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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2003

Commission File No. 1-12984

CENTEX CONSTRUCTION PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation)

75-2520779
(I.R.S. Employer Identification No.)

2728 N. Harwood, Dallas, Texas 75201
(Address of principal executive offices)

(214) 981-5000
(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered

Common Stock (par value $.01 per share)		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x. No o.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to Form 10-K. x.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x. No o.

The aggregate market value of the voting stock held by nonaffiliates of the company at September 28, 2002 (the last business day of the registrants’ most recently completed second fiscal quarter) was $228.2 million.

There were 18,419,612 shares of common stock (or other similar equity securities) outstanding as of the close of business on June 18, 2003:

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference in Parts I, II, and III, of this Report:

(a) 2003 Annual Report to Stockholders of Centex Construction Products, Inc. for the fiscal year ended March 31, 2003.

(b) Proxy statement for the Annual Meeting of Stockholders of Centex Construction Products, Inc. to be held on July 21, 2003.

TABLE OF CONTENTS


PART I
	ITEM 1.BUSINESS
		General
		Industry Segment Information
		Employees
		Additional Information
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. CONTROLS AND PROCEDURES
	ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
	ITEM 16. PRINCIPAL ACCOUNTANT FEES AND SERVICES
SIGNATURES
Certifications
INDEX TO EXHIBITS
EX-4.2 Second Amended/Restated Credit Agreement
EX-11 Earnings (Loss) Per Common Share
EX-13 Annual Report to Shareholders
EX-21 Subsidiaries of the Company
EX-23 Consent of Independent Public Auditors

TABLE OF CONTENTS


				Page

			PART I
Item 1. Business:
	General				1
	Industry Segment Information				1
	Employees				17
	Additional Information				17
Item 2. Properties					17
Item 3. Legal Proceedings					17
Item 4. Submission of Matters to a Vote of Security Holders					17
		PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters					18
Item 6. Selected Financial Data					18
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations					19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk					19
Item 8. Financial Statements and Supplementary Data					20
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure					20
		PART III
Item 10. Directors and Executive Officers of the Registrant					21
Item 11. Executive Compensation					21
Item 12. Security Ownership of Certain Beneficial Owners and Management					21
Item 13. Certain Relationships and Related Transactions					22
Item 14. Controls and Procedures					22
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K					22
Item 16. Principal Accountant Fees and Services					23
SIGNATURES					24
CERTIFICATIONS					25
INDEX TO EXHIBITS					27

PART I

ITEM 1. BUSINESS

General

Centex Construction Products, Inc. (“CXP” or the “Company”) is a producer of a variety of basic construction products used in residential, industrial, commercial and infrastructure applications. CXP is a holding company and the businesses of the consolidated group are conducted through CXP’s subsidiaries. Unless the context indicates to the contrary, the terms “CXP” and the “Company” as used herein, should be understood to include subsidiaries of CXP and predecessor corporations. The Company produces and sells cement, gypsum wallboard, recycled paperboard, aggregates and readymix concrete. The Company is incorporated in the state of Delaware. Prior to April 19, 1994, the Company was a wholly-owned subsidiary of Centex Corporation (“Centex”). On April 19, 1994, the Company completed an Initial Public Offering (“IPO”) of 51% of its common stock. As a result of the IPO, Centex’s ownership of the Company was reduced to 49%. The Company’s common stock (“CXP Common Stock”) began trading publicly on the New York Stock Exchange on April 19, 1994. As of June 18, 2003, 18,419,612 shares of CXP Common Stock were outstanding.

As a result of repurchases by CXP of its common stock from the public since fiscal year 1997, and certain purchases of CXP common stock by Centex from the public, Centex owned approximately 65.1% of the outstanding shares of CXP Common Stock at March 31, 2003.

CXP’s involvement in the construction products business dates to 1963, when it began construction of its first cement plant. Since that time, the Company’s operations have expanded to include additional cement production and distribution facilities and the production, distribution and sale of aggregates, readymix concrete, gypsum wallboard and recycled paperboard. The Company’s production facilities are located principally in the western half of the U.S. and in certain key southwestern states.

On November 10, 2000 the Company acquired certain selected strategic assets (the “Strategic Assets Purchase”). The purchase price was $342.2 million in cash plus the assumption by a subsidiary of $100 million of subordinated debt. The principal strategic assets acquired were: a gypsum wallboard plant with 1.1 billion square feet of capacity located at Duke, Oklahoma; a short line railroad and railcars linking the Duke plant to adjacent railroads; a 220,000 ton-per-year lightweight recycled paperboard mill in Lawton, Oklahoma; a 50,000 ton-per-year recycled paperboard mill located in Commerce City, Colorado; and three recycled paper fiber collection sites. The Commerce City mill was closed in April 2001 and the recycled paper fiber collection sites sold in April 2002. The gypsum wallboard operations are operated by the Company’s American Gypsum Company located in Albuquerque, New Mexico. The paperboard operation is located in Lawton, Oklahoma and focuses primarily on the gypsum wallboard paper business.

Industry Segment Information

The following table presents revenues and earnings before interest and income taxes contributed by each of the Company’s industry segments during the periods indicated. Identifiable assets, depreciation, depletion and amortization, and capital expenditures by segment are presented in Note E of the Notes to the Consolidated Financial Statements of CXP on pages 18, 19 and 20 of CXP’s Annual Report to Stockholders for the fiscal year ended March 31, 2003 (the “2003 CXP Annual Report”). The

contribution from assets acquired in the Strategic Assets Purchase only includes results from the date of acquisition.


			For the Fiscal Years Ended March 31,

			2003			2002			2001			2000			1999

						(dollars in millions)
Contribution to Revenues⁽¹⁾:
	Cement		$	173.2		$	183.2		$	178.8		$	175.4		$	168.5
	Gypsum Wallboard			212.8			183.5			187.3			244.3			170.9
	Paperboard			92.9			84.3			31.5			—			—
	Concrete and Aggregates			56.6			57.6			61.1			55.9			47.3
	Other, net			2.9			(0.4	)		3.7			1.2			1.7

				538.4			508.2			462.4			467.8			388.4
	Less: Intersegment Sales			(37.1	)		(37.1	)		(21.3	)		(6.3	)		(6.5	)

		Total Net Revenues	$	501.3		$	471.1		$	441.1		$	470.5		$	381.9


			For the Fiscal Years Ended March 31,

			2003			2002			2001			2000			1999

						(dollars in millions)
Contribution to Operating Earnings:
	Cement		$	54.4		$	60.2		$	59.6		$	53.0		$	56.8
	Gypsum Wallboard			27.2			4.6			27.1			107.6			56.6
	Paperboard			17.6			10.0			1.4			—			—
	Concrete and Aggregates			(0.3	)		4.4			7.5			9.3			7.4
	Other, net			2.9			(0.4	)		3.7			1.2			1.7

				101.8			78.8			99.3			171.1			122.5
	Corporate Overhead			(5.6	)		(5.5	)		(4.7	)		(4.7	)		(4.4	)

		Total Earnings Before Interest and Income Taxes	$	96.2		$	73.3		$	94.6		$	166.4		$	118.1

(1)

The Company adopted the provisions of Emerging Issues Task Force Issue No. 00-10, “Accounting for Shipping and Handling Fees and Costs,” during Fiscal Year 2001. As a result of this adoption, net revenues prior to fiscal year 2001 have been restated to include freight and delivery costs billed to customers. Previously such billings were offset against corresponding expenses in cost of sales.

Revenues for the past three years from each of the Company’s business segments, expressed as a percentage of total consolidated net revenues, were as follows:


			Percentage of Total Consolidated Net Revenues

			2003			2002			2001

Segment:
	Cement			33.8	%		37.8	%		39.1	%
	Gypsum Wallboard			42.5	%		39.0	%		42.5	%
	Paperboard			12.0	%		11.2	%		3.9	%
	Concrete and Aggregates:
		Readymix Concrete		7.3	%		8.0	%		9.8	%
		Aggregates		3.9	%		4.1	%		3.9	%

				11.2	%		12.1	%		13.7	%
	Other, net			0.5	%		(0.1	%)		0.8	%

		Total Consolidated Net Revenues		100.0	%		100.0	%		100.0	%

Cement Operations

Company Operations. The Company’s cement production facilities are located in or near Buda, Texas; LaSalle, Illinois; Laramie, Wyoming; and Fernley, Nevada. The Laramie, Wyoming and Fernley, Nevada facilities are wholly-owned. The Buda, Texas plant is owned by Texas Lehigh Cement Company LP, a limited partnership owned 50% by the Company and 50% by Lehigh Cement Company, a subsidiary of Heidelberg Cement AG. The LaSalle, Illinois plant is owned by Illinois Cement Company, a joint venture owned 50% by the Company and 50% by RAAM Limited Partnership, a partnership controlled by members of the Pritzker family. The Company receives a management fee of $150,000 per year to manage the Illinois joint venture. The Company’s Laramie, Wyoming plant operates under the name of Mountain Cement Company and the Fernley, Nevada plant under the name of Nevada Cement Company.

Cement is the basic binding agent for concrete, a primary construction material. The manufacture of portland cement primarily involves the extracting, crushing, grinding and blending of limestone and other raw materials into a chemically proportioned mixture which is then burned in a rotary kiln at extremely high temperatures to produce an intermediate product known as clinker. The clinker is cooled and interground with a small amount of gypsum to the consistency of face powder to produce finished cement. Clinker can be produced utilizing either of two basic methods, a “wet” or a “dry” process. In the wet process, the raw materials are mixed with water to take advantage of the greater ease in the handling and mixing of the raw materials. However, additional heat, and therefore fuel, is required to evaporate the moisture before the raw materials can react to form clinker. The dry process, a more fuel efficient technology, excludes the addition of water into the process. Dry process plants are either preheater plants, in which hot air is recycled from the rotary kiln to preheat materials, or are precalciner plants, in which separate burners are added to accomplish a significant portion of the chemical reaction prior to the introduction of the raw materials into the rotary kiln. As fuel is a major cost component in the production of clinker, most modern cement plants, including all four of the plants operated by the Company, incorporate the more fuel-efficient dry process technology. At present, approximately 80% of the Company’s net clinker capacity is from preheater or preheater/precalciner kilns, compared to approximately 60% of U.S. cement capacity manufactured from such kilns. The following table sets forth certain information regarding these plants:

Estimated

Minimum

Rated Annual

Limestone

Clinker Capacity

Manufacturing

Number of

Dedication

Reserves

Location

(M short tons)⁽¹⁾

Process

Kilns

Date

(Years)

Buda, Tx⁽²⁾

1,250

Dry — 4 Stage

1978

⁽⁵⁾

Preheater

1983

Flash Calciner

LaSalle, Il⁽²⁾

640

Dry — 4 Stage

1974

⁽⁵⁾

Preheater

Laramie, Wy

670

Dry — 2 Stage

1988

⁽⁶⁾

Preheater

1996

Dry — Long

Dry Kiln

Fernley, Nv

515

Dry — Long

1964

⁽⁵⁾

Dry Kiln

1969

Dry — 1 Stage

Preheater

Total — Gross⁽³⁾

3,075

Total — Net⁽³⁾⁽⁴⁾

2,130

(1)		One short ton equals 2,000 pounds.

(2)		The amounts shown represent 100% of plant capacity and production. Each of these plants is owned by a separate partnership in which the Company has a 50% interest.

(3)		Generally, a plant’s cement grinding production capacity is greater than its clinker production capacity.

(4)		Net of partners’ 50% interest.

(5)		Owned reserves.

(6)		Includes both owned and leased reserves.

The Company’s net cement production, excluding the partners’ 50% interest in the Buda and LaSalle plants, totaled 2.27 million tons in fiscal 2003 and 2.24 million tons in fiscal 2002. Total net cement sales were 2.36 million tons in fiscal 2003 and 2.44 million tons in fiscal 2002 as all plants sold all of the product they produced. Cement production is capital-intensive and involves high fixed costs. As a result, plant capacity utilization levels are an important measure of a plant’s profitability, since incremental sales volumes tend to generate increasing profit margins. During the past two years, the Company purchased cement from others to be resold. Purchased cement sales typically occur at lower gross profit margins. In fiscal 2003, 6.7% of the cement sold by the Company was acquired from outside sources, compared to 10.5% in fiscal 2002.

Raw Materials and Fuel Supplies. The principal raw material used in the production of portland cement is calcium carbonate in the form of limestone. Limestone is obtained principally through mining and extraction operations conducted at quarries owned or leased by the Company and located in close proximity to its plants. The Company believes that the estimated recoverable limestone reserves owned or leased by it will permit each of its plants to operate at its present production capacity for at least 30 years or, in the case of the Company’s Nevada plant, at least 10 years. The Company expects that additional limestone reserves for its Nevada plant will be available when needed on an economically feasible basis, although such reserves may be more distant and more expensive to transport than the Company’s existing reserves. Other raw materials used in substantially smaller quantities than limestone are sand, clay, iron ore and gypsum. These materials are readily available and can either be obtained from Company-owned or leased reserves or are purchased from outside suppliers.

The Company’s cement plants use coal and coke as their primary fuel, but are equipped to burn natural gas as an alternative. The Company has not used hazardous waste-derived fuels in its plants. The Company’s LaSalle, Illinois and Buda, Texas plants have been permitted to burn scrap tires as a partial fuel alternative. Electric power is also a major cost component in the manufacture of cement. The Company has sought to diminish overall power costs by adopting interruptible power supply agreements which may expose the Company to some production interruptions during periods of power curtailment. Although power and coal costs have generally increased in the U.S. during fiscal 2003, because of the location of the Company’s cement plants, such increases are not expected to significantly impact cement manufacturing costs in fiscal 2004.

Sales and Distribution. Demand for cement is highly cyclical and derived from the demand for concrete products which, in turn, is derived from demand for construction. According to estimates of the Portland Cement Association (the “PCA”), the industry’s primary trade organization, the construction sectors that are the major components of cement consumption are (i) public construction, (ii) non-residential buildings (iii) residential buildings, and (iv) other, which comprised 49%, 23%, 22%, and 6%, respectively, of U.S. cement consumption in 2002, the most recent period for which such data is available. Public works construction was favorably impacted when the U.S. Congress passed legislation in 1998 known as the Transportation Equity Act for the 21st Century (“TEA-21”). This legislation authorized $218 billion in federal expenditures on highways, bridges and mass transit projects over the six year period beginning in 1998. This represents a 44% increase over the previous six-year period, which ended in 1997. A proposal is currently pending in Congress to reauthorize the current six-year Federal Highway Program, TEA-21. The new proposal, “SAFETEA” totals $192.5 billion. This legislation would represent an 11% increase over the “Guaranteed” funding levels under TEA-21. Nevertheless, the

average expenditure per year of $31.2 billion would be only slightly above highway appropriation levels in recent years. Construction spending and cement consumption have historically fluctuated widely. The construction sector is affected by the general condition of the economy as well as regional economic influences. Regional cement markets experience peaks and valleys correlated with regional construction cycles. Also, demand for cement is seasonal, particularly in northern states where inclement weather affects construction activity. Sales are generally greater from spring through the middle of autumn than during the remainder of the year. While the impact on the Company of regional construction cycles may be mitigated to some degree by the geographic diversification of the Company, profitability is very sensitive to shifts in the balance between supply and demand. As a consequence, the Company’s cement segment sales and earnings follow a similar cyclical pattern.

The following table sets forth certain information regarding the geographic area served by each of the Company’s cement plants and the location of the Company’s distribution terminals in each area. The Company has a total of 10 cement storage and distribution terminals that are strategically located to extend the sales areas of its plants.


Plant Location	Principal Geographic Areas	Distribution Terminals

Buda, Texas	Texas and western Louisiana	Corpus Christi, Texas
		Houston, Texas
		Orange, Texas
		Roanoke (Ft. Worth), Texas
		Waco, Texas
LaSalle, Illinois	Illinois and southern Wisconsin	Hartland, Wisconsin
Laramie, Wyoming	Wyoming, Utah, northern	Salt Lake City, Utah
	Colorado, western Nebraska and	Denver, Colorado
	eastern Nevada	North Platte, Nebraska
Fernley, Nevada	Northern Nevada and northern California	Sacramento, California

Cement is distributed directly to customers by common carriers and customer pickups. The Company transports cement principally by rail to its storage and distribution terminals. Cement is distributed primarily in bulk, but also in paper bags. No single customer accounted for 10% or more of the Company’s cement sales during fiscal 2003.

Sales are made on the basis of competitive prices in each area. As is customary in the industry, the Company does not typically enter into long-term sales contracts, except with respect to major construction projects.

Competition. The cement industry is extremely competitive as a result of multiple domestic suppliers and the importation of foreign cement through various terminal operations. Competition among producers and suppliers of cement is based primarily on price, with consistency of quality and service to customers being important but of lesser significance. Price competition among individual producers and suppliers of cement within a geographic area is intense because of the fungible nature of the product. Because of cement’s low value-to-weight ratio, the relative cost of transporting cement is high and limits the geographic area in which each company can market its products economically. Therefore, the U.S. cement industry is fragmented into regional geographic areas rather than a single national selling area. No one cement company has a distribution of plants extensive enough to serve all geographic areas. The

number of principal competitors of the Company’s Texas, Illinois, Wyoming and Nevada plants are six, six, four and six, respectively, operating in these regional areas.

According to the PCA, the United States cement industry is comprised of approximately 39 companies which own 105 gray cement plants with approximately 98 million short tons of clinker manufacturing capacity (approximately 103 million short tons of cement manufacturing capacity, assuming a 105% conversion ratio). The top five companies account for nearly 50% of industry capacity with the top ten companies accounting for a 69% concentration ratio. The PCA estimates that U.S. portland cement demand was approximately 120 million short tons in calendar 2002, with approximately 23% of such demand being satisfied by imported cement and clinker. As a result of weak commercial construction activity, calendar 2002 consumption was down 3% from calendar 2001, breaking the string of eight consecutive years of record setting cement consumption in the U.S. Based on the level of demand, the Company estimates that the cement industry as a whole operated in excess of 91% of its aggregate manufacturing capacity during calendar 2002. The PCA reported that, as of December 2001, approximately 22 plant modernization and expansion projects, including six new cement plants, were announced or are underway. These projects, if completed, could add almost 22 million short tons of new domestic cement manufacturing capacity and increase existing capacity by 22%. The announced expansions represent a significant change for the industry, but market forces and other factors may interfere with producers’ plans. The Company does not anticipate that all of the industry’s announced expansions will actually be constructed, and, because of the long lead times associated with adding additional capacity, any increased production capability is expected to be gradual over the next several years. The PCA has predicted total cement consumption will grow to 133 million short tons by 2007, compared with an estimated 120 million short tons of cement consumption in calendar 2002. The Company, however, cannot offer any assurances regarding any near-term or long-term increases in demand. In addition, the Company does not know how much, if any, old, inefficient cement production capacity may be retired during this period. Even if all announced expansions are completed, a capacity deficit would still exist in 2007 if the PCA consumption projections are realized.

Cement imports into the United States occur primarily to supplement domestic cement production during peak demand periods. Throughout most of the 1980’s, however, competition from low-priced imported cement in most coastal and border areas of the U.S. grew significantly, which included the markets served by the Company’s Fernley, Nevada and Buda, Texas plants. According to the PCA, the 1980’s were a period of relatively high cement imports. This high level of imports depressed cement prices during a period of strong U.S. cement demand. As a result of antidumping petitions filed by a group of domestic cement producers, significant antidumping duty cash deposit requirements have been imposed on cement imported from Mexico since 1990 and from Japan since 1991. The existing antidumping orders have contributed substantially to an improvement in the condition of the U.S. cement industry.

In the case of imports from Mexico, margins to calculate cash deposit rates and the resulting antidumping duties are subject to annual review by the Department of Commerce and appeal to the U.S. Court of International Trade and the U.S. Court of Appeals or to binational dispute panels under the North American Free Trade Agreement (“NAFTA”).

Pursuant to the Uruguay Round Agreement, the General Agreement on Tariffs and Trade (“GATT”) Antidumping Code was superseded on January 1, 1995 by a new antidumping agreement that is administered by the World Trade Organization. As a result of legislation passed by the U.S. Congress in 1994, the Department of Commerce and the ITC conducted “sunset” reviews during the last two years of the first five years of antidumping orders and determined they should remain in effect for another five years until 2005.

NAFTA thus far has had no material adverse effect on the antidumping duty cash deposit rates imposed on gray portland cement and clinker imported from Mexico. The Company does not believe that NAFTA will likely have a material adverse effect on the foregoing antidumping duty cash deposit rates in the near future. A substantial reduction or elimination of the existing antidumping duties as a result of GATT, NAFTA or any other reason could adversely affect the Company’s results of operations.

U.S. imports of foreign cement began to increase in the mid-1990’s as the use of cement in the U.S. began to recover. The PCA has estimated that imports represented approximately 23% of cement used in the U.S. during calendar 2002 as compared with approximately 24% in 2001 and 25% in 2000. Unlike the imports during the 1980’s, however, most of the recent imports have provided an additional source of supply rather than disrupting the market with unfair prices. While the average price of imported cement rose during calendar 2001, the price of cement imports from some countries, particularly those in Southeast Asia, are less. Moreover, independently owned cement operators could undertake to construct new import facilities and begin to purchase large quantities of low-priced cement from countries not yet subject to antidumping orders, such as those in Asia, which could compete with domestic producers, as has happened in the Company’s Houston, Texas market. The introduction of low-priced imported cement from such sources could adversely affect the Company’s result of operations.

Capital Expenditures. Capital expenditures during fiscal 2003 amounted to $4.9 million for the Company’s cement segment compared with $4.4 million and $6.2 million in fiscal 2002 and 2001, respectively. Capital outlays in fiscal 2004 are estimated to be approximately $7.6 million. Approximately 16% of the estimated fiscal 2004 total is related to compliance with environmental regulations.

Environmental Matters. The operations of the Company are subject to numerous federal, state and local laws and regulations pertaining to health, safety and the environment. Some of these laws, such as the federal Clean Air Act and the federal Clean Water Act (and analogous state laws) impose environmental permitting requirements and govern the nature and amount of emissions that may be generated when conducting particular operations. Some laws, such as the federal Comprehensive Environmental Response, Compensation, and Liability Act (and analogous state laws) impose obligations to clean up or remediate spills of hazardous materials into the environment. Other laws require us to reclaim certain land upon completion of extraction and mining operations in our quarries. We believe that the Company has obtained all the material environmental permits that are necessary to conduct its operations. We further believe that the Company is conducting its operations in material compliance with these permits. In addition, none of the Company’s sites is listed as a CERCLA “Superfund” site.

Four environmental issues involving the cement manufacturing industry deserve special mention. The first issue involves cement kiln dust or CKD. The federal Environmental Protection Agency or EPA has been evaluating the regulatory status of CKD under the federal Resource Conservation and Recovery Act (“RCRA”) for a number of years. In 1999, the EPA proposed a rule that would allow states to regulate properly-managed CKD as a non-hazardous waste under state laws and regulations governing solid waste. In contrast, CKD that was not properly managed would be treated as a hazardous waste under RCRA. In 2002, the EPA confirmed its intention to exempt properly-managed CKD from the hazardous waste requirements of RCRA. The agency announced that it would collect additional data over the next three to five years to determine if the states’ regulation of CKD is effective, which may lead the EPA to withdraw its 1999 proposal to treat any CKD as a hazardous waste. Final action implementing the 2002 announcement is expected to occur in fiscal 2004.

Currently, substantially all CKD produced in connection with the Company’s operations is recycled, and therefore such CKD is not viewed as a hazardous waste under RCRA. However, CKD was historically collected and stored on-site at its Illinois, Nevada and Wyoming cement plants and at a former plant site in Corpus Christi, Texas, which is no longer in operation. If either the EPA or the states decide to impose

management standards on this CKD at some point in the future, the Company could incur additional costs to comply with those requirements with respect to its historically collected CKD. CKD that comes in contact with water might produce a leachate with an alkalinity high enough to be classified as hazardous and might also leach certain hazardous trace metals therein.

A second environmental issue involves the historical disposal of refractory brick containing chromium. Such refractory brick was formerly widely used in the cement industry to line cement kilns. The Company currently crushes spent refractory brick (which does not contain chromium) and uses it as raw feed in the kiln.

A third environmental issue involves the potential regulation of greenhouse gasses from cement plants. Carbon dioxide is a greenhouse gas many scientists and others believe contributes to the warming of the Earth’s atmosphere. Although no restrictions have yet been imposed under federal laws, it is possible that cement plants may be targeted because of the large amounts of carbon dioxide generated during the manufacturing process. Any imposition of raw materials or production limitations or fuel-use or carbon taxes could have a significant impact on the cement manufacturing industry.

Fourth, the U.S. EPA has promulgated regulations for certain toxic air pollutants including standards for portland cement manufacturing. The maximum attainable control technology standards require cement plants to test for certain pollutants and meet certain emission and operating standards. Management has no reason to believe, however, that these standards have placed the Company at a competitive disadvantage.

Management believes that the Company’s current procedures and practices in its operations, including those for handling and managing materials, are consistent with industry standards and are in substantial compliance with applicable environmental laws and regulations. Nevertheless, because of the complexity of operations and compliance with environmental laws, there can be no assurance that past or future operations will not result in violations, remediation or other liabilities or claims. Moreover, the Company cannot predict what environmental laws will be enacted or adopted in the future or how such future environmental laws or regulations will be administered or interpreted. Compliance with more stringent environmental laws, or stricter interpretation of existing environmental laws, could necessitate significant capital outlays.

Gypsum Wallboard Operations

Company Operations. The Company owns and operates four gypsum wallboard manufacturing facilities, two located in Albuquerque and nearby Bernalillo, New Mexico, one located in Gypsum (near Vail), Colorado and one located in Duke, Oklahoma. The Company mines and extracts gypsum and then manufactures gypsum wallboard by first pulverizing quarried gypsum, then placing it in a calciner for conversion into plaster. The plaster is mixed with various chemicals and water to produce a mixture known as slurry, which is inserted between two continuous sheets of recycled paperboard on a high-speed production line and allowed to harden. The resulting sheets of gypsum wallboard are then cut to appropriate lengths, dried and bundled for sale. Gypsum wallboard is used to finish the interior walls and ceilings in residential, commercial and institutional construction. These panel products have aesthetic as well as sound-dampening and fire-retarding characteristics.

The Albuquerque plant was acquired in 1985, and was operated until early 1991. Following the start-up of the new Bernalillo plant in the spring of 1990, the Company elected to suspend operations at the Albuquerque plant due to weak market conditions. Operations at the Albuquerque plant were recommenced in May 1993, due to improvements in wallboard demand and prices. The Gypsum, Colorado gypsum wallboard plant and accompanying electric power cogeneration facility were purchased in February 1997. The plant originally commenced production in early 1990 and had been operated by an

independent producer until its acquisition by CXP. The Duke, Oklahoma plant was acquired in November 2000 as part of the Strategic Assets Purchase (see Item 1, Business — General). The plant commenced production in 1964 and has operated continuously since then. In 1999, a second line was added that expanded the plant’s annual capacity to 1.2 billion square feet. The Company believes that the Duke plant is the second largest single gypsum wallboard plant in North America.

The following table sets forth certain information regarding these plants:


	Rated Annual Gypsum		Estimated Minimum Gypsum
Location	Wallboard Capacity (MMSF)⁽¹⁾		Rock Reserves (years)

Albuquerque, New Mexico		360		80	⁽²⁾⁽³⁾
Bernalillo, New Mexico		510		80	⁽²⁾⁽³⁾
Gypsum, Colorado		640		35	⁽⁴⁾
Duke, Oklahoma		1,200		15	⁽⁴⁾

Total		2,710

(1)		Million Square Feet (“MMSF”)

(2)		The same reserves serve both New Mexico plants

(3)		Leased reserves.

(4)		Includes both owned and leased reserves.

The Company’s gypsum wallboard production totaled 1,956 MMSF in fiscal 2003 and 1,890 MMSF in fiscal 2002. Total gypsum wallboard sales were 1,933 MMSF in fiscal 2003 and 1,930 MMSF in fiscal 2002. Total wallboard production as a percentage of rated capacity was 72% in fiscal 2003 and 70% in fiscal 2002.

Raw Materials and Fuel Supplies. The Company mines and extracts natural gypsum rock, the principal raw material used in the manufacture of gypsum wallboard, from mines and quarries owned, leased or subject to claims owned by the Company and located near its plants. The Company does not use synthetic gypsum. The New Mexico, Colorado and Oklahoma mines and quarries are estimated to contain approximately 50 million tons, 21 million tons and 15 million tons, respectively, of gypsum reserves. Other gypsum deposits are located in the immediate area of the Duke, Oklahoma plant and may be obtained at reasonable costs when needed. Based on its current production capacity, the Company estimates that the life of its existing gypsum rock reserves is a minimum of 80 years in New Mexico, 35 years in Colorado and 15 years in Oklahoma.

Prior to November 2000, the Company purchased paper used in manufacturing gypsum wallboard from third-party suppliers. The Company now manufactures almost all of the paper needed for its gypsum wallboard production.

The Company’s gypsum wallboard manufacturing operations use large quantities of natural gas and electrical power. A significant portion of the Company’s natural gas requirements for its gypsum wallboard plants are currently provided by three gas producers under gas supply agreements expiring in September 2003 for Colorado, November 2003 for New Mexico, and June 2004 for Oklahoma. If the agreements are not renewed, the Company expects to be able to obtain its gas supplies from other suppliers at competitive prices. Electrical power is supplied to the Company’s New Mexico plants at standard industrial rates by a local utility. The Company’s Albuquerque plant utilizes an interruptible power supply agreement, which may expose it to some production interruptions during periods of power curtailment. Power for the Gypsum, Colorado facility is generated at the facility by a cogeneration power plant. Currently the cogeneration power facility supplies only the power needs of the gypsum wallboard

plant and does not sell any power to third parties. Power at the Duke, Oklahoma plant is supplied by a local electric cooperative under a contract, which expires in January 2005. Gas costs significantly increased in fiscal 2003 and are likely to increase further during fiscal 2004. If they remain at the current high level, or continue to increase during fiscal 2004, they are expected to significantly impact fiscal 2004 gypsum wallboard manufacturing cost and operating earnings.

Sales and Distribution. The principal sources of demand for gypsum wallboard are (i) residential construction, (ii) repair and remodeling, (iii) non-residential construction, and (iv) other activities such as exports and temporary construction, which the Company estimates accounted for approximately 45%, 38%, 10% and 7%, respectively, of calendar 2002 industry sales. While the gypsum wallboard industry remains highly cyclical, recent growth in the repair and remodeling segment have partially mitigated the impact of fluctuations in overall levels of new construction.

Although the percentage of gypsum wallboard shipments accounted for by new residential construction has declined in recent years, new residential construction remains the largest single source of gypsum wallboard demand. In recent years, demand has been favorably impacted by a shift toward more single-family detached housing within the new residential construction segment and by an increase in the size of the average single-family detached home.

The Company estimates that the size of the total residential repair and remodel market grew to a record $167 billion in calendar 2002, up from $46 billion in 1980. Although data on commercial repair and remodel activity is not readily available, the Company believes that this segment has also grown significantly in recent years. The growth of the repair and remodeling market is primarily due to the aging of housing stock, remodeling of existing buildings and tenant turnover in commercial space. In addition, repair and remodeling activity has benefited from the fact that it has increasingly come to be viewed by homeowners, particularly in recessionary periods, as a low cost alternative to purchasing a new house.

The Company sells gypsum wallboard to numerous building materials dealers, gypsum wallboard specialty distributors, home center chains and other customers located throughout the United States. Two customers with multiple shipping locations accounted for approximately 12.3% and 10.4%, respectively, of the Company’s total gypsum wallboard sales during fiscal 2003. The Company believes that the loss of either of these customers could have a material adverse effect on the Company and its subsidiaries taken as a whole.

During fiscal 2003, the principal states in which the Company had gypsum wallboard sales were Texas, Colorado, California, Arizona and New Mexico. Prior to fiscal 2001, a large portion of the Company’s gypsum wallboard sales were made in the southeastern United States, with significant sales in Florida. However, due to a dramatic increase in new capacity in the eastern portion of the United States and falling prices, the Company has focused the distribution of its gypsum wallboard in the southwestern and western areas of the United States.

Although gypsum wallboard is distributed principally in regional areas, the Company and certain other producers have the ability to ship gypsum wallboard by rail outside their usual regional distribution areas to take advantage of these other regional increases in demand. The Company owns or leases 244 railcars for transporting gypsum wallboard. In addition, in order to facilitate distribution in certain strategic areas, the Company maintains a distribution center in Albuquerque, New Mexico and six reload yards in Arizona and California. The Company’s rail distribution capabilities permit it to reach customers in all states west of the Mississippi River and many eastern states. During fiscal 2003, approximately 22% of the Company’s sales volume of gypsum wallboard was transported by rail.

Competition. There are eight manufacturers of gypsum wallboard in the U.S. operating a total of 81 plants. The Company estimates that the three largest producers — USG Corporation, National Gypsum Company and Georgia-Pacific Corporation — account for approximately 65% of gypsum wallboard sales in the United States. The industry has experienced some consolidation, the largest being Georgia-Pacific Corporation’s purchase of the gypsum wallboard business of Domtar, Inc. and British Plasterboard’s purchase of James Hardie and Celotex. In general, a number of the Company’s competitors in the gypsum wallboard industry have greater financial, manufacturing, marketing and distribution resources than the Company. Furthermore, certain of its competitors have vertically integrated operations consisting of gypsum wallboard manufacturing plants, paperboard mills and distribution centers, which may provide them with certain cost advantages over the Company.

Competition among gypsum wallboard producers is primarily on a regional basis, with local producers benefiting from lower transportation costs, and to a lesser extent on a national basis. Because of the commodity nature of the product, competition is based principally on price, which is highly sensitive to changes in supply and demand, and to a lesser extent, on product quality and customer service.

Currently total United States gypsum wallboard production capacity is estimated at 34.4 billion square feet per year, a 25% rise from 1998. The Gypsum Association, an industry trade group, estimates that total calendar 2002 gypsum wallboard shipments by U.S. manufacturers was approximately 29.9 billion square feet (30.7 billion square feet including imports), resulting in industry capacity utilization of approximately 87%.

Capital Expenditures. Capital expenditures during fiscal 2003 for the gypsum wallboard segment amounted to $3.0 million; $1.2 million in fiscal year 2002; and $4.5 million in fiscal 2001. Capital outlays in fiscal 2004 are estimated to be approximately $10.6 million with less than 1% of the estimated expenditures related to compliance with environmental regulations.

Environmental Matters. The gypsum wallboard industry is subject to environmental regulations similar to those governing the Company’s cement operations. None of the Company’s gypsum wallboard operations are presently the subject of any local, state or federal environmental proceedings or inquiries. The Company does not, and has not, used asbestos in any of its gypsum wallboard products.

Recycled Paperboard Operations

Company Operations. The Company’s recycled paperboard manufacturing operation is located in Lawton, Oklahoma. This mill, in addition to the closed Commerce City, Colorado paperboard mill and the sold four recovered fiber centers were acquired as part of the Strategic Assets Purchase in November 2000. The Commerce City mill was closed in April 2001, due to high manufacturing costs and the successful ramp up rate of the Lawton facility. The four recovered fiber centers were sold early in fiscal 2003, as it was determined that their location and supply capabilities were not strategically favorable to the Lawton location.

All of the paper products manufactured at Lawton are produced from 100% recovered (recycled) paper fiber. The recycled paperboard products manufactured by the Company primarily include the facing and backside paper used in the manufacture of gypsum wallboard. Other recycled paperboard grades used by manufacturers of consumer packaging (e.g. corrugate medium, linerboard and Kraft bag) and industrial paperboard products (e.g. angle board, tube and core board) are also produced for diversity and mill expansion needs.

Manufacturing Process. Recycled paperboard is manufactured at the Lawton mill in a continuous process during which reclaimed paper fiber is mixed with water and pulped to separate the individual

fibers. This mixture is passed through a series of filters and cleaners to remove all of the undesirable materials (e.g. tapes, glass, staples, glues, waxes) from the recovered fiber. This slurry is diluted to a very low concentration and is then applied to a series of rotating wire screens through a mechanical distribution system. The Lawton paper machine is designed so that four individual webs of paper are combined to form one multi-ply sheet of paperboard. The excess water from this process is allowed to be drained through the wire mesh fabric and is continuously recycled for additional paper making. The multi-ply paper mat is then mechanically pressed, steam dried and trimmed to specific customer size and packaged requirements. The finished product is wound in roll form weighing approximately 2.5 tons and containing 2.2 miles of paper. It is made specifically to customer quality specifications.

Raw Materials. The principal raw materials used by the Company’s Lawton paperboard mill are recovered paper fiber (in other words, wastepaper), water and chemicals. Several different types of recovered fiber (e.g. newspaper, grocery store boxes) are formulated together to give the desired paperboard qualities. Recovered paper fiber is currently purchased from several sources, with 47% being under contract commitments.

Management believes that adequate supplies of recovered paper fiber will continue to be available from generators and wholesalers located within a 400-mile radius of the Lawton mill. One third of all purchased fiber is supplied by rail. Recovered paper fiber is a commodity bought, sold and traded under the guidelines of the Institute of Scrap Recycling Industries, Inc. (ISRI). Monthly pricing is established in several industry publications based on location. Prices are subject to fluctuations based on generation, demand and export. The current outlook for fiscal 2004 is for stable wastepaper prices. The current customer contracts include price escalators to compensate for changes in raw material prices.

