<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 1999
REGISTRATION NO. 333-79209
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
U.S. AGGREGATES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1400 57-0990958
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
400 SOUTH EL CAMINO REAL, SUITE 500, SAN MATEO, CALIFORNIA 94402
TELEPHONE: (650) 685-4880
(Address, including zip code, and telephone number, including area code, of
Registrant's principal offices)
MICHAEL J. STONE
EXECUTIVE VICE PRESIDENT--DEVELOPMENT
CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY
U.S. AGGREGATES, INC.
400 SOUTH EL CAMINO REAL, SUITE 500
SAN MATEO, CALIFORNIA 94402
TELEPHONE: (650) 685-4880
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
WILLARD G. FRAUMANN, P.C. BRUCE A. TOTH
Kirkland & Ellis Winston & Strawn
200 East Randolph Drive 35 West Wacker Drive
Chicago, Illinois 60601 Chicago, Illinois 60601
(312) 861-2000 (312) 558-5600
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
--------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par 7,986,111 $19.00 $151,736,109 $42,182.64(1)
value $.01 per
share...............
</TABLE>
(1) The Company has previously paid a filing fee of $41,700.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be used
in connection with an underwritten public offering in the United States and
Canada and one to be used in connection with a concurrent underwritten public
offering outside the United States and Canada. The U.S. prospectus and the
international prospectus are identical except for the front and back cover
pages. The form of the U.S. prospectus is included herein and is followed by the
alternate pages to be used in the international prospectus. The alternate pages
for the international prospectus included herein are each labeled "International
Prospectus Alternate Page." Final forms of each prospectus will be filed with
the SEC under Rule 424(b) under the Securities Act.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION,
DATED , 1999
6,944,444 SHARES
[LOGO]
U.S. AGGREGATES, INC.
COMMON STOCK
---------
This is the initial public offering of our common stock. The U.S.
underwriters are offering 5,555,555 shares in the United States and Canada and
the international managers are offering 1,388,889 shares outside the United
States and Canada. We anticipate that the initial public offering price will be
between $17.00 and $19.00 per share.
Our common stock has been approved for trading on the New York Stock
Exchange under the symbol "AGA," subject to official notice of issuance.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 10.
-------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- -----------
<S> <C> <C>
Public offering price.................................................................... $ $
Underwriting discounts................................................................... $ $
Proceeds, before expenses, to U.S. Aggregates, Inc....................................... $ $
</TABLE>
Certain of our stockholders have granted the U.S. underwriters and the
international managers the right to purchase up to 1,041,667 additional shares
to cover any over-allotments.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------
DEUTSCHE BANC ALEX. BROWN
SCHRODER & CO. INC.
THE ROBINSON-HUMPHREY COMPANY
, 1999
<PAGE>
[Photographs of U.S. Aggregates' quarries located in Alabama and Utah, with the
following captions: "New l million ton per year plant serving the fast growing
market near the new Mercedes Benz plant in Tuscaloosa, Alabama" and "New 2
million ton per year plant serving the fast growing Salt Lake City/Wasatch
Front, Utah market."]
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.............................. 4
Risk Factors.................................... 10
Forward-Looking Statements...................... 17
Use of Proceeds................................. 18
Dividend Policy................................. 18
Capitalization.................................. 20
Dilution........................................ 21
Selected Unaudited Pro Forma Financial Data..... 22
Selected Historical Financial Data.............. 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 27
Liquidity and Capital Resources............... 30
Industry Overview............................... 34
Business........................................ 39
Governmental and Environmental Regulation..... 44
Management...................................... 46
<CAPTION>
PAGE
-----
<S> <C>
Compensation of Directors..................... 47
Incentive Plan................................ 49
Principal and Selling Stockholders.............. 50
Certain Relationships and Related
Transactions.................................. 52
Description of Certain Indebtedness............. 55
Description of Capital Stock.................... 59
The Recapitalization.......................... 59
Shares Eligible for Future Sale................. 62
Material United States Federal Tax Consequences
to Non-United States Holders.................. 64
Underwriting.................................... 67
Experts......................................... 69
Legal Matters................................... 69
Where You Can Find More Information............. 69
Index to Financial Statements................... F-1
</TABLE>
--------------
"Tons," as used in this prospectus, means "short" or "U.S." tons, equalling
a weight of 2,000 pounds.
--------------
You may rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is not an offer to sell, nor a
solicitation to buy shares of our common stock in any circumstances under which
the offer or solicitation is unlawful. Neither the delivery of this prospectus
nor sale of our common stock means that the information contained in this
prospectus is correct after the date of this prospectus.
--------------
Until , 1999 (25 days after the date of this prospectus), all
dealers that buy, sell or trade our common stock, whether or not participating
in the offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER
BEFORE DECIDING TO INVEST IN OUR COMMON STOCK. WE URGE YOU TO READ THIS ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS" SECTION AND THE FINANCIAL
STATEMENTS AND THE NOTES TO THOSE STATEMENTS. UNLESS OTHERWISE NOTED, THE
INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES CONSUMMATION OF THE
RECAPITALIZATION AND STOCK SPLIT DESCRIBED ON PAGE 7 AND NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION.
U.S. AGGREGATES
U.S. Aggregates, Inc. is a leading producer and marketer of aggregates and
associated aggregate-based materials and services. Aggregates consist of crushed
stone, sand and gravel. Our products are used primarily for the construction and
maintenance of highways and other infrastructure projects and for commercial and
residential construction. We serve local markets in nine states in two fast
growing regions of the United States, the Mountain states and the Southeast. As
a result of our geographic diversification, we believe that our results of
operations are less subject to any single market's economic conditions. Our
current estimated aggregate reserve position exceeds 1.3 billion tons, and in
most of our markets we have a 20 to 40 year supply of aggregates. We were
founded in 1994 with the goal of becoming a leading national producer of
aggregates. From our inception in January 1994 through 1998, our net sales have
increased to $228.7 million while operating profit has increased to $24.4
million.
Our growth has been driven by a number of factors, including:
- WE SERVE ATTRACTIVE, HIGH GROWTH MARKETS. According to the U.S. Geological
Survey, from 1993 to 1998, compound annual growth in consumption of
aggregates in the nine states we serve was 6.7%. During the same period,
the United States compound annual increase was 4.8%. In the nine states
that we serve, average annual federal highway spending through 2003 is
projected to be 61% higher than under the predecessor six year federal
program.
- WE ARE A MARKET LEADER IN MOST OF THE LOCAL MARKETS WE SERVE. We have
utilized our management and financial resources to strengthen our position
in our markets and to expand into contiguous markets.
- WE HAVE WELL LOCATED, LONG-TERM AGGREGATE RESERVES. Our long-term,
high-quality aggregate reserves located near our customers are key to our
success. Since 1996, we have started eight major greenfield aggregate
production sites serving large metropolitan markets to complement our
existing operations.
- WE HAVE INVESTED SIGNIFICANT CAPITAL IN OUR BUSINESS. We believe that our
plant and equipment are among the most modern and cost-competitive in our
industry and should enable us to take advantage of increasing demand in
our markets.
- WE HAVE A STRONG TRACK RECORD OF COMPLETING, INTEGRATING AND DEVELOPING
BUSINESS AND ASSET ACQUISITIONS. We have focused on the acquisition and
development of aggregate production sites and companies that are well
located to serve growing markets. Since our inception, we have completed
28 business and asset acquisitions in the aggregates industry and have
generally seen a substantial increase in revenues and profits relative to
their performance prior to our ownership.
Approximately 75% of our aggregates volume is sold directly to customers.
The balance is used to produce asphalt, which generally contains approximately
90% aggregates by volume, and ready-mix concrete, which generally contains
approximately 80% aggregates by volume. Our integration into these
aggregate-based products and related services generally occurs in markets where
our competitors also produce and market these products.
4
<PAGE>
INDUSTRY OVERVIEW
Aggregates are a basic construction material, approximately 50% of which are
used for highway and infrastructure construction and maintenance. Demand for
aggregates has historically been only moderately cyclical due to the stability
of federal and state spending on road maintenance and construction.
Additionally, the national average per ton market price for aggregates has not
experienced an annual decline between 1985 and 1998, experiencing an average
annual increase of 2.3%. The United States market for all aggregates was
approximately 2.8 billion tons in 1998 with a value of $13.5 billion. This
represents an increase of 6.2% in volume and 9.6% in dollar value above 1997
levels.
In 1998, the six year, $218 billion Transportation Equity Act for the 21st
Century, or TEA-21, was passed which designates a minimum of $158 billion
nationally for federal highway construction and maintenance projects. This
represents a 44% increase above average annual federal highway spending levels
under the predecessor six year federal program. In the nine states we serve,
average annual federal highway spending under the new program is projected to be
61% higher than under the predecessor program.
Due to the high cost of transportation relative to the value of the product,
competition within the aggregates industry favors producers with suitable
aggregate reserves closest to the market. Difficulty in obtaining the necessary
permits for new, economically viable aggregate production sites located near
customers has constrained, and will continue to constrain, the number of
competitors able to serve each market. Because of the local nature of the
aggregates industry and its historical development, the ownership within the
industry continues to be highly fragmented, with the top five producers combined
holding an estimated 25% market share in 1998.
GROWTH STRATEGY
We plan to increase sales and profits through five main strategies:
- SERVE GROWTH IN EXISTING MARKET AREAS. We will take advantage of our
existing aggregate reserve capacity and the maturation of our developing
aggregate production sites to serve additional demand in our markets.
- EXPAND CAPACITY. We will expand production capacity and invest capital so
that we can serve additional demand in our markets while remaining
cost-competitive.
- MAKE ACQUISITIONS AND DEVELOP NEW AGGREGATE RESERVES IN EXISTING MARKETS.
We will continue to make add-on acquisitions and develop new aggregate
reserves to increase our competitive position in our markets.
- SERVE MARKETS IN CONTIGUOUS AREAS. We will use our access to existing and
additional reserves so that we can move into contiguous markets when
opportunities arise.
- EXPAND INTO NEW MARKETS THROUGH ACQUISITIONS. We may make acquisitions in
new market areas or, where economically attractive, new regions.
MANAGEMENT
Our executive officers have an average of 26 years of experience in the
aggregates industry and have a strong track record of building profitable
aggregates businesses. Immediately after the offering, our management team will
own approximately 11.5% of our common stock.
--------------
Our corporate headquarters are located at 400 South El Camino Real, Suite
500, San Mateo, California 94402. Our telephone number is (650) 685-4880.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by U.S.
Aggregates:
U.S. offering........................ 5,555,555 shares
International offering............... 1,388,889 shares
Total.............................. 6,944,444 shares
----------------
----------------
Common stock to be outstanding 14,016,808
immediately after the offering....... shares
</TABLE>
<TABLE>
<S> <C>
Use of proceeds........................ Our net proceeds from the offering will be used to
repay outstanding indebtedness and to redeem our
preferred stock. See "Use of Proceeds" for a
further description of the application of the net
proceeds of the offering.
Dividend Policy........................ Beginning in the fourth quarter of 1999, with
respect to earnings generated during the third
quarter of 1999, we intend to pay quarterly cash
dividends at an initial rate of $0.03 per share of
our common stock. Any determination to pay
dividends will be at the discretion of our board of
directors. For a further discussion of our dividend
policy, see "Dividend Policy."
New York Stock Exchange symbol......... "AGA"
</TABLE>
The number of shares of our common stock to be outstanding immediately after
the offering does not include approximately 280,336 shares of our common stock
that may be issued pursuant to stock options to be granted concurrently with the
offering. For a discussion of these stock options, see "Management--Incentive
Plan."
6
<PAGE>
RECAPITALIZATION
U.S. Aggregates currently owns 82.99% of the common stock of Western
Aggregates Holding Corp. and 90.84% of the common stock of SRM Holdings Corp.
with the remainder held primarily by certain officers and employees of Western
Aggregates and SRM. Immediately prior to the consummation of the offering, each
outstanding share of common stock of Western Aggregates not held by U.S.
Aggregates will be converted into 0.6227 shares of our common stock and each
outstanding share of common stock of SRM not held by U.S. Aggregates will be
converted into 8.0707 shares of our common stock. Each share of our common stock
will then be subject to an approximate 30.0347 to 1 stock split. See "Certain
Relationships and Related Transactions" for a further discussion of these
events.
7
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table presents summary historical and unaudited pro forma
financial information for U.S. Aggregates. You should read this along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Selected Unaudited Pro Forma Financial Data," "Selected Historical
Financial Data" and the financial statements and the accompanying notes included
elsewhere in this prospectus.
The summary unaudited pro forma financial data are derived from the
application of unaudited pro forma adjustments related to the 1998 acquisitions
and dispositions and the offering detailed below and in the notes to "Selected
Unaudited Pro Forma Financial Data" on page 22.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------- -----------------------------------
1999
1998 PRO FORMA
PRO FORMA AS
1996 1997 1998 AS 1998 1999 ADJUSTED(2)
--------- --------- --------- ADJUSTED(1) --------- --------- -------------
-------------
(UNAUDITED)
(UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.......................... $131,710 $163,243 $228,739 $249,224 $83,042 $126,939 $126,939
Gross profit....................... 38,889 44,111 60,519 65,771 22,234 34,973 34,973
Selling, general and administrative
expenses......................... 16,571 18,275 25,001 27,052 10,920 14,898 14,898
Depreciation, depletion and
amortization(3).................. 6,301 7,830 11,098 12,145 4,549 5,694 5,749
Income from operations............. 16,017 18,006 24,420 26,574 6,765 14,381 14,326
Interest, net...................... (5,036) (8,344) (14,351) (9,948 ) (5,554) (8,841) (5,505 )
Other income and expense, net...... (150) (150) (1,104) (858 ) (718) (479) (329 )
Income from continuing operations
before provision for income
taxes, minority interest and
extraordinary item............... 10,831 9,512 8,965 15,768 493 5,061 8,492
Provision for income taxes......... (3,660) (3,384) (3,748) (6,367 ) (206) (1,898) (3,219 )
Income from continuing operations
before minority interest and
extraordinary item............... 7,171 6,128 5,217 9,401 287 3,163 5,273
Minority interest.................. (727) (623) (385) -- 100 (39) --
Income from continuing
operations....................... 6,444 5,505 4,832 9,401 387 3,124 5,273
Income from continuing operations
available to common shareholders
per common share(4)
--basic.......................... $0.57 $0.29 $0.12 $0.67 $(0.26) $0.15 $0.38
--diluted........................ $0.57 $0.28 $0.11 $0.67 $(0.26) $0.14 $0.38
Weighted average number of common
shares
--basic........................... 6,074,704 6,116,718 6,136,630 14,016,808 6,136,630 6,136,630 14,016,808
--diluted(5)(6).................. 6,095,472 6,306,747 6,382,094 14,016,808 6,136,630 6,423,011 14,016,808
SELECTED STATISTICAL AND OPERATING
DATA:
EBITDA(7).......................... $21,441 $25,063 $33,691 $37,861 $10,358 $19,557 $19,746
Capital expenditures (excluding
acquisitions).................... $20,945 $17,750 $27,330 $33,496 $19,124 $27,246 $27,246
Capital expenditures (including
acquisitions).................... $58,855 $21,788 $111,214 $117,380 $101,346 $27,246 $27,246
Tons of aggregates shipped (in
millions)........................ 7.2 9.5 15.8 21.6 6.1 9.0 9.0
Tons of asphalt sold (in
millions)........................ 0.9 1.3 1.6 1.6 0.4 0.8 0.8
Yards of ready-mix concrete sold
(in millions).................... 0.9 0.9 1.4 1.7 0.5 0.8 0.8
Estimated tons of aggregate
reserves (in millions)........... 635 863 1,357 1,357 1,357 1,360 1,360
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1999
--------------------------
PRO FORMA
AS
HISTORICAL ADJUSTED(8)
----------- -------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets........................................................................... $ 374,362 $ 381,212
Total debt............................................................................. 225,707 156,713
Minority interest...................................................................... 3,180 --
Mandatory redeemable preferred stock................................................... 45,768 --
Stockholders' equity................................................................... 12,440 136,802
</TABLE>
- ------------------------------
(1) Pro forma to give effect as if all 1998 acquisitions and dispositions had
occurred on January 1, 1998 and certain other pro forma adjustments to the
historical financial statements described in the notes to "Selected
Unaudited Pro Forma Financial Data" on page 22; as adjusted to give effect
to the sale of 6,944,444 shares of our common stock in the offering at the
assumed public offering price of $18.00 per share, and the application of
the net proceeds therefrom, as well as certain other resulting pro forma
adjustments as described in the notes to "Selected Unaudited Pro Forma
Financial Data" on page 22. See "Use of Proceeds" for a further description
of the application of net proceeds from the offering.
(2) Pro forma as adjusted to give effect to the sale of 6,944,444 shares of our
common stock in the offering at the assumed public offering price of $18.00
per share, and the application of the net proceeds, as well as certain other
resulting pro forma adjustments as described in the notes to "Selected
Unaudited Pro Forma Financial Data" on page 22. See "Use of Proceeds" for a
further description of the application of net proceeds from the offering.
(3) In 1996, we began using a 20 percent salvage value in providing depreciation
on certain of our assets. In 1997, we also extended the estimated lives of
certain depreciable assets, resulting in an approximate $1,550 reduction of
1997 depreciation expense compared to what it would have been had the
estimated lives not been changed.
(4) Income from continuing operations available to common shareholders for all
periods except pro forma as adjusted results reflects income from continuing
operations reduced by the accretion of preferred stock dividends.
(5) For pro forma as adjusted purposes we assume the exercise of all warrants
outstanding and the conversion of minority stock into our common stock prior
to the closing of the offering.
(6) We used the same weighted average shares for basic and diluted earnings per
share calculation for June 30, 1998 because the effect of common stock
equivalents in this period is antidilutive.
(7) EBITDA represents net income plus net interest expense, income taxes and
depreciation, depletion and amortization and is a supplemental financial
measurement we use to evaluate our business. However, EBITDA (which is not a
measure of financial performance under GAAP) should not be considered in
isolation or viewed as a substitute for cash flow from operations, net
income or other measures of performance as defined by GAAP or as a measure
of our profitability or liquidity. EBITDA does not give effect to the cash
we must use to service our debt or pay our income taxes and thus does not
reflect the funds actually available for capital expenditures, acquisitions,
or other discretionary uses. We understand that while EBITDA is frequently
used by security analysts, lenders and others in the evaluation of
companies, our presentation of EBITDA may not be comparable to other
similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.
(8) Gives effect to the sale of 6,944,444 shares of our common stock in the
offering at the assumed public offering price of $18.00 per share, and the
application of the net proceeds therefrom, as well as certain other
resulting pro forma adjustments as described in the notes to "Selected
Unaudited Pro Forma Financial Data" on page 22. See "Use of Proceeds" for a
further description of the application of net proceeds from the offering.
9
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER EACH OF THE FOLLOWING RISKS AND ALL OF THE
OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN
SHARES OF OUR COMMON STOCK. INVESTING IN OUR COMMON STOCK WILL PROVIDE YOU WITH
AN EQUITY OWNERSHIP INTEREST IN U.S AGGREGATES. AS A STOCKHOLDER OF U.S.
AGGREGATES, YOU MAY BE EXPOSED TO RISKS INHERENT IN OUR BUSINESS. THE
PERFORMANCE OF YOUR SHARES WILL REFLECT THE PERFORMANCE OF OUR BUSINESS RELATIVE
TO, AMONG OTHER THINGS, COMPETITION, INDUSTRY CONDITIONS AND GENERAL ECONOMIC
AND MARKET CONDITIONS. THE VALUE OF YOUR INVESTMENT MAY INCREASE OR DECREASE AND
COULD RESULT IN A LOSS.
IF ANY OF THE FOLLOWING RISKS AND UNCERTAINTIES DEVELOP INTO ACTUAL EVENTS,
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY
ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISK FACTORS RELATING TO OUR BUSINESS AND INDUSTRY
OUR BUSINESS IS SUBJECT TO THE FOLLOWING RISKS, WHICH INCLUDE RISKS RELATING
TO THE INDUSTRY IN WHICH WE OPERATE.
BAD WEATHER IN OUR PEAK SEASON MAY RESULT IN LOWER SALES
Poor weather during the months of April through November could result in
lower sales of aggregates, which could reduce our net sales and profits. This is
because sales of aggregates are highest during this period and poor weather
conditions may reduce or delay highway construction and maintenance and other
infrastructure projects. 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 competitors, we may
be more vulnerable than these competitors to poor weather conditions in the
regions in which we operate.
GENERAL AND LOCAL ECONOMIC DOWNTURNS MAY RESULT IN DECREASED SALES AND
PROFITS
General economic downturns or localized downturns in regions where we have
operations, including any downturns in the construction industry, could result
in a decrease in sales and profits. A majority of our sales are to customers who
are in industries and businesses that are cyclical in nature and subject to
changes in general economic conditions, such as the construction industry. Our
business is located in the Mountain states and the Southeast and is dependent
upon the economies of those regions. Because our business is more geographically
concentrated than some of our competitors, we may be more vulnerable to local
economic conditions.
A DECREASE IN GOVERNMENT FUNDING OF HIGHWAY CONSTRUCTION AND MAINTENANCE AND
OTHER INFRASTRUCTURE PROJECTS MAY REDUCE OUR SALES AND PROFITS
A decrease or delay in government funding of highway construction and
maintenance and other infrastructure projects could reduce our sales and
profits. This is because many of the customers we serve and intend to serve in
the future depend substantially on government funding of highway construction
and maintenance and other infrastructure projects. Unlike some of our
competitors, we operate in a limited number of states. As a result, we may be
more vulnerable than our more geographically diverse competitors to decreases in
state government highway spending in the states in which we operate.
10
<PAGE>
AN INCREASE IN THE PRICE OR DECREASE IN THE AVAILABILITY OF OIL MAY INCREASE
THE PRICE OF ASPHALT, RESULTING IN LESS ASPHALT USE BY OUR CUSTOMERS
A material rise in the price or a material decrease in the availability of
oil could adversely affect our operating results. Federal, state and municipal
government spending on roads is subject to appropriations by the particular
government entity. Asphalt prices are correlated to the price of oil. Therefore,
if there is a material rise in the price or a material decrease in the
availability of oil, there will be a resulting increase in the cost of producing
asphalt, which we would likely attempt to pass along to our customers. As a
result of any price increase, our customers may use less asphalt, which would
decrease our asphalt sales volumes. A material increase in the price or decrease
in the availability of oil could also lead to higher gasoline costs which would
also increase our operating costs. An increase in our operating costs could
adversely affect our operating results if we cannot pass these increased costs
through to our customers.
OUR SUCCESS DEPENDS ON KEY MEMBERS OF OUR MANAGEMENT
Several of our executive officers are of significant importance to our
business and operations, particularly:
- James A. Harris, the Chairman and Chief Executive Officer;
- Morris L. Bishop, Jr., the President and Chief Operating Officer; and
- Michael J. Stone, the Executive Vice President--Development, Chief
Financial Officer, Treasurer and Secretary.
The loss of the services of any of these executives could adversely affect
our business. It is possible that we would not be able to find replacements for
these people with comparable business experience. Some of our competitors have a
greater number of key executives. As a result of our limited number of top
executives, we may suffer greater harm than our larger competitors from the loss
of a crucial executive. We do not maintain key man life insurance with respect
to any executive officer. See "Management--Directors and Executive Officers" for
a further description of our management personnel.
OUR SUBSTANTIAL INDEBTEDNESS COULD LIMIT OUR GROWTH AND OUR ABILITY TO
RESPOND TO CHANGING CONDITIONS
After giving effect to the offering and the application of the net proceeds,
at June 30, 1999 we would have had approximately $156.7 million of indebtedness
outstanding. The fact that we have a significant amount of debt has important
consequences to you as a stockholder. The material risks include the following:
- Our ability to use operating cash flow in other areas of our business may
be limited because we must dedicate a substantial portion of these funds
to pay interest;
- We may be unable to obtain additional financing to fund our growth
strategy, working capital, capital expenditures, debt service requirements
or other purposes;
- Our ability to adjust to changing market conditions and our ability to
withstand competition may be hampered by the amount of debt we owe; and
- We may be more vulnerable in a market downturn or a recession than our
competitors with less debt.
We may incur additional indebtedness in the future to finance acquisitions,
capital expenditures, working capital and for other purposes.
11
<PAGE>
ACQUISITIONS, WHICH ARE A PART OF OUR GROWTH STRATEGY, INVOLVE RISKS THAT
COULD CAUSE OUR ACTUAL GROWTH OR OPERATING RESULTS TO DIFFER FROM OUR
EXPECTATIONS OR THE EXPECTATIONS OF SECURITY ANALYSTS
We intend to grow in part through the acquisition of additional aggregates
businesses. If we are not successful in integrating acquired businesses, we may
have difficulty operating our business. We may have greater difficulty
integrating acquired businesses and assets than our competitors because of our
size and our rapid growth. We have completed 28 business and asset acquisitions
since 1994. Our future success may be limited because of unforeseen expenses,
difficulties, complications, delays and other risks inherent in the integration
of acquired businesses, including the following:
- We may not be able to compete successfully for available acquisition
candidates, complete future acquisitions or accurately estimate the
financial effect on our company of any businesses we acquire;
- Future acquisitions may require us to spend significant cash amounts or
may decrease our operating income;
- We may have trouble integrating acquired businesses and retaining
personnel;
- We may ultimately fail to consummate an acquisition, even if we announce
that we plan to acquire a company;
- We may choose to acquire a company that is less profitable than we are or
has lower profit margins than we do;
- We may not be able to obtain the necessary financing, on favorable terms
or at all, to finance one or more of our potential acquisitions;
- Acquisitions may disrupt our business and distract our management from
other responsibilities;
- To the extent that any of the companies which we acquire fail, the growth
of our business could be harmed; and
- Future acquired companies may have unknown liabilities that could require
us to spend significant amounts of additional capital.
YOUR STOCK OWNERSHIP COULD BE DILUTED IF WE NEED TO SELL ADDITIONAL SHARES
OF OUR COMMON STOCK TO FINANCE FUTURE ACQUISITIONS
Part of our business strategy is to expand into new markets and enhance our
position in existing markets through the acquisition of aggregates companies. In
order to successfully complete targeted acquisitions, it may be necessary for us
to issue additional equity securities that could dilute your stock ownership.
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY IN THE HIGHLY COMPETITIVE
AGGREGATES INDUSTRY
The following factors specific to the construction aggregates industry may
affect our business:
- Transporting aggregates over relatively short distances is costly in
relation to the value of the delivered materials. Therefore, if we cannot
maintain production sites close to our customers, our operating results
may be adversely affected.
- The cost and time involved in locating suitable mineral sources, obtaining
proper permits and establishing operations can be significant and if we do
not continue to be successful in these matters, we may lose growth
opportunities and our operating results may be adversely affected.
12
<PAGE>
- We have significant investment in fixed locations in specific geographic
areas. In the event one or more of our aggregate production sites loses
business in its market, it could have a material adverse effect on our
business, financial condition and results of operations.
- It is possible that we will encounter increased competition from existing
competitors or new market entrants that may be significantly larger and
have greater financial and marketing resources.
- To the extent existing or future competitors seek to gain or retain market
share by reducing prices, we may be required to lower our prices and
rates, which would adversely affect our operating results.
WE MAY BE ADVERSELY AFFECTED BY GOVERNMENTAL REGULATIONS
Our operations are subject to and affected by federal, state and local laws
and regulations including such matters as land usage, street and highway usage,
noise levels and health, safety and environmental matters. In many instances, we
must have various permits. We cannot assure you that we will not incur material
costs or liabilities in connection with regulatory requirements.
Our operations may from time to time involve the use of substances that are
classified as toxic or hazardous substances within the meaning of these laws and
regulations. Despite our compliance efforts, risk of environmental liability is
inherent in the operation of our business. As a result, it is possible that
environmental liabilities will have a material adverse effect on us in the
future. In addition, future events, such as changes in existing laws or
regulations or enforcement policies, or further investigation or evaluation of
the potential health hazards of certain of our products or business activities,
may give rise to additional compliance and other costs that could have a
material adverse effect on our business, financial condition and results of
operations. See "Business--Governmental and Environmental Regulation" for a
further discussion of the effects of regulation on our business.
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P. HAS SUBSTANTIAL CONTROL OF OUR
COMMON STOCK AND HAS THE ABILITY TO MAKE DECISIONS THAT COULD ADVERSELY AFFECT
STOCKHOLDERS
As long as Golder, Thoma, Cressey, Rauner Fund IV, L.P. has substantial
control of our outstanding common stock, Golder, Thoma, Cressey, Rauner Fund IV,
L.P. will continue to have the ability to influence the election of our board of
directors and the outcome of those corporate actions requiring stockholder
approval. After the completion of the offering and assuming no exercise of the
underwriters' over-allotment option, Golder, Thoma, Cressey, Rauner Fund IV,
L.P. will own approximately 36.4% of the outstanding shares of our common stock.
As a result, Golder, Thoma, Cressey, Rauner Fund IV, L.P. will be in a position
to continue to influence all matters affecting U.S. Aggregates, including:
- the composition of our board of directors and, through it, any
determination with respect to our direction and policies, including the
appointment and removal of our officers;
- any determinations with respect to mergers or other business combinations
involving U.S. Aggregates;
- the acquisition or disposition of assets by U.S. Aggregates;
- future issuances of our common stock or other securities;
- the incurrence of debt by U.S. Aggregates; and
- the payment of dividends on our common stock.
13
<PAGE>
OUR OPERATIONS ARE SUBJECT TO RISKS THAT MAY RESULT IN CLAIMS OF PERSONAL
INJURY, PROPERTY DAMAGE OR OTHER LIABILITIES
The drivers of our heavy delivery trucks are subject to traffic and other
hazards associated with providing services on construction sites. Our plant
personnel are subject to the hazards associated with moving and storing large
quantities of heavy raw materials.
Our operating hazards can cause personal injury and death, damage to or
destruction of property and environmental damage. Our insurance coverage may not
be adequate to cover all losses or liabilities we may incur in our operations,
and we may not be able to maintain insurance of the types or at levels we deem
necessary or adequate or at rates we consider reasonable. Our failure to
maintain adequate insurance could have a material adverse effect on our
business, financial condition and results of operations.
WE MAY INCUR LIABILITIES IN CONNECTION WITH OUR AGGREGATE CERTIFICATION
ACTIVITIES
We operate independent material testing laboratories which determine and
certify aggregates for compliance with material specifications for ourselves and
for third parties. We may be subject to lawsuits alleging negligence or other
legal claims that could involve claims for substantial damages. For example, we
may become involved in litigation with a third party for whom we certified
aggregates if such certification was in error or did not otherwise meet a
particular project's specification. Damages assessed in connection with, and the
costs of defending, any such lawsuit could have a material adverse effect on our
business, financial condition and results of operations.
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE, WHICH MAY DECREASE
OUR STOCK PRICE
Our quarterly revenues, expenses and operating results have varied
significantly in the past and are likely to vary significantly from quarter to
quarter in the future. As a result, our operating results may fall below
security analysts' expectations in some future quarters, which could adversely
affect the market price of our common stock. The reasons our quarterly results
may fluctuate include:
- delays in customer orders;
- adverse weather conditions, particularly in our peak months of April
through November;
- increases in our operating expenses associated with the growth of our
operations;
- our ability to identify, complete and integrate acquisitions;
- downward price adjustments by our competitors; and
- general economic conditions and economic conditions specific to the
aggregates industry.
We believe that quarterly revenues, expenses and operating results are
likely to vary significantly in the future. Therefore, period-to-period
comparisons of such items are not necessarily meaningful and, as a result,
should not be relied upon as indications of future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a further discussion of the fluctuation in our quarterly
operating results.
WE MAY NOT BE ABLE TO PAY DIVIDENDS, WHICH MAY REDUCE OUR SHARE VALUE
We will only be able to pay dividends if our credit facility, senior
subordinated notes, financial performance, general business conditions and our
management's business plans permit it. Our share value may be reduced if we are
not able to pay dividends. Following the offering, our credit facility and
14
<PAGE>
senior subordinated notes will only permit us to pay dividends subject to the
following restrictions and limitations:
- We are not in default under our credit agreement or senior subordinated
notes;
- We are in pro forma compliance with all financial covenants in our credit
agreement and senior subordinated notes;
- In the third and fourth quarters of 1999, we may pay dividends in an
amount not to exceed $600,000 per quarter; and
- For any year after 1999, we may pay dividends in an amount not to exceed
15% of consolidated net income, excluding extraordinary items, for the
prior year.
Because we have no history of dividend payments as a public company, we can
not assure you that dividends will be declared or, if dividends are declared,
what amount per share will be distributed to stockholders. We currently intend
to declare and pay a quarterly cash dividend of $0.03 per share in the fourth
quarter of 1999 with respect to earnings generated during the third quarter of
1999.
THERE WILL BE IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW STOCKHOLDERS IN THE
OFFERING
The initial public offering price is substantially higher than the net
tangible book value per share of our common stock that will be applicable
immediately after the offering. The common stock you purchase in the offering
will have a post-offering net tangible book value per share of $8.24 less than
the assumed $18.00 per share price paid in the offering.
WE COULD SUFFER YEAR 2000 COMPUTER PROBLEMS THAT COULD DISRUPT OUR
OPERATIONS
Our business, financial condition and results of operations may be adversely
impacted by information technology issues related to the Year 2000. We have
completed our assessment of Year 2000 readiness of our information technology
computer hardware and software and non-information technology equipment and
systems. We are currently in the process of upgrading our hardware, software and
equipment systems, and we believe that the planned improvements will result in
these systems being substantially Year 2000 ready. However, we currently do not
have formal contingency plans in place if we do not complete our Year 2000
improvements, or the improvements fail to make our systems Year 2000 ready. We
may not be successful in implementing Year 2000 solutions at a cost that does
not materially adversely affect our business, financial condition and results of
operations. Any failure on our part to have Year 2000 compliant programs and
systems in place in a timely manner could disrupt our operations.
There is uncertainty about the broader scope of the Year 2000 issue as it
may affect third parties, including our suppliers and customers, which are
critical to our operations. In the event our suppliers and customers do not have
Year 2000 compliant programs and systems in place, our operations could also be
disrupted.
15
<PAGE>
RISK FACTORS RELATING TO SECURITIES MARKETS
THERE ARE RISKS RELATING TO SECURITIES MARKETS THAT YOU SHOULD CONSIDER IN
CONNECTION WITH YOUR INVESTMENT IN AND OWNERSHIP OF OUR COMMON STOCK.
OUR STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY AFTER THE OFFERING AND YOU COULD
LOSE ALL OR PART OF YOUR INVESTMENT AS A RESULT
Prior to the offering, there has been no public market for our common stock.
We intend to list our common stock on the New York Stock Exchange. We do not
know how our common stock will trade in the future. The initial public offering
price will be determined through negotiations between the underwriters and us.
You may not be able to resell your shares at or above the initial public
offering price due to a number of factors, including:
- actual or anticipated fluctuations in our operating results;
- changes in expectations as to our future financial performance or changes
in financial estimates of securities analysts; and
- the operating and stock price performance of other comparable companies.
In addition, the stock market in general has experienced extreme volatility
that often has been unrelated to the operating performance of particular
companies. These broad market and industry fluctuations may adversely affect the
trading price of our common stock, regardless of our actual operating
performance.
APPROXIMATELY 50.5% OF OUR TOTAL OUTSTANDING SHARES MAY BE SOLD IN THE
PUBLIC MARKET IN THE FUTURE WHICH COULD CAUSE THE MARKET PRICE OF OUR COMMON
STOCK TO DECLINE
After the offering, 14,016,808 shares of our common stock will be
outstanding. This includes the 6,944,444 shares we are selling in the offering,
which may be immediately resold in the public market. The remaining 7,072,364
shares of our total outstanding shares will become available for resale in the
public market as shown in the chart below, subject to the restrictions imposed
by Rule 144 of the Securities Act. The market price of our common stock could
decline significantly if the holders of these restricted shares sell them or are
perceived by the market as intending to sell them.
<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR RESALE INTO PUBLIC
NUMBER OF SHARES/% OF TOTAL OUTSTANDING MARKET
<S> <C>
6,423,001/45.8% 180 days after the date of this prospectus
due to an agreement these shareholders have
with the underwriters. However, the
underwriters can waive this restriction and
allow these shareholders to sell their shares
at any time.
649,363/4.6% One year after the date of this prospectus
due to the requirements of the federal
securities laws.
</TABLE>
For a more detailed description of the restrictions imposed by Rule 144 of
the Securities Act, see "Shares Eligible for Future Sale."
PROVISIONS IN OUR CORPORATE DOCUMENTS COULD DELAY OR PREVENT A CHANGE IN
CONTROL OF U.S. AGGREGATES, WHICH COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON
STOCK
Immediately following the offering, our restated certificate of
incorporation and bylaws will contain several provisions which may discourage,
delay or prevent a takeover attempt which could depress the market price of our
common stock. These provisions include:
- a classified board of directors;
16
<PAGE>
- the authority of our board of directors to issue preferred stock without
stockholder approval with such terms as our board of directors may
determine;
- with respect to annual stockholders' meetings, requirements that
stockholders must comply with the timing and procedural requirements of
the federal proxy rules in order for a stockholder proposal to be included
in our proxy statement; and
- the ability of our board to adopt a rights plan, more commonly called a
"poison pill," without shareholder approval.
We will also be subject to Delaware corporate law, which imposes some
restrictions on mergers and other business combinations between us and any
holder of 15% or more of our common stock. For a description of these
provisions, see "Description of Capital Stock."
IF WE ISSUE SHARES OF PREFERRED STOCK, THE RIGHTS OF HOLDERS OF COMMON STOCK
WILL BE SUBORDINATE TO THE RIGHTS OF HOLDERS OF PREFERRED STOCK
The rights of the holders of our common stock will be subordinate to, and
may be adversely affected by, the rights of the holders of any preferred stock
that may be issued in the future. Immediately following the offering, our
restated certificate of incorporation will authorize us to issue one or more
classes or series of preferred stock without the approval of our stockholders.
The issuance of the preferred stock could have the effect of making it more
difficult for a third party to acquire a majority of our outstanding voting
stock. Our board of directors has the authority to issue up to 10,000,000 shares
of preferred stock and to determine the price, rights, preferences, privileges
and restrictions, including voting rights, and other rights and preferences over
our common stock. See "Description of Capital Stock" for a further description
of our preferred stock.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on current
expectations which involve risks and uncertainties. These forward-looking
statements include statements about:
- our strategies;
- effects of government funding;
- cost of raw materials; and
- other statements that are not historical facts.
When used in this prospectus, the words "anticipate," "believe," "estimate,"
"should," "could" and similar expressions are generally intended to identify
forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the following:
- changes in general economic and business conditions, including in the
aggregates industry;
- actions of competitors;
- the implementation of our acquisition strategy;
- changes in government funding; and
- other factors discussed under "Risk Factors."
We undertake no obligation to publicly update or revise any forward-looking
statements. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus may not occur.
17
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of our
common stock in the offering will be approximately $114.8 million after
deducting estimated expenses of $1.8 million and underwriting discounts and
commissions of $8.4 million. We intend to use the net proceeds in the following
manner:
- approximately $53.0 million to repay indebtedness outstanding under our
existing credit facility;
- $16.0 million to repay the HTSB Note; and
- approximately $45.8 million to redeem our preferred stock, most of which
is owned by Golder, Thoma, Cressey, Rauner Fund IV, L.P.
Our existing credit facility provides for a term loan in the aggregate
amount of $115.0 million and a revolving loan of up to $60.0 million. The term
loan consists of an "A" tranche and "B" tranche. The term loan A accrues
interest at a rate per annum based on the Eurodollar rate plus a spread of
0.875% to 2.125% and the term loan B accrues interest at a rate per annum based
on the Eurodollar rate plus a spread of 1.875% to 2.500%. The term loan A
matures in March 2004 and the term loan B matures in March 2006. The revolving
facility terminates in June 2004 and accrues interest at a rate per annum based
on the Eurodollar rate plus a spread of 0.875% to 2.125%. As of June 30, 1999,
we had borrowings of approximately $43.4 million outstanding under the revolving
facility, $52.3 million of term loan A outstanding and $58.4 million of term
loan B outstanding.
As of June 30, 1999, our outstanding preferred stock totaled approximately
$30.1 million, excluding accrued and unpaid dividends of approximately $15.7
million. Our preferred stock was sold to Golder, Thoma, Cressey, Rauner Fund IV,
L.P., James A. Harris, our Chief Executive Officer and Chairman of the Board,
Michael J. Stone, our Executive Vice President, Chief Financial Officer,
Treasurer and Secretary and a Director, Edward A. Dougherty, a Director, and one
of our other stockholders for a purchase price of approximately $30.1 million.
The annual yield on our preferred stock is 10%, compounded daily.
We have obtained a $17.5 million revolving line of credit pursuant to which
the HTSB Note was issued. Interest on the note accrues quarterly at an announced
prime commercial rate which was 7.750% as of June 30, 1999. As of June 30, 1999,
there was $16.0 million outstanding on this note. The HTSB Note is due on demand
and is guaranteed by Golder, Thoma, Cressey, Rauner Fund IV, L.P. Upon repayment
of the HTSB Note, Golder, Thoma, Cressey, Rauner Fund IV, L.P. will be released
from the guaranty. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources," "Certain
Relationships and Related Transactions--The Recapitalization" and "Description
of Certain Indebtedness" for a further description of our credit facility, our
preferred stock and the HTSB Note.
DIVIDEND POLICY
Beginning in the fourth quarter of 1999, with respect to earnings generated
during the third quarter of 1999, we intend to pay quarterly cash dividends at
an initial rate of $0.03 per share of our common stock. Any determination to pay
dividends will be at the discretion of our board of directors. The determination
of the board of directors to pay dividends will depend upon, among other
factors:
- our results of operations;
- our financial condition;
- our capital requirements;
- our future prospects;
18
<PAGE>
- restrictions contained in our contracts, including our credit facility and
senior subordinated notes; and
- other factors deemed relevant by our board of directors.
Following the offering, our credit facility and other debt documents will
permit us to pay dividends subject to the following restrictions and
limitations:
- We are not in default under our credit agreement or senior subordinated
notes;
- We are in pro forma compliance with all financial covenants in our credit
agreement and senior subordinated notes;
- In the third and fourth quarters of 1999, we may pay dividends in an
amount not to exceed $600,000 per quarter; and
- For any year after 1999, we may pay dividends in an amount not to exceed
15% of consolidated net income, excluding extraordinary items, for the
prior year.
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<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth, as of June 30, 1999, our: (1) unaudited
actual capitalization and (2) unaudited pro forma as adjusted capitalization,
after giving effect to the sale of 6,944,444 shares of our common stock in the
offering at an assumed offering price of $18.00 per share, and the application
of the net proceeds of $114,763. See "Use of Proceeds" for a further description
of the application of the net proceeds of the offering. This table should be
read in conjunction with our financial statements and notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AT JUNE 30, 1999
-----------------------
PRO FORMA
HISTORICAL AS ADJUSTED
---------- -----------
(UNAUDITED)
<S> <C> <C>
Debt:
Revolving loan...................................................................... $43,400 $16,881
Term loan A......................................................................... 52,325 39,066
Term loan B......................................................................... 58,404 45,145
Notes payable to former stockholders................................................ 4,927 4,927
Other long-term debt................................................................ 6,403 6,403
10.34% senior subordinated notes.................................................... 30,000 30,000
10.09% senior subordinated notes.................................................... 15,000 15,000
Discount on the senior subordinated notes......................................... (709) (709 )
Demand note (the "HTSB Note")....................................................... 15,957 --
---------- -----------
Total debt(1)................................................................... 225,707 156,713
Minority interest..................................................................... 3,180 --
Mandatory redeemable preferred stock, $0.01 par value, 500,000 shares authorized;
300,842 shares initially issued and outstanding; none issued following the
offering............................................................................ 45,768 --
Stockholders' equity:
Common stock, $0.01 par value, 7,508,664 shares initially authorized; 6,144,250
shares issued and outstanding, including 7,629 shares of Treasury stock;
14,016,808 shares issued and outstanding, as adjusted(2).......................... 61 140
Additional paid-in capital.......................................................... 2,887 128,090
Notes receivable from sale of stock(3).............................................. (666) (1,155 )
Treasury stock, at cost............................................................. (2) (2 )
Retained earnings(4)................................................................ 10,160 9,729
---------- -----------
Total stockholders' equity........................................................ 12,440 136,802
---------- -----------
Total capitalization.............................................................. $287,095 $293,515
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Includes historical current maturities of $24,817 and pro forma as adjusted
current maturities of $7,340.
(2) Includes 6,144,250 shares outstanding less 7,629 shares of treasury stock,
6,944,444 shares issued in the offering, the conversion of 286,380 warrants
into shares and 649,363 shares issued to minority stockholders in connection
with the recapitalization described on page 7.
(3) The Pro Forma as adjusted reflects notes receivable on the books of
subsidiaries that remain outstanding after the exchange of the minority
stockholders' stock of our subsidiaries for shares of our common stock prior
to the closing of the offering.
(4) The Pro Forma as adjusted retained earnings has been reduced by $432 to
reflect the write off of certain deferred financing costs related to debt
paid down using proceeds of the offering.
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<PAGE>
DILUTION
As of June 30, 1999, our unaudited net book value was approximately $12.4
million, or $2.02 per share. Net book value per share of our common stock is
determined by dividing our net book value by the aggregate number of shares of
our common stock outstanding. After giving effect to the offering and the
application of the net proceeds from the offering, our unaudited net book value
as of June 30, 1999, would be $136.8 million or $9.76 per share. This represents
an immediate increase in net book value of $7.74 per share to our existing
stockholders and an immediate dilution in net book value of $8.24 per share to
new stockholders. The net book value dilution per share is determined by
subtracting adjusted net book value per share after the offering from the
assumed $18.00 per share initial public offering price. The following table
illustrates the per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............................................. $18.00
Net book value per share before the offering................................................ $2.02
Increase per share attributable to payments by new investors................................ $7.74
Adjusted net book value per share after the offering........................................ 9.76
---------- ----------
Dilution per share to new stockholders...................................................... $8.24
----------
----------
</TABLE>
The following table summarizes, on a pro forma basis, as of June 30, 1999,
the difference between our existing stockholders and the new stockholders
purchasing shares in the offering with respect to the number of shares of our
common stock purchased from U.S. Aggregates, the total consideration paid to
U.S. Aggregates and the average price per share paid by our existing
stockholders and new stockholders purchasing shares in the offering, before
deducting the estimated offering expenses and underwriting discounts and
commissions:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------------- -------------------------- AVERAGE
NUMBER AMOUNT PRICE PER
(IN THOUSANDS) PERCENT (IN THOUSANDS) PERCENT SHARE
-------------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 7,073 50.5% $2,946 2.3% $0.42
New stockholders.................................... 6,944 49.5 125,000 97.7 18.00
-------------- ----- -------------- -----
Total............................................. 14,017 100.0% $127,946 100.0% $9.13
-------------- ----- -------------- ----- ---------
</TABLE>
The preceding computations exclude 280,336 shares of our common stock that
may be issued pursuant to stock options to be granted concurrently with the
offering. See "Management--Incentive Plan" for a further description of these
shares.
21
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA
In 1998, we acquired Falcon Ridge Quarry, Inc. on February 18th, Geodyne
Transport, Inc. on February 20th and Monroc, Inc. on June 5th in separate
transactions. These acquisitions constitute the 1998 acquired businesses.
Subsequently, we disposed of the precast division assets of Monroc, Inc. and
certain other non-business related land assets. These assets constitute the 1998
dispositions. While these acquisitions and dispositions occurred at various
dates during 1998, the unaudited pro forma data are presented as if these
acquisitions and dispositions had occurred on January 1, 1998 and also include
the effect of certain pro forma adjustments to the historical financial
statements described below.
The selected unaudited pro forma financial data for the year ended December
31, 1998 have been derived from our financial information, the unaudited
financial statements and notes thereto of certain of the 1998 acquired
businesses and dispositions. Historical, pro forma and pro forma as adjusted
balance sheet data are reflected as of June 30, 1999. The unaudited pro forma
and unaudited pro forma as adjusted information presented below is not
necessarily indicative of what results of operations actually would have been if
the transactions had occurred on the date indicated.
PRO FORMA AS ADJUSTED
The selected unaudited pro forma as adjusted financial data for the year
ended December 31, 1998 and the six months ended June 30, 1999 gives effect to
the consummation of the offering as if it occurred on January 1, 1998 and
January 1, 1999, and also includes the effects of certain adjustments to the
unaudited pro forma statements as described below.
The selected unaudited pro forma and unaudited pro forma as adjusted
financial data should be read in conjunction with "Selected Historical Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
22
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------
HISTORICAL
--------- PRE-ACQUISITION OPERATING OTHER PRO PRO FORMA AS ADJUSTED
RESULTS FORMA ----------- ADJUSTMENTS
------------------------------ ADJUSTMENTS -----------
ACQUISITIONS(1) DISPOSITIONS(2) ----------- (UNAUDITED)
-------------- -------------- (UNAUDITED) (UNAUDITED)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales..................................... $228,739 $27,425 $(6,940) $-- $249,224 $--
Cost of products sold......................... 168,220 21,121 (5,888) -- 183,453 --
--------- -------------- -------------- ----------- ----------- -----------
Gross profit.................................. 60,519 6,304 (1,052) -- 65,771 --
Selling, general and administrative
expenses.................................... 25,001 2,592 (541) -- 27,052
Depreciation, depletion and amortization...... 11,098 1,328 (152) (238)(3) 12,036 109(7)
--------- -------------- -------------- ----------- ----------- -----------
Income from operations........................ 24,420 2,384 (359) 238 26,683 (109)
Interest, net................................. (14,351) (714) -- (1,481)(4) (16,546) 6,598(8)
Other income and expense, net................. (1,104) 96 -- -- (1,008) 150(9)
--------- -------------- -------------- ----------- ----------- -----------
Income from continuing operations before
provision for income taxes, minority
interest and extraordinary item............. 8,965 1,766 (359) (1,243) 9,129 6,639
Provision for income taxes.................... (3,748) (135) 138 (66)(5) (3,811) (2,556)(10)
--------- -------------- -------------- ----------- ----------- -----------
Income from continuing operations before
minority interest and extraordinary item.... 5,217 1,631 (221) (1,309) 5,318 4,083
Minority interest............................. (385) -- -- (17)(6) (402) 402(11)
--------- -------------- -------------- ----------- ----------- -----------
Income from continuing operations............. $4,832 $1,631 $(221) $(1,326) $4,916 $4,485
--------- -------------- -------------- ----------- ----------- -----------
--------- -------------- -------------- ----------- ----------- -----------
Income per common share - basic
Income from continuing operations available
for common stockholders(12)............... $0.12 $0.13
Weighted average common shares
outstanding............................... 6,136,630 6,136,630
Income per common share - diluted
Income from continuing operations available
for common stockholders(13)............... $0.11 $0.13
Weighted average common shares
outstanding............................... 6,382,094 6,382,094
<CAPTION>
AS ADJUSTED 1999
----------- 1998 -----------
----------- PRO FORMA
(UNAUDITED) PRO FORMA AS ADJUSTED
-----------
<S> <C> <C> <C>
Net sales..................................... $249,224 $103,527 $126,939
Cost of products sold......................... 183,453 76,671 91,966
----------- ----------- -----------
Gross profit.................................. 65,771 26,856 34,973
Selling, general and administrative
expenses.................................... 27,052 12,971 14,898
Depreciation, depletion and amortization...... 12,145 5,541 5,749
----------- ----------- -----------
Income from operations........................ 26,574 8,344 14,326
Interest, net................................. (9,948) (4,468) (5,505)
Other income and expense, net................. (858) (472) (329)
----------- ----------- -----------
Income from continuing operations before
provision for income taxes, minority
interest and extraordinary item............. 15,768 3,404 8,492
Provision for income taxes.................... (6,367) (1,327) (3,219)
----------- ----------- -----------
Income from continuing operations before
minority interest and extraordinary item.... 9,401 2,077 5,273
Minority interest............................. -- -- --
----------- ----------- -----------
Income from continuing operations............. $9,401 $2,077 $5,273
----------- ----------- -----------
----------- ----------- -----------
Income per common share - basic
Income from continuing operations available
for common stockholders(12)............... $0.67 $0.15 $0.38
Weighted average common shares
outstanding............................... 14,016,808 14,016,808 14,106,808
Income per common share - diluted
Income from continuing operations available
for common stockholders(13)............... $0.67 $0.15 $0.38
Weighted average common shares
outstanding............................... 14,016,808 14,016,808 14,016,808
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1999
--------------------------
PRO FORMA
AS
HISTORICAL ADJUSTED(14)
---------- --------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets.................................................................... $ 374,362 $ 381,212
Total debt...................................................................... 225,707 156,713
Minority interest............................................................... 3,180 --
Mandatory redeemable preferred stock............................................ 45,768 --
Stockholders' equity............................................................ 12,440 136,802
</TABLE>
NOTES TO SELECTED UNAUDITED PRO FORMA FINANCIAL DATA (DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS):
(1) Adjustments reflect operating results of the 1998 acquired businesses for
the period of January 1, 1998 to the date of acquisition.
(2) Adjustments reflect operating results of the 1998 dispositions for the
period of January 1, 1998 to the date of disposition.
(3) Adjustment reflects the depreciation, depletion and amortization of fixed
assets, goodwill and other intangibles recorded as a result of purchase
accounting.
(4) Adjustment reflects interest expense on the debt incurred for the
acquisition of the 1998 acquired businesses less the savings on interest
expense from the 1998 dispositions, and the savings on interest expense
related to the payoff of certain debt of the 1998 acquired businesses, all
assuming the 1998 acquisitions and dispositions occurred on January 1,
1998.
(5) Adjustment to provision for income taxes as if the 1998 acquired businesses
(excluding the disposition of assets held for sale) had been combined with
U.S. Aggregates for the period January 1, 1998 to their respective dates of
acquisition, and those additional earnings as adjusted were subject to a
blended federal and state statutory tax rate of 38.5%.
(6) Adjustment reflects the minority interest's share in all pro forma
adjustments.
(7) Adjustment reflects $171 of amortization of goodwill resulting from the
acquisition of minority interest shares (concurrent with the offering) in
exchange for shares of U.S. Aggregates assuming a per share value of $18.00
less a 10% discount; and the savings of amortization expense from the write
off of deferred finance charges of $62 as a result of the pay down of debt
with the proceeds.
(8) Adjustment reflects the interest savings from the application of $68,994 of
the proceeds of the offering to repay indebtedness as if the offering
occurred on January 1, 1998.
(9) Adjustment reflects the elimination of the annual management fee of $150 to
Golder, Thoma, Cressey, Rauner, Inc. which has agreed to eliminate its
management fee in the event of an initial public offering of our common
stock.
(10) Adjustment to provision for income taxes as if the offering had occurred
on January 1, 1998, and the interest and other adjustments were subject to
a blended federal and state statutory tax rate of 38.5%.
(11) Adjustment reflects the exchange of the minority stockholders' stock of
our subsidiaries for our common stock prior to the closing of the offering
and the elimination of a minority interest charge.
(12) The impact on income per share available for common stockholders of the
accretion of the mandatory redeemable preferred stock dividend has been
eliminated.
(13) Includes the conversion of 286,380 warrants into shares of our common
stock and the conversion of minority shares into 649,363 shares of our
common stock upon closing of the offering and the sale of 6,944,444 shares
of our common stock.
