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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K





FOR ANNUAL AND TRANSITION

REPORTS PURSUANT TO
SECTIONS 13 OR 15(d)

OF THE SECURITIES ACT OF 1934



(Mark One)



| | x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - |  | ------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2002



OR



| |  ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - |  | ----------------------------------------------------------------------------------------



For the transition period from to



Commission file number 333-32518





BETTER MINERALS &
AGGREGATES COMPANY

(Exact name of registrant as specified in its charter)





|Delaware                                                       |  | 55-0749125                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer identification number)





Route 522 North, P.O. Box 187

Berkeley
Springs, West Virginia 25411

(Address of principal executive offices, including zip code)





Registrants telephone number, including area code: (304) 258-2500



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



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 ̈No x



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 registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Annual Report on Form 10-K or any amendment to this Annual Report on Form 10-K. x



Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date:



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





|Class        |  | Outstanding as of March 1, 2003
|------------ |  | -------------------------------
|Common Stock |  | 100 shares                     





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TABLE OF CONTENTS



|                            |  |          |  |                                                                                                |  | Page
|--------------------------- |  | -------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|                           
|Forward-Looking Information |  | 1       
|                           
|Industry Data               |  | 2       
|                           
|Measurements                |  | 2       
|                           
|PART I                      |  | 3       
|                           
|                            |  | Item 1.  |  | Business                                                                                       |  | 3   
|                           
|                            |  | Item 2.  |  | Properties                                                                                     |  | 9   
|                           
|                            |  | Item 3.  |  | Legal Proceedings                                                                              |  | 11  
|                           
|                            |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                            |  | 12  
|                           
|PART II                     |  | 13      
|                           
|                            |  | Item 5.  |  | Market for Registrants Common Equity and Related Stockholder Matters                          |  | 13  
|                           
|                            |  | Item 6.  |  | Selected Financial Data                                                                        |  | 14  
|                           
|                            |  | Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  | 15  
|                           
|                            |  | Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                     |  | 26  
|                           
|                            |  | Item 8.  |  | Financial Statements and Supplementary Data                                                    |  | 28  
|                           
|                            |  | Item 9.  |  | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure           |  | 56  
|                           
|PART III                    |  | 57      
|                           
|                            |  | Item 10. |  | Directors and Executive Officers of the Registrant                                             |  | 57  
|                           
|                            |  | Item 11. |  | Executive Compensation                                                                         |  | 59  
|                           
|                            |  | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 63  
|                           
|                            |  | Item 13. |  | Certain Relationships and Related Transactions                                                 |  | 67  
|                           
|                            |  | Item 14. |  | Controls and Procedures                                                                        |  | 68  
|                           
|PART IV                     |  |         
|                           
|                            |  | Item 15. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               |  | 69  
|                           
|SIGNATURES                  |  | 71      
|                           
|CERTIFICATIONS              |  | 72      
|                           
|INDEX TO EXHIBITS           |  | 74      





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Forward-Looking Information



This Annual Report on Form 10-K contains statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We have based these forward-looking statements on
our current expectations and projections about future events. Although we believe that our plans, intentions and expectations reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that our plans,
intentions or expectations will be achieved. We caution investors that all forward-looking statements involve risks and uncertainties, including those arising out of economic, climatic, political, regulatory, competitive and other factors. The
forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 21E. Important factors that could cause actual results to differ materially from those expressed or implied by the
forward-looking statements we make in this Annual Report on Form 10-K are set forth in this Annual Report on Form 10-K. We believe that the following factors, among others, could affect our future performance and cause actual results to differ
materially from those expressed or implied by forward-looking statements made in this Annual Report on Form 10-K:



| |  |  | general and regional economic conditions, including the economy in the states in which we have production facilities and in which we sell our products;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | demand for residential and commercial construction;
| | - |  | ---------------------------------------------------



| |  |  | demand for automobiles and other vehicles;
| | - |  | ------------------------------------------



| |  |  | interest rate changes and changes in financial markets generally;
| | - |  | -----------------------------------------------------------------



| |  |  | levels of government spending on road and other infrastructure construction;
| | - |  | ----------------------------------------------------------------------------



| |  |  | the competitive nature of the industrial minerals and aggregates industries;
| | - |  | ----------------------------------------------------------------------------



| |  |  | operating risks typical of the industrial minerals and aggregates industries;
| | - |  | -----------------------------------------------------------------------------



| |  |  | difficulties in, and unanticipated expense of, assimilating newly-acquired businesses;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | difficulties or delays in, and unanticipated expense of, completing the sale of our aggregates business;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | fluctuations in prices for, and availability of, transportation, power, petroleum-based products and other energy products;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | unfavorable weather conditions;
| | - |  | -------------------------------



| |  |  | regulatory compliance, including compliance with environmental and silica exposure regulations, by us and our customers;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | litigation affecting our customers;
| | - |  | -----------------------------------



| |  |  | product liability litigation by our customers employees affecting us, including the adequacy of indemnity and insurance coverage and of the reserves we have
recorded relating to current and future litigation;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the demand for our products due to the availability of substitutes for products of our customers;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | labor unrest; and
| | - |  | -----------------



| |  |  | the ability to obtain new sources of financing to serve the working capital needs of our remaining business after the completion of the sale of our aggregates
business.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Except for our obligations under the
federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, our future
performance may differ materially from that expressed or implied by the forward-looking statements discussed in this Annual Report on Form 10-K.



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Industry Data



Information contained in this Annual Report on Form 10-K concerning the industrial minerals and aggregates industries, our general expectations concerning these industries and our market position and market share within these
industries and the end use markets we serve are based on estimates prepared by us using data from various sources (primarily the U. S. Geological Survey, including its web site at www.usgs.gov, the Committee on Environment and Public Works of the
United States Senate and data from our internal research) and on assumptions made by us, based on that data and our knowledge of these industries, which we believe to be reasonable. We believe data regarding the industrial minerals and aggregates
industries and our market position and market share within those industries and the end use markets we serve are inherently imprecise, but are generally indicative of their size and our market position and market share within those industries and
end use markets. While we are not aware of any misstatements regarding any industry data presented in this Annual Report on Form 10-K, our estimates, particularly as they relate to our general expectations concerning the industrial minerals and
aggregates industries, involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption Managements Discussion and Analysis of Financial Condition and Results of
Operations Significant Factors Affecting Our Business and elsewhere in this Annual Report on Form 10-K. Information contained in this Annual Report on Form 10-K relating to the Transportation Equity Act for the 21st Century comes
primarily from the United States Department of Transportations web site located at www.fhwa.dot.gov. The information contained in, or linked to, the web sites referenced in this paragraph does not constitute part of this Annual Report on Form
10-K.





Measurements



When
used in this Annual Report on Form 10-K:



| |  |  | data in tons or tonnage is measured in short tons (2,000 pounds);
| | - |  | -------------------------------------------------------------------



| |  |  | mesh refers to size measured in sieve openings per square inch and thus as mesh size increases, particle size decreases; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | microns refer to size (one micron is equal to 0.00004 of an inch).
| | - |  | ------------------------------------------------------------------





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PART I



|Item 1. |  | Business
|------- |  | --------



Overview of
Better Minerals & Aggregates Company



We
mine, process and market industrial minerals, principally industrial silica, in the eastern and midwestern United States. We also mine, process and market aggregates and produce and market hot mixed asphalt in certain parts of Pennsylvania and New
Jersey.



We are the second leading producer of
industrial silica in the United States, accounting for approximately 24% of industry volume in 2002, and believe that we have leading positions in most of our key end use markets for our silica products, typically occupying the number one or two
position by sales. These end use markets include container glass, fiberglass, specialty glass, flat glass, fillers and extenders, chemicals and ceramics. We also supply our silica products to the foundry, building materials and other end use
markets.



Our customers use our aggregates, which
consist of high quality crushed stone, construction sand and gravel, for road construction and maintenance, other infrastructure projects and residential and commercial construction and to produce hot mixed asphalt and concrete products. We also use
our aggregates to produce hot mixed asphalt.



We
operate a network of 27 production facilities in 14 states. Many of our production facilities are located near major modes of transportation and our significant customers, which reduces transportation costs and enhances customer service. Our
principal industrial minerals and aggregates properties each have deposits that we believe will support production in excess of 15 years. Our industrial minerals business (substantially all the sales of which consists of silica products) and our
aggregates business accounted for 61% and 39% of our sales, respectively, for the year ended December 31, 2002.



On April 10, 2003, we entered into an agreement to sell our aggregates segment to a subsidiary of Hanson Building Materials of America,
Inc. The consideration consists of $152 million in cash and the assumption of $3 million in capital lease obligations. Pursuant to the agreement, we would owe Hanson $2 million plus interest (beginning after the third year) on the fifth anniversary
of the closing if certain post-closing permit and rezoning objectives specified in the agreement are not achieved during this period. The agreement also contains customary representations, warranties and indemnities. Closing on the sale is subject
to customary closing conditions, including antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and completion of environmental and geological due diligence and real estate surveys at certain of our
aggregates operating sites. We will also need to obtain the consent of our senior secured lenders in order to release any liens on the assets being sold and the release of the guarantees of our aggregates subsidiaries of the obligations under the
indenture relating to our senior subordinated notes.



Products



We operate in two business segments:
industrial minerals products and aggregates products.



Industrial Minerals. Our industrial minerals products are processed to meet a broad range of chemical purity, particle shape and sizing specifications. Our key industrial minerals products are known as unground silica, ground silica,
fine ground silica, kaolin and aplite. Our unground silica products consist of silica of various size grades ranging from 120 to 20 mesh. For the year ended December 31, 2002, we sold 5.5 million tons of unground silica. Our ground silica products
consist of unground silica that is further processed into sizes of 40 to 125 microns. For the year ended December 31, 2002, we sold 550,000 tons of ground silica. Our fine ground silica products consist of ground silica that we have further
processed with highly engineered equipment into size grades of 5 to 40 microns. For the year ended December 31, 2002, we sold 53,000 tons of fine ground silica. In addition to our silica products we also produce a limited amount of kaolin and
aplite. Kaolin is a mineral co-product in our production of silica in Kosse, Texas that we sell primarily as a filler and extender to the paints and coatings industry. For the year ended December 31, 2002, we sold 43,000 tons of kaolin. Aplite is an
alumina source produced at our Montpelier, Virginia facility that we sell primarily to the glass industry. For the year ended December 31, 2002, we sold 246,000 tons of aplite.



Aggregates. Our aggregates products include high quality crushed stone, construction sand and gravel, which
we provide in various sizes, and hot mixed asphalt. Hot mixed asphalt is a blended mixture of approximately 95% crushed stone, sand or gravel bound together by asphalt oil. A major component of the road system in the United States, hot mixed asphalt
covers approximately 95% of the paved roads in the United States, and the hot mixed asphalt industry generates over $10 billion in sales annually in the United States. Market growth and demand is primarily driven by road construction and population
growth. We



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sold 10.4 million tons of our aggregates products that included 1.8 million tons of our hot mixed asphalt
for the year ended December 31, 2002.



We produce
a high quality, anti-skid asphalt for use in Superpave. Superpave is a relatively new approach to asphalt mix design, which provides designers with standards for customizing roadway mixes for specific weather and traffic conditions. This new set of
standards generally requires high quality aggregates that conform to a variety of specific characteristics, including hardness, absorption, size and shape. Many state governments have elected to require their roadways to conform to the Superpave
standards. For example, the Pennsylvania Department of Transportation requires all roadway contracts to include the use of the Superpave standards. We have the ability both to supply our customers with the quality of aggregates required for
Superpave as well as to manufacture Superpave-compliant asphalt from our own hot mixed asphalt plants.



End Use Markets and Customers



Our industrial minerals and aggregates businesses generate sales from a diversified base of customers and end use markets. During the year ended December 31, 2002, we exceeded $10 million in sales in
each of 8 distinct end use markets, and no single customer accounted for more than 5% of our sales.



Industrial Minerals. Our industrial mineral products are sold into a variety of end use markets, as described below.



Container Glass. We supply unground silica and aplite to the
container glass end use market for use in the production of food, beverage and liquor bottles.



Fiberglass. We supply unground and ground silica and aplite to the textile and insulation fiberglass end use markets. Textile fiberglass is used in the production of roofing products and composites for
automotive parts, sports equipment and boats. Insulation fiberglass is used to maximize energy efficiency in buildings by insulating heating and cooling ducts, attics, basements and exterior walls.



Specialty Glass. We supply unground and ground silica and
aplite to the specialty glass end use market for use in the production of television tubes, lights and tableware. Because of the higher quality standards in this market, certain of our industrial minerals for specialty glass are shipped regionally,
nationally and also are exported.



Flat Glass. We
supply unground silica to the flat glass end use market for use in the production of automotive glass and windows. Windows are primarily used in commercial and residential construction and remodeling.



We estimate that in 2002 our shipments of industrial silica to
the container glass, fiberglass, specialty glass and flat glass end use markets accounted for approximately 29% of the total volume of industrial silica shipped to the glass end use markets in the United States.



Foundry. We supply unground and ground silica to the foundry
end use market for use in the production of automotive, heavy equipment and machine tool castings. We estimate that in 2002 we accounted for approximately 14% of the silica volume shipped to the foundry end use market in the United States.



Fillers and Extenders. We supply unground,
ground and fine ground silica and kaolin to the paints and coatings end use market as fillers and extenders in the production of architectural, industrial and traffic paints, and to the rubber and plastic end use market for use in the production of
epoxy molded countertops and silicone rubber. We estimate that in 2002 we accounted for approximately 30% of the silica volume shipped to the fillers and extenders end use market in the United States. We are able to ship certain of these products,
which are primarily marketed on a local basis, to customers nationally as well as regionally. In addition, we are also able to compete internationally with some of these products.



Building Materials. We supply unground, ground and fine ground silica and kaolin to the building materials
end use market for use in the production of bricks, stucco, concrete and asphalt shingles. We estimate that in 2002 we accounted for approximately 25% of the silica volume shipped to the building materials end use market in the United States.



Chemicals. We supply unground and ground silica
to the chemicals end use market where it is used in the manufacture of sodium silicate, which is used in products such as detergents, paper textile, finishing and dental products. We estimate that in 2002 we accounted for approximately 65% of the
silica volume shipped to the chemicals end use market in the United States.



Ceramics. We supply unground, ground and fine ground silica and kaolin to the ceramics end use market for use in the production of ceramic whiteware, floor tiles and glaze formulations. We estimate
that in 2002 we accounted for approximately 29% of the silica volume shipped to the ceramics end use market in the United States.



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Other. We also
supply our silica, kaolin and aplite to a variety of additional markets. For example, our silica is used as fracturing sand in the oil and gas end use market and in athletic fields, race tracks, sand boxes, playgrounds and golf courses.



Aggregates. We supply our aggregates products
primarily to the paving and construction end use market in southern New Jersey and southeastern and western Pennsylvania for use in pavements. We also supply our aggregates for use in outside recreational facilities, sport stadiums and residential
and commercial construction. We use the remainder of our aggregates to produce hot mixed asphalt.



Our aggregates business is highly seasonal, due primarily to the effect of weather conditions on construction activity in the markets that
we serve. Poor weather during the peak season of our aggregates business from April through November could result in lower sales of aggregates by reducing or delaying road construction and maintenance, other infrastructure projects and residential
and commercial construction. In the past, significant changes in weather conditions during this period have caused variations in demand for aggregates. In addition, because we are not as geographically diverse as some of our aggregates competitors,
we may be more vulnerable than these competitors to poor weather conditions in the geographic areas in which we operate.



Many of our aggregates customers depend substantially on government funding of highway construction and maintenance and other
infrastructure projects that is provided from federal funding and state and municipal governmental matching funds. Accordingly, a decrease in federal funding of highways and related infrastructure improvements or a failure of states or
municipalities to match the federal funding provided them, could adversely affect our revenue and profits in our aggregates business. In addition, unlike some of our competitors, we currently sell our aggregates products almost entirely in only two
states, Pennsylvania and New Jersey. As a result, we are more vulnerable than our more geographically diverse competitors to decreases in state government highway spending in those states.



Sales and Marketing



We market our industrial minerals products primarily on a local basis. Our local sales and marketing efforts are each managed by a
regional sales person, and are directed to meet our local customers specific needs. Our technical and customer service personnel support our local sales and marketing personnel. Certain of our smaller local customers are primarily serviced by
customer service representatives located at our facilities. We also sell to distributors for resale to customers who desire to purchase a combination of our industrial minerals and other products that the distributor supplies.



In the case of our customers that have facilities in multiple
states, we also direct our sales and marketing efforts at the corporate headquarters level. While competition for these customers generally remains at the local level, the terms of certain of our agreements are negotiated with the customer at the
corporate level. Our national account managers also coordinate multi- disciplinary teams that work with these customers and their technical and engineering departments to jointly develop specifications for industrial minerals to meet their local
product and application needs. In addition, we provide technical and customer service to these customers individual facility locations at the local level.



We market our aggregates products, including our hot mixed asphalt, directly through our local sales force,
which calls on our customers at their facilities.



Competition



We operate in the highly competitive
industrial silica and aggregates industries. Transportation costs are a significant portion of the total cost of industrial minerals and aggregates to customers, typically representing up to 50% of that cost. As a result, the industrial minerals and
aggregates markets are typically local, and competition from beyond the local area is limited. Although we experience competition in all of our end use markets, we believe that we are a leading producer in the key end use markets and geographic
areas that we serve.



The industrial silica
industry is a competitive market that is characterized by a small number of large, national producers and a larger number of small, regional producers. We are the second leading producer of industrial silica in the United States, accounting for
approximately 24% of industry volume in 2002. We compete with, among others, Unimin Corporation, Fairmount Minerals, Inc., Oglebay Norton Industrial Sands, Inc. and Badger Mining Corporation. Competition in the industrial minerals industry is based
on price, consistency and quality of product, site location, distribution capability, customer service, reliability of supply, breadth of product offering and technical support. In addition, there is significant underutilized capacity in the
industrial minerals industry that could adversely affect the pricing of our industrial minerals products.



In recent years, the aggregates industry has seen increasing consolidation, although competition remains primarily local.



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Competition in the aggregates
industry is based primarily on price, quality of product, site location, distribution capability and customer service. Due to the high cost of transportation relative to the value of the product, competition within the aggregates industry favors
producers with aggregates production facilities in close proximity to transportation modes and customers. Accordingly, in Pennsylvania and New Jersey, we compete primarily with local or regional operations. In addition, in western Pennsylvania,
slag, a residue from steel processing, also competes with our aggregates products.



Many of our competitors are large companies that have greater financial resources than we do, may develop technology superior to ours and have production facilities that are located closer to key
customers. We cannot guarantee that we will be able to compete successfully against our competitors in the future or that competition will not have a material adverse effect on us.



Production and Distribution



Our production process for our industrial minerals generally consists of mining mineral ore followed by a number of processing steps. All
of our industrial minerals mining operations involve surface mining. As is customary in our industry, some of our mining operations, particularly drilling and blasting, are outsourced to third parties. After the mineral ore is mined we crush it into
various sizes, depending on the specific customer application. We then remove impurities from the materials in a washing process and remove oversized particles by screening. Moisture is removed through a drying process and the product is loaded into
trucks or rail cars for shipment or is bagged before shipping.



We ship our industrial mineral products direct to our customers by either truck or rail. Bagged product is generally distributed by truck. We sometimes utilize rail-truck transfer stations to deliver our products if we can thereby
achieve lower delivery costs to a given customer or region. Almost all our truck shipments of industrial minerals are carried out by third parties. Our rail shipments are generally made by railcar equipment owned by the railroad, although for some
customers and regions we lease our own railcars. Given the value to weight ratio of most of our industrial mineral products, the cost-effective distribution range is approximately 200 miles. For some of our high margin fine ground silica and other
specialty products such as kaolin, we can effectively distribute our products nationally and, in some cases, internationally.



Our production process for our aggregates consists of mining mineral ore and then crushing it into various sizes based on customer
specifications. All of our aggregates mining operations involve surface mining, except for two that involve underground mining. Generally, surface mining is subject to less operational risk than underground mining. We either ship our aggregates
products directly to our customers by truck, typically within 75 miles of the plant, or store it at our facility to meet future customer demand. In certain instances we deliver large orders by rail. Our hot mixed asphalt is produced by mixing our
aggregates with asphalt oil, blending to customer specifications and then delivering by truck typically within 30 miles of the plant.



Our Commercial Aggregates Transportation and Sales, LLC (CATS) subsidiary runs a cooperative fleet of dump trucks owned by
independent contractors. CATS hires these trucks for hauling aggregates and other bulk materials. In return, the independent trucking contractors benefit from a steady source of work and bulk discounts on fuel, tires and other services. CATS enables
us to secure reliable access to a fleet of approximately 200 dump trucks on a cost-effective basis.



Technical Support



We operate an industrial minerals laboratory to monitor the quality of our products, plants and services. The laboratory has four principal functions. The technical service function provides support to both current and
prospective customers and performs controlled tests for a variety of applications. The lab also assists foundries in their quality control programs through periodic testing of their sand and equipment, a service that has enabled us to increase our
business by acquiring several large foundries as customers. The application function evaluates the chemical, physical and performance characteristics of our products and those of our competitors. These evaluations assist us in developing new
products and applications and enable us to provide our customers with technical support and recommendations. The analytical function both provides support for plants lacking the ability to provide certain technical information to customers, and
analyzes drill core samples to provide data for short- and long-term mine planning. The mineral processing function is designed to simulate all plant processes, primarily preparing and analyzing drill core samples for mine planning purposes and
providing expertise in plant problem troubleshooting. We are ISO 9002 registered at nine plants.



Government Regulation



Environmental Matters. We are subject to a variety of governmental regulatory requirements relating to the environment, including those relating to our handling of hazardous materials and air and
wastewater emissions. Some environmental laws impose substantial penalties for noncompliance, and others, such as the federal Comprehensive Environmental Response, Compensation, and Liability Act, impose strict, retroactive and joint and several
liability upon persons responsible for releases of hazardous substances.



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We believe
that we have all material environmental permits, that our operations are in substantial compliance with applicable laws and that any noncompliance is not likely to have a material adverse effect on us. Through periodic self-audits, we continually
evaluate whether we must take additional steps to ensure compliance with existing environmental laws. However, if we fail to comply with present and future environmental laws and regulations, we could be subject to liabilities or our operations
could be interrupted. In addition, future environmental laws and regulations could restrict our ability to expand our facilities or extract our mineral deposits or could require us to acquire costly equipment or to incur other significant expenses
in connection with our business. Although we believe we have made sufficient capital expenditures to achieve substantial compliance with existing environmental laws and regulations, future events, including changes in any environmental requirements
and the costs associated with complying with such requirements, could have a material adverse effect on us.



We have taken a number of steps to minimize potential environmental liabilities and address environmental activities in a proactive
manner, including performing regular environmental audits, performing Phase 1 environmental assessments on all of our properties in 1995 and, prior to acquisition, on all properties acquired after that time, removing all known underground storage
tanks, replacing PCB-containing transformers with non-PCB transformers and developing and implementing an environmental information management system to allow us to better track permits and compliance matters.



Some of our facilities have a long history of industrial
operations. As such, we may have liability for cleanup of contamination from historical discharges of hazardous materials. For example, we may be required to remediate groundwater contamination at our Rockwood, Michigan facility. Although the
contamination has not moved off of our site and has not affected drinking water supplies, further action may be required by state authorities. Our Ottawa, Illinois facility has trace levels of arsenic contamination in the groundwater beneath the
quarries. Studies show that there is no health risk to workers and that the product is not contaminated. We believe that we have claims against responsible third parties or have insurance coverage for these matters. We also believe that, even
assuming third-party or insurance recoveries were not successful, all such remediation matters, individually or in the aggregate, would not have a material adverse effect on us. We have identified other areas of historic waste disposal on our
properties. Historically, the waste, pallets, bags, scrap metal and other wastes from the plant sites were dumped on certain of our lands. The presence of the disposal areas has not materially impacted, and is not expected to materially impact, our
operations or otherwise have a material adverse effect on us.



Regulation of Silica. The Occupational Safety and Health Administration, or OSHA, regulates work place exposure to crystalline silica at our customer locations through a permissible exposure level, commonly referred to as
a PEL and through ancillary provisions. In the Department of Labor regulatory agenda published in December 2002, OSHA announced that it would publish a Notice of Proposed Rule Making regarding occupational exposure to crystalline silica in general
industry in November 2003.



The Mining Safety and
Health Administration, or MSHA, regulates occupational health and safety matters for mining. Accordingly, MSHA regulates our quarries, underground mines and industrial mineral processing facilities. The MSHA threshold limit value for
crystalline silica as quartz is the same as the current OSHA PEL. MSHA is expected to follow OSHAs actions regarding the permissible limits of exposure to crystalline silica for mining.



The Environmental Protection Agency, or EPA, is currently
evaluating crystalline silica under its Integrated Risk Information System, or IRIS, program. Essentially, the EPA is conducting a risk assessment regarding the cancer and non-cancer health effects of crystalline silica and may possibly develop
reference concentrations for non-cancer health effects and unit risk factors for cancer health effects. These reference concentrations and unit risk factors, if developed, will be entered into the EPA IRIS database. In an EPA regulatory agenda, the
EPA announced that the EPAs evaluation of crystalline silica under the IRIS program would be complete in 2004 or 2005. In addition, several states have considered, and a few have promulgated, regulations regarding crystalline silica air
emissions. For example, in Oklahoma and Texas, crystalline silica is considered a toxic air contaminant. As such, these states have established maximum allowable ambient concentrations, or MAACs, for crystalline silica (quartz). Generally, these
MAACs establish limits for facility crystalline silica emissions, measured at the facility property line. The IRIS initiative and state MAAC standards could result in lower permit limits requiring costly equipment upgrades or operational
restrictions.



The U.S. Consumer Product Safety
Commission (CPSC) is studying the potential for crystalline silica exposure arising from the use of play sand. The CPSC activities have just recently begun, and the estimated completion date and any regulatory action resulting from the
activities are unknown.



In 2001, Massachusetts
classified crystalline silica smaller than 10 micron in particle size and used for abrasive blasting or in foundry molding operations as a toxic substance for purposes of the states toxic use reduction act program. The toxic use reduction act
program imposes fees on the use of toxic substances and requires certain users of toxic substances to develop plans



7



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to reduce the use of the toxic
substance. California requires that a warning accompany any chemical that the state has published as being known to cause cancer. Silica, crystalline (airborne particles of respirable size) has been included as a carcinogen under these
criteria since 1988. These state programs, or others similar to them or the Oklahoma MAAC program, may have the effect of reducing our customers demand for silica products.



We believe that we materially comply with governmental requirements for crystalline silica exposure and
emissions and other regulations relating to silica and plan to continue to comply with these regulations. However, we cannot guarantee that we will be able to comply with any new standards that are adopted or that these new standards will not have a
material adverse effect on us by requiring us to modify our operations or equipment or shut down some of our plants. Additionally, we cannot guarantee that our customers will be able to comply with any new standards or that any such new standards
will not have a material adverse effect on our customers by requiring them to shut down old plants and to relocate plants to locations with less stringent regulations that are further away from us. Accordingly, we cannot at this time reasonably
estimate our costs of compliance or the timing of any costs associated with any new standards, or any material adverse effects that any new standards will have on our customers and, consequently, on us.



Mining and Processing of Minerals. In addition to the
regulatory matters described above, the industrial minerals and aggregates industries are subject to extensive governmental regulation on matters such as permitting and licensing requirements, plant and wildlife protection, wetlands protection,
reclamation and restoration of mining properties after mining is completed, the discharge of materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability. Our
future success depends upon the quantity of our industrial minerals and aggregates deposits and our ability to extract these deposits profitably. It is difficult for us to estimate quantities of recoverable deposits, in part due to future permitting
and licensing requirements. We believe we have obtained all material permits and licenses required to conduct our present mining operations. However, we will need additional permits and renewals of permits in the future. We may be required to
prepare and present to governmental authorities data pertaining to the impact that any proposed exploration or production activities may have upon the environment. New site approval procedures may require the preparation of archaeological surveys,
endangered species studies and other studies to assess the environmental impact of new sites. Compliance with these regulatory requirements is expensive, requires an investment of funds well before the potential producer knows if its operation will
be economically successful and significantly lengthens the time needed to develop a new site. Furthermore, obtaining or renewing required permits is sometimes delayed or prevented due to community opposition and other factors beyond our control. New
legal requirements, including those related to the protection of the environment, could be adopted that could materially adversely affect our mining operations (including the ability to extract mineral deposits), our cost structure or our
customers ability to use our industrial minerals or aggregates products.