Chemicals, including size, retention aids and bactericides, used by the Company in its recycled paperboard operations are environmentally friendly and are readily available from several manufacturers at competitive prices. Size is used principally as a water-resisting agent in the production of recycled paperboard. Retention aids are agents used to retain fiber and chemicals in the papermaking process by preventing their loss into the waste stream. Bactericides are agents used to control bacteria and other organisms in the papermaking process.

The manufacture of recycled paperboard involves the use of large volumes of water both in the production process and for cooling purposes. The Oklahoma mill uses water provided by the City of Lawton, Oklahoma municipal services. The term of the agreement with the City of Lawton, Oklahoma is fifteen years (commencing in calendar 1999) with two automatic five-year extensions unless the Company notifies the City in writing at least six months prior to the expiration of the term or extended term. Although adequate sources of water have historically been available, an extended period of general water shortages, legal curtailment of any mill’s current water sources or uses, or deterioration of the current quality of water could adversely affect the mill’s operations and limit its production capacity.

Electricity, natural gas and other utilities are available to the mill either at contracted rates or at standard industrial rates in adequate supplies, subject to standard industrial curtailment provisions. If periods of natural gas curtailment or unfavorable pricing occur, the Lawton mill is equipped to use fuel oil as an alternative fuel. The Lawton mill has a seven year contract for natural gas transportation.

Paperboard mills are generally large consumers of natural gas, with Lawton’s needs in excess of 3200 MMBTU per day. During fiscal 2003, natural gas pricing significantly increased and is expected to increase further during fiscal 2004. If natural gas prices remain at the current high level, or continue to increase during fiscal 2004, they are expected to significantly impact fiscal 2004 production cost and operating earnings.

The Lawton mill is under a very favorable electrical agreement with Public Service of Oklahoma that renews annually, unless terminated by notice by either party. The mill site has also entered into a

letter of intent with a third party co-generation operator for the purchase of steam for the paper making process and possible electrical generation. If the Company is able to reach a definitive agreement with this operator, this co-generation plant should come on line during the fall of 2006, and would be expected to significantly reduce utility price volatility.

Sales and Distribution. The recycled paperboard products manufactured by the Company are sold primarily to gypsum wallboard manufacturers. During fiscal 2003, approximately 31% of the recycled paperboard manufactured and shipped by the Lawton mill was consumed by the Company’s gypsum wallboard manufacturing operations, approximately 9% was shipped to another gypsum wallboard manufacturer and 45% was sold to BPB Gypsum (f/k/a James Hardie Gypsum) (“BPB Gypsum”) pursuant to a paper supply contract (the “BPB Gypsum Agreement”). The BPB Gypsum Agreement is a long-term paper supply contract with sales to BPB Gypsum made at a fixed base price determined at the time of execution of the BPB Gypsum Agreement. This base price is subject to adjustment based on changes in the major variable costs of production of recycled paperboard, including the cost of power, transportation and the primary raw materials, and changes in the purchaser price index for industrial commodities and a reference employment cost index. Under this agreement, the Lawton mill is obligated to sell and BPB Gypsum is obligated to purchase at least 95% (plus or minus 5%) of the gypsum-grade recycled paperboard requirements of BPB Gypsum’s three gypsum wallboard plants purchased from James Hardie Gypsum. In addition, the loss of any one or more gypsum wallboard manufacturers as customers or a termination or reduction of their production of gypsum wallboard, unless replaced by a commercially similar arrangement, could have a material adverse effect on the Company.

Competition. In selling the portion of its production not consumed by its own gypsum wallboard manufacturing operations, the Company competes with approximately nine other manufacturers of gypsum-grade paperboard, six of which have gypsum wallboard manufacturing operations. Substantially all of these competitors have greater financial resources than the Company. During periods of peak demand for gypsum wallboard, the demand for recycled paperboard typically matches or exceeds the productive capacities of the gypsum-grade paperboard producers. During periods of reduced demand for gypsum wallboard, the demand for recycled paperboard falls, and selling prices may decrease.

Price, quality and timeliness of deliveries are the principal methods of competition among paperboard producers. The location of the Company’s Lawton recycled paperboard mill allows the Company to serve a variety of markets, including several gypsum wallboard plants in the midwest, southeast, southwest and western United States.

The Lawton Mill. The Lawton mill is located in southwestern Oklahoma and commenced commercial operations in March 2000. The Lawton mill is designed to manufacture gypsum-grade recycled paperboard utilizing technologies that have been successfully employed in recycled paperboard mills in the United States. These technologies include (i) the use of an advanced paper forming section in which the roll forming process utilizes a hydraulic headbox and a twin wire de-watering system to form a paper sheet operating in excess of 2,500 feet per minute, thereby allowing reduced labor costs per ton produced, (ii) an advanced control system, which immediately senses changes in the paper as it is being formed and adjusts the forming section of the paper machine to maintain the uniformity of the paper and also monitors and adjusts the recovered paper fiber cleaning process to maintain the quality of this raw material, (iii) modern pressing technology, which permits water removal in a way that provides more uniformity and enhances the properties of the paper, (iv) dryer felts on all dryer sections, which improve drying efficiency and reduce shrinkage, and (v) a cleaning and screening process for the reclaimed paper fiber that enhances the strength, surface characteristics and overall surface uniformity of the paperboard.

The Company expects that the Lawton mill will be able to produce recycled paperboard that is technologically superior to, and approximately 20% to 30% lighter than that currently generally available in the United States, but with equal strength characteristics. The Company believes that being one of the

first to produce higher quality, lower basis-weight recycled paperboard will give it a competitive advantage over other recycled paperboard manufacturers until other mills using similar technology come on-line. Because gypsum-grade recycled paperboard generally is sold on the basis of surface area, manufacturing lighter paper potentially translates into higher profit margins per ton for the recycled paperboard manufacturer. Lighter recycled paperboard also reduces drying costs associated with the production of gypsum wallboard and reduces inbound and outbound freight costs of both recycled paperboard and gypsum wallboard. In addition, because the Lawton mill is designed as an efficient, high-speed mill, operating costs are expected to be lower than existing mills now producing recycled paperboard for the wallboard industry. In addition to producing a product which should be more attractive to customers, it is anticipated that the lighter weight, better quality recycled paperboard from the Lawton mill will reduce production and transportation costs at the Company’s gypsum wallboard plants.

The Lawton mill currently has the capacity to produce approximately 275,000 tons of recycled paperboard annually. Production from the Lawton mill will be used both internally at all four of CXP’s gypsum wallboard plants and sold to third parties. Although primarily designed for the production of gypsum-grade recycled paperboard, the Lawton mill is also capable of producing recycled paperboard for other uses.

Environmental Matters. Prior to the Strategic Assets Purchase, the now closed Commerce City, Colorado paper mill (the “Commerce City Mill”) had investigated the presence of subsurface petroleum hydrocarbons at the mill site and had retained an environmental consultant, who concluded that fuel oil, jet fuel, and gasoline additives had migrated in the subsurface of the property from an adjacent property. As a result of an additional subsequent investigation by the Commerce City Mill, there were uncovered newly discovered environmental conditions that appear to stem from underground storage tank use on the mill site. As a result, the Commerce City Mill notified the Division of Oil and Public Safety of the Colorado Department of Labor and Employment (the “Oil Division”). The Commerce City Mill and a former owner of the Commerce City Mill have entered into a participation agreement to respond to those conditions that appear to stem from historical underground storage tank use. Under the participation agreement, the Commerce City mill will pay 25% (with the former owner paying 75%) of the costs associated with the investigation and remediation efforts approved by both parties. The Company and the former owner have each approved and submitted to the Oil Division a Corrective Action Plan (the “CAP”) for the removal of the subsurface petroleum hydrocarbon at the Commerce City Mill. The CAP was approved by the Oil Inspection Section in calendar 2002. It is estimated that this CAP will cost approximately $2,500,000 and take approximately eight years to complete. Under the participation agreement, the Company will pay 25% (or approximately $625,000) of such estimated costs. There can be no assurance however, that the actual costs of remediation will not exceed these estimates.

Capital Expenditures. Capital expenditures during fiscal 2003 for the paperboard operations were $4.7 million and $2.7 million in fiscal 2002. Capital expenditures for fiscal 2004 have been estimated at approximately $4.8 million. All of the fiscal 2004 capital outlays are for the Lawton mill. Approximately 1% of the estimated fiscal 2004 capital outlays is related to compliance with environmental regulations.

Concrete and Aggregates Operations

Company Operations. Readymix concrete, a versatile, low-cost building material used in almost all construction, involves the mixing of cement, sand, gravel, crushed stone and water to form concrete which is then sold and distributed to numerous construction contractors. Concrete is produced in batch plants and transported to the customer’s job site in mixer trucks.

The construction aggregates business consists of the mining, extraction, production and sale of crushed stone, sand, gravel and lightweight aggregates such as expanded clays and shales. Construction aggregates of suitable characteristics are employed in virtually all types of construction, including the production of portland and asphaltic cement concrete mixes and in highway construction and maintenance.

As in the cement industry, the demand for readymix concrete and aggregates largely depends on regional levels of construction activity. The construction sector is subject to the vagaries of weather conditions, the availability of financing at reasonable rates and overall fluctuations in regional economies, and therefore tends to be cyclical. Both the concrete and aggregates industries are highly fragmented, with numerous participants operating in local areas. Because the cost of transporting concrete and aggregates is very high relative to product values, producers of concrete and aggregates typically can sell their products only in areas within 100 miles of their production facilities. Barriers to entry in each industry are low, except with respect to environmental permitting requirements for new aggregate production facilities and zoning of land to permit mining and extraction of aggregates.

The Company produces and distributes readymix concrete north of Sacramento, California and in Austin, Texas. The following table sets forth certain information regarding these operations:


Location		Number of Plants		Number of Trucks

Northern California			4		44
Austin, Texas			5		78

	Total		9		122

The Austin, Texas market, which is the Company’s largest concrete market, was negatively impacted in fiscal 2002 and fiscal 2003 by the market conditions affecting technology companies. The Company’s net readymix concrete production was 681,000 cubic yards in fiscal 2003 and 673,000 cubic yards in fiscal 2002. The Company believes that it has the capacity to increase its concrete production by adding to its fleet of trucks to meet increases in demand in the Austin, Texas market.

The Company conducts aggregate operations near its concrete facilities in northern California and Austin, Texas. Aggregates are obtained principally by mining and extracting from quarries owned or leased by the Company and located in close proximity to its plants. The following table sets forth certain information regarding these operations:


			Estimated Annual
			Production Capacity	Estimated Minimum
Location		Types of Aggregates	(Thousand tons)⁽¹⁾	Reserves (Years)

Northern California		Sand and Gravel	2,000		100	⁽²⁾
Austin, Texas		Limestone	2,000		15	⁽³⁾

	Total		4,000

(1)		Based on single-shift operation.

(2)		Owned reserves.

(3)		Leased reserves.

The Company’s total net aggregate sales were 4.2 million tons in fiscal 2003 and 4.3 million tons in fiscal 2002. Total aggregates production was 4.5 million tons for fiscal 2003 and 4.6 million for fiscal 2002. A portion of the Company’s total aggregates production is used internally by the Company’s readymix concrete operations.

In September 2002, the Company closed its Georgetown, Texas quarry and processing plant. The Company initially planned to utilize all or a substantial portion of the assets used in the Georgetown operations at its other facilities, although it was later determined that only a portion of such assets were needed and the remainder should be sold. Assets written-off during the second quarter of fiscal 2003 as part of the closure totaled $2.6 million.

Raw Materials. The Company supplies approximately 100% and 28% of its cement requirements for its Austin and northern California concrete operations, respectively. The Company supplies approximately 47% and 33%, respectively, of its aggregates requirements for its Austin and northern California concrete operations. The Company obtains the balance of its cement and aggregates requirements from multiple sources in each of these areas.

The Company mines and extracts limestone and sand and gravel, the principal raw materials used in the production of aggregates, from quarries owned or leased by the Company and located near its plants. The northern California quarry is estimated to contain approximately one billion tons of sand and gravel reserves. Based on its current production capacity, the Company estimates its Austin, Texas quarry contains approximately 15 years of limestone reserves. Other limestone deposits are located in the immediate area of the Austin, Texas plant and may be obtained at reasonable costs when needed.

Sales and Distribution. The Company sells readymix concrete to numerous contractors and other customers in each plant’s selling area. The Company’s batch plants in Austin and northern California are strategically located to serve each selling area. Concrete is delivered from the batch plants by trucks owned by the Company.

The Company sells aggregates to building contractors and other customers engaged in a wide variety of construction activities. Aggregates are delivered from the Company’s aggregate plants by common carriers, customer pick-up and, to a lesser extent, trucks owned by the Company. No single customer accounted for 10% or more of the Company’s concrete or aggregates sales during fiscal 2003. The Company is attempting to secure a rail link from its principal aggregates deposit north of Sacramento, California to extended markets.

Competition. Competition among concrete producers within the Company’s northern California and Austin selling areas is strong. The Company’s competitors include five small and four large concrete producers in the northern California area and five large and five small concrete producers in the Austin area.

Both concrete and aggregates are commodity products. Each type of aggregate is sold in competition with other types of aggregates and in competition with other producers of the same type of aggregates. Accordingly, competition in both the concrete and aggregates businesses is based principally on price and, to a lesser extent, on product quality and customer service.

Capital Expenditures. Capital expenditures during fiscal 2003 amounted to $1.1 million for the concrete and aggregates segment compared with $10.6 million and $4.9 million in fiscal 2002 and 2001, respectively. The majority of fiscal 2002 capital expenditures are for the completion of the Company’s Georgetown washed aggregate plant in the Austin, Texas area. Capital outlays in fiscal 2004 are estimated to be approximately $2.2 million. No portion of the estimated fiscal 2004 capital expenditures are related to compliance with environmental regulations.

Environmental Matters. The concrete and aggregates industry is subject to environmental regulations similar to those governing the Company’s cement operations. None of the Company’s

concrete or aggregates operations are presently the subject of any local, state or federal environmental proceeding or inquiries.

Employees

The Company and its subsidiaries had approximately 1,529 employees at March 31, 2003. Approximately 24% of the employees are represented by collective bargaining units. The number of corporate employees of the Company is 12.

Additional Information

The Company’s Internet website address is www.centex-cxp.com. The Company makes available on its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments thereto, as soon as reasonably practicable after such material is filed with, or furnished to, the SEC.

ITEM 2. PROPERTIES

The Company operates cement plants, quarries and related facilities at Buda, Texas; LaSalle, Illinois; Fernley, Nevada and Laramie, Wyoming. The Buda and LaSalle plants are each owned by separate partnerships in which CXP has a 50% interest. The Company’s principal aggregate plants and quarries are located in the Austin, Texas area and Marysville, California. In addition, the Company operates gypsum wallboard plants in Albuquerque and nearby Bernalillo, New Mexico, Gypsum, Colorado and Duke, Oklahoma. The Company produces recycled paperboard at Lawton, Oklahoma. None of the Company’s facilities are pledged as security for any debts.

See “Item 1. Business” on pages 1-17 of this Report for additional information relating to the Company’s properties.

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to certain other ordinary legal proceedings incidental to its business. In general, although the outcome of litigation is inherently uncertain, the Company believes that all of the litigation proceedings in which the Company or any subsidiary is involved, will be resolved without having a material adverse effect on the consolidated financial condition or operations of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

EXECUTIVE OFFICERS OF CXP (See Item 10 of Part III)

The following is a listing of the Company’s executive officers, as such term is defined under the rules and regulations of the Securities and Exchange Commission. Except for Mr. Hirsch, who has been Chairman since 1994 and became Chief Executive Officer in April 2003, all of these executive officers have been employed by the Company and/or one or more subsidiaries of the Company for at least the past five years. Except for Mr. Hirsch who was appointed as Chief Executive Officer in April 2003 following the resignation of Richard D. Jones, Jr. and Mr. Essl, who was promoted to Executive Vice President in January 2003, all executive officers were elected by the Board of Directors of the Company at its Annual Meeting on July 16, 2002. Mr. Hirsch is not paid any compensation by CXP. All such officers shall serve until the next Annual Meeting of Directors or until their respective successors are duly elected and qualified or appointed as the case may be. There is no family relationship between any of these officers.


Name	Age		Positions with CXP

Laurence E. Hirsch		57	Chairman and Chief Executive Officer (Chairman since April 1994; Chief Executive Officer since April 2003).
Arthur R. Zunker, Jr.		60	Senior Vice President — Finance and Treasurer (Senior Vice President — Finance and Treasurer since January 1994; Senior Vice President — Administration from August 1984 to January 1994).
Steven R. Rowley		50	Executive Vice President and Chief Operating Officer (Chief Operating Officer since April 2003; Executive Vice President — Cement/Concrete and Aggregates since January 2001; Executive Vice President — Cement from January 1998 through January 2001; Executive V.P. of Illinois Cement Company from June 1995 through December 1997; Plant Manager at Nevada Cement Company from April 1991 through May 1995).
H. David House		61	Executive Vice President — Gypsum and Paperboard (Executive Vice President — Gypsum and Paperboard since November 2000; Executive Vice President — Gypsum from January 1998 through 2000; President of American Gypsum Company since June 1997).
Gerald J. Essl		53	Executive Vice President — Cement/Concrete and Aggregates (Executive Vice President — Cement/Concrete and Aggregates since January 2003; President of Texas Lehigh Cement Company from 1985 through December 2002).

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information called for by Items 5, 6 and 7 is incorporated herein by reference to the information set forth under the following captions (on the page or pages indicated) in the 2003 CXP Annual Report:


Items	Caption in the 2003 CXP Annual Report	Pages

5	Stock Prices and Dividends		1
6	Summary of Selected Financial Data		38-39
7	Indebtedness (Note C to Consolidated Financial Statements of CXP) Management’s Discussion and Analysis of Financial Condition		15-17
7	and Results of Operations		28-37

ITEM 6. SELECTED FINANCIAL DATA

See Item 5 above.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

See Item 5 above.

Forward Looking Statements

The Management’s Discussion and Analysis of Financial Condition and Results of Operations (incorporated by reference herein from the 2003 CXP Annual Report) and other sections of the 2003 CXP Annual Report and this Annual Report on Form 10-K contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when the Company is discussing its beliefs, estimates or expectations. These statements are not guarantees of future performance and involve a number of risks and uncertainties. These statements involve known and unknown risks and uncertainties that may cause the Company’s actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to:


•	levels of construction spending in major markets	•	unfavorable weather conditions during peak construction periods
•	supply/demand structure of cement and wallboard industries	•	changes in and implementation of environmental and other governmental regulations
•	significant changes in the cost of fuel, energy and other raw materials	•	the ability to successfully identify, complete and efficiently integrate acquisitions
•	availability of raw materials	•	the ability to successfully penetrate new markets
•	the cyclical nature of our businesses	•	international events that may disrupt the world economy
•	national and regional economic conditions	•	unexpected operation difficulties
•	interest rates	•	competition from new or existing competitors
•	seasonality of our operations

In general, the Company is subject to the risks and uncertainties of the construction industry and of doing business in the U.S. The forward-looking statements are made as of the date of this report, and the Company undertakes no obligation to update them, whether as a result of new information, future events or otherwise.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks related to fluctuations in interest rates on its direct debt obligations and receivables securitizations classified as debt. The Company utilizes derivative instruments, including interest rate swaps, in conjunction with its overall strategy to manage the debt outstanding that is subject to changes in interest rates. At March 31, 2003, the Company had approximately $80.3 million in variable rate debt ($55.0 million in bank debt and $25.3 million in note payable under the Company’s accounts receivable securitization program). On July 19, 2001, the Company entered into two interest rate swap agreements with two banks for a total notional amount of $100.0 million. These agreements expire in August 2003. The swap agreements can be matched against $100.0 million of variable-rate LIBOR indexed debt principal and effectively fixes the Company’s interest rate on that debt at 4.493%, plus the spread on the Company’s debt. The Company terminated $45.0 million of the $100.0 million total notional amount in fiscal 2003. Accordingly, using the unhedged balance of the Company’s variable rate debt as of March 31, 2003 of $25.3 million, if the applicable interest rates on such debt (LIBOR or commercial paper rates) increase by 100 basis points (1%) for a full year, the Company’s pre-tax earnings and cash flows would decrease by approximately

$253,000 for such period. On the other hand, if such interest rates decrease by 100 basis points for a full year, the Company’s pre-tax earnings and cash flows would increase by approximately $253,000 for such period. The Company does not utilize forward or option contacts on foreign currencies or commodities, or other types of derivative financial instruments.

Except as set forth above, there have been no material changes in the Company’s market risk from March 31, 2003.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for in this Item 8 is incorporated herein by reference to the information set forth in the 2003 CXP Annual Report as indicated in the index to consolidated financial statements and schedules on page 22 of this Report (see Item 15).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March 23, 2002, the audit committee of the board of directors of the Company, approved the engagement of Ernst & Young LLP (“Ernst & Young”) as the Company’s independent auditors for the fiscal year end March 31, 2002, to replace Arthur Andersen LLP (“Arthur Andersen”), who were dismissed as the Company’s auditors effective as of that day. This action followed the audit committee’s decision to seek proposals from independent accountants to audit the Company’s financial statements.

Arthur Andersen’s audit reports on the Company’s financial statements as of and for the fiscal year ended March 31, 2001, did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope of accounting principles.

During the fiscal year ended March 31, 2001 and the subsequent interim period through March 23, 2002:

	(i)		there were no disagreements between the Company and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersen’s satisfaction would have caused Arthur Andersen to make reference to the subject matter of the disagreement in connection with its reports;

	(ii)		none of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred; and

	(iii)		the Company did not consult with Ernest & Young regarding any of the matters or events described in item 304(a)(2)(i) and (ii) of Regulation S-K.

The Company provided Arthur Andersen with a copy of the foregoing statements. A letter from Arthur Andersen, dated April 1, 2002, stating its agreement with such statements is attached as Exhibit 16.1 to Form 8-K/A filed with the Commission on April 2, 2002.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Except for the information relating to the executive officers of the Company, which follows Item 4 of Part I of this Report and is incorporated herein by reference, the information called for by Items 10, 11, 12 and 13 is incorporated herein by reference to the information included and referenced under the following captions (on the page or pages indicated) in the Company’s Proxy Statement for the Company’s July 21, 2003 Annual Meeting of Stockholders (the “2003 CXP Proxy Statement”):


Items	Caption in the 2003 CXP Proxy Statement	Pages

10	Election of Directors	2-5
10	Section 16(a) Beneficial Ownership Reporting Compliance	12
11	Executive Compensation	7-10
12	Security Ownership of Management and Certain Beneficial Owners	5-7
13	Certain Transactions	12

ITEM 11. EXECUTIVE COMPENSATION

See Item 10 above.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

See Item 10 above.

The following table shows the number of outstanding options and shares available for future issuance of options under all of the Company’s equity compensation plans as of March 31, 2003. All of the Company’s equity compensation plans have been approved by the Company’s shareholders.

Number of securities

Weighted-average

remaining available for

to be issued upon

exercise price of

future issuance under equity

exercise of

outstanding

compensation plans

outstanding options,

options, warrants

[excluding securities

warrants and rights

and rights

reflected in column(a)]

Plan Category

Plan

(a)

(b)

(c)

Equity compensation

1994

939,578

32.23

99,350

plans approved by stockholders

2000

1,000,000

Equity compensation plans not approved by shareholders

Total

939,578

32.23

1,099,350

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Item 10 above.

ITEM 14. CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-14c. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective for the purpose of ensuring that information required to be disclosed by the Company in this report has been processed, summarized and reported in a timely manner. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to such evaluation by the Chief Executive Officer and Chief Financial Officer.

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Report.

(1) and (2) See the Index to Consolidated Financial Statements and Schedules below for a list of the Financial Statements and Financial Statement schedules filed herewith.

Index to Consolidated Financial Statements and Schedules

Centex Construction Products, Inc.


	Reference
	CXP 2003 Annual
	Report Page

Report of Independent Auditors		27
Consolidated Statements of Earnings for the years ended March 31, 2003, 2002 & 2001		6
Consolidated Balance Sheets as of March 31, 2003 & 2002		7
Consolidated Statements of Cash Flows for the years ended March 31, 2003, 2002 & 2001		8
Consolidated Statements of Stockholders’ Equity for the years ended March 31, 2003, 2002 & 2001		9
Notes to Consolidated Financial Statements		10-26
Quarterly Results (Unaudited)		40

Consolidated supporting schedules have been omitted either because the required information is contained in notes to the consolidated financial statements or because such schedules are not required or are not applicable.

(3) Exhibits

The information on exhibits required by this Item 15 is set forth in the Index to Exhibits appearing on pages 27 and 28 of this Report.

(b) Reports on Form 8-K.

On January 21, 2003, the Company filed with the Securities and Exchange Commission a current report on Form 8-K announcing its third quarter net earnings for the quarter ended December 31, 2002.

On February 3, 2003, the Company filed with the Securities and Exchange Commission a current report on Form 8-K announcing the retirement of Richard D. Jones, Jr., its President and Chief Executive Officer.

ITEM 16. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by Item 16 is incorporated herein by reference to the information set forth on page 13 in the 2003 Proxy Statement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		CENTEX CONSTRUCTION PRODUCTS, INC.

		Registrant

June 19, 2003		/s/ LAURENCE E. HIRSCH

		Laurence E. Hirsch, Chairman and
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.


June 19, 2003		/s/ LAURENCE E. HIRSCH

		Laurence E. Hirsch, Chairman and
		Chief Executive Officer

June 19, 2003		/s/ ARTHUR R. ZUNKER, JR.

		Arthur R. Zunker, Jr., Senior Vice President -
		Finance and Treasurer
		(principal financial and accounting officer)

June 19, 2003		/s/ ROBERT L. CLARKE

		Robert L. Clarke, Director

June 19, 2003		/s/ TIMOTHY R. ELLER

		Timothy R. Eller, Director

June 19, 2003		/s/ MICHAEL R. NICOLAIS

		Michael R. Nicolais, Director

June 19, 2003		/s/ DAVID W. QUINN

		David W. Quinn, Director

June 19, 2003		/s/ HAROLD K. WORK

		Harold K. Work, Director

Certifications

I, Laurence E. Hirsch, certify that:

1. I have reviewed this annual report on Form 10-K of Centex Construction Products, Inc.

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 19, 2003

/s/ Laurence E. Hirsch

Laurence E. Hirsch

Chairman and Chief Executive Officer

Certifications

I, Arthur R. Zunker, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Centex Construction Products, Inc.

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: June 19, 2003

/s/ Arthur R. Zunker, Jr.

Arthur R. Zunker, Jr.

Chief Financial Officer

INDEX TO EXHIBITS
CENTEX CONSTRUCTION PRODUCTS, INC.
AND SUBSIDIARIES


Exhibit
Number		Description of Exhibits

3.1		Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Form S-8 Registration Statement of the Company (File No. 33-82928)(the “1994 S-8 Registration Statement”), filed on August 16, 1994 and incorporated herein by reference)
3.2		Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to the 1994 S-8 Registration Statement and incorporated herein by reference)
4.1		Form of Certificate evidencing Common Stock (filed as Exhibit 4.1 to Amendment No. 3 to the Form S-1 Registration Statement of the Company (File No. 33-74816) (“Amendment No. 3”), filed on April 4, 1994, and incorporated herein by reference)
4.2*		Second Amended and Restated Credit Agreement dated as of March 25, 2003
10.1		Joint Venture Agreement between Ilce, Inc. (f/k/a Illinois Cement Company, Inc.) and RAAM Limited Partnership dated April 1, 1972, as amended (filed as Exhibit 10.1 to the Form S-1 Registration Statement of the Company (File No. 33-74816), filed on February 4, 1994 and incorporated herein by reference)
10.2		Limited Partnership Agreement of Texas Lehigh Cement Company LP by and between Texas Cement Company and Lehigh Portland Cement Company effective as of October 1, 2000 (filed as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2001 filed on June 21, 2001 (the “2001 10-K”)
10.2(a)		Amendment No. 1 to Agreement of Limited Partnership by and among Texas Cement Company, TLCC LP LLC, TLCC GP LLC, Lehigh Portland Cement Company, Lehigh Portland Investments, LLC and Lehigh Portland Holdings, LLC effective as of October 2, 2000 (filed as Exhibit 10.2(a) to the 2001 10-K)
10.3		The Centex Construction Products, Inc. Amended and Restated Stock Option Plan (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 1-12984) for the quarter ended September 30, 2000, filed on November 13, 2000 and incorporated herein by reference)⁽¹⁾
10.4		The Centex Construction Products, Inc. 2000 Stock Option Plan (filed as Exhibit 10 to the Form S-8 Registration Statement of the Company (File No. 333-54102) filed on January 22, 2001 and incorporated herein by reference)⁽¹⁾
10.5		The Centex Construction Products, Inc. Amended and Restated Supplemental Executive Retirement Plan (filed as Exhibit 10.4 to the Company’s Annual Report on Form 10-K (File No. 1-12984) for the fiscal year ended March 31, 2000 and incorporated herein by reference)⁽¹⁾
10.6		Indemnification Agreement dated as of April 19, 1994, between the Company and Centex Corporation (“Centex”) (filed as Exhibit 10.5 to the Company’s Annual Report on Form 10-K (File No. 1-12984) for the fiscal year ended March 1, 1995 (the “1995 Form 10-K”) and incorporated herein by reference)
10.7		Tax Separation Agreement dated as of April 1, 1994, among Centex, the Company and its subsidiaries (filed as Exhibit 10.6 to the 1995 Form 10-K and incorporated herein by reference)


Exhibit
Number		Description of Exhibits

10.8		Administrative Services Agreement dated as of April 1, 1994, between the Company and Centex Service Company (filed as Exhibit 10.7 to the 1995 Form 10-K and incorporated herein by reference)
10.9		Trademark License Agreement dated as of April 19, 1994, between the Company and Centex (filed as Exhibit 10.8 to the 1995 Form 10-K and incorporated herein by reference)
10.10		Form of Indemnification Agreement between the Company and each of its directors (filed as Exhibit 10.9 to Amendment No. 3 and incorporated herein by reference)⁽¹⁾
10.11		Paperboard Supply Agreement, dated May 14, 1998, by and among Republic Paperboard Company (n/k/a Republic Paperboard Company LLC), Republic Group, Inc., and James Hardie Gypsum, Inc. Portions of this Exhibit were omitted pursuant to a request for confidential treatment filed with the Office of the Secretary of the Securities and Exchange Commission (filed as Exhibit 10.11 to the 2001 10-K)
11*		Earnings (Loss) Per Common and Dilutive Potential Common Share
13**		Annual Report to Stockholders of the Company for fiscal year ended March 31, 2003 (the “Annual Report to Stockholders”)
21*		Subsidiaries of the Company
23*		Consent of Independent Public Auditors

*		Filed herewith.

**		With the exception of the information expressly incorporated by reference in this Annual Report on Form 10-K from the 2003 Annual Report to Stockholders, the 2003 Annual Report to Stockholders is not deemed filed with the Commission as a part of this Annual Report on Form 10-K.

(1)		Required to be identified as a management contract or a compensatory plan or arrangement pursuant to Item 14(a)(3) of Form 10-K.

EXHIBIT 4.2 ================================================================================ SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF MARCH 25, 2003 AMONG CENTEX CONSTRUCTION PRODUCTS, INC., AS BORROWER, THE LENDERS, BANK ONE, NA, AS ADMINISTRATIVE AGENT AND LC ISSUER, PNC BANK, NATIONAL ASSOCIATION, AS SYNDICATION AGENT, AND BANC ONE CAPITAL MARKETS, INC., AS SOLE LEAD ARRANGER AND SOLE BOOK MANAGER ================================================================================

TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS............................................................................... 1 ARTICLE II THE CREDITS............................................................................... 14 2.1. Commitment................................................................................ 14 2.2. Required Payments; Termination............................................................ 14 2.3. Ratable Loans............................................................................. 14 2.4. Types of Advances......................................................................... 15 2.5. Commitment Fee; Reductions in Aggregate Commitment........................................ 15 2.6. Increase in Commitment.................................................................... 15 2.7. Minimum Amount of Each Advance............................................................ 17 2.8. Optional Principal Payments............................................................... 17 2.9. Method of Selecting Types and Interest Periods for New Advances........................... 17 2.10. Conversion and Continuation of Outstanding Advances....................................... 18 2.11. Changes in Interest Rate, etc............................................................. 18 2.12. Rates Applicable After Default............................................................ 19 2.13. Method of Payment......................................................................... 19 2.14. Noteless Agreement; Evidence of Indebtedness.............................................. 19 2.15. Telephonic Notices........................................................................ 20 2.16. Interest Payment Dates; Interest and Fee Basis............................................ 20 2.17. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions........... 21 2.18. Lending Installations..................................................................... 21 2.19. Non-Receipt of Funds by the Administrative Agent.......................................... 21 2.20. Facility LCs.............................................................................. 22 2.21. Replacement of Lender..................................................................... 26 2.22. Swing Line Subfacility.................................................................... 27 2.23. Limitation of Interest.................................................................... 28 ARTICLE III YIELD PROTECTION; TAXES................................................................... 29 3.1. Yield Protection.......................................................................... 29 3.2. Changes in Capital Adequacy Regulations................................................... 30 3.3. Availability of Types of Advances......................................................... 31 3.4. Funding Indemnification................................................................... 31 3.5. Taxes..................................................................................... 31 3.6. Lender Statements; Survival of Indemnity.................................................. 33 ARTICLE IV CONDITIONS PRECEDENT...................................................................... 33 4.1. Initial Advance........................................................................... 33 4.2. Each Credit Extension..................................................................... 35 ARTICLE V REPRESENTATIONS AND WARRANTIES............................................................ 35 5.1. Existence and Standing.................................................................... 35 5.2. Authorization and Validity................................................................ 36 5.3. No Conflict; Government Consent........................................................... 36 5.4. Financial Statements...................................................................... 36

TABLE OF CONTENTS (CONTINUED) Page ---- 5.5. Material Adverse Change................................................................... 37 5.6. Taxes..................................................................................... 37 5.7. Litigation and Contingent Obligations..................................................... 37 5.8. Subsidiaries.............................................................................. 37 5.9. ERISA..................................................................................... 37 5.10. Accuracy of Information................................................................... 38 5.11. Regulation U.............................................................................. 38 5.12. Material Agreements....................................................................... 38 5.13. Compliance With Laws...................................................................... 38 5.14. Ownership of Properties................................................................... 38 5.15. Plan Assets; Prohibited Transactions...................................................... 38 5.16. Environmental Matters..................................................................... 38 5.17. Investment Company Act.................................................................... 39 5.18. Public Utility Holding Company Act........................................................ 39 5.19. Subordinated Indebtedness................................................................. 39 5.20. Post-Retirement Benefits.................................................................. 39 5.21. Solvency.................................................................................. 39 ARTICLE VI COVENANTS................................................................................. 40 6.1. Financial Reporting....................................................................... 40 6.2. Use of Proceeds........................................................................... 41 6.3. Notice of Default......................................................................... 41 6.4. Taxes..................................................................................... 41 6.5. Insurance................................................................................. 41 6.6. Compliance with Laws...................................................................... 42 6.7. Maintenance of Properties................................................................. 42 6.8. Books and Records......................................................................... 42 6.9. Inspection................................................................................ 42 6.10. Merger.................................................................................... 42 6.11. Sale of Assets............................................................................ 42 6.12. Liens..................................................................................... 43 6.13. Affiliates................................................................................ 44 6.14. Sale and Leaseback Transactions and other Off-Balance Sheet Liabilities................... 44 6.15. Letters of Credit......................................................................... 44 6.16. Financial Covenants....................................................................... 44 6.17. Lines of Business......................................................................... 44 6.18. Prepayment of Debt........................................................................ 45 6.19. Future Subsidiaries....................................................................... 45 6.20. Prohibition on Granting Negative Pledges.................................................. 45 6.21. Prohibition on Granting Restrictions on Distributions..................................... 45 6.22. Prohibition on Synthetic Leases........................................................... 45 6.23. Acquisitions.............................................................................. 45 ii

TABLE OF CONTENTS (CONTINUED) Page ---- ARTICLE VII DEFAULTS.................................................................................. 46 7.1. .......................................................................................... 46 7.2. .......................................................................................... 46 7.3. .......................................................................................... 46 7.4. .......................................................................................... 46 7.5. .......................................................................................... 46 7.6. .......................................................................................... 46 7.7. .......................................................................................... 47 7.8. .......................................................................................... 47 7.9. .......................................................................................... 47 7.10. .......................................................................................... 47 7.11. .......................................................................................... 47 7.12. .......................................................................................... 47 7.13. .......................................................................................... 48 7.14. .......................................................................................... 48 7.15. .......................................................................................... 48 7.16. .......................................................................................... 48 ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES............................................ 48 8.1. Acceleration; Facility LC Collateral Account.............................................. 48 8.2. Amendments................................................................................ 49 8.3. Preservation of Rights.................................................................... 50 ARTICLE IX GENERAL PROVISIONS........................................................................ 50 9.1. Survival of Representations............................................................... 50 9.2. Governmental Regulation................................................................... 50 9.3. Headings.................................................................................. 51 9.4. ENTIRE AGREEMENT.......................................................................... 51 9.5. Several Obligations; Benefits of this Agreement........................................... 51 9.6. Expenses; Indemnification................................................................. 51 9.7. Numbers of Documents...................................................................... 52 9.8. Accounting................................................................................ 52 9.9. Severability of Provisions................................................................ 52 9.10. Nonliability of Lenders................................................................... 52 9.11. Confidentiality........................................................................... 53 9.12. Nonreliance............................................................................... 53 9.13. Disclosure................................................................................ 53 9.14. Survival of Prior Agreements.............................................................. 53 ARTICLE X THE ADMINISTRATIVE AGENT.................................................................. 53 10.1. Appointment; Nature of Relationship....................................................... 53 10.2. Powers.................................................................................... 54 10.3. General Immunity.......................................................................... 54 10.4. No Responsibility for Credit Extensions, Recitals, etc.................................... 54 10.5. Action on Instructions of Lenders......................................................... 55 iii

