the purpose or intent of which is, or could be, to interfere, hinder or delay, in any manner, whether by judicial proceedings or otherwise, any sale, transfer or other disposition of the Shared Collateral by the Applicable Collateral Agent, (iii) except as provided in Section 2.02, it shall have no right to (A) direct the Applicable Collateral Agent or any other First-Lien Secured Party to exercise any right, remedy or power with respect to any Shared Collateral (including pursuant to any intercreditor agreement) or (B) consent to the exercise by the Applicable Collateral Agent or any other First-Lien Secured Party of any right, remedy or power with respect to any Shared Collateral, (iv) it will not institute any suit or assert in any suit, bankruptcy, insolvency or other proceeding any claim against the Applicable Collateral Agent or any other First-Lien Secured Party seeking damages from or other relief by way of specific performance, instructions or otherwise with respect to any Shared Collateral, and none of the Applicable Collateral Agent, any Applicable Authorized Representative or any other First-Lien Secured Party shall be liable for any action taken or omitted to be taken by the Applicable Collateral Agent, such Applicable Authorized Representative or other First-Lien Secured Party with respect to any Shared Collateral in accordance with the provisions of this Agreement, (v) it will not seek, and hereby waives any right, to have any Shared Collateral or any part thereof marshaled upon any foreclosure or other disposition of such Collateral and (vi) it will not attempt, directly or indirectly, whether by judicial proceedings or otherwise, to challenge the enforceability of any provision of this Agreement; provided that nothing in this Agreement shall be construed to prevent or impair the rights of any of the Applicable Collateral Agent or any other First-Lien Secured Party to enforce this Agreement.

(b) Each First-Lien Secured Party hereby agrees that if it shall obtain possession of any Shared Collateral or shall realize any proceeds or payment in respect of any such Shared Collateral, pursuant to any First-Lien Security Document or by the exercise of any rights available to it under applicable law or in any Insolvency or Liquidation Proceeding or through any other exercise of remedies (including pursuant to any intercreditor agreement), at any time prior to the Discharge of each of the First-Lien Obligations, then it shall hold such Shared Collateral, proceeds or payment in trust for the other First-Lien Secured Parties and promptly transfer such Shared Collateral, proceeds or payment, as the case may be, to the Applicable Collateral Agent, to be distributed in accordance with the provisions of Section 2.01 hereof.

 

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SECTION 2.04 Automatic Release of Liens; Amendments to First-Lien Security Documents .

(a) If, at any time the Applicable Collateral Agent forecloses upon or otherwise exercises remedies against any Shared Collateral resulting in a sale or disposition thereof, then (whether or not any Insolvency or Liquidation Proceeding is pending at the time) the Liens in favor of the other Collateral Agent for the benefit of each Series of First-Lien Secured Parties upon such Shared Collateral will automatically be released and discharged as and when, but only to the extent, such Liens of the Applicable Collateral Agent on such Shared Collateral are released and discharged; provided that any proceeds of any Shared Collateral realized therefrom shall be applied pursuant to Section 2.01.

(b) Each Collateral Agent and Authorized Representative agrees to execute and deliver (at the sole cost and expense of the Grantors) all such authorizations and other instruments as shall reasonably be requested by the Applicable Collateral Agent to evidence and confirm any release of Shared Collateral provided for in this Section.

SECTION 2.05 Certain Agreements with Respect to Bankruptcy or Insolvency Proceedings .

(a) This Agreement shall continue in full force and effect notwithstanding the commencement of any proceeding under the Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law by or against the Company or any of its Subsidiaries. The parties hereto acknowledge that the provisions of this Agreement are intended to be enforceable as contemplated by Section 510(a) of the Bankruptcy Code.

(b) If the Company and/or any other Grantor shall become subject to a case (a “ Bankruptcy Case ”) under the Bankruptcy Code and shall, as debtor(s)-in-possession, move for approval of financing (“ DIP Financing ”) to be provided by one or more lenders (the “ DIP Lenders ”) under Section 364 of the Bankruptcy Code or any equivalent provision of any other Bankruptcy Law or the use of cash collateral under Section 363 of the Bankruptcy Code or any equivalent provision of any other Bankruptcy Law, each First-Lien Secured Party agrees that it will raise no objection to any such financing or to the Liens on the Shared Collateral securing the same (“ DIP Financing Liens ”) or to any use of cash collateral that constitutes Shared Collateral, unless a majority in interest of the Controlling Secured Parties (or such greater amount as is necessary to take action under the applicable Loan Document or Additional First Lien Documents), or an Authorized Representative of any Controlling Secured Party, shall then oppose or object to such DIP Financing or such DIP Financing Liens or use of cash collateral (and (i) to the extent that such DIP Financing Liens are senior to the Liens on any such Shared Collateral for the benefit of the Controlling Secured Parties, each Non-Controlling Secured Party will subordinate its Liens with respect to such Shared Collateral on the same terms as the Liens of the Controlling Secured Parties (other than any Liens of any First-Lien Secured Parties constituting DIP Financing Liens) are subordinated thereto, and (ii) to the extent that such DIP Financing Liens rank pari passu with the Liens on any such Shared Collateral granted to secure the First-Lien Obligations of the Controlling Secured Parties, each Non-Controlling Secured Party will confirm the priorities with respect to such Shared Collateral as set forth herein), in each case so long as (A) the First-Lien Secured Parties of each Series retain the benefit of their Liens on all such Shared Collateral pledged to the DIP Lenders, including proceeds thereof arising after the commencement of such proceeding, with the same priority vis-à-vis all the other First-Lien Secured Parties (other than any Liens of the First-Lien Secured Parties constituting

 