(14) Reflects the impact of the following items as of June 30, 1999: the sale
of 6,944,444 shares of our common stock in the offering at the assumed
public offering price of $18.00 per share, less estimated offering costs;
the use of $68,994 in offering proceeds to pay down existing debt of U.S.
Aggregates; the payment of accrued dividends of $15,684 to our preferred
stockholders, the repurchase of all of our outstanding preferred stock for
$30,084 and the exchange of the minority stockholders' stock of our
subsidiaries for our common stock prior to the closing of the offering.
24
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The selected historical financial data for the year ended December 31, 1994
through the year ended December 31, 1998 have been derived from our audited
financial statements and notes thereto, which financial statements for the years
ended December 31, 1996, 1997 and 1998 appear elsewhere in this prospectus. The
following data represent historical results and include the results of the
business and asset acquisitions listed in footnote (1) below following their
acquisition by U.S. Aggregates.
The selected historical financial data should be read in conjunction with
the information contained in the "Selected Unaudited Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," our consolidated financial statements and notes thereto, and the
individual financial statements and notes thereto of Monroc, Inc. included
elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales............................................ $35,442 $97,527 $131,710 $163,243 $228,739
Cost of products sold................................ 24,653 70,006 92,821 119,132 168,220
---------- ---------- ---------- ---------- ----------
Gross profit......................................... 10,789 27,521 38,889 44,111 60,519
Selling, general and administrative expenses......... 6,448 12,977 16,571 18,275 25,001
Depreciation, depletion and amortization(2).......... 1,227 4,139 6,301 7,830 11,098
---------- ---------- ---------- ---------- ----------
Income from operations............................... 3,114 10,405 16,017 18,006 24,420
Interest, net........................................ (844) (2,828) (5,036) (8,344) (14,351)
Other income and expense, net........................ (112) 391 (150) (150) (1,104)
---------- ---------- ---------- ---------- ----------
Income from continuing operations before provision
for income taxes, minority interest, discontinued
operations and extraordinary item.................. 2,158 7,968 10,831 9,512 8,965
Provision for income taxes........................... (756) (2,630) (3,660) (3,384) (3,748)
---------- ---------- ---------- ---------- ----------
Income from continuing operations before minority
interest, discontinued operations and extraordinary
item............................................... 1,402 5,338 7,171 6,128 5,217
Minority interest.................................... (282) (759) (727) (623) (385)
---------- ---------- ---------- ---------- ----------
Income from continuing operations.................... 1,120 4,579 6,444 5,505 4,832
Operating income from discontinued operations, less
applicable income tax expense(3)................... 372 (5) -- -- --
Gain on disposal of discontinued operations and
income during phase out period, less applicable
income tax expense(3).............................. -- 247 -- -- --
---------- ---------- ---------- ---------- ----------
Income before extraordinary item..................... 1,492 4,821 6,444 5,505 4,832
Extraordinary item: loss on extinguishment of debt,
less applicable income tax benefit................. -- -- -- -- (338)
---------- ---------- ---------- ---------- ----------
Net income........................................... $1,492 $4,821 $6,444 $5,505 $4,494
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income per common share--basic.......................
Income from continuing operations available for
common stockholders.............................. $0.07 $0.44 $0.57 $0.29 $0.12
Net income available for common stockholders....... $0.15 $0.48 $0.57 $0.29 $0.06
Weighted average common shares outstanding......... 4,416,968 6,065,688 6,074,704 6,116,718 6,136,630
Income per common share--diluted.....................
Income from continuing operations available for
common stockholders.............................. $0.07 $0.44 $0.57 $0.28 $0.11
Net income available for common stockholders....... $0.15 $0.48 $0.57 $0.28 $0.05
Weighted average common shares outstanding......... 4,416,968 6,065,688 6,095,472 6,306,747 6,382,094
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED STATISTICAL AND OPERATING DATA:
EBITDA(4)........................................................... $4,319 $14,418 $21,441 $25,063 $33,691
Capital expenditures (excluding acquisitions)....................... $1,801 $4,579 $20,945 $17,750 $27,330
Capital expenditures (including acquisitions)....................... $31,747 $24,096 $58,855 $21,788 $111,214
Tons of aggregates shipped (in millions)............................ 2.1 4.8 7.2 9.5 15.8
Tons of asphalt sold (in millions).................................. 0.1 0.6 0.9 1.3 1.6
Yards of ready-mix concrete sold (in millions)...................... 0.4 0.8 0.9 0.9 1.4
Estimated tons of aggregate reserves (in millions).................. 116 405 635 863 1,357
BALANCE SHEET DATA:
Total assets........................................................ $54,300 $83,560 $150,139 $172,266 $337,611
Total debt.......................................................... 22,269 37,992 78,475 92,788 200,591
Stockholders' equity(5)............................................. 18,473 26,271 9,336 10,897 11,547
</TABLE>
- ------------------------------
(1) In 1994, we acquired Southern Ready Mix, Inc., Western Rock Products Corp.,
DeKalb Stone, Inc. and G.M. Aldred & Sons, Inc. in separate transactions; in
1995, we acquired Cox Rock Products, Inc. and related businesses, Jensen
Construction and Development, Inc., Verlie quarry (Alabaster), Mulberry Rock
Corporation and certain assets of Ence Construction Company and related
businesses in separate transactions; in 1996, we acquired or started-up the
following: Vance Materials, L.L.C., BHY Ready Mix, Inc., Jasper Sand, Inc.,
New Hope Farms, Inc., the O'Neal quarry operations, Mohave Concrete and
Materials, Inc. and related businesses and Valley Asphalt, Inc. in separate
transactions; in 1997, we acquired or started-up the following: Southern
Sand, Inc., A-T Asphalt, Inc., Ekins quarry, and Lehi quarry in separate
transactions and certain assets of Southwest Stone, Inc. in separate
transactions; in 1998, we acquired or started-up the following: Pride
quarry, Fort Pearce aggregates, Geodyne Transport, Inc., Falcon Ridge
Quarry, Inc., Beck Paving, Inc., Monroc, Inc. and Sandia Construction, Inc.
in separate transactions.
(2) In 1996, we began assuming a 20 percent salvage value in providing
depreciation on certain of our assets. In 1997, we changed the estimated
lives of certain depreciable assets, resulting in an approximate $1,550
reduction of 1997 depreciation expense compared to what it would have been
had the estimated lives not been changed.
(3) Effective February 7, 1995, we disposed of the concrete pipe plant of
Southern Ready Mix, Inc.
(4) EBITDA represents net income plus net interest expense, income taxes and
depreciation, depletion and amortization and is a supplemental financial
measurement we use to evaluate our business. However, EBITDA (which is not a
measure of financial performance under GAAP) should not be considered in
isolation or viewed as a substitute for cash flow from operations, net
income or other measures of performance as defined by GAAP or as a measure
of our profitability or liquidity. EBITDA does not give effect to the cash
we must use to service our debt or pay our income taxes and thus does not
reflect the funds actually available for capital expenditures, acquisitions,
or other discretionary uses. We understand that while EBITDA is frequently
used by security analysts, lenders and others in the evaluation of
companies, our presentation of EBITDA may not be comparable to other
similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.
(5) In 1996, we modified the terms of our preferred stock, making it mandatorily
redeemable. The liquidation value, at that date, of the preferred stock of
$32,795, including accrued dividends of $2,711, was removed from
Stockholders' Equity and classified as Mandatory Redeemable Preferred Stock.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR RESULTS OF OPERATIONS,
FINANCIAL CONDITION AND LIQUIDITY SHOULD BE READ IN CONJUNCTION WITH "SELECTED
HISTORICAL FINANCIAL DATA" AND THE FINANCIAL STATEMENTS AND NOTES THERETO
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
GENERAL
We conduct our operations through the quarrying and distribution of
aggregate products in nine states in two fast growing regions of the United
States, the Mountain states and the Southeast. Our operations have the same
general economic characteristics including the nature of the products,
production processes, type and class of customers, methods of distribution and
governmental regulations.
Over the last three years, our net sales and profitability have increased as
a result of internal growth, the maturation of our recently developed aggregate
production sites and the completion of several business and asset acquisitions.
In February 1998, we completed the acquisition of Falcon Ridge Quarry, Inc. and
the acquisition of Geodyne Transport, Inc. In June 1998, we completed our
largest acquisition to date, Monroc, Inc. Collectively, these acquisitions are
referred to as the 1998 acquired businesses. The 1998 acquired businesses and
the start-up of several other operations significantly expanded our business in
the Mountain states and increased our presence in a number of local markets.
Since 1996, we have started eight major greenfield aggregate production
sites serving large metropolitan markets. The development of greenfield
aggregate production sites includes securing all necessary permits and zoning to
ensure that commercially economic quantities of aggregates can be produced.
These new sites include both sites which have never been permitted or mined, as
well as sites which may have been properly zoned, but were not operating at
sufficient volumes to be economically viable. Based on our experience, a new
aggregate production site's net sales, cash flow and profitability tend to
increase over the first five years of operation as production increases and the
site matures.
Our business is seasonal, with peak sales and profits occurring primarily in
the months of April through November. Accordingly, our results of operations for
any individual quarter are not indicative of our results for the full year.
RESULTS OF OPERATIONS
The following table presents net sales, gross profit, selling, general and
administrative expenses, depreciation, depletion and amortization, income from
operations, interest, net and minority interest for U.S. Aggregates:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------- -------------------------------
1996 1997 1998 1998 1999
--------------- --------------- --------------- -------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................................... $131,710 100.0% $163,243 100.0% $228,739 100.0% $83,042 100.0% $126,939 100.0%
Gross profit................................ 38,889 29.5 44,111 27.0 60,519 26.5 22,234 26.8 34,973 27.6
Selling, general and administrative
expenses................................... 16,571 12.6 18,275 11.2 25,001 10.9 10,920 13.1 14,898 11.7
Depreciation, depletion and amortization.... 6,301 4.8 7,830 4.8 11,098 4.9 4,549 5.5 5,694 4.5
Income from operations...................... 16,017 12.2 18,006 11.0 24,420 10.7 6,765 8.1 14,381 11.3
Interest, net............................... (5,036) 3.8 (8,344) 5.1 (14,351) 6.3 (5,554) 6.7 (8,841) 7.0
Minority interest........................... (727) 0.6 (623) 0.4 (385) 0.2 100 0.1 (39) 0.0
</TABLE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
NET SALES. Net sales for the six months ended June 30, 1999 increased by
52.9% to $126.9 million from $83.0 million for the six months ended June 30,
1998. This increase consists of $23.4 million additional net sales from the 1998
acquired businesses and an increase in net sales by our existing
27
<PAGE>
business of $20.4 million, a 26.7% increase. The increase in sales from our
existing business was due to strong demand for our aggregates and related
products and increased shipments from new and developing aggregate production
sites of 2.0 million tons. Total shipments of aggregates increased to 9.0
million tons for the six months ended June 30, 1999 from 6.0 million tons for
the six months ended June 30, 1998, a 50.0% increase. We also experienced an
increase in selling prices of 3.4% to 5.0% for our aggregates and related
products.
GROSS PROFIT. Gross profit for the six months ended June 30, 1999 increased
57.3% to $35.0 million from $22.2 million for the six months ended June 30,
1998. The increase consists of $5.0 million additional gross profit from our
acquired businesses and an increase in gross profit from our existing business
of $7.8 million, a 37.2% increase. The increase in gross profit at our existing
business was primarily due to our increased sales. Overall gross margins
increased to 27.6% in 1999 from 26.8% in 1998. Gross margins from our existing
business were 29.8% in 1999, compared to 27.5% in 1998, while gross margins from
acquired businesses were 20.3% in 1999 compared to 18.1% in 1998. Margins from
existing and acquired businesses increased due to higher selling prices as
previously discussed and the fixed nature of many of our costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $14.9 million for the six months ended June
30, 1999 from $10.9 million for the six months ended
June 30, 1998, primarily due to the inclusion of the 1998 acquired businesses.
As a percentage of net sales, selling, general and administrative expenses
decreased to 11.7% for the six months ended June 30, 1999 from 13.1% for the six
months ended June 30, 1998, due to the leveraging of fixed costs over a larger
sales base.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased to $5.7 million for the six months ended June 30, 1999
from $4.5 million for the six months ended June 30, 1998 as a result of the
inclusion of the 1998 acquired businesses. As a percentage of net sales, our
depreciation, depletion and amortization expenses decreased to 4.5% from 5.5%
for the same periods primarily due to a 52.9% increase in sales.
INCOME FROM OPERATIONS. Income from operations for the six months ended
June 30, 1999 increased to $14.4 million compared to $6.8 million for the six
months ended June 30, 1998 because of the factors discussed above.
INTEREST, NET. Net interest expense increased to $8.8 million for the six
months ended June 30, 1999 from $5.6 million for the six months ended June 30,
1998 as a result of significantly increased borrowings used to fund the purchase
of the 1998 acquired businesses and other expansion and capital needs.
MINORITY INTEREST. Minority interest for the six months ended June 30, 1999
changed to a $0.04 million deduction for the six months ended June 30, 1999 from
an add back of $0.1 million for the six months ended June 30, 1998.
Profitability by legal entity and the level of management fees and interest
allocated to the subsidiaries impact the amount of minority interest. The amount
allocated for the six months ended June 30, 1999 was $13.2 million and $6.4
million for the six months ended June 30, 1998.
1998 COMPARED TO 1997
NET SALES. Net sales for 1998 increased by 40.1% to $228.7 million from
$163.2 million in 1997. This increase reflects the inclusion of $37.8 million of
net sales from 1998 acquired businesses since their date of acquisition. The
increase in 1998 net sales from our existing business of $27.7 million, a 16.9%
increase, resulted from increased sales demand in our established business plus
the start up of new aggregate production sites and related activity in both 1998
and 1997. Shipments of aggregates increased by 66% to 15.8 million tons in 1998
from 9.5 million tons in 1997. Although volumes increased, our mix of products
sold in 1998 included more lower priced aggregates than in 1997.
28
<PAGE>
Approximately one-half of this increase in volume came from the 1998 acquired
businesses. Our selling prices per ton also increased approximately 5% during
the period.
GROSS PROFIT. Gross profit for 1998 increased 37.2% to $60.5 million in
1998 from $44.1 million in 1997. The 1998 acquired businesses contributed $10.4
million to gross profit in 1998, with a gross margin of 27.4%. Gross profit at
our existing business increased 13.6% to $50.1 million from $44.1 million in
1997. Gross margins from our existing business were 26.5% in 1998 compared to
27.0% in 1997, continuing a slight down trend in gross margin since 1996 due to
our rapid expansion into the Mountain states markets which, because of product
mix, traditionally have lower gross margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $25.0 million in 1998 from $18.3 million in
1997 primarily due to the 1998 acquired businesses. As a percentage of net
sales, selling, general and administrative expenses decreased to 10.9% in 1998
from 11.2% in 1997, due to the leveraging of fixed costs over a larger sales
base.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased 41.7% to $11.1 million in 1998 from $7.8 million in 1997.
The 1998 acquired businesses contributed $1.8 million of this increase. As a
percentage of net sales, our depreciation, depletion and amortization expenses
increased to 4.9% in 1998 from 4.8% in 1997.
INCOME FROM OPERATIONS. Income from operations increased 35.6% to $24.4
million in 1998 from $18.0 million in 1997 because of the above factors.
INTEREST, NET. Net interest expense increased to $14.4 million in 1998 from
$8.3 million in 1997 as a result of significantly increased borrowings used to
fund the purchase of the 1998 acquired businesses and other expansion and
capital needs.
MINORITY INTEREST. Minority interest for 1998 decreased 38.2% to $0.4
million from $0.6 million in 1997. Profitability by legal entity and the level
of management fees and interest allocated to the subsidiaries impact the amount
of minority interest. The amount allocated was $17.5 million in 1998 and $11.7
million in 1997.
1997 COMPARED TO 1996
NET SALES. Net sales for 1997 increased 23.9% to $163.2 million from $131.7
million in 1996. Shipments of aggregates increased to 9.5 million tons in 1997
from 7.2 million tons in 1996, a 32% increase. Although volumes increased, our
mix of products sold in 1997 was different than 1996. Although volumes of both
aggregates and associated products were up, the growth rate in associated
products was less than the growth rate of aggregates in 1997. The associated
products have a higher "per ton" sales price; accordingly the growth in total
tons shipped exceeded our growth in total sales. In 1997, we developed and
expanded three new aggregate production sites acquired in 1995 and started
operations at two new aggregate production sites acquired in late 1996. Our
selling prices per ton also increased approximately 11.4% during the period.
GROSS PROFIT. Gross profit for 1997 increased 13.4% to $44.1 million from
$38.9 million in 1996 due to increased sales. Gross profit margins decreased to
27.0% from 29.5% primarily due to our rapid expansion into Mountain states
markets which, because of product mix, traditionally have lower gross margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $18.3 million in 1997 and $16.6 million in
1996. As a percentage of net sales, selling, general and administrative expenses
decreased to 11.2% in 1997 from 12.6% in 1996, primarily due to the leveraging
of fixed costs over a larger sales base.
29
<PAGE>
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased 24.3% to $7.8 million in 1997 from $6.3 million in 1996.
As a percentage of net sales, our depreciation, depletion and amortization
expenses were 4.8% in 1997, the same as 1996.
INCOME FROM OPERATIONS. Income from operations increased 12.4% to $18.0
million in 1997 from $16.0 million in 1996.
INTEREST, NET. Net interest expense increased to $8.3 million in 1997 from
$5.0 million in 1996 as a result of a full year's interest on the additional
debt used to finance acquisitions made in mid to late 1996.
MINORITY INTEREST. Minority interest for 1997 decreased 14.3% to $0.6
million from $0.7 million in 1996. Profitability by legal entity and the level
of management fees and interest allocated to the subsidiaries impact the amount
of minority interest. The amount allocated was $11.7 million in 1997 and $7.0
million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
From our inception in 1994, we have financed our operations and growth from
the issuance of preferred and common stock and debt. We have also used operating
leases to finance the acquisition of equipment used in the business.
Through December 31, 1998, we have sold $32.3 million of common and
preferred stock. Substantially all of this stock was issued before 1997.
At June 30, 1999, we had $225.7 million of debt outstanding. This level of
debt increased from $200.6 million as of December 31, 1998, $92.8 million as of
December 31, 1997 and $78.5 million as of December 31, 1996 primarily to finance
acquisitions and capital expansion. The terms of this debt are discussed further
below and in Notes 6 and 7 to the audited financial statements included herein
and "Use of Proceeds."
We lease aggregate production sites and equipment under operating leases
with terms generally ranging from 5 to 40 years. Our minimum commitment under
these leases was $42.9 million at December 31, 1998 versus $23.0 million in 1997
and $15.0 million in 1996.
Our primary capital requirements are for working capital, quarry
development, acquisitions and equipment purchases.
During 1997, operating activities provided net cash flow of $5.3 million
compared to $6.6 million in 1996. The decrease was due to a reduction in net
income of $0.9 million and increased working capital requirements due to growth
in the business. In 1998, we generated $3.2 million of net cash flow from
operating activities. Net income of $4.5 million in 1998 was $1.0 million less
than in 1997, and we again had increased working capital requirements due to
growth. For the six months ended June 30, 1999 we used $1.3 million of cash in
operating activities. Net income was $3.1 million in the period but working
capital requirements increased. As of December 31, 1996, 1997 and 1998, and June
30, 1999, working capital was $8.5 million, $14.2 million, $29.3 million, and
$26.0 million, respectively. Working capital needs will continue to increase
with growth in our business.
Net cash used in investing activities was $58.9 million in 1996. Of this
amount, $37.9 million was used for acquisitions and $21.0 was used for property,
plant and equipment purchases as we expanded our operations. Net cash used in
investing activities was $20.5 million in 1997. Of this amount, $4.0 million was
used for acquisitions and $16.5 million was used for the net purchase of
property, plant and equipment. Net cash used in investing activities was $100.9
million in 1998. Of this amount, $83.9 million was used for acquisitions, $67.8
million of which was for the purchase of Monroc and related fees. Also of this
amount, $27.3 million was for the purchase of property, plant and equipment
offset by proceeds of $10.4 million from the sale of certain properties,
including non-business land at
30
<PAGE>
Monroc. We do not believe that the 1998 dispositions will have a meaningful
impact on our future liquidity.
Net cash used in investing activities for the six months ended June 30, 1999
was $24.4 million. We expended $27.2 million for the purchase of property, plant
and equipment, offset by proceeds of $2.8 million from the sale of assets. Our
planned capital expenditures for the remainder of the fiscal year are $19.0
million.
Cash provided by financing activities was $48.7 million in 1996, $14.3
million in 1997, $100.0 million in 1998 and $25.1 million for the six months
ended June 30, 1999. Of the cash provided by financing activities in 1996, $12.4
million was from common and preferred stock sales and $36.3 million was provided
by net borrowings. All of the cash provided by financing activities in 1997,
1998 and for the six months ended June 30, 1999 was from increased borrowings
under existing or restructured debt agreements.
In June 1998, we amended our existing credit facility with a syndicate of
lenders. The term portion of the facility was increased to an aggregate
principal amount of $115.0 million. The term loan consists of an "A" tranche and
a "B" tranche. The term loan A accrues interest at a rate per annum based on the
Eurodollar rate plus a spread of 0.875% to 2.125% and the term loan B accrues
interest at a rate per annum based on the Eurodollar rate plus a spread of
1.875% to 2.500%. The term loan A matures in March 2004 and the term loan B
matures in March 2006. The revolving portion of the facility was increased to
$60.0 million from $40.0 million in April 1999. The revolving facility
terminates in June 2004 and accrues interest quarterly based on the Eurodollar
rate plus a spread of 0.875% to 2.125%. As of June 30, 1999, we had borrowings
of $43.4 million outstanding under the revolving facility, $52.3 million of term
loan A outstanding, and $58.4 million of term loan B outstanding. The credit
facility is secured by all of our assets.
In March 1998, we entered into a $9.0 million revolving line of credit
facility with Harris Trust and Savings Bank. Interest accrues quarterly at an
announced prime commercial rate which was 7.75% as of June 30, 1999. Harris
Trust and Savings Bank increased the amount available under the HTSB Note to
$17.5 million in April 1999. The outstanding balance at June 30, 1999 was $16.0
million. The HTSB Note is due on demand and is guaranteed by one of our
stockholders.
In November 1996 and June 1998, we issued $30.0 million and $15.0 million of
senior subordinated notes to an institutional investor. Interest accrues
quarterly at an annual rate of 10.34% on the 1996 notes and 10.09% on the 1998
notes. The notes mature in November 2006 and November 2008 and are subject to
annual required principal payments beginning in 2003. In connection with this
debt, we issued warrants to purchase 286,380 shares of common stock.
We believe the proceeds of the offering, cash flow from operations, our
existing credit facility as amended prior to the offering and existing cash
balances will be sufficient to meet working capital requirements and fund future
acquisitions during the next twelve months. To the extent we pursue additional
acquisitions, or require additional working capital, we may need to obtain
additional sources of financing. There can be no assurance that such financing
will be commercially available through an increased commitment under our credit
facility or otherwise be obtained pursuant to favorable terms, if at all. If we
are unable to obtain additional financing to finance our future operations, we
may not be able to implement our business strategy which could have a material
adverse effect on our business, financial condition and results of operation.
There are no known trends, commitments, events or uncertainties which are
reasonably likely to result in our liquidity increasing or decreasing
materially.
All of our borrowings under our floating rate credit facilities are subject
to interest rate risk. Borrowings under our syndicated revolving credit facility
bear interest, at our option, at either the Eurodollar rate or the ABR rate,
plus a margin. The HTSB Note floats with the bank's commercial prime rate. Each
1.0% increase in interest rates on the total of our floating rate debt would
impact
31
<PAGE>
pretax earnings by approximately $1.7 million. We do not use interest rate swap
contracts to hedge the impact of interest rate fluctuations on certain variable
rate debt.
YEAR 2000 ISSUE
The past practice of computer programs being written using two digits rather
than four to define the applicable year has resulted in the "Year 2000 Issue."
Any of our computer programs or hardware that has date sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
Year 2000. This could result in a system failure or miscalculations causing
disruptions of operations or a temporary inability to engage in normal business
activities. In response to this issue, in 1998 we developed Year 2000 task
forces whose project scopes included the assessment and ongoing monitoring of
all information technology computer hardware and software and non-information
technology equipment affected by the Year 2000 issue. The task forces are
granted the authority and resources to address the Year 2000 issue and receive
supervisory support, as needed, from our Chief Financial Officer. Our plan to
resolve the Year 2000 issue involves the following four phases: systems and
hardware assessment, resolution, testing and implementation. To date, the task
forces have completed their assessment of all our systems that could be
significantly affected by the Year 2000 issue and are in the process of
resolving hardware and software shortfalls. We have installed or are in the
process of installing new hardware and system solutions. We are also contacting
various third parties to obtain representations and assurances that their
hardware, embedded technology systems and software which we will use or will
impact us are, or will be modified on a timely basis to be, Year 2000 compliant.
We identified approximately 50 third parties to be contacted, based on our
identification of those persons as being either significant service providers or
materials suppliers to our business. These third parties include banks, cement
and aggregates suppliers, gas, electricity and water suppliers and telephone
companies. We began contacting these third parties in October 1998 and have
received responses from most of them to date. All the third parties that have
responded have stated that they are or expect to be Year 2000 compliant by the
end of 1999. To date, our costs associated with assessing and monitoring the
progress of third parties in resolving their Year 2000 issues have not been
significant, and we do not expect to incur any material costs in the future
relating to this aspect of our Year 2000 program.
In 1998 we spent $499,400 on system improvements and have budgeted $500,000
to complete the process in 1999. We believe these improvements will resolve our
Year 2000 issues. The results of ongoing system resolution and testing, however,
could result in additional costs to us.
Management believes it has an effective program in place to resolve the
impact of the Year 2000 issue in a timely manner and does not expect the Year
2000 issue to have a material adverse effect on our business, financial
condition and results of operations, but we cannot assure you that this will be
the case. We have not yet completed the conversion of all information
technologies identified in our Year 2000 program. We do not anticipate any
material adverse effect from Year 2000 failures, but you have no guarantee that
we will be able to achieve total compliance. Factors that give rise to this
uncertainty include our possible failure to identify all susceptible systems,
noncompliance by third parties whose systems and operations impact us and a
possible loss of technical resources to perform the work.
Our most likely worst case Year 2000 noncompliance scenarios are:
- loss of gas, electricity, water or phone services;
- failures or delays in the daily delivery of raw materials;
- equipment failures;
- an interruption in our ability to collect amounts due from customers; and
- loss of accurate accounting records.
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<PAGE>
Depending on the length of any noncompliance or system failure, any of these
situations could have a material adverse impact on our ability to serve our
customers in a timely manner and result in lost business and revenues or
increased costs.
We currently have no formal contingency plans in place if we do not complete
all phases of the Year 2000 program. However, the progress of the Year 2000
program is being closely monitored, and additional measures will be taken as
risks are identified. We will continue to evaluate the status of completion
throughout 1999 and determine whether such a plan is necessary.
EFFECT OF INFLATION
Management believes that inflation has not had a material effect on U.S.
Aggregates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Effective June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION ("FAS 131"), which superceded Statement
of Financial Accounting Standard No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A
BUSINESS ENTERPRISE. FAS 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. FAS 131 also
establishes standards for related disclosures about products and services,
geographic areas and major customers. We have determined that U.S. Aggregates
operates in a single reportable segment. Accordingly, the adoption of FAS 131
did not affect our net earnings or financial position, nor did it significantly
change the disclosure of segment information.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES ("SOP
98-5"). Effective January 1, 1999, SOP 98-5 requires that all costs related to
start-up activities, including organizational costs, be expensed as incurred.
The cumulative effect of the adoption of SOP 98-5 impacted our net earnings by
$84, which has been recorded as a nonoperating expense in the first quarter of
1999.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE ("SOP 98-1"). We adopted SOP 98-1 on
January 1, 1999. SOP 98-1 requires the capitalization of certain costs incurred
after the date of adoption in connection with developing or obtaining software
for internal use. We expensed such costs as incurred through December 31, 1998.
We do not expect the impact of the adoption of SOP 98-1 to be material.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME, ("FAS
130"). FAS 130 requires all non-owner changes in equity that are excluded from
net earnings under existing Financial Accounting Standards Board standards be
included as comprehensive income. We presently do not have any material
transactions that directly affect equity other than those transactions with
owners in their capacity as owners. Therefore, the provisions of FAS 130 did not
materially affect our net earnings or financial position.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES ("FAS 133"), which is required to be adopted in years
beginning after June 15, 2000. Because of our minimal use of derivatives,
management does not anticipate that the adoption of FAS 133 will have a
significant impact on our net earnings or financial position.
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<PAGE>
INDUSTRY OVERVIEW
Aggregates are a basic construction material used extensively for highway
and infrastructure construction and maintenance as well as for commercial and
residential construction. For these purposes, aggregates have few, if any,
substitutes. The United States market for all aggregates was approximately 2.8
billion tons in 1998 with a value of $13.5 billion. This represents an increase
of 6.2% in volume and 9.6% in dollar value above 1997 levels.
The following chart sets forth data on the total production of aggregates
and value of annual shipments of aggregates in the United States for the periods
shown.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL AGGREGATES PRODUCTION IN THE
<S> <C> <C>
UNITED STATES AND VALUE OF ANNUAL SHIPMENTS
Million Tons
Tons of Aggregates Production (left
scale)
1985 1800.9
1986 1906.2
1987 2096.33
1988 2171.2
1989 2110.73
1990 2132.6
1991 1879.44
1992 2076.75
1993 2192.5
1994 2338
1995 2388.71
1996 2473.59
1997 2614.68
1998 2777.82
Source: U.S. Geological Survey
$ Billion
Value of Aggregates Production (right
scale)
1985 6.5
1986 7.0
1987 8.3
1988 8.7
1989 8.8
1990 8.8
1991 8.0
1992 8.9
1993 9.5
1994 10.4
1995 10.6
1996 11.2
1997 12.3
1998 13.5
</TABLE>
Historically, demand for aggregates has been only moderately cyclical, as the
chart above illustrates, especially relative to other building materials such as
cement and gypsum wallboard. In addition to moderate cycles, the national per
ton average price for aggregates has not experienced an annual decline between
1985 and 1998 as indicated in the chart below.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AGGREGATE PRICES - NATIONAL AVERAGE
<S> <C>
$/ ton
DATE
1985 $3.60
1986 $3.67
1987 $3.94
1988 $4.00
1989 $4.15
1990 $4.15
1991 $4.25
1992 $4.30
1993 $4.31
1994 $4.43
1995 $4.45
1996 $4.52
1997 $4.72
1998 $4.86
Source: U.S. Geological Survey
</TABLE>
34
<PAGE>
Demand for aggregates is driven significantly by spending on highway and
infrastructure construction and maintenance. Spending levels are influenced by
public sector expenditures for construction and regional economic conditions.
Residential and commercial construction spending is influenced by general
economic conditions and prevailing interest rates and thus is generally more
cyclical than public construction spending. Demand is also seasonal because of
the impact of weather conditions on construction activity.
The table below illustrates total United States public infrastructure
spending over the periods shown.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
UNITED STATES PUBLIC INFRASTRUCTURE SPENDING
<S> <C>
SEASONALLY ADJUSTED, ANNUAL RATE
$ Billions
Through 3/99
DATE
01/1988 56.272
02/1988 56.694
03/1988 60.868
04/1988 60.491
05/1988 60.04
06/1988 58.772
07/1988 62.037
08/1988 57.041
09/1988 58.18
10/1988 59.478
11/1988 59.705
12/1988 63.42
01/1989 62.16
02/1989 59.039
03/1989 54.71
04/1989 59.642
05/1989 62.478
06/1989 59.28
07/1989 58.711
08/1989 59.278
09/1989 60.616
10/1989 59.1
11/1989 61.798
12/1989 62.503
01/1990 64.264
02/1990 66.522
03/1990 62.885
04/1990 62.567
05/1990 63.487
06/1990 62.186
07/1990 66.132
08/1990 63.553
09/1990 60.396
10/1990 65.071
11/1990 66.677
12/1990 64.24
01/1991 56.825
02/1991 63.316
03/1991 63.192
04/1991 61.052
05/1991 62.802
06/1991 63.195
07/1991 60.603
08/1991 62.863
09/1991 62.656
10/1991 65.441
11/1991 64.066
12/1991 64.496
01/1992 66.924
02/1992 69.694
03/1992 71.539
04/1992 68.248
05/1992 69.833
06/1992 65.205
07/1992 63.723
08/1992 63.64
09/1992 63.014
10/1992 61.846
11/1992 64.39
12/1992 67.619
01/1993 60.479
02/1993 66.204
03/1993 64.409
04/1993 68.543
05/1993 65.768
06/1993 69.772
07/1993 67.531
08/1993 65.822
09/1993 68.248
10/1993 65.618
11/1993 68.594
12/1993 71.794
01/1994 69.296
02/1994 67.222
03/1994 67.565
04/1994 68.32
05/1994 68.445
06/1994 70.566
07/1994 75.616
08/1994 71.809
09/1994 72.287
10/1994 72.552
11/1994 69.11
12/1994 71.485
01/1995 72.016
02/1995 69.609
03/1995 73.554
04/1995 72.849
05/1995 73.362
06/1995 75.531
07/1995 73.088
08/1995 76.088
09/1995 75.726
10/1995 77.316
11/1995 77.177
12/1995 77.23
01/1996 80.071
02/1996 78.313
03/1996 76.575
04/1996 81.671
05/1996 80.933
06/1996 77.911
07/1996 77.83
08/1996 75.882
09/1996 79.779
10/1996 79.441
11/1996 79.251
12/1996 75.788
01/1997 79
02/1997 84.68
03/1997 86.685
04/1997 82.806
05/1997 83.648
06/1997 83.187
07/1997 83.403
08/1997 84.722
09/1997 83.404
10/1997 82.499
11/1997 84.142
12/1997 83.416
01/1998 82.624
02/1998 82.764
03/1998 82.65
04/1998 81.962
05/1998 76.804
06/1998 82.344
07/1998 81.827
08/1998 81.573
09/1998 84.511
10/1998 81.383
11/1998 82.269
12/1998 83.433
01/1999 90.146
02/1999 93.228
03/1999 94.779
Source: U.S. Census Bureau
</TABLE>
TEA-21, the largest federal public works spending bill in the history of the
United States, became law in June 1998. This legislation will be a key driver of
federal highway and infrastructure spending and the resulting demand for
aggregates over the next six years. This bill provides for total federal
spending over the 1998 through 2003 period of $218 billion on highway and
infrastructure projects. This spending level represents a 41% increase in
funding above the prior federal highway and infrastructure program, the
Intermodel Surface Transportation Efficiency Act, or ISTEA, which covered the
1992 to 1997 period. TEA-21 authorizes average annual federal spending on
highways and roads of at least $26 billion, nearly 44% higher than the average
annual spending of $18 billion that was spent under ISTEA. In the nine states
that we serve, average annual federal highway spending through 2003 under TEA-21
is projected to be 61% higher than under ISTEA and should provide a strong
underpinning for future aggregates demand.
35
<PAGE>
The table below compares average annual federal highway spending under
TEA-21 relative to spending under ISTEA in the nine states that we serve.
U.S. AGGREGATES, INC.
FEDERAL HIGHWAY SPENDING IN STATES SERVED
<TABLE>
<CAPTION>
AVERAGE ANNUAL SPENDING
------------------------
ISTEA TEA-21
STATE 1992-1997 1998-2003 % INCREASE
- --------------------------------------------------------------------------- ------------ ---------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Alabama.................................................................... $330.3 $530.5 61%
Arizona.................................................................... 255.7 407.8 60
Florida.................................................................... 768.4 1,208.6 57
Georgia.................................................................... 541.4 918.8 69
Idaho...................................................................... 124.8 202.0 62
Mississippi................................................................ 202.3 319.0 58
Nevada..................................................................... 117.3 189.7 62
Tennessee.................................................................. 365.6 592.7 62
Utah....................................................................... 129.9 205.0 58
------------ ---------- ---
Total for states served by U.S. Aggregates............................... $2,835.7 $4,574.1 61%
Total United States...................................................... $18,162.5 $26,173.8 44%
</TABLE>
Source: United States Senate Environment and Public Works Committee
The aggregates industry is currently undergoing significant consolidation,
although generally the industry remains fragmented nationally as well as in many
regional areas. The estimated market share of the top five producers was 25% in
1998. From 1980 to 1998, the number of independent producers of crushed stone in
the United States declined by 22% from approximately 1,865 to approximately
1,450, although crushed stone consumption increased by 68%. From 1980 to 1998,
the number of independent sand and gravel producers declined by 19% from 4,512
to 3,642, although sand and gravel consumption increased by 47%.
Due to the high cost of transportation relative to the value of the product,
competition within the aggregates industry tends to be localized. Generally,
individual aggregate production sites compete for customers within a limited
geographic area, which may be as small as 20-30 miles depending on local
availability of suitable aggregates and the geographic density of demand. As a
result, the proximity of aggregate production sites to customers is an important
factor in competition for customers.
In certain areas of the United States, including markets encompassing our
Gulf Coast operations, sources of aggegates may be located much further from
customers due to factors including a lack of suitable aggregates, local
permitting issues and zoning restrictions. In these areas, aggregates must be
transported from more distant sites and thus transportation becomes a greater
component of overall product cost. This has resulted in shipments into these
markets over long distances by rail and water, which favor large operators like
U.S. Aggregates that can invest in the infrastructure necessary to accommodate
these modes of transportation.
There are four primary factors which limit the availability of economically
viable aggregates reserves in a particular market:
- the geological existence of suitable aggregates within a particular
market;
- the physical characteristics of available aggregates and the difficulty in
satisfying increasingly rigorous specifications required by customers;
36
<PAGE>
- the difficulty in and increasingly higher cost of obtaining the necessary
permits for potential reserves; and
- the feasibility of cost-effectively extracting, processing and delivering
available reserves.
In addition to factors that limit the availability of suitable aggregates,
increasing levels of operational, technical and financial sophistication in the
aggregates industry have rewarded efficient producers with a competitive
advantage in terms of their ability to meet the increasing demand for quality
aggregates and to satisfy increasingly demanding and technically sophisticated
customers. Other factors that operate as constraints on competition in the
aggregates industry include:
- High transportation costs relative to the value of the product, which
generally result in very localized competition, with individual aggregate
production sites competing for customers within a limited geographical
area;
- The increasingly capital intensive nature of aggregate mining and
processing;
- Increasing demand for certain types of aggregates that can meet rigorous
material specifications and quality requirements, particularly the new
federal "SuperPave" program. This gives a competive advantage to efficient
and technically sophisticated producers such as U.S. Aggregates that have
access to and are able to make efficient use of suitable aggregate
reserves;
- Increasingly difficult and expensive zoning and regulatory compliance
requirements, such as obtaining the necessary permits for new aggregate
production sites and the reclamation of depleted sites; and
- Increasing levels of technical sophistication required to compete
effectively, including expertise in geological engineering and planning,
blasting technology, processing facility design, computer automation
technology and reclamation planning.
The difficulty and related expense of complying with environmental and other
regulations also make it difficult for small producers to open new aggregate
production sites, enter new markets and compete effectively. In ongoing
aggregate mining and processing, aggregates producers must adhere to various
mining regulations, including rules and regulations regarding:
- dust and water emissions;
- sediment and erosion control;
- noise limitations;
- wetlands protection;
- reclamation of depleted quarry sites; and
- the safety of blasting and other mining techniques.
Often new aggregate production sites require, among other things, zoning
changes and local, state and federal permits and plans regarding mining,
reclamation and air and water emissions. 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 necessitates a significant up-front
investment and adds to the length of time to develop a new site.
While governmental compliance issues can be challenging, aggregates
producers often face opposition from the communities in which new aggregate
production sites are to be located. Public concerns center on noise levels and
blasting safety, the visual impact of an aggregate production site on
neighboring properties and high volume of truck traffic. To respond to these
issues, producers must operate in a more sophisticated manner such as developing
blasting techniques to minimize surface vibrations and noise and developing an
effective community communications program. Producers are often
37
<PAGE>
required to acquire larger tracts of property to allow for extended buffer zones
between aggregate production sites and surrounding properties and to invest
significant capital to improve road and highway access.
Regulatory requirements and public concerns typically add from one to two
years to the time required by us to develop a new site and, in extreme cases,
may require significantly longer time. In addition, at many locations regulatory
and community obstacles may prevent the development of an attractive site. We
anticipate that environmental compliance, operating considerations and community
relations issues will become more difficult in the future, enhancing the
competitive advantage of larger, more sophisticated producers such as U.S.
Aggregates, further encouraging consolidation in the industry and making entry
into the construction aggregates business increasingly expensive.
38
<PAGE>
BUSINESS
U.S. AGGREGATES
U.S. Aggregates is a leading producer and marketer of aggregates and
associated aggregate-based materials and services. Aggregates consist of crushed
stone, sand and gravel. Our products are used primarily for the construction and
maintenance of highways and other infrastructure projects and for commercial and
residential construction. We serve local markets in nine states in two fast
growing regions of the United States, the Mountain states and the Southeast. We
believe that we are a market leader in most of the local markets that we serve.
Our current estimated aggregate reserve position exceeds 1.3 billion tons, which
at most of our aggregate production sites represents in excess of a 20 year
supply. U.S. Aggregates was founded in January 1994 with the goal of becoming a
leading national producer of aggregates. From our inception in January 1994
through 1998, through internal growth and acquisitions, our net sales have
increased to $228.7 million while operating profit has increased to $24.4
million.
Our growth in sales and profitability has been driven by several factors. We
hold strong positions in a number of fast growing local markets in the Mountain
states and Southeast regions of the United States. A majority of our aggregate
sales are in the highway and infrastructure construction and maintenance
markets. During the 1990s, our markets benefitted from increased public sector
spending on highway projects and should continue to see significant growth in
the future as a result of a new, six year, $218 billion federal commitment to
highway and infrastructure projects. Through our management and technical
expertise, we have positioned ourselves as an efficient, low-cost producer and
supplier of high-quality aggregates. We have expanded into contiguous and new
markets by acquiring, integrating, developing and further strengthening
facilities, operations and aggregate sites. Additionally, we have enhanced the
performance of our acquired facilities through increased capital investment and
our management and technical expertise.
In the Mountain states, we serve markets in Utah, Idaho, Nevada and Arizona.
In the Southeast, we serve markets in Alabama, Tennessee, the Florida panhandle,
Mississippi and Georgia. We are well positioned to benefit from continued strong
economic activity in these states and in the local markets where we operate.
According to the Bureau of Labor Statistics, from 1993 to 1998, compound annual
growth in employment in these nine states was 3.7%. The United States compound
annual growth in employment over this period was 2.6%. According to the U.S.
Geological Survey, from 1993 to 1998, compound annual growth in consumption of
aggregates in the nine states we serve was 6.7%. The United States compound
annual growth in consumption of aggregates over this period was 4.8%.
Nationally, approximately 50% of aggregate production is used in highway and
infrastructure construction and maintenance. As a result, we will benefit from
the 1998 passage of the six year, $218 billion Transportation Equity Act for the
21st Century, or TEA-21. TEA-21 designates a minimum of $158 billion nationally
for federal highway construction and maintenance projects. This represents a 44%
increase above average annual federal highway spending levels under the
predecessor six year federal program. In the nine states we serve, average
annual federal highway spending under TEA-21 is projected to be 61% higher than
under the predecessor program. This federal spending, along with programs by
state and local governments, should provide strong underpinnings for our future
growth.
GROWTH STRATEGY
We believe that long-term, high-quality aggregate reserves located near
customers are central to our success. Accordingly, we have focused on the
acquisition and development of aggregate production sites and companies that are
well positioned to serve growing markets. Since our inception, we have completed
and integrated 28 business and asset acquisitions, including both operating
companies and
39
<PAGE>
aggregate production facilities. Our strategy is to utilize our management and
financial resources to strengthen our position in local markets by:
SERVING GROWTH IN EXISTING MARKET AREAS. Demand for aggregates in the
markets we serve has meaningfully outpaced overall United States demand for
aggregates over the past five years. We will continue to take advantage of our
established aggregate reserve capacity and the maturation of our newly developed
aggregate production sites to meet our customers' demands. We have increased our
annual production by 4.1 million tons to 21.6 million tons by opening eight new
major aggregate sites during the 1996 to 1998 period. We believe that our
financial performance does not yet fully reflect the benefit of these new
operations. Based on our experience, a new aggregate production site's sales,
cash flow and profitability usually increase over the first five years of
operation as production is increased and the new aggregate site matures.
EXPANDING CAPACITY AND MAINTAINING COST-COMPETITIVENESS. Where appropriate,
we will expand our production capacity and invest capital in additional plant
and equipment so that we can serve additional demand in our existing local and
remote markets. As we continue to increase capacity we will focus on maintaining
our cost-competitiveness.
MAKING ADD-ON ACQUISITIONS AND DEVELOPING NEW AGGREGATE RESERVES IN EXISTING
MARKETS. We will continue to make add-on acquisitions and to develop well
positioned aggregate reserves. Our primary objective is to increase our
competitive position within the local and remote markets we serve.
SERVING MARKETS IN CONTIGUOUS AREAS. We will use our access to existing and
additional reserves so that we can move into contiguous markets when
opportunities arise.
EXPANDING INTO NEW MARKETS PRIMARILY THROUGH ACQUISITIONS. We will evaluate
and may make acquisitions in new market areas. These potential acquisitions may
be made in the regions we currently serve or, where economically attractive, in
new regions. These acquisitions may entail further add-on acquisitions and
additional capital expenditures to expand our operations in these new areas.
OPERATIONS
We are a leading producer and marketer of aggregates and associated
aggregate-based materials and services. Approximately 75% of our aggregates
volume is sold directly to customers. The balance is used to produce asphalt,
which generally contains approximately 90% aggregates by volume; and ready-mix
concrete, which generally contains approximately 80% aggregates by volume. Our
integration into these aggregate-based materials and related services generally
occurs in markets where our main competitors are integrated into these products.
Our entries into markets in the fast growing Mountain states and Southeast
regions have provided the incremental market demand to justify the development
of a number of new aggregate production sites as well as upgrades of existing
facilities. Approximately 48% of our production in 1998 was produced at
aggregate production sites which are less than three years old. We are currently
developing these new aggregate production sites.
Our production capacity has increased to approximately 30 million tons per
year since 1994 while unit costs have been reduced substantially from the level
of costs incurred in individual operations at the time they were acquired or
started. This cost reduction is the result of comprehensive mining plans
combined with the installation of state of the art equipment permitting the
implementation of "best practices" throughout our operations. In addition,
asphalt plants and transportation infrastructure for delivery of asphalt and
concrete have been upgraded.
40
<PAGE>
The following table shows, for the periods indicated, our total shipments of
aggregates, asphalt and ready-mix concrete.
U.S. AGGREGATES, INC.
SHIPMENTS OF AGGREGATES, ASPHALT AND READY-MIX CONCRETE
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Tons of aggregates produced:
Sold directly to customers..................................... 1.5 3.1 5.1 6.6 11.9
Used internally................................................ 0.6 1.7 2.1 2.9 3.9
--- --- --- --- ---
Total tons of aggregates produced............................ 2.1 4.8 7.2 9.5 15.8
PERCENTAGE OF AGGREGATES PRODUCED USED INTERNALLY.......... 28.6% 35.4% 29.2% 30.5% 24.7%
Tons of asphalt sold............................................. 0.1 0.6 0.9 1.3 1.6
Yards of ready-mix concrete sold................................. 0.4 0.8 0.9 0.9 1.4
<CAPTION>
PRO FORMA
1998
-------------
<S> <C>
Tons of aggregates produced:
Sold directly to customers..................................... 17.6
Used internally................................................ 4.0
---
Total tons of aggregates produced............................ 21.6
PERCENTAGE OF AGGREGATES PRODUCED USED INTERNALLY.......... 18.5%
Tons of asphalt sold............................................. 1.6
Yards of ready-mix concrete sold................................. 1.7
</TABLE>
Pro Forma 1998 gives effect to the 1998 acquired businesses as if they were
acquired on January 1, 1998.
PRODUCT DESCRIPTION AND MANUFACTURING PROCESS
We manufacture and distribute aggregates as well as construction materials
with high aggregate content, including asphalt and ready-mix concrete.
We have also developed state of the art material quality control and
application design laboratories to ensure the highest levels of quality are
maintained. These laboratories permit us to provide aggregates customers with
the most cost effective and consistent materials for downstream applications,
ensuring their compliance with increasingly stringent specifications. We also
provide third party aggregates producers with these certification services. The
laboratories have also contributed to our record of achieving bonuses on
projects where control of variances in materials within a tight range can result
in additional profits.
AGGREGATES
We have developed extensive mining plans at key sites to ensure the long
term competitive position of our aggregate reserves. Typically, we mine raw
aggregates from an open aggregate production site, crush the material and
separate it by size for specific uses. Aggregates are then either shipped by
truck or rail to customers, stockpiled for customer pick-up or used in producing
asphalt, ready-mix concrete and related products.
ASPHALT
Asphalt generally has an aggregates content of approximately 90% by volume.
We produce paving asphalt by heating and mixing aggregates with hot liquid
asphalt in accordance with each customer's specifications. Once produced, we
transfer asphalt into trucks and deliver it directly to job sites for immediate
application. We produce asphalt in many of our markets in the Mountain states,
including throughout Utah and in Las Vegas and northwestern Arizona, where our
competitors are largely also integrated producers. Generally, we have expanded
our asphalt operations in the Mountain states in order to benefit from
government spending on highway construction and maintenance projects.
41
<PAGE>
READY-MIX CONCRETE
Ready-mix concrete generally has an aggregates content of approximately 80%
by volume. We produce ready-mix concrete by mixing aggregates with cement, water
and additives, which have the effect of controlling the concrete's strength,
drying speed and other characteristics. We deliver the concrete by mixer trucks
to construction sites for immediate use. We produce ready-mix concrete in a
number of markets including Chattanooga, Tennessee and throughout Alabama, Utah
and Idaho, among other areas. Generally, we have not expanded ready-mix
operations other than as a result of acquiring an operating company that had an
existing ready-mix business.
RESERVES
We estimate that our total recoverable aggregate reserves are in excess of
1.3 billion tons. The yield from the extraction of reserves is based on an
estimate of the volume of materials which can be economically extracted to meet
current market and product applications. Our mining plans are developed by
experienced mining and operating personnel based on internal and outside
drilling and geological studies and surveys. In some cases, zoned properties
must be extracted in phases as reserves in a particular area of the reserve are
exhausted.
We own approximately 600 million tons and lease approximately 700 million
tons of our aggregate reserves. Leases usually provide for royalty payments
based on revenues from aggregates sold at a specific location. Leases usually
expire after a specific time period and may be renewable for additional terms.
Most leases have extension options providing for at least 20 years of operation
based on 1998 extraction rates. With minor exceptions, where lease options total
less than 20 years, we have developed and zoned additional reserves that will
allow us to serve our markets on a competive basis and ensure long term
availability. Generally, reserves at our aggregate production sites are adequate
for in excess of 20 years production at 1998 rates of extraction. At one of our
quarries we are required to extract a minimum amount of 100,000 tons of
aggregate per year and at another quarry, 500,000 tons of aggregate per year in
order to maintain our rights to mine reserves on these leased properties. We
anticipate fulfilling these minimum extraction requirements during the lease
terms.
The following table presents our aggregate reserves by market area.
U.S. AGGREGATES, INC.
AGGREGATE RESERVES BY MARKET AREA
<TABLE>
<CAPTION>
ZONED/ ZONED/
PERMITTED UNPERMITTED UNZONED TOTAL
----------- --------------- ----------- ---------
(IN MILLION TONS)
<S> <C> <C> <C> <C>
Alabama............................................................. 457 50 -- 507
Eastern Tennessee................................................... 73 -- -- 73
Northern Utah....................................................... 364 -- -- 364
Central Utah........................................................ 113 -- 54 167
So. Utah/SE Nevada/NW Arizona....................................... 129 -- 83 212
Idaho............................................................... 37 -- -- 37
----------- --- ----- ---------
TOTAL............................................................. 1,173 50 137 1,360
----------- --- ----- ---------
----------- --- ----- ---------
</TABLE>
We also have two aggregate production sites in Georgia, one of which is
leased to a major building materials producer under a long term lease. The other
aggregate production site is not anticipated to provide us with a base of
operations in Georgia in 1999.
42
<PAGE>
Because transportation represents such a large component of overall cost of
aggregates delivered to the customer, we operate a large number of small to
medium size aggregate sites. In 1998, no single aggregate production site
accounted for more than 4.0% of consolidated net sales.
TRANSPORTATION
We have a modern transportation infrastructure that allows us to maintain
our competitive position. We have expanded our infrastructure to accommodate
rail shipments of aggregates to our remote markets and we will have the option
of shipping by water from one site by the end of 1999. We own approximately 450
trucks and lease approximately 300 trucks that we use primarily to deliver
aggregates and associated products such as ready-mix concrete and asphalt,
representing approximately 25% of our total volume of aggregates sold. We also
contract for additional trucks to transport aggregates and asphalt to meet short
term peak demand.
PROPERTIES
In 1998, 26 of our aggregate production sites each had shipments of greater
than 100,000 tons. We conducted mining operations in 1998 at all of these
aggregate production sites, of which 12 are located on property we own, two are
on land owned in part and leased in part, 11 are on leased property, and one is
on facilities leased on a job basis. We own 61 pieces of real property and lease
property at 62 locations. We have six pieces of property which are owned in part
and leased in part. Leases typically provide for royalty payments based on
revenues from material extracted from the facility, with specified minimum
monthly royalties. Our significant quarry leases expire from the year 2012 to
2039 and in some cases are renewable for a specified series of additional terms.
We have historically been successful in negotiating desired lease extensions.
Our aggregate production sites are generally small-to medium-sized by industry
standards and we believe that no single aggregate production site is of major
significance to our operations.
Our policy has been to obtain surveys and title opinions on many of our
owned and leased parcels. In addition, we evaluate on a case by case basis
whether to purchase title insurance in connection with real estate purchases and
did in fact obtain title insurance on many of our owned parcels.
RECLAMATION
We are required by the laws of various states to reclaim aggregate sites
after reserves have been depleted. Each site's mining plan includes a
reclamation plan which has been developed for that site to maximize the value of
the end use of the site. In some cases, depleted sites have been sold for
commercial or residential properties generating additional profits.
Historically, we have not incurred and do not anticipate incurring substantial
costs in excess of residual land values in connection with the closing of
aggregate operations due to depletion of reserves.
MANAGEMENT INFORMATION SYSTEMS
In general, we use networked management information systems for immediate
access to production and sales data from our production facilities, tracking
thousands of transactions each day. Automated sales and invoicing systems weigh
trucks at the aggregate production site and related facilities and immediately
generate customer invoicing and sales information. These streamlined procedures
reduce both transportation costs and customer turnaround-time at the aggregate
production site, increasing our productivity and providing us with a competitive
advantage over producers who do not use similar systems.
43
<PAGE>
CUSTOMERS
We market our aggregates products to customers in a variety of industries,
including public infrastructure, commercial and residential construction
contractors; producers of asphaltic concrete, ready-mix concrete, concrete
blocks, and concrete pipes; and railroads. A substantial amount of our
aggregates is used in publicly funded projects. Currently, we do not have any
customers that account for more than 10% of our sales.