TABLE OF CONTENTS (CONTINUED) Page ---- 10.6. Employment of Administrative Agents and Counsel........................................... 55 10.7. Reliance on Documents; Counsel............................................................ 55 10.8. Administrative Agent's Reimbursement and Indemnification.................................. 55 10.9. Notice of Default......................................................................... 56 10.10. Rights as a Lender........................................................................ 56 10.11. Lender Credit Decision.................................................................... 56 10.12. Successor Administrative Agent............................................................ 56 10.13. Administrative Agent and Arranger Fees.................................................... 57 10.14. Delegation to Affiliates.................................................................. 57 10.15. Co-Agents, Syndication Agent, etc......................................................... 57 ARTICLE XI SETOFF; RATABLE PAYMENTS.................................................................. 58 11.1. Setoff.................................................................................... 58 11.2. Ratable Payments.......................................................................... 58 ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS......................................... 58 12.1. Successors and Assigns.................................................................... 58 12.2. Participations............................................................................ 59 12.3. Assignments............................................................................... 60 12.4. Dissemination of Information.............................................................. 61 12.5. Tax Treatment............................................................................. 62 ARTICLE XIII NOTICES................................................................................... 62 13.1. Notices................................................................................... 62 13.2. Change of Address......................................................................... 62 ARTICLE XIV COUNTERPARTS.............................................................................. 62 ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.............................. 63 15.1. CHOICE OF LAW............................................................................. 63 15.2. CONSENT TO JURISDICTION................................................................... 63 15.3. WAIVER OF JURY TRIAL...................................................................... 63 15.4. Effect of Amendment and Restatement....................................................... 63 iv

TABLE OF CONTENTS (CONTINUED) Page ---- EXHIBITS: A - PRICING SCHEDULE B - COMPLIANCE CERTIFICATE C - ASSIGNMENT AGREEMENT D - LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION E - NOTE F - COMMITMENT AND ACCEPTANCE SCHEDULES: 1 - COMMITMENTS 2 - SUBSIDIARIES AND OTHER INVESTMENTS 3 - LIENS 4 - EXISTING FACILITY LCS v

SECOND AMENDED AND RESTATED CREDIT AGREEMENT This Second Amended and Restated Credit Agreement (this "Agreement") is entered into as of March 25, 2003, by and among the banks listed on the signature pages hereof (the "Lenders"), CENTEX CONSTRUCTION PRODUCTS, INC., a Delaware corporation (the "Borrower"), PNC BANK, NATIONAL ASSOCIATION, a national banking association, as Syndication Agent (the "Syndication Agent"), BANC ONE CAPITAL MARKETS, INC., as Sole Lead Arranger and Sole Book Manager (the "Sole Lead Arranger" and/or "Sole Book Manager"), and BANK ONE, NA, as LC Issuer and Administrative Agent (the "LC Issuer" and/or the "Administrative Agent"). RECITALS A. The Borrower, certain lenders party thereto, the Sole Lead Arranger and Sole Book Manager, the LC Issuer and the Administrative Agent are parties to that certain Amended and Restated Credit Agreement dated as of June 30, 2001 to be effective as of July 20, 2001 (as the same has been amended, restated or modified from time to time, the "Existing Credit Agreement"). B. The Borrower desires to amend and restate the Existing Credit Agreement to amend certain covenants and provisions therein, and the Administrative Agent and Lenders have agreed to such amendment, subject to the terms and conditions contained herein. NOW, THEREFORE, in consideration of the covenants, conditions and agreements hereafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are all hereby acknowledged, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS As used in this Agreement: "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company. "Advance" means (a) a borrowing hereunder, (i) made by the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same

Type and, in the case of Eurodollar Loans, for the same Interest Period, (b) a Swing Line Advance, and (c) a payment under a Facility LC. "Administrative Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Administrative Agent appointed pursuant to Article X. "Agents" means, collectively, the Administrative Agent and the Syndication Agent. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders, as reduced or increased from time to time pursuant to the terms hereof. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Lenders. "Agreement" means this second amended and restated credit agreement, as it may be amended, restated or modified and in effect from time to time. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Alternate Base Rate" means, for any day, a fluctuating rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. "Applicable Fee Rate" means, at any time, the percentage rate per annum at which Commitment Fees are accruing on the Available Aggregate Commitment at such time as set forth in the Pricing Schedule. "Applicable Margin" means, with respect to Advances of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Advances of such Type as set forth in the Pricing Schedule. "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, and its successors, in its capacity as Sole Lead Arranger and Sole Book Manager. 2

"Article" means an article of this Agreement unless another document is specifically referenced. "Authorized Officer" means any of the President, Chief Executive Officer, Executive Vice President, Chief Financial Officer, Senior Vice President or Assistant Treasurer of the Borrower, acting singly. "Available Aggregate Commitment" means, at any time, the Aggregate Commitment then in effect minus the Aggregate Outstanding Credit Exposure at such time. "Bank One" means Bank One, NA, a national banking association having its principal office in Dallas, Texas, in its individual capacity, and its successors. "Borrower" means Centex Construction Products, Inc., a Delaware corporation, and its successors and assigns. "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.9. "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Dallas and New York for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Dallas for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Change in Control" means (i) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 50% or more of the outstanding shares of voting stock of the Borrower; or (ii) Centex Corporation shall cease to own, free and clear of all Liens or other encumbrances, greater than 50% of the outstanding shares of voting stock of the Borrower on a fully diluted basis. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Collateral Shortfall Amount" is defined in Section 8.1. 3

"Commitment" means, for each Lender, the obligation of such Lender to make Loans to, and participate in Facility LCs issued upon the application of, the Borrower in an aggregate amount not exceeding the amount set forth on Schedule 1 or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.2, as such amount may be modified from time to time pursuant to the terms hereof. "Commitment Fee" is defined in Section 2.5. "Commitment and Acceptance" is defined in Section 2.6(i). "Consolidated EBIT" means Consolidated EBITDA minus depreciation and amortization, all calculated for the Borrower and its Subsidiaries on a consolidated basis. "Consolidated EBITDA" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) depreciation, (iv) amortization and (v) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Borrower and its Subsidiaries on a consolidated basis. Notwithstanding anything herein to the contrary, but without duplication, Consolidated EBITDA shall be inclusive of either (a) in the case of an Acquisition of equity interests in a Person, the EBITDA (calculated on a basis consistent with this definition of Consolidated EBITDA) of such Person before it became a Subsidiary of the Borrower or (b) in the case of an Acquisition of assets, or any other acquisition of assets if the Administrative Agent so agrees, the EBITDA associated with such acquired assets before such acquisition by the Borrower or any Subsidiary but exclusive of either (1) in the case of a disposition of equity interests in a Person, the EBITDA (calculated on the basis consistent with this definition of Consolidated EBITDA) of such Person after it is directly or indirectly disposed of by the Borrower or (2) in the case of a disposition of assets, the EBITDA associated with such assets after such assets are disposed of by the Borrower or any Subsidiary, all of which amounts shall be based upon audited financial statements. "Consolidated Indebtedness" means at any time the Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time. "Consolidated Interest Expense" means, with reference to any period, the interest expense and preferred stock dividends of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated Net Income" means, with reference to any period, the net income (or loss) of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated Net Worth" means at any time the consolidated stockholders' equity of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time. "Consolidated Tangible Net Worth" means at any time the Consolidated Net Worth, minus (a) any intangible assets, including, without limitation, patents, patent rights, trademarks, trade names, franchises, copyrights, goodwill, and other similar intangible assets of the Borrower 4

and its Subsidiaries calculated on a consolidated basis as of such time, minus (b) any non-cash gain (or plus any non-cash loss, as applicable) resulting from any mark-to-market adjustments made directly to Consolidated Net Worth as a result of fluctuations in the value of financial instruments owned by the Borrower or any of its Subsidiaries as mandated under FAS 133. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership; provided, however, to the extent any Contingent Obligation is included in the calculation of Leverage Ratio, such amounts shall include only those contingent obligations on the balance sheet of such Person (or disclosed and assigned a monetary value in the footnotes thereto) properly prepared in accordance with Agreement Accounting Principles. "Conversion/Continuation Notice" is defined in Section 2.10. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Credit Extension" means the making of an Advance or the issuance of a Facility LC hereunder. "Credit Extension Date" means the Borrowing Date for an Advance or the issuance date of a Facility LC. "Default" means an event described in Article VII. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "Eurodollar Advance" means an Advance which, except as otherwise provided in Section 2.12, bears interest at the applicable Eurodollar Rate. 5

"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, (i) if Reuters Screen FRBD is not available to the Administrative Agent for any reason, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Administrative Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Administrative Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Interest Period. "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.12, bears interest at the applicable Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the Applicable Margin. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Administrative Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Administrative Agent is incorporated or organized or (ii) the jurisdiction in which the Administrative Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced. "Existing Eurodollar Borrowing" is defined in Section 15.4. "Existing Facility LCs" is defined in Section 2.20.1. "Facility LC" is defined in Section 2.20.1. "Facility LC Application" is defined in Section 2.20.3. "Facility LC Collateral Account" is defined in Section 2.20.11. "Facility Termination Date" means March 25, 2006, or any earlier date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof. 6

"Federal Funds Effective Rate" means, for any day, an interest 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 for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Dallas time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion. "Financial Contract" of a Person means (i) any exchange-traded or over-the-counter futures, forward, swap or option contract or other financial instrument with similar characteristics, or (ii) any Rate Management Transaction. "Floating Rate" means, for any day, a rate per annum equal to (i) the Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case changing when and as the Alternate Base Rate changes. "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.12, bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which, except as otherwise provided in Section 2.12, bears interest at the Floating Rate. "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions. "Guarantors" means collectively, all of the Significant Subsidiaries of the Borrower and their respective successors and assigns. "Guaranty" means that certain Second Amended and Restated Guaranty dated as of the date hereof executed by the Guarantors in favor of the Administrative Agent, for the ratable benefit of the Lenders, as it may be amended, restated, supplemented or modified and in effect from time to time. "Increase Date" is defined in Section 2.6(ii). "Increasing Lender" is defined in Section 2.6(i). "Indebtedness" of a Person means, without duplication, such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens on or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) Net Mark-to-Market Exposure under Rate Management Transactions and other Financial Contracts, (viii) Contingent Obligations, (ix) Letters of Credit, (x) Sale and 7

Leaseback Transactions, (xi) Off-Balance Sheet Liabilities, and (xii) any other obligation for borrowed money or other financial accommodation which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person. "Interest Period" means, with respect to a Eurodollar Advance, a period of one week or one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. A weekly Interest Period shall end on the day of the next following week which corresponds to the day of the week on which it began. A monthly Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that, in the case of a monthly Interest Period, if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. "LC Fee" is defined in Section 2.20.4. "LC Issuer" means Bank One, NA (or any subsidiary or Affiliate of Bank One, NA designated by Bank One, NA) in its capacity as issuer of Facility LCs hereunder. "LC Obligations" means, at any time, the sum, without duplication, of (i) the aggregate undrawn stated amount under all Facility LCs outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations. "LC Payment Date" is defined in Section 2.20.5. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. "Lending Installation" means, with respect to a Lender or the Administrative Agent, the office, branch, subsidiary or Affiliate of such Lender or the Administrative Agent listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender or the Administrative Agent pursuant to Section 2.18. "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Leverage Ratio" means, as of the end of each of the Borrower's fiscal quarters, the ratio of (i) Consolidated Indebtedness outstanding on such date to (ii) Consolidated EBITDA for the Borrower's then most-recently ended four fiscal quarters. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, or priority or other security agreement 8

(including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan" means, with respect to a Lender, such Lender's loan made pursuant to Article II (or any conversion or continuation thereof). "Loan Documents" means this Agreement, the Facility LC Applications, any Notes issued pursuant to Section 2.14, the Guaranty and any other related documents, instruments and agreements now or hereafter executed by Borrower or any Guarantor in connection with any of the foregoing. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, financial condition, or results of operations of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Administrative Agent, the LC Issuer or the Lenders thereunder. "Material Indebtedness" is defined in Section 7.5. "Maximum Rate" means, at any time and with respect to any Lender, the maximum rate of interest under applicable law that such Lender may charge the Borrower. The Maximum Rate shall be calculated in a manner that takes into account any and all fees, payments, and other charges in respect of the Loan Documents that constitute interest under applicable law. Each change in any interest rate provided for herein based upon the Maximum Rate resulting from a change in the Maximum Rate shall take effect without notice to the Borrower at the time of such change in the Maximum Rate. For purposes of determining the Maximum Rate under Texas law, the applicable rate ceiling shall be the weekly rate ceiling described in, and computed in accordance with, Chapter 303 of the Texas Finance Code, as amended from time to time. "Modify" and "Modification" are defined in Section 2.20.1. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Net Cash Proceeds" means, with respect to any issuance of any equity of any Person, the aggregate amount of cash received by such Person in connection with such transaction minus reasonable fees, costs and expenses, related taxes paid or payable, and repayment of any Indebtedness required to be repaid as a result of such transaction. "Net Mark-to-Market Exposure" of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. "Unrealized losses" means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination (assuming the Rate Management Transaction were to be terminated as of that date), and "unrealized profits" means the fair market value of the gain to such Person of replacing such 9

Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date). "Non-U.S. Lender" is defined in Section 3.5(iv). "Note" is defined in Section 2.14. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all Reimbursement Obligations, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender or any of their Affiliates, the Administrative Agent, the LC Issuer or any indemnified party arising under the Loan Documents. "Off-Balance Sheet Liability" of a Person means (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any Synthetic Lease entered into by such Person, (iv) any obligation or liability arising with respect to any sale or transfer of an interest in trade receivables of the Borrower or any Subsidiary on a limited recourse basis, or (v) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding from this clause (v) Operating Leases. "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Operating Lease Obligations" means, as at any date of determination, the amount obtained by aggregating the present values, determined in the case of each particular Operating Lease by applying a discount rate (which discount rate shall equal the discount rate which would be applied under Agreement Accounting Principles if such Operating Lease were a Capitalized Lease) from the date on which each fixed lease payment is due under such Operating Lease to such date of determination, of all fixed lease payments due under all Operating Leases of the Borrower and its Subsidiaries. "Other Taxes" is defined in Section 3.5(ii). "Outstanding Credit Exposure" means, as to any Lender at any time, the sum of (i) the aggregate principal amount of its Loans outstanding at such time, plus (ii) an amount equal to its Pro Rata Share of the LC Obligations at such time, plus (iii) an amount equal to its Pro Rata Share of the Swing Line Advances at such time. "Participants" is defined in Section 12.2.1. "Payment Date" means the first day of each calendar quarter. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. 10

"Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Pricing Schedule" means the schedule attached hereto as Exhibit A. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Pro Rata Share" means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lender's Commitment and the denominator of which is the Aggregate Commitment. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Purchasers" is defined in Section 12.3.1. "Rate Management Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions. "Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the 11

purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrower then outstanding under Section 2.20 to reimburse the LC Issuer for amounts paid by the LC Issuer in respect of any one or more drawings under Facility LCs. "Rentals" of a Person means the aggregate fixed amounts payable by such Person under any Operating Lease. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Reports" is defined in Section 9.6. "Required Lenders" means Lenders in the aggregate having at least 51% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 51% of the Aggregate Outstanding Credit Exposure. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Restatement Effective Time" is defined in Section 15.4. "Revolving Credit Facility" means the revolving credit facility described in Section 2.1. "S&P" means Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "Sale and Leaseback Transaction" means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee. "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Significant Subsidiary" means any Subsidiary which at any time has total assets with a book or fair market value (determined in accordance with Agreement Accounting Principles) equal to or greater than 10% of the Consolidated Tangible Net Worth. Significant Subsidiaries shall in any event at all times be comprised of Subsidiaries which, when aggregated with the 12

total assets of the Borrower, in the aggregate have total assets with a book or fair market value (determined in accordance with Agreement Accounting Principles) equal to or greater than 90% of the total assets of the Borrower and its Subsidiaries. "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Subordinated Indebtedness" of a Person means any Indebtedness of such Person the payment of which is subordinated to payment of the Obligations to the written satisfaction of the Required Lenders. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which (i) represents more than 15% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made, or (ii) is responsible for more than 15% of the consolidated net sales or of the Consolidated EBITDA of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. "Super Majority Lenders" means Lenders in the aggregate having at least 66 2/3% of the Aggregate Commitment, or if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 66 2/3% of the Aggregate Outstanding Credit Exposure. "Syndication Agent" means PNC Bank, National Association, in its capacity as syndication agent, and not in its individual capacity as a Lender. "Synthetic Lease" means a lease (i) that is treated as an operating lease under Agreement Accounting Principles and (ii) (a) in respect of which the leased asset is treated as owned by the lessee for purposes of the Code and/or (b) that is treated as a loan to the lessee for commercial law or insolvency law purposes. "Swing Line Advance" means any Advance under the Swing Line Subfacility. "Swing Line Subfacility" means a subfacility under the Revolving Credit Facility described in Section 2.22. "Taxes" means any and all present or future governmental taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. 13

"Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance. "Unfunded Liabilities" means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDITS 2.1. Commitment. From and including the date of this Agreement and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to (i) make Loans (other than Swing Line Advances) to the Borrower, (ii) participate in Swing Line Advances, and (iii) participate in Facility LCs issued upon the request of the Borrower, provided that, after giving effect to the making of each such Loan (including the Swing Line Advances) and the issuance of each such Facility LC, such Lender's Outstanding Credit Exposure shall not exceed its Commitment. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date. The Commitments to extend credit hereunder shall expire on the Facility Termination Date. The LC Issuer will issue Facility LCs hereunder on the terms and conditions set forth in Section 2.20. The Administrative Agent will make Swing Line Advances hereunder on the terms and conditions set forth in Section 2.22. 2.2. Required Payments; Termination. The Aggregate Outstanding Credit Exposure and all other unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date. 2.3. Ratable Loans. Each Advance under the Revolving Credit Facility shall consist of Loans made from the several Lenders ratably according to their Pro Rata Shares. 14

2.4. Types of Advances. The Advances under the Revolving Credit Facility may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.9 and 2.10. 2.5. Commitment Fee; Reductions in Aggregate Commitment. The Borrower agrees to pay to the Administrative Agent for the account of each Lender according to its Pro Rata Share a commitment fee (the "Commitment Fee") at a per annum rate equal to the Applicable Fee Rate on the average daily Available Aggregate Commitment from the date hereof to and including the Facility Termination Date, payable in arrears on each Payment Date hereafter and on the Facility Termination Date. The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $5,000,000, upon at least five Business Days' written notice to the Administrative Agent, which notice shall specify the amount of any such reduction; provided, however, that the amount of the Aggregate Commitment may not be reduced below the Aggregate Outstanding Credit Exposure. All accrued commitment fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Credit Extensions hereunder. 2.6. Increase in Commitment. (i) So long as (a) no Default or Unmatured Default has occurred and is continuing, and (b) the Borrower has not terminated or reduced in part any unused portion of the Commitments at any time pursuant to Section 2.5, the Borrower may, at any time and from time to time, by notice to the Administrative Agent, request, not more than two (2) times each calendar year, an increase in the Aggregate Commitment within the limitations hereafter described, which notice shall set forth the amount of such increase. In accordance with Section 2.6(iv), the Aggregate Commitment may be so increased either by having one or more Purchasers that have been approved by the Borrower and the Administrative Agent become Lenders and/or by having any one or more of the then existing Lenders (at their respective election in their sole discretion) increase the amount of their Commitment ("Increasing Lenders"), provided that (A) the Commitment of any Purchaser shall not be less than $10,000,000 and the sum of the Commitments of the Purchasers and the increases in the Commitments of the Increasing Lenders shall be in an aggregate amount of not less than $10,000,000 (and, if in excess thereof, in integral multiples of $5,000,000); (B) the aggregate amount of all the increases in the Aggregate Commitment pursuant to this Section 2.6 shall not exceed $75,000,000; (C) the Borrower, each Purchaser and/or each Increasing Lender shall have executed and delivered to the Administrative Agent a commitment and acceptance (the "Commitment and Acceptance") substantially in the form of Exhibit F hereto, and the Administrative Agent shall have accepted and executed the same, (D) if requested by the Purchaser and/or the Increasing Lenders, the Borrower shall have executed and delivered to the Administrative Agent a Note or Notes payable to the order of each Purchaser and/or each Increasing Lender, each such Note to be in the amount of such Purchaser's Commitment or such Increasing Lender's Commitment (as applicable), (E) the Guarantors shall have consented in writing to the new Commitments or increases in Commitments (as applicable) and shall have agreed that their Guaranty continue in full force and effect, and (F) the Borrower, each Purchaser and/or each Increasing Lender shall otherwise have executed and delivered such other instruments and documents as the Administrative 15

Agent shall have reasonably requested in connection with such new Commitment or increase in the Commitment (as applicable). The form and substance of the documents required under clauses (C) through (F) above shall be reasonably acceptable to the Administrative Agent. The Administrative Agent shall provide prior written notice to all of the Lenders hereunder of the admission of any Purchaser or the increase in the Commitment of any Increasing Lender hereunder and shall furnish to each of the Lenders copies of the documents required under clause (C), (E) and (F) above. (ii) Upon the effective date of any increase in the Aggregate Commitment pursuant to the provisions hereof ("Increase Date"), which Increase Date shall be mutually agreed upon by the Borrower, each Purchaser, each Increasing Lender and the Administrative Agent, each Purchaser and/or Increasing Lender shall make a payment to the Administrative Agent in an amount sufficient, upon the application of such payments by all Purchasers and Increasing Lenders to the reduction of the Outstanding Credit Exposures of the Lenders (including the Increasing Lenders), to cause the Outstanding Credit Exposures of each Lender to be equal to each Lender's Pro Rata Share of the Aggregate Commitment as so increased. The Borrower hereby irrevocably authorizes each Purchaser and/or each Increasing Lender to fund to the Administrative Agent the payment required to be made pursuant to the immediately preceding sentence for application to the reduction of the Outstanding Credit Exposures of the Lenders, and each such payment shall constitute a Loan hereunder. If, as a result of the repayment of the Outstanding Credit Exposures provided for in this Section 2.6(ii), any payment of a Eurodollar Loan occurs on a day which is not the last day of the applicable Interest Period, the Borrower will pay to the Administrative Agent for the benefit of any of the Lenders (including any Increasing Lender to the extent of Eurodollar Loans held by such Increasing Lender prior to such Increase Date) holding a Eurodollar Loan any loss or cost incurred by such Lender resulting therefrom in accordance with Section 3.4. Upon the Increase Date, all Loans outstanding hereunder (including any Loans made by the Purchasers and/or Increasing Lenders on the Increase Date) shall be Floating Rate Loans, subject to the Borrower's right to convert the same to Eurodollar Loans on or after such date in accordance with the provisions of Section 2.10. (iii) Upon the Increase Date and the making of the Loans by the Purchasers and/or Increasing Lenders in accordance with the provisions of Section 2.6(ii), each Purchaser and/or each Increasing Lender shall also be deemed to have irrevocably and unconditionally purchased and received without recourse or warranty, from the Lenders immediately prior to the Increase Date, an undivided interest and participation in any Facility LC and Swing Line Advance, as applicable, then outstanding, ratably, such that each Lender (including each Purchaser) holds a participation interest in each such Facility LC and Swing Line Advance, as applicable, in proportion to such Lender's Pro Rata Share. (iv) Upon the notice by the Borrower to the Administrative Agent pursuant to Section 2.6(i) hereof, each of the then existing Lenders shall have the right (at its election) to increase its Commitment by an amount equal to such Lender's Pro Rata Share of the proposed increase in the Aggregate Commitment. If less than all of the proposed increase in Aggregate Commitment is elected by the existing Lenders, then any of the 16

then existing Lenders shall have the right to increase its Commitment in an amount greater than such Lender's Pro Rata Share of the proposed increase in the Aggregate Commitment with the Administrative Agent's approval. In the event the sum of each Purchaser's Commitment and the increase in each Increasing Lender's Commitment is less than the requested increase in the Aggregate Commitment, the Borrower may elect to accept the increase in the Aggregate Commitment to be equal to such lesser amount. Notwithstanding anything to the contrary contained herein, the Administrative Agent shall not be liable for any failure to obtain Increasing Lenders or Purchasers hereunder or for any failure to increase the Aggregate Commitment by the amount so requested by the Borrower pursuant to Section 2.6(i). (v) Nothing contained herein shall constitute or otherwise be deemed to be a commitment or agreement on the part of any Lender to increase its Commitment hereunder at any time. No Lender (except only for itself) shall have the right to decline Borrower's request pursuant to Section 2.6(i) for an increase in the Aggregate Commitment. 2.7. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess thereof), and each Floating Rate Advance shall be in the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess thereof); provided, however, that any Floating Rate Advance may be in the amount of the Available Aggregate Commitment. 2.8. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or, in a minimum aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess thereof, any portion of the outstanding Floating Rate Advances not later than 1:00 p.m. (Dallas time) upon prior written notice to the Administrative Agent on the date of such prepayment. The Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances, or, in a minimum aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess thereof, any portion of the outstanding Eurodollar Advances upon three Business Days' prior notice to the Administrative Agent. 2.9. Method of Selecting Types and Interest Periods for New Advances. Except with respect to Swing Line Advances, the Borrower shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period applicable thereto from time to time. The Borrower shall give the Administrative Agent irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. (Dallas time) at least one Business Day before the Borrowing Date of each Floating Rate Advance and three Business Days before the Borrowing Date for each Eurodollar Advance, specifying: (i) the Borrowing Date, which shall be a Business Day, of such Advance, (ii) the aggregate amount of such Advance, (iii) the Type of Advance selected, and 17

(iv) in the case of each Eurodollar Advance, the Interest Period applicable thereto. Not later than noon (Dallas time) on each Borrowing Date, each Lender shall make available its Loan or Loans in funds immediately available in Dallas to the Administrative Agent at its address specified pursuant to Article XIII. The Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agent's aforesaid address. 2.10. Conversion and Continuation of Outstanding Advances. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.10 or are repaid in accordance with Section 2.8. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.8 or (y) the Borrower shall have given the Administrative Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period. Subject to the terms of Section 2.7, the Borrower may elect from time to time to convert all or any part of a Floating Rate Advance (other than Swing Line Advances) into a Eurodollar Advance. The Borrower shall give the Administrative Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a Floating Rate Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 10:00 a.m. (Dallas time) at least three Business Days prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation, (ii) the aggregate amount and Type of the Advance which is to be converted or continued, and (iii) the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest Period applicable thereto. 2.11. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.10, to but excluding the date it is paid or is converted into a Eurodollar Advance pursuant to Section 2.10 hereof, at a rate per annum equal to the lesser of (a) the Maximum Rate, or (b) the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. If at any time the Floating Rate shall exceed the Maximum Rate, thereby causing the interest accruing on an Advance to be limited to the Maximum Rate, then any subsequent reduction in the Floating Rate for such Advance shall not reduce the rate of interest on such Advance below the Maximum Rate until the aggregate amount of interest accrued on such Advance equals the aggregate amount of interest which would have 18

accrued on such Advance if the Floating Rate had at all times been in effect. Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by the Administrative Agent as applicable to such Eurodollar Advance based upon the Borrower's selections under Sections 2.9 and 2.10 and otherwise in accordance with the terms hereof. No Interest Period may end after the Facility Termination Date. 2.12. Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.9 or 2.10, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to the Borrower, declare that no Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower, declare that (i) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period (but calculated as if the highest Applicable Margin was then in effect) plus 2% per annum, (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time (but calculated as if the highest Applicable Margin was then in effect) plus 2% per annum and (iii) the LC Fee shall be calculated as if the highest Applicable Margin was then in effect and increased by 2% per annum, provided that, during the continuance of a Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above and the increase in the LC Fee set forth in clause (iii) above shall be applicable to all Credit Extensions without any election or action on the part of the Administrative Agent or any Lender, subject in all events to the limitations of the Maximum Rate. 2.13. Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Administrative Agent at the Administrative Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Administrative Agent specified in writing by the Administrative Agent to the Borrower, by noon (local time) on the date when due and shall (except in the case of Reimbursement Obligations for which the LC Issuer has not been fully indemnified by the Lenders, or as otherwise specifically required hereunder) be applied ratably by the Administrative Agent among the Lenders. Each payment delivered to the Administrative Agent for the account of any Lender shall be delivered promptly by the Administrative Agent to such Lender in the same type of funds that the Administrative Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Administrative Agent from such Lender. The Administrative Agent is hereby authorized to charge the account of the Borrower maintained with Bank One for each payment of principal, interest, Reimbursement Obligations and fees as it becomes due hereunder. Each reference to the Administrative Agent in this Section 2.13 shall also be deemed to refer, and shall apply equally, to the LC Issuer, in the case of payments required to be made by the Borrower to the LC Issuer pursuant to Section 2.20.6. 2.14. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender 19

resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (ii) The Administrative Agent shall also maintain accounts in which it will record (a) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, (c) the original stated amount of each Facility LC and the amount of LC Obligations outstanding at any time, and (d) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (iii) The entries maintained in the accounts maintained pursuant to clauses (i) and (ii) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Administrative Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms. (iv) Any Lender may request that its Loans under the Revolving Credit Facility be evidenced by a promissory note in substantially the form of Exhibit E (a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender in a form supplied by the Administrative Agent. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein or any assignee pursuant to Section 12.3, except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in clauses (i) and (ii) above. 2.15. Telephonic Notices. The Borrower hereby authorizes the Lenders and the Administrative Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Administrative Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Administrative Agent a written confirmation, if such confirmation is requested by the Administrative Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Administrative Agent and the Lenders, the records of the Administrative Agent and the Lenders shall govern absent manifest error. 2.16. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance not including Swing Line Advances shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof and at maturity. Interest accrued on each Eurodollar Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance having an Interest 20

Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest, commitment fees and LC Fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. 2.17. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Administrative Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. Promptly after notice from the LC Issuer, the Administrative Agent will notify each Lender of the contents of each request for issuance of a Facility LC hereunder. The Administrative Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. 2.18. Lending Installations. Each Lender may book its Loans and its participation in any LC Obligations and the LC Issuer may book the Facility LCs at any Lending Installation selected by such Lender or the LC Issuer, as the case may be, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, Facility LCs, participations in LC Obligations and any Notes issued hereunder shall be deemed held by each Lender or the LC Issuer, as the case may be, for the benefit of any such Lending Installation. Each Lender and the LC Issuer may, by written notice to the Administrative Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it or Facility LCs will be issued by it and for whose account Loan payments or payments with respect to Facility LCs are to be made. 2.19. Non-Receipt of Funds by the Administrative Agent. Unless the Borrower or a Lender, as the case may be, notifies the Administrative Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Administrative Agent for the account of the Lenders, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. 21

2.20. Facility LCs. 2.20.1. Issuance. Subject to the terms and conditions of this Agreement, the LC Issuer agrees to keep outstanding on and after the date hereof the standby letters of credit for the account of the Borrower which were issued by the LC Issuer and which are further described on Schedule 4 (collectively, the "Existing Facility LCs"). Each Existing Facility LC shall constitute a Facility LC for all purposes of this Agreement. For purposes hereof, the Existing Facility LCs are deemed to be issued on the date hereof. Furthermore, the LC Issuer hereby agrees, on the terms and conditions set forth in this Agreement, to issue standby and commercial letters of credit (each, a "Facility LC") and to renew, extend, increase, decrease or otherwise modify each Facility LC ("Modify," and each such action a "Modification"), from time to time from and including the date of this Agreement and prior to the Facility Termination Date upon the request of the Borrower; provided that immediately after each such Facility LC is issued or Modified, (i) the aggregate amount of the outstanding LC Obligations shall not exceed $50,000,000 and (ii) the Aggregate Outstanding Credit Exposure shall not exceed the Aggregate Commitment. No Facility LC shall have an expiry date later than the earlier of (a) the fifth Business Day prior to the Facility Termination Date and (b) one year after its issuance (or, if such Facility LC shall have been renewed, one year after its renewal). 2.20.2. Participations. Upon the issuance or Modification by the LC Issuer of a Facility LC in accordance with this Section 2.20, the LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Pro Rata Share. 2.20.3. Notice. Subject to Section 2.20.1, the Borrower shall give the LC Issuer notice prior to 10:00 a.m. (Dallas time) at least five Business Days prior to the proposed date of issuance or Modification of each Facility LC, specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon receipt of such notice, the LC Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Lender, of the contents thereof and of the amount of such Lender's participation in such proposed Facility LC. The issuance or Modification by the LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article IV (the satisfaction of which the LC Issuer shall have no duty to ascertain), be subject to the conditions precedent that such Facility LC shall be reasonably satisfactory to the LC Issuer and that the Borrower shall have executed and delivered such application agreement and/or such other instruments and agreements relating to such Facility LC as the LC Issuer shall have reasonably requested (each, a "Facility LC Application"). In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control. 22