For most of our operations, state statutes and regulations or local ordinances require that mine property be restored in accordance with specific standards and an approved reclamation plan. We believe
that we are making adequate provisions for all expected reclamation and other costs relating to expected mine closures in the reasonably foreseeable future. We believe that future costs associated with reclamation provisions and mine closures will
not have a material adverse effect on us. Nevertheless, we could be adversely affected if these provisions were later determined to be insufficient, or if future costs associated with reclamation are significantly greater than our current estimates.
Accordingly, there can be no assurance that current or future mining regulation will not have a material adverse effect on our business or that we will be able to obtain or renew permits in the future.



Employees



As of March 1, 2003, we had approximately 1,050 employees, of which approximately 550 were represented by 12
local unions under 12 union contracts. These union contracts have remaining durations ranging from one to four years. Over the last 10 years, we have been involved in numerous labor negotiations, only two of which have resulted in a work disruption
at two of our 27 facilities. During these disruptions, the operations of the facilities and our ability to serve our customers were not materially affected. Although we consider our current relations with our employees to be good, if we do not
maintain these good relations, or if a work disruption were to occur, we could suffer a material adverse effect.



8



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|Item 2. |  | Properties
|------- |  | ----------



We own or lease a number of properties located in the eastern and midwestern United States. Our headquarters is in Berkeley Springs, West Virginia. Set forth below is the location, use, status and number of years of remaining
reserves as of December 31, 2002 for each of our principal properties:



|Location             |  | Use                                                |  | Status       |  | Number of Years Remaining Reserves1
|-------------------- |  | -------------------------------------------------- |  | ------------ |  | -----------------------------------
|                    
|Berkeley Springs, WV |  | Corporate offices                                  |  | Owned        |  | N/A                                
|                    
|Industrial Minerals  |  |                                                    |  |              |  |                                    
|Berkeley Springs, WV |  | Silica mining and processing                       |  | Owned        |  | 23                                 
|Columbia, SC         |  | Silica mining and processing                       |  | Leased       |  | 25                                 
|Dubberly, LA         |  | Silica mining and processing                       |  | Owned/Leased |  | 34                                 
|Dundee, OH           |  | Silica mining and processing                       |  | Owned        |  | 77                                 
|Hurtsboro, AL        |  | Silica mining and processing                       |  | Owned/Leased |  | 12                                 
|Jackson, TN          |  | Silica mining and processing                       |  | Owned        |  | 31                                 
|Kosse, TX            |  | Silica and kaolin mining and processing            |  | Owned/Leased |  | 30                                 
|Mapleton Depot, PA   |  | Silica mining and processing                       |  | Owned/Leased |  | 22                                 
|Mauricetown, NJ      |  | Silica processing                                  |  | Owned        |  | N/A                                
|Mill Creek, OK       |  | Silica mining and processing                       |  | Owned/Leased |  | 26                                 
|Millville, NJ        |  | Silica mining and processing                       |  | Owned/Leased |  | 20                                 
|Montpelier, VA       |  | Aplite mining and processing                       |  | Owned/Leased |  | 39                                 
|Ottawa, IL           |  | Silica mining and processing                       |  | Owned        |  | 54                                 
|Pacific, MO          |  | Silica mining and processing                       |  | Owned        |  | 68                                 
|Port Elizabeth, NJ   |  | Construction sand and silica mining and processing |  | Owned        |  | 39                                 
|Rockwood, MI         |  | Silica processing                                  |  | Owned        |  | N/A                                
|                    
|Aggregates           |  |                                                    |  |              |  |                                    
|Adamsburg, PA        |  | Hot mixed asphalt plant                            |  | Owned        |  | N/A                                
|Berlin, NJ           |  | Construction sand mining and processing            |  | Owned        |  | 12                                 
|Cedar Lake, NJ       |  | Construction sand mining and processing            |  | Owned        |  | 17                                 
|Jim Mountain, PA     |  | Stone quarry                                       |  | Leased       |  | 44                                 
|Latrobe, PA          |  | Stone quarry; hot mixed asphalt plant              |  | Leased       |  | 126                                
|Newport, NJ          |  | Construction sand processing                       |  | Owned        |  | N/A                                
|Ottsville, PA        |  | Stone quarry; hot mixed asphalt plant              |  | Owned        |  | 28                                 
|Penns Park, PA       |  | Stone quarry; hot mixed asphalt plant              |  | Owned        |  | 21                                 
|Penn Valley, PA      |  | Construction sand mining and processing            |  | Leased       |  | 7                                  
|Rich Hill, PA        |  | Stone quarry                                       |  | Owned/Leased |  | 41                                 
|Sewickly, PA         |  | Hot mixed asphalt plant                            |  | Owned        |  | N/A                                
|Springfield Pike, PA |  | Stone quarry; hot mixed asphalt plant; offices     |  | Owned        |  | 41                                 
|Upper Deerfield, NJ  |  | Rail/truck transload                               |  | Owned        |  | N/A                                
|Upper Township, NJ   |  | Construction sand mining and processing            |  | Owned/Leased |  | 2                                  
|Washington, PA       |  | Hot mixed asphalt plant                            |  | Owned        |  | N/A                                



With
respect to each operation at which we mine industrial minerals and aggregates, we obtain permits from various governmental authorities prior to the commencement of mining. The current permitted deposits on our properties are sufficient to support
production, based on historical rates of production ranging from approximately four years to approximately 77 years. We obtain permits to mine deposits as needed in the normal course of business based on our mine plans and state and local regulatory
provisions regarding mine permitting and licensing. Based on our historical permitting experience, we expect to be able to continue to obtain necessary mining permits to support historical rates of production. Industrial minerals and aggregates
properties which have deposits (which include both permitted and unpermitted deposits) that we believe are sufficient to support production for over 15 years accounted for approximately 97% of our sales for the year ended December 31, 2002.
Additionally, to further assure sufficient deposits and adequate facilities to meet future demand, we plan to obtain new deposits through expansion of existing sites, where feasible, and acquisitions of industrial minerals and aggregates businesses.



---

|1 |  | The number of years of remaining reserves for each of our principal properties as of December 31, 2002 is based on extraction and production information collected
during 2002.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9



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Some of our
mining leases can be indefinitely renewed by us on an annual basis while others have terms ranging from two to 50 years (including unilateral renewal rights). These leases generally provide for royalty payments to the lessor based on a specific
amount per ton or a percentage of revenue. In addition, we have a number of non-mining leases that relate to the above properties that permit us to perform activities that are ancillary to the mining of industrial minerals or aggregates such as
surface use leases that allow haul trucks to transport material from the mine to the plant site.



10



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##### Table Of Contents



|Item 3. |  | Legal Proceedings
|------- |  | -----------------



We are a defendant in various lawsuits related to our business. These matters include lawsuits relating to the exposure of persons to silica. On April 20, 2001, in an action pending in Beaumont, Texas (Donald Tompkins et al v.
American Optical Corporation et al), a jury rendered a verdict against Ottawa Silica Company and Pennsylvania Glass Sand Corporation, predecessors to U.S. Silica, in the amount of $7.5 million in actual damages. On June 1, 2001, the trial judge
entered judgment on the verdict against U.S. Silica in the amount of $5,928,000 in actual damages (the verdict of $7.5 million, less credits for other settlements), approximately $464,000 in prejudgment interest and $40,000 in court costs. In
addition, punitive damages were settled for $600,000. In light of the facts entered into evidence relating to the timing of the exposure, we believe that the entire judgment and settlements of the Tompkins action are covered by a combination of
Ottawa Silica Companys insurance coverage and the current indemnity agreement of ITT Industries, in each case, discussed elsewhere in this Annual Report on Form 10-K. After the judgment was entered by the trial judge and upon the posting of a
bond, we filed an immediate appeal to the appropriate appellate court in Texas, which upheld the trial courts ruling. A petition for review has been filed with the Texas Supreme Court. For a detailed discussion of the potential liability to us
from silica-related product liability claims, please see Managements Discussion and Analysis of Financial Condition and Results of OperationsSignificant Factors Affecting Our BusinessSilica Health Risks and Litigation May
Have a Material Adverse Effect on Our Business.



11



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##### Table Of Contents



|Item 4. |  | Submission of Matters to a Vote of Security Holders
|------- |  | ---------------------------------------------------



No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2002.



12



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##### Table Of Contents



PART II



|Item 5. |  | Market for Registrants Common Equity and Related Stockholder Matters
|------- |  | ---------------------------------------------------------------------



Not applicable.



13



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##### Table Of Contents



|Item 6. |  | Selected Financial Data
|------- |  | -----------------------



The following table sets forth our selected historical consolidated financial and other data as of the end of and for the periods presented. The selected historical consolidated financial data as of December 31, 2002 and
December 31, 2001 and for the years ended December 31, 2002, 2001 and 2000 have been derived from our audited consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. The selected historical
consolidated financial data as of December 31, 2000, December 31, 1999 and December 31, 1998 and for the years ended December 31, 1999 and 1998 are derived from our audited consolidated financial statements that are not included in this Annual
Report on Form 10-K. This information should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the notes thereto included
elsewhere in this Annual Report on Form 10-K.



|                                                                |  | 2002 |          |     | 2001 |   |         | 2000 |  |   | 1999(1) |     |  | 1998(2) |        
|--------------------------------------------------------------- |  | ---- | -------- | --- | ---- | - | ------- | ---- |  | - | ------- | --- |  | ------- | -------
|Statement of Operations Data:                                   |  |      |          |     |      |   |         |      |  |   |         |     |  |         |        
|Sales.                                                          |  | $    | 300,495  |     |      | $ | 307,947 |      |  | $ | 299,335 |     |  | $       | 244,802
|Cost of goods sold                                              |  |      | 232,591  |     |      |   | 229,193 |      |  |   | 222,754 |     |  |         | 175,971
|Depreciation, depletion and amortization                        |  |      | 30,013   |     |      |   | 32,670  |      |  |   | 35,895  |     |  |         | 28,481 
|Selling, general and administrative(3)                          |  |      | 46,419   |     |      |   | 23,905  |      |  |   | 26,541  |     |  |         | 21,843 
|Asset impairment(4)                                             |  |      | 107,882  |     |      |   |        |      |  |   |        |     |  |         |       
|Operating income (loss)                                         |  |      | (116,410 | )   |      |   | 22,179  |      |  |   | 14,145  |     |  |         | 18,507 
|Interest expense                                                |  |      | 32,089   |     |      |   | 35,625  |      |  |   | 36,359  |     |  |         | 19,590 
|Accretion of preferred stock warrants(5)                        |  |      |         |     |      |   |        |      |  |   |        |     |  |         | 56     
|Other income net, including interest income                     |  |      | (1,673   | )   |      |   | (1,103  | )    |  |   | (1,575  | )   |  |         | (2,171 
|(Loss) income before income taxes                               |  |      | (146,826 | )   |      |   | (12,343 | )    |  |   | (20,639 | )   |  |         | 1,032  
|Provision (Benefit) for income taxes before extraordinary items |  |      | (56,846  | )   |      |   | (8,299  | )    |  |   | (11,091 | )   |  |         | (2,714 
|Net income (loss) before extraordinary loss                     |  |      | (89,980  | )   |      |   | (4,044  | )    |  |   | (9,548  | )   |  |         | 3,746  
|Extraordinary loss(6)                                           |  |      |         |     |      |   |        |      |  |   |        |     |  |         | (2,747 
|Cumulative effect of change in accounting                       |  |      | 8,623    |     |      |   |        |      |  |   |        |     |  |         |       
|Net income (loss).                                              |  | $    | (98,603  | )   |      | $ | (4,044  | )    |  | $ | (9,548  | )   |  | $       | 999    
|                                                               
|Balance Sheet Data:                                             |  |      |          |     |      |   |         |      |  |   |         |     |  |         |        
|Cash                                                            |  | $    | 1,330    |     |      | $ | 2,493   |      |  | $ | 860     |     |  | $       | 13,573 
|Working capital                                                 |  |      | 41,295   |     |      |   | 34,288  |      |  |   | 38,086  |     |  |         | 45,715 
|Total assets                                                    |  |      | 425,874  |     |      |   | 515,644 |      |  |   | 538,286 |     |  |         | 551,603
|Total debt                                                      |  |      | 294,922  |     |      |   | 288,086 |      |  |   | 289,405 |     |  |         | 287,505
|Stockholders (deficit) equity                                  |  |      | (54,449  | )   |      |   | 48,826  |      |  |   | 53,216  |     |  |         | 64,335 
|                                                               
|Other Financial Data:                                           |  |      |          |     |      |   |         |      |  |   |         |     |  |         |        
|Capital expenditures                                            |  | $    | 14,003   |     |      | $ | 13,738  |      |  | $ | 20,319  |     |  | $       | 14,572 
|Cash interest expense                                           |  |      | 29,808   |     |      |   | 34,132  |      |  |   | 33,266  |     |  |         | 10,925 
|Ratio of earnings to fixed charges(7)                           |  |      |         | (8) |      |   |        | (8)  |  |   |        | (8) |  |         | 1.1    

---

|(1) |  | Includes the results of the Morie Assets from April 9, 1999, the date of acquisition, and the results of Commercial Stone from October 1, 1999, the date of
acquisition.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes (i) with respect to the year ended December 31, 1998, the results of Pettinos from July 25, 1998, the date of acquisition, and (ii) with respect to the year
ended December 31, 1998, the results of Better Materials from December 14, 1998, the date of acquisition.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes non-cash charges for third-party products liability litigation in 2002 and 2001, and non-cash compensation expense recorded in 2000 for stock grants to our
new Chief Executive Officer and in 1998 due to the waiver by USS Holdings, our parent, of its right to repurchase certain capital stock held by our management.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Represents the difference between the estimated fair value of our aggregates business and its previous carrying amount.
|--- |  | -----------------------------------------------------------------------------------------------------------------------

|(5) |  | Represents the non-cash accretion in value of certain warrants granted with respect to preferred stock of USS Holdings. We recognize this charge as part of push down
accounting because the warrants were issued in connection with debt issued by our subsidiary, U.S. Silica. The obligation to satisfy any payments due in connection with these warrants was forgiven by USS Holdings during 1999.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Represents non-cash charges and write-offs recorded in connection with our early retirement of certain subordinated debt in 1998, and the early retirement of certain
senior debt in 1999.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Under Item 503 of Regulation S-K, earnings for purposes of this calculation have been computed by adding to income before extraordinary items
all taxes based on income or profits, total interest charges and the estimated interest element of rentals charged to income. Fixed charges include total interest charges and the estimated interest element of rentals charged to income.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Earnings were insufficient to cover fixed charges by $146.8 million, $12.3 million, $20.6 million, and $16.9 million, for the years ended December 31, 2002, 2001,
2000, and 1998, respectively.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 7. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- |  | -------------------------------------------------------------------------------------



The following information should be read in conjunction with our audited consolidated financial statements and the notes thereto included
in Item 8 of this Annual Report on Form 10-K.



Overview



We mine, process and market industrial
minerals, principally industrial silica, in the eastern and midwestern United States. We also mine, process and market aggregates and produce and market hot mixed asphalt in certain parts of Pennsylvania and New Jersey. We are a holding company that
conducts substantially all our operations through our subsidiaries.



We were incorporated in Delaware in January 1996 and purchased U.S. Silica Company, which was organized in 1927 as the Pennsylvania Glass Sand Corporation, from U.S. Borax in February 1996. After purchasing U.S. Silica, we
subsequently completed the following acquisitions and disposition:



| |  |  | In July 1998, we acquired George F. Pettinos, Inc. (Pettinos), a producer of aggregates with operations in Berlin, New Jersey and a processor of silica
with operations in Ontario, Canada.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 1998, we acquired Better Materials Corporation (Better Materials), an aggregates producer in southeastern Pennsylvania.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In April 1999, we acquired certain operating assets in southern New Jersey from Unimin Corporation (the Morie Assets), which are used in the production
and sale of silica and aggregates.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 1999, we acquired Commercial Stone Co., Inc., a crushed stone and hot mixed asphalt producer in southwestern Pennsylvania, CATS and related quarry
properties (collectively, Commercial Stone).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In February 2000, we sold one of our two Canadian subsidiaries, George F. Pettinos (Canada) Limited (PECAL).
| | - |  | --------------------------------------------------------------------------------------------------------------



In November 2000 we incorporated a new Delaware subsidiary,
BMAC Services Co., Inc., to provide consulting and management services to our other subsidiaries. In April 2001, Commercial Stone merged with Better Materials, with Better Materials surviving. As a result of this merger, CATS became a wholly-owned
subsidiary of Better Materials.



On October 1,
2002, as part of a change in management reporting responsibilities, the New Jersey operating assets of our aggregates business unit that also manufactured industrial minerals were transferred to our industrial minerals business unit. Net sales from
the transferred assets are made both directly to customers and to our aggregates subsidiary. Prior year segment reporting has been restated to reflect this change.



On April 10, 2003, we entered into an agreement to sell our aggregates segment to a subsidiary of Hanson
Building Materials of America, Inc. The consideration consists of $152 million in cash and the assumption of $3 million in capital lease obligations. Pursuant to the agreement, we would owe Hanson $2 million plus interest (beginning after the third
year) on the fifth anniversary of the closing if certain post-closing permit and rezoning objectives specified in the agreement are not achieved during this period. The agreement also contains customary representations, warranties and indemnities.
Closing on the sale is subject to customary closing conditions, including antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and completion of environmental and geological due diligence and real estate
surveys at certain of our aggregates operating sites. We will also need to obtain the consent of our senior secured lenders in order to release any liens on the assets being sold and the release of the guarantees of our aggregates subsidiaries of
the obligations under the indenture relating to our senior subordinated notes.



Critical Accounting Policies



In our opinion, we do not have any individual accounting policy which is critical to the preparation of our financial statements. Also, in many instances, we must use an accounting policy or method because it is the only policy or
method permitted under accounting principles generally accepted in the United States. However, certain accounting policies are more important to the reporting of the Companys financial position and results of operations. These policies are
discussed in the succeeding paragraphs. The notes to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K include a summary of the significant accounting policies used in the preparation of our
financial statements.



15



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##### Table Of Contents



Sales. We
recognize sales at the time the product is shipped to our customers and title passes (generally when the product leaves our facility). Sales includes the costs of transportation borne by our customers when we pay the costs on their behalf and are
reimbursed.



Cost of Goods Sold. Cost of goods
sold includes the ongoing mining and processing costs of our operations (primarily labor costs, energy and power costs, repair and maintenance costs, transportation costs on customer shipments, costs of hiring third party subcontractors to drill and
blast in our mining operations, as well as lease and royalty payments, at some locations) and non-cash charges associated with estimated net future costs of restoring and reclaiming operating mine sites. This reclamation provision is made at each
operating location based on units of production and engineering estimates of total reserves, which are expected to last from 2 to 77 years, as of the balance sheet date. The effect of any changes in estimated costs, production, and minable reserves
is recognized on a prospective basis.



Selling,
General and Administrative. Selling, general and administrative expenses are the costs of operating our business, including corporate overhead and associated fees and expenses related to acquisitions. Management fees to our acquisition advisors, due
diligence costs for any acquisitions that we are unable to complete and amounts recorded for product liability claims are also included in this category. See Self-Insurance and Product Liability Claim Reserves below.



Depreciable Properties. Acquired property and mineral deposits
are recorded at cost. Costs to develop new mining properties are capitalized and amortized based on units of production. The purchase price of business acquisitions is allocated based on the fair values of assets acquired and liabilities assumed at
that time. Depreciation is computed using the straight line method over the estimated useful lives of the assets, which ranges from 3 to 15 years. Depletion of mineral deposits is accounted for as the minerals or aggregates are extracted, based on
units of production and engineering estimates of total deposits. Accordingly, depletion expense will increase or decrease with changes in the volumes of minerals or aggregates extracted or, prospectively, for changes in engineering estimates of
total deposits. Amortization of various non-current assets such as non-competition agreements are made on a straight line basis over the life of the related agreement. Goodwill related to purchased acquisitions was amortized over 15 years. As
described under Recent Accounting Pronouncements, the adoption of SFAS 142 eliminated goodwill amortization and required an evaluation of goodwill impairment upon adoption, as well as subsequent annual valuations. The Company reviews
long-lived assets for impairment periodically in accordance with SFAS 144.



Upon retirement or disposal of assets, other than those of U.S. Silica acquired on February 9, 1996, the cost and accumulated depreciation or amortization are eliminated from the accounts and any gain
or loss is reflected in the statement of operations. Group asset accounting is utilized for the U.S. Silica assets acquired on February 9, 1996. Gains and losses on normal retirements or dispositions of these assets are excluded from net income and
proceeds for dispositions are recorded as a reduction of the acquired cost. Expenditures for normal repairs and maintenance are expensed as incurred. Construction-in-progress is primarily comprised of machinery and equipment which has not yet been
placed in service.



Self-Insurance and Product
Liability Claim Reserves. We are self-insured for healthcare costs and, in some states, workers compensation. Our subsidiary, U.S. Silica Company, is currently self-insured for third party product liability claims alleging occupational
disease. We provide for estimated future losses based on reported cases and past claim history. Accounting for these liabilities requires us to use our best judgment. While we believe that our accruals for these matters are adequate, if the actual
loss is significantly different than the estimated loss for these liabilities, our results of operations could be materially affected. See Significant Factors Affecting Our Business  Silica Health Risks and Litigation May Have a Material
Adverse Effect on Our Business for a further discussion of the manner in which we record amounts for product liability claims.



Employee Benefit Plans. We provide a range of benefits to our employees and retired employees, including pensions and postretirement
healthcare and life insurance benefits. We record annual amounts relating to these plans based on calculations specified by generally accepted accounting principles, which include various actuarial assumptions, including discount rates, assumed
rates of returns, compensation increases, turnover rates and healthcare cost trend rates. We review the actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when it is deemed
appropriate to do so. As required by U.S. generally accepted accounting principles, the effect of the modifications is generally recorded or amortized over future periods. We believe that the assumptions utilized in recording our obligations under
the plans, which are presented in note 10 to the audited consolidated financial statements, are reasonable based on advice from our actuaries and information as to assumptions used by other employers.



Taxes. We account for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences
between the book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be
realized.



16



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##### Table Of Contents



We evaluate
quarterly the realizability of our deferred tax assets by assessing the need for a valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are our forecast of future
taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income might affect the ultimate realization of the net deferred tax assets. Factors that
may affect our ability to achieve sufficient forecasted taxable income include, but are not limited to, the following: a decline in sales or margins, increased competition or loss of market share. In addition, we operate within multiple taxing
jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues, which may require an extended time to resolve. In managements opinion, adequate provisions for income taxes have been made for all years.



Use of Estimates and Assumptions. The
preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include doubtful accounts, amortization and depreciation, income taxes,
environmental and product liabilities, mine reclamation and employee benefit costs. Actual results could differ from those estimates.



Results of Operations



The following table sets forth our consolidated statement of operations data for the three years ended December 31, 2002, 2001 and 2000,
and the percentage of sales of each line item for the periods presented. This statement of operations data is derived from our consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.



|                                                         |  | Year Ended December 31 |         
|-------------------------------------------------------- |  | ---------------------- | --------
|                                                         |  | 2002                   |         
|                                                         |  | (Dollars in Thousands) |         
|                                                        
|Sales:                                                   |  |                        |         
|Industrial minerals                                      |  | $                      | 184,747 
|Aggregates                                               |  |                        | 118,645 
|Intercompany elimination                                 |  |                        | (2,897  
|                                                         |  |                        |         
|                                                        
|Total sales                                              |  |                        | 300,495 
|Cost of goods sold                                       |  |                        | 232,591 
|Depreciation, depletion and amortization                 |  |                        | 30,013  
|Selling, general and administrative                      |  |                        | 46,419  
|Asset impairment                                         |  |                        | 107,882 
|                                                         |  |                        |         
|                                                        
|Operating income (loss)                                  |  |                        | (116,410
|Interest expense                                         |  |                        | 32,089  
|Other income, net of interest income                     |  |                        | (1,673  
|                                                         |  |                        |         
|                                                        
|(Loss) income before income taxes                        |  |                        | (146,826
|Benefit for income taxes before extraordinary items      |  |                        | (56,846 
|                                                         |  |                        |         
|                                                        
|Net (loss) before cumulative effect of accounting change |  |                        | (89,980 
|Cumulative effect of change in accounting                |  |                        | 8,623   
|                                                         |  |                        |         
|Net income (loss)                                        |  | $                      | (98,603 
|                                                         |  |                        |         



Year Ended December
31, 2002 Compared with Year Ended December 31, 2001



Sales. Sales decreased $7.4 million, or 2.4%, to $300.5 million in the year ended December 31, 2002 from $307.9 million in the year ended December 31, 2001.



Sales of industrial minerals decreased $5.0 million, or 2.6%, to $184.7
million in the year ended December 31, 2002 from $189.7 million in the year ended December 31, 2001. Included in industrial minerals sales are intercompany shipments to our aggregates business that are then resold to customers. These intercompany
shipments are eliminated in consolidation and totaled $2.9 million in the year ended December 31, 2002 and $2.6 million in the year ended December 31, 2001. Excluding the intercompany shipments, sales of industrial minerals decreased $5.3 million,
or 2.8%, to $181.8 million in the year ended December 31, 2002 from $187.1 million in the year ended December 31, 2001. The primary reason for the decrease in sales was a $6.9 million decrease in transportation revenue as several customers have
changed their terms with us and now pay these costs directly to the transportation companies. This decline was partially offset by an increase in product sales to customers of $1.6



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million in the year, primarily
from increased silica and aplite sales to our glass customers, partially offset by a decline in sales to the oil &gas extraction market.



Sales of aggregates decreased $2.2 million, or 1.8%, to $118.6 million in the year ended December 31, 2002 from $120.8 million in the year
ended December 31, 2001. The primary reason behind the decrease in aggregates sales was a $7.9 million, or 16.9% decrease in asphalt sales from our existing, or heritage, operations, partially offset by a $2.5 million increase in asphalt sales from
a new leased operation, $2.3 million in stone sales from the same leased operation and a $1.0 million increase in transportation revenue.



Cost of Goods Sold. Cost of goods sold increased $3.4 million, or 1.5%, to $232.6 million in the year ended December 31, 2002 from $229.2
million in the year ended December 31, 2001.



Cost of goods sold for industrial minerals decreased $0.5 million, or 0.4%, to $139.2 million in the year ended December 31, 2002 from $139.7 million in the year ended December 31, 2001. The primary reason for the decrease was a $6.9
million decrease in transportation costs for customer shipments, as several customers changed their terms and pay these costs directly to the transportation companies, and a $2.1 million reduction in the cost of drier fuel, substantially offset by
increased costs of maintenance, wages, premiums and benefits, power and insurance.



Cost of goods sold for aggregates increased $4.0 million, or 4.5%, to $93.7 million for the year ended December 31, 2002 from $89.7 million for the year ended December 31, 2001. Included in cost of
goods sold are the costs of the intercompany shipments from our industrial minerals business as noted earlier. The cost of these shipments are eliminated in consolidation and increased $0.3 million to $2.9 million in the year ended December 31, 2002
from $2.6 million in the year ended December 31, 2001. Excluding these intercompany costs, the cost of goods sold for aggregates increased $3.7 million, or 4.3%, to $90.8 million for the year ended December 31, 2002 from $87.1 million for the year
ended December 31, 2001. The primary reason for the increase in cost of goods sold were the costs of our new leased operations, that were only partially offset by the decline in asphalt volume.



Depreciation, Depletion and Amortization. Depreciation,
depletion and amortization decreased $2.7 million, or 8.3%, to $30.0 million for the year ended December 31, 2002 from $32.7 million for the year ended December 31, 2001, primarily from a $1.2 million decrease in goodwill amortization as a result of
new accounting rules that eliminated goodwill amortization, and a $0.5 million decrease in the amortization of a covenant not to compete that expired in 2001.