COMPETITION
Because of the impact of high transportation costs on the aggregates
business, competition in each of our markets tends to be limited to producers in
proximity to our production facilities. Although we experience competition in
all of our markets, we believe that we are generally a leading producer in the
market areas we serve. Competition is based primarily on aggregate production
site location and price, but quality of aggregates and level of customer service
are also important factors. We compete directly with a number of large and small
producers in the markets we serve. Certain of our competitors have greater
financial resources than we have.
EMPLOYEES
We employ approximately 2,000 employees, of whom approximately 1,600 are
hourly, approximately 400 are salaried and 43 are part-time. Approximately 600
of our employees are represented by labor unions. The expiration dates of the
various labor union contracts are from July 1999 through July 2001. We consider
our relations with our employees to be good.
GOVERNMENTAL AND ENVIRONMENTAL REGULATION
Our facilities are subject to various evolving federal, state and local laws
and regulations relating to the environment, including those relating to
discharges to air, water and land, the handling and disposal of solid and
hazardous waste and the cleanup of properties affected by hazardous substances.
Certain environmental laws impose substantial penalties for noncompliance, and
others, such as the federal Comprehensive Environmental Response, Compensation,
and Liability Act, as amended, impose strict, retroactive, joint and several
liability upon persons responsible for releases of hazardous substances.
In connection with our corporate acquisitions, we usually obtain
environmental assessments from independent environmental consultants. These
assessments generally consist of a site visit, historical record review,
interviews with key personnel and preparation of a report. The purpose of the
consultant's work is to identify potential environmental conditions or
compliance issues associated with the subject property and operations. Some risk
of environmental liability is inherent in the nature of our business, however,
and we might incur future material costs to meet current or more stringent
compliance, cleanup or other obligations pursuant to environmental laws.
We continually evaluate whether we must take additional steps at our
locations to ensure compliance with certain environmental laws. We believe that
our operations are in substantial compliance with applicable laws and
regulations and that any noncompliance is not likely to have a material adverse
effect on our business, financial condition or results of operations. However,
future events, such as changes in or modified interpretations of existing laws
and regulations or enforcement policies, or further investigation or evaluation
of the potential health hazards of certain products or business activities, may
give rise to additional compliance and other costs that could have a material
adverse effect on us.
U.S. Aggregates, as well as other companies in the aggregates industry,
produce certain products containing varying amounts of crystalline silica.
Excessive and prolonged inhalation of very small particles of crystalline silica
has been associated with non-malignant lung disease. The carcinogenic potential
44
<PAGE>
of excessive exposure to crystalline silica has been evaluated for over a decade
by a number of research groups including the International Agency for Research
on Cancer, the National Institute for Occupational Safety and Health and the
National Toxicology Program, a part of the Department of Health and Human
Services. Results of various studies have ranged from classifying crystalline
silica as a probable to a known carcinogen. Other studies concluded higher
incidences of lung cancer in some operations was due to cigarette smoking, not
silica. Governmental agencies, including the Occupational Safety and Health
Administration and Mine Safety Health Administration, coordinate to establish
standards for controlling permissible limits on crystalline silica. In the early
1990s, they considered lowering silica exposure limits but decided to retain
existing limits.
Recently, the Occupational Safety and Health Administration has announced a
deadline of June 2000 for release of new rules to implement more stringent
regulations. We believe we currently meet government guidelines for crystalline
silica exposure and will continue to employ advanced technologies as they become
available to ensure worker safety and comply with regulations.
We believe that our compliance with environmental laws has not had a
material adverse effect on our business, financial condition or results of
operations. See "Risk Factors" for a further description for the effect of
environmental regulation on our business.
LEGAL PROCEEDINGS
From time to time, U.S. Aggregates and our subsidiaries have been involved
in various legal proceedings relating to our and our subsidiaries' operations
and properties, all of which we believe are routine in nature and incidental to
the conduct of our and our subsidiaries' business. Our and our subsidiaries'
ultimate legal and financial liability with respect to such proceedings cannot
be estimated with certainty, but we believe, based on our examination of such
matters, that none of these proceedings, if determined adversely, would have a
material adverse effect on our business, financial condition or results of
operations.
45
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of May 15, 1999, with
respect to our directors and executive officers. Our executive officers serve at
the discretion of our board of directors and may be terminated at any time
without notice.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------ --- -------------------------------------------------
<S> <C> <C>
James A. Harris............... 65 Chief Executive Officer and Chairman of the Board
Morris L. Bishop, Jr.......... 54 President, Chief Operating Officer and Director
Michael J. Stone.............. 55 Executive Vice President--Development, Chief
Financial Officer, Treasurer, Secretary and
Director
Bruce V. Rauner............... 43 Director
David A. Donnini.............. 34 Director
Charles R. Pullin............. 75 Director
Edward A. Dougherty........... 41 Director
</TABLE>
JAMES A. HARRIS. Mr. Harris has been Chief Executive Officer and Chairman of
the Board since he founded U.S. Aggregates with Michael J. Stone and Golder,
Thoma, Cressey, Rauner Fund IV, L.P. in January 1994. Prior to 1994 Mr. Harris
held a number of senior executive positions at Koppers Co., Inc. including a ten
year period when he was responsible for acquisitions for its aggregates
division, Koppers Construction Materials and Services Group. This division of
Koppers grew from $32 million in sales and $4 million in operating income in
1967 to $900 million in sales and $117 million in operating income in 1987. This
growth positioned Koppers as the second largest producer of aggregates in the
United States in 1988.
MORRIS L. BISHOP, JR. Mr. Bishop has been President and Chief Operating
Officer of U.S. Aggregates since May 1997. Mr. Bishop has been a Director since
May 1999. Prior to joining us, Mr. Bishop was with Hoover, Inc., Koppers
Company, Inc. and Vulcan Materials Company serving in senior management
positions in their respective construction materials businesses.
MICHAEL J. STONE. Mr. Stone has been Executive Vice President--Development,
Chief Financial Officer, Treasurer, Secretary and Director since Mr. Harris and
he founded U.S. Aggregates with Golder, Thoma, Cressey, Rauner Fund IV, L.P. in
January 1994. Prior to joining us, Mr. Stone was Chief Financial Officer of
Genstar Building Materials and Services Group, a $1.0 billion division of
Genstar Corporation. This group included Genstar Stone Products, the tenth
largest crushed stone producer in the United States.
BRUCE V. RAUNER. Mr. Rauner has served as a director of U.S. Aggregates
since its founding in January 1994. Mr. Rauner is the Managing Principal of GTCR
Golder Rauner, LLC, a private equity investment company in Chicago, Illinois
formed in January 1998 as a successor to Golder, Thoma, Cressey, Rauner, Inc.,
where he has been a Principal since 1981. Mr. Rauner is also a director of
Coinmach Corporation, Lason, Inc., Province Healthcare Company and AnswerThink
Consulting Group, Inc.
DAVID A. DONNINI. Mr. Donnini has served as a director of U.S. Aggregates
since its founding in January 1994. Mr. Donnini is a Principal of GTCR Golder
Rauner, LLC, a private equity investment company in Chicago, Illinois formed in
January 1998 as a successor to Golder, Thoma, Cressey, Rauner, Inc., where he
has been a Principal since 1993. Mr. Donnini is also a director of Coinmach
Corporation and Polymer Group, Inc.
46
<PAGE>
CHARLES R. PULLIN. Mr. Pullin has been a director of U.S. Aggregates since
August 1994. From 1967 until 1981, when he was appointed Vice Chairman of
Koppers Company, Inc., he served in a number of executive positions at Koppers.
Mr. Pullin was appointed Chief Executive Officer and Chairman of Koppers in 1982
and served in those positions until his retirement in June 1988. During Mr.
Pullin's tenure, Koppers Construction Materials and Services Group grew from a
small acquisition in 1966 to be the second largest producer of aggregates in the
United States in 1988.
EDWARD A. DOUGHERTY. Mr. Dougherty has served as a director of U.S.
Aggregates since July 1997. Mr. Dougherty has provided consulting services to us
since our founding in January 1994. Since 1991, Mr. Dougherty has been an
independent financial advisor, having previously been employed by Bear, Stearns
& Co. Inc., an investment banking firm. Mr. Dougherty is also a director of
Cardinal Logistics Management, Inc.
Our board of directors currently consists of seven directors, divided into
three classes. At each annual meeting of our stockholders, successors to the
class of directors whose term expires at such meeting will be elected to serve
for three-year terms or until their successors are duly elected and qualified.
Messrs. Dougherty and Stone are members of the class whose terms expire in 2000,
Messrs. Bishop, Pullin and Rauner are members of the class whose terms expire in
2001, and Messrs. Donnini and Harris are members of the class whose terms expire
in 2002. Our board of directors has the power to appoint our officers. Each
officer will hold office for such term as may be prescribed by our board of
directors and until such person's successor is chosen and qualified or until
such person's death, resignation or removal.
COMPENSATION OF DIRECTORS
Directors currently do not receive a salary or an annual retainer for their
services. Following the offering we expect however, that non-employee directors
not otherwise affiliated with us or our stockholders will be paid an annual cash
retainer of $3,000. We will also periodically grant these non-employee directors
options to purchase shares of common stock pursuant to our incentive plan. We
will not pay any additional compensation to our employees for serving as
directors, but we will reimburse all directors for out-of-pocket expenses they
incur in connection with attending board or board committee meetings or
otherwise in their capacity as directors. See "--Incentive Plan" for a further
discussion of director compensation.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation of our executive officers will be determined by our board
of directors. The executive officers' bonuses are determined by the compensation
committee of the board of directors and are based on our overall profitability.
We have reserved 700,840 shares of common stock for issuance under a stock
option plan. Options will be issued to employees and executive officers based on
the recommendation of the compensation committee of the board of directors
according to the following:
- Employees holding positions of responsibility with us and whose
performance can have a significant effect on our success and individuals
who have agreed to become our employees within six months of the date of
grant; and
- Non-employee directors.
Awarded shares that we do not issue will again become available for awards.
For purposes of the Exchange Act, which could impose so-called short-swing
trading liabilities on our directors and executive officers in connection with
their purchases and sales of common stock within any six-month period, the
incentive plan will qualify for the exemptions provided under the Exchange Act.
The following table sets forth information regarding the compensation paid
or accrued by us to our chief executive officer and each of our other top
executive officers for services rendered to us in all capacities during the
years indicated.
47
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------------
------------------------------------------------ RESTRICTED
OTHER ANNUAL STOCK STOCK ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- ------------------------------------- --------- ---------- ---------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
James A. Harris...................... 1998 258,333 -- -- -- 2,500
Chief Executive Officer and 1997 200,000 75,000 -- -- -- 4,750
Chairman of the Board 1996 200,000 200,000 -- -- -- 4,750
Morris L. Bishop..................... 1998 220,833 -- -- -- 2,500
President, Chief Operating 1997 167,500 75,000 -- -- -- 2,375
Officer and Director 1996 150,000 100,000 -- -- -- 2,250
Michael J. Stone..................... 1998 208,333 -- -- -- 2,500
Executive Vice President-- 1997 150,000 75,000 -- -- -- 4,750
Development, Chief Financial 1996 150,000 150,000 -- -- -- 4,750
Officer,
Treasurer, Secretary
and Director
</TABLE>
In 1998, Messrs. Harris, Bishop and Stone did not receive bonuses. In May
1999, in recognition of the successful completion of our recent Southeast
expansion program, Mr. Harris was awarded a bonus of $200,000, Mr. Bishop was
awarded a bonus of $125,000 and Mr. Stone was awarded a bonus of $200,000.
MANAGEMENT EMPLOYMENT AGREEMENTS
JAMES A. HARRIS. On January 24, 1994, we entered into an employment
agreement with Mr. James A. Harris, our President and Chief Executive Officer.
Currently, Mr. Harris is entitled to a base salary of $300,000 and a bonus, as
determined from time to time by our board of directors, that is not to exceed
one-half of Mr. Harris' annual base salary for the year. If Mr. Harris'
employment is terminated without cause, or as a result of death or disability,
Mr. Harris is entitled to payment of $16,667 per month for a period of twelve
months following his termination. We plan to amend Mr. Harris' employment
agreement prior to the offering to provide for a three-year term, create a
discretionary bonus and revise the existing severance provisions.
MORRIS L. BISHOP, JR. On August 5, 1995, we entered into an employment
agreement with Mr. Morris Bishop, Jr., our President and Chief Operating
Officer. Under the terms of this agreement, Mr. Bishop is entitled to a base
salary of $250,000 and a bonus in such amount not exceeding one-half of Mr.
Bishop's base salary and based on such criteria as may be established from time
to time by our board of directors. If Mr. Bishop's employment is terminated
without cause, he is entitled to payment of $12,500 per month for twelve months
after termination. We plan to amend Mr. Bishop's employment agreement prior to
the offering to provide for a three-year term, create a discretionary bonus and
revise the existing severance provisions.
MICHAEL J. STONE. On January 24, 1994, we entered into an employment
agreement with Mr. Michael J. Stone, our Executive Vice President--Development,
Chief Financial Officer, Treasurer and Secretary. Under this agreement, Mr.
Stone is entitled to a base salary of $250,000 and a bonus, as determined from
time to time by our board of directors, which is not to exceed one-half of Mr.
Stone's base salary for the year. If Mr. Stone's employment is terminated
without cause, or as a result of death or disability, he is entitled to payment
of $12,500 per month for twelve months after his termination. We plan to amend
Mr. Stone's employment agreement prior to the offering to provide for a
three-year term, create a discretionary bonus and revise the existing severance
provisions.
48
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1998, the compensation committee of our board of directors held no
meetings. Accordingly, decisions concerning compensation of our executive
officers were made by the entire board. Other than Messrs. Harris and Stone,
none of our officers or employees participated in deliberations concerning such
compensation matters.
401(k) PLAN
We maintain a savings plan qualified under Section 401(a) and 401(k) of the
Internal Revenue Code. Generally, all of our full-time employees other than
union employees are eligible to participate in the plan. Employees electing to
participate in the plan are fully vested in their contributions. In addition, we
may make discretionary contributions under the plan each year. Participating
employees increase their vested interest in the discretionary contributions
based upon years of employment in which a minimum of 1,000 hours are worked and
they become fully vested after seven years. The maximum contribution for any
participant for any year is the maximum amount permitted under the Internal
Revenue Code.
COMMITTEES OF THE BOARD OF DIRECTORS
We have two standing committees of our board of directors: the compensation
committee and the audit committee. The compensation committee, which currently
consists of Messrs. Rauner, Donnini and Pullin, makes recommendations regarding
the incentive plan and decisions concerning salaries and incentive compensation
for our executive officers, key employees and consultants. The audit committee,
which currently consists of Messrs. Rauner, Donnini and Pullin, is responsible
for making recommendations to our board regarding the selection of independent
auditors, reviewing the results and scope of the audit and other services
provided by our independent accountants and reviewing and evaluating our audit
and control functions. Our board may also create other committees.
INCENTIVE PLAN
Prior to the completion of the offering, we will establish the U.S.
Aggregates, Inc. Long Term Incentive Plan. A maximum of 700,840 shares of our
common stock, subject to adjustment, have been initially authorized for the
granting of stock options under the incentive plan. To date, no options have
been granted pursuant to the incentive plan. We plan to grant stock options to
purchase 280,336 shares of our common stock to key employees concurrently with
the offering. Options granted under the incentive plan may be either "incentive
stock options," which qualify for special tax treatment under the Internal
Revenue Code, or nonqualified stock options. The purposes of the incentive plan
are to advance the interests of U.S. Aggregates and our stockholders by
providing our employees with an additional incentive to continue their efforts
on our behalf, as well as to attract people of experience and ability to U.S.
Aggregates. The incentive plan is intended to comply with Rule 16b-3 of the
Exchange Act.
It is expected that all of our and our subsidiaries' officers, directors and
other employees and consultants will be eligible to participate under the
incentive plan, as deemed appropriate by our compensation committee. Eligible
employees will not pay any cash consideration to us to receive the options. The
incentive plan will be administered by our compensation committee. The exercise
price for incentive stock options must be no less than the fair market value of
our common stock on the date of grant. The exercise price of nonqualified stock
options is not subject to any limitation based upon the then current market
value of our common stock. Options will expire no later than the tenth
anniversary of the date of grant. An option holder will be able to exercise
options from time to time, subject to vesting. Options will vest immediately
upon death or disability of a participant and upon certain change of control
events. Upon termination for cause or at will, the unvested portion of the
options will be forfeited. Subject to the above conditions, the exercise price,
duration of the options and vesting provisions will be set by our compensation
committee in its discretion.
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PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth certain information regarding the equity
ownership of U.S. Aggregates:
- each person or entity who beneficially owns five percent or more of our
common stock;
- each of our directors and executive officers;
- each of the selling stockholders; and
- all of our directors and executive officers as a group.
Unless otherwise stated, each of the persons named in the table has sole
voting and investment power with respect to the securities beneficially owned by
it, him or her as set forth opposite its, his or her name. Beneficial ownership
of our common stock listed in the table has been determined in accordance with
the applicable rules and regulations under the Exchange Act.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING OFFERING(1)
----------------------- -----------------------
NUMBER OF NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
- --------------------------------------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Golder, Thoma, Cressey, Rauner Fund IV, L.P.(2)(3)................... 5,105,891 72.2% 5,105,891 36.4%
James A. Harris(2)(4)................................................ 497,505 7.0% 497,505 3.6%
Morris L. Bishop, Jr................................................. 123,893 1.8% 123,893 0.9%
Michael J. Stone(2)(5)............................................... 339,784 4.8% 339,784 2.4%
Bruce V. Rauner(2)(3)................................................ 5,105,891 72.2% 5,105,891 36.4%
David A. Donnini(2)(3)............................................... 5,105,891 72.2% 5,105,891 36.4%
Charles R. Pullin.................................................... 14,837 * 14,837 *
Edward A. Dougherty.................................................. 20,424 * 20,424 *
The Prudential Insurance Company of America(2)(6).................... 286,380 4.1% 286,380 2.0%
All directors and executive officers as a group (7 persons).......... 6,102,334 86.1% 6,102,334 43.5%
</TABLE>
- ------------------------
* Represents less than one percent.
(1) Assumes no exercise of the U.S. underwriters' and international managers'
over-allotment option and does not give effect to any purchases, if any, by
such persons named in the table in the offering.
(2) Certain of our stockholders have granted the U.S. underwriters and the
international managers the right to purchase up to 1,041,667 shares to cover
any over-allotments. If the over-allotment option is exercised in full,
Golder, Thoma, Cressey, Rauner Fund IV, L.P. will beneficially own 4,407,275
shares or 31.4%, The Prudential Insurance Company of America will
beneficially own 236,380 shares or 1.7%, James A. Harris will beneficially
own 323,378 shares or 2.3% and Michael J. Stone will beneficially own
220,860 shares or 1.6%.
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(3) All of such shares are held of record by Golder, Thoma, Cressey, Rauner Fund
IV, L.P. Golder, Thoma, Cressey, Rauner, Inc. is the general partner of GTCR
IV, L.P., which is the general partner of Golder, Thoma, Cressey, Rauner
Fund IV, L.P. Messrs. Rauner and Donnini are Principals of Golder, Thoma,
Cressey, Rauner, Inc., and may be deemed to share the power to vote and
dispose of such shares. The address of Golder, Thoma, Cressey, Rauner Fund
IV, L.P. is 6100 Sears Tower, Chicago, Illinois 60606. Each of Messrs.
Rauner and Donnini disclaims beneficial ownership of the shares of our
common stock owned by Golder, Thoma, Cressey, Rauner Fund IV, L.P.
(4) Includes (A) 49,737 shares held by a charitable remainder trust and (B)
199,010 shares held by a grantor retained annuity trust for the benefit of
Mr. Harris' sons. Mr. Harris disclaims beneficial ownership of the shares of
our common stock owned by the trusts.
(5) All of such shares are held by a trust for the benefit of Mr. Stone and his
wife for which they also serve as trustees. Mr. Stone disclaims beneficial
ownership of the shares of our common stock held by the trust.
(6) The Prudential Insurance Company of America owns warrants to purchase up to
286,380 shares of our common stock and has indicated that it intends to
convert all of its warrants into common stock upon the consummation of the
offering.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion describes a number of transactions we have entered
into with affiliates. We believe that the terms of these transactions are at
least as fair to us as we could have obtained from unaffiliated third parties.
THE RECAPITALIZATION
In connection with and immediately prior to the consummation of the
offering, each outstanding share of Western Aggregates Holding Corp. common
stock not held by us will be converted into approximately 0.6227 shares of our
common stock, and each outstanding share of SRM Holdings Corp. common stock not
held by us will be converted into approximately 8.0707 shares of our common
stock. Each share of our common stock will then be subject to an approximate
30.0347 to 1 stock split. Concurrent with the consummation of the offering, we
will use a portion of the proceeds of the offering to redeem 300,842 shares of
our preferred stock owned by Golder, Thoma, Cressey, Rauner Fund IV, L.P.,
Messrs. Harris and Dougherty, a trust for the benefit of Mr. Stone and his wife
for which they also serve as trustees and one of our other stockholders, at an
aggregate price of approximately $45.8 million or $152.13 per share, including
accrued dividends. Dividends have accrued daily at an annual rate of 10% on the
preferred stock since the date of issuance. See "Use of Proceeds" and
"Description of Capital Stock--The Recapitalization" for a further description
of these events.
CERTAIN LOANS TO EXECUTIVES
As of June 30, 1999, we have outstanding principal loans of approximately
$146,000 to James A. Harris, our Chief Executive Officer and Chairman of the
Board, $100,000 to Michael J. Stone, our Executive Vice President, Chief
Financial Officer, Treasurer and Secretary and a Director, $247,000 to Morris L.
Bishop, Jr., our President and Chief Operating Officer and a Director, pursuant
to promissory notes to finance their purchase of our securities. Each of the
notes is secured by a pledge of the securities purchased with the note pursuant
to a pledge agreement between us and each of Messrs. Harris, Stone and Bishop.
The notes bear interest at a rate per annum equal to 8%. The principal amount of
the notes and all interest accrued thereon mature in part on various dates
beginning in October 2001, with the remainder maturing in October 2005. The
notes may be prepaid in full or in part at any time.
PROFESSIONAL SERVICES AGREEMENT
We have a professional services agreement with Golder, Thoma, Cressey,
Rauner, Inc. pursuant to which it provides financial and management consulting
services to us. Under the professional services agreement, Golder, Thoma,
Cressey, Rauner, Inc. receives an annual management fee equal to 0.25% of the
aggregate purchase price paid by Golder, Thoma, Cressey, Rauner Fund IV, L.P. to
us for our common and preferred stock up to a maximum of $150,000 per year plus
reimbursement of out-of-pocket expenses and an investment fee payable at the
time of any purchase of our common or preferred stock by Golder, Thoma, Cressey,
Rauner Fund IV, L.P. equal to 1.0% of the amount of the purchase price paid to
us by Golder, Thoma, Cressey, Rauner Fund IV, L.P. for the common or preferred
stock. For the year ended December 31, 1997 and for the year ended December 31,
1998, we paid or accrued $153,477 and $196,508, respectively, in fees under the
professional services agreement. The professional services agreement will be
terminated immediately prior to the consummation of the offering, and no fee
will be payable to Golder, Thoma, Cressey, Rauner, Inc. with respect to the
issuance of our common stock in the offering. Messrs. Rauner and Donnini will
continue to serve as directors of U.S. Aggregates and they will be compensated
as non-employee directors. See "Management--Compensation of Directors."
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STOCKHOLDERS AGREEMENT
U.S. Aggregates, Golder, Thoma, Cressey, Rauner Fund IV, L.P., James A.
Harris Grantor Retained Annuity Trust, The James A. Harris Charitable Remainder
Unitrust, a trust for the benefit of Mr. Stone and his wife for which they also
serve as trustees, Mrs. Jeanne T. Richey and Messrs. Harris, Bishop, Dougherty
and Pullin are parties to a stockholders agreement. The stockholders agreement
provides that the parties will nominate and vote for a total of seven persons to
our board of directors, which will be comprised of:
- two representatives designated by Golder, Thoma, Cressey, Rauner Fund IV,
L.P.;
- two members of our management designated by Messrs. Harris, Stone and
Richey, determined by a majority vote of our common stock held by Messrs.
Harris, Stone and Richey; and
- three representatives chosen jointly by Golder, Thoma, Cressey, Rauner
Fund IV, L.P. and Mr. Harris provided that such representatives are not
members of our management or an employee or officer of us.
If the members of our board of directors are not selected as provided in the
stockholders agreement, then the members are selected in accordance with our
certificate of incorporation and by-laws. Members of our board of directors may
only be removed from the board, with or without cause, upon the written request
of the party originally entitled to designate the director. If either of Messrs.
Harris or Stone ceases to be employed by us or our subsidiaries, they shall be
removed from our board.
The stockholders agreement generally restricts the transfer of any shares of
our common stock held by James A. Harris Grantor Retained Annuity Trust, The
James A. Harris Charitable Remainder Unitrust, a trust for the benefit of Mr.
Stone and his wife for which they also serve as trustees, Mrs. Jeanne T. Richey,
and Messrs. Harris, Bishop, Dougherty and Pullin by granting Golder, Thoma,
Cressey, Rauner Fund IV, L.P. and us rights of first refusal. The transfer
restrictions of the stockholders agreement automatically terminate upon the sale
by us of our common stock in an underwritten public offering. In addition, the
stockholders agreement requires us to authorize and reserve for issuance to
additional members of our management and our subsidiaries shares of our common
stock in an amount equal to 3% of our common stock on a fully diluted basis. In
addition, each party to the stockholders agreement has agreed to consent to our
sale if such sale is approved by our board and the holders of a majority of our
outstanding common stock. The parties to the stockholders agreement plan to
amend the agreement prior to or concurrently with the offering.
REGISTRATION AGREEMENT
U.S. Aggregates, Golder, Thoma, Cressey, Rauner Fund IV, L.P., James A.
Harris Grantor Retained Annuity Trust, The James A. Harris Charitable Remainder
Unitrust, a trust for the benefit of Mr. Stone and his wife for which they also
serve as trustees, Mrs. Jeanne T. Richey and Messrs. Harris, Bishop, Dougherty
and Pullin are parties to a registration agreement. Pursuant to the registration
agreement, the holders of a majority of our common stock issued pursuant to an
equity purchase agreement, or issued or issuable in respect of the securities
may request, after the offering of our common stock, up to three registrations
of all or any part of their common stock on Form S-1 or any similar long-form
registration statement, if available, an unlimited number of registrations on
Form S-2 or S-3 or any similar short-form registration statement, each at our
expense. In the event the holders of a majority of our common stock make such a
request, all other parties to the registration agreement will be entitled to
participate in the registration. The registration agreement also grants the
parties piggyback registration rights with respect to registrations by us of our
securities, other than the offering. We will pay all expenses related to these
piggyback registrations.
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FINANCIAL ADVISORY ARRANGEMENTS
Pursuant to certain financial advisory agreements between U.S. Aggregates
and Edward A. Dougherty, a Director of U.S. Aggregates, Mr. Dougherty has served
as an advisor to us with respect to strategic financial planning from time to
time in connection with our acquisition program and securing and completing
specific financing arrangements. We paid Mr. Dougherty a total of $404,000 in
1998 for financial advisory services rendered to us. In 1999, to date, we have
paid Mr. Dougherty $261,515 and will pay him $140,000 upon the consummation of
the offering.
CERTAIN FAMILY RELATIONSHIPS
David Harris, the son of James A. Harris, our Chief Executive Officer and
Chairman, is a full-time employee of Southern Ready Mix, Inc., one of our
subsidiaries. David Harris receives a salary of approximately $90,000 for
performing services as an employee.
Christopher M. Bishop, the son of Morris L. Bishop, Jr., our President and
Chief Operating Officer and a Director, and Timothy K. Bishop, the brother of
Morris L. Bishop, Jr., are full-time employees of Southern Ready Mix, Inc., one
of our subsidiaries. Each receives a salary of approximately $60,000 for
services performed as an employee.
Ashia H. Stone, the wife of Michael J. Stone, our Executive Vice
President--Development, Chief Financial Officer, Treasurer and Secretary and a
Director, acts as one of our financial advisors. We paid Ms. Stone a total of
$151,180 in 1998 for financial advisory services provided to us.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR CREDIT FACILITY
GENERAL. On June 5, 1998, U.S. Aggregates, Bank of America National Trust
and Savings Association, as agent, and certain other financial institutions
entered into a third amended and restated bank credit facility and, on April 14,
1999, U.S. Aggregates, the agent and certain other financial institutions
amended the credit facility. The borrowings under our credit facility were used
to refinance indebtedness under our prior credit facility and to finance the
acquisition of Monroc, Inc. As of June 30, 1999, we had unused borrowing
capacity under our credit facility of $16.6 million. As of June 30, 1999, on a
pro forma as adjusted basis we would have had unused borrowing capacity under
our credit facility of $43.1 million.
The credit facility provides for two tranches of term loans to U.S.
Aggregates for $55.0 million and $60.0 million and revolving loans to U.S.
Aggregates for up to $60.0 million. Subject to certain restrictions, our credit
facility may be used for working capital and general corporate purposes of U.S.
Aggregates and our subsidiaries, including permitted acquisitions.
REPAYMENT. The revolving loans must be repaid on June 5, 2004. The
remaining principal repayment schedule for the $55.0 million term loan is:
- $3.525 million in 1999;
- $8.45 million in 2000;
- $11.2 million in 2001;
- $12.45 million in 2002;
- $14.2 million in 2003; and
- $3.675 million in 2004.
The remaining principal repayment schedule for the $60.0 million term loan
is:
- $0.29 million in 1999;
- $0.39 million in 2000;
- $0.39 million in 2001;
- $0.39 million in 2002;
- $0.39 million in 2003;
- $0.39 million in 2004;
- $0.39 million in 2005; and
- $55.89 million in 2006.
Loans made pursuant to our credit facility may be repaid and, in the case of
the revolving loans, borrowed and reborrowed, without premium or penalty, other
than prepayments of eurodollar loans which may be subject to customary breakage
costs from time to time until maturity, subject to the satisfaction of certain
conditions on the date of borrowing. In addition, subject to certain exceptions,
our credit facility provides for mandatory repayments of any outstanding
borrowings out of the following:
- any net cash proceeds received from a sale of assets;
- net cash proceeds of permitted debt issuances;
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- 50.0% of net cash proceeds of permitted equity issuances, reducing to 0.0%
when our leverage ratio is less than 3.5:1.0;
- subject to certain reinvestment rights, net cash proceeds from insurance
recovery and condemnation events; and
- 50.0% of annual excess cash flow, reducing to 0.0% when our leverage ratio
is less than 3.5:1.0.
SECURITY; GUARANTY. Our obligations under our credit facility are
guaranteed by each of our existing subsidiaries and will be guaranteed by each
or our future subsidiaries. Our obligations under our credit facility and each
of our subsidiaries under its guarantee is or will be secured by (1) a first
priority security interest in substantially all of the assets of such person,
and (2) a pledge of all of the capital stock of each of our direct and indirect
domestic subsidiaries.
INTEREST. At our option, the interest rates per year applicable to the
loans under our credit facility are a fluctuating rate of interest measured by
reference to one or a combination of the following: (1) the base rate, plus the
applicable borrowing margin, or (2) the relevant eurodollar rate, plus the
applicable borrowing margin. The applicable borrowing margins are subject to
adjustment based on our leverage ratio.
FEES. We have agreed to pay various fees in connection with our existing
credit facility, including: (1) letter of credit fees; (2) agency fees; (3)
arranger fees; and (4) commitment fees. Commitment fees are payable on the daily
unused amount of the revolver.
COVENANTS. Our existing credit facility requires us to meet three material
financial tests, which are: (1) a maximum leverage ratio; (2) a minimum interest
coverage ratio; and (3) a minimum fixed charge coverage ratio. Our credit
facility also contains covenants which, among other things, restrict our ability
and the ability of our subsidiaries to:
- incur liens;
- transact with affiliates;
- incur indebtedness;
- declare dividends or redeem or repurchase capital stock;
- make loans and investments;
- engage in mergers, acquisitions, consolidations and asset sales;
- acquire assets, stock or debt securities of any person;
- have additional subsidiaries;
- amend our or its certificate of incorporation; and
- make capital expenditures.
Our existing credit facility also requires us and our subsidiaries to
satisfy customary affirmative covenants and to make customary indemnifications
to the lenders and the administrative agent under our credit facility.
EVENTS OF DEFAULT. Our existing credit facility contains customary events
of default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, certain events of bankruptcy
and insolvency, ERISA violations, judgment defaults, cross-defaults to certain
other indebtedness and a change in control.
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THE SENIOR SUBORDINATED NOTES
GENERAL. On November 21, 1996, The Prudential Insurance Company of America
purchased $30.0 million principal amount of our 10.34% senior subordinated notes
due November 22, 2006 and on June 8, 1998, it purchased $15.0 million principal
amount of our 10.09% senior subordinated notes due November 22, 2008. The
proceeds of the 1998 senior subordinated notes were used for working capital and
other general corporate purposes and to finance the acquisition of Monroc, Inc.
WARRANTS. In connection with the issuance of the senior subordinated notes
in 1996, we issued warrants to purchase 190,030 shares of our common stock for
an aggregate purchase price of $63.27 to Prudential. In connection with the
issuance of the senior subordinated notes in 1998, we issued warrants to
purchase 96,350 shares of shares of our common stock for an aggregate purchase
price of $32.08 to Prudential. Prudential has registration rights with respect
to the warrants.
REPAYMENT. The principal repayment schedule for the senior subordinated
notes issued in 1996 is:
- $6.0 million in 2003;
- $6.0 million in 2004;
- $6.0 million in 2005; and
- $12.0 million in 2006.
The principal repayment schedule for the senior subordinated notes issued in
1998 is:
- $4.5 million in 2006;
- $4.5 million in 2007; and
- $6.0 million in 2008.
Subject to exceptions, the senior subordinated notes may not be prepaid
without premium or penalty.
GUARANTY. Our obligations under the senior subordinated notes are
guaranteed by each of our existing subsidiaries and will be guaranteed by each
or our future subsidiaries.
INTEREST. The senior subordinated notes issued in 1996 bear interest at a
rate of 10.34% per year and the senior subordinated notes issued in 1998 bear
interest at a rate of 10.09% per year. Interest on the senior subordinated notes
is paid quarterly.
COVENANTS. Our senior subordinated notes require us to meet three material
financial tests, which are:
- a maximum leverage ratio;
- a minimum interest expense coverage ratio; and
- a minimum fixed charge coverage ratio.
Our senior subordinated notes also contain covenants which, among other
things, restrict our ability and the ability of our subsidiaries to:
- incur liens;
- transact with affiliates;
- incur indebtedness;
- declare dividends or redeem or repurchase capital stock;
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- make loans and investments;
- engage in mergers, acquisitions, consolidations and asset sales;
- acquire assets, stock or debt securities of any person;
- have additional subsidiaries;
- amend our or their certificate of incorporation; and
- make capital expenditures.
Our senior subordinated notes also require us and our subsidiaries to
satisfy customary affirmative covenants and to make customary indemnifications
to Prudential.
EVENTS OF DEFAULT. Our senior subordinated note documents contain customary
events of default, including:
- payment defaults;
- breaches of representations and warranties;
- covenant defaults;
- events of bankruptcy and insolvency;
- ERISA violations;
- judgment defaults; and
- cross-defaults to certain other indebtedness.
THE HTSB UNSECURED DEMAND NOTE
GENERAL. On April 15, 1999, Harris Trust and Savings Bank provided us with
a $17.5 million, floating rate, revolving line of credit evidenced by the HTSB
Note. We borrowed $7.5 million for working capital and other general corporate
purposes and $8.2 million to repay borrowings under an existing facility with
Harris Trust and Savings Bank. As of June 30, 1999, we had $16.0 million
outstanding under the HTSB Note. The HTSB Note is a general unsecured obligation
of U.S. Aggregates.
REPAYMENT. The HTSB Note is due and payable on demand and may be repaid in
whole or in part without premium or penalty at any time.
INTEREST. The interest rate per year applicable to the HTSB Note is the
prime commercial rate announced by Harris Trust and Savings Bank. Interest is
payable quarterly and upon demand.
GUARANTY. Golder, Thoma, Cressey, Rauner Fund IV, L.P. has guaranteed the
repayment of the HTSB Note. In addition, we entered into a letter agreement
among Golder, Thoma, Cressey, Rauner Fund IV, L.P., Harris Trust and Savings
Bank, Bank of America Trust and National Association, and The Prudential
Insurance Company of America. Under the letter agreement, Golder, Thoma,
Cressey, Rauner Fund IV, L.P. has agreed to contribute capital to fund the
repayment of the HTSB Note upon the request of Harris Trust and Savings Bank.
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DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
Immediately prior to the offering, the total amount of our authorized
capital stock will consist of 100,000,000 shares of our common stock, par value
$0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per
share. Upon completion of the offering, 14,016,808 shares of common stock will
be issued and outstanding and no shares of our preferred stock will be issued
and outstanding. The discussion below describes our capital stock, the restated
certificate of incorporation and by-laws as anticipated to be in effect upon
consummation of the offering. The following summary of certain provisions of our
capital stock describes all material provisions of, but does not purport to be
complete and is subject to, and qualified in its entirety by, our restated
certificate of incorporation and by-laws that are included as exhibits to the
registration statement of which this prospectus forms a part and by the
provisions of applicable law.
Immediately following the offering, the restated certificate of
incorporation and by-laws will contain certain provisions that are intended to
enhance the likelihood of continuity and stability in the composition of our
board of directors. These provisions may have the effect of delaying, deferring
or preventing a future takeover or change in control of U.S. Aggregates unless
such takeover or change in control is approved by our board of directors.
THE RECAPITALIZATION
In connection with and immediately prior to the consummation of the
offering, each outstanding share of Western Aggregates Holding Corp. common
stock not held by us will be converted into approximately 0.6227 shares of our
common stock. Each outstanding share of SRM Holdings Corp. common stock not held
by us will be converted into approximately 8.0707 shares of our common stock.
Each share of our common stock will then be subject to an approximate 30.0347 to
1 stock split. See "Certain Relationships and Related Transactions" for a
further description of these transactions.
COMMON STOCK
All outstanding shares of our common stock are fully paid and
non-assessable. Subject to the prior rights of the holders of our preferred
stock, the holders of our common stock are entitled to receive dividends at such
time and in such amounts as our board of directors may determine. See "Dividend
Policy" for a further description of your dividend rights.
The shares of our common stock are not convertible and the holders thereof
have no preemptive or subscription rights to purchase any of our securities.
Upon our liquidation, dissolution or winding up, the holders of our common stock
are entitled to receive pro rata all of our assets which are legally available
for distribution, after payment of all debts and other liabilities and subject
to the prior rights of any holders of our preferred stock which is then
outstanding. Each outstanding share of our common stock is entitled to one vote
on all matters submitted to a vote of stockholders. There is no cumulative
voting.
Our common stock has been approved for trading on the New York Stock
Exchange under the symbol "AGA," subject to official notice of issuance.
PREFERRED STOCK
Our board of directors may, without further action by our stockholders,
direct the issuance of up to 10,000,000 shares of our preferred stock. At the
time of issuance, they may determine the series and rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of our
preferred stock would reduce the amount of funds available for the payment of
dividends on shares of our common stock. Holders of our preferred stock may be
entitled to receive a preference payment in the event of our liquidation,
dissolution or winding-up before any payment is made to the holders of our
common stock. Under certain circumstances, the issuance of our preferred stock
may render more
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difficult or tend to discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of our securities or the
removal of incumbent management. Upon the approval of a majority of the total
number of our directors then in office, our board of directors, without
stockholder approval, may issue shares of our preferred stock with voting and
conversion rights which could adversely affect the holders of shares of our
common stock. Upon consummation of the offering, there will be no shares of our
preferred stock outstanding, and we have no present intention to issue any
additional shares of our preferred stock.
CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS
Our restated certificate of incorporation provides for our board of
directors to be divided into three classes, as nearly equal in number as
possible, serving staggered terms. Approximately one-third of our board will be
elected each year. Under Delaware law, directors serving on a classified board
can only be removed for cause. The provision for a classified board could
prevent a party who acquires control of a majority of our outstanding voting
stock from obtaining control of our board until the second annual stockholders
meeting following the date the acquiror obtains the controlling stock interest.
This provision could have the effect of discouraging a potential acquiror from
making a tender offer or otherwise attempting to obtain control of us and could
increase the likelihood that incumbent directors will retain their positions.
See "Management" for a further discussion of our directors.
Our restated certificate of incorporation provides that stockholder action
can be taken only at an annual or special meeting of stockholders and cannot be
taken by written consent in lieu of a meeting. Our restated certificate of
incorporation and the by-laws provide that, except as otherwise required by law,
special meetings of the stockholders can only be called pursuant to a resolution
adopted by a majority of our board or by our chief executive officer.
Stockholders will not be permitted to call a special meeting or to require our
board to call a special meeting.
The by-laws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of our stockholders, including proposed
nominations of persons for election to our board.
Stockholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of our board or by a stockholder who was a stockholder of record on
the record date for the meeting, who is entitled to vote at the meeting and who
has given to our Secretary timely written notice, in proper form, of the
stockholder's intention to bring that business before the meeting. Although the
by-laws do not give our board the power to approve or disapprove stockholder
nominations of candidates or proposals regarding other business to be conducted
at a special or annual meeting, the by-laws may have the effect of precluding
the conduct of certain business at a meeting if the proper procedures are not
followed or may discourage or defer a potential acquiror from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of U.S. Aggregates.
Our restated certificate of incorporation and by-laws provide that the
approval of holders of at least 80% of the total votes eligible to be cast in
the election of directors is required to amend, alter, change or repeal certain
of their provisions. This requirement of a super-majority vote to approve
amendments to our restated certificate of incorporation and by-laws could enable
a minority of our stockholders to exercise veto power over any such amendments.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are a Delaware corporation and subject to Section 203 of the Delaware
corporate law. Generally, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the time such stockholder became
an interested stockholder unless, as described below, certain conditions are
satisfied. Thus, it
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may make acquisition of control of our company more difficult. The prohibitions
in Section 203 do not apply if:
- prior to the time the stockholder became an interested stockholder, the
board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming
an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
- at or subsequent to the time the stockholder became an interested
stockholder, the business combination is approved by the board of
directors and authorized by the affirmative vote of at least 66 2/3% of
the outstanding voting stock that is not owned by the interested
stockholder.
Under Section 203, a "business combination" includes:
- any merger or consolidation of the corporation with the interested
stockholder;
- any sale, lease, exchange or other disposition, except proportionately as
a stockholder of such corporation, to or with the interested stockholder
of assets of the corporation having an aggregate market value equal to 10%
or more of either the aggregate market value of all the assets of the
corporation or the aggregate market value of all the outstanding stock of
the corporation;
- transactions resulting in the issuance or transfer by the corporation of
stock of the corporation to the interested stockholder;
- transactions involving the corporation which have the effect of increasing
the proportionate share of the stock of any class or series of the
corporation which is owned by the interested stockholder; or
- transactions in which the interested stockholder receives financial
benefits provided by the corporation.
Under Section 203, an "interested stockholder" generally is:
- any person who owns 15% or more of the outstanding voting stock of the
corporation;
- any person who is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period prior to the date on which it is
sought to be determined whether such person is an interested stockholder;
and
- the affiliates or associates of any such person.
Because Golder, Thoma, Cressey, Rauner Fund IV, L.P. owned more than 15% of
our voting stock prior to the offering, Section 203 by its terms is currently
not applicable to business combinations with Golder, Thoma, Cressey, Rauner Fund
IV, L.P. If any other person acquires 15% or more of our outstanding voting
stock, such person will be subject to the provisions of Section 203.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our restated certificate of incorporation limits the liability of our
directors to the fullest extent permitted by Delaware law. In addition, our
restated certificate of incorporation will provide that we shall indemnify our
directors and officers to the fullest extent permitted by Delaware law. We
anticipate entering into indemnification agreements with our current directors
and executive officers prior to the completion of the offering and any new
directors or executive officers following such time.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Harris Trust and
Savings Bank.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering there has been no market for our common stock. We can
make no predictions as to the effect, if any, that sales of shares or the
availability of shares for sale will have on the market price of our common
stock. Nevertheless, sales of significant amounts of our common stock in the
public market, or the perception that such sales may occur, could adversely
affect prevailing market prices. See "Risk Factors" for a further description of
the effect of sales of our common stock.
Upon completion of the offering, we expect to have 14,016,808 shares of our
common stock outstanding. In addition, 280,336 shares of common stock will be
issuable upon the exercise of outstanding stock options pursuant to our
incentive plan. Of the shares outstanding after the offering, the 6,944,444
shares of our common stock, 7,986,111 shares if the U.S. underwriters' and
international managers' over-allotments are exercised in full, sold in the
offering will be freely tradeable without restriction under the Securities Act,
except for any such shares which may be acquired by an "affiliate" of U.S.
Aggregates under Rule 144 of the Securities Act. Those shares will be subject to
the volume limitations and other restrictions of Rule 144 described below. An
aggregate of 6,882,334 shares of our common stock held by existing stockholders
will be "restricted securities" under Rule 144 and may not be resold in the
absence of registration under the Securities Act or pursuant to an exemption
from such registration, including among others, the exemption provided by Rule
144.
In general, under Rule 144 as currently in effect, beginning ninety days
after the date of this prospectus, if a period of at least one year has elapsed
since the later of the date the "restricted securities" were acquired from us or
the date they were acquired from an affiliate, then the holder of such
restricted securities is entitled to sell in the public market a number of
shares within any three-month period that does not exceed the greater of 1% of
the then outstanding shares of our common stock, approximately 140,168 shares
immediately after the offering, or the average weekly reported volume of trading
of our common stock on the New York Stock Exchange during the four calendar
weeks preceding such sale. The holder may only sell such shares through
"brokers' transactions" or in transactions directly with a "market maker." Sales
under Rule 144 are also subject to certain requirements regarding providing
notice of such sales and the availability of current public information
concerning U.S. Aggregates. Affiliates may sell shares not constituting
restricted shares in accordance with the foregoing volume limitations and other
requirements but without regard to the one-year holding period. Under Rule
144(k), if a period of at least two years has elapsed between the later of the
date restricted securities were acquired from us or the date they were acquired
from an affiliate, a holder of such restricted securities who is not an
affiliate at the time of the sale and has not been an affiliate for at least
three months prior to the sale would be entitled to sell the shares in the
public market without regard to the volume limitations and other restrictions
described above. Beginning February, 2000, approximately 6,882,334 shares of our
common stock will be eligible for sale in the public market pursuant to Rule
144, subject to the volume limitations and other restrictions described above.
Notwithstanding the foregoing, our executive officers, directors and certain
of the existing stockholders, who own in aggregate approximately 6,423,001
shares of our common stock, have agreed that, without the prior consent of
Deutsche Bank Securities Inc., they will not (1) directly or indirectly, sell,
offer to sell, grant any option for the sale of or otherwise dispose of any
shares of our common stock or securities or rights convertible into or
exercisable or exchangeable for our common stock, except through gifts to
persons who agree in writing to be bound by such restrictions or (2) make any
demand for or exercise any right with respect to the registration of any shares
of our common stock or other such securities, for a period of 180 days after the
date of this prospectus.
Approximately 700,840 shares of our common stock are reserved for issuance
under the incentive plan. We currently intend to file a registration statement
on Form S-8 under the Securities Act to register all shares of our common stock
issuable pursuant to the incentive plan. We expect to file such
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registration statement within 90 days following the date of this prospectus and
such registration statement will become effective upon filing. Shares covered by
the registration statement will thereafter be eligible for sale in the public
markets, subject to Rule 144 under the Securities Act.
U.S. Aggregates, Golder, Thoma, Cressey, Rauner Fund IV, L.P., James A.
Harris Grantor Retained Annuity Trust, The James A. Harris Charitable Remainder
Unitrust, a trust for the benefit of Mr. Stone and his wife for which they also
serve as trustees, Messrs. Harris, Bishop, Dougherty and Pullin and one of our
other stockholders are parties to a registration agreement. Pursuant to this
agreement, the holders of a majority of our common stock issued pursuant to an
equity purchase agreement, or issued or issuable in respect of such securities,
may request, after the offering, up to three registrations of all or any part of
our common stock on Form S-1 or any similar long-form registration statement, if
available, and an unlimited number of registrations on Form S-2 or S-3 or any
similar short-form registration statement, each at our expense. In the event
such holders make such request, all other parties to the registration agreement
will be entitled to participate in such registration. The registration agreement
also grants the parties piggyback registration rights with respect to
registrations by us of our securities (other than in the offering) and we have
agreed to pay all expenses related to such piggyback registrations. The parties
to the registration agreement will own approximately 6,136,621 shares of our
common stock immediately after the offering.
U.S. Aggregates, Golder, Thoma, Cressey, Rauner Fund IV, L.P., Messrs.
Harris and Stone and The Prudential Insurance Company of America have entered
into a registration rights and stockholders' agreement pursuant to which
Prudential has been granted registration rights with respect to shares of our
common stock issuable upon the exercise of warrants held by Prudential. If we
propose at any time to register any of our common stock for sale to the public,
we have agreed to use our best efforts to include in the registration shares
requested to be registered by Prudential. We have agreed to pay all expenses
related to any shares which are registered on behalf of Prudential. Upon
exercise of the warrants in full, Prudential would own approximately 2.0% of our
common stock immediately after the offering.
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MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
GENERAL
The following is a general discussion of the principal United States federal
income and estate tax consequences of the ownership and disposition of common
stock by a non-U.S. holder. For this purpose, the term "non-U.S. holder" means
any person or entity that is, for United States federal income tax purposes, a
foreign corporation, a non-resident alien individual, a foreign partnership or a
foreign estate or trust. This discussion is based on currently existing
provisions of the Internal Revenue Code, final, temporary and proposed
regulations promulgated thereunder, and administrative and judicial
interpretations thereof. All of these provisions, regulations and
interpretations are subject to change, possibly with retroactive effect, or
different interpretations. This discussion is limited to non-U.S. holders who
hold shares of our common stock as capital assets within the meaning of Section
1221 of the Code. Moreover, this discussion does not address all aspects of
United States federal income and estate taxes that may be relevant to a
particular non-U.S. holder in light of the holder's particular circumstances. It
does not describe certain tax provisions which may apply to individuals who
relinquish their United States citizenship or residence.
An individual may, subject to certain exceptions, be deemed to be a resident
alien, as opposed to a nonresident alien, by virtue of being present in the
United States for at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar
year. For such purposes all of the days present in the current year, one-third
of the days present in the immediately preceding year, and one-sixth of the days
present in the second preceding year are counted. Resident aliens are subject to
United States federal income tax as if they were United States citizens.
EACH PROSPECTIVE PURCHASER OF OUR COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF
PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY FEDERAL, STATE, MUNICIPALITY
OR OTHER TAXING JURISDICTION.
DIVIDENDS
In the event that dividends are paid on shares of our common stock,
dividends paid to a non-U.S. holder of our common stock will be subject to
withholding of United States federal income tax at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty. To claim the benefit of
a lower rate under an income tax treaty, a non-U.S. holder of common stock must
properly file a form with the payor, claiming an exemption from or reduction in
withholding under such tax treaty.
Any dividends paid on shares of common stock to a non-U.S. holder will not
be subject to withholding tax, but instead are subject to United States federal
income tax on a net basis at applicable graduated individual or corporate rates
if:
- dividends are effectively connected with the conduct of a trade or
business by the non-U.S. holder within the United States and, where a tax
treaty applies, will be attributable to a United States permanent
establishment of the non-U.S. holder; and
- an IRS Form 4224, or successor form, is filed with the payor.
Any such effectively connected dividends received by a foreign corporation may,
under certain circumstances, be subject to an additional "branch profits tax" at
a rate of 30% or such lower rate as may be specified by an applicable income tax
treaty.
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Unless the payor has knowledge to the contrary, dividends paid prior to
January 1, 2001 to an address outside the United States are presumed to be paid
to a resident of such country for purposes of the withholding discussed above
and for purposes of determining the applicability of a tax treaty rate. However,
recently finalized Treasury regulations pertaining to United States federal
withholding tax provide that a non-U.S. holder must comply with new
certification procedures with respect to dividends paid after December 31, 2000.
In the case of payments made outside the United States with respect to an
offshore account, a non-U.S. holder must comply with certain documentary
evidence procedures, directly or under certain circumstances through an
intermediary, to obtain the benefits of a reduced rate under an income tax
treaty with respect to dividends paid after December 31, 2000. In addition, tax
regulations will require a non-U.S. holder to provide its United States taxpayer
identification number.
A non-U.S. holder of our common stock eligible for a reduced rate of
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the IRS.
GAIN ON DISPOSITION OF OUR COMMON STOCK
A non-U.S. holder generally will not be subject to federal income tax with
respect to gain recognized on a sale or other disposition of our common stock
unless:
(1) the gain is effectively connected with a trade or business of the
non-U.S. holder in the United States and, where a tax treaty applies, is
attributable to a United States permanent establishment of the non-U.S.
holder;
(2) in the case of a non-U.S. holder who is an individual and holds the
common stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the sale or other
disposition and certain other conditions are met; or
(3) U.S. Aggregates is or has been a "U.S. real property holding
corporation" for federal income tax purposes, as discussed below.
An individual non-U.S. holder who falls under clause (1) above will, unless
an applicable treaty provides otherwise, be taxed on his or her net gain derived
from the sale or other disposition of our common stock under regular graduated
individual United States federal income tax rates. An individual non-U.S. holder
who falls under clause (2) above will be subject to a flat 30% tax on the gain
derived from the sale, which may be offset by certain United States capital
losses.
A non-U.S. holder that is a foreign corporation falling under clause (1)
above will be taxed on its gain under regular graduated corporate United States
federal income tax rates and may be subject to an additional branch profits tax
equal to 30% of its effectively connected earnings and profits within the
meaning of the Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable income tax treaty.
A corporation is a U.S. real property holding corporation if the fair market
value of the United States real property interests held by the corporation is
50% or more of the aggregate fair market value of its United States and foreign
real property interests and any other assets used or held for use by the
corporation in a trade or business. Based on our current and anticipated assets,
we believe that we are likely a U.S. real property holding corporation.
If we are a U.S. real property holding corporation, then gain on the sale or
other disposition of our common stock by a non-U.S. holder generally would be
subject to United States federal income tax unless both:
- the common stock was "regularly traded" on an established securities
market within the meaning of applicable regulations; and
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- the non-U.S. holder actually or constructively owned 5% or less of the
common stock during the shorter of the five-year period preceding such
disposition or the non-U.S. holder's holding period.
Non-U.S. holders should consult their tax advisors concerning any tax
consequences that may arise if we are a U.S. real property holding company.
FEDERAL ESTATE TAX
Common stock owned or treated as owned by an individual non-U.S. holder at
the time of death will be included in such holder's gross estate for federal
estate tax purposes, and may be subject to federal estate tax unless an
applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
We must report annually to the IRS and to each non-U.S. holder the amount of
dividends paid to such holder and the tax withheld with respect to such
dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the non-U.S. holder
resides under the provisions of an applicable income tax treaty or certain other
agreements.
Backup withholding is imposed at the rate of 31% on certain payments to
persons that fail to furnish certain identifying information to the payer.