2.20.4. LC Fees. The Borrower shall pay to the Administrative Agent, for the account of the Lenders ratably in accordance with their respective Pro Rata Shares, (i) with respect to each standby Facility LC, a letter of credit fee at a per annum rate equal to the Applicable Margin for Eurodollar Loans in effect from time to time on the average daily undrawn stated amount under such standby Facility LC, such fee to be payable in arrears on each Payment Date, and (ii) with respect to each commercial Facility LC, a one-time letter of credit fee in an amount equal to 0.125% of the initial stated amount (or, with respect to a Modification of any such commercial Facility LC which increases the stated amount thereof, such increase in the stated amount) thereof, such fee to be payable on the date of such issuance or increase (each such fee described in this sentence an "LC Fee"). The Borrower shall also pay to the LC Issuer for its own account (x) at the time of issuance of each Facility LC, a fronting fee in an amount equal to 0.125% of the initial stated amount (or with respect to a Modification of any such standby Facility LC which increases the stated amount thereof, such increase in the stated amount), and (y) documentary and processing charges in connection with the issuance or Modification of and draws under Facility LCs in accordance with the LC Issuer's standard schedule for such charges as in effect from time to time. 2.20.5. Administration; Reimbursement by Lenders. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the LC Issuer shall notify the Administrative Agent and the Administrative Agent shall promptly notify the Borrower and each other Lender as to the amount to be paid by the LC Issuer as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of the LC Issuer to the Borrower and each Lender shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC in connection with such presentment shall be in conformity in all material respects with such Facility LC. The LC Issuer shall endeavor to exercise the same care in the issuance and administration of the Facility LCs as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by the LC Issuer, each Lender shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse the LC Issuer on demand for (i) such Lender's Pro Rata Share of the amount of each payment made by the LC Issuer under each Facility LC to the extent such amount is not reimbursed by the Borrower pursuant to Section 2.20.6 below, plus (ii) interest on the foregoing amount to be reimbursed by such Lender, for each day from the date of the LC Issuer's demand for such reimbursement (or, if such demand is made after 11:00 a.m. (Dallas time) on such date, from the next succeeding Business Day) to the date on which such Lender pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the rate applicable to Floating Rate Advances. 2.20.6. Reimbursement by Borrower. The Borrower shall be irrevocably and unconditionally obligated to reimburse the LC Issuer on or before the applicable LC Payment Date for any amounts to be paid by the LC Issuer upon any drawing under any Facility LC, without presentment, demand, protest or other formalities of any kind; provided that neither the Borrower nor any Lender shall hereby be precluded from 23

asserting any claim for direct (but not consequential) damages suffered by the Borrower or such Lender to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) the LC Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. All such amounts paid by the LC Issuer and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to Floating Rate Advances for such day if such day falls on or before the applicable LC Payment Date and (y) the sum of 2% plus the rate applicable to Floating Rate Advances for such day if such day falls after such LC Payment Date. The LC Issuer will pay to each Lender ratably in accordance with its Pro Rata Share all amounts received by it from the Borrower for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued by the LC Issuer, but only to the extent such Lender has made payment to the LC Issuer in respect of such Facility LC pursuant to Section 2.20.5. Subject to the terms and conditions of this Agreement (including without limitation the submission of a Borrowing Notice in compliance with Section 2.9 and the satisfaction of the applicable conditions precedent set forth in Article IV), the Borrower may request an Advance hereunder for the purpose of satisfying any Reimbursement Obligation. 2.20.7. Obligations Absolute. The Borrower's obligations under this Section 2.20 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the LC Issuer, any Lender or any beneficiary of a Facility LC. The Borrower further agrees with the LC Issuer and the Lenders that the LC Issuer and the Lenders shall not be responsible for, and the Borrower's Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of the Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. The LC Issuer shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. The Borrower agrees that any action taken or omitted by the LC Issuer or any Lender under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence, bad faith or willful misconduct, shall be binding upon the Borrower and shall not put the LC Issuer or any Lender under any liability to the Borrower. Nothing in this Section 2.20.7 is intended to limit the right of the Borrower to make a claim against the LC Issuer for damages as contemplated by the proviso to the first sentence of Section 2.20.6. 2.20.8. Actions of LC Issuer. The LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Facility LC, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype 24

message, statement, order or other document reasonably 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, independent accountants and other experts selected by the LC Issuer. The LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable 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. Notwithstanding any other provision of this Section 2.20, the LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation in any Facility LC. 2.20.9. Indemnification. The Borrower hereby agrees to indemnify and hold harmless each Lender, the LC Issuer and the Administrative Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses (including reasonable attorneys' fees and disbursements) which such Lender, the LC Issuer or the Administrative Agent may incur (or which may be claimed against such Lender, the LC Issuer or the Administrative Agent by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which the LC Issuer may incur by reason of or in connection with (i) the failure of any other Lender to fulfill or comply with its obligations to the LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have against any defaulting Lender) or (ii) by reason of or on account of the LC Issuer issuing any Facility LC which specifies that the term "Beneficiary" included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower shall not be required to indemnify any Lender, the LC Issuer or the Administrative Agent or any director, officer, agent or employee thereof for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct, bad faith or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.20.9 is intended to limit the obligations of the Borrower under any other provision of this Agreement. 2.20.10. Lenders' Indemnification. Each Lender shall, ratably in accordance with its Pro Rata Share, indemnify the LC Issuer, its Affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such 25

indemnitees' gross negligence or willful misconduct or the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of the Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.20 or any action taken or omitted by such indemnitees hereunder. 2.20.11. Facility LC Collateral Account. The Borrower agrees that it will, after the occurrence of a Default and upon the request of the Administrative Agent or the Required Lenders and until the final expiration date of any Facility LC and thereafter as long as any amount is payable to the LC Issuer or the Lenders in respect of any Facility LC, maintain a special collateral account pursuant to arrangements satisfactory to the Administrative Agent (the "Facility LC Collateral Account") at the Administrative Agent's office at the address specified pursuant to Article XIII, in the name of the Borrower but under the sole dominion and control of the Administrative Agent, for the benefit of the Lenders and in which the Borrower shall have no interest other than as set forth in Section 8.1. The Borrower hereby pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Lenders and the LC Issuer, a security interest in all of the Borrower's right, title and interest in and to all funds which may from time to time be on deposit in the Facility LC Collateral Account to secure the prompt and complete payment and performance of the Obligations. The Administrative Agent will invest any funds on deposit from time to time in the Facility LC Collateral Account in certificates of deposit of Bank One having a maturity not exceeding 30 days. Nothing in this Section 2.20.11 shall either obligate the Administrative Agent to require the Borrower to deposit any funds in the Facility LC Collateral Account or limit the right of the Administrative Agent to release any funds held in the Facility LC Collateral Account in each case other than as required by Section 8.1. 2.20.12. Rights as a Lender. In its capacity as a Lender, the LC Issuer shall have the same rights and obligations as any other Lender. 2.21. Replacement of Lender. If the Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lender's obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender so affected an "Affected Lender"), the Borrower may elect, if such amounts continue to be charged or such suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such replacement, and provided further that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower and the Administrative Agent shall agree, as of such date, to purchase for cash the Credit Extensions and other Obligations due to the Affected Lender pursuant to an assignment substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such Affected Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of termination, including 26

without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Credit Extensions of such Affected Lender been prepaid on such date rather than sold to the replacement Lender. 2.22. Swing Line Subfacility. 2.22.1. Conditions. For the convenience of the parties, the Administrative Agent, solely for its own account, may make any requested Advance under the Revolving Credit Facility (which request must be made before 1:00 p.m. (Dallas time) on the Business Day the Advance is to be made and may be telephonic if confirmed in writing within two Business Days) in the minimum amount of $100,000 (or a greater integral multiple of $100,000) directly to the Borrower as a Swing Line Advance without requiring each other Lender to fund its Pro Rata Share thereof on such Business Day. Swing Line Advances are subject to the following conditions: (i) Each Swing Line Advance must occur on a Business Day before the Facility Termination Date; (ii) The aggregate principal outstanding of all Swing Line Advances may not exceed $15,000,000; the aggregate principal outstanding of all Swing Line Advances, all other Advances under the Revolving Credit Facility, and all LC Obligations may not exceed the Aggregate Commitment under the Revolving Credit Facility; and no Swing Line Advance shall be made which would cause the aggregate principal outstanding of all Loans (including Swing Line Advances) made by the Administrative Agent under the Revolving Credit Facility to exceed the Administrative Agent's Commitment under the Revolving Credit Facility; (iii) Each Swing Line Advance, along with accrued but unpaid interest on such Swing Line Advance, shall be paid in full by the Borrower on the Business Day immediately succeeding the date of such Swing Line Advance by the funding of an Advance under the Revolving Credit Facility and in any event on the Facility Termination Date; and (iv) Each Swing Line Advance shall be a Floating Rate Advance. 2.22.2. Lenders' Funding of Swing Line Advances as Advances Under Revolving Credit Facility. The Administrative Agent shall give to the Lenders notice of each Swing Line Advance not later than 3:00 p.m. (Dallas time) on the date of such Swing Line Advance, which notice shall, on behalf of the Borrower (and for such purpose the Borrower hereby irrevocably directs the Administrative Agent to act on its behalf), request each Lender to make, and each Lender hereby agrees to make, an Advance in an amount equal to such Lender's Pro Rata Share of the aggregate amount of the Swing Line Advances (the "Refunded Swing Line Advances") outstanding on the date of such notice, to repay the Administrative Agent. Each Lender shall make the amount of such Advance available to the Administrative Agent in immediately available funds, not later than noon (Dallas time) one Business Day after the date of such notice. The proceeds of such 27

Advance shall be immediately made available to the Administrative Agent for application by the Administrative Agent to the repayment of the Refunded Swing Line Advances. The Borrower irrevocably authorizes the Administrative Agent to charge the Borrower's accounts with the Administrative Agent in order to immediately pay the amount of such Refunded Swing Line Advances to the extent amounts received from the Lenders are not sufficient to repay in full such Refunded Swing Line Advances (with notice of such charge being provided to the Borrower, provided that the failure to give such notice shall not affect the validity of such charge). All such Refunded Swing Line Advances shall be subject to all provisions of this Agreement concerning Advances under the Revolving Credit Facility. If prior to the time an Advance would otherwise have been made pursuant to this section, Advances may not be made as contemplated by this section, each Lender shall irrevocably and unconditionally purchase and receive from the Administrative Agent a ratable participation in such Swing Line Advance and shall make available to the Administrative Agent in immediately available funds its Pro Rata Share of such unpaid amount, together with interest from the date when its payment was due to, but not including, the date of payment. If a Lender does not promptly pay its amount upon the Administrative Agent's demand, and until such Lender makes the required payment, the Administrative Agent is deemed to continue to have outstanding a Swing Line Advance in the amount of such Lender's unpaid obligation. The Borrower shall make each payment of all or any part of any Swing Line Advance to the Administrative Agent for the ratable benefit of the Administrative Agent and those Lenders who have funded their participations in Swing Line Advances under this Section (but all interest accruing on Swing Line Advances before the funding date of any Advance under the Revolving Credit Facility to repay such Swing Line Advance or any participation is payable solely to the Administrative Agent for its own account). 2.23. Limitation of Interest. The Borrower, the Administrative Agent and the Lenders intend to strictly comply with all applicable laws, including applicable usury laws. Accordingly, the provisions of this Section 2.23 shall govern and control over every other provision of this Agreement or any other Loan Document which conflicts or is inconsistent with this Section 2.23, even if such provision declares that it controls. As used in this Section 2.23, the term "interest" includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under applicable law, provided that, to the maximum extent permitted by applicable law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money and not as interest, and (b) all interest at any time contracted for, reserved, charged or received shall be amortized, prorated, allocated and spread, in equal parts during the full term of the Obligations. In no event shall the Borrower or any other Person be obligated to pay, or any Lender have any right or privilege to reserve, receive or retain, (a) any interest in excess of the maximum amount of nonusurious interest permitted under the laws of the State of Texas or the applicable laws (if any) of the United States or of any other applicable state, or (b) total interest in excess of the amount which such Lender could lawfully have contracted for, reserved, received, retained or charged had the interest been calculated for the full term of the Obligations at the Maximum Rate. On each day, if any, that the interest rate (the "Stated Rate") called for under this Agreement or any other Loan Document exceeds the Maximum Rate, the rate at which interest shall accrue shall automatically be fixed by operation of this sentence at the Maximum Rate for that day, and shall remain fixed at the Maximum Rate for each day thereafter until the total amount of interest accrued equals the 28

total amount of interest which would have accrued if there were no such ceiling rate as is imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Maximum Rate when the provisions of the immediately preceding sentence shall again automatically operate to limit the interest accrual rate. The daily interest rates to be used in calculating interest at the Maximum Rate shall be determined by dividing the applicable Maximum Rate per annum by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in this Agreement or in any other Loan Document which directly or indirectly relate to interest shall ever be construed without reference to this Section 2.23, or be construed to create a contract to pay for the use, forbearance or detention of money at an interest rate in excess of the Maximum Rate. If the term of any Obligation is shortened by reason of acceleration of maturity as a result of any Default or by any other cause, or by reason of any required or permitted prepayment, and if for that (or any other) reason any Lender at any time, including but not limited to, the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Maximum Rate, then and in any such event all of any such excess interest shall be canceled automatically as of the date of such acceleration, prepayment or other event which produces the excess, and, if such excess interest has been paid to such Lender, it shall be credited pro tanto against the then-outstanding principal balance of the Borrower's obligations to such Lender, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor. Chapter 346 of the Texas Finance Code (which regulates certain revolving credit accounts (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this Agreement or to any Loan, nor shall this Agreement or any Loan be governed by or be subject to the provisions of such Chapter 346 in any manner whatsoever. ARTICLE III YIELD PROTECTION; TAXES 3.1. Yield Protection. If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation or the LC Issuer with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) subjects any Lender or any applicable Lending Installation or the LC Issuer to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender or the LC Issuer in respect of its Eurodollar Loans, Facility LCs or participations therein, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending 29

Installation or the LC Issuer (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation or the LC Issuer of making, funding or maintaining its Eurodollar Loans, or of issuing or participating in Facility LCs, or reduces any amount receivable by any Lender or any applicable Lending Installation or the LC Issuer in connection with its Eurodollar Loans, Facility LCs or participations therein, or requires any Lender or any applicable Lending Installation or the LC Issuer to make any payment calculated by reference to the amount of Eurodollar Loans, Facility LCs or participations therein held or interest or LC Fees received by it, by an amount deemed material by such Lender or the LC Issuer as the case may be, and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation or the LC Issuer, as the case may be, of making or maintaining its Eurodollar Loans or Commitment or of issuing or participating in Facility LCs or to reduce the return received by such Lender or applicable Lending Installation or the LC Issuer, as the case may be, in connection with such Eurodollar Loans, Commitment, Facility LCs or participations therein, then, within 15 days of demand by such Lender or the LC Issuer, as the case may be, the Borrower shall pay such Lender or the LC Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the LC Issuer, as the case may be, for such increased cost or reduction in amount received. 3.2. Changes in Capital Adequacy Regulations. If a Lender or the LC Issuer determines the amount of capital required or expected to be maintained by such Lender or the LC Issuer, any Lending Installation of such Lender or the LC Issuer, or any corporation controlling such Lender or the LC Issuer is increased as a result of a Change, then, within 15 days of demand by such Lender or the LC Issuer, the Borrower shall pay such Lender or the LC Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender or the LC Issuer determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans and issue or participate in Facility LCs, as the case may be, hereunder (after taking into account such Lender's or the LC Issuer's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines, or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or the LC Issuer or any Lending Installation or any corporation controlling any Lender or the LC Issuer. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 30

3.3. Availability of Types of Advances. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, then the Administrative Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.4. 3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance. 3.5. Taxes. (i) All payments by the Borrower to or for the account of any Lender, the LC Issuer or the Administrative Agent hereunder or under any Note or Facility LC Application shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender, the LC Issuer or the Administrative Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender, the LC Issuer or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Administrative Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (ii) In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or Facility LC Application or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application ("Other Taxes"). (iii) The Borrower hereby agrees to indemnify the Administrative Agent, the LC Issuer and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Administrative Agent, the LC Issuer or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the 31

date the Administrative Agent, the LC Issuer or such Lender makes demand therefor pursuant to Section 3.6. (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not more than ten Business Days after the date of this Agreement, (i) deliver to the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to the Borrower and the Administrative Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to the Borrower and the Administrative Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Administrative Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (v) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv) above, the Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. 32

(vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Administrative Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Administrative Agent, which attorneys may be employees of the Administrative Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement. 3.6. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as such designation is not, in the reasonable judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Administrative Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable within 15 days after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement. ARTICLE IV CONDITIONS PRECEDENT 4.1. Initial Advance. The Lenders shall not be required to make the initial Credit Extension hereunder unless (a) the Borrower has furnished to the Administrative Agent with sufficient copies for the Lenders or (b) the following shall have occurred, as applicable: (i) A counterpart of this Agreement duly executed and delivered by a duly authorized officer of the Borrower and acknowledged by each Guarantor. (ii) A bring down certificate of the Secretary or Assistant Secretary of the Borrower certifying that the articles or certificate of incorporation and the bylaws of the Borrower have not been modified in any respect from the copies previously provided to 33

the Administrative Agent and the Lenders in connection with the Existing Credit Agreement and copies of the Borrower's Board of Directors' resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which the Borrower is a party. (iii) A bring down certificate of the Secretary or assistant Secretary of each Guarantor certifying that the articles or certificate of incorporation and the bylaws of such Guarantor have not been modified in any respect from the copies previously provided to the Administrative Agent and the Lenders in connection with the Existing Credit Agreement and copies of such Guarantor's Board of Directors' resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which such Guarantor is a party. (iv) Copies of certificates of existence and good standing of the Borrower and each Guarantor, each (a) dated not more than 15 days prior to the date hereof and (b) certified by the appropriate governmental officer in its jurisdiction of organization. (v) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of the Borrower authorized to sign the Loan Documents to which the Borrower is a party, upon which certificate the Administrative Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower. (vi) An incumbency certificate, executed by the Secretary or Assistant Secretary of each Guarantor, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of such Guarantor authorized to sign the Loan Documents to which such Guarantor is a party, upon which certificate the Administrative Agent and the Lenders shall be entitled to rely until informed of any change in writing by such Guarantor. (vii) Any Notes requested by a Lender pursuant to Section 2.14 payable to the order of each such requesting Lender. (viii) A Guaranty duly executed by the Guarantors. (ix) Payment of accrued and unpaid interest on the Obligations due and payable to March 25, 2003. (x) A written legal opinion of the Borrower's and the Guarantors' counsel, addressed to the Lenders in form and substance satisfactory to the Administrative Agent. (xi) Written money transfer instructions, in substantially the form of Exhibit D, addressed to the Administrative Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Administrative Agent may have reasonably requested. 34

(xii) A certificate, signed by the chief financial officer of the Borrower, stating that on the initial Borrowing Date no Default or Unmatured Default has occurred and is continuing. (xiii) An insurance certificate in form and substance reasonably satisfactory to the Administrative Agent. (xiv) The Borrower shall have paid to the Administrative Agent, for the account of the Administrative Agent, the Arranger and the Lenders, the fees set forth herein and in any letter agreements, including but not limited to that certain Fee Letter dated February 11, 2003 executed by and among the Borrower, the Lead Arranger and the Administrative Agent. (xv) Such other documents as the Administrative Agent, any Lender or their counsel may have reasonably requested. 4.2. Each Credit Extension. The Lenders shall not be required to make any Credit Extension unless on the applicable Credit Extension Date: (i) There exists no Default or Unmatured Default. (ii) The representations and warranties contained in Article V are true and correct in all material respects as of such Credit Extension Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all material respects on and as of such earlier date. (iii) All legal matters incident to the making of such Credit Extension shall be reasonably satisfactory to the Lenders and their counsel. (iv) If the Credit Extension will be the issuance of a Facility LC, a properly completed Facility LC Application shall have been executed and delivered to the LC Issuer. Each Borrowing Notice or request for issuance of a Facility LC with respect to each such Credit Extension shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit B as a condition to making a Credit Extension. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: 5.1. Existence and Standing. Each of the Borrower and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries only) or limited liability company (in the 35

case of Subsidiaries only) duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization, is duly qualified to transact business and is in good standing in each jurisdiction in which its business is conducted except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. 5.2. Authorization and Validity. The Borrower has the corporate power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by the Borrower of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which the Borrower is a party constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or general principles of equity. 5.3. No Conflict; Government Consent. Neither the execution and delivery by the Borrower of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries other than violations which could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect or (ii) the Borrower's or any Subsidiary's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents except for such orders, consents, adjudications, approvals, licenses, authorizations or validations of, or filings, recordings or registrations with, or exemptions by or other actions the failure to obtain or make could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. 5.4. Financial Statements. The December 31, 2002 consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. 36

5.5. Material Adverse Change. Since December 31, 2002 there has been no change in the business, Property, financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole which could reasonably be expected to have a Material Adverse Effect. 5.6. Taxes. The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles and as to which no Lien exists and except where failure to file or pay could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. With respect to all United States federal tax returns, the latest period for which the Borrower and its Subsidiaries have been examined or for which the applicable statute of limitations has expired is the fiscal year ended March 31, 1999. No tax Liens have been filed and no claims are being asserted with respect to any such taxes which individually or in the aggregate have a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. If any of its Subsidiaries is a limited liability company, each such limited liability company qualifies for partnership tax treatment under United States federal tax law. 5.7. Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could individually or in the aggregate reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Credit Extensions. Other than any liabilities which could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8. Subsidiaries. Schedule 2 contains an accurate list of all Subsidiaries of the Borrower as of the date of this Agreement, setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable. 5.9. ERISA. Neither the Borrower nor any other member of the Controlled Group has incurred in the aggregate Unfunded Liabilities of all Single Employer Plans in an amount that could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in the aggregate in an amount that could reasonably be expected to have a Material Adverse Effect. Each Plan complies in all material respects with all applicable requirements of law and regulations, and no Reportable Event has occurred with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. 37

5.10. Accuracy of Information. No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Administrative Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any misstatement of material fact or omitted to state a material fact necessary to make the statements contained therein not misleading. 5.11. Regulation U. Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. 5.12. Material Agreements. The Borrower is not a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness which aggregates in excess of $2,500,000. 5.13. Compliance With Laws. The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect. 5.14. Ownership of Properties. Except as set forth on Schedule 3, on the date of this Agreement, the Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.12, to all of the Property and assets reflected in the Borrower's most recent consolidated financial statements provided to the Administrative Agent as owned by the Borrower and its Subsidiaries. 5.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. Section 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Credit Extensions hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 5.16. Environmental Matters. In the ordinary course of its business, the officers of the Borrower consider the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Borrower due to Environmental Laws. On the basis of this consideration, the Borrower has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or 38

substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.17. Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.18. Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 5.19. Subordinated Indebtedness. The Obligations constitute senior indebtedness which is entitled to the benefits of the subordination provisions of all outstanding Subordinated Indebtedness. 5.20. Post-Retirement Benefits. The present value of the expected cost of post-retirement medical and insurance benefits payable by the Borrower and its Subsidiaries to its employees and former employees, as estimated by the Borrower in accordance with procedures and assumptions reasonably acceptable to the Required Lenders, does not exceed $2,500,000. 5.21. Solvency. (i) Immediately after the consummation of the transactions to occur on the date hereof and immediately following the making of each Credit Extension, if any, made on the date hereof and after giving effect to the application of the proceeds of such Credit Extension, (a) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (b) the present fair saleable value of the Property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted after the date hereof. (ii) The Borrower does not intend to, or to permit any of its Subsidiaries to, and does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary. 39

ARTICLE VI COVENANTS During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with Agreement Accounting Principles, and furnish to the Lenders: (i) Within 120 days after the close of each of its fiscal years, an unqualified audit report certified by independent certified public accountants acceptable to the Lenders, prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and its Subsidiaries, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by any management letter prepared by said accountants. (ii) Within 60 days after the close of each of the quarterly periods of each of its fiscal years (other than the last quarterly period of each fiscal year), for itself and its Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer. (iii) As soon as available, but in any event within 15 days before the beginning of each fiscal year of the Borrower, a copy of the plan and forecast (including a projected consolidated balance sheet, income statement and funds flow statement) of the Borrower for the forthcoming fiscal year. (iv) Together with the financial statements required under Sections 6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit B signed by its chief financial officer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof. (v) Within 270 days after the close of each fiscal year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as correct by an actuary enrolled under ERISA. (vi) As soon as possible and in any event within 10 days after the Borrower knows that any Reportable Event that could reasonably be expected to have a Material Adverse Effect has occurred with respect to any Plan, a statement, signed by the chief financial officer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto. 40

(vii) As soon as possible and in any event within 10 days after receipt by the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect. (viii) Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished. (ix) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission. (x) Such other information (including non-financial information) as the Administrative Agent or any Lender may from time to time reasonably request. 6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Credit Extensions for general corporate purposes, and to refinance existing indebtedness of the Borrower and its Subsidiaries. The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Advances for a purpose which violates any applicable law, including the provisions of Regulation U. 6.3. Notice of Default. The Borrower will, and will cause each Subsidiary to, give prompt notice (which notice shall in any event be given within three Business Days) in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect. 6.4. Taxes. The Borrower will, and will cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except (i) those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles or (ii) where failure to file or pay could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. At any time that any Subsidiary of the Borrower is organized as a limited liability company, each such limited liability company will qualify for partnership tax treatment under United States federal tax law. 6.5. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried. 41

6.6. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws other than such noncompliance which could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. 6.7. Maintenance of Properties. The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times except where such failure could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. 6.8. Books and Records. The Borrower will, and will cause each Subsidiary to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities to the extent necessary to permit financial statements to be prepared in conformity with Agreement Accounting Principles and in all material respects with all requirements of law. 6.9. Inspection. The Borrower will, and will cause each Subsidiary to, permit the Administrative Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Administrative Agent or any Lender may designate. 6.10. Merger. The Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that when no Default exists or will result therefrom, (i) a Subsidiary may merge into the Borrower or a Subsidiary (subject to compliance with Section 6.19), (ii) in connection with Acquisitions the Borrower and its Subsidiaries may enter into other mergers or consolidations as long as (a) the Borrower is the survivor of such merger or consolidation or if the Borrower is not a party thereto then a Subsidiary is the survivor, and (b) the Borrower is in compliance with Section 6.23 and (iii) the Borrower may merge Subsidiaries with or into any other Person in connection with dispositions of Property permitted pursuant to Section 6.11(ii). 6.11. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except: (i) Sales of inventory in the ordinary course of business. (ii) Leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than inventory in the ordinary course of business) as permitted by this Section during the twelve-month period ending with the month in which any such lease, sale or 42

other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and its Subsidiaries. (iii) Any transfer of an interest in accounts or notes receivable on a limited recourse basis, provided that the amount of any related financing does not exceed $100,000,000.00 at any one time outstanding. 6.12. Liens. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. (ii) Liens imposed by law, such as carriers', landlords', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books. (iii) Liens arising out of pledges or deposits (a) under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation or (b) made in the ordinary course of business to secure the performance of bids, tenders, insurance or other contracts (other than for the repayment of borrowed money) or to secure statutory obligations, surety or appeal bonds or indemnity, performance or other similar bonds so long as such amounts secured by Liens described in this clause (b) shall not exceed at any time an aggregate amount equal to $5,000,000. (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries. (v) Liens existing on the date hereof and described in Schedule 3. (vi) Liens incurred in connection with any transfer of an interest in accounts or notes receivable which is permitted pursuant to Section 6.11(iii), and which Liens attach solely to the trade receivables sold or transferred (or proceeds thereof). (vii) Liens securing Indebtedness which attach solely to the assets purchased with the proceeds of such Indebtedness. 43

6.13. Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except (i) in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction, (ii) transactions among the Borrower and its Subsidiaries and (iii) immaterial transactions existing as of the date hereof. 6.14. Sale and Leaseback Transactions and other Off-Balance Sheet Liabilities. The Borrower will not, nor will it permit any Subsidiary to, enter into or suffer to exist any (i) Sale and Leaseback Transaction or (ii) any other transaction pursuant to which it incurs or has incurred Off-Balance Sheet Liabilities, except for Rate Management Obligations having a Net Mark-to-Market Exposure not exceeding $15,000,000 or a transaction permitted under Section 6.11(iii). 6.15. Letters of Credit. The Borrower will not, nor will it permit any Subsidiary to, apply for or become liable upon or in respect of any Letter of Credit other than Facility LCs. 6.16. Financial Covenants. 6.16.1. Interest Coverage Ratio. Beginning with the fiscal quarter ending March 31, 2003, the Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters for the then most-recently ended four fiscal quarters, of (i) Consolidated EBIT to (ii) Consolidated Interest Expense to be less than 2.50 to 1.00. 6.16.2. Leverage Ratio. Beginning with the fiscal quarter ending on March 31, 2003, the Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters, of (i) Consolidated Indebtedness to (ii) Consolidated EBITDA for the then most-recently ended four fiscal quarters to be greater than 3.00 to 1.00. 6.16.3. Minimum Tangible Net Worth. As of December 31, 2002, the Borrower will at all times maintain Consolidated Tangible Net Worth of not less than 85% of $430,044,000 and for the last day of each fiscal quarter thereafter, not less than the sum of (i) the minimum Consolidated Tangible Net Worth required for the prior fiscal quarter, plus (ii) 50% of the Consolidated Net Income (not less than $0.00) for the fiscal quarter then ended, plus (iii) 50% of the Net Cash Proceeds of any equity issuances (excluding issuances pursuant to stock options or other stock-based benefit awards to directors, officers or employees of the Borrower, its Subsidiaries or its Affiliates and issuances solely to finance Acquisitions) by the Borrower or any Subsidiary for the fiscal quarter then ended. 6.17. Lines of Business. The Borrower will not, nor will it permit any Subsidiary to, engage in any line or lines of business activity other than the businesses in which they are engaged on the date hereof or lines of business complementary or reasonably related to the construction products or building materials industry. 44

6.18. Prepayment of Debt. When a Default has occurred and is continuing or will result therefrom, the Borrower will not, and will not permit any Subsidiary to, prepay any Indebtedness, except the Obligations. 6.19. Future Subsidiaries. The Borrower shall cause each Person that becomes a Significant Subsidiary after the date of the initial Credit Extension to promptly execute such documents, instruments, and agreements as the Administrative Agent deems necessary or appropriate, in form and substance satisfactory to the Administrative Agent, to cause such Subsidiary to become a guarantor of the Obligations on a basis substantially the same as the existing Guarantors. 6.20. Prohibition on Granting Negative Pledges. Except for this Agreement and Liens permitted by Section 6.12 to the extent such Liens encumber only the assets so financed, the Borrower will not and will not permit any Subsidiary to enter into or become bound by any agreement, understanding or arrangement (other than this Agreement) that limits, restricts or impairs in any way the right of any of such Person to create, assume or suffer to exist any Lien on any of such Person's Properties or assets in favor of the Administrative Agent (or any successor Administrative Agent) for the benefit of the Lenders. 6.21. Prohibition on Granting Restrictions on Distributions. Except for restrictions imposed by applicable law, the Borrower will not enter into or become bound by any agreement, arrangement or understanding or permit its Subsidiaries to do so (including, without limitation, their respective articles of incorporation, bylaws or other charter documents) that limits, restricts, subordinates or impairs in any way the right or ability of any of the Subsidiaries to make dividends or distributions to or investments in the Borrower or to repay any Indebtedness or obligation owed to the Borrower. 6.22. Prohibition on Synthetic Leases. Borrower will not at any time become or be obligated as lessee or borrower under any Synthetic Lease nor will it permit any Subsidiary to do so. 6.23. Acquisitions. For each proposed Acquisition with a total purchase price greater than $25,000,000 (including cash consideration paid however classified, assumed indebtedness, noncompete payments and consulting payments whether such amounts are paid at closing or over time, and the dollar value of all assets to be transferred by the purchaser to the seller in connection with such Acquisition), Borrower will (i) complete not less than customary due diligence on the acquisition target and, if requested by the Administrative Agent, provide reasonable evidence thereof to the Administrative Agent, including without limitation due diligence as to compliance with all Environmental Laws and (ii) provide the Administrative Agent and each Lender copies of the financial statements (which to the extent available, shall be audited financial statements) of the acquisition target for the most recent twelve (12) month period prior to the closing of the Acquisition and the interim financial statements of the acquisition target, each containing at a minimum a balance sheet, statement of income, and a statement of cash flow. 45

ARTICLE VII DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Administrative Agent under or in connection with this Agreement, any Credit Extension, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made. 7.2. Nonpayment of principal of any Loan when due, nonpayment of any Reimbursement Obligation within one Business Day after the same becomes due, or nonpayment of interest upon any Loan or of any commitment fee, LC Fee or other obligations under any of the Loan Documents within five days after the same becomes due. 7.3. The breach by the Borrower of any of the terms or provisions of Section 6.1, 6.2, 6.10, 6.11, 6.12, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.20, 6.21 or 6.22. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement which is not remedied within 15 days after written notice from the Administrative Agent or any Lender. 7.5. Failure of the Borrower or any of its Subsidiaries to pay when due (beyond the applicable grace period with respect thereto, if any) any Indebtedness aggregating in excess of $2,500,000 ("Material Indebtedness"); or the default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any agreement under which any such Material Indebtedness was created or is governed, or any other event shall occur or condition exist, the effect of which default or event is to cause, or to permit the holder or holders of such Material Indebtedness to cause, such Material Indebtedness to become due prior to its stated maturity; or any Material Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material 46

allegations of any such proceeding filed against it, (v) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) consecutive days. 7.8. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Borrower or any Subsidiary which, when taken together with all other Property of the Borrower or such Subsidiary so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such action occurs, constitutes a Substantial Portion. 7.9. The Borrower or any of its Subsidiaries shall fail within 60 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of $2,500,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith. 7.10. The Borrower or any member of the Controlled Group has incurred in the aggregate Unfunded Liabilities of all Single Employer Plans by an amount which could reasonably be expected to have a Material Adverse Effect or any Reportable Event shall occur in connection with any Plan which could reasonably be expected to have a Material Adverse Effect. 7.11. The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrower or any other member of the Controlled Group as withdrawal liability (determined as of the date of such notification), could reasonably be expected to have a Material Adverse Effect. 7.12. The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and the other members of the Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years of each such Multiemployer Plan immediately preceding the plan year in which the reorganization or termination occurs by an amount which could reasonably be expected to have a Material Adverse Effect. 47

7.13. The Borrower or any of its Subsidiaries shall (i) be the subject of any proceeding or investigation pertaining to the release by the Borrower, any of its Subsidiaries or any other Person of any toxic or hazardous waste or substance into the environment, or (ii) violate any Environmental Law, which, in the case of an event described in clause (i) or clause (ii), could reasonably be expected to have a Material Adverse Effect. 7.14. Any Change in Control shall occur. 7.15. Any Guaranty shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Guaranty, or any Guarantor shall fail to comply with any of the terms or provisions of any Guaranty to which it is a party, or any Guarantor shall deny that it has any further liability under any Guaranty to which it is a party, or shall give notice to such effect. 7.16. The representations and warranties set forth in Section 5.15 ("Plan Assets; Prohibited Transactions") shall at any time not be true and correct. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 8.1. Acceleration; Facility LC Collateral Account. (i) If any Default described in Section 7.6 or 7.7 occurs, the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Facility LCs shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Administrative Agent, the LC Issuer or any Lender and the Borrower will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay to the Administrative Agent an amount in immediately available funds, which funds shall be held in the Facility LC Collateral Account, equal to the difference of (x) the amount of LC Obligations at such time, less (y) the amount on deposit in the Facility LC Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations (such difference, the "Collateral Shortfall Amount"). If any other Default occurs, the Required Lenders (or the Administrative Agent with the consent of the Required Lenders) may (a) terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Facility LCs, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives, and (b) upon notice to the Borrower and in addition to the continuing right to demand payment of all amounts payable under this Agreement, make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. 48

(ii) If at any time while any Default is continuing, the Administrative Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Administrative Agent may make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. (iii) The Administrative Agent may at any time or from time to time after funds are deposited in the Facility LC Collateral Account, apply such funds to the payment of the Obligations and any other amounts as shall from time to time have become due and payable by the Borrower to the Lenders or the LC Issuer under the Loan Documents. (iv) At any time while any Default is continuing, neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the Facility LC Collateral Account. After all of the Obligations have been indefeasibly paid in full and the Aggregate Commitment has been terminated, any funds remaining in the Facility LC Collateral Account shall be returned by the Administrative Agent to the Borrower or paid to whomever may be legally entitled thereto at such time. (v) If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans and the obligation and power of the LC Issuer to issue Facility LCs hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Administrative Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. 8.2. Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Administrative Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of the Super Majority Lenders amend, modify, or delete the definition of Change of Control in Article I or amend, modify, waive or delete Section 7.14, provided, further, however, that no such supplemental agreement shall, without the consent of all of the Lenders: (i) Extend the final maturity of any Loan, or extend the expiry date of any Facility LC to a date after the Facility Termination Date or postpone any regularly scheduled payment of principal of any Loan or forgive all or any portion of the principal amount thereof or any Reimbursement Obligation related thereto, or reduce the rate or the unused fee due under Section 2.5 or extend the time of payment of interest or fees thereon or Reimbursement Obligations related thereto. (ii) Reduce the percentage specified in the definition of Required Lenders. 49

(iii) Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Section 2.2, or increase the amount of the Aggregate Commitment (except such increase in the Aggregate Commitment pursuant to Section 2.6, whereby only the consent of the Purchaser(s) and the Increasing Lender(s) shall be necessary), the Commitment of any Lender hereunder (except pursuant to Section 2.6) or the commitment to issue Facility LCs, or permit the Borrower to assign its rights under this Agreement. (iv) Amend this Section 8.2. (v) Release any Guarantor except where the sale of all or substantially all of the assets or equity interests in a Guarantor is otherwise permitted hereunder, in which event the Administrative Agent shall execute and deliver to Borrower such release upon such sale. No amendment of any provision of this Agreement relating to the Administrative Agent shall be effective without the written consent of the Administrative Agent, and no amendment of any provision relating to the LC Issuer shall be effective without the written consent of the LC Issuer. The Administrative Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. 8.3. Preservation of Rights. No delay or omission of the Lenders, the LC Issuer or the Administrative Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Credit Extension notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Credit Extension shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Administrative Agent, the LC Issuer and the Lenders until the Obligations have been paid in full. ARTICLE IX GENERAL PROVISIONS 9.1. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement shall survive the making of the Credit Extensions herein contemplated. 9.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, neither the LC Issuer nor any Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 50

9.3. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.4. ENTIRE AGREEMENT. THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE BORROWER, THE ADMINISTRATIVE AGENT, THE LC ISSUER AND THE LENDERS AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS AMONG THE BORROWER, THE ADMINISTRATIVE AGENT, THE LC ISSUER AND THE LENDERS RELATING TO THE SUBJECT MATTER THEREOF OTHER THAN THE FEE LETTER DESCRIBED IN SECTION 10.13. THE LOAN DOCUMENTS MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. 9.5. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Administrative Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement. 9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the Administrative Agent, and the Arranger for any costs, internal charges for fees and time charges of attorneys who are employees of the Administrative Agent and the Arranger and all reasonable out-of-pocket expenses (including attorneys' fees) paid or incurred by the Administrative Agent, or the Arranger in connection with the preparation, negotiation, execution, delivery, syndication, distribution (including, without limitation, via the internet), review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Administrative Agent, the Arranger, LC Issuer and the Lenders for any costs, internal charges for fees and time charges of attorneys who are employees of the Administrative Agent, the Arranger, the LC Issuer, and the Lenders and out-of-pocket expenses (including attorneys' fees) paid or incurred by the Administrative Agent, the Arranger, LC Issuer or any Lender in connection with the collection and enforcement of the Loan Documents. Expenses being reimbursed by the Borrower under this Section include, without limitation costs and expenses incurred in connection with the Reports described in the following sentence. The Borrower acknowledges that from time to time Bank One may prepare and may distribute to the Lenders (but shall have no obligation or duty to prepare or to distribute to the Lenders) certain audit reports (the "Reports") pertaining to the Borrower's assets for internal use by Bank One from information 51

furnished to it by or on behalf of the Borrower, after Bank One has exercised its rights of inspection pursuant to this Agreement. (ii) THE BORROWER HEREBY FURTHER AGREES TO INDEMNIFY THE ADMINISTRATIVE AGENT, THE ARRANGER, LC ISSUER, EACH LENDER, THEIR RESPECTIVE AFFILIATES, AND EACH OF THEIR DIRECTORS, OFFICERS AND EMPLOYEES AGAINST ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL EXPENSES OF LITIGATION OR PREPARATION THEREFOR WHETHER OR NOT THE ADMINISTRATIVE AGENT, THE ARRANGER, LC ISSUER, ANY LENDER OR ANY AFFILIATE IS A PARTY THERETO) WHICH ANY OF THEM MAY PAY OR INCUR ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE DIRECT OR INDIRECT APPLICATION OR PROPOSED APPLICATION OF THE PROCEEDS OF ANY CREDIT EXTENSION HEREUNDER EXCEPT TO THE EXTENT THAT THEY ARE DETERMINED IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM THE GROSS NEGLIGENCE, BAD FAITH OR WILLFUL MISCONDUCT OF THE PARTY SEEKING INDEMNIFICATION; PROVIDED HOWEVER, THAT IN NO EVENT SHALL THE BORROWER BE LIABLE UNDER THIS SECTION 9.6 FOR ANY LOST PROFITS OR FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES. THE OBLIGATIONS OF THE BORROWER UNDER THIS SECTION 9.6 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT. 9.7. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Administrative Agent with sufficient counterparts so that the Administrative Agent may furnish one to each of the Lenders. 9.8. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. 9.9. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.10. Nonliability of Lenders. The relationship between the Borrower on the one hand and the Lenders, the LC Issuer and the Administrative Agent on the other hand shall be solely that of borrower and lender. Neither the Administrative Agent, the Arranger, the LC Issuer nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Administrative Agent, the Arranger, the LC Issuer nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. The Borrower agrees that neither the Administrative Agent, the Arranger, the LC Issuer nor any Lender shall have liability to the Borrower (whether sounding in 52

tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence, bad faith or willful misconduct of the party from which recovery is sought. Neither the Administrative Agent, the Arranger, the LC Issuer nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect or consequential damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. 9.11. Confidentiality. Each Lender agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Lenders and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, (vii) permitted by Section 12.4, and (viii) to rating agencies if required by such agencies in connection with a rating relating to the Advances hereunder. 9.12. Nonreliance. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) for the repayment of the Credit Extensions provided for herein. 9.13. Disclosure. The Borrower and each Lender hereby acknowledge and agree that Bank One and/or its Affiliates from time to time may hold investments in, make other loans to, or have other relationships with the Borrower and its Affiliates. 9.14. Survival of Prior Agreements. The rights and privileges (excluding the confidentiality and indemnification provisions which are being restated pursuant to this Agreement) afforded the Administrative Agent and the Arranger in that certain commitment letter and that certain fee letter, each dated February 11, 2003 among such Persons and Borrower, shall survive the execution and delivery of this Agreement, and the Administrative Agent and the Arranger shall continue to be entitled to the benefits thereof. ARTICLE X THE ADMINISTRATIVE AGENT 10.1. Appointment; Nature of Relationship. Bank One, NA, is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the "Administrative Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Administrative Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Administrative Agent agrees to act as such contractual representative upon the express 53

conditions contained in this Article X. Notwithstanding the use of the defined term "Administrative Agent," it is expressly understood and agreed that the Administrative Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Administrative Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Administrative Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of "secured party" as defined in Section 9-102 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives. 10.2. Powers. The Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Administrative Agent. 10.3. General Immunity. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence, bad faith or willful misconduct of such Person. 10.4. No Responsibility for Credit Extensions, Recitals, etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Administrative Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrower's or any such guarantor's respective Subsidiaries. The Administrative Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Administrative Agent at such time, but is voluntarily furnished by the Borrower to the Administrative Agent (either in its capacity as Administrative Agent or in its individual capacity). 54