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DIP Financing Liens) as existed prior to the commencement of the Bankruptcy Case, (B) the First-Lien Secured Parties of each Series are granted Liens on any additional collateral pledged to any First-Lien Secured Parties as adequate protection or otherwise in connection with such DIP Financing or use of cash collateral, with the same priority vis-à-vis the First-Lien Secured Parties as set forth in this Agreement, (C) if any amount of such DIP Financing or cash collateral is applied to repay any of the First-Lien Obligations, such amount is applied pursuant to Section 2.01, and (D) if any First-Lien Secured Parties are granted adequate protection, including in the form of periodic payments, in connection with such DIP Financing or use of cash collateral, the proceeds of such adequate protection are applied pursuant to Section 2.01; provided that the First-Lien Secured Parties of each Series shall have a right to object to the grant of a Lien to secure the DIP Financing over any Collateral subject to Liens in favor of the First-Lien Secured Parties of such Series or its Authorized Representative that shall not constitute Shared Collateral; and provided , further , that the First-Lien Secured Parties receiving adequate protection shall not object to any other First-Lien Secured Party receiving adequate protection comparable to any adequate protection granted to such First-Lien Secured Parties in connection with a DIP Financing or use of cash collateral.

SECTION 2.06 Reinstatement . In the event that any of the First-Lien Obligations shall be paid in full and such payment or any part thereof shall subsequently, for whatever reason (including an order or judgment for disgorgement of a preference under the Bankruptcy Code, or any similar law, or the settlement of any claim in respect thereof), be required to be returned or repaid, the terms and conditions of this Article II shall be fully applicable thereto until all such First-Lien Obligations shall again have been paid in full in cash.

SECTION 2.07 Insurance . As between the First-Lien Secured Parties, the Applicable Collateral Agent, (and in the case of the Additional First-Lien Collateral Agent, acting at the direction of the Applicable Authorized Representative), shall have the right to adjust or settle any insurance policy or claim covering or constituting Shared Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding affecting the Shared Collateral.

SECTION 2.08 Refinancings . The First-Lien Obligations of any Series may, subject to the limitations set forth in the extant Secured Credit Documents, be increased, extended, renewed, replaced, restated, supplemented, restructured, repaid, refunded, Refinanced (in whole or in part) or otherwise modified from time to time, in each case, without notice to, or the consent (except to the extent a consent is otherwise required to permit the Refinancing transaction under any Secured Credit Document) of any First-Lien Secured Party of any other Series, all without affecting the priorities provided for herein or the other provisions hereof; provided that the Authorized Representative of the holders of any such Refinancing indebtedness shall have executed a Joinder Agreement on behalf of the holders of such Refinancing indebtedness.

SECTION 2.09 Possessory Collateral Agent as Gratuitous Bailee for Perfection .

(a) The Possessory Collateral shall be delivered to the Credit Agreement Collateral Agent and the Credit Agreement Collateral Agent agrees to hold any Shared Collateral constituting Possessory Collateral that is part of the Collateral in its possession or control (or in

 

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the possession or control of its agents or bailees) as gratuitous bailee for the benefit of each other First-Lien Secured Party and any assignee solely for the purpose of perfecting the security interest granted in such Possessory Collateral, if any, pursuant to the applicable First-Lien Security Documents, in each case, subject to the terms and conditions of this Section 2.09; provided that at any time the Credit Agreement Collateral Agent in not the Applicable Collateral Agent, the Credit Agreement Collateral Agent shall, at the request of the Additional First-Lien Collateral Agent, promptly deliver all Possessory Collateral to the Additional First-Lien Collateral Agent together with any necessary endorsements (or otherwise allow the Additional First-Lien Collateral Agent to obtain control of such Possessory Collateral). The Company shall take such further action as is required to effectuate the transfer contemplated hereby and shall indemnify each Collateral Agent for loss or damage suffered by such Collateral Agent as a result of such transfer except for loss or damage suffered by such Collateral Agent as a result of its own willful misconduct, gross negligence or bad faith.

(b) The Addition Collateral Agent agrees to hold any Shared Collateral constituting Possessory Collateral, from time to time in its possession, as gratuitous bailee for the benefit of each other First-Lien Secured Party and any assignee, solely for the purpose of perfecting the security interest granted in such Possessory Collateral, if any, pursuant to the applicable First-Lien Security Documents, in each case, subject to the terms and conditions of this Section 2.09.

(c) The duties or responsibilities of each Collateral Agent under this Section 2.09 shall be limited solely to holding any Shared Collateral constituting Possessory Collateral as gratuitous bailee for the benefit of each other First-Lien Secured Party for purposes of perfecting the Lien held by such First-Lien Secured Parties therein.

SECTION 2.10 Amendments to Security Documents .

(a) Without the prior written consent of the Credit Agreement Collateral Agent, the Additional First-Lien Collateral Agent agrees that no Additional First-Lien Security Document may be amended, supplemented or otherwise modified or entered into to the extent such amendment, supplement or modification, or the terms of any new Additional First-Lien Security Document would be prohibited by, or would require any Grantor to act or refrain from acting in a manner that would violate, any of the terms of this Agreement.

(b) Without the prior written consent of the Additional First-Lien Collateral Agent, the Credit Agreement Collateral Agent agrees that no Credit Agreement Collateral Document may be amended, supplemented or otherwise modified or entered into to the extent such amendment, supplement or modification, or the terms of any new Credit Agreement Collateral Document would be prohibited by, or would require any Grantor to act or refrain from acting in a manner that would violate, any of the terms of this Agreement.

(c) In making determinations required by this Section 2.10, each Collateral Agent may conclusively rely on an officer’s certificate of the Company.