Backup withholding generally will not apply to dividends paid prior to January
1, 2001 to a non-U.S. holder at an address outside the United States, unless the
payor has knowledge that the payee is a United States person. In the case of
dividends paid after December 31, 2000, the regulations provide that a non-U.S.
holder generally will be subject to withholding tax at a 31% rate unless certain
certification procedures, or, in the case of payments made outside the United
States with respect to an offshore account, certain documentary evidence
procedures, are complied with, directly or under certain circumstances through
an intermediary. Backup withholding and information reporting generally will
also apply to dividends paid on common stock at addresses inside the United
States to non-U.S. holders that fail to provide certain identifying information
in the manner required. Regulations provide certain presumptions under which a
non-U.S. holder would be subject to backup withholding and information reporting
unless certification from the holder of the non-U.S. holder's non-United States
status is provided.
Payment of the proceeds of a sale of common stock effected by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless the beneficial owner provides the payor with its
name and address and certifies under penalties of perjury that it is a non-U.S.
holder, or otherwise establishes an exemption. In general, backup withholding
and information reporting will not apply to a payment of the proceeds of a sale
of common stock by or through a foreign office of a broker. If, however, such
broker is, for federal income tax purposes, a United States person, a controlled
foreign corporation, or a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States, or, in addition, for periods after December 31, 2000, a foreign
partnership that at any time during its tax year either is engaged in the
conduct of a trade or business in the United States or has as partners one or
more United States persons that, in the aggregate, hold more than 50% of the
income or capital interest in the partnership, such payments will be subject to
information reporting, but not backup withholding, unless such broker has
documentary evidence in its records that the beneficial owner is a non-U.S.
holder and certain other conditions are met or the beneficial owner otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against the non-U.S. holder's federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.
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UNDERWRITING
We have agreed to sell to the underwriters and managers named below the
number of shares of our common stock set forth opposite the name of the
underwriter and manager below. Deutsche Bank Securities Inc., Schroder & Co.
Inc. and The Robinson-Humphrey Company, LLC are the U.S. representatives of the
underwriters and Deutsche Bank AG London, J. Henry Schroder & Co. Limited and
The Robinson-Humphrey Company, LLC are the international representatives of the
managers.
<TABLE>
<CAPTION>
U.S. UNDERWRITERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Deutsche Bank Securities Inc...............................................
Schroder & Co. Inc.........................................................
The Robinson-Humphrey Company, LLC.........................................
Total....................................................................
-----------------
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL MANAGERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Deutsche Bank AG London....................................................
J. Henry Schroder & Co. Limited............................................
The Robinson-Humphrey Company, LLC.........................................
Total....................................................................
-----------------
</TABLE>
The U.S. underwriters and international managers will purchase all of the
shares of common stock offered in the offering, other than those shares covered
by the over-allotment option described below, if they purchase any shares. The
U.S. offering and the international offering are each conditioned upon the
closing of the other.
The U.S. underwriters and international managers will initially offer the
shares to the public at the offering price set forth on the cover page of this
prospectus and to selling group members at that price less a concession not in
excess of $ per share. The U.S. underwriters, international managers and
selling group members may allow a discount not in excess of $ per share to
other broker-dealers. After the offering, the underwriters may change the public
offering price and other selling terms.
The following table summarizes the compensation and the estimated expenses
we and the selling stockholders will pay:
<TABLE>
<CAPTION>
TOTAL
----------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
----------- ------------- -------------
<S> <C> <C> <C>
Underwriting discounts and commissions..................................
Expenses payable by U.S. Aggregates.....................................
Expenses payable by the selling stockholders............................
</TABLE>
The selling stockholders have granted to the U.S. underwriters and
international managers a 30-day option, exercisable by Deutsche Bank Securities
Inc., to purchase up to 1,041,667 additional shares of our common stock at the
initial public offering price less the underwriting discounts and commissions.
The option may only be exercised to cover over-allotments of our common stock.
We and the selling stockholders have agreed to indemnify the U.S. underwriters
and international managers against certain liabilities, including liabilities
under the Securities Act.
The underwriters may engage in transactions that stabilize, maintain or
otherwise affect the market price of our common stock. Specifically, the
underwriters may accept orders for more shares of the common stock than are
being offered in the offering. Additionally, to cover those orders or to
stabilize the market price of the common stock, the underwriters may bid for and
purchase shares of our common stock in the open market. Finally, the
underwriters may reclaim selling discounts allowed to
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an underwriter or dealer if the underwriting syndicate repurchases shares
distributed by that underwriter or dealer. Any of these activities may maintain
the market price of our common stock at a level above that which might otherwise
prevail in the open market. The underwriters are not required to engage in these
activities and, if commenced, may end any of these activities at any time.
The U.S. underwriters have agreed to offer, sell and deliver the shares to
residents of and entities organized in the United States, its territories,
possessions and in Canada. The international managers generally will not offer,
sell or deliver shares to any of these persons or entities.
The U.S. underwriters and the international managers may agree to sell to
each other shares of our common stock at the initial public offering price less
an amount not greater than the selling discount. To the extent that there are
sales between the U.S. underwriters and the international managers, the number
of shares initially available for sale by the U.S. underwriters and the
international managers may be more or less than the number of shares appearing
on the cover page of this prospectus.
We and our officers, directors and stockholders have each agreed that, for a
period of 180 days after the date of this prospectus, we will not offer, sell,
contract to sell or otherwise dispose of any shares of our common stock, or
enter into any transaction designed to, or which could be expected to, result in
the disposition of any portion of our common stock without the prior written
consent of Deutsche Bank Securities Inc., which may give its consent at any time
without public notice. The restriction on disposition of our common stock
includes shares of our common stock exchanged for shares of stock of our
subsidiaries.
The underwriters have advised us that they do not expect discretionary sales
to exceed 5% of the offering.
Prior to the closing of the offering, there has been no public market for
our common stock. The initial public offering price has been determined by
negotiation among us and the representatives of the underwriters. The principal
factors considered in determining the public offering price included:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalizations and stages of development of generally
comparable companies;
- estimates of our business potential; and
- other factors deemed relevant by us and the representatives.
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EXPERTS
The financial statements of U.S. Aggregates included in this registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The consolidated financial statements of Monroc, Inc. and Subsidiary for the
year ended December 31, 1997, included in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of Monroc, Inc. and subsidiary for the
year ended December 31, 1996 included in this registration statement have been
audited by Grant Thornton LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
LEGAL MATTERS
Certain legal matters in connection with our common stock offered hereby
will be passed upon for us by Kirkland & Ellis. Certain legal matters will be
passed upon for the U.S. underwriters and the international managers by Winston
& Strawn.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act relating to the common stock offered in the offering. This
prospectus does not contain all of the information set forth in the registration
statement and its exhibits and schedules. Certain items are omitted in
accordance with the rules and regulations of the SEC. For further information
with respect to U.S. Aggregates and our common stock, reference is made to the
registration statement and its exhibits and schedules. We have summarized all of
the material terms of the contracts which are material to our business, however
statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete. In each instance, if a
contract or document is filed as an exhibit, reference is made to the copy of
that contract or other document filed as an exhibit to the registration
statement. A copy of the registration statement, including its exhibits and
schedules, may be read and copied at the SEC's public reference room in
Washington, D.C. and at the SEC's regional offices in New York, New York and
Chicago, Illinois. Information on the operation of the public reference room may
be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains
an Internet site at http://www.sec.gov, from which interested persons can
electronically access the registration statement, including its exhibits and
schedules.
As a result of the offering, we will become subject to the disclosure
requirements of the Exchange Act. We will fulfill our disclosure requirements by
filing periodic reports and other information with the SEC. We intend to furnish
our shareholders with annual reports containing consolidated financial
statements certified by an independent public accounting firm.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
U.S. Aggregates, Inc. and Subsidiaries
Financial Statements--December 31, 1996, 1997 and 1998 and June 30, 1998 and 1999
Report of Independent Public Accountants......................................... F-2
Consolidated Balance Sheets...................................................... F-3
Consolidated Statements of Operations............................................ F-4
Consolidated Statements of Shareholders' Equity.................................. F-5
Consolidated Statements of Cash Flows............................................ F-6
Notes to Consolidated Financial Statements....................................... F-7
Monroc, Inc. and Subsidiary
Financial Statements--December 31, 1997
Independent Auditors' Report..................................................... F-25
Consolidated Statements of Operations............................................ F-26
Consolidated Statements of Shareholders' Equity.................................. F-27
Consolidated Statements of Cash Flows............................................ F-28
Notes to Consolidated Financial Statements....................................... F-29
Financial Statements--December 31, 1996
Report of Independent Certified Public Accountants............................... F-40
Consolidated Statement of Operations............................................. F-41
Consolidated Statement of Stockholders' Equity................................... F-42
Consolidated Statement of Cash Flows............................................. F-43
Notes to Consolidated Financial Statements....................................... F-44
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
U.S. Aggregates, Inc.:
We have audited the accompanying consolidated balance sheets of U.S.
Aggregates, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of U.S. Aggregates, Inc. and
Subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
San Francisco, California,
January 29, 1999
F-2
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
------------- ------------- JUNE 30,
1999
-----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 479 $ 2,849 $ 2,226
Trade accounts receivable, net of allowance for doubtful accounts of
$629, $1,163 and $1,293............................................. 19,113 37,703 54,147
Notes and other receivables........................................... 77 8,104 1,469
Inventories........................................................... 11,280 25,480 27,506
Prepaid expenses and other assets..................................... 2,915 3,966 6,403
------------- ------------- -----------
Total current assets............................................ 33,864 78,102 91,751
------------- ------------- -----------
PROPERTY, PLANT AND EQUIPMENT, net...................................... 116,159 232,319 254,567
------------- ------------- -----------
INTANGIBLE ASSETS, net:
Goodwill.............................................................. 10,852 16,161 16,102
Covenants not to compete.............................................. 2,521 1,607 1,150
Deferred financing charges............................................ 4,511 7,775 7,628
------------- ------------- -----------
Total intangible assets......................................... 17,884 25,543 24,880
------------- ------------- -----------
OTHER ASSETS............................................................ 4,359 1,647 3,164
------------- ------------- -----------
Total assets.................................................... $ 172,266 $ 337,611 $ 374,362
------------- ------------- -----------
------------- ------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable................................................ $ 9,428 $ 24,111 $ 26,152
Accrued payroll....................................................... 1,202 1,270 3,363
Other accrued liabilities............................................. 2,890 7,676 10,720
Income tax payable.................................................... -- 890 667
Current portion of long-term debt..................................... 6,139 6,781 8,860
Demand note........................................................... -- 8,020 15,957
------------- ------------- -----------
Total current liabilities....................................... 19,659 48,748 65,719
LONG TERM DEBT, net of current portion.................................. 86,649 185,790 200,890
OTHER................................................................... 258 192 164
DEFERRED INCOME TAXES, net.............................................. 12,656 44,611 46,201
MINORITY INTEREST, net.................................................. 2,681 3,160 3,180
------------- ------------- -----------
Total liabilities............................................... 121,903 282,501 316,154
------------- ------------- -----------
COMMITMENTS AND CONTINGENCIES (Note 14)
MANDATORY REDEEMABLE PREFERRED STOCK, $.01 par value, 500,000 shares
authorized............................................................ 39,466 43,563 45,768
------------- ------------- -----------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 7,508,664 shares authorized............. 61 61 61
Additional paid-in capital............................................ 2,587 2,887 2,887
Notes receivable from sale of stock................................... (593) (640) (666)
Treasury stock, at cost............................................... (2) (2) (2)
Retained earnings..................................................... 8,844 9,241 10,160
------------- ------------- -----------
Total shareholders' equity...................................... 10,897 11,547 12,440
------------- ------------- -----------
Total liabilities, mandatory redeemable preferred stock and
shareholders' equity.......................................... $ 172,266 $ 337,611 $ 374,362
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES............................................. $ 131,710 $ 163,243 $ 228,739 $ 83,042 $ 126,939
COST OF PRODUCTS SOLD................................. 92,821 119,132 168,220 60,808 91,966
--------- --------- --------- --------- ---------
Gross profit...................................... 38,889 44,111 60,519 22,234 34,973
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......... 16,571 18,275 25,001 10,920 14,898
DEPRECIATION, DEPLETION AND AMORTIZATION.............. 6,301 7,830 11,098 4,549 5,694
--------- --------- --------- --------- ---------
Income from operations............................ 16,017 18,006 24,420 6,765 14,381
OTHER EXPENSE:
Interest, net....................................... (5,036) (8,344) (14,351) (5,554) (8,841)
Loss on sale of real estate......................... -- -- (386) -- --
Other, net.......................................... (150) (150) (718) (718) (479)
--------- --------- --------- --------- ---------
Income from continuing operations before
provision for income taxes, minority
interest and extraordinary item............. 10,831 9,512 8,965 493 5,061
PROVISION FOR INCOME TAXES............................ (3,660) (3,384) (3,748) (206) (1,898)
--------- --------- --------- --------- ---------
Income from continuing operations before
minority interest and extraordinary item.... 7,171 6,128 5,217 287 3,163
MINORITY INTEREST..................................... (727) (623) (385) 100 (39)
--------- --------- --------- --------- ---------
Income from continuing operations............. 6,444 5,505 4,832 387 3,124
EXTRAORDINARY ITEM: Loss on extinguishment of debt,
less applicable income tax benefit of $212.......... -- -- (338) (338) --
--------- --------- --------- --------- ---------
Net income.................................... $ 6,444 $ 5,505 $ 4,494 $ 49 $ 3,124
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income per common share--basic
Income (loss) from continuing operations available
for common shareholders........................... $ 0.57 $ 0.29 $ 0.12 $ (0.26) $ 0.15
Extraordinary item, net of tax...................... -- -- (0.06) (0.06) --
--------- --------- --------- --------- ---------
Net income (loss) available for common
shareholders...................................... $ 0.57 $ 0.29 $ 0.06 $ (0.32) $ 0.15
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average common shares outstanding.......... 6,074,704 6,116,718 6,136,630 6,136,630 6,136,630
Income per common share--diluted
Income (loss) from continuing operations available
for common shareholders........................... $ 0.57 $ 0.28 $ 0.11 $ (0.26) $ 0.14
Extraordinary item, net of tax...................... -- -- (0.06) (0.06) --
--------- --------- --------- --------- ---------
Net income (loss) available for common
shareholders...................................... $ 0.57 $ 0.28 $ 0.05 $ (0.32) $ 0.14
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average common shares
outstanding....................................... 6,095,472 6,306,747 6,382,094 6,136,630 6,423,011
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TREASURY
NOTES STOCK
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE -----------
---------------------- ------------------------- PAID-IN FROM SALE SHARES HELD
SHARES AMOUNT SHARES AMOUNT CAPITAL OF STOCK IN TREASURY
--------- ----------- ---------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.... 182,842 $ 2 6,065,679 $ 2 $ 20,301 $ (310) --
Issuance of stock............. 118,000 1 78,571 -- 11,824 -- --
Issuance of stock warrants.... -- -- -- -- 600 -- --
Notes receivable, net of
payments.................... -- -- -- -- -- (51) --
Conversion to mandatory
redeemable preferred
stock....................... (300,842) (3) -- -- (30,081) -- --
Accretion of mandatory
redeemable preferred stock
dividend.................... -- -- -- -- -- -- --
Net income.................... -- -- -- -- -- -- --
--
--------- --- ---------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1996.... -- -- 6,144,250 2 2,644 (361) --
Purchase of treasury stock,
net......................... -- -- -- -- -- -- 43,190
Notes receivable, net of
payments.................... -- -- -- -- 2 (232) (35,561)
Accretion of mandatory
redeemable preferred stock
dividend.................... -- -- -- -- -- -- --
Net income.................... -- -- -- -- -- -- --
--
--------- --- ---------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1997.... -- -- 6,144,250 2 2,646 (593) 7,629
Notes receivable, net of
payments.................... -- -- -- -- -- (47) --
Issuance of stock warrants.... -- -- -- -- 300 -- --
Accretion of mandatory
redeemable preferred stock
dividend.................... -- -- -- -- -- -- --
Net income.................... -- -- -- -- -- -- --
--
--------- --- ---------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1998.... -- -- 6,144,250 2 2,946 (640) 7,629
Notes receivable, net of
payments (unaudited)........ -- -- -- -- -- (26) --
Accretion of mandatory
redeemable preferred stock
dividend.................... -- -- -- -- -- -- --
Net income (unaudited)........ -- -- -- -- -- -- --
--
--------- --- ---------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1999
(UNAUDITED)................... -- $ -- 6,144,250 $ 2 $ 2,946 $ (666) 7,629
--
--
--------- --- ---------- ----------- ----------- -----------
--------- --- ---------- ----------- ----------- -----------
<CAPTION>
TOTAL
RETAINED SHAREHOLDERS'
AMOUNT EARNINGS EQUITY
--------- ----------- -------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.... $ -- $ 6,276 $ 26,271
Issuance of stock............. -- -- 11,825
Issuance of stock warrants.... -- -- 600
Notes receivable, net of
payments.................... -- -- (51)
Conversion to mandatory
redeemable preferred
stock....................... -- (2,711) (32,795)
Accretion of mandatory
redeemable preferred stock
dividend.................... -- (2,958) (2,958)
Net income.................... -- 6,444 6,444
--------- ----------- -------------
BALANCE AT DECEMBER 31, 1996.... -- 7,051 9,336
Purchase of treasury stock,
net......................... (220) -- (220)
Notes receivable, net of
payments.................... 218 -- (12)
Accretion of mandatory
redeemable preferred stock
dividend.................... -- (3,712) (3,712)
Net income.................... -- 5,505 5,505
--------- ----------- -------------
BALANCE AT DECEMBER 31, 1997.... (2) 8,844 10,897
Notes receivable, net of
payments.................... -- -- (47)
Issuance of stock warrants.... -- -- 300
Accretion of mandatory
redeemable preferred stock
dividend.................... -- (4,097) (4,097)
Net income.................... -- 4,494 4,494
--------- ----------- -------------
BALANCE AT DECEMBER 31, 1998.... (2) 9,241 11,547
Notes receivable, net of
payments (unaudited)........ -- -- (26)
Accretion of mandatory
redeemable preferred stock
dividend.................... -- (2,205) (2,205)
Net income (unaudited)........ -- 3,124 3,124
--------- ----------- -------------
BALANCE AT JUNE 30, 1999
(UNAUDITED)................... $ (2) $ 10,160 $ 12,440
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before extraordinary item...................... $ 6,444 $ 5,505 $ 4,832 $ 387 $ 3,124
Adjustments to reconcile income before extraordinary
item to net cash provided by (used in) operating
activities:
Depreciation, depletion and amortization.......... 6,301 7,830 11,098 4,549 5,694
Provision for doubtful accounts, net.............. 15 (88) (49) (64) 130
Deferred income taxes............................. 2,626 3,129 3,226 522 1,361
Loss (gain) on disposal of fixed assets and real
estate.......................................... (13) (63) 330 8 35
Minority interest................................. 727 981 775 (90) 39
Extraordinary item................................ -- -- (338) (338) --
Change in operating assets and liabilities:
Trade accounts, notes and other receivables..... 2,900 (2,589) (13,018) (13,177) (10,364)
Inventories..................................... (2,797) (3,160) (8,280) (3,477) (3,130)
Prepaid expenses and other...................... (3,865) (4,218) 2,890 2,765 (3,505)
Trade accounts payable and accrued
liabilities................................... (5,678) (2,309) 347 9,410 5,550
Income taxes payable............................ (39) 615 916 (546) (223)
Other........................................... (35) (347) 454 (37) (28)
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities.................................. 6,586 5,286 3,183 (88) (1,317)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment............ (20,945) (17,750) (27,330) (19,124) (27,246)
Acquisition of subsidiaries, net of cash acquired..... (37,910) (4,038) (83,884) (82,222) --
Proceeds from sale of fixed assets.................... -- 1,310 10,360 154 2,868
--------- --------- --------- --------- ---------
Net cash used in investing activities........... (58,855) (20,478) (100,854) (101,192) (24,378)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt.................. (41,773) (693) (85,990) (400) (803)
New borrowings........................................ 78,075 14,946 185,731 103,518 25,867
Sale of stock......................................... 12,426 -- -- 300 --
Other................................................. (18) -- 300 9 8
--------- --------- --------- --------- ---------
Net cash provided by financing activities....... 48,710 14,253 100,041 103,427 25,072
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH......................... (3,559) (939) 2,370 2,147 (623)
CASH, beginning of period............................... 4,977 1,418 479 479 2,849
--------- --------- --------- --------- ---------
CASH, end of period..................................... $ 1,418 $ 479 $ 2,849 $ 2,626 $ 2,226
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest............................................ $ 5,018 $ 8,311 $ 13,364 $ 200 $ 379
Taxes............................................... 937 (639) 131 103 732
NON CASH TRANSACTIONS:
Value assigned to warrants............................ 600 -- 300 -- --
Accretion of preferred stock dividend................. 2,958 3,712 4,097 1,998 2,205
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS:
U.S. Aggregates, Inc. (a Delaware corporation, hereinafter referred to as
USAI or the Company) was incorporated in 1994. USAI is a leading producer of
aggregates, primarily crushed stone, sand and gravel and associated
aggregate-based materials and services. Its products are used primarily for the
construction and maintenance of highways and other infrastructure projects and
for commercial and residential construction, in nine states. The Company
operates through two subsidiaries: SRM Holdings Corp. (SRMHC) and Western
Aggregates Holding Corp. (WAHC). The capital structure of USAI includes common
stock with voting rights and preferred stock without voting rights.
The Company conducts its operations through one reportable segment: the
quarrying and distribution of aggregate products. The Company operates in nine
states which have been aggregated for segment reporting purposes.
2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements as of June 30, 1999, and for
the six months ended June 30, 1998 and 1999, are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements, have been included. The results of operations for the
interim periods are not indicative of the results for the entire fiscal year.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of USAI and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent funds on deposit in noninterest and
interest-bearing operating and/or highly liquid investment accounts, with
original maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of average manufactured cost (which
approximates the first-in, first-out method of accounting) or market. Average
manufactured cost includes all direct labor and material costs and those
indirect costs specifically related to aggregate production, including indirect
labor, repairs, depreciation and depletion.
INCOME PER SHARE
Basic income per share was calculated by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted
earnings per share includes the impact of outstanding Warrants, using the
treasury stock method. Net income per share for all periods
F-7
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
presented and all share data reflect the Company's proposed 30.0347 for 1 stock
split effective at the time of the Company's initial public offering of common
stock.
USE OF ESTIMATES
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RISK FACTORS RELATING TO THE COMPANY'S BUSINESS AND INDUSTRY
The Company's business is seasonal, with peak revenue and profits occurring
primarily in the months of April through November. Bad weather conditions during
this period could adversely affect operating income and cash flow and could
therefore have a disproportionate impact on the Company's results for the full
year. Quarterly results have varied significantly in the past and are likely to
vary significantly from quarter to quarter in the future.
A majority of the Company's revenues are from customers who are in
industries and businesses that are cyclical in nature and subject to changes in
general economic conditions. In addition, since operations occur in a variety of
geographic markets, the Company's business is subject to the economic conditions
in each such geographic market. General economic downturns or localized
downturns in the regions where the Company has operations, including any
downturns in the construction industry, could have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company's operations are subject to and affected by federal, state and
local laws and regulations including such matters as land usage, street and
highway usage, noise levels and health, safety and environmental matters. In
many instances, various permits are required. Although management believes that
the Company is in compliance with regulatory requirements, there can be no
assurance that the Company will not incur material costs or liabilities in
connection with regulatory requirements.
Certain of the Company's operations may from time to time involve the use of
substances that are classified as toxic or hazardous substances within the
meaning of these laws and regulations. Risk of environmental liability is
inherent in the operation of the Company's business. As a result, it is possible
that environmental liabilities will have a material adverse effect on the
Company in the future.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
for using the straight-line method over the estimated useful lives of the
assets, which are as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings....................................................... 40 years
10-30
Plant and equipment............................................. years
Transportation and delivery equipment........................... 4-15 years
Furniture and fixtures.......................................... 5-10 years
</TABLE>
F-8
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
In 1996, the salvage values were changed to 20% to standardize the residual
values used by U.S. Aggregates' various subsidiaries and to recognize the
residual values of the owned operating equipment. In 1997, USAI changed the
estimated lives of certain depreciable assets, resulting in an approximate
$1,550 reduction of 1997 depreciation expense compared to what it would have
been had the estimated lives not been changed.
Expenditures for development, renewals and betterments of developing
quarries and gravel pits are capitalized. Depletion of acquired or leased
mineral deposits is calculated on the units-of-production method over the
estimated remaining recoverable reserves. Repairs and maintenance that do not
improve or extend the lives of the assets are charged against operations or
included in the inventory overhead pool in the year benefited. When properties
are retired or otherwise disposed of, related costs and accumulated depreciation
are removed from the accounts and any resulting gain or loss is included in
operations.
INTANGIBLES
Goodwill is amortized on a straight-line basis over 40 years. Covenants not
to compete are amortized on a straight-line basis over the life of the
agreement. Deferred finance charges are amortized on a straight-line basis over
the life of the related loan. As of December 31, 1997 and 1998, the accumulated
amortization applicable to the intangible assets was $4,067 and $6,208,
respectively.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its plant and other long-term assets for impairment
and assesses their recoverability based upon anticipated future cash flows. If
facts and circumstances lead the Company's management to believe that the cost
of one of its assets may be impaired, the Company will (a) evaluate the extent
to which that cost is recoverable by comparing the future undiscounted cash
flows estimated to be associated with that asset to the asset's carrying amount
and (b) write-down that carrying amount to market value or discounted cash flow
value to the extent necessary. Using this approach, the Company's management
determined that the cash flows would be sufficient to recover the carrying value
of the Company's long lived assets as of December 31, 1997 and 1998.
F-9
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
VALUATION ACCOUNTS
Below is a summary of the changes in the Company's valuation accounts for
1996, 1997 and 1998:
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BEGINNING BALANCE ACQUIRED PROVIDED DEDUCTIONS ENDING BALANCE
------------------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
1996
Allowance for doubtful accounts......... $ 297 $ 554 $ 275 $ (259) $ 867
Inventory valuation reserve............. 450 -- 350 (450) 350
1997
Allowance for doubtful accounts......... $ 867 $ -- $ 50 $ (288) $ 629
Inventory valuation reserve............. 350 -- 500 (559) 291
1998
Allowance for doubtful accounts......... $ 629 $ 583 $ 409 $ (458) $ 1,163
Inventory valuation reserve............. 291 -- 500 (291) 500
</TABLE>
Deductions include all charges against reserves. These deductions were made
in the normal course of business and only for the specific use for which the
reserve was identified and intended.
ENVIRONMENTAL MATTERS
Remediation costs are accrued based on estimates of known environmental
remediation exposure. Ongoing environmental compliance costs, including
maintenance and monitoring costs, are expensed as incurred. Quarry and pit
reclamation costs are treated as normal ongoing costs and are expensed, as
incurred.
INCOME TAXES
USAI accounts for income taxes using the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement and
tax bases, as well as the effect of operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period of
change.
REVENUE RECOGNITION
Revenues are recognized at the time the related products are shipped.
Contract revenues and costs are recognized under the
percentage-of-completion method, measured by the percentage of costs incurred to
date to estimated total costs for each contract. Revisions in cost estimates
during the course of a contract are reflected in the accounting period in which
the change of costs becomes known. Provision for estimated losses on incomplete
contracts is made in the period in which such losses become evident.
F-10
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
DEFERRED OFFERING COSTS
As of December 31, 1998 and June 30, 1999 costs of $348 and $1,242
(unaudited), respectively, have been incurred in connection with the Company's
initial public offering. Such costs will be treated as a reduction of the
proceeds from the offering.
FINANCIAL INSTRUMENTS
USAI'S financial instruments, other than debt, consist of cash, short-term
accounts receivable and accounts payable for which current carrying amounts are
equal to or approximate fair market value. The estimated fair values of the
Company's debt instruments at December 31, 1998, aggregated approximately
$189,100 compared with a carrying amount of $192,571. The fair values were
estimated based on the quoted market prices for similar issues, or on current
rates anticipated by the Company for debt of the same remaining maturities.
INTERNAL USE SOFTWARE
In March 1998, the AICPA issued Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use ("SOP
98-1"). The Company adopted SOP 98-1 on January 1, 1999. SOP 98-1 requires the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal use. The Company
expensed such costs as incurred through December 31, 1998. The Company does not
expect the impact of the adoption of SOP 98-1 to be material.
COSTS OF START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountants (the
"AICPA") issued Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP
ACTIVITIES ("SOP 98-5"). Effective January 1, 1999, SOP 98-5 requires that all
costs related to certain start-up activities, including organizational costs, be
expensed as incurred. The cumulative effect of the adoption of SOP 98-5 reduced
net earnings by $84, which has been recorded as an expense in the period ended
June 30, 1999.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income, ("FAS 130"). FAS 130 requires all
non-owner changes in equity that are excluded from net earnings under existing
FASB standards be included as comprehensive income. The Company presently does
not have any material transactions that directly affect equity other than those
transactions with owners in their capacity as owners. Therefore, the provisions
of FAS 130 did not materially affect net earnings or financial position.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"), which is required to be adopted
in years beginning after June 15, 1999. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption of FAS 133 will
have a significant impact on net earnings or the financial position of the
Company.
F-11
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES: (CONTINUED)
COLLECTIVE BARGAINING AGREEMENTS
The Company is a party to various collective bargaining agreements with
labor unions. The agreements require the Company to pay specified wages and
provide certain benefits to its union employees. These agreements will expire at
various times between July 1999 through July 2001.
3. ACQUISITIONS:
On June 5, 1998, USAI, through WAHC, purchased all of the outstanding common
stock of Monroc, Inc. (Monroc). Monroc's purchase price was approximately
$67,800 in cash plus costs and certain assumed liabilities. The acquisition has
been accounted for under the purchase method of accounting. The amount by which
the total cost exceeded the fair value of the tangible net assets acquired of
$1,135 was recognized as goodwill and is being amortized over 40 years.
In addition, at various dates during 1996, 1997 and 1998, USAI, through its
subsidiaries, acquired assets and businesses of several small companies. The
operating results of the acquired businesses are included in the accompanying
financial statements from their respective dates of acquisition.
The following table reflects supplemental disclosure of noncash transactions
related to these acquisitions for 1998:
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired, including goodwill of $4,132....... $ 139,417
Liabilities assumed............................................... (55,533)
---------
Cash paid for assets.............................................. $ 83,884
---------
---------
</TABLE>
The following unaudited selected pro forma financial data are presented as
if the acquisitions (excluding Monroc's discontinued operations) had occured on
January 1, 1997. The pro forma financial information is based upon certain
estimates and assumptions that management of the Company believes are reasonable
in the circumstances. The unaudited pro forma information presented below is not
necessarily indicative of what results of operations actually would have been if
the acquisition had occured on the date indicated. Moreover, they are not
necessarily indicative of future results.
<TABLE>
<CAPTION>
1997 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales............................................................. $ 212,910 $ 249,224
Income from continuing operations..................................... 3,663 4,916
Income from continuing operations per share........................... $ (0.01) $ 0.13
</TABLE>
ASSETS HELD FOR SALE
Concurrent with the acquisition of Monroc, the Company decided to dispose of
the Precast Division operations of Monroc as well as two parcels of land held by
Monroc. The land parcels were sold during the year for $6,945. On December 31,
1998 the Company sold certain assets and inventory related to the Precast
Division for $8,637. No gain or loss was recognized on these dispositions. The
results of operations from the Precast Division between the date of acquisition
and sale, and the
F-12
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. ACQUISITIONS: (CONTINUED)
interest expense associated with the purchase of these assets totalling $1,075
net of tax, was considered in the purchase price allocation.
4. INVENTORIES:
Inventories consist of the following as of December 31:
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Finished products....................................................... $ 6,300 $ 19,014
Raw materials........................................................... 4,831 5,730
Supplies and parts...................................................... 236 888
Fuel.................................................................... 204 348
Less: Allowances........................................................ (291) (500)
--------- ---------
$ 11,280 $ 25,480
--------- ---------
--------- ---------
</TABLE>
Inventories are pledged as security under various debt agreements (see Note
6).
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following as of December 31:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Land.................................................................. $ 7,889 $ 31,988
Mineral deposits and quarry development............................... 22,872 97,061
Plant and equipment................................................... 96,107 119,675
Furniture and fixtures................................................ 1,669 4,148
Construction in progress.............................................. 2,018 1,038
---------- ----------
130,555 253,910
Less: Accumulated depreciation and depletion.......................... (14,396) (21,591)
---------- ----------
$ 116,159 $ 232,319
---------- ----------
---------- ----------
</TABLE>
Property, plant and equipment are pledged as security for various debt
agreements (see Note 6).
F-13
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. LONG-TERM DEBT:
Long-term debt consists of the following as of December 31:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Prudential Insurance subordinated notes, net of discount of $530 and
$753, respectively.................................................. $ 29,470 $ 44,247
Bank of America term loan............................................. 25,875 --
Bank of America term loan A........................................... -- 53,500
Bank of America term loan B........................................... -- 58,500
Bank of America revolving loan........................................ 13,800 24,200
Bank of America acquisition loan...................................... 16,400 --
Notes payable to former stockholders.................................. 5,737 4,997
Other................................................................. 1,506 7,127
---------- ----------
Total long-term debt.............................................. 92,788 192,571
Less: Current portion................................................. (6,139) (6,781)
---------- ----------
Long-term debt, net of current portion............................ $ 86,649 $ 185,790
---------- ----------
---------- ----------
</TABLE>
The Bank of America credit facilities are secured by all of the assets of
USAI. The Prudential Insurance notes are subordinated to the Bank of America
credit facilities. Among other financial covenants, the debt agreements specify
a minimum interest coverage ratio, a minimum fixed charge coverage ratio and a
maximum leverage ratio. The agreements also prohibit the payment of dividends,
or purchase or redemption of stock without the lenders' consent. The Company is
in compliance with these covenants at December 31, 1997 and 1998.
PRUDENTIAL INSURANCE COMPANY SUBORDINATED NOTES
In November 1996 and June 1998, USAI issued $30,000 and $15,000,
respectively, in subordinated notes to the Prudential Insurance Company of
America (Prudential Insurance). Interest is due quarterly at a rate of 10.34
percent and 10.09 percent, respectively, per annum. Principal payments are
scheduled as follows:
<TABLE>
<S> <C>
2003............................................................... $ 6,000
2004............................................................... 6,000
2005............................................................... 6,000
2006............................................................... 16,500
2007............................................................... 4,500
2008............................................................... 6,000
</TABLE>
In connection with the issuance of the subordinated notes, USAI issued to
Prudential Insurance warrants to purchase 286,380 shares of the common stock of
USAI at a nominal cost. USAI has estimated the fair value of the warrants at
$900 ($600 recorded in 1996 and $300 in 1998) and reflected this amount as a
discount on the subordinated notes, with the offsetting credit to additional
paid-in capital. The discount is being amortized on a straight-line basis (which
approximates the interest method) over the life of the notes.
F-14
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. LONG-TERM DEBT: (CONTINUED)
BANK OF AMERICA TERM LOANS
USAI has a syndicated term loan facility with Bank of America NT & SA, as
agent, and certain other financial institutions (Bank of America). In June 1998,
the term loan agreement was amended to increase the total principal amount of
the Term Loan from $30,000 to $115,000 of Term Loan A and Term Loan B. In
connection with the restructuring of the Company's debt, previously capitalized
fees and costs of $338, net of a tax benefit of $212, were recorded as an
Extraordinary Item--Loss on Extinguishment of Debt in 1998.
TERM LOAN A has interest payments due quarterly and is currently payable at
the Eurodollar rate plus 2.125 percent, or approximately 7.6875 percent as of
December 31, 1998. Principal payments are scheduled as follows:
TERM LOAN A
<TABLE>
<S> <C>
June 1999 through March 2000....... $1,250 per quarter
June 2000 through March 2001....... $2,500 per quarter
June 2001 through March 2002....... $3,000 per quarter
June 2002 through March 2003....... $3,250 per quarter
June 2003 through March 2004....... $3,750 per quarter
</TABLE>
TERM LOAN B has interest payments due quarterly and is currently payable at
the Eurodollar rate plus 2.5 percent, or approximately 8.0625 percent as of
December 31, 1998. Principal payments are scheduled as follows:
TERM LOAN B
<TABLE>
<S> <C>
June 1999 through December 2005.... $138 per quarter
March 2006......................... $51,288
</TABLE>
BANK OF AMERICA REVOLVING LOAN
In June 1998, the Company's revolving loan facility was increased to
$40,000. Subsequent to year end, this loan facility was increased to $60,000.
The revolving loan is to be paid in full by the revolving facility termination
date in June 2004; however, USAI may terminate revolving commitments at any time
provided that USAI pays, in full, all obligations. Interest on the unpaid
principal amount of each revolving loan is due quarterly. If the loan is a
floating rate loan, interest is payable at a rate per annum equal to the sum of
the alternate reference rate from time to time in effect plus 1 percent. If the
loan is a Eurodollar loan, interest is payable at a rate per annum equal to the
sum of the Eurodollar rate applicable to each interest period for such loan plus
1.125 percent. In addition, USAI pays fees of .5 percent per annum on the daily
average of the unused amount of the revolver. The interest rate on this debt as
of December 31, 1998 was 8.875%.
The interest rate and commitment fee on unused amounts of the revolving loan
vary based on certain performance criteria established by USAI's banks. However,
the rates cannot exceed the
F-15
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. LONG-TERM DEBT: (CONTINUED)
Eurodollar rate plus 2.125%, the alternate reference rate plus 1.125%, or, in
relation to committment fees, 0.5% of the unused portion of the revolver.
NOTES PAYABLE TO FORMER SHAREHOLDERS
In connection with the acquisition of certain companies, USAI subsidiaries
have issued from time to time notes payable to the selling shareholders, several
of whom remain employees and shareholders of subsidiaries. These notes payable
bear interest at rates from 6% to 10.65% per annum and have varying maturity
dates continuing to 2001.
OTHER DEBT
Other debt consists primarily of various borrowings from banks, generally
secured by equipment. Interest rates range from 7.9% to 10.0% and have varying
maturity dates through 2018.
SCHEDULED PAYMENTS OF LONG-TERM DEBT
Scheduled long-term debt maturities are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
- ------------------------------------------------------------------------------
<S> <C>
1999.......................................................................... $ 6,781
2000.......................................................................... 12,756
2001.......................................................................... 14,202
2002.......................................................................... 13,949
2003.......................................................................... 21,621
Thereafter.................................................................... 124,193
--------------
193,502
Less: Unamortized discount.................................................... (931)
--------------
$ 192,571
--------------
</TABLE>
7. DEMAND NOTE
In March 1998, Harris Trust & Savings Bank granted USAI a $9,000 revolving
line of credit guaranteed by a shareholder. Interest is due quarterly at a rate
per annum equal to the rate announced from time to time by Harris Trust &
Savings Bank as prime commercial rate or approximately 7.75% as of December 31,
1998. The demand note is due in full on June 30, 1999.
Subsequent to the end of year, the Company retired the above note and was
granted a $17,500 revolving line of credit also guaranteed by a shareholder. The
note is due and payable on demand.
F-16
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. EMPLOYEE BENEFIT PLANS:
U.S. AGGREGATES INC. 401(K) PLAN
Prior to 1998, some of USAI's subsidiaries had 401(k) plans with various
vesting and discretionary contribution formulas. For the year ended December 31,
1997, the subsidiaries provided contributions of $255.
In 1998, USAI established a 401(k) plan that is funded by both employees and
at the discretion of USAI. This plan is administered by a third party.
Subsequently, the subsidiaries' 401(k) plans were merged into the USAI plan.
All full-time employees other than union employees are eligible to
participate in the U.S. Aggregates, Inc. 401(k) Plan. USAI may make
discretionary contributions each year. Participants increase their vested
interest in these discretionary contributions based upon years of employment in
which at least 1,000 hours are worked, and they become fully vested after seven
years. Participants are fully vested in their contributions. For the years ended
December 31, 1997 and 1998, USAI provided contributions of $255 and $0,
respectively.
SRM
SRM had a noncontributory defined benefit pension plan covering
substantially all of its employees. SRM's funding policy was to contribute
amounts that were actuarially determined to provide this plan with sufficient
assets to meet future benefit payment requirements.
In February 1997, a total distribution of plan assets to participants and
termination of the plan occurred. The Company has no ongoing liability related
to this plan.
SRM also maintains a benefit plan partially funded by key-man life insurance
for current and former key employees of SRM. Benefits under the plan are
discretionary and are payable over a ten-year period upon retirement at age 65
or upon death. As of December 31, 1997 and 1998, the present value of long-term
benefits payable are $79 and $76, respectively.
MULTIEMPLOYER PLANS
The Company participates in various multiemployer union pension plans
through two of its subsidiaries. Contributions to these plans in 1996, 1997 and
1998 were approximately $253, $292 and $586, respectively.
F-17
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. INCOME TAXES:
USAI files a consolidated federal tax return. Its subsidiaries file tax
returns in the states in which they conduct business.
The provision for income taxes for 1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal........................................... $ 888 $ 255 $ 884
State............................................. 146 -- 127
------------ ------------ ------------
1,034 255 1,011
------------ ------------ ------------
Deferred:
Federal........................................... 2,276 2,718 2,197
State............................................. 350 411 328
------------ ------------ ------------
2,626 3,129 2,525
------------ ------------ ------------
$ 3,660 $ 3,384 $ 3,536
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The provision for income taxes as reflected in the accompanying statements
of operations includes the following components:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Provision for income taxes.......................... $ 3,660 $ 3,384 $ 3,748
Benefit for income taxes on extraordinary item...... -- -- (212)
------------ ------------ ------------
$ 3,660 $ 3,384 $ 3,536
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-18
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. INCOME TAXES: (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
as of December 31 are as follows:
<TABLE>
<CAPTION>
1997 1998
-------------- --------------
<S> <C> <C>
Deferred tax assets;
Accruals and reserves....................................... $ 559 $ 308
Alternative minimum tax credit.............................. 1,541 2,425
Net operating loss.......................................... 1,554 3,922
Other....................................................... 154 1,211
-------------- --------------
Total deferred tax assets................................. 3,808 7,866
-------------- --------------
Deferred tax liabilities:
Depreciation and depletion.................................. (12,171) (24,147)
Book basis in fixed assets over tax basis................... (3,845) (27,082)
Other....................................................... (448) (1,248)
-------------- --------------
Total deferred tax liabilities............................ (16,464) (52,477)
-------------- --------------
Net deferred tax liability................................ $ (12,656) $ (44,611)
-------------- --------------
-------------- --------------
</TABLE>
The reconciliation of the statutory rate to the effective rate is as
follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Tax at federal statutory rate....................... $ 3,682 $ 3,234 $ 3,037
State taxes, net of federal benefit................. 357 358 304
Effect of tax rate increase to 35 percent........... -- -- 546
Depletion........................................... (432) (365) (491)
Other............................................... 53 157 140
------------ ------------ ------------
$ 3,660 $ 3,384 $ 3,536
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
At December 31, 1997 and 1998 the Company had net operating loss
carryforwards of $4,487 and $10,437 available to offset future taxable income.
These carryforwards expire through 2013. Alternative minimum tax credit
carryforwards of $1,541 and $2,425 at December 31, 1997 and 1998 have no
expiration date. Prior to 1998, the Company provided federal income taxes using
a rate of 34%. In the year ended December 31, 1998 this rate was increased to
35% and deferred taxes were adjusted accordingly.
10. COMMON STOCK
The Company has a stock purchase plan periodically made available to select
members of management. Under this formula plan, individuals are allowed to
purchase stock in the Company or its subsidiaries. The Company sold 43,190
shares of its common stock under this program in 1997. Also 50 shares (12,120
equivalent USAI shares) of SRMHC and 2,500 shares (46,757 equivalent USAI
shares) of WAHC common stock were sold under this program in 1998. Shares issued
under this program are generally sold for a combination of cash and notes and
are subject to vesting over a 6 year period. The
F-19
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. COMMON STOCK (CONTINUED)
vested and unvested shares are subject to various call or put options upon
termination. The repurchase price is at fair market value for vested shares or
original cost for unvested shares. The total number of shares outstanding under
this program are 43,190 and 17,276 unvested and vested for the Company, 3,857
(72,136 equivalent USAI shares) and 952 (17,805 equivalent USAI shares) unvested
and vested for WAHC and 170 (41,208 equivalent USAI shares) and 67 (16,241
equivalent USAI shares) unvested and vested for SRM. Upon completion of the
Initial Public Offering contemplated, the employees shares in subsidiary stock
will be exchanged for stock of the Company, and the Company's and employees
rights with regard to vested shares will cease.
11. PREFERRED STOCK
There are 500,000 shares of non-voting preferred stock authorized with a .01
per share par value. At December 31, 1996, 1997 and 1998 there were 300,842
shares outstanding. Aggregate and per share cumulative preferred dividends in
arrears as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Aggregate cumulative preferred dividends........................ $ 5,670 $ 9,382 $ 13,479
Per preferred share cumulative preferred dividends.............. 18.85 31.18 44.80
</TABLE>
The preferred stock has certain liquidation preferences and a liquidation
value of $100 per share. It entitles the holders to receive cumulative dividends
of 10% per annum of the sum of the liquidation value plus all accumulated and
unpaid dividends when and as declared. The net proceeds from any public offering
must be used to redeem these shares at their liquidation value plus all accrued
and unpaid dividends.
Effective November, 1996 the terms of the preferred stock agreement were
modified, allowing the holders to redeem their shares at liquidation value plus
all accrued and unpaid dividends at any date after January 2000, subject to the
approval of the Company's lenders. As of December 31, 1998 the Company's debt
agreements do not allow such a redemption.
The preferred stock is reflected as Mandatorily Redeemable Preferred Stock
on the balance sheet and is not considered a component of Shareholders' Equity.
Dividends are accreted at a compound rate of 10% per quarter. Accumulated
accreted dividends of $13,479 have been charged against retained earnings and
reflected in mandatory redeemable preferred stock through December 31, 1998.
Upon completion of the Initial Public Offering contemplated, this stock will
be redeemed.
12. INCOME PER SHARE
Basic income per share was calculated by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted
earnings per share include the impact of outstanding Warrants, using the
treasury stock method. Net income per share for all periods presented and all
share data reflect the Company's proposed 30.0347 for 1 stock split effective at
the time of the Company's initial public offering of common stock.
F-20
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. INCOME PER SHARE (CONTINUED)
Income used in the per common share calculations are the same for basic and
diluted calculations. The following table reconciles the weighted average shares
outstanding used for basic and diluted income per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1996 1997
------------------------------------- -------------------------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
----------- --------- ------------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations..................... $ 6,444 $ 5,505
Less: Accretion of Preferred stock dividend......... 2,958 3,712
----------- -----------
Basic income from continuing operations available to
common stockholders................................. 3,485 6,074,704 $ 0.57 1,793 6,116,718 $ 0.29
Effect of warrants.................................... 20,768 190,029
--------- ---------
Dilutive income from continuing operations available
to common stockholders.............................. $ 3,485 6,095,472 $ 0.57 $ 1,793 6,306,747 $ 0.28
----------- --------- ----- ----------- --------- -----
----------- --------- ----- ----------- --------- -----
<CAPTION>
1998
-------------------------------------
PER SHARE
INCOME SHARES AMOUNT
----------- --------- -------------
<S> <C> <C> <C>
Income from continuing operations..................... $ 4,832
Less: Accretion of Preferred stock dividend......... 4,097
-----------
Basic income from continuing operations available to
common stockholders................................. 735 6,136,630 $ 0.12
Effect of warrants.................................... 245,464
---------
Dilutive income from continuing operations available
to common stockholders.............................. $ 735 6,382,094 $ 0.11
----------- --------- -----
----------- --------- -----
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------
1998 1999
------------------------------------- -----------
(UNAUDITED) (UNAUDITED)
PER SHARE
INCOME SHARES AMOUNT INCOME
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income from continuing operations................................... $ 387 $ 3,124
Less: Accretion of preferred stock dividend....................... 1,998 2,205
----------- -----------
Basic income from continuing operations available to common
stockholders...................................................... (1,611) 6,136,630 $ (0.26) 919
Effect of warrants.................................................. --
-----------
Dilutive income from continuing operations available to common
stockholders...................................................... $ (1,611) 6,136,630 $ (0.26) $ 919
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
PER SHARE
SHARES AMOUNT
----------- -----------
<S> <C> <C>
Income from continuing operations...................................
Less: Accretion of preferred stock dividend.......................
Basic income from continuing operations available to common
stockholders...................................................... 6,136,630 $ 0.15
Effect of warrants.................................................. 286,381
-----------
Dilutive income from continuing operations available to common
stockholders...................................................... 6,423,011 $ 0.14
----------- -----------
----------- -----------
</TABLE>
13. CONCENTRATION OF CREDIT RISK:
Financial instruments that potentially subject USAI to concentrations of
credit risk consist primarily of cash and trade receivables.
USAI places its cash on deposit with credit-worthy financial institutions,
in accounts or instruments with maturities of three months or less.
Concentration of credit risk with respect to trade receivables is limited due to
the large number of customers who service a large base of clients dispersed
across many different industries throughout the southeastern and southwestern
sections of the United States.
14. COMMITMENTS AND CONTINGENCIES:
USAI and its subsidiaries lease office facilities, trucks, equipment and
certain quarry sites under operating lease arrangements. Lease expense (other
than royalties) was $3,933 and $8,951 for the years
F-21
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
ended December 31, 1997 and 1998, respectively. Total future minimum rentals
under noncancelable operating leases as of December 31, 1998 are:
<TABLE>
<S> <C>
1999.............................................................. $ 10,755
2000.............................................................. 10,106
2001.............................................................. 8,930
2002.............................................................. 7,358
2003.............................................................. 5,857
Thereafter........................................................ 24,896
---------
$ 67,902
---------
---------
</TABLE>
The Company operates several quarries on land owned entirely or in part by
unrelated third parties. Pursuant to related agreements, the Company pays
monthly royalties to the owner based on the quantity of aggregates sold. The
initial terms of these agreements range from 5 to 40 years and generally include
renewal options. The minimum royalty payments are included in the above table.
Royalty expenses recorded pursuant to these arrangements in 1996, 1997 and 1998
totaled $2,490, $2,725 and $4,748, respectively.
USAI and its subsidiaries are subject to various laws and regulations
relating to the protection of the environment. It is not possible to quantify
with certainty the potential impact of actions regarding environmental matters,
particularly any future remediation and other compliance efforts. In the opinion
of management, future compliance with existing environmental protection laws
will not have a material adverse effect on the financial condition or results of
operations of USAI.
USAI acquired SRM from Lohja, Inc. (Lohja) in 1994. In connection with the
purchase, USAI agreed to make semiannual payments to Lohja (the Lohja
obligation) through December 31, 1999, under an initial $3,760 obligation,
contingent upon the continuing operations and earnings of one of the Company's
quarries. In September 1998, the Company signed a lease authorizing continuing
operations at the quarry and in accordance with the original purchase agreement
paid the balance owed of $1,149 in full satisfaction of the purchase contract.
The Company has a quarry under development in DeKalb County, Georgia which
is inactive but currently permitted as a dimensional stone quarry site. The
Company intends to file a lawsuit against the county regarding a dispute over
the issuance of a blasting permit to start a crushed stone operation. The DeKalb
site development-stage activities to date have consisted primarily of site
preparation work such as road construction, the placement of scales and legal
fees. DeKalb has also made advance minimum royalty payments under a sublease
agreement to be applied against payments due upon the commencement of operations
at this site. Capitalized costs as of December 31, 1998 in connection with this
site were $1,524. Management feels that they will eventually open the quarry;
however, in the event that DeKalb is not permitted to conduct operations at this
quarry, the quarry will likely be leased to a dimensional stone producer.
F-22
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
USAI is subject to various legal proceedings and claims that have arisen in
the ordinary course of its business and have not been finally adjudicated. In
the opinion of management, the ultimate resolution of these issues would not
have a material adverse effect on USAI's financial condition or results of
operations.
15. RELATED-PARTY TRANSACTIONS:
During 1998, SRMHC issued 50 shares (12,120 equivalent USAI shares) of SRMHC
common stock to one management member of SRMHC and received a note receivable of
$57 for the issuance of such shares. This note bears interest at 8 percent per
annum and is due on December 31, 2003.
In 1998, WAHC issued 2,500 shares (46,757 equivalent USAI shares) of WAHC
common stock to several members of WAHC management and received notes receivable
of $250 for the issuance of these shares. Additionally, a member of Valley
Asphalt, Inc.'s (Valley) management elected to purchase 625 shares (11,689
equivalent USAI shares) of WAHC's outstanding common stock, in lieu of amounts
owed to them.
In October 1997, USAI issued 43,190 shares of stock for $220 to a member of
USAI's management. Additionally, during the same period, members of Valley's
management elected to purchase 1,875 shares of WAHC's outstanding common stock,
in lieu of amounts owed to them. Included in long-term debt is $1,449 and $1,682
as of December 31, 1997 and 1998 that is due to employees or shareholders who
were former owners of acquired companies.
Shares of the Company or its subsidiaries owned by members of management are
subject to repurchase agreements with the Company.
USAI pays an advisory fee to one of its major shareholders. Such fee
amounted to $150 for each of the years ended December 31, 1997 and 1998.
Also, USAI paid advisory fees of approximately $308 and $404 to a common and
preferred shareholder of USAI for each of the years ended December 31, 1997 and
1998, respectively. These fees were paid in connection with various financing
transactions undertaken by USAI during these years.
The wife of one executive acts as a financial advisor to the Company. This
advisor was paid a total of $151 in 1998 for financial advisory services
provided.
All related-party transactions are considered to be conducted at arm's
length.
16. SUBSEQUENT EVENTS (UNAUDITED):
OFFERING
The Company is in the process of filing a Registration Statement with the
Securities and Exchange Commission in connection with the offering by the
Company of 6,944,444 shares of common stock for sale to the public.
F-23
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)
U.S. AGGREGATES, INC. LONG-TERM INCENTIVE PLAN
The Board of Directors and the Company intend to adopt the U.S. Aggregates,
Inc. Long-term Incentive Plan, whereby the Company is authorized to issue up to
700,840 shares of the Company. The Compensation Committee of the Board of
Directors intends to grant 280,336 options under the plan to certain employees
of the Company to be effective concurrent with the initial public offering.