10.5. Action on Instructions of Lenders. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders or all Lenders, as the case may be, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Administrative Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6. Employment of Administrative Agents and Counsel. The Administrative Agent may execute any of its duties as Administrative Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Administrative Agent and the Lenders and all matters pertaining to the Administrative Agent's duties hereunder and under any other Loan Document. 10.7. Reliance on Documents; Counsel. The Administrative Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Administrative Agent, which counsel may be employees of the Administrative Agent. 10.8. Administrative Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Administrative Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to their Commitments immediately prior to such termination) (i) for any amounts not reimbursed by the Borrower for which the Administrative Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Administrative Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Administrative Agent in connection with any dispute between the Administrative Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Administrative Agent in connection with any dispute between the Administrative Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct 55

of the Administrative Agent and (ii) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. 10.9. Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Administrative Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. 10.10. Rights as a Lender. In the event the Administrative Agent is a Lender, the Administrative Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Credit Extensions as any Lender and may exercise the same as though it were not the Administrative Agent, and the term "Lender" or "Lenders" shall, at any time when the Administrative Agent is a Lender, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. 10.11. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, the Arranger 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 this Agreement and the other Loan Documents. 10.12. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Administrative Agent or, if no successor Administrative Agent has been appointed, 45 days after the retiring Administrative Agent gives notice of its intention to resign. The Administrative Agent may be removed at any time with or without cause by written notice received by the Administrative Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders within 30 days after the resigning Administrative Agent's giving notice of its intention to resign, then the resigning Administrative Agent may appoint, on behalf of the Borrower and the Lenders, a successor Administrative Agent. Notwithstanding the previous sentence, the Administrative Agent may at any time 56

without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Administrative Agent hereunder. If the Administrative Agent has resigned or been removed and no successor Administrative Agent has been appointed, the Lenders may perform all the duties of the Administrative Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Administrative Agent shall be deemed to be appointed hereunder until such successor Administrative Agent has accepted the appointment. Any such successor Administrative Agent shall be a commercial bank having capital and retained earnings of at least $1,000,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Administrative Agent. Upon the effectiveness of the resignation or removal of the Administrative Agent, the resigning or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Administrative Agent, the provisions of this Article X shall continue in effect for the benefit of such Administrative Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Administrative Agent by merger, or the Administrative Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term "Prime Rate" as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Administrative Agent. 10.13. Administrative Agent and Arranger Fees. The Borrower agrees to pay to the Administrative Agent and the Arranger, for their respective accounts, the fees agreed to by the Borrower, the Administrative Agent and the Arranger pursuant to that certain letter agreement dated February 11, 2003, or as otherwise agreed from time to time. 10.14. Delegation to Affiliates. The Borrower and the Lenders agree that the Administrative Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Administrative Agent is entitled under Articles IX and X. 10.15. Co-Agents, Syndication Agent, etc. Neither any of the Lenders identified in this Agreement as a "co-agent" nor the Syndication Agent 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 such Lenders shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to such Lenders as it makes with respect to the Administrative Agent in Section 10.11. 57

ARTICLE XI SETOFF; RATABLE PAYMENTS 11.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due. 11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Outstanding Credit Exposure (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held by the other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their respective Pro Rata Share of the Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns permitted hereby, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each Lender, (ii) any assignment by any Lender must be made in compliance with Section 12.3, and (iii) any transfer by Participation must be made in compliance with Section 12.2. Any attempted assignment or transfer by any party not made in compliance with this Section 12.1 shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with Section 12.3.2. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and this Section 12.1 does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a Fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Administrative Agent may treat the Person which made any Credit Extension or which holds any 58

Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Administrative Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Credit Extension or which holds any Note to direct payments relating to such Credit Extension or Note to another Person. Any assignee of the rights to any Credit Extension or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Credit Extension (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Credit Extension. 12.2. Participations. 12.2.1. Permitted Participants; Effect. Any Lender may at any time sell to one or more banks or other entities ("Participants") participating interests in any Credit Extension owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Outstanding Credit Exposure and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Credit Extension or Commitment in which such Participant has an interest which forgives principal, interest, fees or any Reimbursement Obligation or reduces the interest rate or fees payable with respect to any such Credit Extension or Commitment, extends the Facility Termination Date, postpones any date fixed for any regularly-scheduled payment of principal of or interest on any Credit Extension in which such Participant has an interest, or any regularly-scheduled payment of fees on any such Credit Extension or Commitment, releases any guarantor of any such Credit Extension (except as otherwise permitted by Section 8.2(v)) or releases any collateral held in the Facility LC Collateral Account (except in accordance with the terms hereof) or all or substantially all of any other collateral, if any, securing any such Credit Extension. 12.2.3. Benefit of Setoff. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. 59

The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. The Borrower further agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4 and 3.5 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.3, provided that (i) a Participant shall not be entitled to receive (and the Borrower shall not be obligated to pay) any greater payment under Section 3.1, 3.2 or 3.5 than the Lender (or the amount that would be payable to the Lender) who sold the participating interest to such Participant would have received had it retained such interest for its own account, and (ii) any Participant not incorporated under the laws of the United States of America or any State thereof agrees to comply with the provisions of Section 3.5 to the same extent as if it were a Lender. 12.3. Assignments. 12.3.1. Permitted Assignments. Any Lender may, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents; provided however, if such assignments are of Eurodollar Loans prior to the last day of the Interest Period applicable thereto, the Borrower will not be required to pay the breakage fees, if any, associated with such assignment. Such assignment shall be substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto. The consent of the Borrower, the Administrative Agent and the LC Issuer shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof; provided, however, that if a Default has occurred and is continuing, the consent of the Borrower shall not be required. Such consent from any of the Borrower, the Administrative Agent and the LC Issuer shall not be unreasonably withheld or delayed. Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate thereof shall (unless each of the Borrower and the Administrative Agent otherwise consents) be in an amount not less than the lesser of (i) $5,000,000 or (ii) the remaining amount of the assigning Lender's Commitment (calculated as at the date of such assignment) or outstanding Credit Extensions (if the applicable Commitment has been terminated). 12.3.2. Effect; Effective Date. Upon (i) delivery to the Administrative Agent of a notice of assignment, substantially in the form attached as Exhibit I to Exhibit C (a "Notice of Assignment"), together with any consents required by Section 12.3.1, and (ii) payment of a $4,000 fee to the Administrative Agent for processing such assignment (unless such fee is waived by the Administrative Agent), such assignment shall become effective on the effective date specified in such Notice of Assignment. The Notice of Assignment shall contain a representation by the Purchaser to the Administrative Agent and the Borrower to the effect that none of the consideration used to make the purchase of the Commitment and Outstanding Credit Exposure under the applicable assignment agreement are "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on 60

behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Lenders or the Administrative Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment and Outstanding Credit Exposure assigned to such Purchaser. In the case of an assignment covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and subject to, those provisions of this Agreement and the other Loan Documents which survive payment of the Obligations and termination of the applicable agreement. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.3 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 12.2. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Administrative Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. 12.3.3. Consents. The consent of the Borrower shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund, provided that the consent of the Borrower shall not be required if a Default has occurred and is continuing. The consent of the Administrative Agent and LC Issuer shall be required prior to an assignment becoming effective unless the Purchaser is a Lender with a Revolving Commitment (in the case of an assignment of a Revolving Commitment) or is an Affiliate of a Lender or an Approved Fund. Any consent required under this Section 12.3.3 shall not be unreasonably withheld or delayed. 12.3.4. Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in Chicago, Illinois a copy of each 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 of the Loans 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 Administrative Agent and the Lenders may 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 Lender, at any reasonable time and from time to time upon reasonable prior notice. 12.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries, 61

including without limitation any information contained in any Reports; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement. 12.5. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(iv). ARTICLE XIII NOTICES 13.1. Notices. Except as otherwise permitted by Section 2.15 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Lender, at its address or facsimile number set forth below its signature hereto, or (z) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Administrative Agent under Article II shall not be effective until received. 13.2. Change of Address. The Borrower, the Administrative Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XIV COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrower, the Administrative Agent, the LC Issuer and the Lenders and each party has notified the Administrative Agent by facsimile transmission or telephone that it has taken such action. 62

ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL 15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR TEXAS STATE COURT SITTING IN DALLAS, TEXAS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT, THE LC ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE ADMINISTRATIVE AGENT, THE LC ISSUER OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT, THE LC ISSUER OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN DALLAS, TEXAS. 15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT, THE LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 15.4. Effect of Amendment and Restatement. (a) This Agreement is an amendment and restatement of the terms and provisions of the Existing Credit Agreement. The indebtedness of the Borrower outstanding under the Existing Credit Agreement and the Notes outstanding thereunder immediately prior to the effectiveness hereof ("Restatement Effective Time") is called the "Existing Indebtedness". Neither the execution and delivery of this Agreement by the Borrower or any Lender, nor any of the terms or provisions contained herein, shall be construed to be a payment on or with respect to the Existing Indebtedness or any accrued interest thereon. Without limiting the foregoing, the Borrower and each of its 63

Subsidiaries hereby ratifies and confirms each Loan Document to which such Person is a party including without limitation the Guaranty. (b) Notwithstanding any provision of this Agreement to the contrary, all Eurodollar Advances which are outstanding at the Restatement Effective Time (each an "Existing Eurodollar Borrowing") shall continue to be maintained by the Lenders until the last day of the current Interest Period therefor (except to the extent prepaid or converted by the Borrower prior to such date). [Remainder of Page Intentionally Left Blank] 64

IN WITNESS WHEREOF, the Borrower, the Lenders, the LC Issuer and the Administrative Agent have executed this Agreement as of the date first above written. CENTEX CONSTRUCTION PRODUCTS, INC., as Borrower By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: 2728 N. Harwood Dallas, Texas 75201 Attention: Arthur R. Zunker, Jr. Chief Financial Officer Telephone: (214) 981-6510 FAX: (214) 981-6559 Signature Page to Second Amended and Restated Credit Agreement

BANK ONE, NA, Individually, as Administrative Agent, LC Issuer and as a Lender By: _____________________________________ William J. Bowne Managing Director Address: 1 Bank One Plaza Mail Suite IL1-0323 Chicago, IL 60670-0323 Attention: William J. Bowne Telephone: (312) 732-1045 FAX: (312) 732-7655 Signature Page to Second Amended and Restated Credit Agreement

PNC BANK, NATIONAL ASSOCIATION, Individually, as Syndication Agent and as a Lender By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: ______________________________ ______________________________ Attention: ______________________________ Telephone: ______________________________ FAX: ______________________________ Signature Page to Second Amended and Restated Credit Agreement

BANK OF AMERICA, N.A., as a Lender By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: ______________________________ ______________________________ Attention: ______________________________ Telephone: ______________________________ FAX: ______________________________ Signature Page to Second Amended and Restated Credit Agreement

JPMORGAN CHASE BANK, as a Lender By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: ______________________________ ______________________________ Attention: ______________________________ Telephone: ______________________________ FAX: ______________________________ Signature Page to Second Amended and Restated Credit Agreement

BANK OF TEXAS, N.A., as a Lender By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: ______________________________ ______________________________ Attention: ______________________________ Telephone: ______________________________ FAX: ______________________________ Signature Page to Second Amended and Restated Credit Agreement

BNP PARIBAS, as a Lender By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: ______________________________ ______________________________ Attention: ______________________________ Telephone: ______________________________ FAX: ______________________________ Signature Page to Second Amended and Restated Credit Agreement

COMERICA BANK, as a Lender By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: ______________________________ ______________________________ Attention: ______________________________ Telephone: ______________________________ FAX: ______________________________ Signature Page to Second Amended and Restated Credit Agreement

SUNTRUST BANK, as a Lender By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: ______________________________ ______________________________ Attention: ______________________________ Telephone: ______________________________ FAX: ______________________________ Signature Page to Second Amended and Restated Credit Agreement

THE NORTHERN TRUST COMPANY, as a Lender By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: ______________________________ ______________________________ Attention: ______________________________ Telephone: ______________________________ FAX: ______________________________ Signature Page to Second Amended and Restated Credit Agreement

Each Guarantor hereby consents and agrees to this Agreement and agrees that the Guaranty shall remain in full force and effect and shall continue to (i) guarantee the Guaranteed Obligations (as defined in the Guaranty) and (ii) be the legal, valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance with its terms. GUARANTORS: REPUBLIC PAPERBOARD COMPANY LLC HOLLIS & EASTERN RAILROAD COMPANY LLC AMERICAN GYPSUM COMPANY AMERICAN GYPSUM MARKETING COMPANY CCP CEMENT COMPANY CCP CONCRETE/AGGREGATES COMPANY CCP GYPSUM COMPANY CENTEX MATERIALS GP LTD, LLC MATHEWS READYMIX, INC. MOUNTAIN CEMENT COMPANY NEVADA CEMENT COMPANY TLCC GP LLC TEXAS CEMENT COMPANY WESTERN AGGREGATES, INC. By: _____________________________________ Arthur R. Zunker, Jr. Senior Vice President - Finance and Treasurer Signature Page to Second Amended and Restated Credit Agreement

CENTEX MATERIALS, LP By: CENTEX MATERIALS GP LTD, LLC, as its general partner By: _________________________________ Arthur R. Zunker, Jr. Senior Vice President - Finance and Treasurer CENTEX MATERIALS LP LTD, LLC By: __________________________________ Name: __________________________________ Title: __________________________________ TLCC LP LLC By: __________________________________ Name: __________________________________ Title: __________________________________ Signature Page to Second Amended and Restated Credit Agreement

EXHIBIT A Pricing Schedule - ----------------------------------------------------------------------------------------- APPLICABLE APPLICABLE APPLICABLE MARGIN FOR MARGIN FOR FEE RATE FOR STATUS EURODOLLAR RATE FLOATING RATE COMMITMENT FEE - ----------------------------------------------------------------------------------------- Level I Status 1.00% 0.00% 0.30% - ----------------------------------------------------------------------------------------- Level II Status 1.25% 0.25% 0.35% - ----------------------------------------------------------------------------------------- Level III Status 1.50% 0.50% 0.40% - ----------------------------------------------------------------------------------------- Level IV Status 1.75% 0.75% 0.40% - ----------------------------------------------------------------------------------------- Level V Status 2.00% 1.00% 0.40% - ----------------------------------------------------------------------------------------- For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule: "Financials" means the annual or quarterly financial statements of the Borrower delivered pursuant to Section 6.1(i) or (ii). "Level I Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, the Leverage Ratio is less than 1.00 to 1.00. "Level II Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status and (ii) the Leverage Ratio is greater than or equal to 1.00 to 1.00 but less than 1.50 to 1.00. "Level III Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status or Level II Status and (ii) the Leverage Ratio is greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00. "Level IV Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status, Level II Status, or Level III Status and (ii) the Leverage Ratio is greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00. "Level V Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status, Level II Status, Level III Status, or Level IV Status and (ii) the Leverage Ratio is greater than or equal to 2.50 to 1.00.

"Status" means either Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status. The Applicable Margin and Applicable Fee Rate shall be determined in accordance with the foregoing table based on the Borrower's Status as reflected in the then most recent Financials. Adjustments, if any, to the Applicable Margin or Applicable Fee Rate shall be effective five Business Days after the Administrative Agent has received the applicable Financials. If the Borrower fails to deliver the Financials to the Administrative Agent at the time required pursuant to Section 6.1, then the Applicable Margin and Applicable Fee Rate shall be the highest Applicable Margin and Applicable Fee Rate set forth in the foregoing table until five days after such Financials are so delivered.

SCHEDULE 1 Commitments Lender Total Commitment ------ ---------------- Bank One, NA 30,000,000 PNC Bank, National Association 25,000,000 Bank of America, N.A. 15,000,000 JPMorgan Chase Bank 15,000,000 Bank of Texas, N.A. 15,000,000 BNP Paribas 15,000,000 Comerica Bank 15,000,000 SunTrust Bank 15,000,000 Northern Trust 10,000,000

SCHEDULE 3 LIENS 1. Lender Balance Secured ------ ------- ------- Weaver Ranch, Inc. $160,000 Land purchased by Mountain Cement Company for use as limestone quarry 2. Liens created in connection with any accounts receivable securitization facility permitted under Section 6.12(vi) of the Credit Agreement.

SCHEDULE 4 Existing Facility LCs 1. Letter of Credit Number 322253 issued by Bank One, NA in the face amount of $3,889,087.00 in favor of Pacific Employers Insurance Co., with an expiry date of May 1, 2003. 2. Letter of Credit Number 38234200 issued by Bank One, NA in the face amount of $3,654,027.00 in favor of St. Paul Fire and Marine Insurance Co., with an expiry date of May 1, 2003.

EXHIBIT B COMPLIANCE CERTIFICATE To: The Lenders parties to the Credit Agreement described below This Compliance Certificate (this "Certificate") is furnished pursuant to that certain Second Amended and Restated Credit Agreement dated as of March 25, 2003 (as amended, modified, restated, supplemented, renewed or extended from time to time, the "Agreement") among Centex Corporation Products, Inc., a Delaware corporation (the "Borrower"), the Lenders party thereto, PNC Bank, National Association, as Syndication Agent, Bank One, NA, as LC Issuer and as Administrative Agent for the Lenders. Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement. THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected _________________ of the Borrower. 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrower and its Significant Subsidiaries during the accounting period covered by the attached financial statements. 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Default or Unmatured Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below. 4. Schedule I attached hereto sets forth financial data and computations evidencing the Borrower's compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct. 5. Schedule II hereto sets forth the determination of the interest rates to be paid for Advances, the LC Fee rates and the commitment fee rates commencing on the fifth day following the delivery hereof. 6. Schedule III attached hereto sets forth the various reports and deliveries which are required at this time under the Agreement and the other Loan Documents and the status of compliance. 7. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:

_______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ The foregoing certifications, together with the computations set forth in Schedule I and Schedule II hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this _____ day of _______________, 200___. ___________________________

SCHEDULE I TO COMPLIANCE CERTIFICATE Compliance as of _______________, 200__ with Provisions of _______________ and _______________ of the Agreement

SCHEDULE II TO COMPLIANCE CERTIFICATE Borrower's Applicable Margin Calculation

SCHEDULE III TO COMPLIANCE CERTIFICATE Reports and Deliveries Currently Due

EXHIBIT C ASSIGNMENT AND ASSUMPTION AGREEMENT This Assignment and Assumption (the "Assignment and Assumption") is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee] (the "Assignee"). Capitalized terms used but not defined herein shall have the meanings given to them in the Second Amended and Restated Credit Agreement identified below (as amended, the "Credit Agreement"), receipt of a copy of which is hereby acknowledged by the Assignee. The 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, the interest in and to all of the Assignor's rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto that represents the amount and percentage interest identified below of all of the Assignor's outstanding rights and obligations under the respective facilities identified below (including without limitation any letters of credit, guaranties and swingline loans included in such facilities and, to the extent permitted to be assigned under applicable law, all claims (including without limitation contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity), suits, causes of action and any other right of the Assignor 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) (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: _____________________________________________________ 2. Assignee: ________________________[and is an Affiliate/Approved Fund of [identify Lender](1) 3. Borrower(s): _____________________________________________________ 4. Administrative Agent: Bank One, NA, as the Administrative Agent under the Credit Agreement. 5. Credit Agreement: The $250,000,000 Second Amended and Restated Credit Agreement dated as of March 25, 2003 among Centex Construction Products, Inc., the Lenders party thereto, the Syndication Agent, and Bank One, NA, as Administrative Agent. - ------------------------------- (1) Select as applicable

6. Assigned Interest: - -------------------------------------------------------------------------------------------------------------- Aggregate Amount of Amount of Commitment/Loans for all Commitment/Loans Percentage Assigned of Lenders* Assigned* Commitment/Loans(2) - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- $ $ _______% - -------------------------------------------------------------------------------------------------------------- $ $ _______% - -------------------------------------------------------------------------------------------------------------- $ $ _______% - -------------------------------------------------------------------------------------------------------------- 7. Trade Date: _____________________________________________(3) Effective Date: ____________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE ADMINISTRATIVE AGENT.] 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: ___________________ - --------------------------- * Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date. (2) Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. (3) Insert if satisfaction of minimum amounts is to be determined as of the Trade Date.

[Consented to and](4) Accepted: BANK ONE, NA, as Administrative Agent By: _________________________________________ Name: _______________________________________ Title: ______________________________________ [Consented to:](5) [NAME OF RELEVANT PARTY] By: _________________________________________ Name: _______________________________________ Title: ______________________________________ - ----------------------------- (4) To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement. (5) To be added only if the consent of the Borrower and/or other parties (e.g. LC Issuer) is required by the terms of the Credit Agreement.

ANNEX 1 TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION 1. Representations and Warranties. 1.1. Assignor. The Assignor 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. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (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, perfection, priority, collectibility, 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, (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, (v) inspecting any of the property, books or records of the Borrower, or any guarantor, or (vi) any mistake, error of judgment, or action taken or omitted to be taken in connection with the Loans or the Loan Documents. 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) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iii) agrees that its payment instructions and notice instructions are as set forth in Schedule 1 to this Assignment and Assumption, (iv) confirms that none of the funds, monies, assets or other consideration being used to make the purchase and assumption hereunder are "plan assets" as defined under ERISA and that its rights, benefits and interests in and under the Loan Documents will not be "plan assets" under ERISA, (v) agrees to indemnify and hold the Assignor harmless against all losses, costs and expenses (including, without limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee's non-performance of the obligations assumed under this Assignment and Assumption, (vi) it has received a copy of the Credit Agreement, together with copies of financial statements 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 or any other Lender, and (vii) attached as Schedule 1 to this Assignment and Assumption is any documentation required to be delivered by the Assignee with respect to its tax status pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee 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. 2. Payments. The Assignee shall pay the Assignor, on the Effective Date, the amount agreed to by the Assignor and the Assignee. 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. 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, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy 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 Texas.

EXHIBIT D LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION To Bank One, NA, as Administrative Agent (the "Administrative Agent") under the Credit Agreement described below. Re: Second Amended and Restated Credit Agreement, dated as of March 25, 2003 (as the same may be amended, restated, supplemented or modified, the "Credit Agreement"), among Centex Construction Products, Inc., a Delaware corporation (the "Borrower"), the Lenders named therein, the LC Issuer, the Syndication Agent, and the Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the Credit Agreement. The Administrative Agent is specifically authorized and directed to act upon the following standing money transfer instructions with respect to the proceeds of Advances or other extensions of credit from time to time until receipt by the Administrative Agent of a specific written revocation of such instructions by the Borrower, provided, however, that the Administrative Agent may otherwise transfer funds as hereafter directed in writing by the Borrower in accordance with Section 13.1 of the Credit Agreement or based on any telephonic notice made in accordance with Section 2.15 of the Credit Agreement. Facility Identification Number(s) ______________________________________________ Customer/Account Name __________________________________________________________ Transfer Funds To ______________________________________________________________ ______________________________________________________________ For Account No. ________________________________________________________________ Reference/Attention To _________________________________________________________ Authorized Officer (Customer Representative) Date ______________________________ __________________________________________ __________________________ (Please Print) Signature

Bank Officer Name Date _____________________ __________________________________________ __________________________ (Please Print) Signature (Deliver Completed Form to Credit Support Staff For Immediate Processing)

EXHIBIT E NOTE March 25, 2003 Centex Construction Products, Inc., a Delaware corporation (the "Borrower"), promises to pay to the order of _______________________ (the "Lender") the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to Article II of the Agreement (as hereinafter defined), in immediately available funds at the main office of Bank One, NA in Dallas, Texas, as Administrative Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Loans in full on the Facility Termination Date. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder. This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Second Amended and Restated Credit Agreement dated as of March 25, 2003 (which, as it may be amended, restated, supplemented or modified and in effect from time to time, is herein called the "Agreement"), among the Borrower, the lenders party thereto, including the Lender, PNC Bank, National Association, as Syndication Agent, Bank One, NA, as LC Issuer and as Administrative Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. This Note is guaranteed pursuant to the Guaranty, all as more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement. CENTEX CONSTRUCTION PRODUCTS, INC. By: ________________________________ Name: __________________________ Title: _________________________

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF CENTEX CONSTRUCTION PRODUCTS, INC. DATED ___________________, 200__ Principal Maturity Principal Amount of of Interest Amount Unpaid Date Loan Period Paid Balance - ---- ----- --------- ----- --------

EXHIBIT F COMMITMENT AND ACCEPTANCE This Commitment and Acceptance (this "Commitment and Acceptance") dated as of ______________, 200__, is entered into among the parties listed on the signature pages hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Second Amended and Restated Credit Agreement (as defined below). PRELIMINARY STATEMENTS Reference is made to that certain Second Amended and Restated Credit Agreement dated March 25, 2003, by and among Centex Corporation Products, Inc., a Delaware corporation (the "Borrower"), the Lenders party thereto, PNC Bank, National Association, as Syndication Agent, Bank One, NA, as LC Issuer and as Administrative Agent for the Lenders (as the same may be amended, modified, restated, supplemented, renewed or extended from time to time, the "Credit Agreement"). Pursuant to Section 2.6 of the Credit Agreement, the Borrower has requested an increase in the Aggregate Commitment from $_________________ to $_________________. Such increase in the Aggregate Commitment is to become effective on ________________, 200__ (the "Increase Date"). In connection with such requested increase in the Aggregate Commitment, the Borrower, the Administrative Agent and __________________ (the "Accepting Lender") hereby agree as follows: AGREEMENTS 1. ACCEPTING LENDER'S COMMITMENT. Effective as of the Increase Date, [the Accepting Lender shall become a party to the Credit Agreement as a Lender, shall have (subject to the provisions of Section 2.6 of the Credit Agreement) all of the rights and obligations of a Lender thereunder, shall agree to be bound by the terms and provisions thereof and shall thereupon have a Commitment under and for purposes of the Credit Agreement in an amount equal to the] [the Commitment of the Accepting Lender under the Credit Agreement shall be increased from $____________ to the] amount set forth opposite the Accepting Lender's name on the signature pages hereof.] 2. [REPRESENTATIONS AND AGREEMENTS OF ACCEPTING LENDER. The Accepting Lender (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements requested by the Accepting Lender and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Commitment and Acceptance, (ii) agrees that it will, independently and without reliance upon the Administrative Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (iii) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (iv) agrees that 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, (v) agrees that its payment instructions and notice instructions are as set forth in Schedule 1 hereto, (vi) confirms that none of the funds, monies, assets or other consideration being used to make the commitment and acceptance hereunder are "plan assets" as defined under ERISA and that its rights, benefits and interests in and under the Loan Documents will not be "plan assets" under ERISA, (vii) confirms that it is a Purchaser, and (viii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying that the Accepting Lender is entitled to receive payments under the Loan Documents without deduction or withholding of any United States federal income taxes.](1) 3. REPRESENTATION OF BORROWER. The Borrower hereby represents and warrants that, as of the date hereof and as of the Increase Date, (a) no event or condition shall have occurred and then be continuing which constitutes a Default or an Unmatured Default, and (b) the representations and warranties contained in Article V of the Credit Agreement are true and correct in all material respects (except to the extent any such representation or warranty is stated to relate solely to an earlier date). 4. SYNDICATION FEE. On or before the Increase Date, the Borrower shall pay to the Administrative Agent for the account of the Accepting Lender a nonrefundable syndication fee in an amount equal to [_____%] of the actual increase on Accepting Lender's Commitment. 5. COUNTERPARTS; DELIVERY BY FACSIMILE. This Commitment and Acceptance may be executed in counterparts. Transmission by facsimile of an executed counterpart of this Commitment and Acceptance shall be deemed to constitute due and sufficient delivery of such counterpart and such facsimile shall be deemed to be an original counterpart of this Commitment and Acceptance. 6. GOVERNING LAW. This Commitment and Acceptance shall be governed by and constructed in accordance with, the laws of the State of Texas and the applicable laws of the United States of America. 7. [NOTICES. FOR THE PURPOSE OF NOTICES TO BE GIVEN UNDER THE CREDIT AGREEMENT, THE ADDRESS OF THE ACCEPTING LENDER (UNTIL NOTICE OF A CHANGE IS DELIVERED) SHALL BE THE ADDRESS SET FORTH IN SCHEDULE 1 HERETO.(2) [Remainder of this page intentionally left blank.] - ---------------------------- (1) Paragraph 2 is to be included only if the Accepting Lender is a Purchaser prior to the Increase Date, and subparagraph 2(viii) is to be included only if such Accepting Lender is not incorporated under the laws of the United States, or a state thereof. (2) Paragraph 6 and Schedule 1 are to be included only if the Accepting Lender is a Purchaser prior to the Increase Date.

IN WITNESS WHEREOF, the parties hereto have executed this Commitment and Acceptance by their duly authorized officers as of the date first above written. CENTEX CONSTRUCTION PRODUCTS, INC., as Borrower By: _______________________________ Name: _________________________ Title: ________________________ BANK ONE, NA, as Administrative Agent By: _______________________________ Name: _________________________ Title: ________________________ $__________________ __________________________________, as Accepting Lender By: _______________________________ Name: _________________________ Title: ________________________

SCHEDULE 1 TO COMMITMENT AND ACCEPTANCE ADMINISTRATIVE INFORMATION SHEET ACCEPTING LENDER INFORMATION CREDIT CONTACT: Name:_________________________________ Telephone No.:________________________ Fax No.:______________________________ Telex No.:____________________________ Answerback:___________________________ KEY OPERATIONS CONTACTS: Booking Installation:_________________ Booking Installation:_________________ Name:_________________________________ Name:_________________________________ Telephone No.:________________________ Telephone No.:________________________ Fax No.:______________________________ Fax No.:______________________________ Telex No.:____________________________ Telex No.:____________________________ Answerback:___________________________ Answerback:___________________________ PAYMENT INFORMATION: Name & ABA # of Destination Bank: ______________________________________ ______________________________________ Account Name & Number for Wire Transfer: ______________________________________ ______________________________________ Other Instructions:_____________________________________________________________ ________________________________________________________________________________ ADDRESS FOR NOTICES FOR ACCEPTING LENDER ______________________________________ ______________________________________ ______________________________________


               CENTEX CONSTRUCTION PRODUCTS, INC. AND SUBSIDIARIES
         EARNINGS (LOSS) PER COMMON AND DILUTIVE POTENTIAL COMMON SHARE
                (AMOUNTS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)


                                   EXHIBIT 11




                                                                                     FOR THE YEARS ENDED MARCH 31,
                                                                            ----------------------------------------------
                                                                                2003             2002             2001
                                                                            ------------     ------------     ------------
                                                                                                     

NET INCOME                                                                  $     57,606     $     39,706     $     59,429
                                                                            ============     ============     ============

DILUTED EARNINGS PER COMMON AND DILUTIVE POTENTIAL COMMON SHARE:

         Weighted average common shares outstanding                               18,418           18,351           18,405

         Stock options                                                               106              110               68
                                                                            ------------     ------------     ------------
                                                                                  18,524           18,461           18,473
                                                                            ============     ============     ============
         Weighted average common and dilutive potential common shares

DILUTED EARNINGS PER COMMON SHARE                                           $       3.11     $       2.15     $       3.22
                                                                            ============     ============     ============

BASIC EARNINGS PER COMMON SHARE:

         Weighted average common shares outstanding                               18,418           18,351           18,405
                                                                            ============     ============     ============

         Basic earnings per common share                                    $       3.13     $       2.16     $       3.23
                                                                            ============     ============     ============


Diluted net income per common equity share assumed the exercise of stock options
and for all years presented. Basic net income per common share was computed by
dividing net income by the weighted average number of shares of Common Stock
outstanding during the year.

2003 ANNUAL REPORT EXHIBIT 13 CENTEX CONSTRUCTION PRODUCTS, INC (CONSTRUCTION PRODUCTS LOGO) (PICTURES OF BAGS OF CEMENT, STACKS OF GYPSUM WALLBOARD, ROLLS OF PAPER AND A PILE OF AGGREGATES)

ABOUT CXP Centex Construction Products, Inc. (NYSE: CXP) produces and distributes building materials essential to the construction and renovation of homes, commercial, industrial and school buildings. Our products are also indispensable in the construction and improvement of America's infrastructure - our streets, roads and highways. CXP is headquartered in Dallas, Texas, and serves national markets through quarrying, manufacturing, and distribution units in 12 states. Our operations are segmented by product group: Cement, Gypsum Wallboard, Paperboard, and Concrete and Aggregates. CXP is one of only two publicly held companies operating in the cement, gypsum wallboard, and concrete and aggregates industries, CXP is 65.1% owned by Centex Corporation. CEMENT CXP's four manufacturing plants and network of 10 distribution terminals produce and market cement in the western half of the United States. Annual production capacity, net of two joint-venture partners' interests, is approximately 2.1 million tons, or about 2.2% of the nation's total capacity. CXP is the eleventh largest U.S. cement manufacturer and the third largest U.S. owned cement producer. GYPSUM WALLBOARD CXP's Gypsum Wallboard operation, which includes four facilities located in New Mexico, Oklahoma and Colorado, is the nation's fifth largest wallboard producer. Together, the plants have a total annual production capacity of approximately 2.7 billion square feet, representing about 8% of total U.S. capacity. During fiscal 2003, CXP's gypsum wallboard production was shipped by rail and by truck to a total of 36 states throughout the nation. CONCRETE AND AGGREGATES CXP's Concrete and Aggregates operations consist of 9 readymix concrete batch plant sites, 122 readymix trucks and two aggregates plants that have approximately 4 million tons of annual single-shift production capacity. The plants are located in northern California and central Texas. CXP's northern California aggregates deposit is believed to be the largest single aggregates deposit in that area. PAPERBOARD CXP's recycled Paperboard operation is located in southwestern Oklahoma. The mill produces paperboard products, made from 100 percent reclaimed paper fiber, which are used as facing paper in the manufacturing of gypsum wallboard and industrial and consumer paperboard products. Annual production capacity is approximately 275,000 tons. The Lawton mill produces gypsum paperboard that is lighter than other products currently available.