 

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ARTICLE III

Existence and Amounts of Liens and Obligations

SECTION 3.01 Determinations with Respect to Amounts of Liens and Obligations . Whenever a Collateral Agent or any Authorized Representative shall be required, in connection with the exercise of its rights or the performance of its obligations hereunder, to determine the existence or amount of any First-Lien Obligations of any Series, or the Shared Collateral subject to any Lien securing the First-Lien Obligations of any Series, it may request that such information be furnished to it in writing by each other Authorized Representative or Collateral Agent and shall be entitled to make such determination or not make any determination on the basis of the information so furnished; provided , however , that if an Authorized Representative or a Collateral Agent shall fail or refuse reasonably promptly to provide the requested information, the requesting Collateral Agent or Authorized Representative shall be entitled to make any such determination by such method as it may, in the exercise of its good faith judgment, determine, including by reliance upon a certificate of the Company. Each Collateral Agent and each Authorized Representative may rely conclusively, and shall be fully protected in so relying, on any determination made by it in accordance with the provisions of the preceding sentence (or as otherwise directed by a court of competent jurisdiction) and shall have no liability to any Grantor, any First-Lien Secured Party or any other person as a result of such determination.

ARTICLE IV

The Applicable Collateral Agent

ARTICLE 4.01 Authority .

(a) Notwithstanding any other provision of this Agreement, nothing herein shall be construed to impose any fiduciary or other duty on any Applicable Collateral Agent to any Non-Controlling Secured Party or give any Non-Controlling Secured Party the right to direct any Applicable Collateral Agent, except that each Applicable Collateral Agent shall be obligated to distribute proceeds of any Shared Collateral in accordance with Section 2.01 hereof.

(b) In furtherance of the foregoing, each Non-Controlling Secured Party acknowledges and agrees that the Applicable Collateral Agent shall be entitled, for the benefit of the First-Lien Secured Parties, to sell, transfer or otherwise dispose of or deal with any Shared Collateral as provided herein and in the First-Lien Security Documents, as applicable, for which the Applicable Collateral Agent is the collateral agent of such Shared Collateral, without regard to any rights to which the Non-Controlling Secured Parties would otherwise be entitled as a result of the First-Lien Obligations held by such Non-Controlling Secured Parties. Without limiting the foregoing, each Non-Controlling Secured Party agrees that none of the Applicable Collateral Agent, the Applicable Authorized Representative or any other First-Lien Secured Party shall have any duty or obligation first to marshal or realize upon any type of Shared Collateral (or any other Collateral securing any of the First-Lien Obligations), or to sell, dispose of or otherwise liquidate all or any portion of such Shared Collateral (or any other Collateral securing any First-Lien Obligations), in any manner that would maximize the return to the Non-Controlling Secured Parties, notwithstanding that the order and timing of any such realization, sale, disposition or liquidation may affect the amount of proceeds actually received by the Non-Controlling Secured Parties from such realization, sale, disposition or liquidation. Each of the First-Lien Secured Parties waives any claim it may now or hereafter have against any Collateral Agent or the Authorized Representative of any other Series of First-Lien Obligations or any

 

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other First-Lien Secured Party of any other Series arising out of (i) any actions which any Collateral Agent, Authorized Representative or the First-Lien Secured Parties take or omit to take (including, actions with respect to the creation, perfection or continuation of Liens on any Collateral, actions with respect to the foreclosure upon, sale, release or depreciation of, or failure to realize upon, any of the Collateral and actions with respect to the collection of any claim for all or any part of the First-Lien Obligations from any account debtor, guarantor or any other party) in accordance with the First-Lien Security Documents or any other agreement related thereto or to the collection of the First-Lien Obligations or the valuation, use, protection or release of any security for the First-Lien Obligations, (ii) any election by any Applicable Authorized Representative or any holders of First-Lien Obligations, in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b) of the Bankruptcy Code or (iii) subject to Section 2.05, any borrowing by, or grant of a security interest or administrative expense priority under Section 364 of the Bankruptcy Code or any equivalent provision of any other Bankruptcy Law, by the Company or any of its Subsidiaries, as debtor-in-possession. Notwithstanding any other provision of this Agreement, the Applicable Collateral Agent shall not accept any Shared Collateral in full or partial satisfaction of any First-Lien Obligations pursuant to Section 9-620 of the Uniform Commercial Code of any jurisdiction, without the consent of each Authorized Representative representing holders of First-Lien Obligations for whom such Collateral constitutes Shared Collateral.

ARTICLE V

Miscellaneous

SECTION 5.01 Notices . All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(a) if to the Credit Agreement Collateral Agent or the Administrative Agent, to it at [                        ], Attention of [                    ] (Fax No. [            ]);

(b) if to the Additional First-Lien Collateral Agent or the Initial Additional Authorized Representative, to it at [            ];

(c) if to any other Additional Authorized Representative, to it at the address set forth in the applicable Joinder Agreement.

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt (if a Business Day) and on the next Business Day thereafter (in all other cases) if delivered by hand or overnight courier service or sent by telecopy or on the date three Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 5.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 5.01. As agreed to in writing among each Collateral Agent and each Authorized Representative from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable person provided from time to time by such person.

 

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SECTION 5.02 Waivers; Amendment; Joinder Agreements .

(a) No failure or delay on the part of any party hereto in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereto are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in similar or other circumstances.

(b) Neither this Agreement nor any provision hereof may be terminated, waived, amended or modified (other than pursuant to any Joinder Agreement) except pursuant to an agreement or agreements in writing entered into by each Authorized Representative and each Collateral Agent (and with respect to any such termination, waiver, amendment or modification which by the terms of this Agreement requires the Company’s consent or which increases the obligations or reduces the rights of the Company or any other Grantor, with the consent of the Company).

(c) Notwithstanding the foregoing, without the consent of any First-Lien Secured Party, any Authorized Representative may become a party hereto by execution and delivery of a Joinder Agreement in accordance with Section 5.13 and upon such execution and delivery, such Authorized Representative and the Additional First-Lien Secured Parties and Additional First-Lien Obligations of the Series for which such Authorized Representative is acting shall be subject to the terms hereof and the terms of the Additional First-Lien Security Documents applicable thereto.