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Monroc, Inc.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Monroc, Inc. and Subsidiary (the
Company) for the year ended December 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated results of operations and cash flows of
Monroc, Inc. and Subsidiary for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Salt Lake City, Utah
March 31, 1998
F-25
<PAGE>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------------
1997 1997 1998
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net Sales............................................................ $ 61,383 $ 14,913 $ 12,307
Cost and Expenses:
Cost of sales...................................................... 52,584 12,868 10,156
General and administrative expenses................................ 6,925 1,611 1,699
Contribution to ESOP............................................... 800 200 200
------------ ------------- -------------
Total costs and expenses............................................. 60,309 14,679 12,055
------------ ------------- -------------
Operating profit (loss).............................................. 1,074 234 252
Other income (expense):
Interest, net...................................................... (1,013) (231) (390)
Gain (loss) on sale of real estate................................. (16) 4 --
------------ ------------- -------------
Total other expense................................................ (1,029) (227) (390)
------------ ------------- -------------
Earnings (loss) before income taxes.................................. 45 7 (138)
Income tax (benefit)................................................. (194) -- --
------------ ------------- -------------
Net earnings (loss).................................................. $ 239 $ 7 $ (138)
------------ ------------- -------------
------------ ------------- -------------
Basic earnings (loss) per common share............................... $ 0.05 $ 0.00 $ (0.03)
Diluted earnings (loss) per common share............................. $ 0.05 $ 0.00 $ (0.03)
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
---------------------- EXCESS
SHARES AMOUNT OF PAR VALUE
--------- ----------- ----------------
<S> <C> <C> <C>
Balance at January 1, 1997.............................................................. 4,467,000 $ 45 $ 24,482
Common stock issued................................................................... 47,200 -- 236
Purchase of stock warrants............................................................ -- -- --
Net earnings for the year............................................................. -- -- --
Reduction of ESOP note receivable..................................................... -- -- --
--------- ----------- ----------------
Balance at December 31, 1997............................................................ 4,514,200 45 24,718
Net loss for the period (unaudited)................................................... -- -- --
Reduction of ESOP note receivable (unaudited)......................................... -- -- --
--------- ----------- ----------------
Balance at March 31, 1998 (unaudited)................................................... 4,514,200 $ 45 $ 24,718
--------- ----------- ----------------
--------- ----------- ----------------
<CAPTION>
ESOP
ACCUMULATED NOTE
DEFICIT RECEIVABLE
------------ ----------
<S> <C> <C>
Balance at January 1, 1997.............................................................. $ (3,332) $ (2,524)
Common stock issued................................................................... -- --
Purchase of stock warrants............................................................ (208) --
Net earnings for the year............................................................. 239 --
Reduction of ESOP note receivable..................................................... -- 800
------------ ----------
Balance at December 31, 1997............................................................ (3,301) (1,724)
Net loss for the period (unaudited)................................................... (138) --
Reduction of ESOP note receivable (unaudited)......................................... -- 200
------------ ----------
Balance at March 31, 1998 (unaudited)................................................... $ (3,439) $ (1,524)
------------ ----------
------------ ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-27
<PAGE>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, --------------------
1997 1997 1998
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)............................................................. $ 239 $ 7 $ (138)
Adjustments to reconcile net earnings (loss) to net cash provided by operating
activities:
Depreciation and amortization of property, plant, and equipment............... 2,303 569 704
Deferred income tax expense................................................... (194) -- --
Provision for contribution to ESOP and repayment of ESOP note receivable...... 800 200 200
Amortization of other assets.................................................. 57 18 13
Provision for discounts and doubtful accounts................................. 396 (1) (72)
Depletion of aggregate deposits............................................... 107 15 28
Loss on sale of property, plant and equipment, and land....................... 16 259 --
Changes in assets and liabilities:
Accounts receivable......................................................... 3,624 1,130 (150)
Note receivable from officer................................................ (140) -- --
Costs and estimated earnings in excess of billings on uncompleted
contracts................................................................. (33) (151) 210
Inventories................................................................. (761) 128 (339)
Prepaid expenses............................................................ 140 547 (214)
Other assets................................................................ -- (25) --
Trade accounts payable...................................................... (1,747) (2,065) 847
Accrued liabilities......................................................... 870 267 415
Billings in excess of costs and estimated earnings on uncompleted
contracts................................................................. (529) 142 (119)
Deferred compensation....................................................... (31) (29) 14
------------ --------- ---------
Net cash provided by operating activities..................................... 5,117 1,011 1,399
------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment................................... (4,357) (1,043) (4,774)
Proceeds from sale of property, plant, equipment, and land.................... 306 -- --
Additions to aggregate deposits............................................... (2,917) -- --
Addition to land.............................................................. (638) -- --
------------ --------- ---------
Net cash used in investing activities....................................... (7,606) (1,043) (4,774)
------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in line of credit..................................... 544 (1,237) (400)
Principal payments on long-term obligations................................... (1,656) (125) (308)
Issuance of long-term obligations............................................. 3,136 565 3,997
Purchase of stock warrants.................................................... (209) -- --
Issuance of common stock...................................................... 236 -- --
------------ --------- ---------
Net cash provided by (used in) financing activities......................... 2,051 (797) 3,289
------------ --------- ---------
Net decrease in cash and cash equivalents....................................... (438) (829) (86)
Cash and cash equivalents at beginning of period................................ 1,190 1,190 752
------------ --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................... $ 752 $ 361 $ 666
------------ --------- ---------
------------ --------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................................................... $ 981,672 $ 203 $ 401
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES--The Company acquired equipment under
capital lease obligations totaling $418 in 1997. Additionally, inventory valued
at a cost of $55 was transferred to the cost of land due to land reclamation
activities during 1997.
See notes to consolidated financial statements.
F-28
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY -- Monroc, Inc. and subsidiary (the Company) operate in
one industry segment; the production and sale of sand and gravel products,
ready-mix concrete, prestress/precast concrete products, and accessories for the
building and construction industry, principally in Utah, Idaho, and Wyoming.
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary, Big Horn
Redi-Mix, Inc. (Big Horn). All significant intercompany accounts and
transactions have been eliminated in consolidation.
INTERIM FINANCIAL STATEMENTS -- The interim consolidated financial
statements for the three months ended March 31, 1998 and 1997, are unaudited. In
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
indicative of the results for the entire fiscal year.
PROPERTY, PLANT, AND EQUIPMENT AND AGGREGATE DEPOSITS -- Property, plant,
and equipment are depreciated over their estimated useful lives. Leased property
under capital leases is amortized over the lives of the respective leases or
over the service lives of the assets for those leases which substantially
transfer ownership. The straight-line method of depreciation is followed for
financial reporting purposes; however, straight-line and accelerated methods are
used for tax purposes. Depletion on aggregate deposits is calculated on a
units-of-production basis. The estimated lives used in determining depreciation
and amortization are:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Mobile equipment................................................... 5-12
Plant equipment.................................................... 5-12
Administrative equipment and buildings............................. 5-50
</TABLE>
OTHER ASSETS -- Other assets include miscellaneous amortizable assets
including financing commitment fees, which fees are being amortized on the
interest method over the term of the notes payable to banks. Other assets also
includes goodwill which is being amortized on the straight-line method over 20
years. Impairment of long-lived assets is determined by evaluating long-lived
assets on a periodic basis in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and of Long-Lived Assets to be Disposed Of,"
which was adopted on January 1, 1996. Assets determined to be impaired are
written down to their fair value. There were no significant impairments during
1997.
REVENUE RECOGNITION -- Revenues on contracts which are primarily for
prestress/precast concrete products are recognized on the
percentage-of-completion method. The percentage-of-completion is determined on
the units-of-production basis. Under this method, revenues, costs, and estimated
profits are recognized as individual units are completed.
F-29
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
During 1997, the Company recognized revenue of approximately $6,349 on a
significant project which was completed during 1997.
Contract costs are included in cost of sales and include all direct labor
and benefits, materials unique to or installed in the project, and indirect cost
allocations, including employee benefits and construction equipment expense. As
long-term contracts extend over one or more years, revision in cost and earnings
estimates during the course of the work are reflected in the accounting period
in which the facts which require the revision become known. At the time a loss
on a contract becomes known, the entire amount of the estimated ultimate loss is
recognized in the financial statements.
Costs attributable to contract claims or disputes are recorded only when
realization is probable. The amounts are recorded at the lesser of actual costs
incurred or the amount expected to be realized.
Revenues on other product sales are recognized when the product is shipped.
INCOME TAXES -- The Company utilizes an asset and liability approach for
financial accounting and reporting for income taxes. Under this method, deferred
tax assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities and are measured
using enacted tax rates and laws that will be in effect when the differences are
expected to reverse. An allowance against deferred tax assets is recorded when
it is more likely than not that such tax benefits will not be realized.
ESOP ACCOUNTING -- The Company established an Employee Stock Ownership
Plan (ESOP) in 1986 to facilitate the acquisition of assets from a predecessor
company. In conjunction with the acquisition, the Company loaned the ESOP $10
million, which the ESOP used to finance the acquisition of its interest in the
Company. Generally accepted accounting principles require that the note
receivable from the ESOP be included in the balance sheet as a reduction of
stockholders' equity.
The ESOP allocates the shares issued to the ESOP in 1986 to the participants
of the ESOP as described below. The Company makes contributions to the ESOP
which allow the ESOP to make the debt payments back to the Company on the note
receivable from the ESOP. Upon a commitment to release shares, ESOP
contributions by the Company are expensed and charged against income for
accounting purposes and are deductible for income tax purposes. Shares allocable
to participants for a given year are determined based on the ratio of the
current year's ESOP debt service payments (principal and interest) on the
original note from the Company as compared to the total remaining required debt
service on that loan. The contribution to the ESOP is a noncash expense of the
Company because the contributions are paid back to the Company and reduce the
note receivable from the ESOP. Consequently, no cash is consumed as a result of
the contributions. Furthermore, since the note receivable from the ESOP is
reduced by contributions, total stockholders' equity is not affected by the
contributions to the ESOP.
CASH EQUIVALENTS -- For financial statement purposes, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK -- A significant portion of the Company's
sales are to customers whose activities are related to the building and
construction industry. These customers are located
F-30
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
primarily in the intermountain west. The Company generally extends credit to
these customers and, therefore, collection of receivables is affected by the
economy of the building and construction industry. However, the Company closely
monitors extensions of credit.
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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RELATED PARTIES -- The Company made consulting fee payments of $200 during
the year ended December 31, 1997 to an entity with controlling ownership of the
Company (see Note 8). This payment is included in general and administrative
expenses in the consolidated statements of operations.
2. LONG-TERM OBLIGATIONS
The following is a schedule of equipment capital lease obligations at
December 31, 1997:
<TABLE>
<S> <C>
Year ending December 31:
1998............................................ $ 553
1999............................................ 490
2000............................................ 448
2001............................................ 357
----------
Total minimum lease payments...................... 1,848
Less amount representing interest................. 275
----------
Present value of minimum lease payments........... $ 1,573
----------
----------
</TABLE>
The Company has entered into several operating leases on certain equipment
expiring through 2003. Lease expense for the year ended December 31, 1997, was
$2,627. The following is a schedule of future minimum lease payments on the
Company's operating leases at December 31, 1997:
<TABLE>
<S> <C>
Year ending December 31:
1998.............................................................. $ 2,650
1999.............................................................. 2,146
2000.............................................................. 1,830
2001.............................................................. 1,360
2002.............................................................. 539
Thereafter........................................................ 97
---------
Total............................................................... $ 8,622
---------
---------
</TABLE>
Not included in the above schedule are production royalties which the
Company has agreed to pay on aggregate deposits mined on lease property. The
payments are based on a progressive scale ranging from $0.25 per ton in 1997 to
$0.48 per ton in 2000. The annual expense for these royalties was $117 for 1997.
F-31
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
3. INCOME TAXES
Income tax benefit for the year ended December 31, 1997 consists of the
following:
<TABLE>
<S> <C>
Current--Federal..................................................... $ --
Deferred--Federal.................................................... (194)
---------
Total................................................................ $ (194)
---------
---------
</TABLE>
At December 31, 1997, the Company had net operating loss carryforwards for
tax reporting purposes of approximately $5,100, which expire through the year
2012. The net operating loss carryforwards are subject to limitation in any
given year upon the occurrence of certain events, including significant changes
in ownership.
The net change in the Company's valuation allowance for the deferred tax
assets was $(82) for 1997, principally due to changes in net operating loss
carry forward, excess tax depreciation, and other items. Reconciliation of
income taxes computed at the federal statutory rate and income tax expense
(benefit) is as follows:
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Income tax (benefit) computed at the
Federal statutory rate of 35%....................................................... $ 16
Net operating loss (utilized)......................................................... (82)
Percentage depletion.................................................................. (145)
Nondeductible expenses................................................................ 17
---------
Income tax (benefit).................................................................. $ (194)
---------
---------
</TABLE>
4. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Company has an ESOP covering substantially all full-time employees who
have at least one year of service. Under the terms of the ESOP, the Company
contributes amounts as determined by the Board of Directors. Shares of stock
allocated for a given year are further allocated to individual participants
based on the ratio of the participants' annual compensation to total
compensation for all participants. Shares allocated to participants vest over
six years.
In 1986, the ESOP purchased 1,606,796 shares of the Company's common stock
representing a 68% interest, in exchange for a $10,000 promissory note. The
balance on the note receivable from the ESOP was $1,724 at December 31, 1997. As
of December 31, 1997, there were 1,164,075 shares of the Company's common stock
remaining in the ESOP with 920,569 shares allocated to participants' accounts
and 243,506 remaining to be allocated based on future contributions by the
Company. All shares in the ESOP are considered issued and outstanding for
purposes of calculating earnings per share. Participants vote the shares in
their accounts on any stockholder vote while the unallocated shares are voted by
the ESOP trustee under instructions from the Company's Board of Directors.
F-32
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
4. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) (CONTINUED)
As of December 31, 1997, the fair value of the 243,506 shares still to be
allocated to participants' accounts was $2,465. The principal reductions on the
ESOP note were $800 for the year ended December 31, 1997 was shown as
contributions to the ESOP. The accumulated deficit at December 31, 1997 includes
$8,276 of contributions since 1986 to the ESOP, which have been used to reduce
principal on the ESOP note.
5. RETIREMENT PLANS
The Company makes payments to a defined contribution pension plan (Plan)
covering most full-time nonbargaining employees who have completed at least one
full year of service with the Company based on a percentage of the employee's
salary. Payments are made to the Plan as they accrue. The contribution for the
year ended December 31, 1997 was $523. There were also certain bargaining
employees who are covered under this Plan. The Company has no liability under
the Plan beyond the amounts contributed. The Company also makes payments to
various bargaining union trust funds, as negotiated under union contracts. The
contribution for the year ended December 31, 1997 was $286.
6. COMMITMENTS AND CONTINGENCIES
DEFERRED COMPENSATION AND EMPLOYMENT AGREEMENTS -- In May 1996, the
Company amended the employment agreement with its former president and chief
executive officer (president). The amended agreement stipulates that the Company
will no longer accrue amounts towards the former president's deferred
compensation effective May 22, 1996. In addition, the amount accrued in the
former president's unfunded deferred compensation account will continue to earn
interest at 1% below the prime interest rate (7.5% at December 31, 1997). The
total accrued amount will be paid over a period equal to one and one-fourth
times the length of Company service of the president as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- --------------------------------------------------------------------------------------
<S> <C>
1998.................................................................................. $ 112
1999.................................................................................. 30
2000.................................................................................. 32
2001.................................................................................. 35
2002.................................................................................. 38
Thereafter............................................................................ 599
---------
Total................................................................................. $ 846
---------
---------
</TABLE>
The Company has entered into employment agreements with certain officers.
These agreements provide for annual compensation through July 1998 as determined
by the Board of Directors. The Board of Directors has approved annual
compensation of $255 for these officers as of December 31, 1997.
ENVIRONMENTAL MATTERS -- The Company is currently the owner of 9.9 acres
of land located in Murray, Utah that contains mining slag previously deposited
by the former owner. The slag contains
F-33
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
certain heavy metals including lead and arsenic that may have leached from the
slag into the environment. This and adjoining properties have been proposed by
the Environmental Protection Agency (EPA) for listing on the National Priorities
List for cleanup of the lead slag and potential groundwater contamination.
Although the Company did not generate the slag material, under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), the current
owner of a property may be liable for cleanup costs. In such case, the Company
would have a claim against the former owner for its respective share of these
costs. All the landholders and the City of Murray entered, in May 1997, into an
Agreement in Principle in which landholders agreed to donate land for a roadway
through the properties which would be used as a depository for some of the
hazardous wastes on the site. In addition, the parties agreed to cooperate in
the remediation efforts to be conducted by the former owner. The parties are
currently in negotiations regarding a proposed draft, Remedial Design/ Remedial
Action Consent Decree ("CD"). As proposed, the CD requires the Company to (i)
contribute a certain amount of its property for the roadway (approximately 1.8
acres with a book value of about $19) as its share of the cleanup costs, (ii)
participate in a local improvement district for the installation of a curb,
gutter, and sidewalks along the proposed roadway (approximately a $30 assessment
over a ten-year period), and (iii) implement certain institutional controls. In
return, the Company will receive protection from making further contributions
and a covenant not to sue. Under the current draft of the CD, the Company's
obligations terminate upon sale of the property. The Company's estimated cost to
satisfy these requirements of the CD as outlined above are immaterial.
On May 5, 1997, the Company entered into an agreement to sell its total
acreage in Murray, Utah to The Boyer Company, L.C. for a total purchase price of
approximately $1,900. The agreement is subject to the purchaser obtaining
necessary approvals. Pursuant to the agreement, the purchaser will assume the
Company's liabilities under the agreement in principle and the proposed consent
agreement described above including the dedication of the land for the roadway
and the participation in the improvement district. If the sale to the Boyer
Group does not occur, then the Company would be responsible for those costs.
Subject to certain conditions, the Company expects the sale of the Murray
property to close on or before January 1, 1999.
Prior to learning of the potential presence of lead in the slag from the
Murray site, the Company sold some of the slag for use in road base and railroad
fill. The Company has not sold any slag material from this site since 1988. The
Company may be liable for cleanup costs if it is determined that the lead from
this slag poses an environmental hazard. The Company has not received any notice
of government or private action on this matter. The potential cost to the
Company, if any, is not ascertainable at the present time because no action
currently is pending by any party and it is unknown whether any action will be
taken in the future. The Company's management believes that there are
economically reasonable methods of containing the slag should this become
necessary.
OTHER -- The Company is engaged in various lawsuits as plaintiff or
defendant arising in the normal course of business. In the opinion of
management, based upon advice of counsel, the ultimate outcome of these lawsuits
will not have a material impact on the Company's financial statements.
F-34
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
7. CAPITAL STOCK
EARNINGS (LOSS) PER SHARE -- Effective December 31, 1997, the Company
adopted SFAS No. 128, "Earnings Per Share", and retroactively restated its
earnings per share (EPS) for 1997 to conform with SFAS No. 128.
Basic and diluted earnings per share are calculated as follows for the year
ended December 31, 1997:
<TABLE>
<CAPTION>
PER
AVERAGE SHARE
INCOME SHARES AMOUNT
----------- ---------- -----------
<S> <C> <C> <C>
Income........................................................ $ 239
-----
EPS basic:
Income available to common stockholders..................... 239 4,485,376 $ 0.05
----- -----
-----
Effect of dilutive securities--options and warrants........... 546,524
----------
EPS diluted:
Income available to common stockholders
with assumed conversions.................................. $ 239 5,031,900 $ 0.05
----- ---------- -----
----- ---------- -----
</TABLE>
Earnings per common share diluted are computed using the treasury stock
method.
8. STOCK OPTIONS AND WARRANTS
In 1997, the Company amended its 1994 stock option plan and increased the
shares available under the 1994 plan to 260,000. As of December 31, 1997, the
Company had granted stock options under the 1994 stock option plan to various
officers, directors, and employees of the Company covering the aggregate amount
of 119,600 shares of common stock.
In 1997, the Company amended its 1996 stock option plan and increased the
shares available under the 1996 plan to 600,000. As of December 31, 1997, the
Company had granted stock options under the 1996 stock option plan covering
296,000 shares of common stock. Of these, 136,000 options had vested as of
December 31, 1997. The remaining 160,000 options vest annually through July 2000
with 60,000 to vest in 1998 and 1999 with the remaining 40,000 to vest in 2000.
In conjunction with its initial public offering in 1994, the Company issued
60,000 warrants at $5.50 per share to various entities involved in helping the
Company go public. During 1997, 58,750 of these warrants were repurchased at a
cost of $209. As of December 31, 1997, none of the remaining 1,250 warrants had
been exercised.
On December 28, 1995, in connection with the issuance of 1,650,000 shares of
common stock, the Company issued a warrant to a single purchaser to purchase
1,500,000 shares of common stock at an exercise price of $6.25 per share. The
warrant was exercisable at the issuance date and expires in December 2000. As of
December 31, 1997, the warrant has not been exercised.
F-35
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
8. STOCK OPTIONS AND WARRANTS (CONTINUED)
The Company accounts for stock-based compensation under APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations under
which no compensation cost has been recognized because all options were issued
at fair value. During 1996, the Company adopted the disclosure provision of
Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
(FAS 123). If the Company had elected to recognize compensation expense based
upon the fair value at the grant date for awards under these plans consistent
with the methodology prescribed by FAS 123, the Company's net earnings (loss)
and earnings (loss) per share would be reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Net earnings (loss):
As reported......................................................................... $ 239
Pro Forma........................................................................... 161
Earnings (loss) per common share:
As reported--basic.................................................................. $ 0.05
Pro forma--basic.................................................................... 0.04
As reported--diluted................................................................ 0.05
Pro forma--diluted.................................................................. 0.03
</TABLE>
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation costs related to
grants made before 1995. The fair value of the applicable options was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions for 1997: expected volatility of 57%,
risk-free interest rate of 5.18%, and expected life of .25 years (See Note 11).
The weighted average fair value of options granted during 1997 was $.70.
Option pricing models require the input of highly subjective assumptions
including the expected stock price volatility. Also, the Company's employee
stock options have characteristics significantly different from those of traded
options and changes in the subjective input assumptions can materially affect
the fair value estimate. Management believes the best input assumptions
available were used to value the options and the resulting option values are
reasonable.
F-36
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
8. STOCK OPTIONS AND WARRANTS (CONTINUED)
Information with respect to the Company's stock option plans at December 31,
1997 and changes for the year then ended is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
STOCK EXERCISE EXERCISE
OPTIONS PRICE PRICE
--------- ----------- -----------
<S> <C> <C> <C>
Outstanding at January 1, 1997............................. 367,600 $ 5.00-8.75 $ 5.95
Granted.................................................... 112,000 5.25-7.50 5.94
Canceled................................................... 16,800 5.00 5.00
Exercised.................................................. 47,200 5.00 5.00
---------
Outstanding at December 31, 1997........................... 415,600 $ 5.00-8.75 $ 6.11
---------
---------
Exercisable at December 31, 1997........................... 255,600 $ 5.00-7.50 $ 5.35
---------
---------
</TABLE>
Additional information about stock options outstanding and exercisable at
December 31, 1997 is summarized as follows:
OPTIONS OUTSTANDING
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
REMAINING WEIGHTED-
CONTRACTUAL AVERAGE
NUMBER LIFE (YEARS) EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING (SEE NOTE 11) PRICE
- ------------------------------------------------------ ----------- --------------- -----------
<S> <C> <C> <C>
$5.00-$5.75........................................... 259,600 2.69 $ 5.25
6.60.................................................. 40,000 5.00 6.60
6.80.................................................. 20,000 5.00 6.80
7.50.................................................. 16,000 4.50 7.50
7.60.................................................. 40,000 5.00 7.60
8.75.................................................. 40,000 5.00 8.75
----------- -----
415,600 $ 6.11
----------- -----
----------- -----
</TABLE>
OPTIONS EXERCISABLE
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER EXERCISE
RANGE OF EXERCISE PRICES EXERCISABLE PRICE
- ---------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
$5.00-$5.75........................................................... 239,600 $ 5.21
7.50.................................................................. 16,000 7.50
----------- -----
255,600 $ 5.35
----------- -----
----------- -----
</TABLE>
F-37
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
9. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial results for the year ended December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
BASIC DILUTED
OPERATING NET EARNINGS EARNINGS
NET PROFIT EARNINGS (LOSS) (LOSS)
SALES (LOSS) (LOSS) PER SHARE PER SHARE
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1997
First quarter.......................................... $ 14,913 $ 234 $ 7 N/A N/A
Second quarter......................................... 16,352 804 764 $ 0.17 $ 0.15
Third quarter.......................................... 16,193 1,198 1,051 0.23 0.19
Fourth quarter......................................... 13,925 (1,162) (1,583) (0.35) (0.29)
--------- ----------- ----------- ----------- -----------
Total.................................................... $ 61,383 $ 1,074 $ 239 $ 0.05 $ 0.05
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
</TABLE>
Year end adjustments to accrued liabilities, accounts receivable, property,
and contract estimates made in the fourth quarter of 1997 had the effect of
decreasing net income by approximately $925 or $.25 per common share --
basic/$.18 per common share -- diluted. Additionally, the Company experienced
operating losses during the fourth quarter of 1997.
10. SUBSEQUENT EVENTS
On January 6, 1998, the Company acquired all the outstanding common stock of
Treasure Valley Concrete, Inc., an Idaho corporation, for $3,350 in cash and the
assumption of $1,141 of liabilities. Treasure Valley Concrete, Inc., with annual
revenues of approximately $7 million, is a producer of ready mix concrete,
serving the Boise, Idaho area. With the close of the transaction, Treasure
Valley Concrete becomes a wholly owned subsidiary of Monroc, Inc.
The Company has entered into an Amended and Restated Agreement and Plan of
Merger dated as of January 29, 1998 and amended and restated as of March 4, 1998
(the Merger Agreement) with U.S. Aggregates, Inc., a Delaware corporation
(USAI), and Western Acquisition, Inc., a Delaware corporation and a subsidiary
of USAI (Sub), providing for the merger of Sub with and into the Company (the
Merger), with the Company continuing as the surviving corporation and a
subsidiary of USAI. Pursuant to the Merger Agreement, each outstanding share of
common stock, par value $.01 per share, of the Company (the Common Stock) will
be converted into the right to receive $10.771 per share in cash. In addition,
the Merger Agreement provides that each option or warrant to purchase shares of
Common Stock will be canceled in consideration for the right to receive in cash
an amount equal to the number of shares subject to such option or warrant
multiplied by the difference between $10.771 and the exercise price of such
option or warrant, less any applicable tax withholdings.
The Merger is conditioned upon, among other things, the approval of the
stockholders of the Company, certain regulatory and governmental approvals and
other customary conditions. In connection with the proposed Merger, the Board of
Directors of the Company received a fairness opinion from SBC Warburg Dillion
Read Inc. to the effect that, as of the date of the opinion, the merger
consideration is fair to the stockholders of the Company from a financial point
of view.
F-38
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
11. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general purpose financial statements. This Statement requires
that an enterprise (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. SFAS No. 130
is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The adoption of SFAS No. 130 may require the
Company to add disclosure to the financial statements about comprehensive
income.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which redefines how public business
enterprises report information about operating segments in annual financial
statements. It also establishes standards for related disclosures about products
and services, geographical areas, and major customers. SFAS No. 131 is effective
for financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier years is to be
restated. The adoption of SFAS No. 131 may result in additional disclosures
regarding the Company's segments.
******
F-39
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Monroc, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Monroc, Inc. and Subsidiary, for the
year ended December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations, changes in
stockholders' equity and cash flows of Monroc, Inc. and Subsidiary, for the year
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ Grant Thornton LLP
Salt Lake City, Utah
February 11, 1997
F-40
<PAGE>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<S> <C>
Net Sales....................................................................... $ 70,401
Cost and Expenses:
Cost of sales................................................................. 63,045
General and administrative expenses........................................... 5,941
Contribution to ESOP.......................................................... 800
Restructuring charges......................................................... 1,500
-----------
Operating loss.................................................................. (885)
Other income (expense):
Interest, net................................................................. (737)
Gain on sale of property, plant and equipment................................. 36
-----------
Loss before income taxes........................................................ (1,586)
Income tax benefit.............................................................. (218)
-----------
Net loss........................................................................ $ (1,368)
-----------
-----------
Loss per common share........................................................... $ (0.31)
Weighted average common shares outstanding...................................... 4,467,000
</TABLE>
The accompanying notes are an integral part of this statement.
F-41
<PAGE>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
---------------------- EXCESS OF ACCUMULATED ESOP NOTE
SHARES AMOUNT PAR VALUE DEFICIT RECEIVABLE
--------- ----------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996........................ 4,467,000 $ 45 $ 24,482 $ (1,964) $ (3,325)
Reduction of ESOP note receivable............... -- -- -- -- 800
Net loss for the year........................... -- -- -- (1,368) --
--------- ----------- ---------- --------------- ----------
Balance at December 31, 1996...................... 4,467,000 $ 45 $ 24,482 $ (3,332) $ (2,525)
--------- ----------- ---------- --------------- ----------
--------- ----------- ---------- --------------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-42
<PAGE>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss............................................................................ $ (1,368)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization of property, plant and equipment and
other assets.................................................................... 2,377
Provision for contribution to ESOP and repayment of ESOP note receivable.......... 800
Amortization of other assets...................................................... 82
Provision for discounts and doubtful accounts, net................................ 537
Depletion of aggregate deposits................................................... 107
Gain on sale of property, plant and equipment..................................... (36)
Deferred income taxes............................................................. (218)
Restructuring charges............................................................. 1,500
Change in operating assets and liabilities:
Accounts receivable............................................................. (7,099)
Costs and estimated earnings in excess of bilings on uncompleted contracts...... (29)
Inventories..................................................................... (1,161)
Prepaid expenses................................................................ (215)
Other assets.................................................................... 518
Trade accounts payable.......................................................... 1,022
Accrued liabilities............................................................. 27
Billings in excess of costs and estimated earnings on uncompleted contracts..... 448
Deferred compensation........................................................... 19
-------
Net cash used in operating activities............................................... (2,689)
-------
Cash flow from investing activities:
Additions to property, plant and equipment.......................................... (4,503)
Additions to aggregate deposits..................................................... (22)
Additions to land................................................................... (842)
Proceeds from sale of property, plant, equipment and land........................... 329
-------
Net cash used in investing activities............................................... (5,038)
-------
Cash flows from financing activities:
Net increase in line of credit...................................................... 5,268
Principal payments on long-term obligations......................................... (3,627)
Issuance of long-term obligations................................................... 769
-------
Net cash provided by financing activities........................................... 2,410
-------
Net decrease in cash................................................................ (5,317)
Cash, beginning of year............................................................. 6,507
-------
Cash, end of year................................................................... $ 1,190
-------
-------
Disclosure of supplemental cash flow information:
Cash paid during the year for:
Interest.......................................................................... $ 907
Income taxes...................................................................... 32
Non cash investing and financing activities:
The Company acquired equipment under capital lease obligations totalling $1,424 in
1996.
</TABLE>
The accompanying notes are an integral part of this statement.
F-43
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
1. BUSINESS ACTIVITY
Monroc, Inc. and Subsidiary (the Company), operate in one industry segment;
the production and sale of sand and gravel products, ready-mix concrete,
prestress/precast concrete products and accessories for the building and
construction industry, principally in Utah, Idaho, and Wyoming.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Big Horn Redi-Mix, Inc. (Big Horn). Effective
December 1995, the Company merged Cody Concrete, Inc. (Cody Concrete), and
Powell Ready Mix, Inc. (Powell Ready Mix) with and into Big Horn with Big Horn
as the surviving corporation. All significant intercompany accounts and
transactions have been eliminated in consolidation.
3. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method, except for sand and gravel which
uses the lower of average cost or market.
4. PROPERTY, PLANT AND EQUIPMENT AND AGGREGATE DEPOSITS
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives. Leased
property under capital leases is amortized over the lives of the respective
leases or over the service lives of the assets for those leases which
substantially transfer ownership. The straight-line method of depreciation is
followed for financial reporting purposes; however, straight-line and
accelerated methods are used for tax purposes. Depletion on aggregate deposits
is calculated on a units-of-production basis. The estimated lives used in
determining depreciation and amortization are:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Mobile equipment............................................................. 5-12
Plant equipment.............................................................. 5-12
Administrative equipment and buildings....................................... 5-50
</TABLE>
5. OTHER ASSETS
Other assets include miscellaneous amortizable assets including financing
commitment fees, which fees are being amortized on the interest method over the
term of the notes payable to banks. Other assets also includes goodwill which is
being amortized on the straight-line method over 20 years. The Company evaluates
its goodwill annually to determine potential impairment by comparing the
carrying value to the undiscounted estimated expected future cash flows of the
related asset.
F-44
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
6. REVENUE RECOGNITION
Revenues on contracts which are primarily for prestress/precast concrete
products are recognized on the percentage-of-competion method. The
percentage-of-completion is determined on the units-of-production basis. Under
this method, revenues, costs, and estimated profits are recognized as individual
units are completed. The amounts included in the accompanying balance sheets as
"costs and estimated earnings in excess of billings on uncompleted contracts"
represent revenues recognized in excess of amounts billed (underbillings) and
"billings in excess of costs and estimated earnings on uncompleted contracts"
represent billings in excess of revenues recognized (overbillings).
During 1996, the Company recognized revenue of approximately $15,600 on a
significant project which is scheduled to be completed during 1997. No single
project with revenues recognized in excess of 10% of total consolidated revenues
existed during 1995.
Contract costs include all direct labor and benefits, materials unique to or
installed in the project, and indirect cost allocations, including employee
benefits and construction equipment expense. As long-term contracts extend over
one or more years, revisions in cost and earnings estimates during the course of
the work are reflected in the accounting period in which the facts which require
the revision become known. At the time a loss on a contract becomes known, the
entire amount of the estimated ultimate loss is recognized in the financial
statements.
Costs attributable to contract claims or disputes are carried in the
accompanying balance sheets only when realization is probable. The amounts are
recorded at the lesser of actual costs incurred or the amount expected to be
realized.
Revenues on all other products are recognized when the product is shipped.
7. INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities and are measured using enacted tax rates and laws that will be
in effect when the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not that such tax
benefits will not be realized.
8. ESOP ACCOUNTING
As described in Note D, the Company established an Employee Stock Ownership
Plan (ESOP) in 1986 to facilitate the acquisition of assets from a predecessor
company. In conjunction with the acquisition, the Company loaned the ESOP
$10,000, which the ESOP used to finance the acquisition of its interest in the
Company. Generally accepted accounting principles require that the note
receivable from the ESOP be included in the balance sheet as a reduction of
stockholders' equity.
The ESOP allocates the shares issued to the ESOP in 1986 to the participants
of the ESOP as described below. The Company makes contributions to the ESOP
which allow the ESOP to make the debt payments back to the Company on the note
receivable from the ESOP. ESOP contributions by the
F-45
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company are expensed and charged against income for accounting purposes and are
deductible for income tax purposes. Shares allocable to participants for a given
year are determined based on the ratio of the current year's ESOP debt service
payments (principal and interest) on the original note from the Company as
compared to the total remaining required debt service on that loan. The
contribution to the ESOP is a noncash expense of the Company because the
contributions are paid back to the Company and reduce the note receivable from
the ESOP. Consequently, no cash is consumed as a result of the contributions.
Furthermore, since the note receivable from the ESOP is reduced by
contributions, total stockholders' equity is not affected by the contributions
to the ESOP.
9. CASH EQUIVALENTS
For financial statement purposes, the Company considers all highly liquid
debt instruments purchased with an original maturity of three months or less to
be cash equivalents.
10. CONCENTRATION OF CREDIT RISK
A significant portion of the Company's sales are to customers whose
activities are related to the building and construction industry. These
customers reside primarily in the intermountain west. The Company generally
extends credit to these customers and, therefore, collection of receivables is
affected by the economy of the building and construction industry. However, the
Company closely monitors extensions of credit.
The Company maintains cash and money market balances at several financial
institutions in the intermountain west. Accounts at each institution are insured
up to $100 by the Federal Deposit Insurance Corporation. Uninsured balances
aggregate to approximately $860 at December 31, 1996.
11. EARNINGS (LOSS) PER SHARE
Earnings (loss) per common and common equivalent share are computed by
dividing net earnings (loss) by the weighted average common shares outstanding
during each year. Common stock equivalents are antidilutive in the loss year and
are not included in the weighted average common shares outstanding.
12. 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's cash, and short-term trade receivables
and payables approximate their fair values.
F-46
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE B--CONTRACTS IN PROCESS
Costs incurred to date, estimated earnings, and the related progress
billings are as follows:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Costs incurred to date............................................................. $ 20,418
Estimated earnings................................................................. 1,304
---------
Revenue recognized................................................................. 21,722
Less billings to date.............................................................. 22,230
---------
$ (508)
---------
---------
</TABLE>
The above are included in the accompanying balance sheet under the following
captions:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Costs and estimated earnings in excess of billings on uncompleted contracts $ 182
Billings in excess of costs and estimated earnings on uncompleted contracts (690)
---------
$ (508)
---------
---------
</TABLE>
Retainage on uncompleted contracts amounted to $870 at December 31, 1996.
All accounts receivable, including retainage, under contracts in process are
expected to be collected within one year.
F-47
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE C--INCOME TAXES
Income tax benefit consists of the following:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Current-Federal....................................................................... $ --
Deferred-Federal...................................................................... (218)
---------
$ (218)
---------
---------
</TABLE>
The components of the Company's deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Deferred tax assets (liabilities)
Net operating loss carryforward................................................... $ 1,915
Deferred compensation............................................................. 243
Allowance for doubtful accounts................................................... 103
Accrued expenses.................................................................. 258
Inventory cost capitalization..................................................... 74
Other............................................................................. 11
Excess of tax depreciation and amortization....................................... (1,096)
Difference in assigned values and tax basis in purchase of subsidiaries........... (972)
Valuation allowance............................................................... (1,508)
---------
Net deferred tax liability.......................................................... $ (972)
---------
---------
</TABLE>
There were no deferred tax assets or income tax benefits recorded in the
financial statements for net deductible temporary differences or net operating
loss carryforwards due to the fact that the likelihood of realization of the
related tax benefits cannot be established. A deferred tax liability was
recognized upon the purchase of three subsidiary corporations during 1994. The
initial deferred liability was calculated on the differences between the
assigned values and tax bases of the assets and liabilities acquired in the
purchase.
At December 31, 1996, the Company had net operating loss carryforwards for
tax reporting purposes of approximately $5,850, which expire through the year
2011. The net operating loss carryforwards are subject to limitation in any
given year upon the occurrence of certain events, including significant changes
in ownership.
F-48
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE C--INCOME TAXES (CONTINUED)
Reconciliation of income taxes computed at the federal statutory rate and
income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Income tax benefit computed at the Federal statutory rate............................. $ (555)
Net operating loss generated.......................................................... 402
Percentage depletion.................................................................. (89)
Nondeductible expenses................................................................ 33
All other, net........................................................................ (9)
---------
Income tax benefit.................................................................... $ (218)
---------
---------
</TABLE>
NOTE D--EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Company has an ESOP covering substantially all full-time employees who
have at least one year of service. Under the terms of the ESOP, the Company
contributes amounts as determined by the Board of Directors, except as discussed
below. Shares of stock allocated for a given year are further allocated to
individual participants based on the ratio of the participants' annual
compensation to total compensation for all participants. Shares allocated to
participants vest over six years.
In 1986, the ESOP purchased 1,606,796 shares of the Company's common stock
representing a 68% interest, in exchange for a $10,000 promissory note. The
interest rate and payment terms of the note receivable were identical to those
of the Company's notes payable to banks, which were paid in full during 1993.
The balance on the note receivable from ESOP was $2,525 at December 31, 1996.
The principal reduction on the ESOP note is $800 for the year ended December
31, 1996 and is shown as a contribution to the ESOP. The accumulated deficit at
December 31, 1996, includes $7,476 of contributions since 1986 to the ESOP,
which have been used to reduce principal on the ESOP note.
NOTE E--RETIREMENT PLANS
The Company makes payments to a defined contribution pension plan (Plan)
covering most full-time nonbargaining employees who have completed at least one
full year of service with the Company based on a percentage of the employee's
salary. Payments are made to the Plan as they accrue. The contribution for the
year ended December 31, 1996 was $481. There are also certain bargaining
employees who are covered under this Plan. The Company has no liability under
the Plan beyond the amounts contributed. The Company also makes payments to
various bargaining union trust funds, as negotiated under union contracts. The
contribution for the year ended December 31, 1996 was $334.
NOTE F--COMMITMENTS AND CONTINGENCIES
1. DEFERRED COMPENSATION AND EMPLOYMENT AGREEMENTS
In May 1996, the Company amended the employment agreement with its former
president and chief executive officer (president). The amended agreement
stipulates that the Company will no longer
F-49
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE F--COMMITMENTS AND CONTINGENCIES (CONTINUED)
accrue amounts towards the former president's deferred compensation effective
May 22, 1996. In addition, the amount accrued in the former president's deferred
compensation account will continue to earn interest at 1% below the prime
interest rate (7.25% at December 31, 1996). The total accrued amount plus
interest will be paid over a period equal to one and one-fourth times the length
of Company service of the president as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
1997................................................................................. $ --
1998................................................................................. 33
1999................................................................................. 78
2000................................................................................. 78
2001................................................................................. 78
Thereafter........................................................................... 1,107
---------
$ 1,374
---------
---------
</TABLE>
Deferred compensation of $779 was accrued in this account as of December 31,
1996.
The Company has entered into employment agreements with certain officers.
These agreements provide for annual compensation through July 1998 as determined
by the Board of Directors. The Board of Directors has approved annual
compensation of $312 for these officers as of December 31, 1996.
2. ENVIRONMENTAL MATTERS
The Company is currently the owner of certain property located in Murray,
Utah, which contains lead slag deposited by the former owner. The slag contains
heavy metals including lead and arsenic which may have leached from the slag
into the environment. This and adjoining properties have been proposed by the
Environmental Protection Agency (EPA) for listing on the National Priorities
List for cleanup of the lead slag, and potential groundwater contamination.
Although the Company did not generate the slag material, under the Comprehensive
Environmental Response, Compensation and Liability Act, the current owner of a
property may be liable for clean-up costs. In such case, the Company would have
a claim against the former owner for its respective share of these costs. The
Company has not been designated a Potentially Responsible Party by the EPA with
respect to cleanup of any waste at this site.
The Company has been participating in a study group with the EPA, the former
owner, Murray City and the other current landowners to develop a plan that would
result in the remediation of the problems described above. An agreement in
principal has been reached among all parties, and upon executing of a formal
understanding, the EPA will begin the process of preparing a consent agreement
in 1997. Cleanup will take several years to accomplish and involves a
combination of offsite disposal, redevelopment of the area including new road
construction, and on site treatment. Development of the land for commercial
purposes will be possible at the end of the process. The remediation plan calls
for the dedication of a certain amount of the Company's property for the
extension of a roadway in
F-50
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE F--COMMITMENTS AND CONTINGENCIES (CONTINUED)
Murray City. Until approval of a consent agreement, it is difficult to estimate
the possible financial impact to the Company, if any.
Prior to learning of the potential presence of lead in the slag from this
site, the Company sold some of the slag for use in road base and railroad fill.
The Company may be liable for cleanup costs if it is determined that the lead
from this slag poses an environmental hazard to drinking water. The Company has
not received any notice of government or private action on this matter. The
potential cost to the Company, if any, is not ascertainable at the present time.
The Company's management believes that there are economically reasonable methods
of containing the slag should this become necessary.
3. OPERATING LEASES
The Company has entered into several operating leases on certain equipment
expiring through 2002. Lease expense for the year ended December 31, 1996 was
$1,493. The following is a schedule of future minimum lease payments on the
Company's operating leases at December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -----------------------------------------------------------------------------------
<S> <C>
1997............................................................................. $ 2,888
1998............................................................................. 2,805
1999............................................................................. 2,263
2000............................................................................. 1,892
2001............................................................................. 1,430
Thereafter....................................................................... 842
---------
$ 12,120
---------
---------
</TABLE>
Not included in the above schedule are production royalties which the Company
has agreed to pay on aggregate deposits mined on leased property. The payments
are based on a progressive scale ranging from $0.25 per ton in 1997 to $0.31 per
ton in 2000.
4. OTHER
The Company is engaged in various lawsuits as plaintiff or defendant arising
in the normal course of business. In the opinion of management, based upon
advice of counsel, the ultimate outcome of these lawsuits will not have a
material impact on the Company's financial statements.
NOTE G--STOCK OPTIONS AND WARRANTS
Effective January 20, 1994, the Company adopted a stock option plan which
provides for the granting of stock options to purchase up to 200,000 shares of
common stock, subject to adjustment under certain circumstances. As of December
31, 1996, the Company had granted stock options under the Company's 1994 stock
option plan to various officers, directors and employees of the Company covering
the aggregate amount of 167,600 shares of common stock.
F-51
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE G--STOCK OPTIONS AND WARRANTS (CONTINUED)
On May 22, 1996, the stockholders approved the Company's 1996 stock option
plan which provides for the granting of stock options to purchase up to 300,000
shares of common stock. As of December 31, 1996, the Company had granted stock
options under the 1996 stock option plan covering 200,000 shares of common
stock. Of these, 40,000 options vested immediately. The remaining 160,000
options vest at 40,000 annually through July 2000.
On December 28, 1995, in connection with the issuance of 1,650,000 shares of
common stock, the Company issued a warrant to a single purchaser to purchase
1,500,000 shares of common stock at an exercise price of $6.25 per share. The
warrant vested immediately and expires in December 2000. As of December 31,
1996, none of the warrants have been exercised.
During 1996 the Company adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS
123). Therefore, the Company accounts for stock based compensation under APB
Opinion No. 25. "Accounting for Stock Issued to Employees," and related
Interpretations under which no compensation cost has been recognized. If the
Company had elected to recognize compensation expense based upon the fair value
at the grant date for awards under these plans consistent with the methodology
prescribed by FAS 123, the Company's net loss and loss per share would be
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Net loss
As reported....................................................................... $ (1,368)
Pro forma......................................................................... (1,566)
Loss per common share
As reported....................................................................... $ (0.31)
Pro forma......................................................................... (0.35)
</TABLE>
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation costs related to
grants made before 1995. The fair value of these options was estimated at the
date of grant using the modified Black-Scholes American option-pricing model
with the following weighted-average assumptions for 1996: expected volatility of
61%, risk-free interest rate of 6%, and expected life of 3.6 years for the
period. The weighted average fair value of options granted during 1996 was
$3.07.
Option pricing models require the input of highly subjective assumptions
including the expected stock price volatility. Also, the Company's employee
stock options have characteristics significantly different from those of traded
options, and changes in the subjective input assumptions can materially affect
the fair value estimate. Management believes the best input assumptions
available were used to value the options and the resulting option values are
reasonable.
F-52
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE G--STOCK OPTIONS AND WARRANTS (CONTINUED)
Information with respect to the Company's stock option plans at December 31,
1996, and changes for the year then ended, is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
STOCK EXERCISE AVERAGE
OPTIONS PRICE EXERCISE PRICE
------------ ----------- ---------------
<S> <C> <C> <C>
Outstanding at January 1, 1996......................................... 156,600 $ 5.00 $ 5.00
Granted.............................................................. 217,700 5.00-8.75 6.61
Canceled............................................................. 6,700 5.00-8.75 5.00
------------
Outstanding at December 31, 1996....................................... 367,600 5.00-8.75 5.95
------------ ----------- -----
------------ ----------- -----
Exercisable at December 31, 1996....................................... 207,600 $ 5.00-5.38 $ 5.01
------------ ----------- -----
------------ ----------- -----
</TABLE>
Additional information about stock options outstanding and exercisable at
December 31, 1996, is summarized as follows:
OPTIONS OUTSTANDING
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE WEIGHTED-
REMAINING AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE
- ----------------------------------------------- ----------- ---------------- ------------
<S> <C> <C> <C>
$5.00-5.75..................................... 247,600 3.1 years $ 5.13
6.60.......................................... 40,000 4.5 years 6.60
7.60.......................................... 40,000 4.5 years 7.60
8.75.......................................... 40,000 4.5 years 8.75
-----------
367,600
-----------
-----------
</TABLE>
OPTIONS EXERCISABLE
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
RANGE OF NUMBER EXERCISE
EXERCISE PRICES EXERCISABLE PRICE
- ----------------------------------------------- ----------- ----------------
<S> <C> <C> <C>
$5.00-5.38..................................... 207,600 $ 5.01
</TABLE>
F-53
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE H--QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial results for the year ended December 31, 1996 is as
follows:
<TABLE>
<CAPTION>
EARNINGS
OPERATING NET EARNINGS (LOSS) PER
1996 NET SALES PROFIT (LOSS) (LOSS) COMMON SHARE
- ------------------------------------------------------------ --------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
First quarter............................................... $ 9,204 $ (916) $ (1,041) $ (0.23)
Second quarter.............................................. 19,416 888 771 0.17
Third quarter............................................... 22,246 (459) (657) (0.15)
Fourth quarter.............................................. 19,535 (398) (441) (0.10)
--------- ----- ------------ ------
$ 70,401 $ (885) $ (1,368) $ (0.31)
--------- ----- ------------ ------
--------- ----- ------------ ------
</TABLE>
NOTE I--RESTRUCTURING CHARGES AND PLANT CLOSING
A change in control of the Company occurred in December 1995. The Company's
management has restructured the operations so that the Company can be more
responsive to the needs of the marketplace and improve operating efficiencies.
Due to these changes, the Company incurred certain restructuring charges
totaling $1,500 ($0.34 per share) during 1996. These one time restructuring
charges included: (i) the write-off of certain facilities and equipment
obsoleted by new operating strategies ($715); (ii) the closure of undersized and
unprofitable operations in Utah and Wyoming ($351); (iii) the payout remaining
on the Company's two-year employment agreement with its former president and
chief executive officer ($333); and (iv) costs associated with restructuring
management ($101).
F-54
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6,944,444 SHARES
U.S. AGGREGATES, INC.
COMMON STOCK
[LOGO]
--------------
PROSPECTUS
, 1999
--------------
DEUTSCHE BANC ALEX. BROWN
SCHRODER & CO. INC.
THE ROBINSON-HUMPHREY
COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION,
DATED , 1999
6,944,444 SHARES
[LOGO]
U.S. AGGREGATES, INC.
COMMON STOCK
---------
This is the initial public offering of our common stock. The international
managers are offering 1,388,889 shares outside the United States and Canada and
the U.S. underwriters are offering 5,555,555 shares in the United States and
Canada. We anticipate that the initial public offering price will be between
$17.00 and $19.00 per share.
Our common stock has been approved for trading on the New York Stock
Exchange under the symbol "AGA," subject to official notice of issuance.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 10.
-------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------- --------------
<S> <C> <C>
Public offering price............................................................ $ $
Underwriting discounts........................................................... $ $
Proceeds, before expenses, to U.S. Aggregates, Inc............................... $ $
</TABLE>
Certain of our stockholders have granted the international managers and the
U.S. underwriters the right to purchase up to 1,041,667 shares to cover any
over-allotments.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------
DEUTSCHE BANK
J. HENRY SCHRODER & CO. LIMITED
THE ROBINSON-HUMPHREY COMPANY
, 1999
[International Prospectus Alternative Cover Page]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6,944,444 SHARES
U.S. AGGREGATES, INC.
COMMON STOCK
[LOGO]
--------------
PROSPECTUS
, 1999
--------------
DEUTSCHE BANK
J. HENRY SCHRODER & CO. LIMITED
THE ROBINSON-HUMPHREY
COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[International Prospectus Alternative Back Cover Page]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses, to be paid solely by the
Company, of the issuance and distribution of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $42,182.64
NASD filing fee................................................. 15,500
New York Stock Exchange original listing fee.................... *
Blue Sky fees and expenses (including attorneys' fees and
expenses)..................................................... *
Printing expenses............................................... *
Accounting fees and expenses.................................... *
Transfer agent's fees and expenses.............................. *
Legal fees and expenses......................................... *
Miscellaneous expenses.......................................... *
---------
Total....................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be provided by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of the
fact that such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his or her conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action or
suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorney's fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the corporation's best interests except that
no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such officer or director has actually and reasonably incurred.
Section 145 further provides that the indemnification provisions of Section
145 shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office. The certificate of incorporation of the Company provides that, to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, no director of the Company shall be liable to the Company or its
II-1
<PAGE>
stockholders for monetary damages arising from a breach of fiduciary duty owed
to the corporation of its stockholders.
Article V of the by-laws of the Company provides that any person who was or
is a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he or she is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director,
officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
the corporation to the fullest extent to which it is empowered to do so unless
prohibited from doing so by the General Corporation Law of the State of
Delaware, as may be amended against all expense, liability and loss (including
attorneys' fees actually and reasonably incurred by such person in connection
with such proceeding) and such indemnification shall continue as to an
indemnitee who has ceased to a be a director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators, provided that, such person shall be indemnified only (subject to
certain limited exceptions) in connection with a proceeding initiated by such
person only if such proceeding was authorized by the board of directors of the
corporation. The right to indemnification of such person shall be a contract
right and shall include the right to be paid expenses incurred in defending any
proceeding in advance of its final disposition.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him or her and incurred by him or her in
any such capacity, arising out of his or her status as such, whether or not the
corporation would otherwise have the power to indemnify him or her under Section
145.
Article V of the by-laws of the Company further provides that the Company
may purchase and maintain insurance on its own behalf and on behalf of any
person who is or was a director, officer, employee, fiduciary, or agent of the
Company or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, whether or not the corporation would have
the power to indemnify such person against such liability under Article V of its
by-laws. All of the directors and officers of the Company are covered by
insurance policies maintained and held in effect by the Company against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since May 15, 1996, the Company has sold and issued the following
unregistered securities:
(1) In June 1996, the Company sold 50,000 shares of Preferred Stock to
Golder, Thoma, Cressey, Rauner Fund IV, L.P. for a cash purchase price of
$5,000,000.00.
(2) In November 1996, the Company sold 810.5 shares of Common Stock to James
Harris for a purchase price of $8,105.00. Mr. Harris purchased the shares
with $8.11 cash and a promissory note for $8,096.89 due November 20,
2001.
(3) In November 1996, the Company sold 810.5 shares of Common Stock to
Michael Stone for a purchase price of $8,105.00. Mr. Stone purchased the
shares with $8.11 cash and a promissory note for $8,096.89 due November
20, 2001.
II-2
<PAGE>
(4) In November 1996, the Company sold 995 shares of Common Stock to Morris
Bishop, Jr. for a purchase price of $9,950.00. Mr. Bishop purchased the
shares with $9.95 cash and a promissory note for $9,940.05 due November
20, 2001.
(5) In November 1996, the Company issued Warrants to purchase 6,327 shares
of Common Stock (the "1996 Warrants") to The Prudential Insurance Company
of America ("Prudential") in connection with Prudential's purchase of
$30,000,000.00 principal amount of the Company's 10.34% Senior
Subordinated Notes due November 22, 2006 (the "1996 Notes"). Prudential
purchased the 1996 Warrants and the 1996 Notes for a purchase price of
$30,000,000.00.
(6) In October 1997, the Company sold 1,438 shares of Common Stock to Morris
Bishop, Jr. for a purchase price of $220,000.00. Mr. Bishop purchased the
shares with $14.38 cash and a demand note for $219,985.62.
(7) In June 1998, the Company issued Warrants to purchase 3,208 shares of
Common Stock (the "1998 Warrants") to Prudential in connection with
Prudential's purchase of $15,000,000.00 principal amount of the Company's
10.09% Senior Subordianted Notes due November 22, 2008 (the "1998
Notes"). Prudential purchased the 1998 Warrants and the 1998 Notes for a
purchase price of $15,000,000.00.
The above-described transactions were exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act as transactions
not involving any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<C> <S>
1.1 Form of U.S. Underwriting Agreement among the Company, the Selling Stockholders,
BT Alex. Brown Incorporated, The Robinson-Humphrey Company, LLC and J. Henry
Schroder & Co. Limited.***
1.2 Form of International Underwriting Agreement among the Company, the Selling
Stockholders, BT Alex. Brown International, division of Bankers Trust
International PLC, The Robinson-Humphrey Company, LLC and J. Henry Schroder & Co.