MAJOR FACILITIES CEMENT PLANTS - - Illinois Cement Company - LaSalle, Illinois* - - Mountain Cement Company - Laramie, Wyoming - - Nevada Cement Company - Fernley, Nevada - - Texas-Lehigh Cement Company LP - Buda, Texas* GYPSUM WALLBOARD PLANTS - - American Gypsum Company - Albuquerque and Bernalillo, New Mexico; Gypsum, Colorado; and Duke, Oklahoma CONCRETE AND AGGREGATES PLANTS - - Centex Materials LLC - Austin and Buda, Texas - - Mathews Readymix LLC - Marysville, California - - Western Aggregates LLC - Marysville, California PAPERBOARD PLANT - - Republic Paperboard Company LLC - Lawton, Oklahoma * 50%-owned with joint-venture partners (MAP OF UNITED STATES)

FINANCIAL HIGHLIGHTS (1) (Amounts in Thousands, Except Per Share Data) FOR THE YEARS ENDED MARCH 31, ---------------------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- REVENUES (2) $501,257 $471,083 $441,127 $470,465 $381,900 EARNINGS BEFORE INCOME TAXES $ 86,613 $ 59,699 $ 92,263 $170,177 $121,127 NET EARNINGS $ 57,606 $ 39,706 $ 59,429 $108,232 $ 77,289 DILUTED EARNINGS PER SHARE $ 3.11 $ 2.15 $ 3.22 $ 5.63 $ 3.71 CASH DIVIDENDS PER SHARE $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 TOTAL ASSETS $712,078 $743,352 $794,622 $438,139 $364,683 TOTAL DEBT $ 80,927 $182,380 $278,828 $ 400 $ 480 STOCKHOLDERS' EQUITY $479,832 $427,832 $392,320 $340,472 $279,920 AVERAGE DILUTED SHARES OUTSTANDING 18,524 18,461 18,473 19,211 20,832 BOOK VALUE PER SHARE AT YEAR END $ 26.10 $ 23.30 $ 21.40 $ 18.33 $ 14.18 (1) The financial highlights should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements for matters that affect the comparability of the information presented above. (2) The company adopted the provisions of Emerging Issues Task Force Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs," during fiscal year 2001. As a result of this adoption, net revenues have been restated to include freight and delivery costs billed to customers. Previously such billings were offset against corresponding expenses in cost of sales. STOCK PRICES AND DIVIDENDS FISCAL YEAR ENDED MARCH 31, 2003 FISCAL YEAR ENDED MARCH 31, 2002 ---------------------------------- ----------------------------------- PRICE PRICE -------------------- ------------------- QUARTER HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS - ------- ---- --- --------- ---- --- --------- FIRST $45.25 $35.54 $0.05 $34.25 $25.70 $0.05 SECOND $40.35 $32.57 $0.05 $34.80 $27.83 $0.05 THIRD $37.70 $31.25 $0.05 $33.32 $28.05 $0.05 FOURTH $37.70 $32.45 $0.05 $39.90 $30.17 $0.05 The common stock of Centex Construction Products, Inc. is traded on the New York Stock Exchange (ticker symbol CXP). The approximate number of record holders of the common stock of CXP as of June 4, 2003 was 327. The closing price of CXP's common stock on the New York Stock Exchange on June 4, 2003 was $38.70. TABLE OF CONTENTS 2 LETTER TO THE SHAREHOLDERS 5 FINANCIAL INFORMATION 1

TO OUR SHAREHOLDERS DESPITE DIFFICULT ECONOMIC CONDITIONS, CENTEX CONSTRUCTION PRODUCTS PERFORMED AT A HIGH LEVEL DURING FISCAL 2003. OUR SIGNIFICANT ACHIEVEMENTS INCLUDED: - - REVENUES ROSE 6% TO AN ALL-TIME HIGH OF $501.3 MILLION; - - NET EARNINGS INCREASED 45% TO $57.6 MILLION; - - EARNINGS PER SHARE ALSO GREW BY 45% TO $3.11; - - DEBT-TO-CAPITALIZATION RATIO FELL TO 14.4%; - - OUR CEMENT PLANTS WERE "SOLD OUT" FOR THE 17TH CONSECUTIVE YEAR; - - THE LAWTON PAPERBOARD MILL OPERATED ABOVE DESIGNED CAPACITY; AND - - SIGNIFICANT PRODUCTIVITY IMPROVEMENTS WERE REALIZED AT THE DUKE WALLBOARD PLANT. Our focus on disciplined development of people and processes has enabled us to attain industry leading operating performances in the cement and wallboard businesses. We carefully control production costs and constantly improve plant efficiencies. As a result, the operating costs of our cement and wallboard plants have risen by less than 2% during the last five years while plant production capacities have been increased every year. Operating low-cost, highly efficient plants allows us to achieve superior returns when the economy is strong while remaining solidly profitable during more difficult economic times. The benefits of our operating philosophies were apparent in fiscal 2003. Our cement operations recorded a good year in a challenging operating environment. Operating profits declined by approximately 10%, principally as a result of slightly lower cement prices. However, all the plants operated at capacity and were "sold out." Our 31% operating margin and return on net assets employed of 43% continued to confirm the productivity of our plants. 2

Profits from our wallboard operations increased by almost 500%. These results were achieved despite a weak commercial construction market and excess industry production capacity. Significant progress was made in improving production efficiencies at our Duke, Oklahoma wallboard facility, which is among the nation's largest and most cost-effective wallboard plants. We believe that the production costs of CXP's wallboard operations are among the lowest in the industry. Our paperboard plant in Lawton, Oklahoma made great strides towards achieving its full potential. Profits improved by 77% and production exceeded originally designed capacity. With the prospect of even greater plant production, we have begun to expand our product line beyond the wallboard paper market into other paper grades. Earnings declined in our concrete and aggregates operations primarily as a result of the decision to close the Georgetown, Texas quarry. Our other concrete and aggregate assets in Texas and northern California continued their excellent performances. On March 31, 2003, Richard Jones, Jr. retired as CXP's President and Chief Executive Officer. During his 13-year CXP career, Dick made significant and long lasting contributions to CXP. He will be missed. Larry Hirsch, Chairman and Chief Executive Officer of Centex Corporation, CXP's major shareholder, has assumed the role of CXP's CEO. Steve Rowley, formerly Executive Vice President-Cement, has been promoted to CXP's Chief Operating Officer. CXP is in a very strong position. Our plants are in excellent operating condition and, in many cases, have the capacity to increase sales as the economy recovers. In addition, our debt continues to decline, which positions us to explore ways to provide even greater value to our stockholders. Our greatest strength is the quality of the people that work for CXP. Their commitment to excellence will allow us to continue to grow and prosper. /s/ Laurence E. Hirsch /s/ Steven Rowley - ---------------------- -------------------- Laurence E. Hirsch Steven R. Rowley Chairman and Executive Vice President and Chief Executive Officer Chief Operating Officer 3

FINANCIAL DATA (BAR CHART) REVENUES ($ in millions) 99 $382 00 $470 01 $441 02 $471 03 $501 (BAR CHART) NET EARNINGS ($ in millions) 99 $ 77 00 $108 01 $ 59 02 $ 40 03 $ 58 (BAR CHART) STOCKHOLDERS' EQUITY ($ in millions) 99 $280 00 $340 01 $392 02 $428 03 $480 (BAR CHART) TOTAL ASSETS ($ in millions) 99 $365 00 $438 01 $795 02 $743 03 $712 (BAR CHART) EARNINGS PER SHARE (in dollars) 99 $3.71 00 $5.63 01 $3.22 02 $2.15 03 $3.11 (BAR CHART) TOTAL DEBT ($ in millions) 99 $ 1 00 $ 0 01 $279 02 $182 03 $ 81 4

FINANCIAL INFORMATION 6 CONSOLIDATED STATEMENTS OF EARNINGS 7 CONSOLIDATED BALANCE SHEETS 8 CONSOLIDATED STATEMENTS OF CASH FLOWS 9 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 27 REPORT OF INDEPENDENT AUDITORS 28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 38 SUMMARY OF SELECTED FINANCIAL DATA 40 QUARTERLY RESULTS 41 BOARD OF DIRECTORS AND OFFICERS 42 CORPORATE INFORMATION 5

CONSOLIDATED STATEMENTS OF EARNINGS (dollars in thousands, except per share data) FOR THE YEARS ENDED MARCH 31, ----------------------------------------- 2003 2002 2001 --------- --------- --------- REVENUES CEMENT $ 173,198 $ 183,154 $ 178,783 GYPSUM WALLBOARD 212,790 183,500 187,347 PAPERBOARD 92,898 84,293 31,492 CONCRETE AND AGGREGATES 56,598 57,621 61,101 OTHER, NET 2,885 (355) 3,673 LESS: INTERSEGMENT SALES (37,112) (37,130) (21,269) --------- --------- --------- 501,257 471,083 441,127 COSTS AND EXPENSES CEMENT 118,768 122,981 119,169 GYPSUM WALLBOARD 185,594 178,857 160,250 PAPERBOARD 75,284 74,316 30,124 CONCRETE AND AGGREGATES 56,866 53,220 53,547 LESS: INTERSEGMENT PURCHASES (37,112) (37,130) (21,269) CORPORATE GENERAL AND ADMINISTRATIVE 5,654 5,486 4,691 INTEREST EXPENSE, NET 9,590 13,654 2,352 --------- --------- --------- 414,644 411,384 348,864 --------- --------- --------- EARNINGS BEFORE INCOME TAXES 86,613 59,699 92,263 INCOME TAXES 29,007 19,993 32,834 --------- --------- --------- NET EARNINGS $ 57,606 $ 39,706 $ 59,429 ========= ========= ========= EARNINGS PER SHARE BASIC $ 3.13 $ 2.16 $ 3.23 ========= ========= ========= DILUTED $ 3.11 $ 2.15 $ 3.22 ========= ========= ========= DIVIDEND PAID PER SHARE $ 0.20 $ 0.20 $ 0.20 ========= ========= ========= See notes to consolidated financial statements. 6

CONSOLIDATED BALANCE SHEETS (dollars in thousands) MARCH 31, ------------------------- 2003 2002 --------- --------- ASSETS CURRENT ASSETS - CASH AND CASH EQUIVALENTS $ 13,599 $ 11,403 ACCOUNTS AND NOTES RECEIVABLE, NET 52,498 58,957 INVENTORIES 58,254 54,220 --------- --------- TOTAL CURRENT ASSETS 124,351 124,580 --------- --------- PROPERTY, PLANT AND EQUIPMENT - 794,380 796,766 LESS: ACCUMULATED DEPRECIATION (259,544) (230,283) --------- --------- PROPERTY, PLANT AND EQUIPMENT, NET 534,836 566,483 NOTES RECEIVABLE, NET 1,197 1,299 GOODWILL 40,290 41,088 OTHER ASSETS 11,404 9,902 --------- --------- $ 712,078 $ 743,352 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES - NOTE PAYABLE $ 25,257 $ 18,630 ACCOUNTS PAYABLE 29,302 31,155 ACCRUED LIABILITIES 41,556 48,204 CURRENT PORTION OF LONG-TERM DEBT 80 80 --------- --------- TOTAL CURRENT LIABILITIES 96,195 98,069 --------- --------- LONG-TERM DEBT 55,590 163,670 DEFERRED INCOME TAXES 80,461 53,781 STOCKHOLDERS' EQUITY - COMMON STOCK, PAR VALUE $0.01; AUTHORIZED 50,000,000 SHARES; ISSUED AND OUTSTANDING 18,379,558 AND 18,358,473 SHARES, RESPECTIVELY 184 184 CAPITAL IN EXCESS OF PAR VALUE 14,228 15,153 ACCUMULATED OTHER COMPREHENSIVE LOSSES (2,061) (1,063) RETAINED EARNINGS 467,481 413,558 --------- --------- TOTAL STOCKHOLDERS' EQUITY 479,832 427,832 --------- --------- $ 712,078 $ 743,352 ========= ========= See notes to consolidated financial statements. 7

CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) FOR THE YEARS ENDED MARCH 31, ----------------------------------------- 2003 2002 2001 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES NET EARNINGS $ 57,606 $ 39,706 $ 59,429 ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH PROVIDED BY OPERATING ACTIVITIES, NET OF EFFECT OF NON-CASH ACTIVITY- DEPRECIATION, DEPLETION AND AMORTIZATION 36,791 35,808 24,871 DEFERRED INCOME TAX PROVISION 28,748 21,229 23,377 ASSET IMPAIRMENT CHARGE 2,586 -- -- LOSS ON ASSET SALE 564 -- -- DECREASE (INCREASE) IN ACCOUNTS AND NOTES RECEIVABLE 6,561 34,268 (3,223) (INCREASE) DECREASE IN INVENTORIES (4,034) 1,788 (2,805) DECREASE IN ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (9,499) (12,387) (5,707) DECREASE IN OTHER ASSETS, NET 2,440 231 7,485 DECREASE IN INCOME TAXES PAYABLE (1,100) -- (1,447) --------- --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 120,663 120,643 101,980 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES PROPERTY, PLANT AND EQUIPMENT ADDITIONS, NET (14,290) (19,024) (16,250) ACQUISITION OF NET ASSETS -- -- (342,200) PROCEEDS FROM ASSET DISPOSITIONS 3,414 855 -- --------- --------- --------- NET CASH USED IN INVESTING ACTIVITIES (10,876) (18,169) (358,450) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES PROCEEDS FROM NOTE PAYABLE 6,627 18,630 -- PROCEEDS FROM LONG-TERM DEBT -- -- 268,500 REPAYMENT OF LONG-TERM DEBT (108,080) (105,580) (80) REDEMPTION OF SUBORDINATED DEBT -- (9,498) (89,992) DIVIDENDS PAID TO STOCKHOLDERS (3,683) (3,671) (3,690) RETIREMENT OF COMMON STOCK (8,135) -- (6,198) PROCEEDS FROM STOCK OPTION EXERCISES 5,680 301 507 --------- --------- --------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (107,591) (99,818) 169,047 --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,196 2,656 (87,423) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,403 8,747 96,170 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,599 $ 11,403 $ 8,747 ========= ========= ========= See notes to consolidated financial statements. 8

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (dollars in thousands) FOR THE YEARS ENDED MARCH 31, ----------------------------------------- 2003 2002 2001 --------- --------- --------- COMMON STOCK BALANCE AT BEGINNING OF PERIOD $ 184 $ 183 $ 186 RETIREMENT OF COMMON STOCK (2) -- (3) STOCK OPTION EXERCISES 2 1 -- --------- --------- --------- BALANCE AT END OF PERIOD 184 184 183 --------- --------- --------- CAPITAL IN EXCESS OF PAR VALUE BALANCE AT BEGINNING OF PERIOD 15,153 14,614 20,302 RETIREMENT OF COMMON STOCK (8,133) -- (6,195) STOCK OPTION EXERCISES 7,208 539 507 --------- --------- --------- BALANCE AT END OF PERIOD 14,228 15,153 14,614 --------- --------- --------- RETAINED EARNINGS BALANCE AT BEGINNING OF PERIOD 413,558 377,523 321,773 DIVIDENDS TO STOCKHOLDERS (3,683) (3,671) (3,679) NET EARNINGS 57,606 39,706 59,429 --------- --------- --------- BALANCE AT END OF PERIOD 467,481 413,558 377,523 --------- --------- --------- ACCUMULATED OTHER COMPREHENSIVE LOSSES BALANCE AT BEGINNING OF PERIOD (1,063) -- (1,789) UNREALIZED GAIN ON INVESTMENT SECURITIES, NET OF TAX -- -- 1,789 UNREALIZED GAIN (LOSS) ON HEDGING INSTRUMENTS, NET OF TAX 484 (1,063) -- MINIMUM PENSION LIABILITY, NET OF TAX (1,482) -- -- --------- --------- --------- BALANCE AT END OF PERIOD (2,061) (1,063) -- --------- --------- --------- TOTAL STOCKHOLDERS' EQUITY $ 479,832 $ 427,832 $ 392,320 ========= ========= ========= See notes to consolidated financial statements. 9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) (A) SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of Centex Construction Products, Inc. and its majority-owned subsidiaries ("CXP" or the "Company") after the elimination of all significant intercompany balances and transactions. CXP is a holding company whose assets consist of its investments in its subsidiaries, intercompany balances and holdings of cash and cash equivalents. The businesses of the consolidated group are conducted through CXP's subsidiaries. In addition, the Company holds 50% joint venture interests in its cement plants in Illinois and Texas and has proportionately consolidated its pro rata interest in the revenues, expenses, assets and liabilities of those extractive industry ventures. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. CASH AND CASH EQUIVALENTS Cash equivalents include short-term, highly liquid investments with original maturities of three months or less, and are recorded at cost, which approximates market value. Included in cash and cash equivalents at March 31, 2003 and 2002 is $4.1 million and $3.6 million, respectively, belonging to the Company's 50%-owned joint ventures. ACCOUNTS AND NOTES RECEIVABLE Accounts and notes receivable have been shown net of the allowance for doubtful accounts of $4.9 million and $4.6 million at March 31, 2003 and 2002, respectively. The allowance for non-collection of receivables is based upon analysis of economic trends in the construction industry, detailed analysis of the expected collectibility of accounts receivable that are past due and the expected collectibility of overall receivables. The Company has no significant credit risk concentration among its diversified customer base. Notes receivable at March 31, 2003 are collectible primarily over three years. The weighted average interest rate at March 31, 2003 and 2002 was 5.4% and 7.1%, respectively. INVENTORIES Inventories are stated at the lower of average cost (including applicable material, labor, depreciation, and plant overhead) or market. Inventories consist of the following: MARCH 31, -------------------- 2003 2002 ------- ------- RAW MATERIALS AND MATERIALS-IN-PROGRESS $16,143 $15,218 FINISHED CEMENT 5,507 5,636 AGGREGATES 3,021 2,772 GYPSUM WALLBOARD 5,520 5,140 PAPERBOARD 4,819 2,894 REPAIR PARTS AND SUPPLIES 22,119 21,576 FUEL AND COAL 1,125 984 ------- ------- $58,254 $54,220 ======= ======= Centex Construction Products, Inc. and Subsidiaries 10

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Major renewals and improvements are capitalized and depreciated. Repairs and maintenance are expensed as incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of depreciable assets. Depreciation expense was $35.2 million, $34.4 million and $23.7 million for the years ended March 31, 2003, 2002 and 2001, respectively. Raw material deposits are depleted as such deposits are extracted for production utilizing the units-of-production method. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the accounts and any resulting gains or losses are recognized at such time. The estimated lives of the related assets are as follows: PLANTS 20 to 30 YEARS BUILDINGS 20 to 40 YEARS MACHINERY AND EQUIPMENT 3 to 20 YEARS The Company periodically evaluates whether current events or circumstances indicate that the carrying value of its depreciable assets may not be recoverable. At March 31, 2003 and 2002, management believes no events or circumstances indicate that the carrying value may not be recoverable. INVESTMENT SECURITIES Investments in debt or marketable equity securities are reported at fair value based primarily on quoted market prices. All investment securities are designated as available for sale, with unrealized gains and losses included in stockholders' equity, net of applicable taxes. Investment securities are regularly reviewed for impairment based on criteria that include the extent to which cost exceeds market value, the duration of any market decline, and the financial health of the issuer. Unrealized losses that are other than temporary are recognized in earnings. Realized gains and losses are accounted for on the specific identification method. During the year ended March 31, 2001, the Company sold an investment in marketable equity securities for $10.8 million and recognized a gain of $1.9 million. The gain is included in other net revenues on the consolidated statements of earnings. OTHER ASSETS Other assets are primarily composed of loan fees and financing costs, prepaid pension costs and other expenses, deposits, identified intangible assets other than goodwill and assets held for sale. INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." That statement requires, among other things, that deferred taxes be provided on differences between the financial reporting basis and tax basis of assets and liabilities using existing tax laws and rates. STOCK REPURCHASES The Company's Board of Directors has authorized the repurchase of a cumulative total of 6,101,430 shares of the Company's common stock. The Company repurchased and retired 223,384 shares, at a cost of $8.1 million, in Fiscal 2003, no shares in Fiscal 2002 and 264,300 shares, at a cost of $6.2 million, in Fiscal 2001. Cumulative shares repurchased at March 31, 2003 were 5,581,514, leaving approximately 519,900 shares remaining under the Company's current authorization. Centex Corporation ("Centex") owned 65.1% of the Company's outstanding common stock at March 31, 2003. COMPREHENSIVE LOSSES Total comprehensive income is defined as the total of net earnings plus all other non-owner changes in equity. Securities that are classified as available-for-sale are stated at market value as determined by the most recently traded price at the balance sheet date. The unrealized gain or loss on hedging instruments represents the deferral in other comprehensive losses of the unrealized gain or loss on swap agreements designed as cash flow hedges. The accounting 11 Centex Construction Products, Inc. and Subsidiaries

for interest rate swaps and other derivative financial instruments is discussed in detail in Note M. The minimum pension liability relates to the accumulated benefit obligation in excess of the fair value of assets of certain defined benefit pension plans. These unrealized gains and losses, net of deferred tax, are excluded from earnings and reported in a separate component of stockholders' equity as "Accumulated Other Comprehensive Losses." Total comprehensive income for the years ended March 31, 2003, 2002 and 2001 was $56.6 million, $38.6 million and $61.2 million, respectively. STATEMENTS OF CONSOLIDATED EARNINGS - SUPPLEMENTAL DISCLOSURES Selling, general and administrative expenses of the operating units are included in costs and expenses of each segment. Corporate general and administrative expenses are shown separately in the statements of consolidated earnings. Total selling, general and administrative expenses for each of the periods are summarized as follows: FOR THE YEARS ENDED MARCH 31, ----------------------------------- 2003 2002 2001 ------- ------- ------- OPERATING UNITS SELLING AND G&A $23,422 $23,550 $19,157 CORPORATE G&A 5,654 5,486 4,691 ------- ------- ------- $29,076 $29,036 $23,848 ======= ======= ======= % OF NET REVENUES 5.8% 6.2% 5.4% ======= ======= ======= Maintenance and repair expenses are included in each segment's costs and expenses. The Company incurred expenses of $38.0 million, $35.1 million and $36.0 million in the years ended March 31, 2003, 2002 and 2001, respectively, for maintenance and repairs. Other net revenues include clinker sales income, lease and rental income, asset sale income, non-inventoried aggregates sales income, recycled waste paper income, distribution center income and trucking income as well as other miscellaneous revenue items and costs which have not been allocated to a business segment. STATEMENTS OF CONSOLIDATED CASH FLOWS - SUPPLEMENTAL DISCLOSURES Interest payments made during the years ended March 31, 2003, 2002 and 2001 were $8.9 million, $14.4 million and $9.0 million, respectively. In Fiscal 2003, the Company made net payments of $1.5 million for federal and state income taxes. The Company received a cash refund of $1.4 million in Fiscal 2002 compared to net payments of $19.7 million made for federal and state income taxes in Fiscal 2001. EARNINGS PER SHARE The Company computes earnings per share in accordance with SFAS No. 128, "Earnings Per Share." This statement established new standards for computing and presenting earnings per share ("EPS"). SFAS No. 128 replaced the presentation of primary EPS previously prescribed by Accounting Principles Board ("APB ") Opinion No. 15 with a presentation of basic EPS which is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. SFAS No. 128 also requires dual presentation of basic and diluted EPS. Basic earnings per common share is based on the weighted average number of common shares outstanding for the years ended March 31, 2003, 2002 and 2001 of 18,418,191, 18,350,716 and 18,405,116, respectively. Diluted earnings per common share is based on the weighted average number of common shares outstanding and share equivalents outstanding, assuming dilution from issued and unexercised stock options outstanding, of 18,523,651, 18,461,414 and 18,473,114 for the years ended March 31, 2003, 2002 and 2001, respectively. Anti-dilutive options to purchase shares of common stock that were excluded from the computation of diluted earnings per share were 322,000 shares at an average price of $38.92 for the year ended March 31, 2003, 551,000 shares at an average price of $35.66 for the year ended March 31, 2002 and 618,000 shares at an average price of $35.80 for the year ended March 31, 2001. All anti-dilutive options have expiration dates ranging from April 2008 to May 2012. Centex Construction Products, Inc. and Subsidiaries 12

ACCOUNTING FOR STOCK-BASED COMPENSATION The Company accounts for employee stock options using the intrinsic value method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees," as allowed by SFAS No. 123, "Accounting for Stock-Based Compensation." Generally, no expense is recognized related to the Company's stock options because each option's exercise price is set at the stock's fair market value on the date the option is granted. In Fiscal 2003, the Company recorded a pre-tax charge of $0.1 million for employee stock-based compensation. As of March 31, 2003, the Company adopted the disclosure requirements of SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 provides for expanded disclosure concerning stock-based compensation, including disclosures in interim financial statements, and amends SFAS No. 123. In accordance with SFAS No. 123, the Company discloses the compensation cost based on the estimated fair value at the date of grant. For disclosures under SFAS No. 123, employee stock options are valued at the grant date using the Black-Scholes option-pricing model and compensation expense is recognized ratably over the vesting period. The weighted average assumptions used in the Black-Scholes model to value the option awards in Fiscal 2003, 2002, and 2001, respectively, are as follows: dividend yield of 0.50 percent, 0.64 percent, and 0.94 percent; expected volatility of 32.3 percent, 32.2 percent, and 32.5 percent; risk-free interest rates of 5.0 percent, 6.9 percent, and 6.4 percent; and expected lives of 10 years for all three years. If the Company had recognized compensation expense for the stock option plans based on the fair value at the grant dates for awards, pro forma net earnings for Fiscal 2003, 2002 and 2001 would be as follows: FOR THE YEARS ENDED MARCH 31, -------------------------------------------- 2003 2002 2001 ---------- ---------- ---------- NET EARNINGS AS REPORTED $ 57,606 $ 39,706 $ 59,429 ADD STOCK-BASED EMPLOYEE COMPENSATION INCLUDED IN THE DETERMINATION OF NET INCOME AS REPORTED, NET OF TAX 47 -- -- DEDUCT FAIR VALUE OF STOCK-BASED EMPLOYEE COMPENSATION, NET OF TAX (2,911) (1,887) (1,278) PRO FORMA $ 54,742 $ 37,819 $ 58,151 BASIC EARNINGS PER SHARE AS REPORTED $ 3.13 $ 2.16 $ 3.23 PRO FORMA $ 2.97 $ 2.06 $ 3.16 DILUTED EARNINGS PER SHARE AS REPORTED $ 3.11 $ 2.15 $ 3.22 PRO FORMA $ 2.96 $ 2.05 $ 3.15 NEW ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. SFAS No. 143's primary impact on the Company relates to the accounting of quarry reclamation obligations. The Company will adopt SFAS No. 143 in the first quarter of Fiscal 2004, and, based on current circumstances, does not believe that the adoption of SFAS No. 143 will have a material impact on the Company's financial position or results of operations. In July 2002, the Financial Accounting Standards Board issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between SFAS No. 146 and EITF Issue No. 94-3 relates to SFAS No. 146's requirement for recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF Issue No. 94-3, a liability for an exit cost 13 Centex Construction Products, Inc. and Subsidiaries

was recognized at the date an entity committed to an exit plan. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this standard is not expected to have a material impact on the consolidated financial statements of the Company. In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires a guarantor to recognize a liability for the fair value of the obligation at the inception of the guarantee. The disclosure requirements of FIN 45, which are already effective, are disclosed in Note F - "Commitments and Contingencies," while the recognition provisions will be applied on a prospective basis to guarantees issued after December 31, 2002. The Company does not expect the adoption of FIN 45 to have a material effect on its consolidated financial statements. In January 2003, the Financial Accounting Standard Board issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), clarifying the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of FIN 46 are applicable no later than July 1, 2003. The Company is currently evaluating the impact of FIN 46 on its consolidated financial statements. In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 provides for expanded disclosure concerning stock-based compensation, including disclosures in interim financial statements, and amends SFAS No. 123. SFAS No. 148's transition guidance and provisions for annual disclosures are effective for fiscal years ending after December 15, 2002. As noted earlier, the Company adopted the disclosure requirements of SFAS No. 148. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of purchase price over net assets of businesses acquired. The Company elected to early adopt SFAS No. 142, "Goodwill and Other Intangible Assets," effective April 1, 2001. With the adoption of SFAS No. 142, goodwill is no longer subject to amortization over its estimated useful life. Rather, intangible assets, including goodwill, that are not subject to amortization will be tested for impairment annually at the reporting unit level using a two-step impairment assessment. Impairment testing must be performed more frequently if events or changes in circumstances indicate that the asset might be impaired. The first step is to identify potential impairment by determining whether the carrying amount of a reporting unit exceeds its fair value. If an impairment is identified, the second step of the goodwill impairment test is to measure the amount of impairment loss, if any. In case of impairment, the recorded costs would be written down to fair value on a discounted basis. On January 1, 2003, the Company completed the first step of its annual impairment assessment and determined that the fair value of its reporting units exceeds its carrying amounts. In making such determination, the Company evaluates the performance, on an undiscounted basis, of the underlying businesses which gave rise to such amount. There have been no material changes in the carrying amount of the Company's goodwill during the fiscal years ended March 31, 2003 and 2002. Goodwill amortization totaled zero in Fiscal 2003 and Fiscal 2002 and $1.0 million in Fiscal 2001. Prior to the early adoption of SFAS No. 142, goodwill was amortized over 20 years. The pro forma adoption of SFAS No. 142 for the fiscal year ended March 31, 2001 would have resulted in an increase in net earnings of $0.7 million with a $0.04 and $0.03 increase in basic and diluted earnings per share, respectively. The acquisition of the Strategic Assets that resulted in the recording of the Company's goodwill occurred in the middle of the third quarter of Fiscal 2001 (see Note J). Other intangibles are intangibles associated with the Strategic Assets purchase. Other intangibles are amortized on a straight-line basis over various periods between seven months and 15 years. Other intangibles amortization totaled $0.1 million in Fiscal 2003, $0.1 million in Fiscal 2002 and $0.2 million in Fiscal 2001. The balance of other intangibles at March 31, 2003 and 2002 was $1.1 million and $1.2 million, respectively. Other intangibles amortization expense for the next five years is estimated to be $0.1 million annually. Centex Construction Products, Inc. and Subsidiaries 14

REVENUE RECOGNITION Revenue from the sale of cement, gypsum wallboard, paperboard, concrete and aggregates is recognized when title and ownership are transferred upon shipment to the customer. Fees for shipping and handling are recorded as revenue, while costs incurred for shipping and handling are recorded as expenses. During Fiscal 2001, the Company adopted the provisions of the Emerging Issues Task Force ("EITF") Issue No. 00-10, "Accounting for Shipping and Handling Costs," which provides guidance regarding how shipping and handling costs incurred by the seller and billed to a customer should be treated. EITF 00-10 requires that all amounts billed to a customer in a sales transaction related to shipping and handling be classified as revenue, and the costs incurred by the seller for shipping and handling be classified as an expense. Historically, certain amounts the Company billed for shipping and handling had been shown as an offset to shipping costs which are recorded in cost of goods sold in the accompanying consolidated statements of earnings. There was no impact to the Company's income from operations or net income as a result of the adoption of EITF 00-10. Prior-year financial statements have been restated to conform to the requirements of EITF 00-10. The amount of billed shipping and handling costs reclassified from cost of goods sold to net sales in the accompanying consolidated statements of earnings in Fiscal 2001 was $61.9 million. Such costs totaled $62.8 million for Fiscal 2002 and $61.8 million for Fiscal 2003. RECLASSIFICATIONS Certain prior year balances have been reclassified to be consistent with the Fiscal 2003 presentation. (B) PROPERTY, PLANT AND EQUIPMENT Cost by major category and accumulated depreciation are summarized as follows: MARCH 31, ------------------------- 2003 2002 --------- --------- LAND AND QUARRIES $ 50,283 $ 49,049 PLANTS 691,389 693,606 BUILDINGS, MACHINERY AND EQUIPMENT 52,708 54,111 --------- --------- 794,380 796,766 ACCUMULATED DEPRECIATION (259,544) (230,283) --------- --------- $ 534,836 $ 566,483 ========= ========= During the second quarter of Fiscal 2003, the Company closed its Georgetown, Texas quarry and crushing plant. Assets written off during the second quarter as part of the Georgetown closure totaled $2.6 million. Portions of the Georgetown assets will be utilized at other company locations with the remainder to be sold. The Georgetown assets held for sale have been reclassified to other assets and totaled $0.7 million at March 31, 2003. During the first quarter of Fiscal 2003, all of the Company's recycled fiber collection centers were sold. (C)INDEBTEDNESS NOTE PAYABLE Note payable balances are set forth below: MARCH 31, -------------------- 2003 2002 ------- ------- RECEIVABLES SECURITIZATION FACILITY $25,257 $18,630 The weighted average interest rate of the note payable borrowings during Fiscal 2003 and 2002 was 1.7% and 4.2%, respectively. The interest rate on note payable debt was 1.3% and 2.0% at March 31, 2003 and 2002, respectively. The amount of accounts receivable pledged under the receivables securitization program at March 31, 2003 and 2002 was $36.9 million and $39.3 million, respectively. 15 Centex Construction Products, Inc. and Subsidiaries

LONG-TERM DEBT Long-term debt is set forth below: MARCH 31, ------------------------- 2003 2002 --------- --------- BANK DEBT, DUE MARCH 2006, UNSECURED $ 55,000 $ 163,000 SUBORDINATED NOTES, 9 1/2%, DUE JULY 2008, UNSECURED 510 510 PROPERTY NOTE, INTEREST AT 7%, DUE MARCH 2005, SECURED 160 240 LESS: CURRENT MATURITIES (80) (80) --------- --------- $ 55,590 $ 163,670 ========= ========= The weighted average interest rate of the bank debt borrowings during Fiscal 2003 and 2002 was 3.1% and 5.4%, respectively. The interest rate on the bank debt was 2.3% at March 31, 2003 and 3.7% at March 31, 2002. Maturities of long-term debt during the next five fiscal years are: 2004, $80; 2005, $80; 2006, $55,000; 2007, zero; 2008, zero; thereafter, $510. CREDIT FACILITIES On November 10, 2000, the Company's $35.0 million unsecured revolving credit facility used to finance its working capital and capital expenditures requirements was cancelled and replaced with a new $325.0 million senior revolving credit facility. During the quarter ended June 30, 2001, pursuant to an Amended and Restated Credit Agreement, the credit facility was amended to reduce the facility amount from $325.0 million to $275.0 million and to modify certain financial and other covenants (the "Amended Credit Facility"). During the quarter ended September 30, 2002, the Company again reduced the Amended Credit Facility from $275.0 million to $175.0 million. On March 25, 2003, pursuant to the Second Amended and Restated Credit Agreement, the Amended Credit Facility was amended to reduce the facility amount from $175.0 million to $155.0 million, modify certain financial and other covenants and extend the maturity date three years (the "New Credit Facility"). The principal balance of the New Credit Facility matures on March 25, 2006. At March 31, 2003 and 2002, the Company had $55.0 million outstanding under the New Credit Facility and $163.0 million outstanding under the Amended Credit Facility, respectively. The borrowings under the New Credit Facility are guaranteed by all major operating subsidiaries of the Company. At the option of the Company, outstanding principal amounts on the New Credit Facility bear interest at a variable rate equal to: (i) LIBOR, plus an agreed margin (ranging from 100 to 200 basis points), which is to be established quarterly based upon the Company's ratio of EBITDA to total funded debt; or (ii) an alternate base rate which is the higher of (a) the prime rate or (b) the federal funds rate plus 1/2% per annum, plus an agreed margin (ranging from 0 to 100 basis points). Interest payments are payable monthly or at the end of the LIBOR advance periods, which can be up to a period of six months at the option of the Company. Under the New Credit Facility, the Company is required to adhere to a number of financial and other covenants, including covenants relating to the Company's interest coverage ratio, consolidated funded indebtedness ratio and minimum tangible net worth. At March 31, 2003, $91.2 million of borrowings were available to the Company. Also on November 10, 2000, a subsidiary of the Company (the "Debtor Subsidiary") assumed $100.0 million of 9.5% senior subordinated notes (the "Notes") with a maturity date of July 15, 2008. Interest payments on the Notes are due on January 15 and July 15. The Notes are redeemable at the option of the Debtor Subsidiary, in whole or in part, at any time after July 15, 2003. Upon the acquisition of the Strategic Assets on November 10, 2000, the Debtor Subsidiary was required to commence a tender offer for the Notes at 101%. On December 20, 2000, $90.0 million in principal amount of the Notes was tendered, leaving $10.0 million outstanding. During the June 30, 2001 quarter, the Debtor Subsidiary commenced another tender offer for the Notes at 108.75%. On June 28, 2001, the Debtor Subsidiary purchased $9.5 million in principal amount of the Notes, leaving $0.5 million outstanding. Prior to the commencement of the second tender offer, the Debtor Subsidiary obtained the necessary consents from a majority of holders of the Notes to eliminate certain covenants and reporting requirements. Centex Construction Products, Inc. and Subsidiaries 16

On June 29, 2001, the Company entered into a $50.0 million trade receivable securitization facility (the "Receivables Securitization Facility"), which is funded through the issuance of commercial paper and backed by a 364-day committed bank liquidity arrangement. The Receivables Securitization Facility has a termination date of June 10, 2004, subject to a 364-day bank commitment that was renewed on June 28, 2002 for another 364-day period terminating on June 28, 2003. The Receivables Securitization Facility is fully consolidated on the balance sheet. Subsidiary company receivables are sold on a revolving basis first to the Company and then to a wholly owned special purpose bankruptcy remote entity of the Company. This entity pledges the receivables as security for advances under the facility. The purpose of the Receivables Securitization Facility is to obtain financing at a lower interest rate by pledging accounts receivable. The borrowed funds have been used to pay down borrowings under the New Credit Facility. Outstanding principal amounts under the Receivables Securitization Facility bear interest at the commercial paper rate plus a facility fee. Under the Receivables Securitization Facility, the Company is required to adhere to certain financial and other covenants that are similar to those in the New Credit Facility. The Company had $25.3 million outstanding under the Receivables Securitization Facility at March 31, 2003. The Company was in compliance with all financial ratios and tests at March 31, 2003 and throughout the fiscal year under the Amended Credit Facility, the New Credit Facility, the Notes and the Receivables Securitization Facility. The New Credit Facility has a $50.0 million letter of credit facility. Under the letter of credit facility, the Company pays a fee at a per annum rate equal to the applicable margin for Eurodollar loans in effect from time to time plus a one-time letter of credit fee in an amount equal to 0.125% of the initial stated amount. At March 31, 2003, the Company had $8.8 million of letters of credit outstanding. (D) INCOME TAXES The provision for income taxes includes the following components: FOR THE YEARS ENDED MARCH 31, ------------------------------------- 2003 2002 2001 -------- -------- ------- CURRENT PROVISION (BENEFIT) FEDERAL $ 0 $ (1,146) $ 7,423 STATE 259 (90) 2,034 -------- -------- ------- 259 (1,236) 9,457 DEFERRED PROVISION FEDERAL 26,919 18,949 20,900 STATE 1,829 2,280 2,477 -------- -------- ------- 28,748 21,229 23,377 -------- -------- ------- PROVISION FOR INCOME TAXES $ 29,007 $ 19,993 $32,834 ======== ======== ======= The effective tax rates vary from the federal statutory rates due to the following items: FOR THE YEARS ENDED MARCH 31, ---------------------------------------- 2003 2002 2001 -------- -------- -------- EARNINGS BEFORE INCOME TAXES $ 86,613 $ 59,699 $ 92,263 ======== ======== ======== INCOME TAXES AT STATUTORY RATE $ 30,315 $ 20,895 $ 32,292 INCREASES (DECREASES) IN TAX RESULTING FROM - STATE INCOME TAXES, NET 1,357 1,424 2,932 STATUTORY DEPLETION IN EXCESS OF COST (3,048) (2,556) (2,600) OTHER 383 230 210 -------- -------- -------- PROVISION FOR INCOME TAXES $ 29,007 $ 19,993 $ 32,834 ======== ======== ======== EFFECTIVE TAX RATE 33% 33% 36% 17 Centex Construction Products, Inc. and Subsidiaries