Asset Impairment Charge. We recorded in the fourth quarter of 2002 an asset impairment charge of $107.9 million to record the current fair
market value of our aggregates business unit according to Statement of Financial Accounting Standard No. 144 Accounting for Impairment or Disposal of Long-Lived Assets (SFAS 144). The impairment analysis was necessitated by the sale
process for our aggregates business which began late in the fourth quarter of 2002. Following the asset impairment charge, the expected proceeds upon sale of the aggregates business in 2003 as discussed previously will approximate the value of the
business. This non-cash charge to operating loss results in a corresponding decrease in the valuation of the ore reserves for the aggregates business. The reported results of the aggregates business, including the impairment charge in 2002 will be
classified as discontinued operations for all periods presented commencing in the second quarter of 2003 and the related assets and liabilities will be classified as held for sale.



Selling, General and Administrative. Selling, general and administrative expenses increased $22.5 million, or
94.1%, to $46.4 million for the year ended December 31, 2002 from $23.9 million for the year ended December 31, 2001. Included in selling, general and administrative expense are our costs and accruals for third party product liability litigation
relating to occupational health claims against one of our subsidiaries. Our industrial minerals subsidiary incurred a significant increase in new cases filed against it in the fourth quarter of 2002 and accordingly performed a comprehensive review
of the estimated future costs of this litigation, and, as a result, recorded a non-cash expense of $23.7 million in the year ended December 31, 2002, an increase of $22.3 million, from the $1.4 million of non-cash charges recorded in the year ended
December 31, 2001. See Significant Factors Affecting Our Business  Silica Health Risks and Litigation May Have a Material Adverse Effect on Our Business. Except for the non-cash charges for silica health litigation relating to
occupational health claims, selling, general and administrative expense only increased $0.2 million to $22.7 million for the year ended December 31, 2002 from $22.5 million for the year ended December 31, 2001.



Operating Loss. Operating loss incurred for the year ended
December 31, 2002 was $116.4 million, as compared to operating income of $22.2 million for the year ended December 31, 2001 as a result of the factors noted earlier, primarily the non-cash asset impairment charge of $107.9 million and the non-cash
charges for occupational health claims from alleged silica exposure of $23.7 million.



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Interest
Expense. Interest expense decreased $3.5 million, or 9.8%, to $32.1 million for the year ended December 31, 2002 from $35.6 million for the year ended December 31, 2001 due primarily to decreased interest rates.



Benefit for Income Taxes. The benefit for income taxes of
$56.8 million reflects the tax benefits related to the current year loss reduced by a $7.5 million valuation allowance from the uncertainty of the future utilization of our net operating loss carry forwards and alternative minimum tax credit carry
forward.



Net Loss Before Accounting Changes. Net
loss before the cumulative change in accounting for goodwill increased $86.0 million to $90.0 million in the year ended December 31, 2002 from $4.0 million in the year ended December 31, 2001.



Cumulative Effect of Change in Accounting for Goodwill. Under
Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets (SFAS 142), we were required to perform an asset impairment test on all goodwill recorded on our books as of January 1, 2002. The result of the
impairment test was a complete write-down of the $14.7 million of goodwill recorded as an asset as of January 1, 2002, which was recorded as a cumulative effect of change in accounting. The goodwill was the result of the acquisitions of the Morie
Assets and Commercial Stone completed in 1999 by the aggregates segment. Adoption of this standard, which was effective January 1, 2002, eliminated annual goodwill amortization expense of approximately $1.2 million. The $8.6 million expense recorded
in the year ended December 31, 2002 is net of applicable income taxes of $6.1 million.



Net Loss. Net loss for the year ended December 31, 2002 was $98.6 million as a result of the factors noted earlier, but primarily the asset impairment charge, silica litigation charge and cumulative
effect of the change in accounting for goodwill.



Year Ended December 31, 2001 Compared with Year Ended December 31, 2000



Sales. Sales increased $8.6 million, or 2.9%, to $307.9 million in the year ended December 31, 2001 from $299.3 million in the year ended December 31, 2000.



Sales of industrial minerals decreased $2.9 million, or 1.5%
to $189.7 million in the year ended December 31, 2001 from $192.6 million in the year ended December 31, 2000. Included in sales in 2000 was $1.9 million from PECAL, our subsidiary that was sold in February 2000. Excluding PECAL results, sales of
industrial minerals decreased $1.0 million, or 0.5%, to $189.7 million in the year ended December 31, 2001 from $190.7 million in the year ended December 31, 2000. The primary reason behind the decrease in industrial minerals sales was decreased
sales of silica sand to all glass market segments, and the chemicals and foundry market segments, partially offset by increased silica sand sales to the oil and gas and building product market segments, a $1.7 million increase, from $0.9 million in
2000 to $2.6 million in 2001, in intercompany shipments to our aggregates business that are eliminated in consolidation, and additional sales of aplite to the glass container market segment.



Sales of aggregates increased $13.2 million, or 12.3% to
$120.8 million in the year ended December 31, 2001 from $107.6 million in the year ended December 31, 2000. The increase in sales is primarily due to a 14.5% increase in asphalt volume and a 21.4% increase in stone volume sold to customers, and a
$3.4 million, or 14.1% increase in transportation costs billed to customers, increasing from $24.1 million in 2000 to $27.5 million in 2001.



Cost of Goods Sold. Cost of goods sold increased $6.4 million, or 2.9%, to $229.2 million in the year ended December 31, 2001 from $222.8
million in the year ended December 31, 2000.



Cost of goods sold for industrial minerals decreased $1.3 million, or 0.9%, to $139.7 million in the year ended December 31, 2001 from $141.0 million in the year ended December 31, 2000. Excluding PECALs results from 2000, cost
of goods sold for industrial minerals increased $0.2 million to $139.7 million for the year ended December 31, 2001 from $139.5 million in the year ended December 31, 2000. The remaining change in cost of goods sold is primarily due to the 3.8%
decrease in the volume of material sold in the year, offset by a $1.9 million increase in the price of drier fuel and a $0.4 million increase in the price of electricity.



Cost of goods sold for aggregates increased $7.8 million, or 9.5%, to $89.7 million in the year ended
December 31, 2001 from $81.9 million in the year ended December 31, 2000. The increase in cost of goods sold for aggregates is primarily due to a 14.4% increase in the volume of material sold in the year, and an increase of $1.7 million in the cost
of materials received from our industrial minerals business unit that is eliminated in consolidation, partially offset by a $2.9 million decrease in the price of asphalt cement that is the binder used in the production of hot mixed asphalt.



Depreciation, Depletion and Amortization.
Depreciation, depletion and amortization decreased $3.2 million, or 8.9%, to $32.7 million in the year ended December 31, 2001 from $35.9 million in the year ended December 31, 2000. The decrease was primarily due to a $4.9 million decrease in the
amortization of non-compete agreements on the expiration, in February 2001, of



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the non-compete agreement with
the former owner of our industrial minerals subsidiary. Depletion costs increased $1.5 million in 2001 to $7.9 million from $6.4 million in 2000 due to the increase in aggregates volume mined and sold.



Selling, General and Administrative. Selling, general and
administrative expenses decreased $2.6 million, or 9.8%, to $23.9 million in the year ended December 31, 2001 from $26.5 million in the year ended December 31, 2000. Included in selling, general and administrative expense in 2000 were $2.3 million
in compensation costs incurred to recruit our new chief executive officer that were not duplicated in 2001, and $0.4 million in costs for PECAL. Excluding both the compensation costs and PECALs results from 2000, selling, general and
administrative expenses increased $0.1 million to $23.9 million in the year ended December 31, 2001 from $23.8 million in the year ended December 31, 2000. This increase is primarily due to reduced personnel and other operating expenses, and a $0.8
million reduction in management fees and consulting expenses on unsuccessful acquisitions, offset by a $1.4 million increase in the amounts provided for product liability claims primarily recorded in the fourth quarter relating to occupational
health claims. See Significant Factors Affecting Our Business  Silica Health Risks and Litigation May Have a Material Adverse Effect on Our Business.



Operating Income. Operating income increased $8.1 million or 57.5% to $22.2 million in the year ended
December 31, 2001, from $14.1 million in the year ended December 31, 2000.



Corporate expenses not allocated to the business segments decreased $2.9 million to $1.1 million in the year ended December 31, 2001 from $4.0 million in the year ended December 31, 2000 due to the
reduction in management and consulting fees, and non-recurring compensation and incentive stock compensation expenses noted earlier.



Interest Expense. Interest expense decreased $0.8 million, or 2.2%, to $35.6 million in the year ended December 31, 2001 from $36.4
million in the year ended December 31, 2000 primarily as a result of lower interest rates on the variable portion of our senior secured debt.



Net Income (Loss). Net loss decreased $5.5 million to $4.0 million in the year ended December 31, 2001 from $9.5 million in the year ended
December 31, 2000. The decrease is primarily due to the factors noted earlier, partially offset by $2.8 million decrease in the benefit for income taxes.



Liquidity and Capital Resources



Our principal liquidity requirements have historically been to service our debt, meet our working capital, capital expenditure and mine
development expenditure needs and finance acquisitions. We are a holding company and as such we conduct substantially all our operations through our subsidiaries. As a holding company, we are dependent upon dividends or other intercompany transfers
of funds from our subsidiaries to meet our debt service and other obligations, and have historically met our liquidity and capital investment needs with internally generated funds supplemented from time to time by borrowings under our revolving
credit facility. Conversely, we have funded our acquisitions through borrowings and equity investments. Our total debt as of December 31, 2002 was $294.9 million and our total stockholders deficit as of that date was $54.4 million, giving us
total debt representing approximately 123% of total capitalization. Our debt level makes us more vulnerable to economic downturns and adverse developments in our business.



Net cash provided by operating activities was $9.2 million for the year ended December 31, 2002 compared to
$16.5 million of net cash provided by operating activities in the year ended December 31, 2001. Cash provided by operating activities decreased $7.3 million in 2002 due primarily to decreased earnings.



Net cash used for investing activities decreased $0.2 million
to $12.9 million in the year ended December 31, 2002 from $13.1 million for the year ended December 31, 2001. This decrease primarily resulted from an increase in proceeds from sale of property, plant and equipment of $0.4 million partially offset
by increased capital spending of $0.3 million.



Cash flow provided by financing activities was $2.6 million for the year ended December 31, 2002 as compared to $1.8 million of cash flow used for financing activities in the year ended December 31, 2001. There was a $10.7 million
reduction in long-term debt in the year ended December 31, 2002 and a $9.2 million decrease in long-term debt in the same period in 2001. Advances under the revolving credit facility were $16.5 million and $7.9 million in the years ended December
31, 2002 and December 31, 2001, respectively.



Interest payments on our 13% senior subordinated notes due 2009 ($150 million outstanding as of December 31, 2002), which are unconditionally and irrevocably guaranteed, jointly and severally, by each of our domestic subsidiaries,
debt service under our senior secured credit agreement described below, working capital, capital expenditures and mine development expenditures, incurred in the normal course of business as current deposits are depleted, represent our current
significant liquidity requirements.



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Under our
senior secured credit agreement, as of December 31, 2002, we had $23.7 million outstanding under the tranche A term loan facility (which matures in September 2005) and $89.5 million outstanding under the tranche B term loan facility (which matures
in September 2007). In addition, this credit agreement provides us with a $50.0 million revolving credit facility. The revolving credit facility was partially drawn for $29.8 million as of December 31, 2002, and $8.6 million was allocated for
letters of credit, leaving $11.6 million available for our use. As of March 31, 2003, borrowings under the revolving credit facility increased to $30.8 million, and $8.6 million was allocated for letters of credit, leaving $10.6 million available
for our use. The revolving credit facility is available for general corporate purposes, including working capital and capital expenditures, but excluding acquisitions, and includes sublimits of $12.0 million and $3.0 million, respectively, for
letters of credit and swingline loans. In addition, effective March 13, 2003 a new second lien tranche C term loan facility in the amount of $15.0 million (which matures in September 2007) was added and fully utilized. Debt under the senior secured
credit agreement is collateralized by substantially all of our assets, including our real and personal property, inventory, accounts receivable and other intangibles. For a further description of our senior secured credit agreement, including
interest rate provisions, certain restrictions that it imposes upon us and certain quarterly and annual financial covenants that it requires us to maintain, please see note 6 to our audited consolidated financial statements included elsewhere in
this Annual Report on Form 10-K.



On November 8,
2002, the lenders under our senior secured credit agreement approved an amendment effective September 30, 2002 that waived any default under the required leverage ratio and interest coverage covenants as of September 30, 2002. In connection with
this amendment, we agreed to a 50 basis point increase in interest rates when the leverage ratio is greater than 5.0. When combined with two earlier amendments under the senior secured credit agreement, this results in a 100 basis point increase in
interest rates over the original senior secured credit agreement for any quarter in which the leverage ratio is greater than 5.0. As of September 30, 2002 the leverage ratio was 6.1 compared to the applicable covenant of 5.5. The interest coverage
ratio at September 30, 2002 was 1.68 compared to a 1.70 covenant. A one-time amendment fee of approximately $415,000 was paid to the lenders as part of this amendment.



On March 12, 2003, the lenders under our senior secured credit agreement approved an amendment that provided
for a the new second lien tranche C term loan facility of $15.0 million and waived the agreements leverage ratio and interest coverage covenants through June 30, 2003. A one-time amendment fee of approximately $203,000 was paid to the lenders
as part of this amendment and a one-time commitment fee of $600,000 was paid to the term C lender.



On April 17, 2003, the lenders under our senior secured credit agreement approved an amendment that revised the required leverage ratio
and interest coverage ratio covenants through January 1, 2004. Under this amendment, the leverage ratio must be less than 7.98 at June 30, 2003, 7.51 at September 30, 2003 and 6.94 at December 31, 2003. The interest coverage ratio has been changed
to greater than 1.26 at June 30, 2003, 1.31 at September 30, 2003 and 1.46 at December 31, 2003. In connection with this amendment, if our proposed aggregates sale is not completed by July 16, 2003, there will be a 100 basis point increase in the
applicable margins under the senior secured credit agreement.



We believe, based on our calendar year 2003 forecast (which, for this purpose, includes our aggregates business), that we will be in compliance with the amended leverage ratio and interest coverage ratio covenants contained in the
senior secured credit agreement throughout calendar year 2003. In the event that we do not substantially achieve our 2003 forecast, it will be necessary to seek further amendments to the senior secured credit agreement covenants. In addition, the
required leverage ratio and interest coverage ratio covenants contained in the senior secured credit agreement are substantially more restrictive as of March 31, 2004 than the amended 2003 covenants and it is probable that we will need to seek
amendments or waivers to avoid violating these covenants at that time. While we have obtained amendments and waivers under the senior secured credit agreement in the past, there can be no assurance that future amendments or waivers will be granted
or that such amendments or waivers, if granted, would be on terms satisfactory to us.



In the event that we are not in compliance with the leverage ratio and interest ratio covenants contained in the senior secured credit
agreement and we do not obtain a waiver or amendment under the agreement, we would be in default under the agreement and the lenders could declare all of the funds borrowed under the agreement, together with accrued interest, immediately due and
payable. Similarly, if the lenders take this action under the senior secured credit agreement, we would be in default under the indenture relating to our senior subordinated notes and, if the default is not cured within 10 days after notice thereof,
the bondholders could declare the principal of and accrued interest on the notes immediately due and payable. In the event this debt becomes due and payable it is unlikely that we will be able to repay the amounts due and payable and we could be,
therefore, required to sell assets to generate cash or the lenders under our senior secured credit agreement could foreclose on the pledged stock of our subsidiaries and on the assets in which they have been granted a security interest.



As discussed earlier, on April 10, 2003, we
signed an agreement for the sale of our aggregates business, which we expect will result in net cash proceeds to us of approximately $147 million (subject to a post-closing working capital adjustment). We plan to use the net proceeds from the sale
to repay indebtedness outstanding under our senior secured credit agreement. In addition, as a result of this planned repayment, we will seek a new source of financing for the liquidity needs of the remaining



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business. In addition to
providing working capital for the remaining business, we may use this new source of financing to repay the remaining amounts outstanding under the senior secured credit agreement. We are currently in discussions with a number of financial
institutions to establish this new credit facility, which we would expect would be entered into at or around the time of the completion of the aggregates sale. While we believe that we will be able to obtain this new credit facility, we cannot
guarantee that we will be able to do so on terms satisfactory to us or at all.



Capital expenditures increased $0.3 million, or 2.2%, to $14.0 million in the year ended December 31, 2002 from $13.7 million in the year ended December 31, 2001. Excluding possible acquisitions, our
expected capital expenditure and mine development requirements for 2003 are $10.0 million.



As of December 31, 2002, the total of our future contractual cash commitments, including the repayment of our debt obligations under our senior secured credit agreement and our senior subordinated
notes, is summarized as follows:



|Contractual Cash Obligations (In millions) |       | Payments Due by Period
|------------------------------------------ | ----- | ----------------------
|                                           | Total |                       
|Senior Long-Term Debt(1)                   |       | $                     
|Subordinated Long-Term Debt                |       |                       
|Capital Lease Obligations(2)               |       |                       
|Operating Lease Obligations(2) (3) (4)     |       |                       
|Other Long-Term Obligations(3) (4)         |       |                       
|Total Contractual Cash Obligations         |       | $                     

---

|1) |  | For a further description of the annual payment terms for the debt incurred under our senior secured credit agreement, please see note 6 to our audited consolidated
financial statements included elsewhere in this Annual Report on Form 10-K.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2) |  | We are obligated under certain capital and operating leases for railroad cars, mining properties, mining and processing equipment, office space, transportation and
other equipment. Certain of our operating lease arrangements include options to purchase the equipment for fair market value at the end of the original lease term. Ownership of the equipment under a capital lease transfers to us at the end of the
original lease term. Annual operating and capital lease commitments are presented in more detail in note 5 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3) |  | In March 2001, we entered into a sublease and option agreement for all rights, title and interest under leases held, and property owned, of a Pennsylvania aggregates
operation known as the Jim Mountain Quarry. The original term of this agreement expires in March 2004. Included in our operating lease obligations is $0.4 million for our annual rental expense, and included in other long-term obligations is $0.8
million in annual payments covering an option to purchase the quarry and minimum annual royalty payments. For a further description of this agreement, please see note 3 to our audited consolidated financial statements included elsewhere in this
Annual Report on Form 10-K.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4) |  | In March 2002, the company entered into a lease and option agreement for all rights, title and interest under property owned of an aggregates operation located in
Latrobe, Pennsylvania. The original term of this agreement expires in March 2005. Included in our operating lease obligations is $0.2 million in annual rental and operating expenses and included in other long-term obligations is $0.5 million in
minimum royalties. For a further description of this agreement, please see the footnotes to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our ability to satisfy our debt obligations and to pay
principal and interest on our debt, fund working capital, mine development and acquisition requirements and make anticipated capital expenditures will depend on the future performance of our subsidiaries, which is subject to general economic,
financial and other factors, some of which are beyond our control. We cannot be certain that the cash earned by our subsidiaries will be sufficient to allow us to pay principal and interest on our debts and meet our other obligations. We believe,
however, that based on current levels of operations and anticipated growth, cash flow from operations, together with borrowings under the revolving credit facility, will be adequate for at least the next twelve months to make required payments of
principal and interest on our debt and fund working capital, mine development and capital expenditure requirements. After the completion of the sale of our aggregates business, our cash flow from operations will be principally dependent on the
results of our industrial minerals segment. We believe, assuming the completion of the aggregates



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sale and transactions related
to the aggregates sale, that based on current levels of operations from our remaining business and anticipated growth, cash flow from these remaining operations, together with borrowings under credit facilities, will be adequate for at least the
next twelve months to make required payments of principal and interest on our debt and fund working capital and capital expenditure requirements. There can be no assurance, however, that our business will generate sufficient cash flow from
operations or that future borrowings will be available under the revolving credit facility or other credit facilities in an amount sufficient to enable us to service our debt or to fund our other liquidity needs. If we do not have enough cash, we
may be required to refinance all or part of our existing debt, including the notes, sell assets, borrow more money or raise equity. We cannot guarantee that we will be able to refinance our debt, sell assets, borrow more money or raise equity on
terms acceptable to us, or at all.



Significant Factors
Affecting Our Business



Silica Health
Risks and Litigation May Have a Material Adverse Effect on Our Business. The inhalation of respirable crystalline silica is associated with several adverse health effects. First, it has been known since at least the 1930s that prolonged
inhalation of respirable crystalline silica can cause silicosis, an occupational disease characterized by fibrosis, or scarring, of the lungs. Second, since the mid-1980s, the carcinogenicity of crystalline silica has been at issue and the subject
of much debate and research. In 1987, the International Agency for Research on Cancer, or IARC, an agency of the World Health Organization, classified crystalline silica as a probable human carcinogen. In 1996, a working group of IARC voted to
reclassify crystalline silica as a known human carcinogen. On May 15, 2000, the National Toxicology Program, part of the Department of Health and Human Services, issued its ninth report on carcinogens, which reclassified crystalline silica
(respirable size) from its previous classification as a reasonably anticipated carcinogen to a known human carcinogen. Third, the disease silicosis is associated with an increased risk of tuberculosis. Finally, there is
recent evidence of a possible association between crystalline silica exposure or silicosis and other diseases such as immune system disorders, like scleroderma, end-stage renal disease and chronic obstructive pulmonary disease.



One of our subsidiaries, U.S. Silica, was named as a defendant
in an estimated 5,100 product liability claims alleging silica exposure filed in the period January 1, 2002 to December 31, 2002, with 3,100 of those claims filed between November 1, 2002 and December 31, 2002. U.S. Silica was named as a defendant
in 154 similar claims filed in 1998, 497 filed in 1999, 610 filed in 2000, and 1,320 filed in 2001. Year-to-date through April 3, 2003 (the latest date information is available), U.S. Silica has been named in an additional 9,900 product liability
claims, and as of that date, there were an estimated 16,500 silica-related products liability claims pending in which U.S. Silica is a defendant. Almost all of the claims pending against U.S. Silica arise out of the alleged use of U.S. Silica
products in foundries or as an abrasive blast media and have been filed in the states of Texas and Mississippi.



The plaintiffs, who allege that they are employees or former employees of our customers, claim that our silica products were defective or
that we acted negligently in selling our silica products without a warning, or with an inadequate warning. The plaintiffs further claim that these alleged defects or negligent actions caused them to suffer injuries and sustain damages as a result of
exposure to our products. In almost all cases, the injuries alleged by the plaintiffs are silicosis or mixed dust disease, a claim that allows the plaintiffs to pursue litigation against the sellers of both crystalline silica and other
minerals. There are no pending claims of this nature against any of our other subsidiaries.



ITT Industries, Inc., successor to a former owner of U.S. Silica, has agreed to indemnify U.S. Silica for third party silicosis claims (including litigation expenses) filed against it prior to
September 12, 2005 alleging exposure to U.S. Silica products for the period prior to September 12, 1985, to the extent of the alleged exposure prior to that date. This indemnity is subject to an annual deductible of $275,000, which is cumulative and
subject to carry-forward adjustments. The Company fully accrued this deductible on a present value basis when it acquired U.S. Silica. As of December 31, 2002 and 2001, this accrual amounted to $1.9 million and $1.8 million, respectively.
Pennsylvania Glass Sand Corporation, predecessor to U.S. Silica, was a named insured on insurance policies issued to ITT Industries for the period April 1, 1974 to September 12, 1985 and to U.S. Borax (another former owner) for the period September
12, 1985 to December 31, 1985. To date, we have not sought coverage under these policies. However, as a named insured, we believe that coverage under these policies will be available to us. Ottawa Silica Company (a predecessor that merged into U.S.
Silica in 1987) had insurance coverage on an occurrence basis prior to July 1, 1985.



It is likely that we will continue to have silica-related product liability claims filed against us, including claims that allege silica exposure for periods after January 1, 1986. We cannot guarantee
that our current indemnity agreement with ITT Industries (which currently expires in 2005 and in any event only covers alleged exposure to certain U.S. Silica products for the period prior to September 12, 1985), or potential insurance coverage
(which, in any event, only covers periods prior to January 1, 1986) will be adequate to cover any amount for which we may be found liable in such suits. Any such claims or inadequacies of the ITT Industries indemnity or insurance coverage could have
a material adverse effect in future periods on our consolidated



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financial position, results of
operations or cash flows, if such developments occur.



In the past, we recorded amounts for product liability claims based on estimates of our portion of the cost to be incurred for all pending product liability claims and estimates based on the value of an incurred but not reported
liability for unknown claims for exposures that occurred before 1976, when we began warning our customers and their employees of the health effects of crystalline silica. Estimated amounts recorded were net of any expected recoveries from insurance
policies or the ITT Industries indemnity. The amounts recorded for product liability claims were estimates, which were reviewed periodically by management and legal counsel and adjusted to reflect additional information when available. As the rate
of claims filed against the company and others in the industry increased in 2002, we determined it was no longer sufficient for management to solely estimate the product liability claims that might be filed against the company, and we retained the
services of an independent actuary to estimate the number and costs of unresolved current and future silica related product liability claims that might be asserted against us.



The actuary relied on generally accepted actuarial methodologies and on information provided by us, including
the history of reported claims, insurance coverages and indemnity protections available to us from third parties, the quantity of sand sold by market and by year through December 31, 2002, recent court rulings addressing the liability of sellers of
silica sand, and other reports, articles and records publicly available that discuss silica related health risks, to estimate a range of the number and severity of claims that could be filed against the company over the next 50 years, the period
found by the actuary to be reasonably estimable. The variables used to determine the estimate were further analyzed and multiple iterations were modeled by our actuary to calculate a range of expected outcomes.



As previously discussed, we have available to us several forms
of potential recovery to offset a portion of these costs in the form of insurance coverage and the ITT Industries indemnity. As part of the overall study, our actuary also estimated the amount recoverable from these sources, assuming that all
primary and excess insurance coverage and the ITT indemnity is valid and fully collectible and also based on the timing of current and new claims filed, the alleged exposure periods and the portion of the exposure that would fall within an insured
or indemnified exposure period.



Following the
adverse developments during the year, especially in the fourth quarter, and based on the study performed by our actuary, we recorded a pre-tax charge related to silica claims of $23.7 million in 2002 for the estimated undiscounted gross costs,
including defense costs, after consideration of recoveries under the ITT indemnity and insurance, that we expect to incur over the next 50 years through the end of 2052. This resulted in a long term liability of $69.2 million related to third party
product liability claims and a non-current asset of $40.9 million for probable insurance and indemnity recoveries at December 31, 2002. The pre-tax charge in 2001 for silica claims was $2.1 million and the net liability recorded at December 31, 2001
was $4.6 million.



On an annual basis, our
actuary has calculated that our cash portion of the retained losses (reflecting any insurance coverage and indemnity payments) over the next 15 years would average $1.4 million per year, ranging from $0.7 million to $2.0 million in any year. On
average, we have incurred approximately $1.0 million per year in retained losses over the past two years.



The process of estimating and recording amounts for product liability claims is imprecise and based on a variety of assumptions, some of
which, while reasonable at the time, may prove to be inaccurate. Our actuarys report is based to a large extent on the assumption that our past experience is predictive of future experience. Unanticipated changes in factors such as judicial
decisions, future legal judgments against us, legislative actions, claims consciousness, claims management, claims settlement practices and economic conditions make these estimates subject to a greater than normal degree of uncertainty that could
cause the silica-related liabilities and insurance or indemnity recoveries to be greater or less than those projected and recorded.



Given the inherent uncertainty in making future projections, we plan to have these projections periodically updated based on our actual
claims experience and other relevant factors such as changes in the judicial system and legislative actions.



The exposure of persons to silica and the accompanying health risks have been, and will continue to be, a significant issue confronting
the industrial minerals industry and our industrial minerals segment. Concerns over silicosis and other potential adverse health effects, as well as concerns regarding potential liability arising from the use of silica, may have the effect of
discouraging our customers use of our silica products. The actual or perceived health risks of mining, processing and handling silica could materially and adversely affect silica producers, including us, through reduced use of silica products,
the threat of product liability or employee lawsuits, increased levels of scrutiny by federal and state regulatory authorities of us and our customers or reduced financing sources available to the silica industry.