Limited.*
3.1 (i) Certificate of Incorporation of the Company dated as of January 13, 1994.***
3.1 (ii) Certificate of Correction of Certificate of Incorporation Before Payment of
Capital of the Company dated as of January 14, 1994.***
3.1 (iii) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of February 24, 1994.***
3.1 (iv) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of November 21, 1996.***
3.1 (v) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of June 3, 1998.***
3.1 (vi) Form of Restated Certificate of Incorporation of the Company.
3.2 (i) By-laws of the Company.***
3.2 (ii) Form of Restated By-laws of the Company.
4.1 (i) Third Amended and Restated Credit Agreement dated as of June 5, 1998 by and among
the Company, various financial institutions and Bank of America National Trust and
Savings Association, individually and as agent.
4.1 (ii) First Amendment to Third Amended and Restated Credit Agreement dated as of April
14, 1999 by and among the Company, various financial institutions and Bank of
America National Trust and Savings Association, individually and as agent.
</TABLE>
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)
(a) Exhibits.
<TABLE>
<C> <S>
4.2 Amended and Restated Security Agreement dated as of June 5, 1998 by and among the
Company, its subsidiaries and Bank of America National Trust and Savings
Association.
4.3 Amended and Restated Company Pledge Agreement dated as of June 5, 1998 by and
between the Company and Bank of America National Trust and Savings Association.
4.4 Amended and Restated Subsidiary Pledge Agreement dated as of June 5, 1998 by and
among Western Aggregates Holding Corp., Western Rock Products Corp., SRM Holdings
Corp., Southern Ready Mix, Inc., Monroc, Inc. and Bank of America National Trust
and Savings Association.
4.5 Amended and Restated Shareholder Pledge Agreement dated as of June 5, 1998 by and
among Western Aggregates Holding Corp.'s stockholders, SRM Holdings Corp.'s
stockholders and Bank of America National Trust and Savings Association.
4.6 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's
subsidiaries, various financial institutions and Bank of America National Trust
and Savings Association.
4.7 (i) Amended and Restated Note and Warrant Purchase Agreement dated as of June 5, 1998
by and between the Company and The Prudential Insurance Company of America.
4.7 (ii) Amendment No. 1 to Amended and Restated Note and Warrant Purchase Agreement dated
as of April 14, 1999 by and between the Company and The Prudential Insurance
Company of America.
4.7 (iii) Waiver under Note Agreement dated as of April 15, 1999 by and between the Company
and The Prudential Insurance Company of America.
4.8 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's
subsidiaries and The Prudential Insurance Company of America.
4.9 (i) Registration Rights and Stockholders' Agreement dated as of November 21, 1996 by
and among the Company, the Company's stockholders and The Prudential Insurance
Company of America.
4.9 (ii) First Amendment to Registration Rights and Stockholders' Agreement dated as of
June 5, 1998 by and among, the Company, the Company's stockholders and The
Prudential Insurance Company of America.
4.10 Warrant Agreement dated as of November 21, 1996 by and between the Company and The
Prudential Insurance Company of America.
4.11 Warrant Agreement dated as of June 5, 1998 by and between the Company and The
Prudential Insurance Company of America.
4.12 Letter Agreement dated as of April 15, 1999 by and among Golder, Thoma, Cressey,
Rauner Fund IV, L.P., Harris Trust and Savings Bank, Bank of America National
Trust and Savings Association, as Agent, The Prudential Insurance Company of
America and the Company.
4.13 Floating Rate Loan - Procedures Letter dated as of April 15, 1999 by and between
Harris Trust and Savings Bank and the Company.
4.14 Guaranty, dated April 15, 1999, in favor of Harris Trust and Savings Bank executed
by Golder, Thoma, Cressey, Rauner Fund, IV, L.P.
5.1 Opinion and consent of Kirkland & Ellis.
</TABLE>
II-4
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)
(a) Exhibits.
<TABLE>
<C> <S>
10.1 Professional Services Agreement dated as of January 24, 1994 by and between the
Company and Golder, Thoma, Cressey, Rauner, Inc.***
10.1 (i) Cancellation of Professional Services Agreement dated as of July 9, 1999 by and
between the Company and Golder, Thoma, Cressey, Rauner, Inc.
10.2 Equity Purchase Agreement dated as of January 24, 1994 between the Company and
Golder, Thoma, Cressey, Rauner Fund IV, L.P.***
10.3 Stockholders Agreement dated as of January 24, 1994 by and among the Company and
Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named
therein.***
10.4 Stockholders Joinder Agreement dated as of August 1, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty.***
10.5 Stockholders Joinder Agreement dated as of August 5, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop.***
10.6 Stockholders Joinder Agreement dated as of October 31, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R. Pullin.***
10.7 Stockholders Joinder Agreement dated as of July 31, 1998 by and among the Company,
James A. Harris and James A. Harris Grantor Retained Annuity Trust.***
10.8 Stockholders Joinder Agreement dated as of October 1, 1998 by and among the
Company, James A. Harris and The James A. Harris Charitable Remainder Unitrust.***
10.9 Registration Rights Agreement dated as of January 24, 1994 by and among the
Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives
named therein.***
10.10 Registration Rights Joinder Agreement dated as of August 1, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty.***
10.11 Registration Rights Joinder Agreement dated as of August 5, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop.***
10.12 Registration Rights Joinder Agreement dated as of October 31, 1994 by and among
the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R.
Pullin.***
10.13 Senior Management Agreement dated as of January 24, 1994 by and between the
Company and James A. Harris.** ***
10.15 Senior Management Agreement dated as of November 20, 1996 by and between the
Company and James A. Harris.** ***
10.16 Senior Management Agreement dated as of January 24, 1994 by and between the
Company and Michael J. Stone.** ***
10.18 Senior Management Agreement dated as of November 20, 1996 by and between the
Company and Michael J. Stone.** ***
10.19 Senior Management Agreement dated as of August 5, 1994 by and between the Company
and Morris L. Bishop, Jr.**
10.20 Senior Management Agreement dated as of October 1, 1997 by and between the Company
and Morris L. Bishop, Jr.** ***
10.21 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the
Company and James A. Harris.***
</TABLE>
II-5
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)
(a) Exhibits.
<TABLE>
<C> <S>
10.22 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the
Company and James A. Harris.***
10.23 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the
Company and James A. Harris. (Included as Exhibit B to exhibit 10.15)***
10.24 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the
Company and Michael J. Stone.***
10.25 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the
Company and Michael J. Stone.***
10.26 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the
Company and Michael J. Stone. (Included as Exhibit B to exhibit 10.18)***
10.27 Executive Stock Pledge Agreement dated as of August 5, 1994 by and between the
Company and Morris L. Bishop, Jr.***
10.28 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the
Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.43)***
10.29 Executive Stock Pledge Agreement dated as of October 1, 1997 by and between the
Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.20)***
10.30 Promissory Note dated as of January 24, 1994 by James A. Harris in favor of the
Company in the principal amount of $16,223.76.***
10.31 Promissory Note dated as of May 10, 1994 by James A. Harris in favor of the
Company in the principal amount of $121,638.24.***
10.32 Promissory Note dated as of November 20, 1996 by James A. Harris in favor of the
Company in the principal amount of $8,096.89. (Included as Exhibit A to exhibit
10.15)***
10.33 Promissory Note dated as of January 24, 1994 by Michael J. Stone in favor of the
Company in the principal amount of $10,809.18.***
10.34 Promissory Note dated as of May 10, 1994 by Michael J. Stone in favor of the
Company in the principal amount of $81,098.82.***
10.35 Promissory Note dated as of November 20, 1996 by Michael J. Stone in favor of the
Company in the principal amount of $8,096.89. (Included as Exhibit A to Exhibit
10.18)***
10.36 Promissory Note dated August 5, 1994 by Morris L. Bishop in favor of the Company
in the principal amount of $16,903.08.***
10.37 Promissory Note dated November 20, 1996 by Morris L. Bishop in favor of the
Company in the principal amount of $9,940.05. (Included as Exhibit A to exhibit
10.43)***
10.38 Demand Note dated October 1, 1997 by Morris L. Bishop in favor of the Company in
the principal amount of $219,985.62. (Included as an exhibit A to exhibit 20)***
10.39 Employment Agreement dated as of January 24, 1994 by and between the Company and
James A. Harris.***
10.40 Employment Agreement dated as of January 24, 1994 by and between the Company and
Michael J. Stone.***
10.41 Employment Agreement dated as of August 5, 1994 by and between the Company and
Morris L. Bishop, Jr.***
</TABLE>
II-6
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)
(a) Exhibits.
<TABLE>
<C> <S>
10.42(i) Agreement and Plan of Merger dated as of January 29, 1998 by and among the
Company, Western Acquisition, Inc. and Monroc, Inc.***
10.42(ii) Amended and Restated Agreement and Plan of Merger dated as of March 4, 1998 by and
among the Company, Western Acquisition, Inc. and Monroc, Inc.***
10.43 Senior Management Agreement dated as of November 20, 1996 by and between the
Company and Morris L. Bishop, Jr.***
10.44 Stockholders Joinder Agreement dated as of December 31, 1997 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Jeanne T. Richey.
10.45 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward
A. Dougherty.
10.46 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward
A. Dougherty.
10.47 Letter Agreement dated as of December 30, 1998 by and between the Company and
Edward A. Dougherty.
10.48 Form of Lock-Up Agreement with Deutsche Banc Securities Inc.
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Grant Thornton LLP.
23.4 Consent of Kirkland & Ellis (Included in Exhibit 5.1).
24.1 Powers of Attorney of Directors and Officers of the Company (Included on signature
page).***
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** Management contract or compensatory plan or arrangement.
*** Filed previously.
(b) Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions,
are inapplicable or not material, or the information called for thereby is
otherwise included in the financial statements and therefore has been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at closing specified in the underwriting agreement certificates in such
denominations and registered in such names as requested by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
II-7
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of San Mateo, State of California, on July 14, 1999.
U.S. AGGREGATES, INC.
By: /s/ MICHAEL J. STONE
-----------------------------------------
Michael J. Stone
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER, TREASURER AND
SECRETARY
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
Chief Executive Officer
* and Chairman of the
- ------------------------------ Board (principal July 14, 1999
James A. Harris executive officer)
Executive Vice President,
/s/ MICHAEL J. STONE Chief Financial Officer
- ------------------------------ and Director (principal July 14, 1999
Michael J. Stone financial and accounting
officer)
*
- ------------------------------ President, Chief Operating July 14, 1999
Morris L. Bishop, Jr. Officer and Director
*
- ------------------------------ Director July 14, 1999
Bruce V. Rauner
*
- ------------------------------ Director July 14, 1999
David A. Donnini
*
- ------------------------------ Director July 14, 1999
Charles R. Pullin
*
- ------------------------------ Director July 14, 1999
Edward A. Dougherty
- ------------------------
* The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-1 on behalf of the above
named officers and directors of U.S. Aggregates, Inc. pursuant to the Power
of Attorney executed by such officers and directors and filed with the
Securities and Exchange Commission.
<TABLE>
<S> <C>
/s/ MICHAEL J. STONE
- -------------------------------
Michael J. Stone
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of U.S. Underwriting Agreement among the Company, the Selling Stockholders,
BT Alex. Brown Incorporated, The Robinson-Humphrey Company, LLC and J. Henry
Schroder & Co. Limited.***
1.2 Form of International Underwriting Agreement among the Company, the Selling
Stockholders, BT Alex. Brown International, division of Bankers Trust
International PLC, The Robinson-Humphrey Company, LLC and J. Henry Schroder & Co.
Limited.*
3.1 (i) Certificate of Incorporation of the Company dated as of January 13, 1994.***
3.1 (ii) Certificate of Correction of Certificate of Incorporation Before Payment of
Capital of the Company dated as of January 14, 1994.***
3.1 (iii) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of February 24, 1994.***
3.1 (iv) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of November 21, 1996.***
3.1 (v) Certificate of Amendment to Certificate of Incorporation of the Company dated as
of June 3, 1998.***
3.1 (vi) Form of Restated Certificate of Incorporation of the Company.
3.2 (i) By-laws of the Company.***
3.2 (ii) Form of Restated By-laws of the Company.
4.1 (i) Third Amended and Restated Credit Agreement dated as of June 5, 1998 by and among
the Company, various financial institutions and Bank of America National Trust and
Savings Association, individually and as agent.
4.1 (ii) First Amendment to Third Amended and Restated Credit Agreement dated as of April
14, 1999 by and among the Company, various financial institutions and Bank of
America National Trust and Savings Association, individually and as agent.
4.2 Amended and Restated Security Agreement dated as of June 5, 1998 by and among the
Company, its subsidiaries and Bank of America National Trust and Savings
Association.
4.3 Amended and Restated Company Pledge Agreement dated as of June 5, 1998 by and
between the Company and Bank of America National Trust and Savings Association.
4.4 Amended and Restated Subsidiary Pledge Agreement dated as of June 5, 1998 by and
among Western Aggregates Holding Corp., Western Rock Products Corp., SRM Holdings
Corp., Southern Ready Mix, Inc., Monroc, Inc. and Bank of America National Trust
and Savings Association.
4.5 Amended and Restated Shareholder Pledge Agreement dated as of June 5, 1998 by and
among Western Aggregates Holding Corp.'s stockholders, SRM Holdings Corp.'s
stockholders and Bank of America National Trust and Savings Association.
4.6 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's
subsidiaries, various financial institutions and Bank of America National Trust
and Savings Association.
4.7 (i) Amended and Restated Note and Warrant Purchase Agreement dated as of June 5, 1998
by and between the Company and The Prudential Insurance Company of America.
4.7 (ii) Amendment No. 1 to Amended and Restated Note and Warrant Purchase Agreement dated
as of April 14, 1999 by and between the Company and The Prudential Insurance
Company of America.
4.7 (iii) Waiver under Note Agreement dated as of April 15, 1999 by and between the Company
and The Prudential Insurance Company of America.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
4.8 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's
subsidiaries and The Prudential Insurance Company of America.
4.9 (i) Registration Rights and Stockholders' Agreement dated as of November 21, 1996 by
and among the Company, the Company's stockholders and The Prudential Insurance
Company of America.
4.9 (ii) First Amendment to Registration Rights and Stockholders' Agreement dated as of
June 5, 1998 by and among, the Company, the Company's stockholders and The
Prudential Insurance Company of America.
4.10 Warrant Agreement dated as of November 21, 1996 by and between the Company and The
Prudential Insurance Company of America.
4.11 Warrant Agreement dated as of June 5, 1998 by and between the Company and The
Prudential Insurance Company of America.
4.12 Letter Agreement dated as of April 15, 1999 by and among Golder, Thoma, Cressey,
Rauner Fund IV, L.P., Harris Trust and Savings Bank, Bank of America National
Trust and Savings Association, as Agent, The Prudential Insurance Company of
America and the Company.
4.13 Floating Rate Loan - Procedures Letter dated as of April 15, 1999 by and between
Harris Trust and Savings Bank and the Company.
4.14 Guaranty, dated April 15, 1999, in favor of Harris Trust and Savings Bank executed
by Golder, Thoma, Cressey, Rauner Fund, IV, L.P.
5.1 Opinion and consent of Kirkland & Ellis.
10.1 Professional Services Agreement dated as of January 24, 1994 by and between the
Company and Golder, Thoma, Cressey, Rauner, Inc.***
10.1 (i) Cancellation of Professional Services Agreement dated as of July 9, 1999 by and
between the Company and Golder, Thoma, Cressey, Rauner, Inc.
10.2 Equity Purchase Agreement dated as of January 24, 1994 between the Company and
Golder, Thoma, Cressey, Rauner Fund IV, L.P.***
10.3 Stockholders Agreement dated as of January 24, 1994 by and among the Company and
Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named
therein.***
10.4 Stockholders Joinder Agreement dated as of August 1, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty.***
10.5 Stockholders Joinder Agreement dated as of August 5, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop.***
10.6 Stockholders Joinder Agreement dated as of October 31, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R. Pullin.***
10.7 Stockholders Joinder Agreement dated as of July 31, 1998 by and among the Company,
James A. Harris and James A. Harris Grantor Retained Annuity Trust.***
10.8 Stockholders Joinder Agreement dated as of October 1, 1998 by and among the
Company, James A. Harris and The James A. Harris Charitable Remainder Unitrust.***
10.9 Registration Rights Agreement dated as of January 24, 1994 by and among the
Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives
named therein.***
10.10 Registration Rights Joinder Agreement dated as of August 1, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty.***
10.11 Registration Rights Joinder Agreement dated as of August 5, 1994 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop.***
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.12 Registration Rights Joinder Agreement dated as of October 31, 1994 by and among
the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R.
Pullin.***
10.13 Senior Management Agreement dated as of January 24, 1994 by and between the
Company and James A. Harris.** ***
10.15 Senior Management Agreement dated as of November 20, 1996 by and between the
Company and James A. Harris.** ***
10.16 Senior Management Agreement dated as of January 24, 1994 by and between the
Company and Michael J. Stone.** ***
10.18 Senior Management Agreement dated as of November 20, 1996 by and between the
Company and Michael J. Stone.** ***
10.19 Senior Management Agreement dated as of August 5, 1994 by and between the Company
and Morris L. Bishop, Jr.**
10.20 Senior Management Agreement dated as of October 1, 1997 by and between the Company
and Morris L. Bishop, Jr.** ***
10.21 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the
Company and James A. Harris.***
10.22 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the
Company and James A. Harris.***
10.23 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the
Company and James A. Harris. (Included as Exhibit B to exhibit 10.15)***
10.24 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the
Company and Michael J. Stone.***
10.25 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the
Company and Michael J. Stone.***
10.26 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the
Company and Michael J. Stone. (Included as Exhibit B to exhibit 10.18)***
10.27 Executive Stock Pledge Agreement dated as of August 5, 1994 by and between the
Company and Morris L. Bishop, Jr.***
10.28 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the
Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.43)***
10.29 Executive Stock Pledge Agreement dated as of October 1, 1997 by and between the
Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.20)***
10.30 Promissory Note dated as of January 24, 1994 by James A. Harris in favor of the
Company in the principal amount of $16,223.76.***
10.31 Promissory Note dated as of May 10, 1994 by James A. Harris in favor of the
Company in the principal amount of $121,638.24.***
10.32 Promissory Note dated as of November 20, 1996 by James A. Harris in favor of the
Company in the principal amount of $8,096.89. (Included as Exhibit A to exhibit
10.15)***
10.33 Promissory Note dated as of January 24, 1994 by Michael J. Stone in favor of the
Company in the principal amount of $10,809.18.***
10.34 Promissory Note dated as of May 10, 1994 by Michael J. Stone in favor of the
Company in the principal amount of $81,098.82.***
10.35 Promissory Note dated as of November 20, 1996 by Michael J. Stone in favor of the
Company in the principal amount of $8,096.89. (Included as Exhibit A to Exhibit
10.18)***
10.36 Promissory Note dated August 5, 1994 by Morris L. Bishop in favor of the Company
in the principal amount of $16,903.08.***
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.37 Promissory Note dated November 20, 1996 by Morris L. Bishop in favor of the
Company in the principal amount of $9,940.05. (Included as Exhibit A to exhibit
10.43)***
10.38 Demand Note dated October 1, 1997 by Morris L. Bishop in favor of the Company in
the principal amount of $219,985.62. (Included as an exhibit A to exhibit 20)***
10.39 Employment Agreement dated as of January 24, 1994 by and between the Company and
James A. Harris.***
10.40 Employment Agreement dated as of January 24, 1994 by and between the Company and
Michael J. Stone.***
10.41 Employment Agreement dated as of August 5, 1994 by and between the Company and
Morris L. Bishop, Jr.***
10.42(i) Agreement and Plan of Merger dated as of January 29, 1998 by and among the
Company, Western Acquisition, Inc. and Monroc, Inc.***
10.42(ii) Amended and Restated Agreement and Plan of Merger dated as of March 4, 1998 by and
among the Company, Western Acquisition, Inc. and Monroc, Inc.***
10.43 Senior Management Agreement dated as of November 20, 1996 by and between the
Company and Morris L. Bishop, Jr.***
10.44 Stockholders Joinder Agreement dated as of December 31, 1997 by and among the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Jeanne T. Richey.
10.45 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward
A. Dougherty.
10.46 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward
A. Dougherty.
10.47 Letter Agreement dated as of December 30, 1998 by and between the Company and
Edward A. Dougherty.
10.48 Form of Lock-Up Agreement with Deutsche Banc Securities Inc.
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Grant Thornton LLP.
23.4 Consent of Kirkland & Ellis (Included in Exhibit 5.1).
24.1 Powers of Attorney of Directors and Officers of the Company (Included on signature
page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** Management contract or compensatory plan or arrangement.
*** Filed previously.
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
U.S. AGGREGATES, INC.
ARTICLE I - NAME
The name of the corporation is U.S. Aggregates, Inc. (hereinafter
referred to as the "CORPORATION").
ARTICLE II - REGISTERED OFFICE
The address of the registered office of the Corporation in the State
of Delaware is [32 Loockerman Square, Suite L-100, in the City of Dover, County
of Kent 19901]. The name of the registered agent of the Corporation at such
address is The Prentice-Hall Corporation System, Inc.
ARTICLE III - PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "DELAWARE GENERAL CORPORATION LAW").
ARTICLE IV - CAPITAL STOCK
PART A. GENERAL. The maximum number of shares of capital stock that
the Corporation is authorized to have outstanding at any one time is 110,000,000
shares, consisting of: (i) 10,000,000 shares of Preferred Stock, par value
$0.01 per share (the "PREFERRED STOCK") and (ii) 100,000,000 shares of Common
Stock, par value $0.01 per share (the "COMMON STOCK").
PART B. PREFERRED STOCK. Authority is hereby expressly vested in
the Board of Directors of the Corporation, subject to the provisions of this
ARTICLE IV and to the limitations prescribed by law, to authorize the issuance
from time to time of one or more series of Preferred Stock. The authority of
the Board of Directors with respect to each series shall include, but not be
limited to, the determination or fixing of the following by resolution or
resolutions adopted by the affirmative vote of a majority of the total number of
the Directors then in office:
<PAGE>
(1) The designation of such series;
(2) The dividend rate of such series, the conditions and dates upon
which such dividends shall be payable, the relation which such dividends shall
bear to the dividends payable on any other class or classes or series of the
Corporation's capital stock and whether such dividends shall be cumulative or
non-cumulative;
(3) Whether the shares of such series shall be subject to redemption
for cash, property or rights, including securities of any other corporation, by
the Corporation or upon the happening of a specified event and, if made subject
to any such redemption, the times or events, prices, rates, adjustments and
other terms and conditions of such redemptions;
(4) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series;
(5) Whether or not the shares of such series shall be convertible
into, or exchangeable for, at the option of either the holder or the Corporation
or upon the happening of a specified event, shares of any other class or classes
or of any other series of the same class of the Corporation's capital stock and,
if provision be made for conversion or exchange, the times or events, prices,
rates, adjustments and other terms and conditions of such conversions or
exchanges;
(6) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock;
(7) The rights of the holders of the shares of such series upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; and
(8) The provisions as to voting, optional and/or other special rights
and preferences, if any, including, without limitation, the right to elect one
or more Directors.
PART C. COMMON STOCK. Except as otherwise provided by the Delaware
General Corporation Law or this Restated Certificate of Incorporation (the
"RESTATED CERTIFICATE"), the holders of Common Stock (i) subject to the rights
of holders of any series of Preferred Stock, shall share ratably in all
dividends payable in cash, stock or otherwise and other distributions, whether
in respect of liquidation or dissolution (voluntary or involuntary) or otherwise
and (ii) are subject to all the powers, rights, privileges, preferences and
priorities of any series of Preferred Stock as provided herein or in any
resolution or resolutions adopted by the Board of Directors pursuant to
authority expressly vested in it by the provisions of Part B of this ARTICLE IV.
(1) The Common Stock shall not be convertible into, or exchangeable
for, shares of any other class or classes or of any other series of the same
class of the Corporation's capital stock.
(2) No holder of Common Stock shall have any preemptive,
subscription, redemption, conversion or sinking fund rights with respect to the
Common Stock, or to any
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obligations convertible (directly or indirectly) into stock of the
Corporation whether now or hereafter authorized.
(3) Except as otherwise provided by the Delaware General Corporation
Law or the Restated Certificate and subject to the rights of holders of any
series of Preferred Stock, all of the voting power of the stockholders of the
Corporation shall be vested in the holders of the Common Stock, and each holder
of Common Stock shall have one vote for each share held by such holder on all
matters voted upon by the stockholders of the Corporation.
ARTICLE V - EXISTENCE
The Corporation is to have perpetual existence.
ARTICLE VI - BY-LAWS
In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors of the Corporation is
expressly authorized to make, alter, amend, change, add to or repeal the By-laws
of the Corporation by the affirmative vote of a majority of the total number of
Directors then in office. Any alteration or repeal of the By-laws of the
Corporation by the stockholders of the Corporation shall require the affirmative
vote of at least a majority of the voting power of the then outstanding shares
of capital stock of the Corporation entitled to vote on such alteration or
repeal, subject to ARTICLE IX hereof and ARTICLE VII of the Corporation's
By-laws.
ARTICLE VII - STOCKHOLDERS AND DIRECTORS
PART A. STOCKHOLDER ACTION. Election of Directors need not be by
written ballot unless the By-laws of the Corporation so provide. Subject to any
rights of holders of any series of Preferred Stock, from and after the date on
which the Common Stock of the Corporation is registered pursuant to the Exchange
Act, (i) any action required or permitted to be taken by the stockholders of the
Corporation must be effected at an annual or special meeting of stockholders of
the Corporation and may not be effected in lieu thereof by any consent in
writing by such stockholders, (ii) special meetings of stockholders of the
Corporation may be called only by either the Board of Directors pursuant to a
resolution adopted by the affirmative vote of the majority of the total number
of Directors then in office or by the chief executive officer of the Corporation
and (iii) advance notice of stockholder nominations of persons for election to
the Board of Directors of the Corporation and of business to be brought before
any annual meeting of the stockholders by the stockholders of the Corporation
shall be given in the manner provided in the By-laws of the Corporation.
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PART B. NUMBER OF DIRECTORS AND TERM OF OFFICE. Subject to any
rights of holders of any series of Preferred Stock to elect additional Directors
under specified circumstances, the number of Directors which shall constitute
the Board of Directors of the Corporation shall be fixed from time to time in
the manner set forth in the By-laws of the Corporation. The Directors of the
Corporation shall be divided into three classes: Class I, Class II and Class
III. Membership in each class shall be as nearly equal in number as possible.
The term of office of the initial Class I Directors shall expire at the annual
election of Directors by the stockholders of the Corporation in 2000, the term
of office of the initial Class II Directors shall expire at the annual election
of Directors by the stockholders of the Corporation in 2001 and the term of
office of the initial Class III Directors shall expire at the annual election of
Directors by the stockholders of the Corporation in 2002, or thereafter when
their respective successors in each case are elected by the stockholders and
qualified, subject however, to prior death, resignation, retirement,
disqualification or removal from office for cause. At each succeeding annual
election of Directors by the stockholders of the Corporation beginning in 2000,
the Directors chosen to succeed those whose terms then expire shall be
identified as being of the same class as the Directors they succeed and shall be
elected for a term expiring at the third succeeding annual election of Directors
by the stockholders of the Corporation, or thereafter when their respective
successors in each case are elected by the stockholders and qualified. If the
number of Directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of Directors in each class as
nearly equal as possible, and any additional Director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
shall a decrease in the number of Directors shorten the term of any incumbent
Director.
PART C. REMOVAL AND RESIGNATION. No Director may be removed from
office without cause and without the affirmative vote of the holders of a
majority of the voting power of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of Directors voting
together as a single class; PROVIDED, HOWEVER, that if the holders of any class
or series of Preferred Stock are entitled by the provisions of this Restated
Certificate (it being understood that any references to this Restated
Certificate shall include any duly authorized certificate of designation) to
elect one or more Directors, such Director or Directors so elected may be
removed without cause only by the vote of the holders of a majority of the
outstanding shares of that class or series entitled to vote. Any Director may
resign at any time upon written notice to the Corporation.
PART D. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to any
rights of holders of any series of Preferred Stock to fill such newly created
Directorships or vacancies, any newly created Directorships resulting from any
increase in the authorized number of Directors and any vacancies in the Board of
Directors resulting from death, resignation, disqualification or removal from
office for cause shall, unless otherwise provided by law or by resolution
approved by the affirmative vote of a majority of the total number of Directors
then in office, be filled only by resolution approved by the affirmative vote of
a majority of the total number of Directors then in office. Any Director so
chosen shall hold office until the next election of the class for which such
Director shall have been chosen, and until his or her successor shall have been
duly elected and qualified, unless he or she shall resign, die, become
disqualified or be removed for cause.
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ARTICLE VIII - GENERAL PROVISIONS
PART A. DIVIDENDS. The Board of Directors shall have authority from
time to time to set apart out of any assets of the Corporation otherwise
available for dividends a reserve or reserves as working capital or for any
other purpose or purposes, and to abolish or add to any such reserve or reserves
from time to time as the Board of Directors may deem to be in the interest of
the Corporation; and the Board of Directors shall likewise have power to
determine in its discretion, except as herein otherwise provided, what part of
the assets of the Corporation available for dividends in excess of such reserve
or reserves shall be declared in dividends and paid to the stockholders of the
Corporation.
PART B. ISSUANCE OF STOCK. The shares of all classes of stock of
the Corporation may be issued by the Corporation from time to time for such
consideration as from time to time may be fixed by the Board of Directors of the
Corporation, PROVIDED THAT shares of stock having a par value shall not be
issued for a consideration less than such par value, as determined by the Board.
At any time, or from time to time, the Corporation may grant rights or options
to purchase from the Corporation any shares of its stock of any class or classes
to run for such period of time, for such consideration, upon such terms and
conditions, and in such form as the Board of Directors may determine. The Board
of Directors shall have authority, as provided by law, to determine that only a
part of the consideration which shall be received by the Corporation for the
shares of its stock which it shall issue from time to time, shall be capital;
PROVIDED, HOWEVER, that, if all the shares issued shall be shares having a par
value, the amount of the part of such consideration so determined to be capital
shall be equal to the aggregate par value of such shares. The excess, if any,
at any time, of the total net assets of the Corporation over the amount so
determined to be capital, as aforesaid, shall be surplus. All classes of stock
of the Corporation shall be and remain at all times nonassessable.
The Board of Directors is hereby expressly authorized, in its
discretion, in connection with the issuance of any obligations or stock of the
Corporation (but without intending hereby to limit its general power so to do in
other cases), to grant rights or options to purchase stock of the Corporation of
any class upon such terms and during such period as the Board of Directors shall
determine, and to cause such rights to be evidenced by such warrants or other
instruments as it may deem advisable.
PART C. INSPECTION OF BOOKS AND RECORDS. The Board of Directors
shall have power from time to time to determine to what extent and at what times
and places and under what conditions and regulations the accounts and books of
the Corporation, or any of them, shall be open to the inspection of the
stockholders; and no stockholder shall have any right to inspect any account or
book or document of the Corporation, except as conferred by the laws of the
State of Delaware, unless and until authorized so to do by resolution of the
Board of Directors or of the stockholders of the Corporation.
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PART D. LOCATION OF MEETINGS, BOOKS AND RECORDS. Except as
otherwise provided in the By-laws, the stockholders of the Corporation and the
Board of Directors may hold their meetings and have an office or offices outside
of the State of Delaware and, subject to the provisions of the laws of the State
of Delaware, may keep the books of the Corporation outside of the State of
Delaware at such places as may, from time to time, be designated by the Board of
Directors.
ARTICLE IX - AMENDMENTS
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate in the manner now or
hereinafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding anything contained in this Restated Certificate to
the contrary, ARTICLE IV (other than any alteration or amendment to Part A of
ARTICLE IV that increases the authorized number of shares of Preferred Stock or
Common Stock), ARTICLE VII, ARTICLE X, and this ARTICLE IX of this Restated
Certificate shall not be altered, amended or repealed and no provision
inconsistent therewith shall be adopted without the affirmative vote of the
holders of at least 80% of the voting power of the then outstanding shares of
capital stock of the Corporation entitled to vote on such alteration, amendment
or repeal, voting together as a single class.
ARTICLE X - LIABILITY
PART A. LIMITATION OF LIABILITY.
(1) To the fullest extent permitted by the Delaware General
Corporation Law as it now exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), and except as otherwise provided in the Corporation's By-laws, no
Director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages arising from a breach of fiduciary duty owed
to the Corporation or its stockholders.
(2) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
PART B. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "PROCEEDING"), by reason of the
fact that he or she is or was a Director or officer of the Corporation or, while
a Director or officer of the Corporation, is or was serving at the request of
the Corporation as a Director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (an
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"INDEMNITEE"), whether the basis of such proceeding is alleged action in an
official capacity as a Director or officer or in any other capacity while
serving as a Director or officer, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than permitted
prior thereto), against all expense, liability and loss (including attorneys'
fees, judgments, fines, excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; PROVIDED,
HOWEVER, that, except as provided in Part C of this ARTICLE X with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The
right to indemnification conferred in this Part B of this ARTICLE X shall be
a contract right and shall include the obligation of the Corporation to pay
the expenses incurred in defending any such proceeding in advance of its
final disposition (an "ADVANCE OF EXPENSES"); PROVIDED, HOWEVER, that, if and
to the extent that the Delaware General Corporation Law requires, an advance
of expenses incurred by an indemnitee in his or her capacity as a Director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (an "UNDERTAKING"), by or on behalf of such indemnitee, to repay
all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (a "FINAL
ADJUDICATION") that such indemnitee is not entitled to be indemnified for
such expenses under this Part B or otherwise. The Corporation may, by action
of its Board of Directors, provide indemnification to employees and agents of
the Corporation with the same or lesser scope and effect as the foregoing
indemnification of Directors and officers.
PART C. PROCEDURE FOR INDEMNIFICATION. Any indemnification of a
Director or officer of the Corporation or advance of expenses under Part B of
this ARTICLE X shall be made promptly, and in any event within forty-five days
(or, in the case of an advance of expenses, twenty days), upon the written
request of the Director or officer. If a determination by the Corporation that
the Director or officer is entitled to indemnification pursuant to this ARTICLE
X is required, and the Corporation fails to respond within sixty days to a
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification or
advance of expenses, in whole or in part, or if payment in full pursuant to such
request is not made within forty-five days (or, in the case of an advance of
expenses, twenty days), the right to indemnification or advances as granted by
this ARTICLE X shall be enforceable by the Director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for the advance of expenses where the undertaking required pursuant to
Part B of this ARTICLE X, if any, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
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the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct. The procedure for indemnification of other employees and agents for
whom indemnification is provided pursuant to Part B of this ARTICLE X shall be
the same procedure set forth in this Part C for Directors or officers, unless
otherwise set forth in the action of the Board of Directors providing
indemnification for such employee or agent.
PART D. INSURANCE. The Corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss asserted against him or her and incurred by him or
her in any such capacity, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
PART E. SERVICE FOR SUBSIDIARIES. Any person serving as a
Director, officer, employee or agent of another corporation, partnership,
limited liability company, joint venture or other enterprise, at least 50% of
whose equity interests are owned by the Corporation (a "SUBSIDIARY" for this
ARTICLE X) shall be conclusively presumed to be serving in such capacity at the
request of the Corporation.
PART F. RELIANCE. Persons who after the date of the adoption
of this provision become or remain Directors or officers of the Corporation or
who, while a Director or officer of the Corporation, become or remain a
Director, officer, employee or agent of a subsidiary, shall be conclusively
presumed to have relied on the rights to indemnity, advance of expenses and
other rights contained in this ARTICLE X in entering into or continuing such
service. The rights to indemnification and to the advance of expenses conferred
in this ARTICLE X shall apply to claims made against an indemnitee arising out
of acts or omissions which occurred or occur both prior and subsequent to the
adoption hereof.
PART G. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification
and to the advance of expenses conferred in this ARTICLE X shall not be
exclusive of any other right which any person may have or hereafter acquire
under this Restated Certificate or under any statute, by-law, agreement, vote of
stockholders or disinterested Directors or otherwise.
PART H. MERGER OR CONSOLIDATION. For purposes of this ARTICLE X,
references to the "CORPORATION" shall include, in addition to the resulting
Corporation, any constituent Corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which,
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if its separate existence had continued, would have had power and authority
to indemnify its Directors, officers and employees or agents, so that any
person who is or was a Director, officer, employee or agent of such
constituent Corporation, or is or was serving at the request of such
constituent Corporation as a Director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under this ARTICLE X with respect to the resulting
or surviving Corporation as he or she would have with respect to such
constituent Corporation if its separate existence had continued.
ARTICLE XI - BUSINESS COMBINATIONS
The Corporation expressly elects to be governed by Section 203 of the
Delaware General Corporation Law.
* * * * *
<PAGE>
RESTATED BY-LAWS
OF
U.S. AGGREGATES, INC.
A DELAWARE CORPORATION
(Adopted as of January 13, 1994, and Restated on ___________ __, 1999)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of U.S.
Aggregates, Inc. (the "CORPORATION") in the State of Delaware shall be
located at [32 Loockerman Square, Suite L-100, in the City of Dover,
County of Kent 19901]. The name of the Corporation's registered agent at
such address shall be The Prentice-Hall Corporation System, Inc. The
registered office and/or registered agent of the Corporation may be
changed from time to time by action of the Board of Directors.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETING. An annual meeting of the stockholders
shall be held each year within 150 days after the close of the immediately
preceding fiscal year of the Corporation or at such other time specified by
the Board of Directors for the purpose of electing Directors and conducting
such other proper business as may come before the annual meeting. At the
annual meeting, stockholders shall elect Directors and transact such other
business as properly may be brought before the annual meeting pursuant to
Section 11 of ARTICLE II hereof.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may
only be called in the manner provided in the Corporation's certificate of
incorporation.
<PAGE>
SECTION 3. PLACE OF MEETINGS. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of
meeting for any annual meeting or for any special meeting. If no designation
is made, or if a special meeting be otherwise called, the place of meeting
shall be the principal executive office of the Corporation. If for any
reason any annual meeting shall not be held during any year, the business
thereof may be transacted at any special meeting of the stockholders.
SECTION 4. NOTICE. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting
not less than 10 nor more than 60 days before the date of the meeting. All
such notices shall be delivered, either personally or by mail, by or at the
direction of the Board of Directors, the chairman of the board, the president
or the secretary, and if mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, postage prepaid, addressed to the
stockholder at his, her or its address as the same appears on the records of
the Corporation. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends for the
express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 5. STOCKHOLDERS LIST. The officer having charge of the stock
ledger of the Corporation shall make, at least 10 days before every meeting
of the stockholders, a complete list of the stockholders entitled to vote at
such meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 6. QUORUM. The holders of a majority of the outstanding shares
of capital stock entitled to vote, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders, except as
otherwise provided by the General Corporation Law of the State of Delaware or
by the Corporation's certificate of incorporation. If a quorum is not
present, the holders of a majority of the shares present in person or
represented by proxy at the meeting, and entitled to vote at the meeting, may
adjourn the meeting to another time and/or place. When a specified item of
business requires a vote by a class or series (if the Corporation shall then
have outstanding shares of more than one class or series) voting as a class
or series, the holders of a majority of the shares of such class or series
shall constitute a quorum (as to such class or series) for the transaction of
such item of business.
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SECTION 7. ADJOURNED MEETINGS. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than 30 days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
SECTION 8. VOTE REQUIRED. When a quorum is present, the affirmative
vote of the majority of shares present in person or represented by proxy at
the meeting and entitled to vote on the subject matter shall be the act of
the stockholders, unless (i) by express provisions of an applicable law or of
the Corporation's certificate of incorporation a different vote is required,
in which case such express provision shall govern and control the decision of
such question, or (ii) the subject matter is the election of Directors, in
which case Section 2 of ARTICLE III hereof shall govern and control the
approval of such subject matter.
SECTION 9. VOTING RIGHTS. Except as otherwise provided by the General
Corporation Law of the State of Delaware, the Corporation's certificate of
incorporation or these By-laws, every stockholder shall at every meeting of
the stockholders be entitled to one vote in person or by proxy for each share
of common stock held by such stockholder.
SECTION 10. PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or
her by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in the stock
itself or an interest in the Corporation generally. Any proxy is suspended
when the person executing the proxy is present at a meeting of stockholders
and elects to vote, except that when such proxy is coupled with an interest
and the fact of the interest appears on the face of the proxy, the agent
named in the proxy shall have all voting and other rights referred to in the
proxy, notwithstanding the presence of the person executing the proxy. At
each meeting of the stockholders, and before any voting commences, all
proxies filed at or before the meeting shall be submitted to and examined by
the secretary or a person designated by the secretary, and no shares may be
represented or voted under a proxy that has been found to be invalid or
irregular.
SECTION 11. BUSINESS BROUGHT BEFORE AN ANNUAL MEETING. At an annual
meeting of the stockholders, only such business shall be conducted as shall
have been properly brought before the meeting. To be properly brought before
an annual meeting, business must be (i) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) brought before the meeting by or at the direction of the
Board of Directors or (iii) otherwise
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properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation,
not less than 60 days nor more than 90 days prior to the meeting; PROVIDED,
HOWEVER, that in the event that less than 70 days' notice or prior public
announcement of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th day following the date on which such notice of
the date of the annual meeting was mailed or such public announcement was
made. A stockholder's notice to the secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting, (ii) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business, (iii) the class and number
of shares of the Corporation which are beneficially owned by the stockholder
and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in these By-laws to the contrary, no business shall
be conducted at an annual meeting except in accordance with the procedures
set forth in this section. The presiding officer of an annual meeting shall,
if the facts warrant, determine and declare to the meeting that business was
not properly brought before the meeting and in accordance with the provisions
of this section; if he or she should so determine, he or she shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted. For purposes of this section, "PUBLIC ANNOUNCEMENT"
shall mean disclosure in a press release reported by Dow Jones News Service,
Associated Press or a comparable national news service. Nothing in this
section shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT").
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. In
addition to such powers as are herein and in the Corporation's certificate of
incorporation expressly conferred upon it, the Board of Directors shall have
and may exercise all the powers of the Corporation, subject to the provisions
of the laws of Delaware, the Corporation's certificate of incorporation and
these By-laws.
SECTION 2. NUMBER, ELECTION AND TERM OF OFFICE. Subject to any rights
of the holders of any series of preferred stock to elect additional Directors
under specified circumstances, the number of Directors which shall constitute
the Board of Directors shall be fixed from time to time by resolution adopted
by the affirmative vote of a majority of the total number of Directors then
in office. The Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled
to vote in the election of Directors; provided that, whenever the
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holders of any class or series of preferred stock of the Corporation are
entitled to elect one or more Directors pursuant to the provisions of the
Corporation's certificate of incorporation (including, but not limited to,
for purposes of these By-laws, pursuant to any duly authorized certificate of
designation), such Directors shall be elected by a plurality of the votes of
such class or series present in person or represented by proxy at the meeting
and entitled to vote in the election of such Directors. The Directors shall
be elected and shall hold office only in the manner provided in the
Corporation's certificate of incorporation.
SECTION 3. REMOVAL AND RESIGNATION. No Director may be removed from
office without cause and without the affirmative vote of the holders of a
majority of the voting power of the then outstanding shares of capital stock
entitled to vote generally in the election of Directors voting together as a
single class; provided, however, that if the holders of any class or series
of preferred stock are entitled by the provisions of the Corporation's
certificate of incorporation (it being understood that any references to the
Corporation's certificate of incorporation shall include any duly authorized
certificate of designation) to elect one or more Directors, such Director or
Directors so elected may be removed without cause only by the vote of the
holders of a majority of the outstanding shares of that class or series
entitled to vote. Any Director may resign at any time upon written notice to
the Corporation.
SECTION 4. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the total number of Directors may be filled
only in the manner provided in the Corporation's certificate of incorporation.
SECTION 5. NOMINATIONS.
(a) Only persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible to serve as
Directors. Nominations of persons for election to the Board of Directors of
the Corporation may be made at a meeting of stockholders (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this By-law, who is entitled to vote generally in the
election of Directors at the meeting and who shall have complied with the
notice procedures set forth below in Section 5(b).
(b) In order for a stockholder to nominate a person for election
to the Board of Directors of the Corporation at a meeting of stockholders,
such stockholder shall have delivered timely notice of such stockholder's
intent to make such nomination in writing to the secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation (i)
in the case of an annual meeting, not less than 60 nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting;
PROVIDED, HOWEVER, that in the event that the date of the annual meeting is
changed by more than 30 days from such anniversary date, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the earlier of the day on which notice of
the date of the
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meeting was mailed or public disclosure of the meeting was made, and (ii) in
the case of a special meeting at which Directors are to be elected, not later
than the close of business on the 10th day following the earlier of the day
on which notice of the date of the meeting was mailed or public disclosure of
the meeting was made. Such stockholder's notice shall set forth (i) as to
each person whom the stockholder proposes to nominate for election as a
Director at such meeting all information relating to such person that is
required to be disclosed in solicitations of proxies for election of
Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a Director if
elected); (ii) as to the stockholder giving the notice (A) the name and
address, as they appear on the Corporation's books, of such stockholder and
(B) the class and number of shares of the Corporation which are beneficially
owned by such stockholder and also which are owned of record by such
stockholder; and (iii) as to the beneficial owner, if any, on whose behalf
the nomination is made, (A) the name and address of such person and (B) the
class and number of shares of the Corporation which are beneficially owned by
such person. At the request of the Board of Directors, any person nominated
by the Board of Directors for election as a Director shall furnish to the
secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
(c) No person shall be eligible to serve as a Director of the
Corporation unless nominated in accordance with the procedures set forth in
this section. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this section, and if he or she
should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded. A stockholder seeking to nominate
a person to serve as a Director must also comply with all applicable
requirements of the Exchange Act, and the rules and regulations thereunder
with respect to the matters set forth in this section.
SECTION 6. ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held without other notice than this By-law immediately
after, and at the same place as, the annual meeting of stockholders.
SECTION 7. OTHER MEETINGS AND NOTICE. Regular meetings, other than the
annual meeting, of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution
of the Board of Directors. Special meetings of the Board of Directors may be
called by the chairman of the board, the chief executive officer (if the
chief executive officer is a Director) or, upon the written request of at
least a majority of the Directors then in office, the secretary of the
Corporation on at least 24 hours notice to each Director, either personally,
by telephone, by mail or by telecopy.
SECTION 8. CHAIRMAN OF THE BOARD, QUORUM, REQUIRED VOTE AND
ADJOURNMENT. The Board of Directors shall elect, by the affirmative vote of a
majority of the total number of Directors then in office, a chairman of the
board, who shall preside at all meetings of the stockholders and Board
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of Directors at which he or she is present and shall have such powers and
perform such duties as the Board of Directors may from time to time
prescribe. If the chairman of the board is not present at a meeting of the
stockholders or the Board of Directors, the chief executive officer (if the
chief executive officer is a Director and is not also the chairman of the
board) shall preside at such meeting, and, if the chief executive officer is
not present at such meeting, a majority of the Directors present at such
meeting shall elect one of their members to so preside. A majority of the
total number of Directors then in office shall constitute a quorum for the
transaction of business. Unless by express provision of an applicable law,
the Corporation's certificate of incorporation or these By-laws a different
vote is required, the vote of a majority of Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors. If a
quorum shall not be present at any meeting of the Board of Directors, the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present.
SECTION 9. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the total number of Directors then in office,
designate one or more committees, each committee to consist of one or more of
the Directors of the Corporation, which to the extent provided in such
resolution or these By-laws shall have, and may exercise, the powers of the
Board of Directors in the management and affairs of the Corporation, except
as otherwise limited by law. The Board of Directors may designate one or
more Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors. Each
committee shall keep regular minutes of its meetings and report the same to
the Board of Directors upon request.
SECTION 10. COMMITTEE RULES. Each committee of the Board of Directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the Board
of Directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the
committee shall be necessary to constitute a quorum. Unless otherwise
provided in such a resolution, in the event that a member and that member's
alternate, if alternates are designated by the Board of Directors, of such
committee is or are absent or disqualified, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in place of any such absent
or disqualified member.
SECTION 11. COMMUNICATIONS EQUIPMENT. Members of the Board of
Directors or any committee thereof may participate in and act at any meeting
of such board or committee through the use of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear and speak with each other, and participation in the meeting
pursuant to this section shall constitute presence in person at the meeting.
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SECTION 12. WAIVER OF NOTICE AND PRESUMPTION OF ASSENT. Any member of
the Board of Directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except
when such member attends for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened. Such member shall be
conclusively presumed to have assented to any action taken unless his or her
dissent shall be entered in the minutes of the meeting or unless his or her
written dissent to such action shall be filed with the person acting as the
secretary of the meeting before the adjournment thereof or shall be forwarded
by registered mail to the secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to any
member who voted in favor of such action.
SECTION 13. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by
the Corporation's certificate of incorporation, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of such
board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the board or
committee.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be elected by
the Board of Directors and shall consist of a chairman of the board, a chief
executive officer, a president, a chief financial officer, a chief operating
officer, one or more vice-presidents, a secretary, a treasurer and such other
officers and assistant officers as may be deemed necessary or desirable by
the Board of Directors. Any number of offices may be held by the same
person, except that neither the chief executive officer nor the president
shall also hold the office of secretary. In its discretion, the Board of
Directors may choose not to fill any office for any period as it may deem
advisable, except that the offices of president and secretary shall be filled
as expeditiously as possible.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
Corporation shall be elected annually by the Board of Directors at its first
meeting held after each annual meeting of stockholders or as soon thereafter
as convenient. Vacancies may be filled or new offices created and filled at
any meeting of the Board of Directors. Each officer shall hold office until
a successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent elected by the Board of
Directors may be removed by the Board of Directors at its discretion, but
such removal shall be without prejudice to the contract rights, if any, of
the person so removed.
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SECTION 4. VACANCIES. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise may be filled by
the Board of Directors.
SECTION 5. COMPENSATION. Compensation of all executive officers shall
be approved by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of his or her also being a Director of
the Corporation; PROVIDED HOWEVER, that compensation of all executive
officers may be determined by a committee established for that purpose if so
authorized by the Board of Directors.
SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board shall
preside at all meetings of the stockholders and of the Board of Directors and
shall have such other powers and perform such other duties as may be
prescribed to him or her by the Board of Directors or provided in these
By-laws.
SECTION 7. CHIEF EXECUTIVE OFFICER. The chief executive officer shall
have the powers and perform the duties incident to that position. Subject to
the powers of the Board of Directors and the chairman of the board, the chief
executive officer shall be in the general and active charge of the entire
business and affairs of the Corporation, and shall be its chief policy making
officer. The chief executive officer shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or
provided in these By-laws. The chief executive officer is authorized to
execute bonds, mortgages and other contracts requiring a seal, under the seal
of the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall
be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation. Whenever the president is unable to serve, by
reason of sickness, absence or otherwise, the chief executive officer shall
perform all the duties and responsibilities and exercise all the powers of
the president.
SECTION 8. THE PRESIDENT. The president of the Corporation shall,
subject to the powers of the Board of Directors, the chairman of the board
and the chief executive officer, have general charge of the business, affairs
and property of the Corporation, and control over its officers, agents and
employees. The president shall see that all orders and resolutions of the
Board of Directors are carried into effect. The president is authorized to
execute bonds, mortgages and other contracts requiring a seal, under the seal
of the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall
be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation. The president shall have such other powers and
perform such other duties as the Board of Directors, the chairman of the
board, the chief executive officer or these By-laws may, from time to time,
prescribe.
SECTION 9. THE CHIEF FINANCIAL OFFICER. The chief financial officer
shall have the custody of the corporate funds and securities; shall keep full
and accurate all books and accounts of the Corporation as shall be necessary
or desirable in accordance with applicable law or generally accepted
accounting principles; shall deposit all monies and other valuable effects in
the name and
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to the credit of the Corporation as may be ordered by the chairman of the
board or the Board of Directors; shall cause the funds of the Corporation to
be disbursed when such disbursements have been duly authorized, taking proper
vouchers for such disbursements; and shall render to the Board of Directors,
at its regular meeting or when the Board of Directors so requires, an account
of the Corporation; shall have such other powers and perform such other
duties as the Board of Directors, the chairman of the board, the chief
executive officer, the president or these By-laws may, from time to time,
prescribe. If required by the Board of Directors, the chief financial
officer shall give the Corporation a bond (which shall be rendered every six
years) in such sums and with such surety or sureties as shall be satisfactory
to the Board of Directors for the faithful performance of the duties of the
office of chief financial officer and for the restoration to the Corporation,
in case of death, resignation, retirement or removal from office of all
books, papers, vouchers, money and other property of whatever kind in the
possession or under the control of the chief financial officer belonging to
the Corporation.
SECTION 10. CHIEF OPERATING OFFICER. The chief operating officer of
the Corporation shall, subject to the powers of the Board of Directors, the
chairman of the board and the chief executive officer, have general and
active management of the business of the Corporation and see that all orders
and resolutions of the Board of Directors are carried into effect. The chief
operating officer shall have such other powers and perform such other duties
as the Board of Directors, the chairman of the board, the chief executive
officer, the president or these By-laws may, from time to time, prescribe.
SECTION 11. VICE-PRESIDENTS. The vice-president, or if there shall be
more than one, the vice-presidents in the order determined by the Board of
Directors or the chairman of the board, shall, in the absence or disability
of the president, act with all of the powers and be subject to all the
restrictions of the president. The vice-presidents shall also perform such
other duties and have such other powers as the Board of Directors, the
chairman of the board, the chief executive officer, the president or these
By-laws may, from time to time, prescribe. Any vice-president may also be
designated as an executive vice-president or senior vice-president, as the
Board of Directors may from time to time prescribe.
SECTION 12. THE SECRETARY AND ASSISTANT SECRETARIES. The secretary
shall attend all meetings of the Board of Directors, all meetings of the
committees thereof and all meetings of the stockholders and record all the
proceedings of the meetings in a book or books to be kept for that purpose or
shall ensure that his or her designee attends each such meeting to act in
such capacity. Under the chairman of the board's supervision, the secretary
shall give, or cause to be given, all notices required to be given by these
By-laws or by law; shall have such other powers and perform such other duties
as the Board of Directors, the chairman of the board, the chief executive
officer, the president or these By-laws may, from time to time, prescribe;
and shall have custody of the corporate seal of the Corporation. The
secretary, or an assistant secretary, shall have authority to affix the
corporate seal to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any
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other officer to affix the seal of the Corporation and to attest the affixing
by his or her signature. The assistant secretary, or if there be more than
one, any of the assistant secretaries, shall in the absence or disability of
the secretary, perform the duties and exercise the powers of the secretary
and shall have such other powers and perform such other duties as the Board
of Directors, the chairman of the board, the chief executive officer, the
president, or secretary may, from time to time, prescribe.