(d) Notwithstanding the foregoing, without the consent of any other Authorized Representative or any First-Lien Secured Party, the Collateral Agents may effect amendments and modifications to this Agreement to the extent necessary to reflect any incurrence of any Additional First-Lien Obligations in compliance with the Credit Agreement and the other Secured Credit Documents.

SECTION 5.03 Parties in Interest . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, as well as the other First-Lien Secured Parties, all of whom are intended to be bound by, and to be third party beneficiaries of, this Agreement.

SECTION 5.04 Survival of Agreement . All covenants, agreements, representations and warranties made by any party in this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement.

 

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SECTION 5.05 Counterparts . This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart hereof.

SECTION 5.06 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 not invalidate or render unenforceable such provision in any other jurisdiction. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 5.07 GOVERNING LAW . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SECTION 5.08 Submission to Jurisdiction Waivers; Consent to Service of Process . Each Collateral Agent and each Authorized Representative, on behalf of itself and the First-Lien Secured Parties of the Series for whom it is acting, irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the First-Lien Security Documents, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, Borough of Manhattan, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such 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;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Person (or its Authorized Representative) at the address set forth in Section 5.01;

(d) agrees that nothing herein shall affect the right of any other party hereto (or any First-Lien Secured Party) to effect service of process in any other manner permitted by law or shall limit the right of any party hereto (or any First-Lien Secured Party) to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section 5.08 any special, exemplary, punitive or consequential damages.

 

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SECTION 5.09 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR FOR ANY COUNTERCLAIM THEREIN.

SECTION 5.10 Headings . Article, Section and Annex headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 5.11 Conflicts . In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of any of the First-Lien Security Documents or any of the other Secured Credit Documents, the provisions of this Agreement shall control.

SECTION 5.12 Provisions Solely to Define Relative Rights . The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the First-Lien Secured Parties in relation to one another. None of the Company, any other Grantor or any other creditor thereof shall have any rights or obligations hereunder, except as expressly provided in this Agreement ( provided that nothing in this Agreement (other than Section 2.04, 2.05, 2.08, 2.09 or Article V) is intended to or will amend, waive or otherwise modify the provisions of the Credit Agreement or any Additional First-Lien Documents), and none of the Company or any other Grantor may rely on the terms hereof (other than Sections 2.04, 2.05, 2.08, 2.09 and Article V). Nothing in this Agreement is intended to or shall impair the obligations of any Grantor, which are absolute and unconditional, to pay the First-Lien Obligations as and when the same shall become due and payable in accordance with their terms.

SECTION 5.13 Additional Senior Debt . To the extent, but only to the extent permitted by the provisions of the Credit Agreement and the Additional First-Lien Documents, the Company may incur additional indebtedness after the date hereof that is permitted by the Credit Agreement and the Additional First-Lien Documents to be incurred and secured on an equal and ratable basis by the liens securing the First-Lien Obligations (such indebtedness referred to as “ Additional Senior Class Debt ”). Any such Additional Senior Class Debt may be secured by a Lien and may be Guaranteed by the Grantors on a senior basis, in each case under and pursuant to the Additional First-Lien Documents, if and subject to the condition that the Authorized Representative of any such Additional Senior Class Debt (each, a “ Additional Senior Class Debt Representative ”), acting on behalf of the holders of such Additional Indebtedness (such Authorized Representative and holders in respect of any Additional Senior Class Debt being referred to as the “ Additional Senior Class Debt Parties ”), becomes a party to this Agreement by satisfying the conditions set forth in clauses (i) through (iv) of the immediately succeeding paragraph.

 

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In order for a Additional Senior Class Debt Representative to become a party to this Agreement,

(i) such Additional Senior Class Debt Representative, each Collateral Agent, each Authorized Representative and each Grantor shall have executed and delivered an instrument substantially in the form of Annex II (with such changes as may be reasonably approved by each Collateral Agent and such Additional Senior Class Debt Representative) pursuant to which such Additional Senior Class Debt Representative becomes an Authorized Representative hereunder, and the Additional Senior Class Debt in respect of which such Additional Senior Class Debt Representative is the Authorized Representative and the related Additional Senior Class Debt Parties become subject hereto and bound hereby;

(ii) the Company shall have (x) delivered to each Collateral Agent true and complete copies of each of the Additional First-Lien Documents relating to such Additional Senior Class Debt, certified as being true and correct by a Responsible Officer of the Company and (y) identified in a certificate of an authorized officer the obligations to be designated as Additional First-Lien Obligations and the initial aggregate principal amount or face amount thereof and certified that such obligations are permitted to be incurred and secured on a pari passu basis with the then extant First-Lien Obligations and by the terms of the then extant Secured Credit Documents;

(iii) all filings, recordations and/or amendments or supplements to the First-Lien Security Documents necessary or desirable in the reasonable judgment of the Additional Collateral Agent to confirm and perfect the Liens securing the relevant obligations relating to such Additional Senior Class Debt shall have been made, executed and/or delivered (or, with respect to any such filings or recordations, acceptable provisions to perform such filings or recordings have been taken in the reasonable judgment of the Additional Collateral Agent), and all fees and taxes in connection therewith shall have been paid (or acceptable provisions to make such payments have been taken in the reasonable judgment of the Additional Collateral Agent); and

(iv) the Additional First-Lien Documents, as applicable, relating to such Additional Senior Class Debt shall provide, in a manner reasonably satisfactory to each Collateral Agent, that each Additional Senior Class Debt Party with respect to such Additional Senior Class Debt will be subject to and bound by the provisions of this Agreement in its capacity as a holder of such Additional Senior Class Debt.

Each Authorized Representative acknowledges and agrees that upon execution and delivery of a Joinder Agreement substantially in the form of Annex II by an additional Additional Senior Class Debt Representative and each Grantor in accordance with Section 5.13, the Additional First-Lien Collateral Agent will continue to act in its capacity as Additional First Lien Collateral Agent in respect of the then existing Authorized Representatives (other than the Administrative Agent) and such additional Authorized Representative.