Our Business Is Subject to Operating Risks, Including
Fluctuations in Oil and Energy Prices. All of our revenue is and will be derived from our industrial minerals and aggregates businesses. The mining, processing and related infrastructure facilities



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of these businesses are
subject to risks normally encountered in the industrial minerals and aggregates industries. These risks include environmental hazards, industrial accidents, technical difficulties or failures, late delivery of supplies, the price and availability of
power, the price and availability of transportation, unusual or unexpected geological formations or pressures, cave-ins, pit wall failures, rock falls, unanticipated ground, grade or water conditions, flooding and periodic or extended interruptions
due to the unavailability of materials and equipment, inclement or hazardous weather conditions, fires, explosions or other accidents or acts of force majeure. Any of these risks could result in damage to, or destruction of, our mining properties or
production facilities, personal injury, environmental damage, delays in mining or processing, losses or possible legal liability. Any prolonged downtime or shutdowns at our mining properties or production facilities could have a material adverse
effect on us.



In addition, the price or
availability of oil, a raw material used in making hot mixed asphalt, could adversely affect operating costs, which could in turn adversely affect our operating results if we cannot pass these increased costs through to our customers or if customers
use less asphalt due to higher prices. Furthermore, increased energy prices, particularly relating to natural gas, propane, diesel fuel and other petroleum-based products, could adversely affect operating costs and, therefore, operating results.



Demand for Our Products Is Affected by
External Factors. Demand in the markets served by the industrial minerals and aggregates industries is affected by many external factors, including the general and regional economic conditions in the states in which we produce and sell our
products, demand for automobiles and other vehicles, the substitution of plastic or other materials for glass, levels of government spending on road and other infrastructure construction and demand for residential and commercial construction.
General or localized economic downturns or other external factors adversely affecting demand in the areas where we sell our products could result in a decrease in sales and operating income and, therefore, could have a material adverse effect on us.
For example, because our aggregates business is more geographically concentrated than the businesses of some of our competitors, we may be more vulnerable to local economic conditions in Pennsylvania and New Jersey.



We Rely Heavily on Third Party Transportation. We rely
heavily on railroads and trucking companies to ship our industrial minerals and aggregates products to our customers. Because freight costs represent a significant portion of the total cost to the customer, fluctuations in freight rates can change
the relative competitive position of our production facilities. Rail and trucking operations are subject to various hazards, including extreme weather conditions, work stoppages and operating hazards. If we are unable to ship our products as a
result of the railroads or trucking companies failing to operate or if there are material changes in the cost or availability of railroad or trucking services, we may not be able to arrange alternative and timely means to ship our products, which
could lead to interruptions or slowdowns in our businesses and, therefore, have a material adverse effect on us.



Future Acquisitions May Adversely Affect Our Operations.We may actively pursue acquisition opportunities, some of which could be
material. We may finance future acquisitions through internally generated funds, bank borrowings, public offerings or private placements of equity or debt securities, or a combination of these sources. We might not be able to make acquisitions on
terms that are favorable to us, or at all. If we do complete any future acquisitions, we will face many risks, including the possible inability to integrate an acquired business into our operations, diversion of our managements attention,
failure to retain key acquired personnel and unanticipated problems or liabilities, some or all of which could have a material adverse effect on us. Acquisitions could place a significant strain on management, operating, financial and other
resources and increased demands on our systems and controls.



We May Face Difficulties or Delays in Completing the Sale of Our Aggregates Business.The closing of the sale of our aggregates business to a subsidiary of Hanson Building Materials of America, Inc. is subject to various
closing conditions, including antitrust clearance under the Hart-Scott-Rodino Improvements Act of 1976, as amended, completion of environmental and geological due diligence and real estate surveys at certain of our aggregates operating sites,
obtaining the consent of our senior secured lenders and obtaining the release of the guarantees of our aggregates subsidiaries of the obligations under the indenture relating to our senior subordinated notes. We expect these conditions to be
satisfied. However, it is possible that the required regulatory approvals will be delayed or will not be obtained, or that satisfaction of the other conditions may not occur in the timeframe we expect or not at all.



Inflation



We do not believe that inflation has had a material impact on our financial position or results of operations
during the periods covered by the financial statements included in this Annual Report on Form 10-K.



Seasonality



Our aggregates business is seasonal, due primarily to the effect of weather conditions in winter months on construction



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activity in our Pennsylvania
and New Jersey markets. Due to this, peak sales of aggregates occur primarily in the months of April through November. Accordingly, our results of operations in any individual quarter may not be indicative of our results of operations for the full
year.



Environmental and Related Matters



We discuss certain environmental matters relating to our
various production and other facilities, certain regulatory requirements relating to human exposure to crystalline silica and our mining activity and how such matters may affect our business in the future under BusinessGovernment
Regulation.



Recent Accounting Pronouncements



Statement of Financial Accounting Standards
No. 143 (SFAS 143), Accounting for Asset Retirement Obligations, was issued in June 2001. SFAS 143 establishes accounting and reporting standards for obligations associated with the retirement of tangible long-lived assets. We currently provide for
this obligation based on units of production over the life of our mining property and as of December 31, 2002 reported a liability of $9.9 million in other noncurrent liabilities related to this obligation. Effective January 1, 2003, we will adopt
SFAS 143 which requires the liability to be determined based on legal obligations that will be incurred when an asset is retired. We estimate that our obligations under the new Standard will result in a liability of $8.6 million and an asset of $4.3
million. The resulting $5.6 million pre-tax gain from adoption will be reported net of tax as a cumulative effect of a change in accounting principle as of January 1, 2003.



In 2002 we adopted Statement of Financial Accounting Standard No. 144 Accounting for Impairment or
Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144 addresses significant issues relating to the implementation of FASB Statement No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of (SFAS No. 121), and the development of a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly
acquired.



In November 2002, the Financial
Accounting Standards Board (FASB) issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. Interpretation No. 45 requires
the disclosure of certain guarantees existing at December 31, 2002. In addition, Interpretation No. 45 requires the recognition of a liability for the fair value of the obligation of qualifying guarantee activities that are initiated or modified
after December 31, 2002. Accordingly, we will apply the recognition provisions of Interpretation No. 45 prospectively to guarantee activities initiated after December 31, 2002.



|Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk
|-------- |  | ----------------------------------------------------------



We do not expect to enter into financial instruments for trading purposes. We anticipate periodically entering into interest rate swap
agreements to effectively convert all or a portion of our floating-rate debt to fixed-rate debt in order to reduce our exposure to movements in interest rates. Such agreements would involve the exchange of fixed and floating interest rate payments
over the life of the agreement without the exchange of the underlying principal amounts. The impact of fluctuations in interest rates on the interest rate swap agreements is expected to be offset by the opposite impact on the related debt. We record
the payments or receipts on the agreements as adjustments to interest expense. Swap agreements will only be entered into with syndicate banks. In addition, we may enter into interest rate cap agreements, which limit our variable rate interest to a
specified level. In the future, we may enter into natural gas and other energy related hedge arrangements in order to reduce our exposure to changes in commodity energy prices. As of March 31, 2003, we have no energy hedge agreements outstanding.



We are exposed to various market risks,
including changes in interest rates. Market risk related to interest rates is the potential loss arising from adverse changes in interest rates.



At December 31, 2002 and December 31, 2001, we had an outstanding interest rate swap agreement maturing in 2004 with a notional principal
amount of $30.0 million. At December 31, 1999, we had outstanding interest rate swap agreements maturing in 2001 with an aggregate notional principal amount of $30.0 million. These swaps effectively convert the variable interest rates on the
notional principal amounts to a fixed interest rate. In addition, we had interest rate cap agreements at December 31, 2002, 2001 and 2000 with aggregate notional principal amounts of $41.0 million, $46.0 million, and $57.0 million, respectively.
These agreements effectively limit the variable interest rate on the notional principal amount of variable rate debt to 6.5%.



The fair value of interest rate swap and cap agreements represents the estimated receipts or payments that we would



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make to terminate the
agreements. At December 31, 2002, we would have paid $1.7 million to terminate the interest rate swap agreement and received $17,000 to terminate the interest rate cap agreements.



The fair market value of our long-term fixed interest rate debt is subject to interest rate risk. Generally,
the fair market value of the fixed interest rate debt will increase as the interest rates fall and decrease as interest rates rise. At December 31, 2002, the estimated fair value of our fixed interest rate long-term debt (including current portion)
was approximately $96 million less than its carrying value of $150.0 million due to changes in market conditions for the senior subordinated notes, which were trading at 36% of their face value as of December 31, 2002.





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|Item 8. |  | Financial Statements and Supplementary Data
|------- |  | -------------------------------------------



Report of Independent Accountants



To the Board of Directors and Stockholder of Better Minerals & Aggregates Company:



In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) on page 69 present fairly,
in all material respects, the financial position of Better Minerals & Aggregates Company and subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) on page69 presents
fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Companys
management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.



As discussed in Note 2 to
the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets.



As discussed in Note 6, the lenders under the Companys Senior Secured Credit Facilities approved an
amendment on April 17, 2003 which revised certain financial covenants through January 1, 2004, however, the covenants for March 31, 2004 are substantially more restrictive than those provided for in the April 17, 2003 amendment. It is probable that
the Company will need to seek amendments or waivers to avoid violating these more restrictive covenants. In the event that the Company is unable to obtain amendments or waivers the lenders could declare all of the funds borrowed thereunder, together
with accrued interest, immediately due and payable. Similarly, if the lenders take this action the Company would be in default under the indenture related to its Senior Subordinated Notes. In the event the debt becomes due and payable it is unlikely
that the Company will be able to repay amounts due and it could be required to sell assets to generate cash or the lenders could foreclose on the pledged stock of the Companys subsidiaries and the assets in which they have been granted a
security interest. In addition, as discussed in Note 17, on April 10, 2003, the Company entered into an agreement to sell its aggregates business. The Companys plans with respect to these matters are discussed in Note 6.



PricewaterhouseCoopers LLP

New York, New York

April 17, 2003



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Better Minerals & Aggregates Company

Consolidated Balance Sheets

(Dollars in thousands)

---



|                                                                         |  | 2002 |          |   | 2001 |  
|------------------------------------------------------------------------ |  | ---- | -------- | - | ---- | -
|Assets                                                                   |  |      |          |   |      |  
|Current:                                                                 |  |      |          |   |      |  
|Cash and cash equivalents                                                |  | $    | 1,330    |   |      | $
|Accounts receivable:                                                     |  |      |          |   |      |  
|Trade, less allowance for doubtful accounts of $1,629 and $1,824         |  |      | 43,398   |   |      |  
|Other                                                                    |  |      | 5,988    |   |      |  
|Inventories                                                              |  |      | 31,882   |   |      |  
|Prepaid expenses and other current assets                                |  |      | 5,061    |   |      |  
|Income tax deposit                                                       |  |      | 338      |   |      |  
|Deferred income taxes                                                    |  |      | 5,215    |   |      |  
|                                                                         |  |      |          |   |      |  
|Total current assets                                                     |  |      | 93,212   |   |      |  
|                                                                        
|Property, plant and equipment:                                           |  |      |          |   |      |  
|Mining property                                                          |  |      | 158,072  |   |      |  
|Mine development                                                         |  |      | 5,772    |   |      |  
|Land                                                                     |  |      | 27,011   |   |      |  
|Land improvements                                                        |  |      | 6,125    |   |      |  
|Buildings                                                                |  |      | 36,627   |   |      |  
|Machinery and equipment                                                  |  |      | 178,974  |   |      |  
|Furniture and fixtures                                                   |  |      | 1,722    |   |      |  
|Construction-in-progress                                                 |  |      | 8,667    |   |      |  
|                                                                         |  |      |          |   |      |  
|                                                                         |  |      | 422,970  |   |      |  
|Accumulated depletion, depreciation and amortization                     |  |      | (147,794 | ) |      |  
|                                                                         |  |      |          |   |      |  
|Property, plant and equipment, net                                       |  |      | 275,176  |   |      |  
|                                                                        
|Other noncurrent:                                                        |  |      |          |   |      |  
|Goodwill and non-compete agreements, net                                 |  |      | 21       |   |      |  
|Debt issuance costs                                                      |  |      | 9,518    |   |      |  
|Insurance for third-party products liability claims                      |  |      | 40,864   |   |      |  
|Other noncurrent assets                                                  |  |      | 7,083    |   |      |  
|                                                                         |  |      |          |   |      |  
|Total other noncurrent                                                   |  |      | 57,486   |   |      |  
|                                                                         |  |      |          |   |      |  
|Total assets                                                             |  | $    | 425,874  |   |      | $
|                                                                         |  |      |          |   |      |  
|                                                                        
|                                                                         |  | 2002 |          |   | 2001 |  
|Liabilities                                                              |  |      |          |   |      |  
|Current:                                                                 |  |      |          |   |      |  
|Book overdraft                                                           |  | $    | 4,632    |   |      | $
|Accounts payable                                                         |  |      | 12,985   |   |      |  
|Accrued liabilities                                                      |  |      | 12,455   |   |      |  
|Due to parent                                                            |  |      | 2,346    |   |      |  
|Accrued interest                                                         |  |      | 7,381    |   |      |  
|Income taxes payable                                                     |  |      |         |   |      |  
|Current portion of obligation under capital lease                        |  |      | 1,033    |   |      |  
|Current portion of long-term debt                                        |  |      | 11,085   |   |      |  
|                                                                         |  |      |          |   |      |  
|Total current liabilities                                                |  |      | 51,917   |   |      |  
|                                                                        
|Noncurrent liabilities:                                                  |  |      |          |   |      |  
|Deferred income taxes                                                    |  |      | 29,172   |   |      |  
|Obligations under capital lease                                          |  |      | 2,405    |   |      |  
|Long-term debt                                                           |  |      | 283,837  |   |      |  
|Third-party products liability claims                                    |  |      | 69,209   |   |      |  
|Other noncurrent liabilities                                             |  |      | 43,783   |   |      |  
|                                                                         |  |      |          |   |      |  
|Total noncurrent liabilities                                             |  |      | 428,406  |   |      |  
|                                                                        
|Commitments and contingencies                                            |  |      |          |   |      |  
|                                                                        
|Stockholders (Deficit) Equity                                           |  |      |          |   |      |  
|Common stock, par value $.01, authorized 5,000 shares, issued 100 shares |  |      |         |   |      |  
|Loans to related party                                                   |  |      | (1,360   | ) |      |  
|Additional paid-in capital                                               |  |      | 81,377   |   |      |  
|Retained deficit                                                         |  |      | (129,207 | ) |      |  
|Accumulated other comprehensive (loss)                                   |  |      | (5,259   | ) |      |  
|                                                                         |  |      |          |   |      |  
|Total stockholders (deficit) equity                                     |  |      | (54,449  | ) |      |  
|Total liabilities and stockholders equity                               |  | $    | 425,874  |   |      | $
|                                                                         |  |      |          |   |      |  



The
accompanying notes are an integral part of these financial statements.



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Better Minerals & Aggregates Company

Consolidated Statements of Operations

(Dollars in thousands)

---





|                                                                                                                |  | Years Ended December 31, |         
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------
|                                                                                                                |  | 2002                     |         
|                                                                                                               
|Sales                                                                                                           |  | $                        | 300,495 
|Cost of goods sold                                                                                              |  |                          | 232,591 
|Depreciation, depletion and amortization                                                                        |  |                          | 30,013  
|Selling, general and administrative (Notes 8 and 12)                                                            |  |                          | 46,419  
|Asset impairment (Note 16)                                                                                      |  |                          | 107,882 
|                                                                                                                |  |                          |         
|Operating income (loss)                                                                                         |  |                          | (116,410
|                                                                                                               
|Interest expense                                                                                                |  |                          | 32,089  
|Other income, net, including interest income                                                                    |  |                          | (1,673  
|                                                                                                                |  |                          |         
|Loss before income taxes                                                                                        |  |                          | (146,826
|                                                                                                               
|Benefit for income taxes                                                                                        |  |                          | (56,846 
|                                                                                                                |  |                          |         
|Net loss before cumulative effect of change in accounting for
goodwill                                          |  |                          | (89,980 
|Cumulative effect of change in accounting for goodwill (less applicable income tax
benefit of $6,115) (Note 2k) |  |                          | 8,623   
|                                                                                                                |  |                          |         
|Net loss                                                                                                        |  | $                        | (98,603 
|                                                                                                                |  |                          |         





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Better Minerals & Aggregates Company

Consolidated Statements of Stockholders (Deficit) Equity

(Dollars in thousands)

---





|                                           |  |        |  |            |  |           |   |  |          |   |  | Accumulated Other Comprehensive Income (Loss) |   |  |             |  
|------------------------------------------ |  | ------ |  | ---------- |  | --------- | - |  | -------- | - |  | --------------------------------------------- | - |  | ----------- | -
|                                           |  |        |  | Additional |  |           |   |  | Loans to |   |  | Foreign                                       |   |  | Unrealized  |  
|                                           |  | Common |  | Paid-In    |  | Retained  |   |  | Related  |   |  | Currency                                      |   |  | Loss on     |  
|                                           |  | Stock  |  | Capital    |  | Deficit   |   |  | Party    |   |  | Translation                                   |   |  | Derivatives |  
|                                          
|Balance, December 31, 1999                 |  |        |  | $81,377    |  | $(17,012  | ) |  |          |   |  | $(30                                          | ) |  |             |  
|Comprehensive loss, net of income taxes:   |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Net loss                                   |  |        |  |            |  | (9,548    | ) |  |          |   |  |                                               |   |  |             |  
|Foreign currency translation               |  |        |  |            |  |           |   |  |          |   |  | 30                                            |   |  |             |  
|Minimum pension liability,net of tax       |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|                                           |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Total comprehensive loss                   |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Loans to related party                     |  |        |  |            |  |           |   |  | (1,507   | ) |  |                                               |   |  |             |  
|                                           |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Balance, December 31, 2000                 |  |        |  | 81,377     |  | (26,560   | ) |  | (1,507   | ) |  |                                              |   |  |             |  
|Comprehensive loss, net of income taxes:   |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Net loss                                   |  |        |  |            |  | (4,044    | ) |  |          |   |  |                                               |   |  |             |  
|Unrealized loss on derivatives, net of tax |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  | (499        | )
|Minimum pension liability, net of tax      |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|                                           |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Total comprehensive loss                   |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Loans to related party                     |  |        |  |            |  |           |   |  | 73       |   |  |                                               |   |  |             |  
|                                           |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Balance, December 31, 2001                 |  |       |  | 81,377     |  | (30,604   | ) |  | (1,434   | ) |  |                                              |   |  | (499        | )
|Comprehensive loss, net of income taxes:   |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Net loss                                   |  |        |  |            |  | (98,603   | ) |  |          |   |  |                                               |   |  |             |  
|Unrealized loss on derivatives, net of tax |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  | (596        | )
|Minimum pension liability, net of tax      |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|                                           |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Total comprehensive loss                   |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Loans to related party                     |  |        |  |            |  |           |   |  | 74       |   |  |                                               |   |  |             |  
|                                           |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  
|Balance, December 31, 2002                 |  | $     |  | $81,377    |  | $(129,207 | ) |  | $(1,360  | ) |  | $                                            |   |  | $(1,095     | )
|                                           |  |        |  |            |  |           |   |  |          |   |  |                                               |   |  |             |  





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Better Minerals & Aggregates Company

Consolidated Statements of Cash Flows

(Dollars in thousands)

---





|                                                                                       |  | Years Ended December 31, |        
|-------------------------------------------------------------------------------------- |  | ------------------------ | -------
|                                                                                       |  | 2002                     |        
|                                                                                      
|Cash flows from operating activities:                                                  |  |                          |        
|Net loss                                                                               |  | $                        | (98,603
|Adjustments to reconcile net loss to cash flows from operations:                       |  |                          |        
|Depreciation, depletion and amortization                                               |  |                          | 29,809 
|Debt issuance amortization                                                             |  |                          | 1,898  
|Provision for third-party products liability claims                                    |  |                          | 23,691 
|Cumulative effect of change in accounting for goodwill                                 |  |                          | 14,738 
|Deferred income taxes                                                                  |  |                          | (64,730
|Gain on disposal of property, plant and equipment                                      |  |                          | (551   
|Asset impairment                                                                       |  |                          | 107,882
|Loss on sale of investment                                                             |  |                          |       
|Other                                                                                  |  |                          | 111    
|Changes in current assets and liabilities, net of the effects from acquired
companies: |  |                          |        
|Trade receivables                                                                      |  |                          | 1,843  
|Other receivables                                                                      |  |                          | (3,650 
|Receivable from parent                                                                 |  |                          | (59    
|Payable to related party                                                               |  |                          |       
|Inventories                                                                            |  |                          | (1,102 
|Prepaid expenses and other current assets                                              |  |                          | (2,082 
|Accounts payable and accrued liabilities                                               |  |                          | 556    
|Accrued interest                                                                       |  |                          | (10    
|Income taxes                                                                           |  |                          | (534   
|                                                                                       |  |                          |        
|Net cash provided by operating activities                                              |  |                          | 9,207  
|Cash flows from investing activities:                                                  |  |                          |        
|Capital expenditures                                                                   |  |                          | (14,003
|Proceeds from sale of property, plant and equipment                                    |  |                          | 996    
|Proceeds from sale of investment                                                       |  |                          |       
|Loans to related party                                                                 |  |                          | 74     
|Purchases of businesses, net of cash acquired                                          |  |                          |       
|                                                                                       |  |                          |        
|Net cash used for investing activities                                                 |  |                          | (12,933
|Cash flows from financing activities:                                                  |  |                          |        
|Change in book overdraft                                                               |  |                          | (2,510 
|Issuance of long-term debt                                                             |  |                          | 1,132  
|Repayment of long-term debt                                                            |  |                          | (10,747
|Change in Working Capital Facility                                                     |  |                          | 16,450 
|Principal payments on capital lease obligations                                        |  |                          | (913   
|Financing fees                                                                         |  |                          | (849   
|                                                                                       |  |                          |        
|Net cash (used for) provided by financing activities                                   |  |                          | 2,563  
|Effect of exchange rate on cash                                                        |  |                          |       
|                                                                                       |  |                          |        
|Net increase (decrease) in cash                                                        |  |                          | (1,163 
|Cash and cash equivalents, beginning of period                                         |  |                          | 2,493  
|                                                                                       |  |                          |        
|Cash and cash equivalents, end of period                                               |  | $                        | 1,330  
|                                                                                       |  |                          |        
|Schedule of noncash investing and financing activities:                                |  |                          |        
|Assets acquired by entering into capital lease obligations                             |  | $                        | 955    
|                                                                                       |  |                          |        
|Cash paid during the year for:                                                         |  |                          |        
|Interest                                                                               |  | $                        | 29,808 
|                                                                                       |  |                          |        
|Income taxes                                                                           |  | $                        | 1,442  
|                                                                                       |  |                          |        



The
accompanying notes are an integral part of these financial statements.



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





|1. |  | Organization
|-- |  | ------------



Better Minerals & Aggregates Company (the Company), an indirect wholly owned subsidiary of USS Holdings, Inc.
(Holdings), was organized in January 1996. BMAC Holdings, Inc. (BMAC Holdings), a wholly owned subsidiary of Holdings, is the direct parent of the Company.



The Company owns three operating subsidiaries: U.S. Silica Company (U.S. Silica), which produces
industrial minerals, Better Materials Corporation (Better Materials), which produces aggregates and BMAC Services Co., Inc., which provides management advisory services to the Company.



The Company and its subsidiaries are collectively referred to
as the Company in the accompanying financial statements and footnotes.



|2. |  | Summary of Significant Accounting Policies
|-- |  | ------------------------------------------



| | a. |  | Principles of Consolidation
| | -- |  | ---------------------------



The consolidated financial statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in consolidation.



| | b. |  | Reclassifications
| | -- |  | -----------------



Certain prior years amounts have been reclassified to conform with the current years presentation.



| | c. |  | Use of Estimates and Assumptions
| | -- |  | --------------------------------



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. Significant estimates include doubtful accounts, amortization and depreciation, income taxes, environmental and product liabilities, mine reclamation and employee benefit costs. Actual results could differ from those estimates.



| | d. |  | Cash and Cash Equivalents
| | -- |  | -------------------------



All highly liquid investments with a maturity of three months or less when purchased are considered cash equivalents.



| | e. |  | Inventories
| | -- |  | -----------



Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out and average cost methods.



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Notes to Consolidated Financial Statements

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| | f. |  | Revenue Recognition
| | -- |  | -------------------



Revenue is recorded when legal title passes at the time of shipment to the customer. Shipping and handling costs billed to customers are
included in sales.



| | g. |  | Deferred Financing Costs
| | -- |  | ------------------------



Deferred financing costs consist of loan origination costs, which are being amortized over the term of the related debt principal.
Amortization included in interest expense for each of the three years in the period ended December 31, 2002 totaled approximately $1.9 million, $2.4 million and $2.1 million, respectively.



| | h. |  | Depreciable Properties
| | -- |  | ----------------------



Depreciable properties, mining properties and mineral deposits acquired in connection with business acquisitions are recorded at fair
market value as of the date of acquisition. Additions and improvements occurring through the normal course of business are capitalized at cost.



Upon retirement or disposal of assets, other than those of U.S. Silica acquired on February 9, 1996, the cost and accumulated depreciation
or amortization are eliminated from the accounts and any gain or loss is reflected in the statement of operations. Group asset accounting is utilized for the U.S. Silica assets acquired on February 9, 1996. Gains and losses on normal retirements or
dispositions of these assets are excluded from net income and proceeds from dispositions are recorded as a reduction of the acquired cost. Expenditures for normal repairs and maintenance are expensed as incurred. Construction-in-progress is
primarily comprised of machinery and equipment which has not yet been placed in service.



Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 15 years.



Depletion and amortization of mineral deposits are provided as the minerals are extracted, based on units of
production and engineering estimates of mineable reserves. The impact of revisions to reserve estimates is recognized on a prospective basis.



| | i. |  | Mine Exploration and Development
| | -- |  | --------------------------------



Costs to develop new mining properties and expand existing properties are capitalized and amortized based on units of production.



| | j. |  | Mine Reclamation Costs
| | -- |  | ----------------------



The estimated net future costs of dismantling, restoring and reclaiming operating mines and related mine sites, in accordance with
federal, state and local regulatory requirements, are accrued during operations. The provision is made based upon units of production and estimated minable reserves as of the balance sheet date. The effect of changes in estimated costs, production,
and minable reserves is recognized on a prospective basis.



| | k. |  | Goodwill and Intangible Assets
| | -- |  | ------------------------------



The Companys intangible assets include goodwill and non-compete agreements. Until 2002, the cost of goodwill was being amortized on
a straight-line basis over a period of fifteen years. The costs of the non-compete agreements are being amortized on a straight-line basis over the terms of the agreements, which range from three to five years.



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





Effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 (FAS 142), Goodwill and Other Intangible Assets. FAS 142 eliminates goodwill amortization and requires an evaluation of potential goodwill impairment upon
adoption, as well as subsequent annual valuations, or more frequently if circumstances indicate a possible impairment. Adoption of FAS 142 eliminates annual goodwill amortization expense of approximately $1.2 million.



The Company completed its assessment of goodwill during its
second quarter, which resulted in goodwill impairment of $8.6, net of income taxes of $6.1, and represents the elimination of the entire amount of goodwill previously reported on the balance sheet. In accordance with FAS 142, this amount has been
recorded as a cumulative effect of accounting change as of the beginning of the current fiscal year. The Company has performed its assessment of goodwill and other intangible assets by comparing the fair value of the aggregates segment, which has
been determined to be the only reporting unit that had goodwill, to its net book value in accordance with the provisions of FAS 142. The Company has estimated the fair value of the reporting unit based upon a combination of several valuation methods
including residual income, replacement cost and market approaches, giving appropriate weighting to such methods in arriving at an estimate of fair value. The Companys equity is not subject to market quotations.