SECTION 13. THE TREASURER AND ASSISTANT TREASURER. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation as may be ordered by the chairman of the
board, the chief financial officer or the Board of Directors; shall cause the
funds of the Corporation to be disbursed when such disbursements have been
duly authorized, taking proper vouchers for such disbursements; and shall
render to the chairman of the board, the chief financial officer and the
Board of Directors, at its regular meeting or when the Board of Directors so
requires, an account of the Corporation; shall have such other powers and
perform such other duties as the Board of Directors, the chairman of the
board, the chief financial officer or these By-laws may, from time to time,
prescribe. If required by the Board of Directors, the treasurer shall give
the Corporation a bond (which shall be rendered every six years) in such sums
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of
treasurer and for the restoration to the Corporation, in case of death,
resignation, retirement, or removal from office, of all books, papers,
vouchers, money, and other property of whatever kind in the possession or
under the control of the treasurer belonging to the Corporation. The
assistant treasurer, or if there are more than one, the assistant treasurers
in the order determined by the Board of Directors shall, in the absence or
disability of the treasurer, perform the duties and exercise the powers of
the treasurer. The assistant treasurers shall have such other powers and
perform such other duties as the Board of Directors, the chairman of the
board, the chief financial officer, the treasurer or these By-laws may, from
time to time, prescribe.
SECTION 14. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these By-laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the Board of
Directors.
SECTION 15. ABSENCE OR DISABILITY OF OFFICERS. In the case of the
absence or disability of any officer of the Corporation and of any person
hereby authorized to act in such officer's place during such officer's
absence or disability, the Board of Directors may by resolution delegate the
powers and duties of such officer to any other officer or to any Director, or
to any other person selected by it.
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ARTICLE V
CERTIFICATES OF STOCK
SECTION 1. FORM. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation
by the chairman of the board, the chief executive officer or the president
and the secretary or an assistant secretary of the Corporation, certifying
the number of shares owned by such holder in the Corporation. If such a
certificate is countersigned (i) by a transfer agent or an assistant transfer
agent other than the Corporation or its employee or (ii) by a registrar,
other than the Corporation or its employee, the signature of any such
chairman of the board, chief executive officer, president, secretary or
assistant secretary may be facsimiles. In case any officer or officers who
have signed, or whose facsimile signature or signatures have been used on,
any such certificate or certificates shall cease to be such officer or
officers of the Corporation whether because of death, resignation or
otherwise before such certificate or certificates have been delivered by the
Corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used
thereon had not ceased to be such officer or officers of the Corporation.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name of the person to whom the shares represented thereby
are issued, with the number of shares and date of issue, shall be entered on
the books of the Corporation. Shares of stock of the Corporation shall only
be transferred on the books of the Corporation by the holder of record
thereof or by such holder's attorney duly authorized in writing, upon
surrender to the Corporation of the certificate or certificates for such
shares endorsed by the appropriate person or persons, with such evidence of
the authenticity of such endorsement, transfer, authorization and other
matters as the Corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates and record the transaction on its books.
The Board of Directors may appoint a bank or trust company organized under
the laws of the United States or any state thereof to act as its transfer
agent or registrar, or both, in connection with the transfer of any class or
series of securities of the Corporation.
SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the
Corporation may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his or her legal representative, to give the
Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against the Corporation on account of the loss, theft or
destruction of any such certificate or the issuance of such new certificate.
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SECTION 3. FIXING A RECORD DATE FOR STOCKHOLDER MEETINGS. In order
that the Corporation may determine the stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which record date shall not be more than 60 nor less than
10 days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of
business on the next day preceding the day on which notice is first given. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
SECTION 4. FIXING A RECORD DATE FOR OTHER PURPOSES. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purposes of any other lawful action, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than 60 days prior to such action. If no
record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto.
SECTION 5. REGISTERED STOCKHOLDERS. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the
Corporation may treat the registered owner as the person entitled to receive
dividends, to vote, to receive notifications and otherwise to exercise all
the rights and powers of an owner. The Corporation shall not be bound to
recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or
other notice thereof.
SECTION 6. SUBSCRIPTIONS FOR STOCK. Unless otherwise provided for in
the subscription agreement, subscriptions for shares shall be paid in full at
such time, or in such installments and at such times, as shall be determined
by the Board of Directors. Any call made by the Board of Directors for
payment on subscriptions shall be uniform as to all shares of the same class
or as to all shares of the same series. In case of default in the payment of
any installment or call when such payment is due, the Corporation may proceed
to collect the amount due in the same manner as any debt due the Corporation.
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ARTICLE VI
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Corporation's certificate of
incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, in accordance with applicable law. Dividends may
be paid in cash, in property or in shares of the capital stock, subject to
the provisions of the Corporation's certificate of incorporation. Before
payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Directors from
time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the Corporation, or any other purpose and the
Directors may modify or abolish any such reserve in the manner in which it
was created.
SECTION 2. CHECKS, DRAFTS OR ORDERS. All checks, drafts or other
orders for the payment of money by or to the Corporation and all notes and
other evidences of indebtedness issued in the name of the Corporation shall
be signed by such officer or officers, agent or agents of the Corporation,
and in such manner, as shall be determined by resolution of the Board of
Directors or a duly authorized committee thereof.
SECTION 3. CONTRACTS. In addition to the powers otherwise granted to
officers pursuant to ARTICLE IV hereof, the Board of Directors may authorize
any officer or officers, or any agent or agents, of the Corporation to enter
into any contract or to execute and deliver any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined
to specific instances.
SECTION 4. LOANS. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiaries, including any officer or employee who is
a Director of the Corporation or its subsidiaries, whenever, in the judgment
of the Directors, such loan, guaranty or assistance may reasonably be
expected to benefit the Corporation. The loan, guaranty or other assistance
may be with or without interest, and may be unsecured, or secured in such
manner as the Board of Directors shall approve, including, without
limitation, a pledge of shares of stock of the Corporation. Nothing in this
section shall be deemed to deny, limit or restrict the powers of guaranty or
warranty of the Corporation at common law or under any statute.
SECTION 5. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 6. CORPORATE SEAL. The Board of Directors may provide a
corporate seal which shall be in the form of a circle and shall have
inscribed thereon the name of the Corporation and the words
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"Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. VOTING SECURITIES OWNED BY CORPORATION. Voting securities
in any other corporation held by the Corporation shall be voted by the chief
executive officer, the president or a vice-president, unless the Board of
Directors specifically confers authority to vote with respect thereto, which
authority may be general or confined to specific instances, upon some other
person or officer. Any person authorized to vote securities shall have the
power to appoint proxies, with general power of substitution.
SECTION 8. INSPECTION OF BOOKS AND RECORDS. The Board of Directors
shall have power from time to time to determine to what extent and at what
times and places and under what conditions and regulations the accounts and
books of the Corporation, or any of them, shall be open to the inspection of
the stockholders; and no stockholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred by the
laws of the State of Delaware, unless and until authorized so to do by
resolution of the Board of Directors or of the stockholders of the
Corporation.
SECTION 9. SECTION HEADINGS. Section headings in these By-laws are for
convenience of reference only and shall not be given any substantive effect
in limiting or otherwise construing any provision herein.
SECTION 10. INCONSISTENT PROVISIONS. In the event that any provision
of these By-laws is or becomes inconsistent with any provision of the
Corporation's certificate of incorporation, the General Corporation Law of
the State of Delaware or any other applicable law, the provision of these
By-laws shall not be given any effect to the extent of such inconsistency but
shall otherwise be given full force and effect.
ARTICLE VII
AMENDMENTS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make,
alter, amend, change, add to or repeal these By-laws by the affirmative vote
of a majority of the total number of Directors then in office. Any
alteration or repeal of these By-laws by the stockholders of the Corporation
shall require the affirmative vote of a majority of the outstanding shares of
the Corporation entitled to vote on such alteration or repeal; PROVIDED,
HOWEVER, that Section 11 of ARTICLE II and Sections 2, 3, 4 and 5 of ARTICLE
III and this ARTICLE VII of these By-laws shall not be altered, amended or
repealed and no provision inconsistent therewith shall be adopted without the
affirmative vote of the holders of at least 80% of the outstanding shares of
the Corporation entitled to vote on such alteration or repeal.
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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
dated as of June 5, 1998
among
U.S. AGGREGATES, INC.,
VARIOUS FINANCIAL INSTITUTIONS
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
individually and as Agent
Arranged by
BANCAMERICA ROBERTSON STEPHENS
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TABLE OF CONTENTS
Page
RECITALS.....................................................................1
SECTION 1 DEFINITIONS AND INTERPRETATION...................................1
1.1 Definitions.......................................................1
1.2 Computations.....................................................19
1.3 Cross-References; Section Captions...............................19
1.4 Addition of Lenders; Adjustment of Percentages; Reallocation
of Loans.........................................................19
SECTION 2 COMMITMENTS OF THE BANKS; TYPES OF LOANS; BORROWING
AND CONVERSION PROCEDURES.......................................20
2.1 Commitments......................................................20
2.1.1 Revolving Commitments..............................20
2.1.2 Term A Loan Commitments............................20
2.1.3 Term B Loan Commitments............................20
2.2 Various Types of Loans...........................................21
2.3 Borrowing Procedures.............................................21
2.4 Procedures for Conversion of Type of Loan........................21
2.5 Letter of Credit Procedures......................................22
2.6 Participations in Letters of Credit..............................22
2.7 Reimbursement Obligations........................................22
2.8 Limitation on the Issuing Lender's Obligations...................23
2.9 Funding by Revolving Lenders to the Issuing Lender...............23
2.10 Warranty........................................................23
2.11 Conditions......................................................24
2.12 Commitments Several.............................................24
SECTION 3 NOTES EVIDENCING LOANS; PAYMENT SCHEDULE........................24
3.1 Notes............................................................24
3.2 Recordkeeping....................................................25
SECTION 4 INTEREST........................................................25
4.1 Interest Rates...................................................25
4.2 Interest Payment Dates...........................................26
4.3 Interest Periods.................................................26
4.4 Setting and Notice of Eurodollar Rates...........................26
4.5 Computation of Interest..........................................27
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SECTION 5 FEES............................................................27
5.1 Non-Use Fees.....................................................27
5.2 Letter of Credit Fees............................................27
5.3 Agent's Fees.....................................................27
5.4 Arranger's Fee...................................................27
SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS;
PREPAYMENTS.....................................................28
6.1 Reduction or Termination of the Commitments......................28
6.1.1 Mandatory Reduction of Revolving Commitments.......28
6.1.2 Voluntary Reduction or Termination of Revolving
Commitments........................................28
6.1.3 Reductions Pro Rata................................28
6.2 Prepayments......................................................28
6.2.1 Mandatory Prepayments..............................28
6.2.2 Voluntary Prepayments..............................29
6.2.3 Application of Mandatory and Voluntary Prepayments
among Term Loan Facilities.........................30
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF;
TAXES...........................................................30
7.1 Making of Payments...............................................30
7.2 Application of Certain Payments..................................31
7.3 Due Date Extension...............................................31
7.4 Setoff...........................................................31
7.5 Proration of Payments............................................31
7.6 Net Payments; Tax Exemptions.....................................32
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR
EURODOLLAR LOANS................................................33
8.1 Increased Costs..................................................33
8.2 Basis for Determining Interest Rate Inadequate or Unfair.........34
8.3 Changes in Law Rendering Eurodollar Loans Unlawful...............34
8.4 Funding Losses...................................................35
8.5 Right of Lenders to Fund through Other Offices...................35
8.6 Discretion of Lenders as to Manner of Funding....................35
8.7 Mitigation of Circumstances; Replacement of Affected Lender......35
8.8 Conclusiveness of Statements; Survival of Provisions.............36
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SECTION 9 WARRANTIES......................................................36
9.1 Organization, etc................................................36
9.2 Authorization; No Conflict.......................................36
9.3 Validity and Binding Nature......................................37
9.4 Financial Information............................................37
9.5 No Material Adverse Change.......................................37
9.6 Litigation and Contingent Liabilities............................37
9.7 Ownership of Properties; Liens...................................38
9.8 Subsidiaries.....................................................38
9.9 Pension and Welfare Plans........................................38
9.10 Regulated Industry..............................................38
9.11 Regulations G, U and X..........................................38
9.12 Taxes...........................................................38
9.13 Environmental Matters...........................................38
9.14 Compliance with Law.............................................40
9.15 Information.....................................................40
9.16 Insurance.......................................................40
9.17 Solvency, etc...................................................40
9.18 Real Property...................................................40
9.19 Merger, Subordinated Notes, etc.................................41
9.20 Intellectual Property...........................................41
9.21 Burdensome Obligations..........................................41
9.22 Senior Debt.....................................................41
SECTION 10 COVENANTS.......................................................42
10.1 Reports, Certificates and Other Information.....................42
10.1.1 Audit Report......................................42
10.1.2 Interim Reports...................................42
10.1.3 Compliance Certificate............................42
10.1.4 Reports to SEC....................................43
10.1.5 Notice of Default, Litigation and ERISA Matters...43
10.1.6 Subsidiaries......................................43
10.1.7 Management Reports................................43
10.1.8 Projections.......................................43
10.1.9 Insurance Information.............................44
10.1.10 Subordinated Debt Notices........................44
10.1.11 Other Information................................44
10.2 Books, Records and Inspections..................................44
10.3 Insurance.......................................................44
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10.4 Compliance with Law; Payment of Obligations.....................44
10.5 Maintenance of Existence, etc...................................45
10.6 Financial Ratios and Restrictions...............................45
10.6.1 Interest Coverage Ratio...........................45
10.6.2 Fixed Charge Coverage Ratio.......................45
10.6.3 Leverage Ratio....................................45
10.7 Mergers, Consolidations, Purchases and Sales....................45
10.8 Debt............................................................46
10.9 Liens...........................................................46
10.10 Investments....................................................47
10.11 Restricted Payments............................................49
10.12 Capital Expenditures, etc......................................49
10.13 Rental Obligations.............................................49
10.14 Use of Proceeds................................................50
10.15 Maintenance of Property........................................50
10.16 Employee Benefit Plans.........................................50
10.17 Environmental Matters..........................................50
10.17.1 Environmental Obligations........................50
10.17.2 Environmental Information........................50
10.18 Unconditional Purchase Obligations.............................51
10.19 Inconsistent Agreements, etc...................................51
10.20 Transactions with Related Parties..............................51
10.21 Business Activities............................................51
10.22 Further Assurances.............................................51
10.23 Modification of Certain Agreements.............................52
10.24 Lender Meetings................................................52
10.25 Interest Rate Protection.......................................52
10.26 Fiscal Year....................................................52
10.27 Limitations on Sale and Leaseback Transactions.................52
10.28 Post-Closing Real Estate Matters...............................52
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING............................53
11.1 Effectiveness...................................................53
11.1.1 Notes.............................................53
11.1.2 Resolutions.......................................53
11.1.3 Consents, etc.....................................53
11.1.4 Incumbency and Signature Certificates.............53
11.1.5 Guaranty..........................................53
11.1.6 Security Agreement................................54
11.1.7 Pledge Agreements.................................54
11.1.8 Opinions of Counsel...............................54
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11.1.9 Insurance.........................................54
11.1.10 Merger, 1996 Subordinated Notes, 1998
Subordinated Notes...............................54
11.1.11 Payment of Fees..................................54
11.1.12 Solvency Certificate.............................55
11.1.13 Financial Information............................55
11.1.14 Pro Forma........................................55
11.1.15 Mortgage Amendments..............................55
11.1.16 Real Estate Documentation........................55
11.1.17 Other............................................55
11.2 Other Conditions to Initial Credit Extension....................56
11.2.1 1998 Subordinated Notes...........................56
11.2.2 Capital Structure; Indebtedness...................56
11.2.3 1996 Subordinated Notes...........................56
11.2.4 Merger Consideration; Expenses....................56
11.3 All Loans and Letters of Credit.................................56
11.3.1 No Default, etc...................................56
11.3.2 Confirmatory Certificate..........................56
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT..............................57
12.1 Events of Default...............................................57
12.1.1 Non-Payment of the Loans, etc.....................57
12.1.2 Defaults in Respect of Other Debt.................57
12.1.3 Other Material Obligations........................57
12.1.4 Bankruptcy, Insolvency, etc.......................57
12.1.5 Non-Compliance with Provisions of this Agreement..58
12.1.6 Warranties........................................58
12.1.7 Pension Plans.....................................58
12.1.8 Judgments.........................................58
12.1.9 Invalidity of Collateral Documents, etc...........58
12.1.10 Invalidity of Guaranty, etc......................58
12.1.11 Change in Control or Management..................58
12.1.12 Invalidity of Subordination Provisions, etc......59
12.2 Effect of Event of Default......................................59
SECTION 13 THE AGENT.......................................................59
13.1 Appointment and Authorization...................................59
13.2 Delegation of Duties............................................60
13.3 Liability of Agent..............................................60
13.4 Reliance by Agent...............................................60
13.5 Notice of Default...............................................61
13.6 Credit Decision.................................................61
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13.7 Indemnification.................................................61
13.8 Agent in Individual Capacity....................................62
13.9 Successor Agent.................................................62
13.10 Withholding Tax................................................63
13.11 Collateral Matters.............................................64
13.12 Funding Reliance...............................................65
13.13 Assignment of Agency Function..................................65
SECTION 14 GENERAL.........................................................66
14.1 Waiver; Amendments..............................................66
14.2 Confirmations...................................................67
14.3 Notices.........................................................67
14.4 Subsidiary References...........................................68
14.5 Regulation U....................................................68
14.6 Costs, Expenses and Taxes.......................................68
14.7 Indemnification by the Company..................................68
14.8 Successors and Assigns..........................................69
14.9 Assignments; Participations.....................................69
14.9.1 Assignments.......................................69
14.9.2 Participations....................................71
14.10 Governing Law..................................................71
14.11 Counterparts...................................................71
14.12 Forum Selection and Consent to Jurisdiction....................72
14.13 Waiver of Jury Trial...........................................72
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SCHEDULE I Commitments and Percentages
SCHEDULE 1.1A Pricing Schedule
SCHEDULE II Disclosure Schedule
Item 9.6 Litigation, etc.
Item 9.8 Subsidiaries
Item 9.9 Pension and Welfare Plans
Item 9.13 Environmental Matters
Item 9.16 Insurance
Item 9.18 Real Property
Item 10.8 Debt
Item 10.9 Liens
Item 10.10 Investments
EXHIBIT A Form of Note (Section 3.1)
EXHIBIT B Form of Acquisition Certificate
(Section 10.10)
EXHIBIT C Form of Security Agreement (Section 11.1.6)
EXHIBIT D-1 Form of Company Pledge Agreement (Section 11.1.7)
EXHIBIT D-2 Form of Subsidiary Pledge Agreement (Section 11.1.7)
EXHIBIT D-3 Form of Shareholder Pledge Agreement (Section 11.1.7)
EXHIBIT E Form of Guaranty (Section 11.1.5)
EXHIBIT F-1 Form of Opinion of Kirkland & Ellis
(Section 11.1.8)
EXHIBIT F-2 Form of Opinion of Nevada Counsel (Section 11.1.8)
EXHIBIT F-3 Form of Opinion of Utah Counsel (Section 11.1.8)
EXHIBIT F-4 Form of Opinion of Alabama Counsel (Section 11.1.8)
EXHIBIT F-5 Form of Opinion of Arizona Counsel (Section 11.1.8)
EXHIBIT F-6 Form of Opinion of California Counsel (Section 11.1.8)
EXHIBIT F-7 Form of Opinion of Georgia Counsel (Section 11.1.8)
EXHIBIT F-8 Form of Opinion of Tennessee Counsel (Section 11.1.8)
EXHIBIT G Form of Purchase Agreement Assignment
EXHIBIT H Form of Assignment Agreement
(Section 14.9.1)
EXHIBIT I Form of Compliance Certificate
(Section 10.1.3)
EXHIBIT J Form of Notice of Borrowing
(Section 2.3)
EXHIBIT K Form of Notice of Conversion
(Section 2.4)
EXHIBIT L Form of Notice of Continuation
(Section 4.3)
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EXHIBIT M Form of Notice of Prepayment
(Section 6.2.4)
EXHIBIT N Form of Solvency Certificate (Section 11.1.12)
EXHIBIT O Form of Prepayment Option Notice
(Section 6.2.3)
EXHIBIT P Form of Exemption Certificate
(Section 13.10)
EXHIBIT Q Form of Amendment to Mortgage
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<PAGE>
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of June 5, 1998 (as amended or otherwise
modified from time to time, this "Agreement"), is entered into among U.S.
AGGREGATES, INC., a Delaware corporation (the "Company"), the undersigned
financial institutions (together with their respective successors and assigns,
collectively the "Lenders" and individually each a "Lender") and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (successor-by-merger to Bank of America
Illinois), as agent and letter of credit issuing bank for the Lenders.
RECITALS
WHEREAS, the Company and various financial institutions are parties to a
Second Amended and Restated Credit Agreement, dated as of October 15, 1996 (as
amended or otherwise modified from time to time prior to the date hereof, the
"Existing Agreement");
WHEREAS, the Company and the Lenders desire to amend and restate the
Existing Agreement to increase the commitments of the Lenders to $145,000,000
and to make certain other changes as hereinafter set forth; and
WHEREAS, the Company and the Lenders have agreed that on the Effective
Date (as defined below) the Existing Agreement shall be amended and restated in
the form of this Agreement and that the outstanding loans and letters of credit
under the Existing Agreement shall be deemed to be Loans and Letters of Credit
hereunder;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1 DEFINITIONS AND INTERPRETATION.
1.1 Definitions. When used herein the following terms shall have the
following meaning (such definitions to be applicable to both the singular and
plural forms of such terms):
ABR Loan means any Loan which bears interest at or by reference to the
Alternate Base Rate.
Accepting Lenders - see Section 6.2.3.
Acquisition Capital Expenditures means the aggregate amount of all
expenditures of the Company and its Subsidiaries for fixed or capital assets
made in connection with a Permitted
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Acquisition on or reasonably near the date of such Permitted Acquisition, as
detailed in the Acquisition Certificate related thereto.
Acquisition Certificate - see Section 10.10(k)(ii).
AcquisitionCo means Western Acquisition, Inc., a Delaware corporation.
Adjusted Working Capital means the excess of:
(a) (i) the consolidated current assets of the Company and its
Subsidiaries less (ii) the amount of cash and cash equivalents included in such
consolidated current assets;
over
(b) (i) consolidated current liabilities of the Company and its
Subsidiaries less (ii) the amount of short-term Indebtedness (including current
maturities of long-term Indebtedness) of the Company and its Subsidiaries
included in such consolidated current liabilities.
Affected Lender means any Lender that has given notice to the Company
(which has not been rescinded) of (i) any obligation by the Company to pay any
amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any
circumstances of the nature described in Section 8.2 or 8.3.
Affected Loan - see Section 8.3.
Affiliate means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
Affiliate Agent - see Section 13.13.
Agent means BofA in its capacity as agent for the Lenders hereunder and
any successor thereto in such capacity.
Agent-Related Persons means BofA and any successor agent arising under
Section 13.9, together with their respective Affiliates (including the
Arranger), and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.
Agreement - see the Preamble.
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Aldred Notes means (a) the Promissory Note secured by Deed of Trust dated
January 19, 1993 issued by Western Rock to the order of G.M. Aldred and Sons
Corp. in the original principal amount of $116,753 and (b) the Promissory Note
dated November 16, 1993 issued by Western Rock to G.M. Aldred and Sons Corp. in
the original principal amount of $163,833.28.
Alternate Base Rate means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in effect for
such day as publicly announced from time to time by BofA in Chicago, Illinois,
as its "reference rate." (The "reference rate" is a rate set by BofA taking into
account various factors, including BofA's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced
rate.)
Amendment to Mortgage means, with respect to any Mortgage executed prior
to the Effective Date, an amendment to such Mortgage dated the date hereof in
substantially the form of Exhibit Q.
Applicable ABR Margin means the rate per annum set forth in Schedule 1.1A
opposite the applicable Leverage Ratio.
Applicable Eurodollar Margin means the rate per annum set forth in
Schedule 1.1A opposite the applicable Leverage Ratio.
Arranger means BancAmerica Robertson Stephens, a Delaware corporation.
Asset Sale means the sale, lease, assignment or other transfer for value
by the Company or any Subsidiary to any Person (other than the Company or any
Subsidiary) of any asset or right of the Company or such Subsidiary (including
any sale or other transfer of stock of any Subsidiary, whether by merger,
consolidation or otherwise); for purposes of greater clarity, it is understood
that a sale by the Company or any Subsidiary of its own capital stock is not an
"Asset Sale" hereunder.
Assignee - see Section 14.9.1.
Assignment Agreement - see Section 14.9.1.
Available Cash Proceeds means all Net Cash Proceeds of Asset Sales by the
Company or any Subsidiary (other than sales of inventory and dispositions of
obsolete, unused, surplus or unnecessary equipment, in each case in the ordinary
course of business) to a Person other than the Company or a Subsidiary.
Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
ss. 101 et seq.), as amended.
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BofA means Bank of America National Trust and Savings Association, a
national banking association.
Business Day means any day other than a Saturday or Sunday on which
commercial banks in Chicago and San Francisco are open for commercial banking
business and, in the case of a Business Day which relates to a Eurodollar Loan,
on which dealings are carried on in the interbank eurodollar market.
Capital Expenditures means all expenditures which, in accordance with
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of the Company, but excluding (a) payments on the Lohja Note and
Investments in preferred stock issued by Dekalb Stone (to the extent such
payments or investments constitute capital expenditures), (b) expenditures made
in connection with the replacement, substitution or restoration of assets to the
extent financed (i) from insurance proceeds (or other similar recoveries) paid
on account of the loss of or damage to the assets being replaced or restored or
(ii) with awards of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced and (c) Acquisition Capital
Expenditures to the extent that Acquisition Capital Expenditures during the
Fiscal Year or Computation Period in question do not exceed $7,500,000.
Capital Lease means, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of such Person.
Cash Equivalent Investment means, at any time:
(a) any evidence of Debt, maturing not more than one year after such
time, issued or guaranteed by the United States Government;
(b) commercial paper, maturing not more than one year from the date
of issue, which is issued by
(i) a corporation (except the Company or an Affiliate thereof)
organized under the laws of any State of the United States of
America or of the District of Columbia and rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Service,
Inc., at the time of investment, or
(ii) any Lender (or its holding company);
(c) any certificate of deposit or bankers' acceptance or
eurocurrency time deposit, maturing not more than one year after the date
of issue, which is issued by either
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(i) a financial institution that is a member of the Federal
Reserve System and has a combined capital and surplus and undivided
profits of not less than $500,000,000, or
(ii) any Lender; or
(d) any repurchase agreement with a term of one year or less which
(i) is entered into with
(A) any Lender, or
(B) any other commercial banking institution of the
stature referred to in clause (c)(i),
(ii) is secured by a fully perfected Lien in any obligation of
the type described in any of clauses (a) through (c), and
(iii) has a market value at the time such repurchase agreement
is entered into of not less than 100% of the repurchase obligation
of such Lender (or other commercial banking institution) thereunder;
(e) investments in money market mutual funds registered with the SEC
meeting the requirements of Rule 2a-7 promulgated under the Investment
Company Act of 1940, as amended;
(f) participations in short-term loans to any corporation (other
than an affiliate of the Company) organized under the laws of any state of
the United States or of the District of Columbia and rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Services,
Inc.; or
(g) investments in short-term asset management accounts offered by
any Lender for the purpose of investing in loans to any corporation (other
than an affiliate of the Company) organized under the laws of any state of
the United States or of the District of Columbia and rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Service, Inc.
CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
CERCLIS means the Comprehensive Environmental Response Compensation
Liability Information System List.
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Code means the Internal Revenue Code of 1986, as amended.
Collateral Documents means each Pledge Agreement, the Security Agreement,
each Mortgage, each Purchase Agreement Assignment and any other pledge
agreement, security agreement or similar document which is executed to grant
security to the Agent for the obligations of the Company or any Guarantor
hereunder or in connection herewith.
Commitment means, as to any Lender, such Lender's commitment to make Loans
and to issue or participate in Letters of Credit hereunder, as adjusted from
time to time pursuant to Section 6.1 or Section 14.9.
Company - see the Preamble.
Compliance Certificate - see Section 10.1.3.
Computation Period means any period of four consecutive Fiscal Quarters.
Consolidated Net Income means, with respect to the Company and its
Subsidiaries for any period, the consolidated net income (or loss) of the
Company and its Subsidiaries for such period, excluding extraordinary items;
provided that there shall be excluded therefrom the income of any Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
to the Company by such Subsidiary of such income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Subsidiary.
Cox Notes means the Promissory Notes, each dated March 30, 1995 and each
issued by the Company (a) to the order of Ronnie J. Cox in the original
principal amount of $285,714.28, (b) to the order of Larry W. Cox in the
original principal amount of $285,714.29, (c) to the order of Dennis A. Cox in
the original principal amount of $285,714.29, (d) to the order of Kevin M. Cox
in the original principal amount of $285,714.29, (e) to the order of Lee J. Cox
in the original principal amount of $285,714.28, (f) to the order of Reid M. Cox
in the original principal amount of $285,714.28 and (g) to the order of Michael
G. Cox in the original principal amount of $285,714.29.
Debt of any Person means, without duplication, (a) all indebtedness of
such Person for borrowed money, whether or not evidenced by bonds, debentures,
notes or similar instruments, (b) all obligations of such Person as lessee under
Capital Leases which have been recorded as liabilities on a balance sheet of
such Person, (c) all obligations of such Person to pay the deferred purchase
price of property or services (other than current accounts payable and accrued
expenses arising in the ordinary course of business), (d) all indebtedness
secured by a Lien on the property of such Person, whether or not such
indebtedness shall have been assumed by such Person, (e) all obligations,
contingent or otherwise, with respect to the face amount of all letters of
credit (whether or not drawn) and banker's acceptances issued for the account of
such Person, (f) all obligations of
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such Person in respect of Hedging Agreements, (g) all Suretyship Liabilities of
such Person and (h) all Debt (as defined above) of any partnership in which such
Person is a general partner. The amount of the Debt of any Person in respect of
Hedging Agreements shall be deemed to be the unrealized net loss position of
such Person thereunder (determined for each counterparty individually, but
netted for all Hedging Agreements maintained with such counterparty).
Dekalb Stone means Dekalb Stone, Inc., a Georgia corporation.
Designated Proceeds - see Section 6.2.1.
Direct Recipient - see Section 7.6(a).
Dollar and the sign "$" mean lawful money of the United States of America.
EBITDA means, for any period, Consolidated Net Income of the Company for
such period before accounting for Minority Interests plus, to the extent
deducted in determining Consolidated Net Income, Interest Expense, income tax
expense, depreciation, depletion and amortization for such period.
Effective Date - see Section 11.1.
Environmental Laws means all applicable federal, state or local statutes,
laws, ordinances, codes, rules, regulations and guidelines (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment (including, without limitation, CERCLA and the
Resource Conservation and Recovery Act).
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
Eurocurrency Reserve Percentage means, with respect to any Eurodollar Loan
for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentage in effect on each
day of such Interest Period (whether or not applicable to any Lender), as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor), for determining the aggregate maximum reserve requirements
applicable to "Eurocurrency Liabilities" pursuant to Regulation D or any other
then applicable regulation of such Board of Governors which prescribes reserve
requirements applicable to "Eurocurrency Liabilities" as presently defined in
Regulation D.
Eurodollar Loan means any Loan which bears interest at a rate determined
by reference to the Eurodollar Rate (Reserve Adjusted).
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Eurodollar Office means, with respect to any Lender, any office of such
Lender which shall be making or maintaining any Eurodollar Loan of such Lender
hereunder or such other office through which such Lender determines its
Eurodollar Rate. A Eurodollar Office of any Lender may be, at the option of such
Lender, either a domestic or foreign office.
Eurodollar Rate means, with respect to any Eurodollar Loan for any
Interest Period, the rate per annum determined by the Agent at which Dollar
deposits in immediately available funds are offered to the Eurodollar Office of
BofA two Business Days prior to the beginning of such Interest Period by major
banks in the interbank eurodollar market as at or about 10:00 A.M., Chicago
time, for delivery on the first day of such Interest Period, for the number of
days comprised therein and in an amount equal or comparable to the amount of the
Eurodollar Loan of BofA for such Interest Period.
Eurodollar Rate (Reserve Adjusted) means, with respect to any Eurodollar
Loan for any Interest Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/16 of 1%) determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
Event of Default means any of the events described in Section 12.1.
Excess Cash Flow means, for any period, the remainder of
(a) EBITDA for such period,
less
(b) the sum, without duplication, of
(i) scheduled repayments of principal of Term Loans, regularly
scheduled principal payments arising with respect to any other
long-term Debt of the Company and its Subsidiaries, and the portion
of any regularly scheduled payments with respect to Capital Leases
allocable to principal, in each case made during such period,
plus
(ii) voluntary prepayments of the Term Loans pursuant to
Section 6.2.2 during such period,
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plus
(iii) cash payments made in such period with respect to
Capital Expenditures,
plus
(iv) all federal, state, local and foreign income taxes paid
by the Company and its Subsidiaries during such period,
plus
(v) cash Interest Expense of the Company and its Subsidiaries
during such period and, to the extent not deducted in determining
EBITDA, cash payments (other than payments of principal) made by the
Company in connection with prepayments and repayments of Term Loans
under clauses (b)(i) and (b)(ii) above,
plus
(vi) any net increase in Adjusted Working Capital during such
period (exclusive of increases in working capital associated with
Asset Sales),
plus
(vii) cash payments made by the Company of transaction fees
and expenses in connection with any Permitted Acquisition,
including, without limitation, the Merger, and
plus
(viii) any gains on Asset Sales or resulting from receipt of
insurance or condemnation proceeds (or similar recoveries) during
such period to the extent that (A) such gains were included in
calculating EBITDA and (B) the proceeds of such gains were applied
to prepay Loans pursuant to Section 6.2.1.
Excess Cash Proceeds means all Available Cash Proceeds generated by Asset
Sales that are not Primary Cash Proceeds.
Exemption Agreement - see Section 7.6(b).
Exemption Representation - see Section 7.6(c).
Existing Agreement - see the recitals.
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Existing Letter of Credit means a letter of credit issued under the
Existing Agreement which is outstanding on the Effective Date.
Facility means each of (a) the Revolving Commitments and the Revolving
Loans made thereunder, (b) the Term A Loan Commitments and the Term A Loans made
thereunder and (c) the Term B Loan Commitments and the Term B Loans made
thereunder.
Federal Funds Rate means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor
publication, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 A.M. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
Fiscal Quarter means a fiscal quarter of a Fiscal Year.
Fiscal Year means the fiscal year of the Company, which period shall be
the 12-month period ending on December 31 of each year.
Fixed Charge Coverage Ratio means, for any Computation Period, the ratio
of (a) EBITDA for such Computation Period to (b) the sum for such Computation
Period of (i) Interest Expense (other than, so long as the Harris Note Documents
are in effect, with respect to the Harris Note), (ii) Capital Expenditures,
(iii) cash taxes paid by the Company and its Subsidiaries and (iv) all scheduled
principal payments due on any Total Debt, other than principal payments made as
a result of any mandatory reduction of the Revolving Commitments.
GAAP means generally accepted accounting principles as in effect on the
date of this Agreement.
Governmental Authority means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
Group - see Section 2.2.
GTCR - means Golder, Thoma, Cressey, Rauner, Inc.
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Guarantor means (a) as of the Effective Date, each of the Subsidiaries
listed on Item 9.8 ("Subsidiaries") of Schedule II and (b) thereafter, each of
the Persons referred to in clause (a) and each other Person which from time to
time guaranties the Obligations (other than any such Person that ceases to be a
Guarantor as a result of a transaction permitted hereunder).
Guaranty means the Guaranty, in substantially the form of Exhibit E, to be
issued by each Guarantor, as the same may be amended or otherwise modified from
time to time.
Harris Note means the $9,000,000 Unsecured Note dated March 12, 1998 of
the Company payable to Harris Trust and Savings Bank.
Harris Note Documents means the Harris Note, the Guaranty of Golder,
Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR IV") of the Harris Note dated March
12, 1998 and the letter agreement dated March 12, 1998 among GTCR IV, Harris
Trust and Savings Bank, the Agent, The Prudential Life Insurance Company of
America and the Company.
Hazardous Material means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act, as amended;
(c) any crude oil, petroleum product or fraction thereof (excluding
gasoline and oil in motor vehicles, small amounts of cleaners and similar
items used in the ordinary course of business); or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any Environmental
Law.
Hedging Agreement means any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designed to protect a Person against fluctuations in
interest rates.
Indemnified Liabilities - see Section 14.7.
Indemnified Person - see Section 14.7.
Insolvency Proceeding means (a) any case, action or proceeding before any
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors or (b) any general assignment for the benefit of creditors, composition,
marshalling of assets for creditors or other, similar arrangement in respect of
its
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creditors generally or any substantial portion of its creditors; in either case
undertaken under U.S. Federal, state or foreign law, including the Bankruptcy
Code.
Interest Coverage Ratio means, for any Computation Period, the ratio of
(a) EBITDA for such Computation Period to (b) Interest Expense (other than, so
long as the Harris Note Documents are in effect, with respect to the Harris
Note) for such Computation Period.
Interest Expense means for any period the consolidated interest expense
(net of consolidated interest income) of the Company and its Subsidiaries for
such period (excluding interest expense accrued but not paid on Subordinated
Debt but including any interest expense with respect to Subordinated Debt which
was accrued prior to such period but paid during such period).
Interest Period - see Section 4.3.
Investment means, with respect to any Person:
(a) any loan or advance made by such Person to any other Person; and
(b) any capital contribution made by such Person to, or ownership or
similar interest held by such Person in, any other Person.
The amount of any Investment shall be the original principal or capital
amount thereof less all returns of principal or equity thereon (and without
adjustment by reason of the financial condition of such other Person) and shall,
if made by the transfer or exchange of property other than cash, be deemed to
have been made in an original principal or capital amount equal to the fair
market value of such property.
IRS means the Internal Revenue Service and any Governmental Agency
succeeding to any of its principal functions under the Code.
Issuing Lender means BofA in its capacity as issuer of one or more Letters
of Credit hereunder, together with any replacement letter of credit issuer
arising under Section 13.9.
Jensen Note means the Promissory Note dated October 7, 1996 issued by
Western Rock to the order of Theron Jensen in the original principal amount of
$500,000.
Lender - see the Preamble.
Letter of Credit - see Section 2.1.1. The term "Letter of Credit" includes
each Existing Letter of Credit.
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Letter of Credit Application means a letter of credit application in the
form used by BofA at the applicable time for the type of Letter of Credit
requested.
Leverage Ratio means, as of the last day of any Computation Period, the
ratio of (a) Total Debt (other than, for so long as the Harris Note Documents
are in effect, the Harris Note) as of such day to (b) EBITDA for such
Computation Period. For the purposes of this calculation, the historical EBITDA
of Subsidiaries acquired during any Computation Period shall be included in the
calculation of EBITDA for the entire Computation Period.
Lien means, when used with respect to any Person, any interest in any real
or personal property, asset or other right owned or being purchased or acquired
by such Person which secures payment or performance of any obligation and shall
include any mortgage, lien, security interest, charge or other encumbrance of
any kind, whether arising by contract, as a matter of law, by judicial process
or otherwise.
Loan Documents means this Agreement, the Notes, the Letter of Credit
Applications, the Guaranty and the Collateral Documents.
Loans means Revolving Loans and Term Loans and Loan means any of the
foregoing.
Lohja Note means the Promissory Note dated July 13, 1994 issued by the
Company to the order of Lohja Inc. in the original principal amount of
$3,759,500.
Mandatory Prepayment Event - see Section 6.2.1.
Margin Stock means any "margin stock" as defined in Regulation U of the
Board of Governors of the Federal Reserve System.
Material Adverse Effect means a material adverse effect on (a) the
financial condition, operations, business, assets or prospects of the (i)
Company or any Subsidiary (excluding any Subsidiary which owns less than 5% of
the consolidated assets of the Company and its Subsidiaries and had revenues
which were less than 5% of the consolidated revenues of the Company and its
Subsidiaries during the 12-month period ending on the last day of the most
recent month) or (ii) the Company and its Subsidiaries taken as a whole or (b)
the ability of the Company or any Subsidiary to timely and fully perform any of
its payment or other material obligations under this Agreement or any other Loan
Document to which it is a party.
Material Adverse Environmental Impact means an event, occurrence or
condition described in clause (b) or (i) of Section 9.13 which, together with
all other such events, occurrences or conditions, may reasonably be expected to
result in liabilities, for the Company and its Subsidiaries taken as a whole,
exceeding $1,000,000 in any Fiscal Year.
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Maximum Proceeds Amount means an amount in aggregate Available Cash
Proceeds (for all Asset Sales during the term of this Agreement) equal to (x)
$30,000,000 plus (y) if the Leverage Ratio at the time of any Asset Sale is less
than 3.50:1 on a pro forma basis for the four most recent Fiscal Quarters
immediately preceding the date of such Asset Sale (assuming such Asset Sale and
all other similar Asset Sales that would not be permitted but for this clause
(y) had occurred on the first day of such period), then up to an additional
$20,000,000 in the aggregate for all Asset Sales permitted solely by this clause
(y).
Merger means the merger of AcquisitionCo with and into Monroc pursuant to
the terms of the Merger Agreement.
Merger Agreement means the Agreement and Plan of Merger, dated as of
January 29, 1998 and amended and restated as of March 4, 1998, among the
Company, AcquisitionCo and Monroc, as amended from time to time.
Minority Interests means the aggregate interests of the Pledgors in any
Subsidiary.
Monroc means Monroc, Inc., a Delaware corporation.
Mortgage means a mortgage, leasehold mortgage, deed of trust or similar
document granting a Lien on real property (or any interest therein) of the
Company or any Guarantor in appropriate form for filing or recording in the
applicable jurisdiction and otherwise reasonably satisfactory to the Agent.
1996 Subordinated Notes means the $30,000,000 10.34% Senior Subordinated
Notes of the Company due 2006 issued pursuant to the Note and Warrant Purchase
Agreement dated as of November 21, 1996 among the Company and the Purchasers
named therein (which agreement has been amended and restated concurrently
herewith to be the Note and Warrant Purchase Agreement).
1998 Subordinated Notes means the $15,000,000 10.09% Senior Subordinated
Notes of the Company due 2008 issued pursuant to the Note and Warrant Purchase
Agreement.
Net Cash Proceeds means
(a) with respect to any Asset Sale, cash proceeds (including any cash
received by way of deferred payment pursuant to a note receivable or
otherwise, but only as and when so received) received from such Asset Sale
net of the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees and sales
commissions), taxes paid or payable as a result thereof (after taking into
account any reduction in tax liability due to available tax credits or
deductions and any tax sharing arrangements), amounts required to be
applied to the repayment of Debt secured by a Lien
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on the asset or assets which are the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or
assets or for indemnification in connection with such Asset Sale (in each
case, until such reserve is no longer required), and
(b) with respect to any issuance of equity securities or Other Debt, the
aggregate cash proceeds received by the Company or the relevant Subsidiary
pursuant to such issuance, net of the direct costs relating to such
issuance (including, without limitation, sales and underwriter's
commissions and legal, accounting and investment banking fees).
Net Revenues means, with respect to the Company and its Subsidiaries for
any period, the total net sales of the Company and its Subsidiaries that would
be shown on a statement of operations of the Company and its Subsidiaries
prepared in accordance with GAAP for such period.
Non-Use Fee Rate means the rate per annum set forth in Schedule 1.1A
opposite the applicable Leverage Ratio.
Note - see Section 3.1.
Note and Warrant Purchase Agreement means the Amended and Restated Note
and Warrant Purchase Agreement, dated as of June 5, 1998, among the Company and
the Purchasers party thereto, as amended, supplemented or otherwise modified
from time to time.
Other Debt means debt securities of the Company and its Subsidiaries other
than as permitted by Section 10.8.
Participant - see Section 14.9.2.
PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which the Company or any
corporation, trade or business that is, along with the Company, a member of a
controlled group of corporations or a controlled group of trades or businesses,
as described in section 414 of the Code or section 4001 of ERISA, may have any
liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five years or by reason of being deemed to be a contributing sponsor
under section 4069 of ERISA.
Percentage means a Revolving Loan Percentage, a Term A Loan Percentage or
a Term B Loan Percentage, as the context may require.
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Permitted Acquisition means any purchase or acquisition by the Company or
any Subsidiary of all or substantially all of the assets of any other Person (or
of a particular business unit of any other Person), or of any equity interest in
any other Person, in each case which is engaged in the aggregates, or related
materials and services, business.
Person means any natural person, corporation, partnership, trust,
association, governmental authority or unit, limited liability company, or any
other entity, whether acting in an individual, fiduciary or other capacity.
Pledge Agreement means an Amended and Restated Pledge Agreement
substantially in the form of Exhibit D-1, D-2 or D-3, as appropriate, executed
by the Company or any other Person which owns stock of any Subsidiary, in each
case as amended or otherwise modified from time to time.
Pledgor means any Person (other than the Company or any Subsidiary) which
owns stock of the Company or any Subsidiary.
Prepayment Date - see Section 6.2.3.
Prepayment Option Notice - see Section 6.2.3.
Primary Cash Proceeds means the first $10,000,000 of aggregate Available
Cash Proceeds generated by Asset Sales during the term of this Agreement.
Public Offering means an offering of equity securities or Debt registered
under the Securities Act of 1933, as amended.
Purchase Agreements means, collectively, each purchase agreement entered
into by the Company and its Subsidiaries in connection with a Permitted
Acquisition hereunder, under the Existing Credit Agreement or under any
predecessor thereto as to which the Required Lenders have performed due
diligence and approved, in each case, as amended or otherwise modified from time
to time with the consent of the Required Lenders.
Purchase Agreement Assignment has the meaning assigned thereto in the
Credit Agreement dated as of July 13, 1994 among the Company, the Agent and
certain Lenders; see Exhibit G.
Recipient Taxes - see Section 7.6(a).
Related Party means, with respect to the Company, (i) any director or
officer of the Company or any member of the immediate family of any such officer
or director, (ii) any Person that beneficially owns or holds, or directly or
indirectly has the power to vote, 5% or more of the Capital
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Stock of the Company or (iii) any other Person which, directly or indirectly,
controls or is under common control with the Company.
Release means a "release", as such term is defined in CERCLA.
Required Lenders means Lenders having an aggregate Total Percentage of 51%
or more.
Required Revolving Lenders means, at any time, Revolving Lenders having an
aggregate Revolving Loan Percentage of 51% or more.
Required Term A Lenders means, at any time, Term A Lenders having an
aggregate Term A Percentage of 51% or more.
Required Term B Lenders means, at any time, Term B Lenders having an
aggregate Term B Percentage of 51% or more.
Resource Conservation and Recovery Act means the Resource Conservation and
Recovery Act, 42 U.S.C. Section 690, et seq., as amended.
Revolving Commitment means, as to any Revolving Lender, the commitment of
such Revolving Lender to make Revolving Loans pursuant to Section 2.1.1. The
initial amount of each Revolving Lender's Revolving Commitment is set forth on
Schedule I.
Revolving Lender means, at any time, a Lender with a Revolving Commitment
at such time or which then holds any Revolving Loan.
Revolving Loan - see Section 2.1.1.
Revolving Loan Percentage means, as to any Revolving Lender, the
percentage which (a) the amount of such Revolving Lender's Revolving Commitment
(or, after termination of the Revolving Commitments, the outstanding principal
amount of such Revolving Lender's Revolving Loans) is of (b) the aggregate
amount of the Revolving Commitments (or, after termination of the Revolving
Commitments, the outstanding principal amount of all Revolving Loans).
Revolving Termination Date means June 5, 2004 or such earlier date on
which the Revolving Commitments terminate pursuant to Section 6 or 12.
SEC means the Securities and Exchange Commission.
Security Agreement means the Amended and Restated Security Agreement, in
substantially the form of Exhibit C, to be executed by the Company and each
Guarantor, as the same may be amended or otherwise modified from time to time.
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Stated Amount means, with respect to any Letter of Credit at any date of
determination, the maximum aggregate amount available thereunder at any time
during the then ensuing term of such Letter of Credit under any and all
circumstances, plus the aggregate amount of all unreimbursed payments and
disbursements under such Letter of Credit.
Subordinated Acquisition Debt means Debt incurred by the Company or any
Subsidiary to pay deferred purchase price in any Permitted Acquisition, which
has payment schedules and other terms, and which is subordinated to the
obligations of the Company hereunder or, as applicable, the obligations of such
Subsidiary under the Guaranty in a manner, satisfactory to the Agent.
Subordinated Debt means (1)(a) the Debt evidenced by the Lohja Note, the
Aldred Notes, the Jensen Note, the Cox Notes and the Vance Notes and (b) any
other Debt of the Company having payment schedules and other terms, and which is
subordinated to the obligations of the Company hereunder in a manner,
satisfactory to the Agent, (2) the 1996 Subordinated Notes and the 1998
Subordinated Notes and (3) Subordinated Acquisition Debt.
Subsidiary means, with respect to any Person, any other Person of which or
in which such Person and/or its other Subsidiaries own, directly or indirectly,
50% or more of (i) the combined voting power of all classes of stock having
general voting power under ordinary circumstances to elect a majority of the
directors of such Person, if it is a corporation, (ii) the capital interest or
profits interest of such Person, if it is a partnership, joint venture or
similar entity or (iii) the beneficial interest of such Person, if it is a
trust, association or other unincorporated association. Unless the context
otherwise requires, each reference to a Subsidiary herein shall be a reference
to a Subsidiary of the Company.
Suretyship Liability means any agreement, undertaking or other contractual
arrangement (but excluding completion and performance bonding in the ordinary
course of business) by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to or
otherwise to invest in a debtor, or otherwise to assure a creditor against loss)
any indebtedness, obligation or other liability (including accounts payable) of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of any Person's obligation under any
Suretyship Liability shall (subject to any limitation set forth therein) be
deemed to be the principal amount of the indebtedness, obligation or other
liability guaranteed thereby.
Surviving Obligations means contingent obligations arising under this
Agreement and the other Loan Documents by operation of the provisions hereof and
thereof which by their terms survive termination hereof and thereof, which
obligations are not yet fixed or payable.
Term A Lender means, at any time, a Lender with a Term A Loan Commitment
at such time or which then holds any Term A Loan.
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Term A Loan - see Section 2.1.2.
Term A Loan Commitment means, as to any Lender, the commitment of such
Lender to make a Term A Loan pursuant to Section 2.1.2. The amount of each
Lender's Term A Loan Commitment is set forth on Schedule I.
Term A Loan Percentage means, as to any Lender, the percentage which (a)
the Term A Loan Commitment of such Lender (or, after the making of the Term A
Loans, the principal amount of such Lender's Term A Loan) is of (b) the
aggregate amount of the Term A Loan Commitments (or, after the making of the
Term A Loans, the aggregate principal amount of all Term A Loans).
Term B Lender means, at any time, a Lender with a Term B Loan Commitment
at such time or which then holds any Term B Loan.
Term B Loan - see Section 2.1.3.
Term B Loan Commitment means, as to any Lender, the commitment of such
Lender to make a Term B Loan pursuant to Section 2.1.3. The amount of each
Lender's Term B Loan Commitment is set forth on Schedule I.
Term B Loan Percentage means, as to any Lender, the percentage which (a)
the Term B Loan Commitment of such Lender (or, after the making of the Term B
Loans, the principal amount of such Lender's Term B Loan) is of (b) the
aggregate amount of the Term B Loan Commitments (or, after the making of the
Term B Loans, the aggregate principal amount of all Term B Loans).
Term B Prepayment Amount - see Section 6.2.3.
Term Loans means the Term A Loans and the Term B Loans.
Total Debt means the sum, without duplication, of (i) all Debt (other than
Debt described in clauses (f) and (g) of the definition of Debt) of the Company
and its Subsidiaries plus (ii) all Suretyship Liabilities of the Company and its
Subsidiaries in respect of Debt (other than Debt described in clause (f) of the
definition of Debt) of any other Person.
Total Percentage means, as to any Lender, the percentage which (a) the
Commitment of such Lender plus the unpaid principal amount of the Term A Loans
and Term B Loans of such Lender (plus, after the termination of the Revolving
Commitments, the sum of the unpaid principal amount of the Revolving Loans of
such Lender plus the participations of such Lender in all Letters of Credit) is
of (b) the sum of the Commitments of all Lenders plus the unpaid principal
amount of all Term A Loans and all Term B Loans (plus, after the termination of
the Revolving Commitments, the sum of the unpaid principal amount of all
Revolving Loans plus the Stated Amount of all Letters of Credit).
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Type of Loan or Borrowing - see Section 2.2. The types of Loans or
borrowings under this Agreement are as follows: ABR Loans or borrowings and
Eurodollar Loans or borrowings.
Unmatured Event of Default means any event which if it continues uncured
will, with lapse of time or notice or both, constitute an Event of Default.
Vance Notes means the Promissory Notes, each dated November 22, 1995 and
each issued by Southern Ready Mix, Inc. (a) to the order of Roland Pugh in the
original principal amount of $1,500,000 and (b) to the order of R.E. Grills
Construction Co. in the original principal amount of $1,500,000.
Welfare Plan means a "welfare plan", as such term is defined in section
3(1) of ERISA.
Western Rock means Western Rock Products Corporation, a Utah corporation.
1.2 Computations. Where the character or amount of any asset or liability
or any item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for
purposes of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with GAAP.
1.3 Cross-References; Section Captions. A Section, an Exhibit or a
Schedule is, unless otherwise stated, a reference to a section hereof or an
exhibit or schedule hereto, as the case may be. Section captions are for
convenience only and shall not affect the interpretation of this Agreement.
1.4 Addition of Lenders; Adjustment of Percentages; Reallocation of Loans.
On the Effective Date, (a) each financial institution listed on the signature
pages hereof that was not a party to the Existing Agreement shall automatically
become a party hereto and be entitled to the benefits, and have the obligations,
of a "Lender" hereunder, (b) each Lender's Revolving Loan Percentage, Term A
Loan Percentage and Term B Loan Percentage shall be as set forth on Schedule I
to this Agreement and (c) each Revolving Lender or Term A Lender which, as a
result of any adjustment of the Revolving Loan Percentages and the Term A Loan
Percentages as set forth in clause (b) above, is to have a greater principal
amount of Loans outstanding than such Lender had outstanding under the Existing
Agreement immediately prior to the effectiveness hereof shall deliver to the
Agent immediately available funds to cover such Loans (and the Agent shall, to
the extent of the funds so received, disburse funds to each Lender which, as a
result of such adjustment of the Revolving Loan Percentages and the Term A Loan
Percentages is to have a lesser principal amount of Loans outstanding than such
Lender had outstanding under the Existing Agreement). In addition, on the
Effective Date, $55,000,000 of the Loans outstanding under the Existing
Agreement shall automatically become Term A Loans hereunder and the balance of
the Loans outstanding under the Existing Agreement shall automatically become
Revolving Loans hereunder. To facilitate the foregoing, the Company agrees that
on the Effective Date the Company will (i) convert all
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Eurodollar Loans outstanding under the Existing Agreement to ABR Loans and (ii)
pay to the Agent for the account of each Lender which is a party to the Existing
Agreement all interest, fees and other amounts (including amounts payable under
Section 8.4 of the Existing Agreement as a result of the conversion described in
clause (i) of this sentence) owed to such Lender under the Existing Agreement.
SECTION 2 COMMITMENTS OF THE BANKS; TYPES OF LOANS; BORROWING
AND CONVERSION PROCEDURES.