SECTION 5.14 Agent Capacities . Except as expressly provided herein or in the Credit Agreement Collateral Documents, Bank of America is acting in the capacities of

 

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Administrative Agent and Credit Agreement Collateral Agent solely for the Credit Agreement Secured Parties. Except as expressly provided herein or in the Additional First Lien Security Documents, [                    ] is acting in the capacity of the Additional First-Lien Collateral Agent solely for the Additional First-Lien Secured Parties. Except as expressly set forth herein, none of the Administrative Agent, the Credit Agreement Collateral Agent or the Additional First-Lien Collateral Agent shall have any duties or obligations in respect of any of the Collateral, all of such duties and obligations, if any, being subject to and governed by the applicable Secured Credit Documents.

SECTION 5.15 Integration . This Agreement together with the other Secured Credit Documents and the First-Lien Security Documents represents the agreement of each of the Grantors and the First-Lien Secured Parties with respect to the subject matter hereof and there are no promises, undertakings, representations or warranties by any Grantor, the Credit Agreement Collateral Agent, any or any other First-Lien Secured Party relative to the subject matter hereof not expressly set forth or referred to herein or in the other Secured Credit Documents or the First-Lien Security Documents.

SECTION 5.16 Additional Grantors . The Company agrees that, if any Subsidiary shall become a Grantor after the date hereof, it will promptly cause such Subsidiary to become party hereto by executing and delivering an instrument in the form of Annex III. Upon such execution and delivery, such Subsidiary will become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of such instrument shall not require the consent of any other party hereunder, and will be acknowledged by the Administrative Agent, the Initial Additional Authorized Representative and each additional Authorized Representative. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.

SECTION 5.17 Administrative Agent and Representative . It is understood and agreed that (a) the Administrative Agent is entering into this Agreement in its capacity as administrative agent and collateral agent under the Credit Agreement and the provisions of Article 9 of the Credit Agreement applicable to the Agents (as defined therein) thereunder shall also apply to the Administrative Agent hereunder and (b) [    ] is entering into this Agreement in its capacity as [Trustee] under [indenture] and the provisions of Article [    ] of such indenture applicable to the Trustee thereunder shall also apply to the Trustee hereunder

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

BANK OF AMERICA, N.A.,
as Collateral Agent
By:  

 

  Name:  
  Title:  
BANK OF AMERICA, N.A.,
as Authorized Representative for the Credit Agreement Secured Parties
By:  

 

  Name:  
  Title:  
[                                                                                                  ],
as Additional First-Lien Collateral Agent
By:  

 

  Name:  
  Title:  
[                                                                                              ],
as Initial Additional Authorized Representative
By:  

 

  Name:  
  Title:  
SUMMIT MATERIALS, LLC
By:  

 

  Name:  
  Title:  
[GRANTORS]
By:  

 

  Name:  
  Title:  

 

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ANNEX I

Grantors

Schedule 1

 

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ANNEX II

[FORM OF] JOINDER NO. [            ] dated as of [            ], 20[    ] to the FIRST-LIEN INTERCREDITOR AGREEMENT dated as of [            ], 20[    ] (the “ First-Lien Intercreditor Agreement ”), among Summit Materials, LLC, a Delaware limited liability company (the “ Company ”), certain subsidiaries and affiliates of the Company (each a “ Grantor ”), Bank of America, N.A., as Credit Agreement Collateral Agent for the Credit Agreement Secured Parties under the First-Lien Security Documents (in such capacity, the “ Credit Agreement Collateral Agent ”), Bank of America, N.A., as Authorized Representative for the Credit Agreement Secured Parties, [                    ], as Additional First-Lien Collateral Agent, [                    ], as Initial Additional Authorized Representative, and the additional Authorized Representatives from time to time a party thereto. 35

A. Capitalized terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the First-Lien Intercreditor Agreement.

B. As a condition to the ability of the Company to incur Additional First-Lien Obligations and to secure such Additional Senior Class Debt with the liens and security interests created by the Additional First-Lien Security Documents, the Additional Senior Class Debt Representative in respect of such Additional Senior Class Debt is required to become an Authorized Representative, and such Additional Senior Class Debt and the Additional Senior Class Debt Parties in respect thereof are required to become subject to and bound by, the First-Lien Intercreditor Agreement. Section 5.13 of the First-Lien Intercreditor Agreement provides that such Additional Senior Class Debt Representative may become an Authorized Representative, and such Additional Senior Class Debt and such Additional Senior Class Debt Parties may become subject to and bound by, the First-Lien Intercreditor Agreement, pursuant to the execution and delivery by the Senior Debt Class Representative of an instrument in the form of this Joinder and the satisfaction of the other conditions set forth in Section 5.13 of the First-Lien Intercreditor Agreement. The undersigned Additional Senior Class Debt Representative (the “ New Representative ”) are executing this Representative Joinder in accordance with the requirements of the First-Lien Intercreditor Agreement and the First-Lien Security Documents.

Accordingly, each Collateral Agent, each Authorized Representative and the New Representative agree as follows:

SECTION 1. In accordance with Section 5.13 of the First-Lien Intercreditor Agreement, the New Representative by its signature below becomes an Authorized Representative under, and the related Additional Senior Class Debt and Additional Senior Class Debt Parties become subject to and bound by, the First-Lien Intercreditor Agreement with the same force and effect as if the New Representative had originally been named therein as an Authorized Representative and the New Representative, on their behalf and on behalf of such Additional Senior Class Debt Parties, hereby agree to all the terms and provisions of the First-Lien Intercreditor Agreement

 

35  

In the event of the Refinancing of the Credit Agreement Obligations, revise to reflect joinder by a new Credit Agreement Collateral Agent

 

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applicable to it as Authorized Representative and to the Additional Senior Class Debt Parties that they represent as Additional First-Lien Secured Parties. Each reference to a “ Authorized Representative ” in the First-Lien Intercreditor Agreement shall be deemed to include the New Representative. The First-Lien Intercreditor Agreement is hereby incorporated herein by reference.