The following table reflects the gross carrying value and
accumulated amortization of the Companys goodwill and amortizable intangible assets (in thousands) for the periods presented:





|                       |  | December 31, 2002 Gross Carrying Value |  | December 31, 2002 Accumulated Amortization
|---------------------- |  | -------------------------------------- |  | ------------------------------------------
|                      
|Non-compete agreements |  | $    442                               |  | $    421                                  
|                       |  |                                        |  |                                           
|Total                  |  | $    442                               |  | $    421                                  
|                       |  |                                        |  |                                           
|                      
|                       |  | December 31, 2001 Gross Carrying Value |  | December 31, 2001 Accumulated Amortization
|                      
|Goodwill               |  | $17,321                                |  | $2,583                                    
|Non-compete agreements |  | 442                                    |  | 323                                       
|                       |  |                                        |  |                                           
|Total                  |  | $17,763                                |  | $2,906                                    
|                       |  |                                        |  |                                           



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





The
effect of goodwill amortization on net loss was as follows (in thousands):





|                                                                                         |  | For the twelve months ended December 31, |        
|---------------------------------------------------------------------------------------- |  | ---------------------------------------- | -------
|                                                                                         |  | 2002                                     |        
|                                                                                        
|Reported net income (loss) before cumulative effect of change in accounting for
goodwill |  | $                                        | (98,603
|Add back: Goodwill amortization                                                          |  |                                          |       
|                                                                                         |  |                                          |        
|Adjusted net income (loss)                                                               |  | $                                        | (98,603
|                                                                                         |  |                                          |        



| | l. |  | Income Taxes
| | -- |  | ------------



The Company accounts for income taxes pursuant to the provisions under Statement of Financial Accounting Standards (SFAS) No.
109, Accounting for Income Taxes, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based upon the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the expenses are expected to reverse. The
Company is included in the consolidated federal tax return of Holdings. The tax benefit included in the accompanying financial statements has been computed on a separate return basis.



| | m. |  | Concentration of Credit Risk
| | -- |  | ----------------------------



The Companys five largest customers accounted for approximately 13%, 12% and 13% of sales for the three years ended December 31,
2002, 2001 and 2000. Management believes it maintains adequate reserves for potential credit losses; ongoing credit evaluations are performed and collateral is generally not required.



| | n. |  | Financial Instruments
| | -- |  | ---------------------



The Company uses interest rate swap and cap agreements to manage interest costs and the risk associated with changing interest rates.
Amounts to be paid or received under interest rate swap agreements are accrued as interest rates change and are recognized over the life of the swap agreements as an adjustment to interest expense. The Companys policy is to not hold or issue
derivative financial instruments for trading or speculative purposes. When entered into, these financial instruments are designated as hedges of underlying exposures, associated with the Companys long-term debt, and are monitored to determine
if they remain effective hedges. The Company also uses natural gas rate swap agreements in the normal course of business to manage the risk associated with fluctuations in the natural gas market. Natural gas rate swap agreements are used to secure a
fixed rate for natural gas prior to the actual delivery required by the operations of the business. Gains and losses on derivatives designated as cash flow hedges are recorded in other comprehensive income and reclassified to earnings in a manner
that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges, if any, are recognized currently in income.







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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





| | o. |  | Environmental Costs
| | -- |  | -------------------



Environmental costs, other than qualifying capital expenditures, are accrued at the time the exposure becomes known and costs can be
reasonably estimated. Costs are accrued based upon managements estimates of all direct costs, after taking into account expected reimbursement by third parties (primarily the sellers of acquired businesses), and are reviewed by outside
consultants. Environmental costs are charged to expense unless a settlement with an indemnifying party has been reached.



| | p. |  | Comprehensive Income
| | -- |  | --------------------



Comprehensive income is defined as the change in equity from transactions and other events from nonowner sources and consists of net
income and other comprehensive income. The Company includes foreign currency translation adjustments, changes in the fair value of cash flow hedge derivative instruments and minimum pension liability adjustments in other comprehensive income.



| | q. |  | Impact of Recent Accounting Standards/Pronouncements
| | -- |  | ----------------------------------------------------



Statement of Financial Accounting Standards No. 143 (FAS 143), Accounting for Asset Retirement Obligations, was issued in June 2001. FAS
143 establishes accounting and reporting standards for obligations associated with the retirement of tangible long-lived assets. The Company currently provides for this obligation as described in Note 2.j. and as of December 31, 2002 reported a
liability of $9.9 million in other noncurrent liabilities related to this obligation. Effective January 1, 2003, the Company will adopt FAS 143 which requires the liability to be determined based on legal obligations that will be incurred when an
asset is retired. The Company estimates that its obligations under the new Standard will result in a liability of $8.6 million and an asset of $4.3 million. The resulting $5.6 million pretax gain from adoption will be reported net of tax as a
cumulative effect of a change in accounting principle as of January 1, 2003.



In 2002 the Company adopted Statement of Financial Accounting Standard No. 144 Accounting for Impairment or Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144 addresses
significant issues relating to the implementation of FASB Statement No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS No. 121), and the development of a single
accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired.



In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. Interpretation No. 45 requires the disclosure of certain guarantees existing at December 31, 2002 (see
footnote 15). In addition, Interpretation No. 45 requires the recognition of a liability for the fair value of the obligation of qualifying guarantee activities that are initiated or modified after December 31, 2002. Accordingly, the Company will
apply the recognition provisions of Interpretation No. 45 prospectively to guarantee activities initiated after December 31, 2002.



|3. |  | Acquisitions
|-- |  | ------------



On March 14, 2002, Better Materials Corporation, a wholly owned subsidiary of the Company, entered into a Lease and option Agreement with
A&R Limited Partnership for a three-year period. Under this agreement, Better Materials Corporation obtained all rights, title and interest under property owned by A&R Limited Partnership to an aggregate operation in Latrobe, Pennsylvania.
The agreement requires Better Materials to pay a monthly amount for equipment rental and royalties plus a one-time option payment made at the time of closing. Furthermore, the agreement grants Better Materials the right to purchase all of the assets
of the operation at any time during the three-year period for a predetermined price less the option payment. The



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Notes to Consolidated Financial Statements

---





Company
expenses all lease payments related to the operation of the facility. The option payment is recorded as an other noncurrent asset on the balance sheet. As of December 31, 2002 the amount included in other noncurrent assets for this option payment
totaled $1 million. If the Company decides not to exercise its option by the end of the three-year period, this amount will be expensed at that time.



On March 10, 2001, Better Materials entered into a Sublease and Option Agreement with Amerikohl Mining, Inc. for a three year period.
Under this agreement, Better Materials Corporation obtained all rights, title and interest under leases held, and property owned, by Amerikohl Mining, Inc. to an aggregates operation in Springfield Township, Pennsylvania, known as the Jim Mountain
Quarry. The agreement requires Better Materials to pay a monthly amount for equipment rental and royalties plus a purchase option payment. Furthermore, the agreement grants Better Materials the right to purchase all of the assets of the operation at
any time during the three-year period for a predetermined price less the total option payments paid up to the time the option is exercised. The Company expenses all payments related to the operation of the facility. Option payments are recorded as
other noncurrent assets on the balance sheet. As of December 31, 2002 the total amount included in other noncurrent assets for option payments totaled $1.1 million. If the Company decides not to exercise its option by the end of the three-year
period, this amount will be expensed at that time.



|4. |  | Inventories
|-- |  | -----------



At December 31, 2002 and 2001, inventory consisted of the following:





|                                                     |  | 2002           |        | 2001
|---------------------------------------------------- |  | -------------- | ------ | ----
|                                                     |  | (In thousands)
|                                                    
|Supplies (net of $183 and $266 obsolescence reserve) |  | $              | 11,998 |     
|Raw materials and work in process                    |  |                | 6,051  |     
|Finished goods                                       |  |                | 13,833 |     
|                                                     |  |                |        |     
|                                                     |  | $              | 31,882 |     
|                                                     |  |                |        |     







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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





|5. |  | Lease Commitments
|-- |  | -----------------



The Company is obligated under certain capital and operating leases for railroad cars, mining property, mining/processing equipment,
office space and transportation and other equipment. Certain of the operating lease agreements include options to purchase the equipment for fair market value at the end of the original lease term. Future minimum annual commitments under such
operating leases at December 31, 2002 are as follows:





|Year Ending December 31, |  | (In thousands)
|------------------------ |  | --------------
|                        
|2003                     |  | $             
|2004                     |  |               
|2005                     |  |               
|2006                     |  |               
|2007                     |  |               
|Thereafter               |  |               
|                         |  |               
|                         |  | $             
|                         |  |               



Rental
expense for operating leases for each of the three years in the period ended December 31, 2002 totaled approximately $3.0 million, $2.6 million and $2.7 million, respectively.



In general, the above leases include renewal options and provide that the Company pays for all utilities,
insurance, taxes and maintenance.



Future minimum
annual commitments under the capital lease obligations as of December 31, 2002 are as follows:





|Year Ending December 31,                    |  | (In thousands)
|------------------------------------------- |  | --------------
|                                           
|2003                                        |  | $             
|2004                                        |  |               
|2005                                        |  |               
|2006                                        |  |               
|2007                                        |  |               
|                                            |  |               
|Total minimum lease payments                |  |               
|Less amount representing interest           |  |               
|                                            |  |               
|Present value of net minimum lease payments |  | $             
|                                            |  |               

|
|





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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





|6. |  | Long-Term Debt
|-- |  | --------------



At December 31, 2002 and 2001, long-term debt consisted of the following:





|                                                                                                        |  | 2002           |         | 2001
|------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | ----
|                                                                                                        |  | (In thousands)
|                                                                                                       
|Senior Secured Credit Facilities                                                                        |  | $              | 23,650  |     
|Tranche A Term Loan Facility (final maturity September 30, 2005) (5.8125% at December
31, 2002)         |  |                |         |     
|Tranche B Term Loan Facility (final maturity September 30, 2007) (6.3125% at December
31, 2002)         |  |                | 89,500  |     
|Senior Subordinated Notes (final maturity September 15, 2009) (13%
at    December 31, 2002)             |  |                | 150,000 |     
|Working Capital Facility (final maturity September 30, 2005) (average of
5.97%    at December 31, 2002) |  |                | 29,800  |     
|Mortgage Notes                                                                                          |  |                |         |     
|0% Note, imputed at 10.0% (due January 16, 2008)                                                        |  |                | 918     |     
|4.75% Notes (due November 28, 2009)                                                                     |  |                | 834     |     
|0.0% Note (due March 5, 2004)                                                                           |  |                | 210     |     
|8.5% Note (due July 1, 2003)                                                                            |  |                | 10      |     
|                                                                                                        |  |                |         |     
|                                                                                                        |  |                | 294,922 |     
|Less, current portion                                                                                   |  |                | 11,085  |     
|                                                                                                        |  |                |         |     
|                                                                                                        |  | $              | 283,837 |     
|                                                                                                        |  |                |         |     



At
December 31, 2002, contractual maturities of long-term debt are as follows:



|Year Ending December 31, |  | (In thousands)
|------------------------ |  | --------------
|                        
|2003                     |  | $             
|2004                     |  |               
|2005                     |  |               
|2006                     |  |               
|2007                     |  |               
|Thereafter               |  |               
|                         |  |               
|                         |  | $             
|                         |  |               



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





Debt
Agreements



On September 30, 1999, the
Company entered into a new $230.0 million Credit Agreement (the Agreement), which consisted of a $50.0 million revolving credit facility (the Revolving Credit Facility), a $45.0 million Tranche A Term Loan Facility
(Term A Loan), a $95.0 million Tranche B Term Loan Facility (Term B Loan) and a $40.0 million term loan acquisition facility (the Acquisition Term Loan Facility). The Term A Loan included a tranche of loans
denominated in Canadian dollars (the Canadian Term Facility) equal to $2.0 million, which was borrowed by George F. Pettinos (Canada) Limited, an indirect wholly owned subsidiary of the Company. The Revolving Credit Facility, Term A
Loan, Term B Loan, Acquisition Term Loan Facility and the Canadian Term Facility are collectively referred to in the notes to the financial statements as the Senior Secured Credit Facilities. In addition, on October 1, 1999 the Company
issued $150.0 million of Senior Subordinated Notes. Pursuant to an Exchange and Registration Rights Agreement, in April 2000, the Company consummated an exchange offer pursuant to which it exchanged the Senior Subordinated Notes for registered notes
having substantially the same terms. The proceeds from the Senior Secured Credit Facilities and the Senior Subordinated Notes were primarily used to pay off the outstanding senior debt and to finance the acquisition of Commercial Stone. On February
29, 2000, the Company completed the sale of the stock of its Canadian operating subsidiary, George F. Pettinos (Canada) Limited for $3.2 million. The proceeds from the sale were used to retire the Canadian Term Facility and for general corporate
uses. The Acquisition Term Loan facility was canceled in February 2001 as described below.



Under the Agreement, the Company has available, until September 30, 2005, the Revolving Credit Facility, which provides for the borrowings of up to $50.0 million with a sublimit of $12.0 million for
letters of credit and a sublimit of $3.0 million for swingline loans. The borrowing capacity of the Revolving Credit Facility is reduced by outstanding letters of credit and swingline loans. At December 31, 2002, outstanding letters of credit
totaled $8.6 million.



Borrowings under the
Senior Secured Credit Facilities bear variable interest at the Companys option at either (1) the banks base rate (base rate at December 31, 2002 was 4.25%) plus a margin percentage, ranging from 1.5% to 3.0% or (2) the London Interbank
Offered Rate (LIBOR) (LIBOR at December 31, 2002 was 1.44%) plus a margin percentage, ranging from 2.5% to 4.0%. Commitment fees, ranging from 0.375% to 0.75%, on the average daily unused Revolving Credit Facility are payable quarterly.
Letter of credit fees are also payable quarterly based upon the average daily balance of all letters of credit outstanding. The Senior Subordinated Notes bear interest at a rate of 13% per annum, payable semi-annually.



The obligations of the Company under the Senior Secured Credit
Facilities are unconditionally and irrevocably guaranteed, jointly and severally, by BMAC Holdings and each of the Companys direct or indirect domestic subsidiaries. BMAC Holdings has no operations or assets other than its investment in its
subsidiaries. In addition, the Senior Secured Credit Facilities are secured by a first priority pledge of (i) all the capital stock of BMAC Holdings, the Company, each of the Companys direct or indirect domestic subsidiaries and 65% of the
capital stock of each direct foreign subsidiary of the Company or any of its domestic subsidiaries and (ii) substantially all of the tangible and intangible assets held by BMAC Holdings, the Company and each of the Companys direct or indirect
domestic subsidiaries.



The Agreement contains
various restrictive covenants that, among other things, limit the ability of the Company to engage in certain transactions with affiliates, incur additional indebtedness, repay other indebtedness or amend other debt instruments, create liens on
assets, make investments or acquisitions, engage in mergers or consolidations, dispose of assets, or pay dividends. In addition, the Agreement requires the Company to maintain certain financial covenants, annually and quarterly, including a leverage
ratio, an interest coverage ratio and a capital expenditures covenant. The Senior Subordinated Notes are also subject to certain restrictive covenants that are similar to those of the Senior Secured Credit Facilities.



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





The
obligation of the Company under the Senior Subordinated Notes is unconditionally and irrevocably guaranteed, jointly and severally, on an unsecured senior subordinated basis to the Companys Senior Secured Credit Facilities, by each of the
Companys domestic subsidiaries. The Senior Subordinated Notes are not guaranteed by the Companys inactive Canadian subsidiary.



On February 22, 2001 the lenders under the Senior Secured Credit Facilities approved an amendment effective December 31, 2000 that revised
the required leverage ratio and interest coverage ratio covenants under the Agreement for the period of December 31, 2000 through December 31, 2001. As a result of this amendment, the Company was in compliance with all of its financial covenants, as
revised, as of December 31, 2000. In connection with this amendment, the Company agreed to a 25 basis point increase in interest rates for any period in which the leverage ratio is greater than 5.0. In addition, the Company agreed to cancel the
undrawn $40.0 million Acquisition Term Loan Facility, which also resulted in a $300,000 reduction in the annual loan commitment fees, as of February 22, 2001. A one-time amendment fee of approximately $424,000 was paid to the lenders as part of the
amendment.



Effective January 31, 2002, the
lenders under the Senior Secured Credit Facilities approved an amendment that waived any default under the required leverage ratio and interest coverage covenants for the fiscal quarter ended December 31, 2001. The amendment also revised the
requirement for these covenants under the Agreement for the period from March 31, 2002 through December 31, 2002. In connection with this amendment, the Company agreed to another 25 basis point increase in interest rates for any period in which the
leverage ratio is greater than 5.0. A one-time amendment fee of approximately $424,000 was paid to the lenders as part of the amendment.



On November 8, 2002, the lenders under the Senior Secured Credit Facilities approved an amendment effective September 30, 2002 that waived
any default under the required leverage ratio and interest coverage ratio covenants as of September 30, 2002. In connection with this amendment, the Company agreed to a 50 basis point increase when the leverage ratio is greater than 5.0. When
combined with two earlier amendments, this results in a 100 basis point increase in interest rates over the original Credit Agreement for any quarter in which the leverage ratio is greater than 5.0. As of September 30, 2002 the leverage ratio was
6.1 compared to the applicable covenant of 5.5. The interest coverage ratio at September 30, 2002 was 1.68 compared to a 1.70 covenant. The interest rates at September 30, 2002 ranged from 5.3125% to 7.75% prior to the November 8, 2002 amendment. A
one-time amendment fee of approximately $415,000 was paid to the lenders as part of the amendment.



On March 12, 2003, the lenders under the Senior Secured Credit Facilities approved an amendment that provided for a Term C Facility of $15
million and waived the Agreements leverage ratio and interest coverage covenants through June 30, 2003. The new Term C bears a variable interest rate at the banks base rate plus a 7.75% margin percentage. The Agreement also provides that
2% of the applicable interest be paid in kind. A one-time amendment fee of approximately $203,000 was paid to the lenders as part of this amendment and a one-time commitment fee of $600,000 was paid to the Term C lender.



On April 17, 2003, the lenders under the Senior Secured Credit
Facilities approved an amendment effective on that date which revised the required leverage ratio and interest coverage ratio covenants through January 1, 2004. Under the agreement, the leverage ratio must be less than 7.98 for June 30, 2003, 7.51
for September 30, 2003 and 6.94 for December 31, 2003. The interest coverage ratio has been changed to greater than 1.26 for June 30, 2003, 1.31 for September 30, 2003 and 1.46 for December 31, 2003. In connection with this amendment, if the
proposed aggregates sale, as discussed in Note 17, is not completed by July 16, 2003, there will be a 100 basis point increase in the applicable margins under the Senior Secured Credit Agreement.



The Company believes, based on its calendar year 2003
forecast, that it will be in compliance with the amended leverage ratio and interest coverage ratio covenants contained in the Agreement throughout calendar



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Notes to Consolidated Financial Statements

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year
2003. In the event that the Company does not substantially achieve its 2003 forecast, it will be necessary to seek further amendments to the senior credit agreement covenants. While the Company obtained amendments and waivers under this agreement in
the past, there can be no assurance that future amendments or waivers will be granted or that such amendments or waivers, if granted, would be on terms satisfactory to the Company.



In addition, the required leverage ratio and interest coverage ratio covenants are substantially more
restrictive as of March 31, 2004 than the amended 2003 covenants and it is probable that the Company will need to seek amendments or waivers to avoid violating these covenants. While the Company obtained amendments and waivers under this agreement
in the past, there can be no assurance that future amendments or waivers will be granted or that such amendments or waivers, if granted, would be on terms satisfactory to the Company. In the event that the Company is not in compliance with the
leverage ratio and interest ratio covenants contained in the Senior Secured Credit Agreement and does not obtain a waiver or amendment under the Agreement, the Company would be in default under the Agreement and the lenders could declare all of the
funds borrowed under the Agreement, together with accrued interest, immediately due and payable. Similarly, if the lenders take this action under the senior secured credit agreement, the Company would be in default under the indenture relating to
its senior subordinated notes and, if the default is not cured within 10 days after notice thereof, the bondholders could declare the principal of and accrued interest on the notes immediately due and payable. In the event this debt becomes due and
payable it is unlikely that the Company will be able to repay the amounts due and payable and could be, therefore, required to sell assets to generate cash or the lenders under the senior secured credit agreement could foreclose on the pledged stock
of the Companys subsidiaries and on the assets in which they have been granted a security interest.



As discussed in Note 17, the Company signed an agreement for the sale of its aggregates business. The Company plans to use the net
proceeds from the sale to repay indebtedness outstanding under the Companys Senior Secured Credit Agreement. In addition, as a result of this planned repayment, the Company will need to obtain a new source of financing for the liquidity needs
of the remaining business. In addition to providing working capital for the remaining business, the Company may use this new source of financing to repay the remaining amounts outstanding under the Senior Secured Credit Agreement. The Company is
currently in discussions with a number of financial institutions to establish this new credit facility, which the Company would expect would be entered into at or around the time of the completion of the aggregates sale. While the Company believes
that it will be able to obtain this new credit facility, the Company cannot guarantee that it will be able to do so on terms satisfactory to the Company or at all.



At December 31, 2002 and 2001, the fair value of the Companys long-term debt approximated $198.9
million and $266 million, respectively.



|7. |  | Financial Instruments
|-- |  | ---------------------



Interest rate swap and cap agreements are utilized in the normal course of business to manage the Companys interest costs and the
risk associated with changing interest rates. Interest rate swap agreements are used to exchange the difference between fixed and variable-rate interest amounts calculated by reference to an agreed-upon notional principal amount. In addition, the
Company utilizes interest rate cap agreements to limit the impact of increases in interest rates on its floating rate debt. Interest rate cap agreements entitle the Company to receive from the counterparties the amounts, if any, by which the
selected market interest rates exceed the strike rates stated per the agreements. The Company also uses natural gas rate swap agreements in the normal course of business to manage the risk associated with fluctuations in the natural gas market.
Natural gas rate swap agreements are used to secure a fixed rate for natural gas prior to the actual delivery required by the operations of the business. The Company does not use derivative financial instruments for trading or speculative purposes.
By their nature, all such instruments involve risk, including the possibility that a loss may occur from the failure of another party to perform according to the terms of a contract (credit risk) or the possibility that future changes in market
price may make a financial instrument less valuable or



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Notes to Consolidated Financial Statements

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more
onerous (market risk). As is customary for these types of instruments, the Company does not require collateral or other security from other parties to these instruments. In managements opinion there is no significant risk of loss in the event
of nonperformance of the counterparties to these financial instruments.



The fair value of the interest rate agreements represents the estimated receipts or payments that would be required to settle the agreements at year-end. Quoted market prices were used to estimate the fair values of the
interest rate swap and cap agreements. The notional amount represents agreed upon amounts on which calculations of dollars to be exchanged are based. They do not represent amounts exchanged by the parties and, therefore, are not a measure of the
Companys exposure. The Companys credit exposure is limited to the fair value of the contracts with a positive fair value plus interest receivable, if any, at the reporting date.



|                                 |  | December 31, 2002 |  |                           | December 31, 2001 |    
|-------------------------------- |  | ----------------- |  | ------------------------- | ----------------- | ---
|                                 |  | Maturity Date     |  | Contract/ Notional Amount |                   |    
|                                 |  | (In thousands)    | 
|                                
|Derivatives Interest rate swap   |  | 2004              |  | $                         | 30,000            | (1)
|Interest rate cap                |  |                   |  |                           |                   |    
|                                 |  | 2004              |  | $                         | 25,000            | (2)
|                                 |  | 2005              |  | $                         | 16,000            | (2)
|Natural gas rate swap agreements |  | 2003              |  |                           | 120,000           |    



|(1) |  | Agreement effectively exchanges the LIBOR floating interest rate for a fixed interest rate of 5.74%.
|--- |  | ----------------------------------------------------------------------------------------------------

|(2) |  | Agreement limits the LIBOR floating interest rate to 6.5%.
|--- |  | ----------------------------------------------------------



The Company has designated these contracts as qualified cash flow hedges. Accordingly, the effective portion of the gain or loss on the
derivative instrument is reported as a component of other comprehensive income and recognized in earnings in the same period or periods during which the hedged transaction affects earnings. The Company had no ineffective interest rate contracts at
December 31, 2002.



|8. |  | Commitments and Contingencies
|-- |  | -----------------------------



One of the Companys subsidiaries U.S. Silica, has been named as a defendant in an estimated 5,100 product liability claims alleging
silica exposure filed in the period January 1, 2002 to December 31, 2002, with 3,500 of these claims filed since September 30, 2002. U.S. Silica was named as defendant in 154 similar claims filed in 1998, 497 filed in 1999, 610 filed in 2000, and
1,320 filed in 2001. U.S. Silica has been named as a defendant in similar suits since 1975. The plaintiffs, who allege that they are employees or former employees of our customers, claim that the Companys silica products were defective or that
the Company acted negligently in selling silica products without a warning, or with an inadequate warning. The plaintiffs further claim that these alleged defects or negligent actions caused them to suffer injuries and sustain damages as a result of
exposure to our products. In almost all cases, the injuries alleged by the plaintiffs are silicosis or mixed dust disease, a claim that allows the plaintiffs to pursue litigation against the sellers of both crystalline silica and other
minerals. There are no pending claims of this nature against any of the Companys subsidiaries.



As of December 31, 2002, there were an estimated 7,000 silica-related products liability claims pending in which U.S. Silica is a
defendant. Almost of all of the claims pending against U.S. Silica arose out of the



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Notes to Consolidated Financial Statements

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alleged
use of U.S. Silica products in foundries or as an abrasive blast media and have been filed in the states of Texas and Mississippi.



ITT Industries, Inc., successor to a former owner of U. S. Silica, has agreed to indemnify U. S. Silica for third party silicosis claims
(including litigation expenses) filed against it prior to September 12, 2005 alleging exposure to U. S. Silica products for the period prior to September 12, 1985, to the extent of the alleged exposure prior to that date. This indemnity is subject
to an annual deductible of $275,000, which is cumulative and subject to carry-forward adjustments. The Company fully accrued this deductible on a present value basis when it acquired U. S. Silica. As of December 31, 2002 and 2001, this accrual
amounted to $1.9 million and $1.8 million, respectively. Pennsylvania Glass Sand Corporation, predecessor to U. S. Silica, was a named insured on insurance policies issued to ITT Industries for the period April 1, 1974 to September 12, 1985 and to
U. S. Borax (another former owner) for the period September 12, 1985 to December 31, 1985. To date, we have not sought coverage under these policies. Ottawa Silica Company (a predecessor that merged into U. S. Silica in 1987) had insurance coverage
on an occurrence basis prior to July 1, 1985.



On
April 20, 2001, in an action pending in Beaumont, Texas (Donald Tompkins et al v. American Optical Corporation et al), a jury rendered a verdict against Ottawa Silica Company and Pennsylvania Glass Sand Corporation, predecessors to U. S. Silica, in
the amount of $7.5 million in actual damages. On June 1, 2001, the trial judge entered judgment on the verdict against U. S. Silica in the amount of $5.928 million in actual damages (the verdict of $7.5 million, less credits for other settlements),
$464,000 in prejudgment interest and $40,000 in court costs. In addition, punitive damages were settled for $600,000.



In light of the facts entered into evidence relating to the timing of the exposure, the Company believes that the entire judgment and
settlement of the Tompkins action are covered by a combination of Ottawa Silica Companys insurance coverage and the current indemnity agreement of ITT Industries, in each case, discussed above. After the judgment was entered by the trial judge
and upon the posting of a bond, the Company filed an immediate appeal to the appropriate appellate court in Texas, which upheld the trial courts ruling. A petition for review has been filed with the Texas Supreme Court.



In the past, the Company recorded amounts for product
liability claims based on estimates of its portion of the cost to be incurred for all pending product liability claims and estimates based on the value of an incurred but not reported liability for unknown claims for exposures that occurred before
1976, when it began warning its customers and employees of the health effects of crystalline silica. Estimated amounts recorded were net of any expected recoveries from insurance policies or the ITT Industries indemnity. The amounts recorded for
product liability claims were estimates, which were reviewed periodically by management and legal counsel and adjusted to reflect additional information when available. As the rate of claims filed against the Company and others in the industry
increased in 2002, the Company determined it was no longer sufficient for management to solely estimate the product liability claims that might be filed against the Company, and the Company retained the services of an independent actuary to estimate
the number and costs of unresolved current and future silica related product liability claims that might be asserted against the Company.