The deferred income tax provision results from the following temporary differences in the recognition of revenues and expenses for tax and financial reporting purposes: FOR THE YEARS ENDED MARCH 31, -------------------------------------- 2003 2002 2001 -------- -------- -------- EXCESS TAX DEPRECIATION AND AMORTIZATION $ 21,253 $ 39,951 $ 32,919 NET OPERATING LOSS CARRYOVER 3,757 (14,342) -- BAD DEBTS 32 26 (9,364) UNIFORM CAPITALIZATION (390) (259) (73) ACCRUAL CHANGES 3,390 (5,144) (317) OTHER 706 997 212 -------- -------- -------- $ 28,748 $ 21,229 $ 23,377 ======== ======== ======== Components of deferred income taxes are as follows: MARCH 31, ------------------------ 2003 2002 --------- -------- ITEMS GIVING RISE TO DEFERRED TAXES EXCESS TAX DEPRECIATION AND AMORTIZATION $ 111,934 $ 90,681 OTHER 5,203 5,295 --------- -------- 117,137 95,976 --------- -------- ITEMS GIVING RISE TO PREPAID TAXES ACCRUAL CHANGES (13,499) (17,149) NET OPERATING LOSS CARRYOVER (12,115) (14,342) BAD DEBTS (10,328) (10,360) UNIFORM CAPITALIZATION (734) (344) --------- -------- (36,676) (42,195) --------- -------- NET DEFERRED INCOME TAX LIABILITY $ 80,461 $ 53,781 ========= ======== In Fiscal 2002, deferred taxes of $15.3 million were recast to reflect an adjustment to deferred taxes and goodwill relating to the Strategic Assets Purchase. In Fiscal 2003, the Company utilized its regular and alternative minimum tax carryovers from Fiscal 2002. Remaining net operating loss carryovers available for Fiscal 2004 amount to $34.6 million and $4.0 million for regular and alternative minimum tax, respectively. The net operating loss carryovers, if unused, will expire after Fiscal 2022. (E) BUSINESS SEGMENTS The Company operates in four business segments: Cement, Gypsum Wallboard, Recycled Paperboard, and Concrete and Aggregates, with Cement and Gypsum Wallboard being the Company's principal lines of business. These operations are conducted in the United States and include the mining of limestone and the manufacture, production, distribution and sale of portland cement (a basic construction material which is the essential binding ingredient in concrete), the mining of gypsum and the manufacture and sale of gypsum wallboard, the manufacture and sale of recycled paperboard to the gypsum wallboard industry and other paperboard converters, the sale of readymix concrete and the mining and sale of aggregates (crushed stone, sand and gravel). These products are used primarily in commercial and residential construction, public construction projects and projects to build, expand and repair roads and highways. Demand for the Company's products is derived primarily from residential construction, commercial and industrial construction and public (infrastructure) construction which are highly cyclical and are influenced by prevailing economic conditions including interest rates and availability of public funds. Due to the low value-to-weight ratio of cement, concrete and aggregates, these industries are largely regional and local with demand tied to local economic factors that may fluctuate more widely than those of the nation as a whole. Centex Construction Products, Inc. and Subsidiaries 18

The Company operates four cement plants, ten cement distribution terminals, four gypsum wallboard plants, six gypsum wallboard reload centers, a gypsum wallboard distribution center, a recycled paperboard mill, nine readymix concrete batch plant locations and two aggregates processing plant locations. The principal markets for the Company's cement products are Texas, northern Illinois (including Chicago), the Rocky Mountains, northern Nevada, and northern California. Gypsum wallboard and recycled paperboard are distributed throughout the continental United States. Concrete and aggregates are sold to local readymix producers and paving contractors in the Austin, Texas area and northern California. The following table sets forth certain financial information relating to the Company's operations by segment: FOR THE YEARS ENDED MARCH 31, ----------------------------------------- 2003 2002 2001 --------- --------- --------- REVENUES CEMENT $ 173,198 $ 183,154 $ 178,783 GYPSUM WALLBOARD 212,790 183,500 187,347 PAPERBOARD 92,898 84,293 31,492 CONCRETE AND AGGREGATES 56,598 57,621 61,101 OTHER, NET 2,885 (355) 3,673 --------- --------- --------- 538,369 508,213 462,396 LESS: INTERSEGMENT SALES (37,112) (37,130) (21,269) --------- --------- --------- $ 501,257 $ 471,083 $ 441,127 ========= ========= ========= INTERSEGMENT SALES CEMENT $ 3,505 $ 5,093 $ 6,347 PAPERBOARD 32,959 31,461 14,393 CONCRETE AND AGGREGATES 648 576 529 --------- --------- --------- $ 37,112 $ 37,130 $ 21,269 ========= ========= ========= SEGMENT OPERATING EARNINGS CEMENT $ 54,430 $ 60,173 $ 59,614 GYPSUM WALLBOARD 27,196 4,643 27,097 PAPERBOARD 17,614 9,977 1,368 CONCRETE AND AGGREGATES (268) 4,401 7,554 OTHER, NET 2,885 (355) 3,673 CORPORATE GENERAL AND ADMINISTRATIVE (5,654) (5,486) (4,691) INTEREST EXPENSE, NET (9,590) (13,654) (2,352) --------- --------- --------- $ 86,613 $ 59,699 $ 92,263 ========= ========= ========= IDENTIFIABLE ASSETS CEMENT $ 141,617 $ 141,734 $ 145,696 GYPSUM WALLBOARD 322,580 341,724 353,104 PAPERBOARD 193,661 206,607 243,026 CONCRETE AND AGGREGATES 35,100 39,174 33,233 OTHER, NET 19,120 14,113 19,563 --------- --------- --------- $ 712,078 $ 743,352 $ 794,622 ========= ========= ========= CAPITAL EXPENDITURES CEMENT $ 4,916 $ 4,424 $ 6,199 GYPSUM WALLBOARD 3,028 1,197 4,521 PAPERBOARD 4,724 2,745 489 CONCRETE AND AGGREGATES 1,070 10,604 4,859 OTHER, NET 552 54 182 --------- --------- --------- $ 14,290 $ 19,024 $ 16,250 ========= ========= ========= DEPRECIATION, DEPLETION AND AMORTIZATION CEMENT $ 8,595 $ 8,370 $ 8,219 GYPSUM WALLBOARD 15,325 15,070 10,529 19 Centex Construction Products, Inc. and Subsidiaries

PAPERBOARD 7,739 7,921 3,164 CONCRETE AND AGGREGATES 3,651 3,052 2,924 OTHER, NET 1,481 1,395 35 ------- ------- ------- $36,791 $35,808 $24,871 ======= ======= ======= Segment operating earnings represent revenues less direct operating expenses, segment depreciation, and segment selling, general and administrative expenses. The Company accounts for intersegment sales at market prices. Corporate assets consist primarily of cash and cash equivalents, general office assets and miscellaneous other assets. Goodwill at March 31, 2003 was $40.3 million and $41.1 million at March 31, 2002 and 2001, respectively. The segment breakdown of goodwill at March 31, 2003 was Gypsum Wallboard ($33.3 million) and Paperboard ($7.0 million) and at March 31, 2002 and 2001 was Gypsum Wallboard ($33.3 million) and Paperboard ($7.8 million). Certain summarized financial information of the two cement joint ventures, in the aggregate, is presented below. Applicable financial statement amounts (i.e., 50% of respective amounts) that have been proportionately consolidated into the Company's financial statements are: FOR THE YEARS ENDED MARCH 31, --------------------------------- 2003 2002 2001 ------- ------- ------- REVENUES $74,692 $78,725 $77,701 COSTS AND EXPENSES $49,610 $51,623 $50,953 EARNINGS BEFORE INCOME TAXES $25,082 $27,102 $26,748 (F) COMMITMENTS AND CONTINGENCIES The Company, in the ordinary course of business, has various litigation, commitments and contingencies. Management believes that none of the litigation in which it or any subsidiary is involved, if finally determined unfavorably to the Company, would have a material adverse effect on the consolidated financial condition or results of operations of the Company. The Company's operations and properties are subject to extensive and changing federal, state and local laws, regulations and ordinances governing the protection of the environment, as well as laws relating to worker health and workplace safety. The Company carefully considers the requirements mandated by such laws and regulations and has procedures in place at all of its operating units to monitor compliance. Any matters which are identified as potential exposures under these laws and regulations are carefully reviewed by management to determine the Company's potential liability. Although management is not aware of any exposures which would require an accrual under SFAS No. 5, "Accounting for Contingencies," there can be no assurance that prior or future operations will not ultimately result in violations, claims or other liabilities associated with these regulations. The Company has certain deductible limits under its workers' compensation and liability insurance policies for which reserves are established based on the undiscounted estimated costs of known and anticipated claims. The Company has entered into standby letter of credit agreements relating to workers' compensation and auto and general liability self-insurance. At March 31, 2003, the Company had contingent liabilities under these outstanding letters of credit of approximately $8.8 million. The Company is currently contingently liable for performance under $3.2 million in performance bonds required by certain states and municipalities, and their related agencies. The bonds are principally for certain reclamation obligations and mining permits. The Company has indemnified the underwriting insurance company against any exposure under the performance bonds. In the Company's past experience, no material claims have been made against these financial instruments. In the ordinary course of business, the Company executes contracts involving indemnifications standard in the industry and indemnifications specific to a transaction such as sale of a business. These indemnifications might include claims relating to any of the following: environmental and tax matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier, and other commercial contractual relationships; and financial matters. While the maximum amount to which the Company may be exposed under such agreements cannot be estimated, it is the opinion of management that these indemnifications are not expected to have a material adverse effect on the Company's consolidated financial position or results of operations. The Company currently has no outstanding guarantees. Centex Construction Products, Inc. and Subsidiaries 20

The Company has a contract until October 2015 (subject to the purchaser's right to shorten the term to October 2010) to supply approximately 35% to 40% of the Lawton, Oklahoma mill's output of gypsum-grade recycled paperboard to another gypsum wallboard producer. The Company has certain operating leases covering manufacturing, transportation and certain other facilities and equipment. Rental expense for the fiscal years 2003, 2002, and 2001 totaled $2.9 million, $3.0 million and $2.6 million, respectively. Minimum annual rental commitments as of March 31, 2003, under noncancellable leases are set forth as follows: FISCAL YEAR TOTAL - ----------- ----- 2004 $2,517 2005 $1,777 2006 $1,036 2007 $ 599 2008 $ 54 THEREAFTER $4,504 (G) STOCK OPTION PLANS The Company has two stock option plans for certain directors, officers and key employees of the Company: the Centex Construction Products, Inc. Amended and Restated Stock Option Plan (the "1994 Plan") and the Centex Construction Products, Inc. 2000 Stock Option Plan (the "2000 Plan"). Although the 1994 Plan and the 2000 Plan provide that option grants may be at less than fair market value at the date of grant, the Company has consistently followed the practice of issuing options at or above fair market value at the date of grant. Under both plans, option periods and exercise dates may vary within a maximum period of 10 years. All option grants have been issued with vesting occurring near the end of the option grants' 10-year life; however, the option grants may qualify for early vesting, on an annual basis, if certain predetermined performance criteria are met. The Company records proceeds from the exercise of options as additions to common stock and capital in excess of par value. The federal tax benefit, if any, is considered additional capital in excess of par value. No charges or credits would be made to earnings unless options were to be granted at less than fair market value at the date of grant. A summary of the activity of the stock option plans is presented as follows: FOR THE YEARS ENDED MARCH 31, -------------------------------------------------------------------------------- 2003 2002 2001 --------------------- ------------------ ---------------------- WEIGHTED WEIGHTED WEIGHTED NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE OF EXERCISE OF EXERCISE OF EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------- -------- --------- --------- -------- -------- OUTSTANDING OPTIONS AT BEGINNING OF YEAR 1,069,499 $28.66 1,046,009 $28.77 803,208 $31.72 GRANTED 142,000 $42.88 109,500 $27.45 393,500 $22.63 EXERCISED (244,469) $22.94 (19,711) $18.24 (31,330) $12.79 CANCELLED (27,452) $30.93 (66,299) $31.55 (119,369) $32.55 --------- -------- --------- --------- --------- OUTSTANDING OPTIONS AT END OF YEAR 939,578 $32.23 1,069,499 $28.66 1,046,009 $28.77 ========= ======== ========= ========= ========= OPTIONS EXERCISABLE AT END OF YEAR 577,294 548,537 336,994 ========= ======== ========= ========= ========= WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED DURING THE YEAR $18.85 $14.95 $11.50 Centex Construction Products, Inc. and Subsidiaries 21

The following table summarizes information about stock options outstanding at March 31, 2003: OPTIONS OUTSTANDING OPTIONS EXERCISABLE ----------------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED NUMBER OF AVERAGE AVERAGE NUMBER OF AVERAGE SHARES REMAINING EXERCISE SHARES EXERCISE RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE OUTSTANDING PRICE - ------------------------ ----------- ---------------- -------- ----------- -------- $12.00 - $26.97 339,703 7.33 yrs $23.47 123,285 $22.09 $31.70 - $36.36 477,875 5.80 yrs $35.38 449,509 $35.57 $39.53 - $44.45 122,000 9.00 yrs $44.27 4,500 $39.53 ----------- ---------------- -------- ----------- 939,578 6.77 yrs $32.23 577,294 $32.72 =========== ================ ======== =========== Shares available for future stock option grants were 1,099,350 at March 31, 2003. (H) FAIR VALUE OF FINANCIAL INSTRUMENTS The fair values of the Company's long-term debt, before the interest rate swap, of which 99% has floating rate terms, have been estimated based upon the Company's current incremental borrowing rates for similar types of borrowing arrangements. The carrying values of the Company's long-term debt approximate fair value. All assets and liabilities which are not considered financial instruments have been valued using historical cost accounting. The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term maturities of these assets and liabilities. (I) AGREEMENTS WITH CENTEX CORPORATION On April 19, 1994 (the "Closing Date") the Company completed the sale of 11,730,000 shares, or 51%, of its common stock through an Initial Public Offering. Prior to that time, the Company was a wholly owned subsidiary of Centex. On the Closing Date the Company entered into certain agreements with Centex to define the Company's ongoing relationship with Centex. The major agreements are: Indemnification Agreement: The Company and Centex entered into an Indemnification Agreement, pursuant to which the Company and Centex agreed generally to indemnify each other against substantially all liabilities relating to the businesses of the Company and its subsidiaries as they had been and will be conducted, including environmental liabilities. Tax Separation Agreement: The Company and Centex entered into a Tax Separation Agreement (the "Tax Agreement"). The Tax Agreement (i) provides for the termination of any existing tax sharing or allocation arrangements between the Company and Centex, (ii) specifies the manner in which the federal income tax liability and certain state tax liabilities (including any subsequent adjustments to such federal and state liabilities) of the consolidated group of which Centex is the common parent (the "Group") will be allocated for the final year in which the Company is a member of the Group and for any prior tax year of the Group and (iii) specifies the manner in which audits or administrative or judicial proceedings relating to federal income taxes and certain state taxes of the Group will be controlled. Administrative Services: Centex Service Company ("CSC"), a subsidiary of Centex, provides the Company with employee benefit administration, public/investor relations and certain other services. The Administrative Services Agreement is renewable annually with the administrative fee determined on an annual basis. The Company paid CSC an administrative fee of $0.2 million in Fiscal 2003, 2002 and 2001, respectively. In addition, the Company reimburses CSC for its out-of-pocket expenses incurred in connection with the performance of such services. 22 Centex Construction Products, Inc. and Subsidiaries

(J) ACQUISITIONS On November 10, 2000, the Company and a wholly owned subsidiary (together, the "Purchasers") entered into a purchase agreement to acquire certain strategic assets as summarized below (collectively, the "Strategic Assets"): (1) A 1.1 billion square foot gypsum wallboard plant located in Duke, Oklahoma; (2) A short line railroad and railcars linking the Duke plant to adjacent railroads; (3) A 220,000 ton-per-year lightweight paper mill in Lawton, Oklahoma; and (4) A 50,000 ton-per-year Commerce City (Denver), Colorado paper mill. Pursuant to the purchase agreement, the Purchasers paid aggregate consideration consisting of (1) $338.2 million in cash, plus (2) the assumption by the subsidiary of $100.0 million of 9.5% senior subordinated notes due in 2008. In exchange for this consideration, the subsidiary acquired the assets described above and a $24.3 million net secured note receivable, which was collected during Fiscal 2002. The acquisition has been accounted for as a purchase, and accordingly, the purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair market values at the date of acquisition. The results of operations of the Strategic Assets since November 10, 2000 are included in the Company's financial statements. The fair value of tangible assets purchased, goodwill (prior to the adoption of SFAS 142, amortized over a 20-year period) and other intangible assets is as follows: CASH CONSIDERATION PAID CXP CASH $ 150,000 BANK BORROWINGS 188,200 --------- 338,200 CXP TRANSACTION COSTS 4,000 --------- TOTAL CASH CONSIDERATION 342,200 SUBORDINATED DEBT ASSUMED 100,000 LIABILITIES ASSUMED 24,358 --------- 466,558 FAIR VALUE OF PROPERTY, PLANT, EQUIPMENT, INVENTORY, RECEIVABLES, OTHER MISCELLANEOUS ASSETS AND APPLICABLE DEFERRED TAXES (423,039) --------- GOODWILL AND OTHER INTANGIBLE ASSETS $ 43,519 ========= The unaudited pro forma results for the fiscal year ended March 31, 2001 assume that the acquisition was completed on April 1, 2000: FOR THE YEAR ENDED MARCH 31, 2001 ------------------ REVENUES $520,380 NET EARNINGS $ 44,975 EARNINGS PER DILUTIVE SHARE $ 2.43 The pro forma results have been prepared for comparative purposes only and include certain adjustments such as additional depreciation expense, goodwill amortization and interest expense on new bank borrowings and debt assumed. They do not purport to be indicative of the results of operations which actually would have resulted had the combination been in effect at April 1, 2000 or of future results of operations of the consolidated entities. Centex Construction Products, Inc. and Subsidiaries 23

(K) PENSION AND PROFIT SHARING PLANS The Company has several defined benefit and defined contribution retirement plans which together cover substantially all of its employees. The Company is not a party to any multi-employer pension plan. Benefits paid under the defined benefit plans covering certain hourly employees are based on years of service and the employee's qualifying compensation over the last few years of employment. The Company's funding policy is to generally contribute amounts that are deductible for income tax purposes. The following table provides a reconciliation of the defined benefit plan obligations and fair value of plan assets over the two-year period ended March 31, 2003 and a statement of the funded status as of March 31, 2003 and 2002: 2003 2002 ------- ------- RECONCILIATION OF BENEFIT OBLIGATIONS BENEFIT OBLIGATION AT APRIL 1, $ 6,569 $ 5,589 SERVICE COST - BENEFITS EARNED DURING THE PERIOD 1,132 232 INTEREST COST ON PROJECTED BENEFIT OBLIGATION 520 419 ACTUARIAL LOSS 639 522 BENEFITS PAID (247) (193) ------- ------- BENEFIT OBLIGATION AT MARCH 31, 8,613 6,569 RECONCILIATION OF FAIR VALUE OF PLAN ASSETS FAIR VALUE OF PLAN ASSETS AT APRIL 1, 6,158 4,691 ACTUAL RETURN ON PLAN ASSETS (1,013) 124 EMPLOYER CONTRIBUTIONS 667 1,536 BENEFITS PAID (247) (193) ------- ------- FAIR VALUE OF PLANS AT MARCH 31, 5,565 6,158 FUNDED STATUS FUNDED STATUS AT MARCH 31, (3,048) (411) UNRECOGNIZED LOSS FROM PAST EXPERIENCE DIFFERENT THAN THAT ASSUMED AND EFFECTS OF CHANGES IN ASSUMPTIONS 1,219 1,794 UNRECOGNIZED PRIOR-SERVICE COST 3,786 614 ------- ------- NET AMOUNT RECOGNIZED (PREPAID PENSION COST INCLUDED IN OTHER ASSETS) $ 1,957 $ 1,997 ======= ======= Net periodic pension cost for the fiscal years ended March 31, 2003, 2002 and 2001, included the following components: FOR THE YEARS ENDED MARCH 31, ----------------------------- 2003 2002 2001 ----- ----- ----- SERVICE COST - BENEFITS EARNED DURING THE PERIOD $ 336 $ 232 $ 209 INTEREST COST OF PROJECTED BENEFIT OBLIGATION 520 419 379 EXPECTED RETURN ON PLAN ASSETS (490) (366) (463) AMORTIZATION OF TRANSITION ASSET 192 65 (52) AMORTIZATION OF PRIOR-SERVICE COST 150 103 101 ----- ----- ----- NET PERIODIC PENSION COST $ 708 $ 453 $ 174 ===== ===== ===== 24 Centex Construction Products, Inc. and Subsidiaries

The following table sets forth the rates used in the actuarial calculations of the present value of benefit obligations and the rate of return on plan assets: 2003 2002 2001 ---- ---- ---- WEIGHTED-AVERAGE DISCOUNT RATE 6.3% 7.0% 7.5% RATE OF INCREASE IN FUTURE COMPENSATION LEVELS 3.5% 3.5% 3.5% EXPECTED LONG-TERM RATE OF RETURN ON ASSETS 8.0% 8.0% 8.0% The Company had at March 31, 2003 a minimum pension liability of $2.9 million related to the accumulated benefit obligation in excess of the fair value of the plan assets. The Company also provides a profit sharing plan, which covers substantially all salaried and certain hourly employees. The profit sharing plan is a defined contribution plan funded by employer discretionary contributions and also allows employees to contribute on an after-tax basis up to 10% of their base annual salary. Employees are fully vested to the extent of their contributions and become fully vested in the Company's contributions over a seven-year period. Costs relating to the employer discretionary contributions for the Company's defined contribution plan totaled $2.3 million, $1.6 million and $1.5 million in fiscal years 2003, 2002 and 2001, respectively. In addition, as a part of the November 2000 Strategic Assets purchase, the Company agreed to provide to former employees of the seller, who became employed by the Company as a result of the November 2000 Strategic Asset purchase, benefits substantially comparable to those provided under the seller's welfare plans. These welfare plans included the seller's 401(k) plan which included employer matching percentages. As a result, the Company made matching contributions to its 401(k) plan totaling $0.1 million, $0.4 million and $0.2 million for these employees during fiscal years 2003, 2002 and 2001, respectively. (L) NET INTEREST EXPENSE The following components are included in interest expense, net: FOR THE YEARS ENDED MARCH 31, ------------------------------------ 2003 2002 2001 ------- -------- ------- INTEREST (INCOME) $ (65) $ (2,515) $(6,694) INTEREST EXPENSE 8,247 14,918 8,766 OTHER EXPENSES 1,408 1,251 280 ------- -------- ------- INTEREST EXPENSE, NET $ 9,590 $ 13,654 $ 2,352 ======= ======== ======= Interest income includes interest on investments of excess cash and interest on notes receivable. Components of interest expense include interest associated with the assumed subordinated debt, the New Credit Facility, the Amended Credit Facility, the Receivables Securitization Facility and commitment fees based on the unused portion of the New Credit Facility and Amended Credit Facility. Included in interest expense for Fiscal 2003 is $0.9 million of costs resulting from the early termination of one of the Company's interest rate swaps and the partial termination of the remaining interest rate swap relating to the reduction of the outstanding debt levels. Other expenses include amortization of debt issue costs, the New Credit Facility costs and the Amended Credit Facility costs. Centex Construction Products, Inc. and Subsidiaries 25

REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders of Centex Construction Products, Inc. We have audited the accompanying consolidated balance sheets of Centex Construction Products, Inc. and subsidiaries (the "Company") as of March 31, 2003 and 2002, and the related consolidated statements of earnings, stockholders' equity, and cash flow for each of the three years in the period ended March 31, 2003. 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. 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 consolidated financial position of Centex Construction Products, Inc. and subsidiaries at March 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States. As discussed in Note A to the consolidated financial statements, in fiscal year 2002, the Company changed its method of accounting for goodwill and other intangible assets. /s/ ERNST AND YOUNG LLP Dallas, Texas, May 9, 2003 26 Centex Construction Products, Inc. and Subsidiaries

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FISCAL YEAR 2003 COMPARED TO FISCAL YEAR 2002 OVERVIEW. Information presented for Fiscal 2003 and 2002 reflects the grouping of Centex Construction Products' businesses into four segments, consisting of Cement, Gypsum Wallboard, Recycled Paperboard and Concrete and Aggregates. Concrete and Aggregates are broken out separately in the segment discussions. Commercial construction, which is a significant component of the demand for the Company's products, has declined dramatically and is expected to remain at its currently depressed level. A large portion of the decline relates to the completion of pre-9/11 projects and the absence of projects to replace them. Infrastructure activity (road building) is performing short of expectations. With highway construction funding softening, and the downturn in commercial construction activity, U.S. cement consumption for calendar 2002 was below calendar 2001 consumption. Congress recently approved Fiscal 2003 TEA-21 funding (highway funding) in excess of $31 billion. Budget constraints at the State level are likely to adversely affect the actual level of public works tendered in calendar 2003. Although new housing and home repair activity remains strong, the gypsum wallboard industry experienced a softening in wallboard demand in the latter part of calendar 2002. While the industry reported a 1.8% increase in calendar 2002 consumption over calendar 2001 consumption, cumulative production volume at the Company's Gypsum Wallboard plants during Fiscal 2003 was 72% of its total capacity due to an "over capacity" situation in the gypsum wallboard industry. During September 2002, the Company implemented price increases of up to 15%; however, the price increase completely eroded by the end of calendar 2002 as monthly wallboard consumption from August 2002 to November 2002 was below the same months' consumption for the prior year. Pricing continued to soften and then stabilized in January 2003. During March 2003, the Company implemented a price increase that eroded and implemented another price increase in May 2003. Longer term, the level of wallboard demand and prices will be determined by the strength of the housing market and wallboard industry utilization levels. In Austin, Texas, which is the Company's primary concrete and aggregates market, the economy has been affected by weakened economic conditions which negatively impacted concrete and aggregates demand and pricing in the Austin market. On September 3, 2002, the Company announced the closing of its aggregates facility in Georgetown, Texas (near Austin, Texas). CONSOLIDATED RESULTS. Consolidated net revenues for Fiscal 2003 totaled $501.3 million, up 6% from $471.1 million for Fiscal 2002. Higher net sales prices in Gypsum Wallboard and Paperboard accounted for the majority of the revenue gain. Operating earnings of $96.2 million in Fiscal 2003 were up 31% from last fiscal year mainly due to a $22.6 million increase in Gypsum Wallboard operating earnings. Net interest expense of $9.6 million in Fiscal 2003 decreased $4.1 million from Fiscal 2002 due to lower interest rates and reduced debt levels. As a result of the foregoing, pre-tax earnings of $86.6 million were 45% above Fiscal 2002 pre-tax earnings of $59.7 million. The Fiscal 2003 effective tax rate of 33.5%, the same rate as in Fiscal 2002, resulted in Fiscal 2003 net earnings of $57.6 million, a 45% increase from $39.7 million in Fiscal 2002. Diluted earnings per share in Fiscal 2003 of $3.11 were 45% higher than the $2.15 for Fiscal 2002. The following table compares sales volumes, average unit sales prices and unit operating margins for the Company's operations: SALES VOLUME AVERAGE NET (THOUSANDS) SALES PRICE (1) OPERATING MARGIN ---------------- -------------------- --------------------- 2003 2002 2003 2002 2003 2002 ----- ----- ------- ------- ------- ------- CEMENT (TON) 2,361 2,441 $ 66.84 $ 67.69 $ 23.05 $ 24.66 GYPSUM WALLBOARD (MSF) 1,933 1,930 $ 87.12 $ 72.97 $ 14.07 $ 2.41 PAPERBOARD (TON) 225 210 $408.44 $398.13 $ 78.12 $ 47.49 CONCRETE (CUBIC YARD) 681 673 $ 53.68 $ 55.93 $ 2.74 $ 3.71 AGGREGATES (TON) 4,159 4,265 $ 4.51 $ 4.33 $ (0.51) $ 0.45 (1)As historically reported. Does not include freight and delivery costs billed to customers. Centex Construction Products, Inc. and Subsidiaries 27

CEMENT. Cement revenues for Fiscal 2003 were $173.2 million, down 5% from $183.2 million for the prior fiscal year due to decreased sales volume and lower sales prices. Operating earnings of $54.4 million decreased 10% from $60.2 million in Fiscal 2002, which had been an all-time high, due to a 3% decrease in sales volume, an $0.85 per ton sales price decline and a 2% increase in cost of sales. Cement sales volume of 2.36 million tons was 80,000 tons below Fiscal 2002 sales volume. The Company supplemented its Fiscal 2003 manufactured cement sales volume with 159,000 tons of purchased cement, down 98,000 tons from last fiscal year. All of the net sales volume decline came from purchased cement as all plants operated at their capacity and were "sold out." According to the Portland Cement Association, calendar 2002 U.S. total cement consumption of 119.8 million short tons was 3% below calendar 2001 consumption. Cement imports of 26.5 million short tons in calendar 2002 were 6.5% below prior year's cement imports. CXP's Fiscal 2003 average net sales price of $66.84 per ton was 1% below Fiscal 2002 as lower pricing in the northern California and Texas markets was partially offset by higher pricing in the Company's other markets. Cost of sales of $43.79 per ton increased $0.76 per ton over Fiscal 2002 due to higher maintenance and energy costs. GYPSUM WALLBOARD. Gypsum Wallboard revenues of $212.8 million increased 16% from Fiscal 2002 revenues. Higher average sales prices resulted in the revenue gain. Operating earnings totaled $27.2 million in Fiscal 2003, up 486% from $4.6 million in Fiscal 2002. Increased sales prices, partially offset by a $2.49 per MSF increase in cost of sales, resulted in the earnings gain. Sales volume of 1,933 million square feet ("MMSF") in Fiscal 2003 was level with Fiscal 2002 sales volume. The Company's wallboard plants ran at approximately 72% of total annual capacity during Fiscal 2003 and 70% in Fiscal 2002. The Company's plants are currently operating at less than full capacity. Excess production capacity continues to negatively impact industry utilization rates. U.S. wallboard consumption was 30.7 billion square feet in calendar 2002, the second highest level on record, up 1.8% from calendar 2001 consumption. Despite the erosion of the September 2002 price increase, Gypsum Wallboard's Fiscal 2003 average net sales price of $87.12 per thousand square feet ("MSF") increased 19% from Fiscal 2002's net sales price. Fiscal 2003 cost of sales of $73.06 per MSF increased 4% from last fiscal year's cost of sales due mostly to higher energy, paper and labor costs. PAPERBOARD. For Fiscal 2003, Paperboard reported revenues of $92.9 million and operating earnings of $17.6 million compared to revenues of $84.3 million and operating earnings of $10.0 million for Fiscal 2002. The operating earnings gain resulted from the combination of increased sales volume, higher sales prices and a 6% decrease in cost of sales. Included in Fiscal 2002's operating earnings is a $2.3 million loss associated with the closing of the Denver mill in last fiscal year's first quarter. Paperboard sales volume of 225,000 tons for this fiscal year was 7% greater than last fiscal year's sales volume due mostly to the sale this year of an additional 10,000 tons of kraft paper. The Company is now supplementing its gypsum wallboard paper sales volume with lower priced non-gypsum paper sales volume. The average net sales price of $408.44 per ton for Fiscal 2003 increased 3% from last year's average sales price of $398.13 per ton due to higher sales prices for all grades of paper. Cost of sales of $330.22 per ton was $20.32 per ton lower than last fiscal year's cost of sales due to decreased maintenance and chemical costs. CONCRETE AND AGGREGATES. Revenues from Concrete and Aggregates were $56.6 million in Fiscal 2003, down 2% from $57.6 million in Fiscal 2002. The revenue decline resulted mostly from lower Concrete sales prices. The Austin, Texas market, which is the Company's largest concrete market, continues to be negatively impacted by a depressed local economy. Fiscal 2003's operating loss of $268,000 declined 106% from operating earnings of $4.4 million in Fiscal 2002 mainly due to costs associated with the closing of the Georgetown quarry and lower Concrete and Aggregates operating margins. Concrete operating earnings of $1.9 million were 25% below Fiscal 2002 operating earnings due to a 4% decrease in sales prices, partially offset by a 3% decline in cost of sales. Concrete sales volume of 681,000 cubic yards in Fiscal 2003 was 8,000 cubic yards above Fiscal 2002 sales volume. Fiscal 2003's concrete net sales price of $53.68 per cubic yard was 4% lower than $55.93 per cubic yard in Fiscal 2002 due to slow demand in the Austin, Texas market. Cost of sales of $50.94 per cubic yard decreased 3% from Fiscal 2002 due to decreased materials costs at the Texas operation. Aggregates reported a Fiscal 2003 operating loss of $2.1 million compared to a $1.9 million operating profit in 28 Centex Construction Products, Inc. and Subsidiaries

Fiscal 2002. The earnings decline resulted from increased cost of sales along with costs associated with the closing of the Georgetown quarry. On September 3, 2002, the Company closed its aggregates quarry and processing plant in Georgetown, Texas. The decision to cease operations was due primarily to excessive manufacturing costs as well as to soft local market conditions. A portion of the plant and equipment will be deployed at the Company's other mining operations with the remainder to be sold. The amount written off during the second quarter of Fiscal 2003 from the closing was $2.6 million. Fiscal 2003 Aggregates sales volume of 4,159,000 tons was 3% below Fiscal 2002 due to a partial year of sales volume in Fiscal 2003 from the Georgetown operation. The average net sales price of $4.51 per ton for Fiscal 2003 was 4% higher than Fiscal 2002 due to the combination of less lower-priced Georgetown sales volume and higher sales prices at all other locations. Cost of sales (excluding Georgetown closure costs) increased 7% to $3.88 per ton in Fiscal 2003 due mostly to excessive Georgetown production cost prior to its closing. OTHER INCOME. Fiscal 2003 other income of $2.9 million compares to a $0.4 million loss in Fiscal 2002. Included in the Fiscal 2002 loss is $0.6 million from recycled center losses and $0.6 million of expenses related to the early retirement of subordinated debt. Other income consists of a variety of items that are non-segment operating in nature and includes clinker sales income, non-inventoried aggregates income, gypsum wallboard distribution center income, recycled fiber collection centers losses, trucking income, asset sales and other miscellaneous income and cost items. NET INTEREST EXPENSE. Net interest expense of $9.6 million in Fiscal 2003 declined from $13.7 million in Fiscal 2002 due to declining debt balances and lower borrowing costs. Included in last fiscal year's net interest expense is $2.5 million of interest income relating to a note receivable that was collected during Fiscal 2002's third quarter. Included in Fiscal 2003's net interest expense is $0.9 million of cost associated with the early termination of one of the Company's interest rate swap agreements and the partial termination of the remaining interest rate swap agreement. INCOME TAXES. The effective tax rate for Fiscal 2003 and 2002 was 33.5%. FISCAL YEAR 2002 COMPARED TO FISCAL YEAR 2001 OVERVIEW. Fiscal year 2002 marked the first full fiscal year of operating results from the Strategic Assets purchased in November 2000. The acquisition was accounted for under the purchase method of accounting. The principal assets acquired were a gypsum wallboard plant and a lightweight recycled paper mill. Demand in the Company's two principal business segments, Cement and Gypsum Wallboard, was at and near all-time highs, respectively, in Calendar 2001. Although the Company reported record Gypsum Wallboard shipments, sales volume at each of the Company's three heritage Gypsum Wallboard plants was down from the prior year due to "over capacity" in the gypsum wallboard industry. This imbalance also negatively impacted gypsum wallboard pricing early in the fiscal year. During the middle of Fiscal 2002, the Company implemented price increases that held for the remainder of the fiscal year, and at fiscal year end, the Company implemented an additional 15% price increase. Longer term, the level of wallboard demand and prices will be determined by the strength of the housing market and wallboard industry utilization levels. The Austin, Texas economy, which is the Company's primary Concrete and Aggregates market, is being affected by weakening economic conditions, and as a result, Concrete demand was negatively impacted. Aggregates and Concrete demand is characterized by a high level of dependence on public (infrastructure) spending. Funding for highway construction projects has been and continues at a high level, and as a result, Aggregates and Concrete demand remains strong. CONSOLIDATED RESULTS. Consolidated net revenues for Fiscal 2002 totaled $471.1 million, up 7% from $441.1 million for Fiscal 2001. Increased sales volume in all segments, except Concrete, and higher net sales prices, except for Gypsum Wallboard, resulted in the revenue gain. Operating earnings of $73.3 million in Fiscal 2002 were down 23% from last fiscal year mainly due to a $22.5 million decline in Gypsum Wallboard operating earnings. Net interest expense of $13.7 million in Fiscal 2002 increased $11.3 million over Fiscal 2001 due to a full year of debt outstanding in Fiscal 2002. As a result of the foregoing, pre-tax earnings of $59.7 million were 35% below Fiscal 2001 pre-tax earnings of $92.3 million. The Fiscal 2002 effective tax rate of 33.5% resulted in Fiscal 2002 net earnings of $39.7 million, a 33% decline from $59.4 million in Fiscal 2001. Diluted earnings per share in Fiscal 2002 of $2.15 were 33% lower than the $3.22 for Fiscal 2001. Centex Construction Products, Inc. and Subsidiaries 29