SECTION 2. The New Representative represents and warrants to each Collateral Agent, each Authorized Representative and the other First-Lien Secured Parties, individually, that (i) it has full power and authority to enter into this Joinder, in its capacity as [agent] [trustee], (ii) this Joinder has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms and (iii) the Additional First-Lien Documents relating to such Additional Senior Class Debt provide that, upon the New Representative’s entry into this Agreement, the Additional Senior Class Debt Parties in respect of such Additional Senior Class Debt will be subject to and bound by the provisions of the First-Lien Intercreditor Agreement as Additional First-Lien Secured Parties.

SECTION 3. This Joinder may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Joinder shall become effective when each Collateral Agent shall have received a counterpart of this Joinder that bears the signatures of the New Representative. Delivery of an executed signature page to this Joinder by facsimile transmission shall be effective as delivery of a manually signed counterpart of this Joinder.

SECTION 4. Except as expressly supplemented hereby, the First-Lien Intercreditor Agreement shall remain in full force and effect.

SECTION 5. THIS JOINDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 6. In case any one or more of the provisions contained in this Joinder should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the First-Lien Intercreditor Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 5.01 of the First-Lien Intercreditor Agreement. All communications and notices hereunder to the New Representative shall be given to them at their respective addresses set forth below their signatures hereto.

SECTION 8. The Company agrees to reimburse each Collateral Agent and each Authorized Representative for its reasonable out-of-pocket expenses in connection with this Joinder, including the reasonable fees, other charges and disbursements of counsel.

 

-28-


IN WITNESS WHEREOF, the New Representative has duly executed this Joinder to the First-Lien Intercreditor Agreement as of the day and year first above written.

 

[NAME OF NEW REPRESENTATIVE], as
[            ] for the holders of [            ],
By:  

 

  Name:  
  Title:  
Address for notices:

 

 

attention of:  

 

Telecopy:  

 

Acknowledged by:

 

BANK OF AMERICA, N.A.

as the Credit Agreement Collateral Agent and Authorized Representative,

  By:  

 

    Name:  
    Title:  
[                                         ],

as the Additional First-Lien Collateral Agent and Initial Additional Authorized Representative,

 

  By:  

 

    Name:  
    Title:  
[OTHER AUTHORIZED REPRESENTATIVES]

SUMMIT MATERIALS, LLC,

as Company

  By:  

 

    Name:  
    Title:  

 

-29-


THE OTHER GRANTORS LISTED ON
SCHEDULE I HERETO,
  By:  

 

    Name:
    Title:

 

-30-


Schedule I to the

Supplement to the

First-Lien Intercreditor Agreement

Grantors

[            ]

 

-31-


ANNEX III

SUPPLEMENT NO. [    ] dated as of [            ], 201[    ], to the FIRST LIEN INTERCREDITOR AGREEMENT dated as of [            ], 20[    ] (the “ First-Lien Intercreditor Agreement ”), among Summit Materials, LLC, a Delaware limited liability company (the “ Company ”), certain subsidiaries and affiliates of the Company (each a “ Grantor ”), Bank of America, N.A., as Credit Agreement Collateral Agent for the Credit Agreement Secured Parties under the First-Lien Security Documents (in such capacity, the “ Credit Agreement Collateral Agent ”), Bank of America, N.A., as Authorized Representative for the Credit Agreement Secured Parties, [                    ], as Additional First-Lien Collateral Agent, [                    ], as Initial Additional Authorized Representative, and the additional Authorized Representatives from time to time a party thereto.

A. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the First Lien Intercreditor Agreement.

B. The Grantors have entered into the First Lien Intercreditor Agreement. Pursuant to the Credit Agreement and certain Additional First-Lien Documents, certain newly acquired or organized Subsidiaries of the Company are required to enter into the First Lien Intercreditor Agreement. Section 5.16 of the First Lien Intercreditor Agreement provides that such Subsidiaries may become party to the First Lien Intercreditor Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “ New Grantor ”) is executing this Supplement in accordance with the requirements of the Credit Agreement and the Additional First-Lien Documents.

Accordingly, each Authorized Representative and the New Subsidiary Grantor agree as follows:

SECTION 1. In accordance with Section 5.16 of the First Lien Intercreditor Agreement, the New Grantor by its signature below becomes a Grantor under the First Lien Intercreditor Agreement with the same force and effect as if originally named therein as a Grantor, and the New Grantor hereby agrees to all the terms and provisions of the First Lien Intercreditor Agreement applicable to it as a Grantor thereunder. Each reference to a “Grantor” in the First Lien Intercreditor Agreement shall be deemed to include the New Grantor. The First Lien Intercreditor Agreement is hereby incorporated herein by reference.

SECTION 2. The New Grantor represents and warrants to each Authorized Representative and the other First Lien Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforceability may be limited by Bankruptcy Law and by general principles of equity.

 

-32-


SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when each Authorized Representative shall have received a counterpart of this Supplement that bears the signature of the New Grantor. Delivery of an executed signature page to this Supplement by facsimile transmission or other electronic method shall be as effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. Except as expressly supplemented hereby, the First Lien Intercreditor Agreement shall remain in full force and effect.

SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the First Lien Intercreditor Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 5.01 of the First Lien Intercreditor Agreement. All communications and notices hereunder to the New Grantor shall be given to it in care of the Company as specified in the First Lien Intercreditor Agreement.

SECTION 8. The Company agrees to reimburse each Authorized Representative for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for each Authorized Representative as required by the applicable Senior Credit Documents.