The actuary relied on generally accepted actuarial methodologies and on information provided by the Company, including the history of
reported claims, insurance coverages and indemnity protections available to us from third parties, the quantity of sand sold by market and by year, recent court rulings addressing the liability of sellers of silica sand, and other reports, articles
and records publicly available that discuss silica related health risks, to estimate a range of the number and severity of claims that could be filed against the company over the next 50 years, the period found by the actuary to be reasonably
estimable. The variables used to determine the estimate were further analyzed and multiple iterations were modeled by the actuary.



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Notes to Consolidated Financial Statements

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As
previously discussed, the Company has available several forms of potential recovery to offset a portion of these costs in the form of insurance coverage and the ITT Industries indemnity. As part of the overall study, the actuarial also estimated the
amount recoverable from these sources, assuming that all primary and excess insurance coverage and the ITT indemnity is valid and fully collectible and also based on the timing of current and new claims filed, the alleged exposure periods and the
portion of the exposure that would fall within an insured or indemnified exposure period.



Following the adverse developments during the year, especially in the fourth quarter, and based on the study performed by our actuary, the Company recorded a pre-tax charge related to silica claims of
$23.7 million in 2002 for estimated undiscounted gross costs, including defense costs after consideration of recoveries under the ITT indemnity and insurance. This resulted in a long term liability of $69.2 million related to third party product
liability claims and a non-current asset of $40.9 million for probable insurance recoveries at December 31, 2002. The pre-tax charge in 2001 for silica claims was $2.1 million and the net liability recorded at December 31, 2001 was $4.6 million.
Recognizing the inherent uncertainties and numerous factors and assumptions which are used to develop this estimate management has determined that the amount is a reasonable estimate when considering all relevant factors.



The process of estimating and recording amounts for product
liability claims is imprecise and based on a variety of assumptions, some of which, while reasonable at the time, may prove to be inaccurate. The actuarys report is based to a large extent on the assumption that the Companys past
experience is predictive of future experience. Unanticipated changes in factors such as judicial decisions, legislative actions, claims consciousness, claims management, claims settlement practices and economic conditions make these estimates
subject to a greater than normal degree of uncertainty that could cause the silica-related liabilities and insurance or indemnity recoveries to be greater than those projected and recorded.



Given the inherent uncertainty in making future projections,
the Company plans to have these projections periodically updated based on actual claims experience and other relevant factors such as changes in the judicial system and legislative actions.



It is likely that the Company will continue to have
silica-related product liability claims filed against it including claims that allege silica exposure. The Company has recorded estimated liabilities and recoveries under the current ITT indemnity agreement and an estimate of future recoveries under
insurance policies after evaluating the legal obligations and financial viability of the insurers and believes that such recoveries are probable. Increases in the number of claims filed or costs associated with the silica-related claims will result
in the Company further increasing its liabilities and could have a material adverse effect on the Companys financial position, results of operations and cash flows, if such developments occur.







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Notes to Consolidated Financial Statements

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|9. |  | Income Taxes
|-- |  | ------------



The benefit for income taxes consisted of the following for each of the three years in the period ended December 31, 2002:





|                                                      |  | 2002           |         |   | 2001 |   |        | 2000 | 
|----------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------ | ---- | 
|                                                      |  | (In thousands) |        
|                                                     
|Current:                                              |  |                |         |   |      |   |        |      | 
|Federal                                               |  | $              | 3       |   |      | $ | (139   | )    | 
|State                                                 |  |                | 619     |   |      |   | 1,324  |      | 
|Foreign                                               |  |                |        |   |      |   |       |      | 
|                                                      |  |                |         |   |      |   |        |      | 
|                                                      |  |                | 622     |   |      |   | 1,185  |      | 
|Deferred:                                             |  |                |         |   |      |   |        |      | 
|Federal                                               |  |                | (49,463 | ) |      |   | (7,692 | )    | 
|State                                                 |  |                | (14,120 | ) |      |   | (1,792 | )    | 
|Foreign                                               |  |                |        |   |      |   |        |      | 
|                                                      |  |                |         |   |      |   |        |      | 
|                                                      |  |                | (63,583 | ) |      |   | (9,484 | )    | 
|                                                     
|Tax benefit of cumulative effect of accounting change |  |                | 6,115   |   |      |   |       |      | 
|                                                      |  |                |         |   |      |   |        |      | 
|Benefit for income taxes                              |  | $              | (56,846 | ) |      | $ | (8,299 | )    | 
|                                                      |  |                |         |   |      |   |        |      | 



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Under SFAS
No. 109, deferred tax assets and liabilities are recognized for the estimated future tax effects, based on enacted tax laws, of temporary differences between the values of assets and liabilities recorded for financial reporting and for tax purposes
and of net operating loss and other carryforwards. The tax effects of the types of temporary differences and carryforwards that gave rise to deferred tax assets and liabilities at December 31, 2002 and 2001 consisted of the following:





|                                            |  | 2002 |         |   | 2001 |  
|------------------------------------------- |  | ---- | ------- | - | ---- | -
|                                           
|Gross deferred tax liabilities              |  |      |         |   |      |  
|Land and mineral property basis difference  |  | $    | (60,496 | ) |      | $
|Fixed assets and depreciation               |  |      | (25,809 | ) |      |  
|Restricted stock vesting                    |  |      | (573    | ) |      |  
|Debt fee amortization                       |  |      | (98     | ) |      |  
|Other                                       |  |      | (5,035  | ) |      |  
|                                            |  |      |         |   |      |  
|Total deferred tax liabilities              |  |      | (92,011 | ) |      |  
|                                            |  |      |         |   |      |  
|Gross deferred tax assets                   |  |      |         |   |      |  
|                                           
|Third party products liability              |  |      | 11,621  |   |      |  
|Goodwill                                    |  |      | 6,111   |   |      |  
|Royalty                                     |  |      | 540     |   |      |  
|Post retirement benefit costs               |  |      | 7,306   |   |      |  
|Reserves for self-insurance                 |  |      | 988     |   |      |  
|Plant closure liability                     |  |      | 3,153   |   |      |  
|State deferred tax                          |  |      | 3,521   |   |      |  
|Covenants not to compete                    |  |      | 5,883   |   |      |  
|Alternative minimum tax credit carryforward |  |      | 2,953   |   |      |  
|Reserves for vacation                       |  |      | 763     |   |      |  
|Pensions                                    |  |      | 5,160   |   |      |  
|Inventories                                 |  |      | 1,548   |   |      |  
|Net operating loss carryforward             |  |      | 22,652  |   |      |  
|Bad debts                                   |  |      | 693     |   |      |  
|Reclamation                                 |  |      | 1,027   |   |      |  
|Other                                       |  |      | 1,635   |   |      |  
|                                            |  |      |         |   |      |  
|Total deferred tax assets                   |  |      | 75,554  |   |      |  
|                                            |  |      |         |   |      |  
|Less valuation allowance                    |  |      | 7,500   |   |      |  
|                                            |  |      |         |   |      |  
|Net deferred tax liabilities                |  |      | (23,957 | ) |      |  
|Less net current deferred tax assets        |  |      | (5,215  | ) |      |  
|                                            |  |      |         |   |      |  
|Net long-term deferred tax liabilities      |  | $    | (29,172 | ) |      | $
|                                            |  |      |         |   |      |  



At
December 31, 2002 and 2001, the Company had federal net operating loss carryforwards (NOL) of $56.0 million and $37.0 million, respectively, which begin to expire in 2011.



In addition, the Company has an alternative minimum tax credit carryforward at December 31, 2002 and 2001 of
approximately $3 million and $5 million, respectively. The credit carryforward may be carried forward indefinitely to offset any excess of regular tax liability over alternative minimum tax liability subject to certain limitations.



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Notes to Consolidated Financial Statements

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SFAS No.
109 requires a valuation allowance against deferred tax assets if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company believes that some uncertainty exists with
respect to the future utilization of net operating loss carry forwards and alternative minimum tax credits; therefore, the Company carries a valuation allowance relating to such items of $7.5 million at December 31, 2002.



The effective income tax rate on pretax earnings before
cumulative effect of change in accounting principle differed from the U.S. federal statutory rate for each of the three years in the period ended December 31, 2002 for the following reasons:





|                                                            |  | 2002  |    |  | 2001  |    |  | 2000  |   
|----------------------------------------------------------- |  | ----- | -- |  | ----- | -- |  | ----- | --
|                                                           
|Provision (benefit) computed at U.S. federal statutory rate |  | (35.0 | %) |  | (35.0 | %) |  | (35.0 | %)
|Increase (decrease) resulting from:                         |  |       |    |  |       |    |  |       |   
|Percentage depletion                                        |  | (2.7  | )  |  | (29.6 | )  |  | (19.4 | ) 
|Prior year tax return reconciliation                        |  | (.3   | )  |  | .5    |    |  | (3.1  | ) 
|State income taxes, net of federal benefit                  |  | (5.9  | )  |  | (2.1  | )  |  | (3.0  | ) 
|Sale of Canadian operation                                  |  |      |    |  |      |    |  | 5.5   |   
|Valuation allowance                                         |  | 5.1   |    |  |      |    |  |      |   
|Other, net                                                  |  | 1.0   |    |  | (1.0  | )  |  | 1.3   |   
|                                                            |  |       |    |  |       |    |  |       |   
|Provision for income taxes                                  |  | (38.7 | %) |  | (67.2 | %) |  | (53.7 | %)
|                                                            |  |       |    |  |       |    |  |       |   



|10. |  | Pension and Postretirement Benefits
|--- |  | -----------------------------------



The Company maintains a number of single-employer noncontributory defined benefit pension plans covering substantially all employees. The
plans provide benefits based on each covered employees years of qualifying service. The Companys funding policy is to contribute amounts within the range of the minimum required and maximum deductible contributions for each plan
consistent with a goal of appropriate minimization of the unfunded projected benefit obligation. The majority of the Companys pension plans use a benefit level per year of service (hourly) with one plan using final average pay method
(salaried). All Company plans use the projected unit credit cost method to determine the actuarial valuation.



In addition, the Company provides defined benefit postretirement healthcare and life insurance benefits to substantially all employees.
Covered employees become eligible for these benefits at retirement after meeting minimum age and service requirements. The projected future cost of providing postretirement benefits, such as healthcare and life insurance, is recognized as an expense
as employees render services.



The Company
contributes to a Voluntary Employees Beneficiary Association trust that will be used to partially fund health care benefits for future retirees. Benefits are funded to the extent contributions are tax deductible, which under current
legislation is limited. In general, retiree health benefits are paid as covered expenses are incurred.



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Net
pension and postretirement cost consisted of the following for each of the three years in the period ended December 31, 2002:





|                                               |  | Pension Benefits |        |   | Postretirement Benefits |  
|---------------------------------------------- |  | ---------------- | ------ | - | ----------------------- | -
|                                               |  | 2002             |        |   | 2001                    |  
|                                               |  | (In thousands)   |       
|                                              
|Service costbenefits earned during the period |  | $                | 1,128  |   |                         | $
|Interest cost                                  |  |                  | 4,449  |   |                         |  
|Expected return on plan assets                 |  |                  | (4,876 | ) |                         |  
|Net amortization and deferral                  |  |                  | 172    |   |                         |  
|                                               |  |                  |        |   |                         |  
|Net pension and postretirement cost            |  | $                | 873    |   |                         | $
|                                               |  |                  |        |   |                         |  



The
changes in benefit obligations and plan assets, as well as the funded status of the Companys pension and postretirement plans at December 31, 2002 and 2001 were as follows:





|                                                                     |  | Pension Benefits |         |   | Postretirement Benefits |  
|-------------------------------------------------------------------- |  | ---------------- | ------- | - | ----------------------- | -
|                                                                     |  | 2002             |         |   | 2001                    |  
|                                                                     |  | (In thousands)   |        
|                                                                    
|Benefit obligation at January 1                                      |  | $                | 60,922  |   |                         | $
|Service cost                                                         |  |                  | 1,128   |   |                         |  
|Interest cost                                                        |  |                  | 4,449   |   |                         |  
|Actuarial (gain)/loss                                                |  |                  | 4,232   |   |                         |  
|Benefits paid                                                        |  |                  | (3,892  | ) |                         |  
|Other                                                                |  |                  | 478     |   |                         |  
|                                                                     |  |                  |         |   |                         |  
|Benefit obligation at December 31                                    |  |                  | 67,317  |   |                         |  
|                                                                     |  |                  |         |   |                         |  
|                                                                    
|Fair value of plan assets at January 1                               |  |                  | 58,824  |   |                         |  
|Actual return on plan assets                                         |  |                  | (3,500  | ) |                         |  
|Employer contributions                                               |  |                  |        |   |                         |  
|Benefits paid                                                        |  |                  | (3,892  | ) |                         |  
|Other                                                                |  |                  |        |   |                         |  
|                                                                     |  |                  |         |   |                         |  
|Fair value of plan assets at December 31                             |  |                  | 51,432  |   |                         |  
|                                                                     |  |                  |         |   |                         |  
|                                                                     |  |                  |         |   |                         |  
|Plan assets in excess (less than) benefit obligations at December 31 |  |                  | (15,885 | ) |                         |  
|Unrecognized net loss (gain)                                         |  |                  | 9,800   |   |                         |  
|Unrecognized prior service cost                                      |  |                  | 1,619   |   |                         |  
|                                                                     |  |                  |         |   |                         |  
|                                                                    
|Net accrued benefit cost recognized as other noncurrent
liabilities  |  | $                | (4,466  | ) |                         | $
|                                                                     |  |                  |         |   |                         |  





An adjustment to recognize an additional minimum pension liability on the Companys consolidated balance sheet of $8.7 million was
recorded at December 31, 2002. The pension liability adjustment has been recorded as a long-term liability offset by an intangible pension asset of $1.9 million and a reduction to stockholders equity and deferred taxes of $4.2 million and $2.6
million, respectively, at December 31, 2002.



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





The
following weighted-average assumptions were used to determine the Companys obligations under the plans:





|                                        |  | Pension Benefits |   |  | Postretirement Benefits |  
|--------------------------------------- |  | ---------------- | - |  | ----------------------- | -
|                                        |  | 2002             |   |  | 2001                    |  
|                                       
|Discount rate                           |  | 6.75             | % |  | 7.25                    | %
|Long-term rate of compensation increase |  | 3.50             | % |  | 3.50                    | %
|Long-term rate of return on plan assets |  | 9.00             | % |  | 9.00                    | %
|Health care cost trend rate             |  |                 |   |  |                        |  



The
assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 9.0%, declining by 1% per year to an ultimate rate of 5%.



A one-percentage-point increase in the assumed health care cost trend rates for each year would increase the
accumulated postretirement benefit obligation at December 31, 2002 and net postretirement health care cost (service cost and interest cost) for the year then ended by approximately $1.8 million and $1.4 million, respectively. A one-percentage-point
decrease in the assumed health care cost trend rates for each year would decrease the accumulated postretirement benefit obligation at December 31, 2002 and net postretirement health care cost (service cost and interest cost) for the year then ended
by approximately $1.5 million and $1.2 million, respectively.



Certain hourly employees are covered under a multi-employer defined benefit pension plan. The pension cost recognized for these plans for each of the three years in the period ended December 31, 2002 totaled approximately $878,000,
$735,000, and $606,000, respectively.



The
Company also sponsors a defined contribution plan covering certain employees. The Company contributes to the plan in two ways. For certain employees not covered by the defined benefit plan, the Company makes a contribution equal to 4% of their
salary. The Company also contributes an employee match which can range from 25 to 100 cents, based on financial performance, for each dollar contributed by an employee, up to 8% of their earnings. Contributions for each of the three years in the
period ended December 31, 2002 totaled approximately $862,000, $744,000 and $680,000, respectively. The Company also sponsors a defined contribution thrift plan for hourly employees to which employees may contribute up to 15% of their earnings.
There is no contributing match for the thrift plan.



|11. |  | Related Party Transactions
|--- |  | --------------------------



Pursuant to an agreement between the Company and principals of D. George Harris & Associates, LLC (DGH&A), who are
also stockholders of the Companys ultimate parent, DGH&A provides certain management advisory services to the Company. The Company paid approximately $500,000, $795,000 and $923,000 to DGH&A for each of the three years in the period
ended December 31, 2002, respectively, associated with these management services. The agreement also provides that the Company will pay DGH&A an acquisition fee in the event of a business acquisition by the Company. The management advisory
services and acquisition fees have been charged to selling, general and administrative expense during each of the respective periods noted above.



The agreement also provides that, at DGH&As request, U.S. Silica provide DGH&A with an interest-free loan not to exceed $3.0
million in total or $500,000 in any given year. At December 31, 2002, a loan receivable from DGH&A of $1.4 million is currently outstanding. The loan is guaranteed by certain principals of DGH&A.



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





On
occasion, the Company and its ultimate parent make non-interest bearing cash advances to each other. At December 31, 2002 and 2001, the Company had a payable to its parent of approximately $2.3 million and $2.4 million, respectively.



|12. |  | Incentive Stock Compensation
|--- |  | ----------------------------



On April 10, 2000, the Company entered into an employment agreement with an executive to manage its aggregates business segment. In the
second quarter of 2000, a one-time charge of approximately $2.3 million was recorded representing the cost to replace certain benefits forfeited by the executive officer in order to join the Company, of which $998,000 is the cost of non-cash stock
grants in the Companys ultimate parent company, Holdings, and is recorded in selling, general and administrative expense.



|13. |  | Segment Information
|--- |  | -------------------



The Company operates in the industrial minerals and aggregates business segments, principally in the United States, and conducts limited
operations in Canada. Industrial minerals includes the mining, processing and marketing of industrial minerals, principally industrial silica, to a wide variety of end use markets, including foundry, glass, chemicals, fillers and extenders
(primarily used in paints and coatings), building materials, ceramics, and oil and gas. Aggregates includes the mining, processing and marketing of high quality crushed stone, construction sand and gravel. The Companys customers use its
aggregates for road construction and maintenance, other infrastructure projects and residential and commercial construction and to produce hot mixed asphalt and concrete products. The Company also uses its aggregates to produce hot mixed asphalt at
production facilities the Company owns or operates. The industrial minerals and aggregates business segments constitute the reportable segments of the Company.



The Companys management reviews operating segment income to evaluate segment performance and allocate resources. Certain corporate
expenses (income) including unusual items, business development costs and fees paid to DGH&A, interest expense, the accretion of preferred stock warrants, other income (net of interest income) and the provision (benefit) for income taxes are not
included in segment operating income since they are excluded from the measure of segment profitability reviewed by the Companys management. The Companys assets are managed based on segment and accordingly, asset information is reported
for the aggregates and industrial minerals segments. Corporate assets consist primarily of cash and cash equivalents, debt issuance costs and equipment. The accounting policies of the segments are the same as those described in the Summary of
Significant Accounting Policies.



On October 1,
2002, as part of a change in management reporting responsibilities, certain New Jersey operating assets of the Companys aggregates business unit were transferred to the Companys industrial minerals business unit. Net sales from the
transferred assets are made both directly to customers and to the Companys aggregates subsidiary. Intersegment sales are recorded at amounts which approximate sales to third party distributors. Prior year segment reporting has been restated to
include the transferred assets as a part of the Companys industrial minerals business unit.



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





Reportable segment information for each of the three years in the period ended December 31, 2002 was as follows:





|                                                       |  | 2002           |          |   | 2001 |   |         | 2000 | 
|------------------------------------------------------ |  | -------------- | -------- | - | ---- | - | ------- | ---- | 
|                                                       |  | (In thousands) |         
|                                                      
|Sales:                                                 |  |                |          |   |      |   |         |      | 
|Aggregates                                             |  | $              | 118,645  |   |      | $ | 120,833 |      | 
|Industrial Minerals                                    |  |                | 184,747  |   |      |   | 189,747 |      | 
|Eliminations                                           |  |                | (2,897   | ) |      |   | (2,633  | )    | 
|                                                       |  |                |          |   |      |   |         |      | 
|Total sales                                            |  | $              | 300,495  |   |      | $ | 307,947 |      | 
|                                                       |  |                |          |   |      |   |         |      | 
|                                                      
|Operating segment income (loss):                       |  |                |          |   |      |   |         |      | 
|Aggregates                                             |  | $              | (107,017 | ) |      | $ | 5,607   |      | 
|Industrial Minerals                                    |  |                | (8,790   | ) |      |   | 17,677  |      | 
|                                                       |  |                |          |   |      |   |         |      | 
|Total operating segment income (loss)                  |  |                | (115,807 | ) |      |   | 23,284  |      | 
|                                                      
|General corporate expense                              |  |                | (603     | ) |      |   | (1,105  | )    | 
|                                                       |  |                |          |   |      |   |         |      | 
|Total operating income (loss)                          |  | $              | (116,410 | ) |      | $ | 22,179  |      | 
|                                                       |  |                |          |   |      |   |         |      | 
|                                                      
|Depreciation, depletion and amortization expense:      |  |                |          |   |      |   |         |      | 
|Aggregates                                             |  | $              | 14,096   |   |      | $ | 15,551  |      | 
|Industrial Minerals                                    |  |                | 15,744   |   |      |   | 17,001  |      | 
|Corporate                                              |  |                | 173      |   |      |   | 118     |      | 
|                                                       |  |                |          |   |      |   |         |      | 
|Total depreciation, depletion and amortization expense |  | $              | 30,013   |   |      | $ | 32,670  |      | 
|                                                       |  |                |          |   |      |   |         |      | 
|Capital expenditures:                                  |  |                |          |   |      |   |         |      | 
|Aggregates                                             |  | $              | 10,746   |   |      | $ | 2,742   |      | 
|Industrial Minerals                                    |  |                | 3,257    |   |      |   | 10,996  |      | 
|Corporate                                              |  |                |         |   |      |   |        |      | 
|                                                       |  |                |          |   |      |   |         |      | 
|Total capital expenditures                             |  | $              | 14,003   |   |      | $ | 13,738  |      | 
|                                                       |  |                |          |   |      |   |         |      | 



Reportable segment information at December 31, 2002, 2001 and 2000 was as follows:





|                                        |  | 2002           |         |   | 2001 |   |         | 2000 | 
|--------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- | 
|                                        |  | (In thousands) |        
|                                       
|Assets:                                 |  |                |         |   |      |   |         |      | 
|Aggregates                              |  | $              | 209,716 |   |      | $ | 330,134 |      | 
|Industrial Minerals                     |  |                | 237,176 |   |      |   | 195,686 |      | 
|Corporate                               |  |                | 15,807  |   |      |   | 21,823  |      | 
|Elimination of intersegment receivables |  |                | (36,825 | ) |      |   | (31,999 | )    | 
|                                        |  |                |         |   |      |   |         |      | 
|Total assets                            |  | $              | 425,874 |   |      | $ | 515,644 |      | 
|                                        |  |                |         |   |      |   |         |      | 



|14. |  | Guarantor Financial Data
|--- |  | ------------------------



Except for the Companys Canadian subsidiary, which is an inactive company with an immaterial amount of assets and liabilities, each
of the Companys subsidiaries has fully and unconditionally guaranteed the Senior Subordinated Notes on a joint and several basis. The separate financial statements of the subsidiary guarantors are not included in this report because (a) the
Company is a holding company with no independent assets or operations other than its investments in its subsidiaries, (b) the subsidiary guarantors each are wholly owned by the Company, comprise all of the direct and indirect subsidiaries of the
Company (other than a



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





minor
subsidiary) and have jointly and severally guaranteed the Companys obligations under the Senior Subordinated Notes on a full and unconditional basis, (c) the aggregate assets, liabilities, earnings and equity of the subsidiary guarantors are
substantially equivalent to the assets, liabilities, earnings and equity of the Company on a consolidated basis and (d) management has determined that separate financial statements and other disclosures concerning the subsidiary guarantors are not
material to investors.



|15. |  | Obligations Under Guarantees
|--- |  | ----------------------------



The Company has indemnified St. Paul Fire and Marine Insurance Company (St. Paul) against any loss St. Paul may incur in the event that
holders of surety bonds, issued on behalf of the Company by St. Paul, execute the bonds. As of December 31, 2002 St. Paul had $12.7 million in bonds outstanding for the Company. The majority of these bonds ($8.2 million) relate to reclamation
requirements issued by various governmental authorities. Reclamation bonds remain outstanding until the mining area is reclaimed and the authority issues a formal release. Another large group ($3.7 million) arise from the bidding process with local
governments who require supply or performance bonds. These typically expire one year from the date the bid is issued. The remaining bonds relate to such indefinite purposes as licenses, permits, and tax collection.



U.S. Silica has indemnified Safeco Insurance Company of
America (Safeco) against any loss Safeco may incur in the event that holders of surety bonds, issued on behalf of U.S. Silica by Safeco, execute the bonds. As of December 31, 2002 Safeco had $555,000 in bonds outstanding for U.S. Silica. These are
all reclamation bonds.



U.S. Silica is the
contingent guarantor of Winifrede Railroad Companys (Winifrede) obligations as lessee of 200 covered hopper railroad cars which are used by U.S. Silica to ship sand to its customers. Winifredes performance is also guaranteed by its
parent, Carbon Industries, Inc. (Carbon), a subsidiary of ITT; and U.S. Silicas liability under the guaranty does not arise unless Winifrede or Carbon fail to cure any default within five business days after notice of default has been given to
Carbon and U.S. Silica. Winifredes obligation as lessee includes paying monthly rent of $53,000 until May 1, 2005, maintaining the cars, paying for any cars damaged or destroyed, and indemnifying all other parties to the lease transaction
against liabilities including any loss of certain tax benefits. By separate agreement between U.S. Silica and Winifrede, Winifrede may, upon the occurrence of certain events, assign the lease obligations to U.S. Silica, but none of these events have
occurred.



|16. |  | Asset Impairment
|--- |  | ----------------



In accordance with SFAS 144, the Company recorded a $107.9 million non-cash charge for the impairment of mining properties in the
aggregates segment as of December 31, 2002. The Company conducted an impairment review of the properties in the aggregates business, which resulted in the determination that the segments undiscounted future cash flows could no longer support
its carrying value. The loss on impairment represented the difference between the segments estimated fair value, as determined using the expected present value of cash flows, and its previous carrying amount.



|17. |  | Subsequent Event
|--- |  | ----------------



On April 10, 2003, the Company entered into an agreement to sell its aggregates segment to a subsidiary of Hanson Building Materials of
America, Inc. The consideration consists of $152 million in cash and the assumption of $3 million in capital lease obligations. Pursuant to the agreement, the Company would owe Hanson $2 million plus interest (beginning after the third year) on the
fifth anniversary of the closing if certain post-closing permit and rezoning objectives specified in the agreement are not achieved during this period. The agreement also contains customary representations, warranties and indemnities. Closing on the
sale is subject to customary closing conditions, including antitrust clearance under the Hart-Scott-Rodino



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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





Antitrust
Improvements Act of 1976, as amended, and completion of environmental and geological due diligence at the Companys operating sites and real estate surveys at certain of the Companys operating sites. The Company will also need to secure
the consent of its senior secured lenders in order to release any liens on the assets being sold.



The assets and liabilities of the aggregates operations, after recording an asset impairment charge in 2002 (see footnote 16), included in
the consolidated balance sheet are as follows:





|                                   |  | December 31,
|---------------------------------- |  | ------------
|                                   |  | 2002        
|                                   |  | In millions 
|                                  
|Assets                             |  |             
|Current assets                     |  | $           
|Property, plant and equipment, net |  |             
|Other noncurrent assets            |  |             
|                                   |  |             
|Total assets                       |  | $           
|                                  
|Liabilities                        |  |             
|Current liabilities                |  | $           
|Other liabilities                  |  |             
|                                   |  |             
|Total liabilities                  |  | $           
|                                  
|Net book value                     |  | $           





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Better Minerals & Aggregates Company

Notes to Consolidated Financial Statements

---





|Item 9. |  | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
|------- |  | ------------------------------------------------------------------------------------



Not applicable.