The following table compares sales volume, average unit sales prices and unit operating margins for the Company's segments: SALES VOLUME AVERAGE NET (THOUSANDS) SALES PRICE (1) OPERATING MARGIN ---------------- -------------------- -------------------- 2002 2001 2002 2001 2002 2001 ----- ----- ------- ------- ------- ------- CEMENT (TON) 2,441 2,387 $ 67.69 $ 67.65 $ 24.66 $ 24.98 GYPSUM WALLBOARD (MSF) 1,930 1,584 $ 72.97 $ 91.12 $ 2.41 $ 17.11 PAPERBOARD (TON) 210 80 $398.13 $386.32 $ 47.49 $ 17.04 CONCRETE (CUBIC YARD) 673 808 $ 55.93 $ 53.70 $ 3.71 $ 7.38 AGGREGATES (TON) 4,265 4,009 $ 4.33 $ 4.16 $ 0.45 $ 0.40 (1) As historically reported. Does not include freight and delivery costs billed to customers. CEMENT. Cement revenues for Fiscal 2002 were $183.2 million, up 2% from $178.8 million for the prior fiscal year due to increased sales volume. Operating earnings of $60.2 million, an all-time-high, increased 1% from $59.6 million in Fiscal 2001 due to a 2% increase in sales volume being partially offset by a 1% decline in operating margins. Cement sales volume of 2.44 million tons, also an all-time-high, was 54,000 tons higher than Fiscal 2001 sales volume. Favorable weather conditions and record U.S. cement consumption contributed to the sales volume gain. All plants experienced sales volume gains and again operated at their capacity and were "sold out." The Company supplemented its Fiscal 2002 manufactured cement sales volume with 257,000 tons of purchased cement, up 99,000 tons from last fiscal year. Fueled by strong infrastructure spending, calendar 2001 U.S. total cement consumption of 123.8 million short tons was 3% above calendar 2000 consumption. Cement imports of 28.4 million short tons in calendar 2001 were 10% below prior year's cement imports. The Fiscal 2002 average net sales price of $67.69 per ton was level with Fiscal 2001 as lower pricing in the Illinois and Texas markets was offset by higher pricing in the Company's western markets. Operating margin of $24.66 per ton decreased $0.32 per ton from Fiscal 2001 due to higher power, fuel and maintenance costs and the cost impact from the 63% increase in higher cost purchased cement sales volume. GYPSUM WALLBOARD. Fiscal 2002 Gypsum Wallboard revenues of $183.5 million decreased 2% from Fiscal 2001 revenues. Lower average sales prices, partially offset by increased sales volume, resulted in the revenue decline. Operating earnings totaled $4.6 million in Fiscal 2002, down 83% from $27.1 million in Fiscal 2001. Increased sales volume offset by an 86% decrease in operating margins, due primarily to lower pricing, resulted in the earnings decline. Sales volume of 1,930 million square feet ("MMSF") in Fiscal 2002 increased 22% from Fiscal 2001 sales volume. Fiscal 2002 sales volume gain resulted from a full year of sales from the Oklahoma wallboard plant that was acquired during the middle of Fiscal 2001's third quarter, partially offset by reduced shipments at each of the Company's heritage wallboard plants. The Company's wallboard plants ran at approximately 70% of combined annual capacity during Fiscal 2002 compared to 82% last fiscal year. The Company's plants were operating at less than full capacity. Excess production capacity continues to negatively impact industry utilization rates. U.S. wallboard consumption was 30.2 billion square feet in calendar 2001, the second highest level on record. Gypsum Wallboard's Fiscal 2002 average net sales price of $72.97 per thousand square feet ("MSF") declined 20% from Fiscal 2001's net sales price. Pricing declined during the first part of Fiscal 2002 until the Company successfully implemented price increases late in Fiscal 2002's second quarter. Pricing held during the remainder of Fiscal 2002, and at fiscal year end, the Company implemented an additional 15% price increase. Operating margin of $2.41 per MSF declined 86% from Fiscal 2001's $17.11 per MSF operating margin. The operating margin decline resulted from lower sales prices, partially offset by a $3.45 per MSF decrease in cost of sales. Fiscal 2002 cost of sales of $70.56 per MSF decreased 5% from last fiscal year's cost of sales due to reduced energy costs and the impact from lower Duke production cost, partially offset by the impact on fixed costs from decreased production volume at the Company's heritage wallboard plants. PAPERBOARD. Paperboard reported Fiscal 2002 revenues and operating earnings of $84.3 million and $10.0 million, respectively, compared to revenues of $31.5 million and operating earnings of $1.4 million in Fiscal 2001. The Paperboard 30 Centex Construction Products, Inc. and Subsidiaries

operations were acquired during the third quarter of Fiscal 2001. Fiscal 2002 revenues of $84.3 million increased 168% from Fiscal 2001 due to a full year of sales volume and higher net pricing. Fiscal 2002 sales volume of 210,000 tons was 162% greater than the prior year's sales volume. Approximately 32% of Fiscal 2002 sales volume was sales to the Company's gypsum wallboard plants. The average net sales price of $398.13 per ton increased 3% from Fiscal 2001's net sales price. Fiscal 2002's net sales price was favorably impacted by the smaller percentage of lower-priced non-gypsum paper sales volume to total sales volume. Operating earnings of $10.0 million for Fiscal 2002 increased 629% from Fiscal 2001 due to increased sales volume and higher operating margins. Operating earnings were negatively impacted early in Fiscal 2002 by costs associated with closing the Denver mill on April 23, 2001. The Denver mill's production requirements were transferred to the Lawton, Oklahoma mill. The Denver mill reported a $2.3 million loss for Fiscal 2002. Cost of sales of $350.64 per ton for Fiscal 2002 declined 5% from Fiscal 2001's cost of sales. Reduced energy costs and improved operating efficiencies were major contributors to the cost of sales reduction. Excluding the Denver mill results, Fiscal 2002's cost of sales would have been $339.22 per ton. The Lawton mill is now capable of running at its designed capacity of 220,000 tons annually. The recycled paper centers were sold after Fiscal 2002's year end. Fiscal 2002 recycled paper center operating losses of $0.6 million are reported in other income. CONCRETE AND AGGREGATES. Revenues from Concrete and Aggregates were $57.6 million in Fiscal 2002, down 6% from $61.1 million in Fiscal 2001. The revenue decline resulted from decreased Concrete sales volume, partially offset by higher Concrete and Aggregates sales prices and increased Aggregates sales volume. The Austin, Texas market, which is the Company's largest Concrete and Aggregates market, has enjoyed exemplary growth over the past decade. However, in Fiscal 2002, Austin was negatively impacted by the troubles of the technology companies. Fiscal 2002 operating earnings of $4.4 million declined 42% from $7.6 million in Fiscal 2001. Decreased Concrete sales volume and operating margins, partially offset by increased Aggregates sales volume and operating margins, resulted in the earnings decline. Concrete operating earnings of $2.5 million for Fiscal 2002 were 58% below Fiscal 2001 operating earnings. Concrete sales volume of 673,000 cubic yards in Fiscal 2002 declined 17% from Fiscal 2001 due to decreased demand in the Austin, Texas market. Concrete's Fiscal 2002 net sales price of $55.93 per cubic yard was 4% higher than the $53.70 per cubic yard in Fiscal 2001. The net sales price gain resulted mainly from higher prices in the California market. The Austin, Texas market experienced some price weakening late in Fiscal 2002. Cost of sales of $52.22 per cubic yard in Fiscal 2002 increased 13% from Fiscal 2001 due to higher materials and operating costs. Aggregates Fiscal 2002 operating earnings of $1.9 million increased 20% from $1.6 million in Fiscal 2001 as a result of increased sales volume and higher operating margins. Fiscal 2002 Aggregates sales volume of 4,265,000 tons was 6% greater than Fiscal 2001 due to 223,000 tons of additional sales volume from the Texas operations. The Georgetown Aggregates plant expansion was completed mid-Fiscal 2002 and by fiscal year-end was producing commercial aggregates products. The average net sales price of $4.33 per ton for Fiscal 2002 was 4% higher than $4.16 per ton in Fiscal 2001. Cost of sales of $3.88 per ton in Fiscal 2002 increased 3% from Fiscal 2001 due to increased production costs at the Texas operations. NET INTEREST EXPENSE. Net interest expense of $13.7 million in Fiscal 2002 was $11.3 million greater than the $2.4 million in Fiscal 2001 due to a full year of debt outstanding in Fiscal 2002. On November 10, 2000, the Company utilized $150.0 million of cash on hand and incurred $280.0 million of new debt to complete the acquisition of the Strategic Assets. The increase in net interest expense was somewhat mitigated by declining interest rates on the Company's variable rate debt. OTHER INCOME. Fiscal 2002 other income recorded a $0.4 million loss compared to a $3.7 million profit in Fiscal 2001. Included in the Fiscal 2002 loss is $0.6 million of recycled center losses, $0.6 million of expenses related to the early retirement of subordinated debt and $0.4 million less distribution center income. Included in Fiscal 2001 results is a $1.9 million gain on the disposition of investment securities owned by the Company. Other income consists of a variety of items that are non-segment operating in nature and includes clinker sales income, non-inventoried aggregates income, gypsum wallboard distribution center income, recycled waste paper earnings, trucking income, asset sales and other miscellaneous income and cost items. CRITICAL ACCOUNTING POLICIES Certain of the Company's critical accounting policies require the use of judgment in their application or require estimates of inherently uncertain matters. Although the Company's accounting policies are in compliance with generally accepted accounting principles, a change in the facts and circumstances of the underlying transactions could significantly change Centex Construction Products, Inc. and Subsidiaries 31

the application of the accounting policies and the resulting financial statement impact. Listed below are those policies that the Company believes are critical and require the use of complex judgment in their application. IMPAIRMENT OF LONG-LIVED ASSETS. The Company assesses long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for impairment are significantly impacted by estimates of revenues, costs and expenses and other factors. If these 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. GOODWILL. The Company early adopted the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets." Upon the adoption of SFAS No. 142, goodwill is no longer subject to amortization. Rather, goodwill will be subject to at least an annual assessment for impairment by applying a fair-value-based test. If the carrying amounts exceed the fair value, an impairment has occurred. The Company continually evaluates whether events and circumstances have occurred that indicate the remaining balance of goodwill may not be recoverable. In evaluating impairment, the Company estimates the sum of the expected future cash flows derived from such goodwill over its remaining life. Similar to the review for impairment of other long-lived assets, evaluations for impairment are significantly impacted by estimates of future prices for the Company's products, capital needs, economic trends and other factors. ENVIRONMENTAL LIABILITIES. The Company's operations are subject to state, federal and local environmental laws and regulations, which impose liability for cleanup or remediation of environmental pollution and hazardous waste arising from past acts; and require pollution control and prevention, site restoration and operating permits and/or approvals to conduct certain of its operations. The Company records environmental accruals when it is probable that a reasonably estimable liability has been incurred. Environmental remediation accruals are based on internal studies and estimates, including shared financial liability with third parties. Environmental expenditures that extend the life, increase the capacity, improve the safety or efficiency of assets or mitigate or prevent future environmental contamination may be capitalized. Other environmental costs are expensed when incurred. VALUATION OF ACCOUNTS RECEIVABLE. The Company evaluates the collectibility of accounts receivable based on a combination of factors. In circumstances when the Company is aware of a specific customer's inability to meet its financial obligation to the Company, the balance in the reserve for doubtful accounts is evaluated, and if determined to be deficient, a specific amount will be added to the reserve. For all other customers, the reserve for doubtful accounts is determined by the length of time the receivables are past due or the status of the customer's financial condition. LIQUIDITY AND CAPITAL RESOURCES On November 10, 2000, the Company's $35.0 million unsecured revolving credit facility used to finance its working capital and capital expenditures requirements was cancelled and replaced with a new $325.0 million senior revolving credit facility. During the quarter ended June 30, 2001, pursuant to an Amended and Restated Credit Agreement, the credit facility was amended to reduce the facility amount from $325.0 million to $275.0 million and to modify certain financial and other covenants (the "Amended Credit Facility"). During the quarter ended September 30, 2002, the Company again reduced the Amended Credit Facility amount from $275.0 million to $175.0 million. On March 25, 2003, pursuant to the Second Amended and Restated Credit Agreement, the Amended Credit Facility was amended to reduce the facility amount from $175.0 million to $155.0 million, modify certain financial and other covenants and extend the maturity date three years (the "New Credit Facility"). The principal balance of the New Credit Facility matures on March 25, 2006. At March 31, 2003 and 2002, the Company had $55.0 million outstanding under the New Credit Facility and $163.0 million outstanding under the Amended Credit Facility, respectively. The borrowings under the New Credit Facility are guaranteed by all major operating subsidiaries of the Company. At the option of the Company, outstanding principal amounts on the New Credit Facility bear interest at a variable rate equal to: (i) LIBOR, plus an agreed margin (ranging from 100 to 200 basis points), which is to be established quarterly based upon the Company's ratio of EBITDA to total funded debt; or (ii) an alternate base rate which is the higher of (a) the prime rate or (b) the federal funds rate plus 1/2% per annum, plus an agreed margin (ranging from 0 to 100 basis points). Interest payments are payable monthly or at the end of the LIBOR advance periods, which can be up to a period of six months at the option of the Company. Under 32 Centex Construction Products, Inc. and Subsidiaries

the New Credit Facility, the Company is required to adhere to a number of financial and other covenants, including covenants relating to the Company's interest coverage ratio, consolidated funded indebtedness ratio and minimum tangible net worth. The Company had $91.2 million and $105.8 million of borrowings available at March 31, 2003 and 2002, respectively. Also, on November 10, 2000, a subsidiary of the Company (the "Debtor Subsidiary") assumed $100.0 million of 9.5% senior subordinated notes (the "Notes") with a maturity date of July 15, 2008. Interest payments on the Notes are due on January 15 and July 15. The Notes are redeemable at the option of the Debtor Subsidiary, in whole or in part, at any time after July 15, 2003. Upon the acquisition of certain strategic assets on November 10, 2000, the Debtor Subsidiary was required to commence a tender offer for the Notes at 101%. On December 20, 2000, $90.0 million in principal amount of the Notes was tendered, leaving $10.0 million outstanding. During the June 30, 2001 quarter, the Debtor Subsidiary commenced another tender offer for the Notes at 108.75%. On June 28, 2001, the Debtor Subsidiary purchased $9.5 million in principal amount of the Notes, leaving $0.5 million outstanding. Prior to the commencement of the second tender offer, the Debtor Subsidiary obtained the necessary consents from a majority of holders of the Notes to eliminate certain covenants and reporting requirements. On June 29, 2001, the Company entered into a $50.0 million trade receivables securitization facility (the "Receivables Securitization Facility"), which is funded through the issuance of commercial paper and backed by a 364-day committed bank liquidity arrangement. The Receivables Securitization Facility has a termination date of June 10, 2004, subject to a 364-day bank commitment that was renewed on June 28, 2002 for another 364-day period terminating on June 28, 2003. The purpose of the Receivables Securitization Facility is to obtain financing at a lower interest rate by pledging accounts receivable. The Receivables Securitization Facility is fully consolidated on the balance sheet. Subsidiary company receivables are sold on a revolving basis first to the Company and then to a wholly owned special purpose bankruptcy remote entity of the Company. This entity pledges the receivables as security for advances under the facility. The borrowed funds are used to pay down borrowings under the New Credit Facility. Outstanding principal amounts under the Receivables Securitization Facility bear interest at the commercial paper rate plus a facility fee. Under the Receivables Securitization Facility, the Company is required to adhere to certain financial and other covenants that are similar to those in the New Credit Facility. The Company had $25.3 million and $18.6 million outstanding under the Receivables Securitization Facility at March 31, 2003 and 2002, respectively. The Company funds the growth of its business through the combination of cash flow from operations, advances under the receivables securitization program and bank borrowings. Liquidity is not currently dependent on the use of off-balance sheet transactions other than normal operating leases. The Company believes that cash on hand, cash provided by operations and funds available under the Receivables Securitization Facility and the New Credit Facility should be sufficient to cover working capital needs, capital expenditures and debt service requirements for the next twelve months. Other than the Receivables Securitization Facility and the New Credit Facility, the Company has no other financing alternatives in place. In the event the Receivables Securitization Facility is terminated, funds should be available under the New Credit Facility to repay borrowings. However, if the New Credit Facility is terminated, no assurance can be given as to the Company's ability to secure a new source of financing. Consequently, if a balance is outstanding on the New Credit Facility at the time of termination, and an alternative source of financing cannot be secured, it would have a material adverse impact on the Company. The Company uses interest rate swaps to mitigate interest rate risk associated with its variable rate debt. On July 19, 2001, the Company entered into two interest rate swap agreements which have the effect of converting a total notional amount of $100.0 million of the Company's debt from a variable rate of interest to a fixed rate of interest. The Company receives three month LIBOR and pays a fixed rate of interest under these agreements. These agreements expire on August 28, 2003. On November 22, 2002, the Company terminated one of its interest rate swap agreements with a notional amount of $25.0 million. On February 28, 2003, the Company terminated $20.0 million of the remaining $75.0 million interest rate swap agreement. At March 31, 2003, the Company recorded a cumulative net after-tax loss of $0.6 million to Accumulated Other Comprehensive Losses for the change in fair value of the remaining swap agreement. Centex Construction Products, Inc. and Subsidiaries 33

The Company does not have any off balance sheet debt, except for operating leases (see Note F). Other than the Receivables Securitization Facility, the Company does not have any other transactions, arrangements or relationships with "special purpose" entities. Also, the Company has no outstanding debt guarantees. The Company has available under the New Credit Facility a $50.0 million Letter of Credit Facility. At March 31, 2003, the Company had $8.8 million of letters of credit outstanding that renew annually. Also, the Company is contingently liable for performance under $3.2 million in performance bonds relating primarily to its mining operations. Based on its financial condition at March 31, 2003, the Company believes that its internally generated cash flow coupled with funds available under various credit facilities will enable it to provide adequately for its current operations and future growth. The Company was in compliance at March 31, 2003 and during the twelve months ended March 31, 2003 with all the terms and covenants of its credit agreements. Working capital at March 31, 2003 was $28.2 million compared to $26.5 million at March 31, 2002. The increase resulted from a $2.2 million increase in cash and a $8.5 million decline in accounts payable and accrued liabilities, partially offset by a $6.6 million increase in note payable and a $2.4 million decrease in accounts and notes receivable and inventories. Cash and cash equivalents increased $2.2 million from March 31, 2002 to $13.6 million at March 31, 2003. The net cash provided by or used in the operating, investing, and financing activities for the fiscal years ended March 31, 2003 and 2002 is summarized below: FOR THE YEARS ENDED MARCH 31, ----------------------------- 2003 2002 --------- --------- (dollars in thousands) NET CASH PROVIDED BY (USED IN): OPERATING ACTIVITIES $ 120,663 $ 120,643 INVESTING ACTIVITIES (10,876) (18,169) FINANCING ACTIVITIES (107,591) (99,818) --------- --------- NET INCREASE IN CASH $ 2,196 $ 2,656 ========= ========= Cash provided by operating activities of $120.7 million for Fiscal 2003 was level with last fiscal year. A $17.9 million increase in net earnings and a $8.5 million increase in deferred tax liability and depreciation was offset by a $29.5 million decrease in net working capital. The majority of the working capital decline was due to the collection in Fiscal 2002 of a $24.3 million note receivable. Cash used for investing activities of $10.9 million declined $7.3 million compared to last fiscal year due to the combination of a $2.6 million increase in asset sale proceeds and a $4.7 million decrease in capital expenditures. Cash used in financing activities for this fiscal year of $107.6 million increased $7.8 million over last fiscal year due to an additional $5.0 million net reduction in total debt and $8.1 million in stock repurchases, partially offset by a $5.4 million increase in net proceeds from stock option exercises. During Fiscal 2003 total debt was reduced by $101.5 million from $182.4 million at March 31, 2002 to $80.9 million at March 31, 2003. Debt-to-Capitalization at March 31, 2003 was 14.4%, down from 29.9% at March 31, 2002. In Fiscal 2003, the Company utilized its regular and alternative minimum tax carryovers from Fiscal 2002. Remaining net operating loss carryovers available for Fiscal 2003 amount to $34.6 million and $4.0 million for regular and alternative minimum tax, respectively. The net operating loss carryovers, if unused, will expire after Fiscal 2022. OTHER DEVELOPMENTS On September 3, 2002, the Company announced the closing of its aggregates quarry and crushing plant in Georgetown, Texas, north of Austin. The decision to cease operations at the Georgetown plant was due primarily to excessive manufacturing costs as well as to soft local market conditions. A portion of the plant and equipment will be deployed to the Company's other mining operations. The unused portion of the plant and equipment will be sold. On March 31, 2003, the Company's President and Chief Executive Officer, Richard D. Jones, Jr., retired. He also resigned from the Company's Board of Directors. Laurence E. Hirsch assumed Mr. Jones' responsibilities and became its Chief Executive Officer. Mr. Hirsch has been the Company's Chairman since the Company became publicly held in 1994. Mr. Hirsch is also Chairman and Chief Executive Officer of the Company's majority owner, Centex Corporation, and has extensive experience in the construction products business. 34 Centex Construction Products, Inc. and Subsidiaries

STOCK REPURCHASE PROGRAM The Company's Board of Directors has approved the repurchase of a cumulative total of 6,101,430 shares of the Company's stock since the Company became publicly held in April 1994. The Company repurchased 223,384 shares at a cost of $8.1 million in Fiscal 2003 and no shares in Fiscal 2002. At March 31, 2003, Centex Corporation owned approximately 65.1% of the outstanding shares of the Company's common stock. At March 31, 2003, there are approximately 519,900 shares remaining under the Company's current repurchase authorization. PURCHASE OF STRATEGIC ASSETS On November 10, 2000, the Company acquired selected strategic assets. The purchase price was $342.2 million cash plus the assumption by a subsidiary of $100.0 million of subordinated debt. Funding came from cash on hand and borrowings under a new $325.0 million senior credit facility entered into during November 2000 (reduced to the current $155.0 million level). The principal strategic assets acquired were: a 1.1 billion square foot gypsum wallboard plant located at Duke, Oklahoma; a short line railroad and railcars linking the Duke plant to adjacent railroads; and a 220,000 ton-per-year lightweight recycled paperboard mill in Lawton, Oklahoma. The gypsum wallboard plant is operated by the Company's American Gypsum Company, located in Albuquerque, New Mexico. The paperboard operation is located in Lawton, Oklahoma and focuses primarily on the gypsum wallboard paper business. INFLATION AND CHANGING PRICES Inflation has become less of a factor in the U.S. economy as the rate of increase has moderated during the last several years. The Consumer Price Index rose approximately 2.4% in calendar 2002, 1.6% in 2001, and 3.4% in 2000. Prices of materials and services, with the exception of power and natural gas, have remained relatively stable over the three-year period. Strict cost control and improving productivity also minimize the impact of inflation. The ability to recover increasing costs by obtaining higher sales prices 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. GENERAL OUTLOOK Despite decreased cement consumption and eroding wallboard prices during Fiscal 2003, the outlook for Fiscal 2004 is favorable with cement and wallboard consumption forecasted to remain at relatively high levels. Cement prices are currently stable and a wallboard price increase has been implemented in early May, 2003. In addition, the profitability of CXP's paperboard operations continues to steadily increase as operating efficiencies continue to improve. Fiscal 2004 interest expense is expected to decline significantly as the Company continues to reduce debt. Like many other companies, CXP is experiencing cost pressures in areas such as natural gas and raw materials. Assuming prices and demand remain at current levels for CXP's products, along with the expected decline in interest expense, the Company expects to report higher earnings for Fiscal 2004 than it did for Fiscal 2003. RECENT ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. The Company will adopt SFAS No. 143 in the first quarter of Fiscal 2004, and, based on current circumstances, does not believe that the impact of adoption of SFAS No. 143 will have a material impact on the Company's financial position or results of operations. In July 2002, the Financial Accounting Standards Board issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities." This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between SFAS No. 146 and EITF Issue No. 94-3 relates to SFAS No. 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability for a cost associated with an exit Centex Construction Products, Inc. and Subsidiaries 35

or disposal activity be recognized when the liability is incurred. Under EITF Issue No. 94-3, a liability for an exit cost was recognized at the date an entity committed to an exit plan. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this standard is not expected to have a material impact on the consolidated financial statements of the Company. In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires a guarantor to recognize a liability for the fair value of the obligation at the inception of the guarantee. The disclosure requirements of FIN 45, which are already effective, are disclosed in Note F - "Commitments and Contingencies," while the recognition provisions will be applied on a prospective basis to guarantees issued after December 31, 2002. The Company does not expect the adoption of FIN 45 to have a material effect on its consolidated financial statements. In January 2003, the Financial Accounting Standard Board issued Interpretation No. 46, "Consolidation of Variable Interest Entities," clarifying the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements" ("FIN 46"), to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of FIN 46 are applicable no later than July 1, 2003. The Company is currently evaluating the impact of FIN 46 on its consolidated financial statements. In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 provides for expanded disclosure concerning stock-based compensation, including disclosures in interim financial statements, and amends SFAS No. 123. SFAS No. 148's transition guidance and provisions for annual disclosures are effective for fiscal years ended after December 15, 2002. As of March 31, 2003, the Company adopted the disclosure requirements of SFAS No. 148. FORWARD-LOOKING STATEMENTS Certain sections of this Management's Discussion and Analysis of Results of Operations and Financial Condition contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when the Company is discussing its beliefs, estimates or expectations. These statements involve known and unknown risks and uncertainties that may cause the Company's actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to: - - levels of construction spending in major markets - unfavorable weather conditions during peak construction periods - - supply/demand structure of cement and wallboard - changes in and implementation of environmental and other industries governmental regulations - - significant changes in the cost of fuel, energy and other raw materials - the ability to successfully identify, complete and - - availability of raw materials efficiently integrate acquisitions - - the cyclical nature of our business - the ability to successfully penetrate new markets - - national and regional economic conditions - international events that may disrupt the world economy - - interest rates - unexpected operation difficulties - - seasonality of our operations - competition from new or existing competitors In general, the Company is subject to the risks and uncertainties of the construction industry and of doing business in the U.S. The forward-looking statements are made as of the date of this report, and the Company undertakes no obligation to update them, whether as a result of new information, future events or otherwise. 36 Centex Construction Products, Inc. and Subsidiaries

SUMMARY OF SELECTED FINANCIAL DATA (dollars in thousands, except per share data) (unaudited) ----------------------------------------------- 2003 2002 2001 ----------- ----------- ----------- REVENUES(1) $501,257 $471,083 $441,127 NET EARNINGS $ 57,606 $ 39,706 $ 59,429 TOTAL ASSETS $712,078 $743,352 $794,622 TOTAL LONG-TERM DEBT $ 55,670 $163,750 $278,828 TOTAL DEBT $ 80,927 $182,380 $278,828 DEFERRED INCOME TAXES $ 80,461 $ 53,781 $ 33,363 STOCKHOLDERS' EQUITY $479,832 $427,832 $392,320 TOTAL DEBT AS A PERCENT OF TOTAL CAPITALIZATION (TOTAL DEBT AND STOCKHOLDERS' EQUITY) 14.4% 29.9% 41.5% NET EARNINGS AS A PERCENT OF BEGINNING STOCKHOLDERS' EQUITY 13.5% 10.1% 17.5% PER COMMON SHARE DILUTED NET EARNINGS(2) $ 3.11 $ 2.15 $ 3.22 CASH DIVIDENDS(3) $ 0.20 $ 0.20 $ 0.20 BOOK VALUE BASED ON SHARES OUTSTANDING AT YEAR END(2) $ 26.10 $ 23.30 $ 21.40 STOCK PRICES HIGH $ 45.25 $ 39.90 $ 33.50 LOW $ 31.25 $ 25.70 $ 21.75 (1) The Company adopted the provisions of Emerging Issues Task Force Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs," during fiscal year 2001. As a result of this adoption, net revenues have been restated to include freight and delivery costs billed to customers. Previously such billings were offset against corresponding expenses in cost of sales. (2) Prior to April 1994, CXP was a wholly owned subsidiary of Centex Corporation and accordingly did not report per share information. To facilitate comparisons between periods, per share data for 1994 has been presented using the 23,000,000 shares outstanding immediately after the Initial Public Offering. (3) Declared initial quarterly cash dividend of five cents per share on March 12, 1996. Centex Construction Products, Inc. and Subsidiaries 37

FOR THE YEARS ENDED MARCH 31, -------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- -------- -------- $470,465 $381,900 $344,264 $278,144 $258,637 $222,672 $193,038 $108,232 $ 77,289 $ 56,533 $ 41,799 $ 33,944 $ 21,820 $ 10,240 $438,139 $364,683 $351,112 $305,637 $269,575 $250,103 $257,315 $ 400 $ 480 $ 560 $ 640 $ 720 $ 24,500 $ 15,585 $ 400 $ 480 $ 560 $ 2,640 $ 720 $ 24,500 $ 16,200 $ 24,360 $ 25,158 $ 22,250 $ 18,835 $ 14,344 $ 6,705 $ 37,925 $340,472 $279,920 $274,803 $239,436 $216,462 $183,405 $170,839 0.1% 0.2% 0.2% 1.1% 0.3% 11.8% 8.7% 38.7% 28.1% 23.6% 19.3% 18.5% 12.8% 6.4% $ 5.63 $ 3.71 $ 2.56 $ 1.89 $ 1.47 $ 0.95 $ 0.45 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.05 -- -- $ 18.33 $ 14.18 $ 12.77 $ 10.89 $ 9.42 $ 7.99 $ 7.43 $ 41.81 $ 45.13 $ 39.00 $ 20.00 $ 15.50 $ 14.38 -- $ 22.63 $ 31.25 $ 18.00 $ 12.50 $ 11.38 $ 8.88 -- 38 Centex Construction Products, Inc. and Subsidiaries

QUARTERLY RESULTS (dollars in thousands, except per share data) (unaudited) 2003 2002 -------- -------- FIRST QUARTER REVENUES $128,775 $117,423 EARNINGS BEFORE INCOME TAXES $ 25,161 $ 8,142 NET EARNINGS $ 16,735 $ 5,455 DILUTED EARNINGS PER SHARE $ 0.90 $ 0.30 SECOND QUARTER REVENUES $135,993 $129,545 EARNINGS BEFORE INCOME TAXES $ 24,218 $ 17,921 NET EARNINGS $ 16,107 $ 11,880 DILUTED EARNINGS PER SHARE $ 0.87 $ 0.64 THIRD QUARTER REVENUES $119,089 $112,750 EARNINGS BEFORE INCOME TAXES $ 23,122 $ 17,427 NET EARNINGS $ 15,378 $ 11,590 DILUTED EARNINGS PER SHARE $ 0.83 $ 0.63 FOURTH QUARTER REVENUES $117,400 $111,365 EARNINGS BEFORE INCOME TAXES $ 14,112 $ 16,209 NET EARNINGS $ 9,386 $ 10,781 DILUTED EARNINGS PER SHARE $ 0.51 $ 0.58 Centex Construction Products, Inc. and Subsidiaries 39

BOARD OF CENTEX GEOFF W. GRAY MOUNTAIN CEMENT DIRECTORS CONSTRUCTION Vice President COMPANY PRODUCTS, INC. ROBERT L. CLARKE (2, 3) KEITH W. METCALF BRUCE E. BALLINGER Senior Partner, LAURENCE E. HIRSCH Vice President President Bracewell & Patterson, L.L.P. Chairman and Chief Executive Officer JOHN ARELLANO TIMOTHY R. ELLER MARY SCHAFER Vice President President and STEVEN R. ROWLEY Vice President Chief Operating Officer, Executive Vice President NEVADA CEMENT Centex Corporation and COMPANY Chief Operating Officer CENTEX NICHOLAS STIREN MATERIALS LLC President LAURENCE E. HIRSCH (1) H.D. HOUSE JOHN R. BREMNER Chairman and Executive Vice President- PHILIP BOWDEN Vice President Chief Executive Officer, Gypsum/Paperboard President Centex Corporation GARY J. ROMA and Chairman and GERALD J. ESSL J. DAVID LOFTIS Vice President Chief Executive Officer, Executive Vice President- Vice President Centex Construction Cement and Products, Inc. Concrete/Aggregates C. DOUGLAS WESTBROOK REPUBLIC Vice President PAPERBOARD COMPANY LLC MICHAEL R. NICOLAIS (2,3) JAMES H. GRAASS Managing Director, Executive Vice President, ILLINOIS CEMENT Stephens Inc. General Counsel and COMPANY H.D. HOUSE Secretary President DAVID W. QUINN ARTHUR R. ZUNKER, JR. WAYNE W. EMMER Former Vice Chairman, Senior Vice President- President Centex Corporation Finance, Treasurer and TEXAS - LEHIGH Chief Financial Officer CEMENT COMPANY L P WILLIAM C. BOOR THOMAS F. CLARKE ROBERT KIDNEW HAROLD K. WORK (2, 3) Senior Vice President- Vice President President Former Chairman, Marketing and Strategic Elcor Corporation Planning R. LEE HUNTER Vice President RODNEY E. CUMMICKEL FRANK P. KOEPPEL Vice President Vice President JASON L. GIBERT (Numbers in parentheses HUBERT L. SMITH, JR. Vice President indicate board committees) Vice President WESTERN AMERICAN MATHEWS AGGREGATES LLC (1) Executive Committee GYPSUM COMPANY READY MIX LLC JOE CHEVREAUX, JR. H.D. HOUSE President (2) Compensation and Stock President JOE CHEVREAUX, JR. Option Committee President JAMES D. ELLIOTT DAVID B. POWERS Vice President (3) Audit Committee Executive Vice President- JAMES D. ELLIOTT Marketing Vice President KERRY G. GANNAWAY Vice President 40 Centex Construction Products, Inc. and Subsidiaries

CORPORATE HEADQUARTERS 2728 N. Harwood, Suite 600 Dallas, Texas 75201-1516 (214) 981-5000 (Telephone) (214) 981-6559 (Fax) Mailing Address: P.O. Box 199000 Dallas, Texas 75219-9000 TRANSFER AGENT AND REGISTRAR Mellon Investor Services LLC 85 Challenger Road Overpeck Center Ridgefield Park, NJ 07660 1-800-635-9270 (Toll-Free) STOCK LISTINGS New York Stock Exchange Ticker Symbol "CXP" ANNUAL MEETING The Annual Meeting of Stockholders of Centex Construction Products, Inc. will be held on Monday, July 21, 2003 at 10:00 a.m. on the 10th floor at its corporate office, 2728 N. Harwood, Dallas, Texas. STOCKHOLDER INQUIRIES Communications concerning transfer requirements, lost certificates, dividends or change of address should be sent to Mellon Investor Services LLC at the address listed above. FORM 10-K A copy of the Annual Report on Form 10-K of Centex Construction Products, Inc. is available upon request to the Senior Vice President-Finance at corporate headquarters. Centex Construction Products, Inc. and Subsidiaries 41

(CENTEX CONSTRUCTION PRODUCTS LOGO)

EXHIBIT 21 THE FOLLOWING IS A LIST OF SUBSIDIARIES OF CENTEX CONSTRUCTION PRODUCTS, INC., WHOLLY-OWNED UNLESS OTHERWISE STATED. THIS LIST OF SUBSIDIARIES INCLUDES ALL OF THE SIGNIFICANT SUBSIDIARIES OF CENTEX CONSTRUCTION PRODUCTS, INC. AS OF MAY 31, 2003.

EXHIBIT 21

TLCC GP LLC DELAWARE TLCC LP LLC DELAWARE WESTERN AGGREGATES LLC NEVADA WESTERN CEMENT COMPANY OF CALIFORNIA CALIFORNIA WISCONSIN CEMENT COMPANY 50% WISCONSIN

EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Centex Construction Products, Inc. of our report dated May 9, 2003, included in the 2003 Annual Report to Shareholders of Centex Construction Products, Inc. We also consent to the incorporation by reference in the registration statements (Form S-8 No's. 33-82820, 33-82928, 33-84394, and 333-54102) of Centex Construction Products, Inc. of our report dated May 9, 2003, with respect to the consolidated financial statements of Centex Construction Products, Inc. incorporated by reference in the Form 10-K for the year ended March 31, 2003. Dallas, Texas June 20, 2003 /s/ ERNST & YOUNG ----------------------------- Ernst & Young

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