IN WITNESS WHEREOF, the New Grantor, and each Authorized Representative have duly executed this Supplement to the First Lien Intercreditor Agreement as of the day and year first above written.

 

[NAME OF NEW SUBSIDIARY GRANTOR]

By:

 

 

  Name:  
  Title:  

 

-33-


Acknowledged by:

BANK OF AMERICA, N.A.,

as the Credit Agreement Collateral Agent and Authorized Representative,

 

By:

 

 

    Name:
    Title:

[                    ],

as the Additional First Lien Collateral Agent and Initial Additional Authorized Representative,

 

 

By:

 

 

    Name:
    Title:
[OTHER AUTHORIZED REPRESENTATIVES]

 

-34-


EXHIBIT L

FORM OF AFFILIATED LENDER ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (this “ Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between [the][each] 36 Assignor identified in item 1 below ([the][each, an] “ Assignor ”) and [the][each] 37 Assignee identified in item 2 below ([the][each, an] “ Assignee ”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees] 38 hereunder are several and not joint.] 39 Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “ Credit Agreement ”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below (including, without limitation, participations in Swing Line Loans and L/C Obligations included in such facility)and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “ Assigned Interest ”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.

 

36   For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.
37   For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.
38   Select as appropriate.
39   Include bracketed language if there are either multiple Assignors or multiple Assignees.


1.    Assignor[s] :      

 

        

 

2.    Assignee[s] :      

 

        

 

   [for each Assignee, indicate if the Sponsor or a Non-Debt Fund Affiliate of the Sponsor]
3.    Affiliate Status :      
4.    Borrower :    Summit Materials, LLC   
5.    Administrative Agent :    Bank of America, N.A., including any successor thereto, as the administrative agent under the Credit Agreement
6.    Credit Agreement :    The Credit Agreement, dated as of January [    ], 2012, among Summit Materials, LLC (the “ Borrower ”), a Delaware limited liability company, Summit Materials Intermediate Holdings, LLC, a Delaware limited liability company, the other Guarantors party thereto, the Lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and the other parties from time to time party thereto.
7.    Assigned Interest :      


Assignor[s] 40

   Assignee[s] 41      Facility
Assigned 42
     Aggregate
Amount of
Commitment/Loans
for all Lenders 43
    Amount of
Commitment/Loans
Assigned 44
     Percentage
Assigned of
Commitment/
Loans 45
    CUSIP
Number
         $                   $                     
     

 

 

    

 

 

   

 

 

    

 

 

   
        —         $ —        $                            
     

 

 

    

 

 

   

 

 

    

 

 

   
        —         $ —        $                            
     

 

 

    

 

 

   

 

 

    

 

 

   
        —           —                   
[8.      Trade Date :                                 ] 46        

Effective Date:                     , 20     [TO BE INSERTED BY THE ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

 

40   List each Assignor, as appropriate.
41   List each Assignee, as appropriate.
42   Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment and Assumption (e.g. “Term Loans”, “ Other Term Loans”, “Extended Term Loans”, etc.).
43   Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.
44   After giving effect to Assignee’s purchase and assumption of the Assigned Interest, the aggregate principal amount of Term Loans held at any one time by Affiliated Lenders shall not exceed 20% of the original principal amount of all Term Loans at such time outstanding. To the extent any assignment to an Affiliated Lender would result in the aggregate principal amount of all Loans held by Affiliated Lenders exceeding the Affiliated Lender Cap, such excess will be void ab initio .
45   Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.
46   To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.


The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR
[NAME OF ASSIGNOR]

By:

 

 

  Name:
  Title:
ASSIGNEE
[NAME OF ASSIGNEE]

By:

 

 

  Name:
  Title:

 

[Consented to and] 47 Accepted:
BANK OF AMERICA, N.A., as Administrative Agent

By:

 

 

  Name:  
  Title:  
[Consented to:] 48
[L/C Issuer]

By:

 

 

  Name:  
  Title:  

 

47   To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.
48   To be added only if the consent of L/C Issuer is required by the terms of the Credit Agreement.


[Consented to:] 49
[Swing Line Lender]
By:  

 

  Name:  
  Title:  
[Consented to]: 50
SUMMIT MATERIALS, LLC
By:  

 

  Name:  
  Title:  

 

49   To be added only if the consent of the Swing Line Lender is required by the terms of the Credit Agreement.
50   To be added only if the consent of the Borrower is required by the terms of the Credit Agreement.


ANNEX 1

TO AFFILIATED LENDER ASSIGNMENT AND ASSUMPTION

STANDARD TERMS AND CONDITIONS FOR

AFFILIATED LENDER ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties .

1.1. Assignor . [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2. Assignee . [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 10.07(a) of the Credit Agreement (subject to such consents, if any, as may be required under Section 10.07(b) of the Credit Agreement), (iii) each of the conditions to the Affiliated Lender Assignment and Assumption contained in Section 10.07(k) of the Credit Agreement has been satisfied, (iv) from and after the Effective Date referred to in this Assignment and Assumption, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (v) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (vi) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.01(a) and (b) thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vii) 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 credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest and (viii) attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, including but not limited to any documentation required pursuant to Section 3.01 of the Credit Agreement, duly completed and executed by [the][such] Assignee, after giving effect to its purchase and assumption of the Assigned Interest, the aggregate principal amount of all Loans held by Affiliated Lenders will not exceed 20% of the aggregate principal amount of all Term Loans outstanding under the Credit Agreement (such percentage, the “ Affiliated Lender Cap ”); provided that any assignment to an Affiliated Lender which results in the aggregate principal amount of all Loans


held by Affiliated Lenders exceeding the Affiliated Lender Cap will be void ab initio 51 ; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender. 52

2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

 

51   Only in the case of a Dutch auction, pursuant to Section 10.07(k)(x) of the Credit Agreement, if the Assignee can make such representation, the following should be inserted:

“and (ix) it does not possess material non-public information with respect to Holdings and its Subsidiaries or the securities of any of them that has not been disclosed to the Lenders generally (other than Lenders who elect not to receive such information)”

52   If, in the case of a Dutch auction pursuant to Section 10.07(k)(x) of the Credit Agreement, the Assignee cannot make the representation specified in footnote 16, then the following text should be inserted here:

“The Assignee[s] cannot represent at this time that [it does][they do] not possess material non-public information with respect to Holdings and its Subsidiaries or the securities of any of them.”