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PART III



|Item 10. |  | Directors and Executive Officers of the Registrant
|-------- |  | --------------------------------------------------



The following table identifies members of the Board of Directors and the executive officers of USS Holdings, Inc., our indirect parent, and us.



|Name                  |  | Age |  | Present Position at March 1, 2003                                                    |  | Year Assumed Present Position(s) |  | Other Positions and Other Business Experience Within the Last Five Years                                                                                                                                                                                                                                                                                                                   
|--------------------- |  | --- |  | ------------------------------------------------------------------------------------ |  | -------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     
|D. George Harris      |  | 69  |  | Chairman and Director                                                                |  | 1996                             |  | Chairman and director, D. George Harris & Associates, LLC (1987-present); officer or director of various companies,
including Harris Chemical Group, Inc. (1993-1998), Harris Specialty Chemicals, Inc. (1994-1999) and Penrice Pty Ltd. (1996-1998); Chairman, Shareholders Committee, Vestolit Holdings GmbH & Co., KG (1999-present); director, McWhorter
Technologies, Inc. (1994-2000)
|                     
|Anthony J. Petrocelli |  | 65  |  | Vice Chairman and Director                                                           |  | 1996                             |  | Vice Chairman, D. George Harris & Associates, LLC (1987-present); officer or director of various companies, including
Harris Chemical Group, Inc. (1993-1998), Harris Specialty Chemicals, Inc. (1994-1999) and Penrice Pty Ltd. (1996-1998); Vice Chairman, Shareholders Committee, Vestolit Holdings GmbH & Co., KG (1999-present)                                                       
|                     
|Richard E. Goodell    |  | 58  |  | Vice Chairman; Director                                                              |  | 2001; 1996                       |  | Chief Executive Officer (1999-2000); President (1996-2000); President, Pennsylvania Glass Sand Corporation (renamed U.S. Silica Company) (our subsidiary) (1985-1998)                                                                                                                                                                                                                      
|                     
|Roy D. Reeves         |  | 57  |  | President and Chief Executive Officer; Director                                      |  | 2001                             |  | President, Stone Materials Company, LLC (our subsidiary) (2000); President and Chief Operating Officer, Hanson Aggregates East
(1997-2000); President and Chief Operating Officer, Sloan Construction Company (1993-1997)                                                                                                                                                                  
|                     
|Gary E. Bockrath      |  | 50  |  | Vice President and Chief Financial Officer                                           |  | 1996                             |  | Senior Vice President of Finance, U.S. Silica (1993-present); director, U.S. Silica (1994-present)                                                                                                                                                                                                                                                                                         
|                     
|Craig S. Cinalli      |  | 44  |  | President and Chief Operating Officer, Better Materials Corporation (our subsidiary) |  | 1989                             |  |                                                                                                                                                                                                                                                                                                                                                                                            



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|Walter C. Pellish  |  | 62 |  | Vice President Administration                                        |  | 2000 |  | Vice PresidentAdministration, U.S. Silica (1981-present)                                                                                                                                                                                    
|------------------ |  | -- |  | --------------------------------------------------------------------- |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  
|Richard J. Donahue |  | 59 |  | Vice President, Assistant Treasurer, Assistant Secretary and Director |  | 1996 |  | Managing Director, D. George Harris & Associates, LLC (1987-present); officer of various companies, including Harris
Chemical Group, Inc. (1993-1998) and Harris Specialty Chemicals, Inc. (1994-1999)                                       
|                  
|Richard J. Nick    |  | 59 |  | Vice President, Treasurer and Assistant Secretary                     |  | 1996 |  | Managing Director, D. George Harris & Associates, LLC (1989-present); officer of various companies, including Harris
Chemical Group, Inc. (1993-1998) and Harris Specialty Chemicals, Inc. (1994-1999)                                       
|                  
|Richard J. Shearer |  | 52 |  | President, U.S. Silica Company (our subsidiary)                       |  | 1999 |  | Executive Vice President, U.S. Silica (1997-1999); Vice President, General Manager, North American Chemical Company
(1996-1997)                                                                                                              
|                  
|John A. Ulizio     |  | 47 |  | Vice President, General Counsel and Assistant Secretary               |  | 1996 |  | Associate General Counsel, U.S. Silica (1991-1995); manager of environmental, health and safety matters
(1994-present)                                                                                                                       
|                  
|Arnold L. Chavkin  |  | 51 |  | Director                                                              |  | 1996 |  | Executive Partner, J.P. Morgan Partners, LLC (formerly Chase Capital Partners) (1992-present); director, American Tower
Corporation, Carrizo Oil & Gas, Inc., Crown Media Holdings, Inc., Encore Acquisition Partners, Triton PCS, Inc.      
|                  
|Ruth Dreessen      |  | 47 |  | Director                                                              |  | 1996 |  | Retired. Formerly Managing Director, J. P. Morgan Securities Inc., formerly Chase Securities Inc. (1997-2001); Director,
Georgia Gulf Corporation.                                                                                           
|                  
|Timothy J. Walsh   |  | 39 |  | Director                                                              |  | 1998 |  | Partner, J.P. Morgan Partners, LLC (formerly Chase Capital Partners) (1999-present); associate, J.P. Morgan Partners, LLC
(1993-1999); director, MetoKote Corporation, Inc., Pliant Corporation, Klöckner Pentaplest S.A., NexPak Corporation





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|Item 11. |  | Executive Compensation
|-------- |  | ----------------------



Executive Compensation



The following table sets forth information regarding annual compensation for services rendered to us during the fiscal years ended December 31, 2002, 2001 and 2000 by our (i) chief executive officer and (ii) four most highly
compensated executive officers (collectively, the Named Executive Officers).





Summary Compensation Table



|                                   |  |      |  | Annual Compensation |  |           | Long-term Compensation Awards |                               |     | 
|---------------------------------- |  | ---- |  | ------------------- |  | --------- | ----------------------------- | ----------------------------- | --- | 
|Name and Principal Position        |  | Year |  | Salary ($)          |  | Bonus ($) |                               | Other Annual Compensation ($) |     | 
|Roy D. Reeves                      |  | 2002 |  | 440,975             |  |          |                               |                              |     | 
|Chief Executive Officer            |  | 2001 |  | 425,000             |  | 125,000   |                               |                              |     | 
|                                   |  | 2000 |  | 300,000             |  | 200,000   |                               | 2,103,368                     | (1) | 
|                                  
|Richard J. Shearer                 |  | 2002 |  | 256,300             |  |          |                               |                              |     | 
|President                          |  | 2001 |  | 249,062             |  | 20,000    |                               |                              |     | 
|(U.S. Silica Company)              |  | 2000 |  | 240,400             |  |          |                               |                              |     | 
|                                  
|Gary E. Bockrath                   |  | 2002 |  | 196,050             |  |          |                               |                              |     | 
|Vice President and Chief           |  | 2001 |  | 184,585             |  | 20,000    |                               |                              |     | 
|Financial Officer                  |  | 2000 |  | 176,400             |  |          |                               |                              |     | 
|                                  
|Craig S. Cinalli                   |  | 2002 |  | 200,850             |  |          |                               |                              |     | 
|President                          |  | 2001 |  | 195,000             |  | 20,000    |                               |                              |     | 
|(Better Materials Corporation)     |  | 2000 |  | 175,000             |  |          |                               |                              |     | 
|                                  
|John A. Ulizio                     |  | 2002 |  | 195,500             |  |          |                               |                              |     | 
|Vice President and General Counsel |  | 2001 |  | 188,500             |  | 20,000    |                               |                              |     | 
|                                   |  | 2000 |  | 175,000             |  |          |                               |                              |     | 

---

|(1) |  | Includes reimbursement by us to Mr. Reeves for his purchase of 25,000 shares of Class A common stock at $39.90 per share, the purchase by Mr. Reeves for $0.01 per
share of 25,000 shares of Class C common stock valued at $4.10 per share, and the gross-up for the tax liability attributable to these purchases and to his signing bonus of $100,000, described in footnote 5 below.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | As of December 31, 2002, the Named Executive Officers held the following amounts of restricted stock: Mr. Reeves, 25,000 shares; Mr. Shearer, 17,000 shares; Mr.
Bockrath, 6,000 shares; Mr. Ulizio 6,000 shares and Mr. Cinalli, 6,000 shares. The value of the restricted stock as of December 31, 2002 is equal to the value as of the date of grant reflected in the above table.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes life insurance premiums paid by us in 2002 on behalf of the Named Executive Officers as follows: Mr. Ulizio, $1,440; Mr. Reeves, $9,690; Mr. Shearer,
$1,440; Mr. Bockrath, $1,440; and Mr. Cinalli, $1,440.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Includes matching contributions by us to the U.S. Silica Company Retirement Savings and Investment Plan for Salaried Employees in 2002 on behalf of the Named
Executive Officers as follows: Mr. Ulizio, $3,486; Mr. Reeves, $3,430; Mr. Shearer, $3,275; Mr. Bockrath, $3,275; and Mr. Cinalli, $3,275. Also includes other contributions by us to this plan in 2002 on behalf of certain Named Executive Officers as
follows: Mr. Shearer, $12,795; Mr. Bockrath, $9,347; and Mr. Ulizio $9,325.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Includes a one-time signing bonus of $100,000 received by Mr. Reeves upon entering into his employment agreement with us.
|--- |  | -------------------------------------------------------------------------------------------------------------------------

|(6) |  | Includes income imputed to Mr. Cinalli from the personal use of a company- owned vehicle and residence in the amount of $10,725.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Includes $17,881 in commuting expenses reimbursed to Mr. Reeves.
|--- |  | ----------------------------------------------------------------



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Better
Materials Corporation Pension Plan



|                  |  | Years of Service
|----------------- |  | ----------------
|Remuneration      |  | 15              
|$125,000          |  | $               
|150,000           |  |                 
|175,000           |  |                 
|200,000 and above |  |                 



At
December 31, 2002, credited years of service under the Better Materials Corporation Pension Plan (the BMC Plan) for the only Named Executive Officer who participates, Mr. Cinalli, were 22 years. The compensation covered under the BMC
Plan includes total cash remuneration paid to the Named Executive Officer up to the statutory limits stipulated by the Internal Revenue Service. Estimated benefits set forth in the BMC Plan table were calculated on the basis of a single life annuity
and are not offset by any amount.



Supplemental
Executive Retirement Plan



|             |  | Years of Service
|------------ |  | ----------------
|Remuneration |  | 15              
|$125,000     |  | $               
|150,000      |  |                 
|175,000      |  |                 
|200,000      |  |                 
|225,000      |  |                 
|250,000      |  |                 
|300,000      |  |                 
|400,000      |  |                 
|500,000      |  |                 
|600,000      |  |                 
|700,000      |  |                 



At
December 31, 2002, credited years of service under a Supplemental Executive Retirement Plan (SERP) for Mr. Reeves were 18 years. The compensation covered under the SERP includes total cash remuneration paid to the Named Executive
Officer. Estimated benefits set forth in the SERP table were calculated on the basis of a single life annuity and are offset by the benefit Mr. Reeves will receive under a retirement plan with his previous employer in the amount of $36,911.



Employment Contracts and Termination of Employment and
Change-in-Control Arrangements



Employment
Agreement with Mr. Cinalli. In December 2002, Better Materials Corporation, one of our subsidiaries, renewed Mr. Cinallis existing employment agreement for a one-year term. The agreement provides for annual compensation of at least $195,000, a
performance-based bonus, eligibility to receive restricted stock and the use of a company-owned vehicle and residence.



Under this agreement, Better Materials Corporation may terminate Mr. Cinalli for any reason other than cause, as defined in
the agreement, with thirty days prior written notice. This agreement provides for severance in the amount of two years annual salary upon termination without cause. This agreement contains confidentiality and non-compete
covenants.



Severance Agreement with Mr. Shearer.
In August 2000, U.S. Silica Company, one of our subsidiaries, entered into a severance agreement with Mr. Shearer to provide for severance and benefits in the event his employment is terminated for any reason other than cause, as defined
in the agreement. Under this severance agreement, Mr. Shearer is entitled to continue to receive his salary for a maximum period of two years following termination of employment. In addition, U.S. Silica will pay medical premiums for Mr. Shearer and
his family under the U.S. Silica Health Plan for a maximum period of six months beyond the required COBRA continuation coverage period and, upon the sale of Mr. Shearers house, U.S. Silica will pay a percentage of the unrecovered cost of
improvements to his residence up to approximately $47,000. This agreement contains confidentiality and non-compete covenants.



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Employment and
Change-in-Control Agreements with Mr. Reeves. In April 2000, we entered into an employment agreement with Mr. Reeves with an initial three- year term, automatically renewable annually, which provides for annual compensation of $400,000 (subject to
salary reviews), a performance-based bonus, a signing bonus of $100,000, net of applicable taxes, and supplemental retirement benefits.



Mr. Reeves is also entitled to a number of stock incentives under this agreement. First, he purchased from USS Holdings, our indirect
parent, 25,000 restricted shares of USS Holdings Class C common stock for one cent ($.01) per share. If we terminate Mr. Reeves employment under certain circumstances, or in the event of certain corporate transactions, such as a sale, merger
or initial public offering involving USS Holdings, we may be obligated to repurchase these shares, depending on the value of USS Holdings Class A common stock at the time of such event. We reimbursed Mr. Reeves for the tax liability for these shares
at the time of purchase. Second, Mr. Reeves purchased 25,000 shares of USS Holdings Class A common stock, for which we reimbursed him at a price of $39.90 per share, plus tax liability resulting from this reimbursement.



We may terminate Mr. Reeves for any reason other than for
cause, as defined in the agreement, or he may resign for good reason, as defined in the agreement, with thirty days prior written notice. If we terminate Mr. Reeves without cause, he is entitled to severance
in an amount equal to his annual salary plus full bonus for the remainder of the term of the agreement. If Mr. Reeves employment is terminated following a change in control involving us, as defined in the agreement, he is entitled to severance
in an amount equal to his annual salary plus full bonus for the remainder of the term of the agreement, which is reduced to 18 months following the change in control. This agreement contains confidentiality and non-compete covenants.



Mr. Reeves has also entered into an agreement with USS
Holdings that provides for payment upon the occurrence of certain corporate transactions involving USS Holdings, such as a sale, merger or initial public offering. If one of these events occurs, Mr. Reeves will be entitled to a bonus based on the
extent to which the price for USS Holdings Class A common stock, as valued in such event, exceeds a target price set for the year in which the event occurs. If the target price is exceeded by 100% or more, Mr. Reeves will receive a bonus of $8
million net of any excise tax liability to Mr. Reeves if the payment is determined to be an excess parachute payment under IRS regulations. If the target price is exceeded by less than 100%, Mr. Reeves will receive a prorated portion of the $8
million maximum. No bonus is payable if the target price for the year of the triggering event is not exceeded. If we experience a change in control as a result of the triggering event and Mr. Reeves employment is terminated following the
change in control, USS Holdings may cause us to pay the bonus amount to Mr. Reeves.



Employment and Consulting Agreement with Mr. Goodell. Mr. Goodell is currently party to an employment and consulting agreement with USS Holdings, BMAC Holdings, Inc., U.S. Silica Company, BMAC Services
Co., Inc. and us extending the term of his employment through July 7, 2004 at an annual base salary of $100,000, plus participation in employee benefit plans and rights to use of certain property of ours for hunting purposes.



Under this agreement, in the event of a change in control, as
defined in the agreement, Mr. Goodell is entitled to terminate his employment and receive severance in the amount of his salary through July 7, 2004. Alternatively, if Mr. Goodell remains employed following a change in control, he is entitled to
receive at the time of the change in control a bonus equal to one years salary and to receive a stay bonus equal to one years salary payable and conditioned upon his continued employment until a period of six months after the change in
control. If his employment is terminated following a change in control, he is deemed to have been employed through July 7, 2004 for purposes of determining eligibility for, and calculation of benefits under, the U.S. Silica benefit plans.



For a period of five years following his
termination of employment, Mr. Goodell will serve as a consultant to USS Holdings, BMAC Holdings, Inc., U.S. Silica Company, BMAC Services Co., Inc. and us for which he will be compensated at an annual salary of $50,000 for up to 20 days of
consulting plus $2,500 per day for his services for a maximum additional period of 30 days.



This agreement may be terminated for cause, as defined in the agreement, upon Mr. Goodells death, or in the event of disability. This agreement contains non-compete and non-solicitation
provisions.



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U.S. Silica
Company Retirement Plan for Salaried Employees



|             |  | Years of Service
|------------ |  | ----------------
|Remuneration |  | 15              
|$125,000     |  | $               
|150,000      |  |                 
|175,000      |  |                 
|200,000      |  |                 
|225,000      |  |                 
|250,000      |  |                 
|300,000      |  |                 
|400,000      |  |                 



At
December 31, 2002, credited years of service under the U.S. Silica Company Retirement Plan for Salaried Employees (the Retirement Plan) for the only person who participates, Mr. Goodell, were 21 years. The compensation covered by the
Retirement Plan includes the annual base salary listed above. The estimated annual retirement benefit indicated in the Retirement Plan table includes enhanced pension provisions under the U.S. Silica Company Pension Restoration Plan, which is an
unfunded plan providing benefits to participants in the Retirement Plan that are not payable under the Retirement Plan because of the limitations stipulated by the Internal Revenue Code. Estimated benefits set forth in the Retirement Plan table were
calculated on the basis of a single life annuity. Annual benefits payable under the Retirement Plan are not offset by any amount.



Director Compensation



Members of our Board of Directors who are our employees, or employees of our shareholders, are not compensated for their services as
directors, but may be reimbursed for actual expenses incurred in attending meetings of the Board of Directors or committees thereof. Outside directors may be compensated for their services. Ruth Dreessen, an outside director, receives $35,000
annually as Director, and Chair of the Audit Committee.



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|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- |  | ----------------------------------------------------------------------------------------------



Security Ownership



All of our outstanding capital stock is directly owned by BMAC Holdings, which in turn is wholly owned by USS Holdings. The following
table sets forth, to the best of our knowledge, certain information regarding the ownership of the capital stock of USS Holdings as of March 1, 2003 with respect to the following: (i) each person known by us to own beneficially more than 5% of the
outstanding shares of any class of capital stock of USS Holdings; (ii) each of our directors; (iii) each of our executive officers; and (iv) all of our directors and executive officers as a group.



Except as otherwise indicated, each person listed in the
following table has sole voting and investment power with respect to the shares listed opposite that persons name.





|Beneficial Owners(1)                                                     |  | Shares of Common Stock |  | Percentage of Common Stock(2)* | 
|------------------------------------------------------------------------ |  | ---------------------- |  | ------------------------------ | 
|                                                                         |  | Class A(3)             |  | Class B(4)                     | 
|                                                                        
|J.P. Morgan Chase & Co.(9)(10)                                           |  | 0                      |  | 340,069                        | 
|Massachusetts Mutual Life Insurance Company(11)                          |  | 0                      |  | 104,211                        | 
|D. George Harris(12)                                                     |  | 124,653                |  | 8,186                          | 
|Anthony J. Petrocelli(13)(15)                                            |  | 73,222                 |  | 5,184                          | 
|Richard E. Goodell                                                       |  | 6,640                  |  | 0                              | 
|Richard J. Donahue                                                       |  | 65,972                 |  | 1,950                          | 
|Richard J. Shearer                                                       |  | 5,203                  |  | 0                              | 
|Craig S. Cinalli                                                         |  | 2,000                  |  | 0                              | 
|Walter C. Pellish                                                        |  | 5,755                  |  | 0                              | 
|Richard J. Nick(15)                                                      |  | 34,296                 |  | 1,744                          | 
|Donald G. Kilpatrick(13)                                                 |  | 50,962                 |  | 0                              | 
|Roy D. Reeves                                                            |  | 27,500                 |  | 0                              | 
|John A. Ulizio                                                           |  | 5,755                  |  | 0                              | 
|Gary E. Bockrath                                                         |  | 6,109                  |  | 0                              | 
|Arnold L. Chavkin(10)(14)                                                |  | 0                      |  | 0                              | 
|Ruth Dreessen                                                            |  | 0                      |  | 0                              | 
|Timothy J. Walsh(10)(14)                                                 |  | 0                      |  | 0                              | 
|All directors and executive officers as a group (14 persons)(10)(12)(14) |  | 357,104                |  | 17,063                         | 





|Beneficial Owners(1)                                                     |  | Shares of Preferred Stock |  | Percentage of Preferred Stock(2)* | 
|------------------------------------------------------------------------ |  | ------------------------- |  | --------------------------------- | 
|                                                                         |  | Series A(6)               |  | Series B(7)                       | 
|                                                                        
|J.P. Morgan Chase & Co.(9)(10)                                           |  | 678,035                   |  | 1,356,070                         | 
|Massachusetts Mutual Life Insurance                                      |  | 207,778                   |  | 415,556                           | 
|Company(11)                                                              |  |                           |  |                                   | 
|D. George Harris(12)                                                     |  | 15,268                    |  | 58,016                            | 
|Anthony J. Petrocelli(13)                                                |  | 9,035                     |  | 27,070                            | 
|Richard E. Goodell                                                       |  | 0                         |  | 20,000                            | 
|Richard J. Donahue                                                       |  | 1,104                     |  | 16,291                            | 
|Richard J. Shearer                                                       |  | 596                       |  | 1,775                             | 
|Craig S. Cinalli                                                         |  | 0                         |  | 0                                 | 
|Walter C. Pellish                                                        |  | 0                         |  | 10,000                            | 
|Richard J. Nick                                                          |  | 3,312                     |  | 17,771                            | 
|Donald G. Kilpatrick(13)                                                 |  | 1,534                     |  | 9,422                             | 
|Roy D. Reeves                                                            |  | 0                         |  | 0                                 | 
|John A. Ulizio                                                           |  | 0                         |  | 10,000                            | 
|Gary E. Bockrath                                                         |  | 0                         |  | 10,000                            | 
|Arnold L. Chavkin(10)(14)                                                |  | 0                         |  | 0                                 | 
|Ruth Dreessen                                                            |  | 0                         |  | 0                                 | 
|Timothy J. Walsh(10)(14)                                                 |  | 0                         |  | 0                                 | 
|All directors and executive officers as a group (14 persons)(10)(12)(14) |  | 29,315                    |  | 170,923                           | 



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|* |  | All share percentages assume that each respective beneficial owner, and only that owner, has exercised its warrants to purchase shares of preferred stock or common
stock, as the case may be, of USS Holdings, if any.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** |  | Less than 1%.
|-- |  | -------------