EXHIBIT M

FORM OF NOTICE OF AFFILIATE ASSIGNMENT

Bank of America, N.A.

[ADDRESS]

 

  Re: Credit Agreement, dated as of January 30, 2012, among Summit Materials Intermediate Holdings, LLC, a Delaware limited liability company, Summit Materials, LLC, a Delaware limited liability company (the “ Borrower ”), the other Guarantors party thereto from time to time, the Lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and the other parties from time to time party thereto (the “ Credit Agreement ”).

Dear Sir:

The undersigned (the “ Proposed Affiliate Assignee ”) hereby gives you notice, pursuant to Section 10.07(k)(v) of the Credit Agreement, that

(a) it has entered into an agreement to purchase via assignment a portion of the Term Loans under the Credit Agreement,

(b) the assignor in the proposed assignment is [                    ],

(c) immediately after giving effect to such assignment, the Proposed Affiliate Assignee will be an Affiliated Lender,

(d) the principal amount of Term Loans to be purchased by such Proposed Affiliate Assignee in the assignment contemplated hereby is $        ,

(e) the aggregate amount of all Term Loans held by such Proposed Affiliate Assignee and each other Affiliated Lender after giving effect to the assignment hereunder (if accepted) is $[        ],

(f) it, in its capacity as a Term Lender under the Credit Agreement, hereby waives any right to bring any action against the Administrative Agent in connection with the Term Loans that are the subject of the proposed assignment hereunder, and

(g) the proposed effective date of the assignment contemplated hereby is [            , 20    ].


Very truly yours,
[EXACT LEGAL NAME OF PROPOSED AFFILIATE ASSIGNEE]

By:

 

 

  Name:  
  Title:  
  Phone Number:  
  Fax:  
  Email:  
Date:  

 

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Summit Materials, LLC:

We consent to the use of our report dated March 27, 2013, with respect to the consolidated balance sheet of Summit Materials, LLC as of December 29, 2012, and the related consolidated statements of operations, comprehensive (loss) income, cash flows and changes in redeemable noncontrolling interest and member’s interest for the year then ended, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

McLean, Virginia

May 3, 2013

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Summit Materials, L.L.C.:

We consent to the use of our report dated March 27, 2013, with respect to the consolidated balance sheet of Continental Cement Company, L.L.C. as of December 31, 2012, and the related consolidated statements of operations, comprehensive income (loss), cash flows and changes in redeemable members’ interest and member’s interest for the year then ended, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

McLean, Virginia

May 3, 2013

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Amendment No. 1 to Registration Statement No. 333-187556 of our report dated May 1, 2012 (March 26, 2013 as to Note 3), relating to the consolidated financial statements of Summit Materials, LLC and Subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph regarding retrospective adjustments for discontinued operations) for the years ended December 31, 2011 and 2010 appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the heading “Experts” in such Prospectus.

/s/ DELOITTE & TOUCHE LLP

McLean, Virginia

May 3, 2013

Exhibit 23.4

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Amendment No. 1 to Registration Statement No. 333-187556 of Summit Materials, LLC of our report dated April 18, 2012, relating to the consolidated financial statements of Continental Cement Company, L.L.C. and Subsidiary as of and for the year ended December 31, 2011 and for the periods from May 27, 2010 to December 31, 2010 (Successor) and from January 1, 2010 to May 26, 2010 (Predecessor) appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the heading “Experts” in such Prospectus.

/s/ DELOITTE & TOUCHE LLP

McLean, Virginia

May 3, 2013

Exhibit 23.5

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated December 15, 2011, with respect to the consolidated financial statements of Cornejo & Sons, Inc. and Subsidiaries included in the Registration Statement (Form S-4) and related Prospectus for the registration of $250 million aggregate principal amount of 10.5% Senior Notes due 2020.

/s/ Allen, Gibbs & Houlik, L.C.

May 2, 2013

Exhibit 23.6

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Members

Summit Materials, LLC and Subsidiaries

We consent to the use of our report dated October 25, 2011, with respect to the balance sheets of Kilgore Pavement Maintenance, LLC as of August 1, 2010 and December 31, 2009, and the related statements of operations and members’ equity and cash flows, for the period from January 1, 2010 through August 1, 2010 and for the year ended December 31, 2009, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ Wisan, Smith, Racker & Prescott, LLP

Salt Lake City, Utah

May 2, 2013

Exhibit 23.7

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Summit Materials, LLC

Washington, DC

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated October 23, 2012, with respect to the financial statements of Norris Aggregate Products, a division of Norris Asphalt Paving Co., included in the Registration Statement (Form S-4) of Summit Materials, LLC and Summit Materials Finance Corp. and related Prospectus for the registration of $250 million aggregate principal amount of 10.5% Senior Notes due 2020.

/s/ Clifton Larson Allen LLP

West Des Moines, Iowa

May 2, 2013

Exhibit 23.8

CONSENT OF INDEPENDENT AUDITOR

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated September 21, 2011, with respect to the combined financial statements and schedule of R.K. Hall Construction, Ltd. included in the Registration Statement (Form S-4) and related Prospectus for the registration of $250 million aggregate principal amount of 10.5% Senior Notes due 2020.

/s/ Perryman Chaney Russell, LLP

Perryman Chaney Russell, LLP

May 2, 2013