|(1) |  | The address of J.P. Morgan Chase & Co. (J.P. Morgan Chase) and its affiliates referred to in note (9) below is 270 Park Avenue, New York, New York,
New York 10017 and 1221 Avenue of the Americas, 39thFloor, New York, New York 10020, respectively. The address of
Massachusetts Mutual Life Insurance Company and its affiliates is 1295 State Street, Springfield, Massachusetts 01111. The address of Mr. Kilpatrick is c/o Pillsbury Winthrop LLP, One Battery Park Plaza, New York, New York 10004. The address of each
other person is c/o D. George Harris & Associates, Inc., 9 Sylvan Way, Suite 285, Parsippany, New Jersey 07059.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Notwithstanding the enumerated percentage shares of beneficial ownership of common and preferred stock, a stockholders agreement dated as of February 9, 1996, as
amended (the stockholders agreement), among all of the stockholders of USS Holdings (the Stockholders) governs the Stockholders exercise of their voting rights with respect to election of directors and certain other
material events. The parties to the stockholders agreement have agreed to vote their shares of USS Holdings to elect the Board of Directors as set forth therein. See The Stockholders Agreement.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Holders of Class A common stock are entitled to one vote with respect to all matters to be voted on by USS Holdings Stockholders for each share of Class A
common stock held, subject to the stockholders agreement.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Holders of Class B common stock, except as otherwise required by law, have no voting rights. The Class B common stock will automatically be converted into shares of
Class A common stock on a one-for-one basis at the time of a trigger event or an event of conversion. A trigger event is defined in the stockholders agreement as (i) a default under certain debt documents or a failure to achieve a
designated level of EBITDA (as defined in the stockholders agreement), (ii) after February 9, 2000, the passage of 180 days after JPMP (23A SBIC) (as defined in note (9)) has exercised its right to demand a sale of USS Holdings and the failure of
the principals of D. George Harris & Associates, LLC (DGHA) to sell USS Holdings or purchase the shares of the Institutional Stockholders (as defined below) or (iii) both D. George Harris and Anthony J. Petrocelli no longer serving
on the USS Holdings Board of Directors due to death, disability or resignation. An event of conversion is defined in the stockholders agreement as (i) the consummation of an initial public offering resulting in net proceeds to USS
Holdings and/or any selling stockholders of not less than $30 million or (ii) the conversion of more than 50% of the Series B preferred stock originally issued. Holders (other than Mass Mutual (as defined in note (11))) of at least 50% of the then
outstanding common stock purchase warrants and shares issued or issuable under the stockholders agreement, and Mass Mutual, if it holds at least 50% of the then outstanding common stock purchase warrants and shares issued or issuable under the
stockholders agreement upon the exercise of the warrants then outstanding and held by Mass Mutual, have the right to require USS Holdings to purchase their warrants to purchase Class B common stock and shares issued thereunder held by JPMP (23A
SBIC), Mass Mutual and certain DGHA principals at any time after October 1, 2004 and prior to a sale, public offering of common stock or liquidation of USS Holdings. Upon the exercise of those put rights, if USS Holdings cannot obtain the consents
from third parties necessary to purchase those shares after using reasonable efforts, USS Holdings will be released from its obligation to purchase the warrants. At any time after October 1, 2005, USS Holdings has the right to purchase all (but not
less than all) of the warrants to purchase shares of Class B common stock held by JPMP (23A SBIC), Mass Mutual and certain DGHA principals.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Holders of Class C common stock are entitled to one vote with respect to all matters to be voted on by USS Holdings stockholders for each share of Class C
common stock held, subject to the stockholders agreement. Those shares are subject to repurchase by USS Holdings in certain circumstances upon the occurrence of certain liquidity events, including the sale of all or substantially all of the assets
of USS Holdings and its subsidiaries, a merger of USS Holdings or any subsidiary and a sale of USS Holdings and upon the occurrence of certain termination events, including death, disability, retirement or termination of employment. The total number
of shares of Class C common stock issuable under the warrants will be reduced by the number of shares of Class C common stock which did not vest and/or which are repurchased in accordance with the terms of the restricted stock purchase agreements
pursuant to which the shares of Class C common stock are issued. Holders (other than Mass Mutual (as defined in note (11))) of at least 50% of the then outstanding common stock purchase warrants and shares issued or issuable under the stockholders
agreement, and Mass Mutual, if it holds at least 50% of the then outstanding common stock purchase warrants and shares issued or issuable under the stockholders agreement upon the exercise of the warrants then outstanding and held by Mass Mutual,
have the right to require USS Holdings to purchase their warrants to purchase shares of common stock and shares issued thereunder held by JPMP (23A SBIC) (as defined in note (9)), Mass Mutual and certain DGHA principals at any time after October 1,
2004 and prior to a sale, public offering of common stock or liquidation of USS Holdings. Upon the exercise of those put rights, if USS Holdings cannot obtain the consents from third parties necessary to purchase those shares after using reasonable
efforts, USS Holdings will be released from its obligation to purchase the warrants. At any time after October 1, 2005, USS Holdings has the right to purchase all (but not less than all) of the warrants to purchase shares of Class C common stock
held by JPMP (23A SBIC), Mass Mutual and certain DGHA principals.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(6) |  | Holders of Series A preferred stock, except as otherwise required by law, have no voting rights, except in the event that there is a proposal to amend the terms of
the Series A preferred stock so as to affect it adversely or a proposal to authorize or issue (i) any equity or convertible debt securities or (ii) certain rights to purchase equity or convertible debt securities, in either case ranking equal or
superior to the Series A preferred stock (with certain exceptions), which shall then require the consent of the holders of two-thirds of the outstanding shares of Series A preferred stock. Holders of more than 50% of the Series B preferred stock
originally issued have the right to require USS Holdings to purchase all (but not less than all) of the shares of Series A preferred stock and warrants to purchase Series A preferred stock held by JPMP (SBIC) (as defined in note (9)) and Mass Mutual
(as defined in note (11)) at any time after October 1, 2004 and prior to a sale, public offering of common stock or liquidation of USS Holdings. Upon the exercise of those put rights, if USS Holdings cannot obtain the consents from third parties
necessary to purchase those shares and warrants after using reasonable efforts, USS Holdings will be released from its obligation to purchase the shares and warrants. At any time after October 1, 2005, USS Holdings has the right to purchase all (but
not less than all) of the Series A preferred stock held by JPMP (SBIC) and Mass Mutual.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Holders of Series B preferred stock shall not, prior to the occurrence of a trigger event (as defined in note (4) above), have any voting rights, except
as otherwise required by law and except in the event of a proposal to authorize or issue additional shares of Series B preferred stock or change the preferences, rights or powers of the Series B preferred stock so as to affect it adversely, which
shall then require the consent of the holders of a majority of the outstanding shares of Series B preferred stock. After a trigger event, the holders of Series B preferred stock shall vote, together with the holders of Class A common stock, as one
class, with each share of Series B preferred stock entitling its holder to that number of votes equal to the number of shares of common stock issuable upon conversion thereof (currently one share of Class B common stock for each share of Series B
preferred stock (subject to adjustment)) on the date of any such vote, subject to the Stockholders Agreement. Holders of more than 50% of the Series B preferred stock originally issued have the right to require USS Holdings to purchase all (but not
less than all) of the shares of Series B preferred stock and warrants to purchase Series B preferred stock held by JPMP (SBIC) (as defined in note (9)) and Mass Mutual (as defined in note (11)) at any time after October 1, 2004 and prior to a sale,
public offering of common stock or liquidation of USS Holdings. Upon the exercise of those put rights, if USS Holdings cannot obtain the consents from third parties necessary to purchase those shares and warrants after using reasonable efforts, USS
Holdings will be released from its obligation to purchase the shares and warrants. At any time after October 1, 2005, USS Holdings has the right to purchase all (but not less than all) of the Series B preferred stock held by JPMP (SBIC) and Mass
Mutual. The Series B preferred stock will automatically be converted into an equal number of shares of Class B common stock (before a trigger event) or Class A common stock (after a trigger event) upon an event of conversion (as defined in note (4)
above). Moreover, any holder of the Series B preferred stock can at any time and from time to time convert all or a portion of his Series B preferred stock into an equal number of shares of Class B common stock (before a trigger event) or Class A
common stock (after a trigger event).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Holders of Series D preferred stock, except as otherwise required by law, have no voting rights, except in the event there is a proposal to amend the terms of the
Series D preferred stock so as to affect it adversely or a proposal to authorize or issue (i) any equity or convertible debt securities or (ii) certain rights to purchase equity or convertible debt securities, in either case ranking equal or
superior to the Series D preferred stock, which shall then require the consent of the holders of a majority of the outstanding shares of Series D preferred stock.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | Includes (i) 664,146 shares of Series A preferred stock, 1,328,292 shares of Series B preferred stock, 9,232 shares of Series D preferred stock, 280,076 shares of
Class B common stock, 59,993 shares of Class B common stock issuable upon exercise of common stock warrants and 8,800 shares of Class C common stock issuable upon exercise of common stock purchase warrants, in each case held by J.P. Morgan Partners
(23A SBIC), LLC (JPMP (23A SBIC)), the managing member of which is J.P. Morgan Partners (23A SBIC Manager), Inc. (JPMP (23A SBIC Manager)), the sole stockholder of which is JPMorgan Chase Bank, formerly known as The Chase
Manhattan Bank (JPMC), the sole stockholder of which is J.P. Morgan Chase and (ii) 13,889 shares of Series A preferred stock issuable upon exercise of preferred stock warrants and 27,778 shares of Series B preferred stock issuable upon
exercise of preferred stock warrants, in each case held by J.P. Morgan Partners (SBIC), LLC (JPMP (SBIC)), the sole member of which is J.P. Morgan Partners (BHCA), L.P. (JPMP (BHCA)), the general partner of which is JPMP
Master Fund Manager, L.P. (JPMP MFM), the general partner of which is JPMP Capital Corp. (JPMP CC), the sole stockholder of which is J.P. Morgan Chase. Each of JPMP (23A SBIC), JPMP (23A SBIC Manager), JPMC, JPMP (SBIC), JPMP
(BHCA), JPMP MFM, JPMP CC and J.P. Morgan Chase may be deemed the beneficial owner of the foregoing shares. Messrs. Chavkin and Walsh are executive officers of JPMP (23A SBIC Manager), JPMP (SBIC), JPMP CC and J.P. Morgan Partners, LLC (JPMP
LLC), which serves as investment advisor to JPMP (23A SBIC), JPMP (SBIC) and JPMP (BHCA). JPMP (23A SBIC) and JPMP (SBIC) are licensed small business investment companies (an SBIC) and as such are subject to certain restrictions
imposed upon SBICs by the regulations established and enforced by the United States Small Business Administration. Among these restrictions are certain limitations on the extent to which an SBIC may exercise control over companies in which it
invests.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) |  | Messrs. Chavkin and Walsh may be deemed the beneficial owners of the shares of common stock and preferred stock and warrants to purchase preferred and common stock
referred to in note (9) above given their positions as executive officers of JPMP (23A SBIC Manager), JPMP (SBIC), JPMP CC and JPMP LLC.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(11) |  | Includes (i) 180,000 shares of Series A preferred stock and warrants to purchase 27,778 shares of Series A preferred stock, (ii) 360,000 shares of Series B preferred
stock and warrants to purchase 55,556 shares of Series B preferred stock (iii) 2,829 shares of Series D preferred stock, (iv) 85,827 shares of Class B common stock, (v) warrants to purchase 18,384 shares of Class B common stock issuable upon
exercise of common stock purchase warrants and (vi) 2,697 shares of Class C common stock issuable upon exercise of common stock purchase warrants owned by Massachusetts Mutual Life Insurance Company, Mass Mutual Participation Investors, Mass Mutual
Corporate Investors and Gerlach & Co. (collectively, Mass Mutual).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) |  | Does not include 19,691 shares of Class A common stock, 938 shares of Series A preferred stock, 31,575 shares of Series B preferred stock, 219 shares of Series D
preferred stock, 1,420 shares of Class B common stock issuable upon exercise of common stock purchase warrants and 208 shares of Class C common stock issuable upon exercise of common stock purchase warrants held in two trusts over which Mr. Harris,
as co-trustee, shares voting control and investment control.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) |  | Does not include 22,075 shares of Class A common stock, 18,537 shares of Series B preferred stock, 78 shares of Series D preferred stock, 84 shares of Class B common
stock issuable upon exercise of common stock purchase warrants and 12 shares of Class C common stock issuable upon exercise of common stock purchase warrants held in twelve trusts over which Messrs. Petrocelli and Kilpatrick, as co-trustees, share
voting control and investment control.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(14) |  | Does not include the shares of common stock and preferred stock and warrants to purchase preferred and common stock referred to in note (9) above.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|(15) |  | Does not include 750 shares of Class A Common held in two trusts over which Messrs. Nick and Petrocelli as co-trustees share voting control and investment control.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The |  | Stockholders Agreement
|--- |  | ----------------------



The holders of all of the capital stock of USS Holdings are party to a stockholders agreement. The stockholders agreement governs the
holders exercise of their voting rights with respect to the election of directors and certain other material events. The parties to the agreement have agreed to vote their shares of USS Holdings to elect (i) for as long as Mr. Harris owns 50%
or more of the securities of USS Holdings (subject to certain exceptions set forth in the agreement) held by him on February 9, 1996 (the date of the U.S. Silica acquisition), two directors designated by Mr. Harris, including himself, (ii) for as
long as Mr. Petrocelli owns 50% or more of the securities of USS Holdings (subject to certain exceptions set forth in the agreement) held by him on February 9, 1996, one director designated by Mr. Petrocelli, and (iii) three directors designated by
a majority of the institutional stockholders party to the stockholders agreement (the Institutional Stockholders). JPMP (23A SBIC) and JPMP (SBIC) currently hold 76.5% of the stock owned by the Institutional Stockholders. For so long as
each shall be a director, Mr. Harris will always be elected as Chairman of the Board of Directors, and Mr. Petrocelli will always be elected as Vice Chairman of the Board of Directors. Upon a trigger event, a majority of the Institutional
Stockholders have the right to designate two additional directors, thus enabling them to choose the majority of directors serving on the Board of Directors.



The provisions of the stockholders agreement also govern:



| |  |  | restrictions on certain actions by USS Holdings and its subsidiaries without the consent of (i) prior to the occurrence of a trigger event, a majority of the
Institutional Stockholders and the DGHA Stockholders (as defined in the stockholders agreement), and (ii) after the occurrence of a trigger event, a majority of the Institutional Stockholders only; these restricted actions include, among other
things, the consummation of a public offering, the issuance of certain equity securities, the merger or consolidation with or into another entity, the acquisition of another entity, certain sales of assets, the liquidation or reorganization of USS
Holdings and the incurrence of certain debt;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | stockholder rights of first refusal to purchase certain capital stock or equity securities to be issued by USS Holdings;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | USS Holdings and stockholder rights of first offer to purchase certain shares of USS Holdings to be sold by stockholders;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | USS Holdings and stockholder rights to purchase, and stockholder rights to sell, certain shares of USS Holdings held by stockholders in certain instances
(including a persons termination of employment);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | rights of certain stockholders to cause all of the other stockholders to sell stock in connection with the sale of USS Holdings; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | rights of certain stockholders to participate in certain sales of the shares of USS Holdings by other stockholders.
| | - |  | -------------------------------------------------------------------------------------------------------------------



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|Item 13. |  | Certain Relationships and Related Transactions
|-------- |  | ----------------------------------------------



Loans to Management



In 2000, our indirect parent, USS Holdings, made loans to certain of its management stockholders to finance their purchase of shares of USS Holdings Class A common stock and Series D preferred stock. The loans are evidenced by
promissory notes that accrue interest at 9% per annum payable quarterly, and are collateralized by the stock. During 2002, the largest aggregate amount of indebtedness under these loans for Richard J. Shearer, the President of U.S. Silica, was
$83,000. As of March 1, 2003, Mr. Shearers outstanding loan was $77,000.



Relationship with J.P. Morgan Chase & Co.



JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank (JPMC), an affiliate of J.P. Morgan Securities Inc., formerly known as Chase Securities Inc. (JPMSI), is a lender under our senior
secured credit agreement. From time to time, JPMSI acts as a principal or agent in connection with offers and sales of our senior subordinated notes in market-making transactions. Both JPMSI and JPMC are affiliates of JPMP LLC, which serves as
investment advisor to JPMP (23A SBIC) and JPMP (SBIC). Certain affiliates of J.P. Morgan Chase own a majority of the outstanding preferred stock of USS Holdings and thus have the right under the stockholders agreement to appoint three directors of
USS Holdings. Arnold L. Chavkin, one of our directors, is also an executive partner at JPMP LLC. Timothy J. Walsh, one of our directors, is also a partner at JPMP LLC. Messrs. Chavkin and Walsh are also executive officers of the managing member of
JPMP (23A SBIC) and executive officers of JPMP (SBIC).



Management Services Agreement



Pursuant to an agreement among USS Holdings, BMAC Holdings, D. George Harris & Associates, LLC (DGHA) and us, DGHA (the principals of which are stockholders of USS Holdings) provides management advisory services to us
from time to time. In consideration of these management services, we have agreed to pay an annual management fee of $500,000 to DGHA.



The agreement also provides that, at DGHAs request, we are obligated to provide DGHA with one or more interest-free loans not
exceeding an aggregate of $0.5 million in any calendar year and not to exceed $3.0 million in total. As of December 31, 2002, a loan of $1.4 million was currently outstanding. This loan is guaranteed by D. George Harris, Anthony J. Petrocelli,
Richard J. Donahue, Donald G. Kilpatrick and Richard J. Nick. Finally, pursuant to the agreement, the other companies party to the agreement will reimburse DGHA for all reasonable out-of-pocket travel and entertainment expenses incurred in rendering
their management services to us. The agreement terminated on December 31, 2002, but, pursuant to its terms, was automatically extended and will continue in full force and effect unless terminated (i) by USS Holdings or DGHA upon nine months
prior written notice, (ii) upon certain events of sale, merger, change of stock ownership or appointment of additional directors or (iii) at the option of USS Holdings if neither Messrs. Harris or Petrocelli is actively involved in the management of
DGHA.



We paid approximately $500,000 in
management fees to DGHA for the year ended December 31, 2002 under this agreement.



Tax Sharing Agreement



Pursuant to a tax sharing agreement, USS Holdings has agreed to file consolidated federal income tax returns (and, in certain circumstances, state and local income tax returns) with us and our domestic subsidiaries. Under this
agreement, we have agreed to pay USS Holdings amounts designed to approximate the amount of income tax that we and our domestic subsidiaries would have paid had we filed consolidated federal income tax returns (and, if applicable, state and local
income tax returns) separate from USS Holdings.



67



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|Item 14. |  | Controls and Procedures
|-------- |  | -----------------------



Based on their evaluation, as of a date within 90 days of the filing of this Annual Report on Form 10-K, our principal executive officer and principal financial officer have concluded that our disclosure controls and
procedures (as defined in Rule 15d-14(c) under the Securities Exchange Act of 1934) are effective. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the
date of our evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



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PART IV



|Item 15. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K
|-------- |  | ----------------------------------------------------------------



(a) (1) Financial Statements Filed as Part of This Annual Report on Form 10-K



Index to Consolidated Financial Statements



|Report of Independent Accountants                                                                             |  | 28
|------------------------------------------------------------------------------------------------------------- |  | --
|                                                                                                             
|Consolidated Balance Sheets at December 31, 2001 and 2000                                                     |  | 29
|                                                                                                             
|Consolidated Statement of Operations for the years ended December 31, 2001, 2000 and
1999.                    |  | 30
|                                                                                                             
|Consolidated Statement of Stockholders (Deficit) Equity for the years ended
December 31, 2001, 2000 and 1999 |  | 31
|                                                                                                             
|Consolidated Statement of Cash Flows for the years ended December 31, 2001, 2000 and
1999.                    |  | 32
|                                                                                                             
|Notes to Consolidated Financial Statements.                                                                   |  | 33



(2) Financial Statement
Schedules



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Schedule
IIValuation and Qualifying Accounts and Reserves



Better Minerals & Aggregates Company



For the Years Ended December 31, 2002, 2001, and 2000

(in thousands of dollars)



|                                |  |                                |       | Additions                     |   |                             |           |          |   |                          |         
|------------------------------- |  | ------------------------------ | ----- | ----------------------------- | - | --------------------------- | --------- | -------- | - | ------------------------ | --------
|Description                     |  | Balance at Beginning of Period |       | Charged to Costs and Expenses |   | Resulting from Acquisitions |           | Accounts |   | Balance at End of Period
|                                |  |                                |       | Written Off                   |   |                             | Recovered |         
|                               
|Allowance for Doubtful Accounts |  |                                |       |                               |   |                             |           |          |   |                          |         
|2002                            |  | $                              | 1,824 |                               | $ | 1,135                       |           | $        |  |                          | $       
|2001                            |  | $                              | 1,327 |                               | $ | 780                         |           | $        |  |                          | $       
|2000                            |  | $                              | 1,278 |                               | $ | 638                         |           | $        |  |                          | $       
|                               
|                                |  | Balance at Beginning of Period |       | Charged to Costs and Expenses |   |                             |           |          |   |                          | Utilized
|                               
|Income Tax Valuation Allowance  |  | $                              |      |                               | $ | 7,500                       |           |          |   |                          |         



All
other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.



|(3) |  | Exhibits
|--- |  | --------



The list of exhibits on the accompanying Index to Exhibits is hereby incorporated by reference. Each management contract or compensatory
plan or arrangement required to be filed as an exhibit is indicated by an asterisk.



|(b) |  | Reports on Form 8-K.
|--- |  | --------------------



We did not file any reports on Form 8-K during the last quarter of the period covered by this Annual Report on Form 10-K.



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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, on the 17th day of April, 2003.



BETTER MINERALS & AGGREGATES COMPANYBy:

/S/    GARY E. BOCKRATHName:

Gary E. BockrathTitle:

Vice President and Chief Financial Officer




POWER OF ATTORNEY



Know
all persons by these presents, that each person whose signature appears below appoints Gary E. Bockrath and John A. Ulizio, jointly and severally, as his or her true and lawful attorney-in-fact, each with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, jointly and severally, full power and authority to do and perform each in connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said attorneys-in-fact, jointly and severally, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.



Dated: April 17, 2003



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



|SIGNATURE                               |  | TITLE                                                                                                     |  | DATE          
|--------------------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | --------------
|                                       
|/S/    ROY D. REEVES                    |  | President and Chief Executive Officer (Principal Executive Officer); Director                             |  | April 17, 2003
|Roy D. Reeves                           |  |                                                                                                           |  |               
|                                       
|/S/    GARY E.
BOCKRATHGary E. Bockrath |  | Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting
Officer) |  | April 17, 2003
|                                       
|/S/    D. GEORGE
HARRIS                 |  | Director                                                                                                  |  | April 17, 2003
|D. George Harris                        |  |                                                                                                           |  |               
|                                       
|/S/    ANTHONY J.
PETROCELLI            |  | Director                                                                                                  |  | April 17, 2003
|Anthony J. Petrocelli                   |  |                                                                                                           |  |               
|                                       
|/S/    RICHARD J.
DONAHUE               |  | Director                                                                                                  |  | April 17, 2003
|Richard J. Donahue                      |  |                                                                                                           |  |               
|                                       
|/S/    ARNOLD L.
CHAVKIN                |  | Director                                                                                                  |  | April 17, 2003
|Arnold L. Chavkin                       |  |                                                                                                           |  |               
|                                       
|/S/    RUTH
DREESSEN                    |  | Director                                                                                                  |  | April 17, 2003
|Ruth Dreessen                           |  |                                                                                                           |  |               
|                                       
|/S/    TIMOTHY J.
WALSH                 |  | Director                                                                                                  |  | April 17, 2003
|Timothy J. Walsh                        |  |                                                                                                           |  |               
|                                       
|/S/    RICHARD E.
GOODELL               |  | Director                                                                                                  |  | April 17, 2003
|Richard E. Goodell                      |  |                                                                                                           |  |               



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CERTIFICATION



I, Roy
D. Reeves, certify that:



1.    I have reviewed this annual report on Form 10-K of Better Minerals & Aggregates Company;



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: April 17, 2003



By:

/S/    ROY D.
REEVESName:

Roy D. ReevesTitle:

President and Chief Executive Officer




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CERTIFICATION



I, Gary E. Bockrath, certify that:



1.    I have reviewed this annual report on Form 10-K of Better Minerals & Aggregates
Company;



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: April 17, 2003



By:

/S/    GARY E. BOCKRATHName:

Gary E. BockrathTitle:

Vice President and Chief Financial Officer




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INDEX TO EXHIBITS



|EXHIBIT NUMBER |  | EXHIBIT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              
|2.1**          |  | Purchase Agreement dated as of April 10, 2003 among Better Minerals & Aggregates Company, as Seller, Hanson BMC
Acquisition Co., as Purchaser, U.S. Silica Company, solely for the purposes of Article 14 of the Purchase Agreement, and Hanson Building Materials America, Inc., solely for the purposes of Article 15 of the Purchase Agreement (in accordance with
Securities and Exchange Commission rules, this agreement omits the schedules thereto, which Better Minerals & Aggregates Company agrees to furnish supplementally to the Commission upon request).
|              
|3.1            |  | Amended and Restated Certificate of Incorporation of Better Minerals & Aggregates Company dated as of February 9,
1996 (incorporated by reference to Exhibit 3.1 of the Better Minerals & Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15, 2000).                                                                                                                                                                                                                                                                  
|              
|3.1.1          |  | Certificate of Amendment of Amended and Restated Certificate of Incorporation of Better Minerals & Aggregates
Company dated September 30, 1999 (incorporated by reference to Exhibit 3.1.1 of the Better Minerals & Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15, 2000).                                                                                                                                                                                                                                        
|              
|3.2            |  | By-laws of Better Minerals & Aggregates Company (incorporated by reference to Exhibit 3.2 of the Better Minerals
& Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15, 2000).                                                                                                                                                                                                                                                                                                                                         
|              
|4.1            |  | Indenture, dated as of October 1, 1999, among Better Minerals & Aggregates Company, the subsidiary guarantors
named therein and The Bank of New York, as trustee (including the forms of Better Minerals & Aggregates Companys 13% Senior Subordinated Notes due 2009 attached thereto as exhibits) (incorporated by reference to Exhibit 4.1 of the Better
Minerals & Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15, 2000).                                                                                    
|              
|4.2            |  | Supplemental Indenture, dated as of December 1, 2000, among Better Minerals & Aggregates Company, BMAC Services
Co., Inc. and the other subsidiary guarantors named therein and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.2 of the Better Minerals & Aggregates Company Annual Report on Form 10-K/A filed on March 29,
2001).                                                                                                                                                                                                           
|              
|10.1           |  | Stockholders Agreement, dated as of February 9, 1996, among USS Holdings, Inc. and the stockholders of USS Holdings,
Inc. (incorporated by reference to Exhibit 10.1 of the Better Minerals & Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15, 2000).                                                                                                                                                                                                                                                              
|              
|10.1.1         |  | Amendment No. 1 to Stockholders Agreement, dated as of October 15, 1996, among USS Holdings, Inc. and the stockholders
of USS Holdings, Inc. (incorporated by reference to Exhibit 10.1.1 of the Better Minerals & Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15, 2000).                                                                                                                                                                                                                                         
|              
|10.1.2         |  | Amendment No. 2 to Stockholders Agreement, dated as of October 6, 1998, among USS Holdings, Inc. and the stockholders
of USS Holdings, Inc. (incorporated by reference to Exhibit 10.1.2 of the Better Minerals & Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15, 2000).                                                                                                                                                                                                                                          
|              
|10.2           |  | Second Amended and Restated Management Services Agreement, dated as of March 28, 2001, among Better Minerals &
Aggregates Company, USS Holdings, Inc., U.S. Silica Company, and D. George Harris & Associates, LLC (incorporated by reference to Exhibit 10.1 of the Better Minerals & Aggregates Company Quarterly Report on Form 10-Q filed on August 9,
2001).                                                                                                                                                                                                       
|              
|10.2.1         |  | Assignment and Assumption Agreement, dated as of September 30, 1999, among D. George Harris & Associates, Inc., D.
George Harris & Associates, LLC, USS Holdings, Inc., USS Intermediate Holdco, Inc., U.S. Silica Company, BMAC Holdings, Inc. and Better Minerals & Aggregates Company (incorporated by reference to Exhibit 10.2.1 of the Better Minerals &
Aggregates Company                                                                                                                                                                                       



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|         |  | Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15, 2000).                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        
|10.3     |  | Amended and Restated Tax Sharing Agreement, dated as of October 1, 1999, among Better Minerals & Aggregates
Company, its domestic subsidiaries, and USS Holdings, Inc. (incorporated by reference to Exhibit 10.3 of the Better Minerals & Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15,
2000).                                                                                                                                                                        
|        
|10.4     |  | Credit Agreement, dated as of September 30, 1999, among Better Minerals & Aggregates Company, BMAC Holdings, Inc.,
George F. Pettinos (Canada) Limited, Banque Nationale de Paris, and the financial institutions and other institutional lenders named therein (incorporated by reference to Exhibit 10.4 of the Better Minerals & Aggregates Company Registration
Statement on Form S-4, Registration No. 333-32518, filed on March 15, 2000).                                                                               
|        
|10.4.1   |  | Amendment and Waiver No. 1 to the Credit Agreement and Security Agreement, dated as of December 31, 1999, among BMAC
Holdings, Inc., Better Minerals & Aggregates Company, George F. Pettinos (Canada) Limited, the banks, financial institutions and other institutional lenders parties to the Credit Agreement dated as of September 30, 1999, and Banque Nationale de
Paris (incorporated by reference to Exhibit 10.1 of the Better Minerals & Aggregates Company Quarterly Report on Form 10-Q filed on August 11, 2000).
|        
|10.4.2   |  | Amendment No. 2 to the Credit Agreement, dated as of March 15, 2000, among BMAC Holdings, Inc., Better Minerals &
Aggregates Company, the banks, financial institutions and other institutional lenders parties to the Credit Agreement dated as of September 30, 1999, and Banque Nationale de Paris (incorporated by reference to Exhibit 10.2 of the Better Minerals
& Aggregates Company Quarterly Report on Form 10-Q filed on August 11, 2000).                                                                          
|        
|10.4.3   |  | Amendment No. 3 to the Credit Agreement, dated as of December 31, 2000, among BMAC Holdings, Inc., Better Minerals
& Aggregates Company, the banks, financial institutions and other institutional lenders parties to the Credit Agreement dated as of September 30, 1999, and Banque Nationale de Paris (incorporated by reference to Exhibit 10.1 of the Better
Minerals & Aggregates Company Current Report on Form 8-K filed on March 5, 2001).                                                                            
|        
|10.4.4   |  | Amendment No. 4 to the Credit Agreement, dated as of January 31, 2002, among BMAC Holdings, Inc., Better Minerals
& Aggregates Company, the banks, financial institutions and other institutional lenders parties to the Credit Agreement dated as of September 30, 1999, and Banque Nationale de Paris (incorporated by reference to Exhibit 10.4.4 of the Better
Minerals & Aggregates Company Annual Report on Form 10-K filed on March 29, 2002).                                                                          
|        
|10.4.5   |  | Amendment No. 5 to the Credit Agreement, dated as of November 8, 2002, among BMAC Holdings, Inc., Better Minerals
& Aggregates Company, the banks, financial institutions and other institutional lenders parties to the Credit Agreement dated as of September 30, 1999, and Banque Nationale de Paris (incorporated by reference to the exhibit listed under Item 6
of the Better Minerals & Aggregates Company Quarterly Report on Form 10-Q filed on November 13, 2002).                                                   
|        
|10.4.6** |  | Amendment No. 6 and Waiver to the Credit Agreement, dated as of March 12, 2003, among BMAC Holdings, Inc., Better
Minerals & Aggregates Company, the banks, financial institutions and other institutional lenders parties to the Credit Agreement dated as of September 30, 1999, and BNP Paribas.                                                                                                                                                                                                                            
|        
|10.4.7** |  | Amendment No. 7 and Waiver to the Credit Agreement, dated as of April 11, 2003, among BMAC Holdings, Inc., Better
Minerals & Aggregates Company, the banks, financial institutions and other institutional lenders parties to the Credit Agreement dated as of September 30, 1999, and BNP Paribas.                                                                                                                                                                                                                            
|        
|10.5     |  | Security Agreement, dated September 30, 1999, among Better Minerals & Aggregates Company, the subsidiary
guarantors named therein and Banque Nationale de Paris (incorporated by reference to Exhibit 10.5 of the Better Minerals & Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15,
2000).                                                                                                                                                                               
|        
|10.6     |  | Intellectual Property Security Agreement, dated September 30, 1999, among Better Minerals & Aggregates Company,
the subsidiary guarantors named therein and Banque Nationale de Paris (incorporated by reference to Exhibit 10.6 of the Better Minerals & Aggregates Company Registration Statement on Form S-4, Registration No. 333-32518, filed on March 15,
2000).                                                                                                                                                         



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|                                                               
|---------------------------------------------------------------
|10.7                                                           
|                                                               
|10.8                                                           
|                                                               
|10.9                                                           
|                                                               
|10.10*                                                         
|                                                               
|10.11*                                                         
|                                                               
|10.12*                                                         
|                                                               
|10.13*                                                         
|                                                               
|10.14*                                                         
|                                                               
|10.15*                                                         
|                                                               
|10.16*                                                         
|                                                               
|12.1**                                                         
|                                                               
|21.1**                                                         
|                                                               
|99.1**                                                         
|                                                               
|99.2**                                                         
|                                                               
|*       Management contract or compensatory plan or arrangement
|**     Filed herewith                                          



76