2.1 Commitments. On and subject to the terms and conditions of this
Agreement, each of the Lenders, severally and for itself alone, agrees as
follows:
2.1.1 Revolving Commitments. (a) Each Revolving Lender agrees to make
loans to the Company on a revolving basis (each such loan, a "Revolving Loan")
from time to time before the Revolving Termination Date in such Revolving
Lender's Revolving Loan Percentage of such aggregate amounts as the Company may
request from all Revolving Lenders under the Revolving Commitments and (b) the
Issuing Lender agrees to issue standby letters of credit, in each case
containing such terms and conditions as are permitted by this Agreement and are
reasonably satisfactory to the Issuing Lender (each a "Letter of Credit"), at
the request of and for the account of the Company from time to time before the
Revolving Termination Date and, as more fully set forth in Section 2.6, each
Revolving Lender agrees to purchase a participation in each such Letter of
Credit; provided, however, that (i) the sum of the aggregate principal amount of
all outstanding Revolving Loans plus the aggregate Stated Amount of all Letters
of Credit shall not at any time exceed $40,000,000 (as such amount is reduced
from time to time pursuant to Section 6.1) and (ii) the aggregate Stated Amount
of all Letters of Credit shall not at any time exceed $7,500,000.
2.1.2 Term A Loan Commitments. Each Term A Lender agrees to make a loan to
the Company (each such loan, a "Term A Loan") on the Effective Date in such Term
A Lender's Term A Loan Percentage of $55,000,000. The Term A Loan Commitments
shall expire concurrently with the making of the Term A Loans on the Effective
Date.
2.1.3 Term B Loan Commitments. Each Term B Lender agrees to make a loan to
the Company (each such loan, a "Term B Loan") on the Effective Date in such Term
B Lender's Term B Loan Percentage of $60,000,000. The Term B Loan Commitments
shall expire concurrently with the making of the Term B Loans on the Effective
Date.
2.2 Various Types of Loans. Each Revolving Loan shall be, and each Term
Loan may be divided into tranches which are, either an ABR Loan or a Eurodollar
Loan (each a "type" of Loan), as the Company shall specify in the related notice
of borrowing or conversion pursuant to Section 2.3 or 2.4. Eurodollar Loans
having the same Interest Period are sometimes called a "Group." ABR Loans and
Eurodollar Loans may be outstanding at the same time; provided that (i) not more
than ten different Groups shall be outstanding at any one time and (ii) the
aggregate principal amount of
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each Group of Eurodollar Loans shall at all times be at least $1,000,000 and an
integral multiple of $100,000; provided, further that one Group of Term A Loans
and one Group of Term B Loans may be in a different amount to the extent
necessary to comply with the repayment schedule for such Loans. All borrowings,
conversions and repayments of Loans in each Facility shall be effected so that
each Lender holding Loans in such Facility will have a pro rata share (according
to the applicable Percentage) of all types and Groups of Loans constituting such
Facility.
2.3 Borrowing Procedures. The Company shall give written notice
substantially in the form of Exhibit J (or by telephonic notice followed
promptly by such written notice) to the Agent of each proposed borrowing not
later than (a) in the case of an ABR borrowing, 10:00 A.M., Chicago time, on the
proposed date of such borrowing and (b) in the case of a Eurodollar borrowing,
11:00 A.M., Chicago time, at least three Business Days prior to the proposed
date of such borrowing. Each such notice shall be effective upon receipt by the
Agent, shall be irrevocable, and shall specify the date, amount and type of
borrowing and, in the case of a Eurodollar borrowing, the initial Interest
Period therefor. Promptly upon receipt of such notice, the Agent shall advise
each Lender holding a Commitment within the applicable Facility of such notice.
Not later than 1:00 P.M., Chicago time, on the date of a proposed borrowing,
each Lender holding a Commitment in the applicable Facility shall provide the
Agent at the payment office of the Agent in Concord, California with immediately
available funds covering such Lender's pro rata share of such borrowing and,
subject to the satisfaction of the conditions precedent set forth in Section 11
with respect to such borrowing, the Agent shall pay over the requested amount to
the Company on the requested borrowing date. Each borrowing shall be on a
Business Day and, if an ABR borrowing, shall be in an aggregate amount of at
least $500,000 or a higher integral multiple of $100,000 or, if a Eurodollar
borrowing, shall be in an aggregate amount of at least $1,000,000 or a higher
integral multiple of $100,000. Unless the Company shall otherwise direct in
writing, the proceeds of all borrowings shall be deposited to the Company's
demand deposit account no. 78-19625 maintained with BofA.
2.4 Procedures for Conversion of Type of Loan. Subject to the provisions
of Section 2.2, the Company may from time to time convert all or any part of any
outstanding Loan into a Loan of a different type by giving written notice
substantially in the form of Exhibit K (or by telephonic notice followed
promptly by such written notice) to the Agent not later than (a) in the case of
conversion into an ABR Loan, 10:00 A.M., Chicago time, on the proposed date of
such conversion and (b) in the case of conversion into a Eurodollar Loan, 11:00
A.M., Chicago time, at least three Business Days prior to the proposed date of
such conversion. Each such notice shall be effective upon receipt by the Agent,
shall be irrevocable, and shall specify the date and amount of such conversion,
the Loan to be so converted, the type of Loan to be converted into and, in the
case of a conversion into a Eurodollar Loan, the initial Interest Period
therefor. Promptly upon receipt of such notice, the Agent shall advise each
Lender holding a Loan in the applicable Facility of such notice. Subject to
Section 2.11, such Loan shall be so converted on the requested date of
conversion. Each conversion shall be on a Business Day.
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2.5 Letter of Credit Procedures. The Company shall give notice to the
Issuing Lender (with a copy to the Agent) of the proposed issuance of each
Letter of Credit (other than an Existing Letter of Credit) on a Business Day
which is at least two Business Days (or such lesser period as the Issuing Lender
may agree) prior to the proposed date of issuance of such Letter of Credit. Each
such notice shall be accompanied by a Letter of Credit Application, duly
executed by the Company and in all respects reasonably satisfactory to the
Issuing Lender, together with such other documentation as the Issuing Lender may
reasonably request in support thereof, it being understood that each Letter of
Credit Application shall specify, among other things, the date on which the
proposed Letter of Credit is to be issued, the expiration date of such Letter of
Credit (which shall not be later than the earlier of (x) one year after the
issuance date thereof and (y) thirty days prior to the then-scheduled Revolving
Termination Date, unless the Company shall have pledged cash collateral to the
Agent therefor in an amount, and pursuant to documentation, reasonably
satisfactory to the Required Revolving Lenders and the Agent) and whether such
Letter of Credit is to be transferable in whole or in part. Subject to the
satisfaction of the conditions precedent set forth in Section 11 with respect to
the issuance of such Letter of Credit, the Issuing Lender shall issue such
Letter of Credit on the requested issuance date.
2.6 Participations in Letters of Credit. Concurrently with the issuance of
each Letter of Credit (or, in the case of any Existing Letter of Credit, on the
Effective Date), the Issuing Lender shall be deemed to have sold and transferred
to each Revolving Lender and each Revolving Lender shall be deemed irrevocably
and unconditionally to have purchased and received from the Issuing Lender,
without recourse or warranty, an undivided interest and participation, to the
extent of such Revolving Lender's Revolving Loan Percentage, in such Letter of
Credit and the Company's reimbursement obligations with respect thereto. The
Agent hereby agrees, if any Letters of Credit are outstanding, to deliver
monthly to each Revolving Lender a list of all outstanding Letters of Credit,
together with such information related thereto as any Revolving Lender may
reasonably request.
2.7 Reimbursement Obligations. The Company hereby unconditionally and
irrevocably agrees to reimburse the Issuing Lender for each payment or
disbursement made by the Issuing Lender under any Letter of Credit honoring any
demand for payment made by the beneficiary thereunder, in each case on the date
that such payment or disbursement is made. Any amount not reimbursed on the date
of such payment or distribution shall bear interest from and including the date
of such payment or disbursement to but not including the date that the Issuing
Lender is reimbursed by the Company therefor, payable on demand, at a rate per
annum equal to the sum of Alternate Base Rate from time to time in effect plus
1% (plus, beginning on the first Business Day after demand by the Issuing
Lender, an additional 2%). The Issuing Lender shall notify the Company whenever
any demand for payment is made under any Letter of Credit by the beneficiary
thereunder; provided, however, that the failure of the Issuing Lender to so
notify the Company shall not affect the rights of the Issuing Lender or the
Revolving Lenders in any manner whatsoever.
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2.8 Limitation on the Issuing Lender's Obligations. In determining whether
to pay under any Letter of Credit, the Issuing Lender shall have no obligation
to the Company or any Revolving Lender other than to confirm that any documents
required to be delivered under such Letter of Credit appear to have been
delivered and appear to comply on their face with the requirements of such
Letter of Credit. Any action taken or omitted to be taken by the Issuing Lender
under or in connection with any Letter of Credit, if taken or omitted in the
absence of gross negligence and willful misconduct, shall not impose upon the
Issuing Lender any liability to the Company or any Revolving Lender and shall
not reduce or impair the Company's reimbursement obligations set forth in
Section 2.7 or the obligations of the Revolving Lenders pursuant to Section 2.9.
2.9 Funding by Revolving Lenders to the Issuing Lender. If the Issuing
Lender makes any payment or disbursement under any Letter of Credit and the
Company has not reimbursed the Issuing Lender in full for such payment or
disbursement by 11:00 A.M., Chicago time, on the date of such payment or
disbursement, or if any reimbursement received by the Issuing Lender from the
Company is or must be returned or rescinded upon or during any bankruptcy or
reorganization of the Company or otherwise, each Revolving Lender shall be
obligated to pay to the Agent for the account of the Issuing Lender, in full or
partial payment of the purchase price of its participation in such Letter of
Credit, its pro rata share (according to its Revolving Loan Percentage) of such
payment or disbursement (but no such payment shall diminish the obligations of
the Company under Section 2.7), and the Agent shall promptly notify each
Revolving Lender thereof. Each Revolving Lender irrevocably and unconditionally
agrees, severally and for itself alone, to so pay to the Agent in immediately
available funds for the Issuing Lender's account the amount of such Revolving
Lender's Revolving Loan Percentage of such payment or disbursement. If and to
the extent any Revolving Lender shall not have made such amount available to the
Agent by 2:00 P.M., Chicago time, on the Business Day on which such Revolving
Lender receives notice from the Agent of such payment or disbursement (it being
understood that any such notice received after noon, Chicago time, on any
Business Day shall be deemed to have been received on the immediately following
Business Day), such Revolving Lender agrees to pay interest on such amount to
the Agent for the Issuing Lender's account forthwith on demand for each day from
and including the date such amount was to have been delivered to the Agent to
but excluding the date such amount is paid, at a rate per annum equal to (a) for
the first three days after demand, the Federal Funds Rate from time to time in
effect and (b) thereafter, the Alternate Base Rate from time to time in effect
(together with such other compensatory amounts as may be required to be paid by
such Revolving Lender to the Agent pursuant to the Rules for Interbank
Compensation of the Counsel on International Banking or the Clearinghouse
Compensation Committee, as applicable, as in effect from time to time). Any
Revolving Lender's failure to make available to the Agent its Revolving Loan
Percentage of any such payment or disbursement shall not relieve any other
Revolving Lender of its obligation hereunder to make available to the Agent such
other Revolving Lender's Revolving Loan Percentage of such payment, but no
Revolving Lender shall be responsible for the failure of any other Revolving
Lender to make available to the Agent such other Revolving Lender's Revolving
Loan Percentage of any such payment or disbursement.
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2.10 Warranty. Each notice of borrowing pursuant to Section 2.3, and the
delivery of each Letter of Credit Application pursuant to Section 2.5, shall
automatically constitute a warranty by the Company to the Agent and each Lender
to the effect that on the date of such requested borrowing or the issuance of
the requested Letter of Credit (a) the warranties of the Company contained in
Section 9 (excluding Sections 9.6 and 9.8) of this Agreement shall be true and
correct as of such requested date as though made on the date thereof (except to
the extent relating solely to an earlier date, in which case such warranty shall
have been true and correct as of such earlier date) and (b) no Event of Default
or Unmatured Event of Default shall exist or will result therefrom.
2.11 Conditions. Notwithstanding any other provision of this Agreement,
(a) no Lender shall be obligated to make any Loan, (b) no Lender shall be
obligated to convert into or permit the continuation at the end of the
applicable Interest Period of any Eurodollar Loan and (c) the Issuing Lender
shall not be obligated to issue any Letter of Credit if, in any such case, an
Event of Default or Unmatured Event of Default exists or would result therefrom.
2.12 Commitments Several. The failure of any Lender to make a requested
Loan on any date shall not relieve any other Lender of its obligation to make a
Loan on such date, but no Lender shall be responsible for the failure of any
other Lender to make any Loan to be made by such other Lender.
SECTION 3 NOTES EVIDENCING LOANS; PAYMENT SCHEDULE.
3.1 Notes. The Loans of each Lender shall be evidenced by a promissory
note (as amended, supplemented, replaced or otherwise modified from time to
time, individually each a "Note" and collectively for all Lenders the "Notes")
substantially in the form of Exhibit A, with appropriate insertions, dated the
Effective Date (or such other date as shall be satisfactory to the Agent),
payable to the order of such Lender in an amount equal to the aggregate unpaid
principal amount of all of such Lender's Loans, as follows:
(a) each Revolving Loan of such Lender shall be paid in full on the
Revolving Termination Date;
(b) each Term A Loan of such Lender shall be paid in quarterly
installments, on the last Business Day of each calendar quarter
(commencing with the calendar quarter ending June 30, 1999), with each
such installment to be in such Lender's Term A Loan Percentage of the
aggregate amount of the Term A Loans payable on such date set forth below
opposite the period in which the last date of each such calendar quarter
occurs:
Amount of
Period Term A Loans Payable
------ --------------------
6/30/99-3/31/00 $1,250,000
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6/30/00-3/31/01 $2,500,000
6/30/01-3/31/02 $3,000,000
6/30/02-3/31/03 $3,250,000
6/30/03-3/31/04 $3,750,000;
(c) each Term B Loan of such Lender shall be paid in quarterly
installments, on the last Business Day of each calendar quarter
(commencing with the calendar quarter ending June 30, 1999), with each
such installment to be in such Lender's Term B Loan Percentage of the
aggregate amount of the Term B Loans payable on such date set forth below
opposite the period in which the last date of each such calendar quarter
occurs:
Amount of
Period Term B Loans Payable
------ --------------------
6/30/99-12/31/05 $137,500
3/31/06 $51,287,500.
3.2 Recordkeeping. Each Lender shall record in its records the date and
amount of each Loan made by such Lender, each repayment or conversion thereof
and, in the case of each Eurodollar Loan, the dates on which each Interest
Period therefor shall begin and end. The aggregate unpaid principal amount so
recorded shall be rebuttable presumptive evidence of the principal amount owing
and unpaid on such Lender's Note. The failure to so record any such amount or
any error in so recording any such amount shall not, however, limit or otherwise
affect the obligations of the Company hereunder or under any Note to repay the
principal amount of the Loans evidenced by such Note together with all interest
accruing thereon.
SECTION 4 INTEREST.
4.1 Interest Rates. The Company promises to pay interest on the unpaid
principal amount of each Loan for the period commencing on and including the
date of such Loan to but excluding the date such Loan is paid in full, as
follows:
(a) at all times while such Loan is an ABR Loan, at a rate per annum
equal to the sum of the Alternate Base Rate from time to time in effect
plus the Applicable ABR Margin; and
(b) at all times while such Loan is a Eurodollar Loan, at a rate per
annum equal to the sum of the Eurodollar Rate (Reserve Adjusted)
applicable to each Interest Period for such Loan plus the Applicable
Eurodollar Margin;
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provided, however, that upon notice to the Company from the Agent (acting upon
the request of the Required Lenders) at any time an Event of Default exists, and
for so long as such Event of Default continues, the interest rate applicable to
all Loans shall be increased by 2%.
4.2 Interest Payment Dates. Accrued interest on each ABR Loan shall be
payable on the last Business Day of each calendar quarter and at maturity,
commencing with the first of such dates to occur after the date of such Loan.
Accrued interest on each Eurodollar Loan shall be payable on the last day of
each Interest Period relating to such Loan (and, in the case of any Eurodollar
Loan with an Interest Period exceeding three months, on each three-month
anniversary of the first day of such Interest Period) and at maturity. After
maturity, accrued interest on all Loans shall be payable on demand.
4.3 Interest Periods. Each "Interest Period" for a Eurodollar Loan shall
commence on the date such Eurodollar Loan is made or converted from an ABR Loan,
or on the expiration of the immediately preceding Interest Period for such
Eurodollar Loan, and shall end on the date which is one, two, three or six
months thereafter, as the Company may specify:
(a) in the case of an Interest Period which commences on the date a
Eurodollar Loan is made or converted from an ABR Loan, in the related
notice of borrowing or conversion pursuant to Section 2.3 or 2.4, or
(b) in the case of a succeeding Interest Period with respect to any
Eurodollar Loan, by notice substantially in the form of Exhibit L (or by
telephonic notice followed promptly by such written notice) to the Agent
not later than 11:00 A.M., Chicago time, at least three Business Days
prior to the first day of such succeeding Interest Period, it being
understood that (i) each such notice shall be effective upon receipt by
the Agent and (ii) if the Company fails to give such notice (or timely
notice of prepayment of the applicable Loan pursuant to Section 6.2) by
the time and date specified above, such Loan shall automatically become an
ABR Loan at the end of its then-current Interest Period.
Each Interest Period for a Eurodollar Loan which would otherwise end on a day
which is not a Business Day shall end on the immediately succeeding Business Day
(unless such immediately succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day). The Company may not select any Interest Period (a) for
a Revolving Loan which would end after the scheduled Revolving Termination Date
or (b) for any Term A Loan or Term B Loan if, after giving effect to such
selection, the Company would have to prepay any Eurodollar Loan before the last
day of an Interest Period therefor in order to make any scheduled prepayment of
such Term A Loan or Term B Loan, as the case may be.
4.4 Setting and Notice of Eurodollar Rates. The applicable Eurodollar Rate
for each Interest Period shall be determined by the Agent, and notice thereof
shall be given by the Agent promptly
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to the Company and each Lender. Each determination of the applicable Eurodollar
Rate by the Agent shall be conclusive and binding upon the parties hereto, in
the absence of demonstrable error. The Agent shall, upon written request of the
Company or any Lender, deliver to the Company or such Lender a statement showing
the computations used by the Agent in determining any applicable Eurodollar Rate
hereunder.
4.5 Computation of Interest. Interest shall be computed for the actual
number of days elapsed on the basis of a year of 360 days. The applicable
interest rate for each ABR Loan shall change simultaneously with each change in
the Alternate Base Rate.
SECTION 5 FEES.
5.1 Non-Use Fees. The Company agrees to pay to the Agent for the account
of each Revolving Lender a non-use fee at a rate per annum equal to the Non-Use
Fee Rate on the daily unused amount of such Revolving Lender's Revolving
Commitment. Such non-use fee shall be payable in arrears on the last Business
Day of each calendar quarter and on the Revolving Termination Date, in each case
for the period then ending for which such non-use fee shall not have been
theretofore paid. The non-use fee shall be computed for the actual number of
days elapsed on the basis of a year of 360 days.
5.2 Letter of Credit Fees. (a) The Company agrees to pay to the Agent for
the account of the Revolving Lenders pro rata according to their respective
Revolving Loan Percentages a letter of credit fee for each Letter of Credit in
an amount equal to the Applicable Eurodollar Margin of the daily aggregate
Stated Amount of such Letter of Credit (excluding any unreimbursed payment or
disbursement thereunder).
(b) The Company agrees to pay to the Issuing Lender for its own account a
fronting fee in an amount equal to 0.25% per annum of the daily average of the
aggregate Stated Amount of each Letter of Credit (excluding any unreimbursed
payment or disbursement thereunder).
(c) The fees payable pursuant to clauses (a) and (b) above shall be
computed for the actual number of days elapsed on the basis of a year of 360
days and shall be payable in arrears on the last Business Day of each calendar
quarter and on the Revolving Termination Date for the period from and including
the date of the issuance of the applicable Letter of Credit to and including the
date such payment is due or, if earlier, the date on which such Letter of Credit
expired or was terminated.
(d) In addition, with respect to each Letter of Credit, the Company agrees
to pay to the Issuing Lender for its own account such fees and expenses as the
Issuing Lender customarily requires in connection with the issuance, amendment,
transfer, negotiation, processing and/or administration of letters of credit.
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5.3 Agent's Fees. The Company agrees to pay to the Agent such fees as are
mutually agreed upon by the Company and the Agent.
5.4 Arranger's Fee. The Company agrees to pay the Arranger such fees as
are mutually agreed upon by the Company and the Arranger.
SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS;
PREPAYMENTS.
6.1 Reduction or Termination of the Commitments.
6.1.1 Mandatory Reduction of Revolving Commitments. After the payment in
full of the Term Loans, the Revolving Commitments shall be permanently reduced
in an amount equal to the Designated Proceeds of any Mandatory Prepayment Event
in accordance with Section 6.2.1.
6.1.2 Voluntary Reduction or Termination of Revolving Commitments. The
Company may from time to time on at least three Business Days' prior written
notice received by the Agent (which shall promptly advise each Revolving Lender
thereof) permanently reduce the amount of the Revolving Commitments; provided,
that the Revolving Commitments may not be reduced to an amount which is less
than the sum of the aggregate principal amount of all outstanding Revolving
Loans plus the aggregate Stated Amount of all outstanding Letters of Credit. Any
such reduction shall be in an aggregate principal amount of at least $1,000,000
and shall result in the aggregate Revolving Commitments being an integral
multiple of $500,000. The Company may at any time on like notice terminate the
Revolving Commitments; provided, that in the case of the termination of the
Revolving Commitments, the Company shall concurrently pay in full all Revolving
Loans and all other then-payable obligations of the Company hereunder in respect
of the Revolving Commitments and shall cash collateralize in full, pursuant to
documentation reasonably satisfactory to the Issuing Lender, the Required
Revolving Lenders and the Agent, all obligations arising with respect to the
Letters of Credit.
6.1.3 Reductions Pro Rata. All reductions of the Revolving Commitments
shall be pro rata among the Revolving Lenders according to their respective
Percentages of the Revolving Commitments.
6.2 Prepayments.
6.2.1 Mandatory Prepayments. (a) If any of the following (each a
"Mandatory Prepayment Event") shall occur, the Company (or, in the case of
clause (iii), if the Agent is holding the proceeds of insurance or condemnation
as additional collateral pursuant to the terms of any Collateral Document, the
Agent) shall make a prepayment of the Term Loans at the following times and in
the following amounts and, after the Term Loans have been paid in full, the
Revolving Commitments
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shall be permanently reduced in accordance with Section 6.1.1 at the following
times and in the following amounts (such applicable amounts being referred to as
"Designated Proceeds"):
(i) Forthwith upon any Asset Sale that results in any Primary Cash
Proceeds, in an amount equal to 100% of such Primary Cash Proceeds.
(ii) Within 180 days after any Asset Sale that results in any Excess
Cash Proceeds, in an amount equal to 100% of the Excess Cash Proceeds
resulting from such Asset Sale; provided that the foregoing shall not
apply to Asset Sales the proceeds of which are used by the Company or any
of its Subsidiaries for the financing of productive assets to be used in
the business of the Company or such Subsidiary prior to or within 180 days
after any such Asset Sale.
(iii) Within 180 days after the receipt of any insurance or
condemnation proceeds (or other similar recoveries) in excess of $200,000
by the Company or any Subsidiary or by the Agent (to the extent the Agent
is holding the insurance or condemnation proceeds as additional collateral
pursuant to any provision of any Collateral Document) from any casualty
loss incurred by the Company or any Subsidiary or condemnation of
property, in an amount equal to 100% of such insurance or condemnation
proceeds (or other similar recoveries) net of any collection expenses;
provided that no such prepayment shall be required to the extent such
proceeds are used by the Company prior to or within 180 days after the
date of receipt of such proceeds for the financing of the replacement,
substitution or restoration of the assets sustaining such casualty loss or
condemnation.
(iv) Concurrently with the receipt of any Net Cash Proceeds from any
issuance of equity securities of the Company or any Subsidiary (including
a Public Offering, but excluding (x) any issuance of shares of capital
stock pursuant to any employee or director stock option program, benefit
plan or compensation program, (y) equity contributions from GTCR or its
Affiliates to fund Permitted Acquisitions or to fund payments required by
the Harris Note Documents and (z) any issuance of capital stock by a
Subsidiary to the Company or another Subsidiary), in an amount equal to
50% of such Net Cash Proceeds.
(v) Concurrently with the receipt of any Net Cash Proceeds from the
issuance of any Other Debt of the Company or any Subsidiary in an amount
equal to 100% of such Net Cash Proceeds.
(vi) Within 90 days after the end of each Fiscal Year (commencing
with the Fiscal Year ending December 31, 1998), in an amount equal to 50%
of Excess Cash Flow for such Fiscal Year; provided that if the Leverage
Ratio as of the end of such Fiscal Year is less than 3.5:1.0, then the
amount of such required prepayment shall be zero.
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All prepayments of Term Loans pursuant to this Section 6.2.1 shall be applied to
the prepayment of the Term Loans pro rata among the Term A Loans and Term B
Loans, with application to the remaining installments of each on a pro rata
basis.
(b) If on any day the outstanding principal amount of all Revolving Loans
plus the Stated Amount of all outstanding Letters of Credit exceeds the
Revolving Commitments, the Company shall immediately prepay Revolving Loans
and/or cash collateralize the outstanding Letters of Credit, or do a combination
of the foregoing, in an amount sufficient to eliminate such excess.
6.2.2 Voluntary Prepayments. The Company may from time to time prepay the
Loans in whole or in part, without premium or penalty; provided that (a) the
Company shall give the Agent (which shall promptly advise each Lender)
irrevocable written notice substantially in the form of Exhibit M (or by
telephonic notice promptly followed by such notice), of such prepayment not
later than 11:00 A.M., Chicago time, on the Business Day of such prepayment, in
the case of prepayment of ABR Loans, and not less than three Business Days prior
to the day of such prepayment, in the case of prepayment of Eurodollar Loans, in
each case specifying the Loans to be prepaid and the date and amount of
prepayment, (b) any prepayment of a Eurodollar Loan prior to the end of an
Interest Period therefor shall be subject to Section 8.4, (c) each partial
prepayment shall be in a principal amount which is in a minimum principal amount
of $500,000 or a higher integral multiple of $100,000, (d) any prepayment of a
Eurodollar Loan shall include accrued interest to the date of prepayment on the
principal amount being prepaid and (e) any prepayment of Term Loans shall be
applied ratably to the Term A Loans and Term B Loans and shall be applied pro
rata to the remaining unpaid installments of each such Facility.
6.2.3 Application of Mandatory and Voluntary Prepayments among Term Loan
Facilities. Notwithstanding anything to the contrary in this Section 6.2, so
long as and to the extent that any Term A Loans are outstanding, if the Company
offers, at its option, to the Term B Lenders the right to waive any voluntary
prepayment or mandatory prepayment, each Term B Lender may, at its option,
decline the portion of any such prepayment applicable to the Term B Loans of
such Lender; accordingly, with respect to the amount of any mandatory prepayment
described in Section 6.2.1 or voluntary prepayment described in Section 6.2.2
that is allocated to Term B Loans (such amount, the "Term B Prepayment Amount"),
the Company will, in lieu of applying such amount to the prepayment of Term B
Loans, on the date specified in Section 6.2.1 for such mandatory prepayment (or
on the date specified by the Company with respect to any voluntary prepayment),
give the Agent telephonic notice (promptly confirmed in writing) requesting that
the Agent prepare and provide to each Term B Lender a notice (each, a
"Prepayment Option Notice") as described below. As promptly as practicable after
receiving such notice from the Company, the Agent will send to each Term B
Lender a Prepayment Option Notice, which shall be in the form of Exhibit O, and
shall include an offer by the Company to prepay on the date (each, a "Prepayment
Date") that is ten Business Days after the date of the Prepayment Option Notice,
the Term B Loans of such Lender by an amount equal to the Term B Prepayment
Amount specified in such Lender's Prepayment Option Notice. On the Prepayment
Date, (A) the Company shall pay to the Agent the aggregate
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amount necessary to prepay that portion of the outstanding Term B Loans in
respect of which Term B Lenders have accepted prepayment as described above
(such Lenders, the "Accepting Lenders"), and such amount shall be applied to
reduce the Term B Prepayment Amounts with respect to each Accepting Lender and
(B) the Company shall pay to the Agent an amount equal to the portion of the
Term B Prepayment Amount not accepted by the Term B Lenders, and such amount
shall be applied to the prepayment of the Term A Loans.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF;
TAXES.
7.1 Making of Payments. All payments of principal of or interest on the
Loans, and of all fees, shall be made by the Company to the Agent in immediately
available funds at its payment office in Concord, California not later than
noon, Chicago time, on the date due; and funds received after that hour shall be
deemed to have been received by the Agent on the next following Business Day.
The Agent shall promptly remit to each Lender its share of all such payments
received in collected funds by the Agent for the account of such Lender.
All payments under Sections 8.1 and 8.4 shall be made by the Company
directly to the Lender or Lenders entitled thereto.
7.2 Application of Certain Payments. Each payment of principal shall be
applied to such Loans as the Company shall direct by written notice to be
received by the Agent on or before the date of such payment or, in the absence
of such notice, as the Agent shall determine in its reasonable discretion.
Concurrently with each remittance to any Lender of its share of any such
payment, the Agent shall advise such Lender as to the application of such
payment.
7.3 Due Date Extension. If any payment of principal or interest with
respect to any of the Loans, or of any fees, falls due on a day which is not a
Business Day, then (subject to the last paragraph of Section 4.3) such due date
shall be extended to the immediately following Business Day and, in the case of
principal, additional interest shall accrue and be payable for the period of any
such extension.
7.4 Setoff. The Company agrees that the Agent and each Lender have all
rights of set-off and bankers' lien provided by applicable law, and in addition
thereto, the Company agrees that at any time (i) any payment or other amount
owing by the Company under this Agreement is then due to the Agent or any Lender
or (ii) any Unmatured Event of Default under Section 12.1.4 or any Event of
Default exists, the Agent and each Lender may apply to the payment of such
payment or other amount (or, in the case of clause (ii), to any of the
obligations of the Company hereunder, whether or not then due) any and all
balances, credits, deposits, accounts or moneys of the Company then or
thereafter with the Agent or such Lender. The Agent and each Lender agree to
give prompt notice to the Company of any exercise of rights pursuant to this
Section 7.4, but no failure to give such notice shall affect the validity of any
such exercise.
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7.5 Proration of Payments. Except to the extent that this Agreement
provides for payments to be allocated to the Lenders under a particular
Facility, if any Lender shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of offset or otherwise) on account of
principal of or interest on any Loan (or on account of its participation in any
Letter of Credit) in excess of its pro rata share of payments and other
recoveries obtained by all Lenders on account of principal of and interest on
Loans (or such participations) then held by them (other than in respect of an
Affected Loan or as a result of replacement of a Lender pursuant to Section
8.7), such Lender shall purchase from the other Lenders such participations in
the Loans (or sub-participations in the Letters of Credit) held by them as shall
be necessary to cause such purchasing Lender to share the excess payment or
other recovery ratably with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter recovered from
such purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery.
7.6 Net Payments; Tax Exemptions. (a) All payments by the Company of
principal, interest, fees, indemnities and other amounts payable hereunder and
under the Notes shall be made to the recipient thereof without setoff or
counterclaim and free and clear of, and without withholding or deduction for or
on account of, any present or future Taxes (other than Excluded Taxes) now or
hereafter imposed on such recipient or its income, property, assets or
franchises (such recipient's "Recipient Taxes"), except to the extent that such
withholding or deduction (i) is required by applicable law, (ii) results from
the breach by such recipient of its Exemption Agreement (as defined below) or
(iii) would not be required if such recipient's Exemption Representation (as
defined below) were true. If any such withholding or deduction is required by
applicable law, the Company will:
(A) pay to the relevant authorities the full amount so required to
be withheld or deducted;
(B) promptly forward to the Agent (or, in the case of any
indemnification or other payment made directly to a recipient (the "Direct
Recipient") other than the Agent, to the Direct Recipient) an official
receipt or other documentation satisfactory to the Agent (or the Direct
Recipient) evidencing such payment to such authorities; and
(C) except to the extent that such withholding or deduction results
from the breach, by the recipient of a payment, of its Exemption Agreement
or would not be required if such recipient's Exemption Representation were
true, pay to the Agent (or the Direct Recipient) for the account of the
relevant recipient such additional amount as is necessary to ensure that
the net amount actually received by such recipient will equal the full
amount such recipient would have received had no such withholding or
deduction been required.
For purposes of this Section 7.6, (1) "Taxes" means, with respect to any Person,
taxes, assessments or other governmental charges or levies imposed upon such
Person, such Person's income or any of such Person's properties, franchises or
assets; and (2) "Excluded Taxes" means, in the case of payments made to any
Lender or the Agent, all of the following: taxes imposed upon the overall net
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income of such Person, franchise taxes imposed upon such Person with respect to
its net income by the jurisdiction under the laws of which such Person is
organized or any political subdivision thereof, and franchise taxes imposed upon
such Person with respect to its net income by the jurisdiction in which such
Person's Eurodollar Office is located or any political subdivision thereof.
(b) In consideration of the Company's agreements in clause (a) of this
Section 7.6, each Lender which is a "foreign corporation, partnership or trust"
within the meaning of the Code hereby agrees (such Lender's "Exemption
Agreement") to provide to the Company the same forms required to be provided to
the Agent pursuant to Section 13.10 at the same time such forms are provided to
the Agent.
(c) Each Lender hereby represents and warrants (such Lender's "Exemption
Representation") to the Company that on the Effective Date (or, if later, the
date such Lender becomes a party to this Agreement) it is entitled to receive
payments of principal of, and interest on, Loans made by such Lender without
withholding or deduction for or on account of such Lender's Recipient Taxes
imposed by the United States of America or any political subdivision thereof.
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR
EURODOLLAR LOANS.
8.1 Increased Costs. (a) If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or any Eurodollar Office of such Lender)
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(A) shall subject any Lender (or any Eurodollar Office of such
Lender) to any tax, duty or other charge with respect to its Eurodollar
Loans, its Note or its obligation to make Eurodollar Loans, or shall
change the basis of taxation of payments to any Lender of the principal of
or interest on its Eurodollar Loans or any other amounts due under this
Agreement in respect of its Eurodollar Loans or its obligation to make
Eurodollar Loans (except for changes in the rate of tax on the overall net
income of such Lender or its Eurodollar Office imposed by the jurisdiction
in which such Lender's principal executive office or Eurodollar Office is
located); or
(B) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve included in the
determination of interest rates pursuant to Section 4), special deposit or
similar requirement against assets of, deposits with or for the account
of, or credit extended by any Lender (or any Eurodollar Office of such
Lender); or
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(C) shall impose on any Lender (or its Eurodollar Office) any other
condition affecting its Eurodollar Loans, its Note or its obligation to
make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D of the Board of Governors of the Federal Reserve System, to
impose a cost on) such Lender (or any Eurodollar Office of such Lender) of
making or maintaining any Eurodollar Loan, or to reduce the amount of any sum
received or receivable by such Lender (or its Eurodollar Office) under this
Agreement or under its Note with respect thereto, then within 10 days after
demand by such Lender (which demand shall be accompanied by a statement setting
forth in reasonable detail the basis for and a calculation of the amount of such
demand, a copy of which shall be furnished to the Agent), the Company shall pay
directly to such Lender such additional amount or amounts as will compensate
such Lender for such increased cost or such reduction.
(b) If any Lender shall reasonably determine that the adoption or phase-in
of any applicable law, rule or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Eurodollar Office) or any Person controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's or such controlling
Person's capital as a consequence of such Lender's obligations hereunder
(including, without limitation, such Lender's Commitment) to a level below that
which such Lender or such controlling Person could have achieved but for such
adoption, change or compliance (taking into consideration such Lender's or such
controlling Person's policies with respect to capital adequacy) by an amount
deemed by such Lender or such controlling Person to be material, then from time
to time, within 10 days after demand by such Lender (which demand shall be
accompanied by a statement setting forth in reasonable detail the basis for and
a calculation of the amount of such demand, a copy of which shall be furnished
to the Agent), the Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such controlling Person for such
reduction.
8.2 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being
offered to the Agent in the interbank eurodollar market for such Interest
Period, or the Agent otherwise reasonably determines (which determination
shall be binding and conclusive on the Company) that by reason of
circumstances affecting the interbank eurodollar market adequate and
reasonable means do not exist for ascertaining the applicable Eurodollar
Rate; or
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(b) Lenders having a pro rata share of 25% or more of the Loans to
be made for such Interest Period advise the Agent that the Eurodollar Rate
(Reserve Adjusted) as determined by the Agent will not adequately and
fairly reflect the cost to such Lenders of maintaining or funding such
Loans for such Interest Period (taking into account any amount to which
such Lenders may be entitled under Section 8.1), or that the making or
funding of Eurodollar Loans has become impracticable as a result of an
event occurring after the date of this Agreement which in the opinion of
such Lenders materially affects such Loans;
then the Agent shall promptly notify the other parties thereof and, so long as
such circumstances shall continue, (i) no Lender shall be under any obligation
to make or convert into Eurodollar Loans and (ii) on the last day of the current
Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in
full, automatically convert to an ABR Loan.
8.3 Changes in Law Rendering Eurodollar Loans Unlawful. In the event that
any change in (including the adoption of any new) applicable laws or
regulations, or any change in the interpretation of applicable laws or
regulations by any governmental or other regulatory body charged with the
administration thereof, should make it (or in the good faith judgment of any
Lender cause a substantial question as to whether it is) unlawful for any Lender
to make, maintain or fund Eurodollar Loans, then such Lender shall promptly
notify each of the other parties hereto and, so long as such circumstances shall
continue, (a) such Lender shall have no obligation to make or convert into
Eurodollar Loans (but shall make ABR Loans concurrently with the making of or
conversion into such Eurodollar Loans by the Lenders which are not so affected,
in each case in an amount equal to such Lender's applicable Percentage of all
Eurodollar Loans which would be made or converted into at such time in the
absence of such circumstances) and (b) on the last day of the current Interest
Period for each Eurodollar Loan of such Lender (or, in any event, on such
earlier date as may be required by the relevant law, regulation or
interpretation), such Eurodollar Loan shall, unless then repaid in full,
automatically convert to an ABR Loan. Each ABR Loan made by a Lender which, but
for the circumstances described in the foregoing sentence, would be a Eurodollar
Loan (an "Affected Loan") shall remain outstanding for the same period as the
Group of Eurodollar Loans of which such Affected Loan would be a part absent
such circumstances.
8.4 Funding Losses. The Company hereby agrees that upon demand by any
Lender (which demand shall be accompanied by a statement setting forth the basis
for the calculations of the amount being claimed, a copy of which shall be
furnished to the Agent) the Company will indemnify such Lender against any net
loss or expense which such Lender may sustain or incur (including, without
limitation, any net loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain any Eurodollar Loan), as reasonably determined by such Lender, as a
result of (a) any payment or prepayment or conversion of any Eurodollar Loan of
such Lender on a date other than the last day of an Interest Period for such
Loan (including, without limitation, any conversion pursuant to Section 8.3) or
(b) any failure of the Company to borrow or convert any Loan on a date specified
therefor in a notice of borrowing or
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conversion pursuant to this Agreement. For this purpose, all notices to the
Agent pursuant to this Agreement shall be deemed to be irrevocable.
8.5 Right of Lenders to Fund through Other Offices. Each Lender may, if it
so elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign
branch or affiliate of such Lender to make such Loan; provided that in such
event for the purposes of this Agreement such Loan shall be deemed to have been
made by such Lender and the obligation of the Company to repay such Loan shall
nevertheless be to such Lender and shall be deemed held by it, to the extent of
such Loan, for the account of such branch or affiliate.
8.6 Discretion of Lenders as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Lender shall be entitled to
fund and maintain its funding of all or any part of its Loans in any manner it
sees fit, it being understood, however, that for the purposes of this Agreement
all determinations hereunder shall be made as if such Lender had actually funded
and maintained each Eurodollar Loan during each Interest Period for such Loan
through the purchase of deposits having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Eurodollar Rate for
such Interest Period.
8.7 Mitigation of Circumstances; Replacement of Affected Lender. (a) Each
Lender shall promptly notify the Company and the Agent of any event of which it
has knowledge which will result in, and will use reasonable commercial efforts
available to it (and not, in such Lender's good faith judgment, otherwise
disadvantageous to such Lender) to mitigate or avoid, (i) any obligation by the
Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence
of any circumstances of the nature described in Section 8.2 or 8.3 (and, if any
Lender has given notice of any such event described in clause (i) or (ii) above
and thereafter such event ceases to exist, such Lender shall promptly so notify
the Company and the Agent). Without limiting the foregoing, each Lender will
designate a different funding office if such designation will avoid (or reduce
the cost to the Company of) any event described in clause (i) or (ii) of the
preceding sentence and such designation will not, in such Lender's sole
judgment, be otherwise disadvantageous to such Lender.
(b) At any time any Lender is an Affected Lender, the Company may (and
BofA agrees that it will use reasonable efforts to help the Company to) replace
such Affected Lender as a party to this Agreement with one or more other bank(s)
or financial institution(s) reasonably satisfactory to the Agent, such bank(s)
or financial institution(s) to have Commitments in such amounts as shall be
reasonably satisfactory to the Agent and the Issuing Lender (and upon notice
from the Company such Affected Lender shall assign pursuant to an Assignment
Agreement, and without recourse or warranty, its Commitments, its Loans, its
Note, its participation in Letters of Credit and all of its other rights and
obligations hereunder to such replacement bank(s) or other financial
institution(s) for a purchase price equal to the sum of the principal amount of
the Loans so assigned, all accrued and unpaid interest thereon, its ratable
share of all accrued and unpaid non-use fees and Letter of Credit fees, any
amounts payable under Section 8.4 as a result of such Lender receiving payment
of
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any Eurodollar Loan prior to the end of an Interest Period therefor and all
other obligations owed to such Affected Lender hereunder).
8.8 Conclusiveness of Statements; Survival of Provisions. Determinations
and statements of any Lender pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall be
conclusive absent demonstrable error. Lenders may use reasonable averaging and
attribution methods in determining compensation under Sections 8.1 and 8.4, and
the provisions of such Sections shall survive repayment of the Loans,
cancellation of the Notes and any termination of this Agreement.
SECTION 9 WARRANTIES.
To induce the Agent and the Lenders to enter into this Agreement and to
induce the Lenders to make Loans and to issue or participate in Letters of
Credit hereunder, the Company warrants to the Agent and the Lenders that:
9.1 Organization, etc. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
each Subsidiary is duly organized and validly existing under the laws of the
state of its organization; and the Company and each Subsidiary is duly qualified
to do business in each other jurisdiction where the nature of its business makes
such qualification necessary, except where such failure to so qualify would not
have a Material Adverse Effect.
9.2 Authorization; No Conflict. The execution and delivery by the Company
of this Agreement and each other Loan Document to which it is a party, the
borrowings hereunder, the execution by each Guarantor of each Loan Document to
which it is a party and the performance by the Company and each Guarantor of its
obligations under each Loan Document to which it is a party are within the
corporate powers of the Company and each Guarantor, have been duly authorized by
all necessary corporate action on the part of the Company and each Guarantor
(including any necessary shareholder action), have received all necessary
governmental approval and do not and will not (a) violate any provision of any
law, rule or regulation or any order, decree, judgment or award which is binding
on the Company or any Guarantor or any of their respective Subsidiaries, (b)
contravene or conflict with, or result in a breach of, any provision of the
certificate or articles of incorporation, by-laws or other organizational
documents of the Company or any Guarantor or any of their respective
Subsidiaries or of any agreement, indenture, instrument or other document which
is binding on the Company or any Guarantor or any of their respective
Subsidiaries or (c) result in, or require, the creation or imposition of any
Lien on any property of the Company or any Guarantor or any of their respective
Subsidiaries (other than Liens created under the Loan Documents).
9.3 Validity and Binding Nature. This Agreement is, and upon the execution
and delivery thereof each other Loan Document to which the Company is a party
will be, the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms,
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subject to bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general principles of equity.
9.4 Financial Information. The audited consolidated financial statements
of the Company as at December 31, 1997 and the unaudited consolidated financial
statements of the Company as at April 30, 1998, copies of which have been
furnished to the Lenders, have been prepared in accordance with generally
accepted accounting principles (subject, in the case of the unaudited
statements, to the absence of footnotes and to normal year-end adjustments) and
fairly present the financial condition of the Company and its Subsidiaries as of
such dates and the results of their operations for the Fiscal Year and fiscal
period then ended, respectively. To the best of the Company's knowledge, the
Company and its Subsidiaries have, on the date hereof and the Effective Date, no
liability (contingent or otherwise) or unusual or long-term commitment which
could have a Material Adverse Effect and which is not reflected in the financial
statements referred to in the immediately preceding sentence.
9.5 No Material Adverse Change. Since December 31, 1997, there has been no
event or occurrence which has had or is reasonably likely to have a Material
Adverse Effect (other than any such event or occurrence which has been waived in
writing by the Required Lenders).
9.6 Litigation and Contingent Liabilities. Except as set forth on Item 9.6
("Litigation, etc.") of Schedule II, no litigation (including, without
limitation, derivative actions), arbitration proceeding or governmental
proceeding is pending or, to the Company's knowledge, threatened against the
Company or any Subsidiary which, if adversely decided, is reasonably likely to
result, either individually or collectively, in a Material Adverse Effect. Other
than any liability incident to such litigation or proceedings, neither the
Company nor any Subsidiary has any material contingent liabilities not provided
for or disclosed in the financial statements referred to in Section 9.4 or set
forth on Item 9.6 ("Litigation, etc.") of Schedule II.
9.7 Ownership of Properties; Liens. Each of the Company and each
Subsidiary owns good and marketable title to, or a valid leasehold interest in,
all properties and assets which are material to its business, real and personal,
tangible and intangible, of any nature whatsoever, in each case free and clear
of all Liens, except as permitted pursuant to Section 10.9.
9.8 Subsidiaries. Set forth on Item 9.8 ("Subsidiaries") of Schedule II is
a complete and accurate list, as of the Effective Date, of the name and
jurisdiction of organization of each Subsidiary of the Company, the number of
outstanding shares of stock of each such Subsidiary, and the percentage
ownership interest of the Company and its other Subsidiaries in each such
Subsidiary.
9.9 Pension and Welfare Plans. Except as set forth on Item 9.9 ("Pension
and Welfare Plans") of Schedule II, during the twelve-consecutive-month period
prior to the date of the execution and delivery of this Agreement or the making
of any Loan hereunder, no steps have been taken to terminate any Pension Plan,
and no contribution failure has occurred with respect to any Pension
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Plan sufficient to give rise to a lien under Section 302(f) of ERISA. No
condition exists or event or transaction has occurred with respect to any
Pension Plan which could result in the incurrence by the Company of any material
liability, fine or penalty. The Company has no contingent liability with respect
to any post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of subtitle B of title I of ERISA.
9.10 Regulated Industry. Neither the Company nor any Subsidiary is (a) an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended, or (b) a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
9.11 Regulations G, U and X. Neither the Company nor any Subsidiary is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Loan will be used for the purpose, whether immediate, incidental
or ultimate, of purchasing or carrying any Margin Stock or maintaining or
extending credit to others for such purpose.
9.12 Taxes. Each of the Company and each Subsidiary has filed all material
tax returns and reports required by law to have been filed by it and has paid
all taxes and governmental charges thereby shown to be owing, except any such
taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on its books.
9.13 Environmental Matters. Except as set forth in Item 9.13
("Environmental Matters") of Schedule II:
(a) all facilities and property (including underlying groundwater)
owned or leased by the Company or any of its Subsidiaries have been, and
continue to be, owned or leased by the Company and its Subsidiaries in
material compliance with all Environmental Laws;
(b) there have been no past, and (to the best of the Company's
knowledge) there are no pending or threatened,
(i) claims, complaints, notices or requests for information
received by the Company or any of its Subsidiaries with respect to
any alleged violation of any Environmental Law, or
(ii) complaints, notices or inquiries to the Company or any of
its Subsidiaries regarding potential liability under any
Environmental Law,
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which, singly or in the aggregate, have had, or may reasonably be expected
to have, a Material Adverse Environmental Impact;
(c) there have been no Releases of Hazardous Materials at, on or
under any property now or previously owned or leased by the Company or any
of its Subsidiaries that, singly or in the aggregate, have had, or may
reasonably be expected to have, a Material Adverse Effect;
(d) the Company and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses
and other authorizations relating to environmental matters and necessary
or desirable for their businesses;
(e) no property now or previously owned or leased by the Company or
any of its Subsidiaries is listed or (to the best of the Company's
knowledge with respect to owned property only) proposed for listing on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list of sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by the Company or any of its Subsidiaries that,
singly or in the aggregate, have had, or may reasonably be expected to
have, a Material Adverse Effect;
(g) neither the Company nor any of its Subsidiaries has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed or, to the best of the Company's
knowledge, proposed for listing on the National Priorities List pursuant
to CERCLA, on the CERCLIS or on any similar state list or which is the
subject of federal, state or local enforcement actions or other
investigations which may lead to material claims against the Company or
such Subsidiary for any remedial work, damage to natural resources or
personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the Company
or any of its Subsidiaries that, singly or in the aggregate, have had, or
may reasonably be expected to have, a Material Adverse Effect; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Company or any of its Subsidiaries
which, with the passage of time or the giving of notice or both, would
give rise to liability under any Environmental Law which, singly or in the
aggregate, have had, or may reasonably be expected to have, a Material
Adverse Environmental Impact.
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9.14 Compliance with Law. Each of the Company and each Subsidiary is in
compliance with all statutes, judicial and administrative orders, permits and
governmental rules and regulations which are material to its business or the
non-compliance with which could result in any material fine, penalty or
liability.
9.15 Information. All written information heretofore or contemporaneously
herewith furnished by the Company or any Subsidiary to any Lender for purposes
of or in connection with this Agreement and the transactions contemplated hereby
is, and all information hereafter furnished by or on behalf of the Company or
any Subsidiary to any Lender pursuant hereto or in connection herewith will be,
true and accurate in every material respect on the date as of which such
information is dated or certified, and such information, taken as a whole, does
not and will not omit to state any material fact necessary to make such
information, taken as a whole, not misleading.
9.16 Insurance. Set forth on Item 9.16 ("Insurance") of Schedule II is a
complete and accurate summary of the property and casualty insurance program of
the Company and its Subsidiaries as of the Effective Date (including the names
and Best's rating of all insurers, policy numbers, expiration dates, amounts and
types of coverage, annual premiums, exclusions, deductibles, self-insured
retention, and a description in reasonable detail of any self-insurance program,
retrospective rating plan, fronting arrangement or other risk assumption
arrangement involving the Company or any Subsidiary).
9.17 Solvency, etc. On the Effective Date (or, in the case of any Person
which becomes a Guarantor after the Effective Date, on the date such Person
becomes a Guarantor), and immediately prior to and after giving effect to each
borrowing hereunder and the use of the proceeds thereof, (a) each of the
Company's and each Guarantor's assets will exceed its liabilities and (b) each
of the Company and each Guarantor will be solvent, will be able to pay its debts
as they mature, will own assets with present fair saleable value greater than
the amount required to pay its probable liability on its existing debts as they
mature and will have capital sufficient to carry on its business as then
constituted.
9.18 Real Property. Set forth on Item 9.18 ("Real Property") of Schedule
II is a complete and accurate list, as of the Effective Date, of the address of
all real property owned or leased by the Company or any Subsidiary, together
with, in the case of leased real property, the name and mailing address of the
lessor of such property.
9.19 Merger, Subordinated Notes, etc. (a) The Merger and the issuance and
sale of the 1998 Subordinated Notes will comply with all requirements of law
(including, without limitation, the Securities Act of 1933, as amended), and all
necessary governmental, regulatory, shareholder and other consents and approvals
required for the consummation of the Merger and the issuance and sale of the
1998 Subordinated Notes were, prior to the consummation thereof, duly obtained
and in full force and effect. All applicable waiting periods with respect to the
Merger and the issuance and sale of the 1998 Subordinated Notes have expired
without any action being taken by any competent
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Governmental Authority which restrains, prevents or imposes material adverse
conditions upon the consummation of any such transaction.
(b) The execution and delivery of the Merger Agreement and the issuance
and sale of the 1998 Subordinated Notes did not, and the consummation of the
Merger will not, violate any requirement of law, or result in a breach of, or
constitute a default under, any contractual obligation affecting the Company or
any of its Subsidiaries which, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect.
(c) There does not exist any judgment, order or injunction prohibiting or
imposing material adverse conditions upon the consummation of the Merger and the
issuance and sale of the 1998 Subordinated Notes.
(d) All of the representations and warranties of the Company,
AcquisitionCo and, to the Company's knowledge, Monroc contained in the Merger
Agreement are true and correct in all material respects as of the date hereof.
(e) All of the representations and warranties of the Company set forth in
the Note and Warrant Purchase Agreement are true and correct in all material
respects as of the date hereof.
9.20 Intellectual Property. The Company and each of its Subsidiaries owns
and possesses or has a license or other right to use all such patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights and copyrights as are necessary for the conduct of
the business of the Company and its Subsidiaries, without any infringement upon
rights of others which could reasonably be expected to have a Material Adverse
Effect.
9.21 Burdensome Obligations. Neither the Company nor any of its
Subsidiaries is a party to any agreement or contract or subject to any charter
or corporate restriction which would reasonably be expected to have a Material
Adverse Effect.
9.22 Senior Debt. The obligations of the Company hereunder constitute
"Senior Debt" under and as defined in the documents governing the 1996
Subordinated Notes and the 1998 Subordinated Notes. The obligations of each
Guarantor under the Guaranty constitute "Guarantor Senior Debt" under and as
defined in each such Guarantor's guaranty of the 1996 Subordinated Notes and the
1998 Subordinated Notes.
SECTION 10 COVENANTS.
Until the expiration or termination of the Commitments and thereafter
until all obligations (other than Surviving Obligations) hereunder and under the
Notes are paid in full and all Letters of Credit have terminated, the Company
agrees that, unless at any time the Required Lenders shall otherwise expressly
consent in writing, it will:
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10.1 Reports, Certificates and Other Information. Furnish to each Lender:
10.1.1 Audit Report. Promptly when available and in any event within 120
days after the close of each Fiscal Year, a copy of the annual audit report of
the Company and its Subsidiaries for such Fiscal Year, including therein
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such Fiscal Year and consolidated statements of earnings and cash flows of the
Company and its Subsidiaries for such Fiscal Year certified, without
qualification as to going concern or scope, by Arthur Andersen & Co. LLP or
other independent auditors of recognized standing selected by the Company and
reasonably acceptable to the Required Lenders together with a certificate from
such accountants to the effect that, in making the examination necessary for the
signing of such annual report by such auditors, they have not become aware of
any Event of Default or Unmatured Event of Default that has occurred and is
continuing or, if they have become aware of any such event, describing it in
reasonable detail.
10.1.2 Interim Reports. Promptly when available and (i) in any event
within 30 days after the end of each month, consolidated balance sheets of the
Company and its Subsidiaries as of the end of such month, and consolidated
statements of earnings and cash flows for such month and for the period
beginning with the first day of the applicable Fiscal Year and ending on the
last day of such month, including a comparison with the corresponding month and
period of the previous Fiscal Year and a comparison with the budget for such
month and for such period of the current Fiscal Year, together with a
certificate of the President or the chief financial officer of the Company to
the effect that such financial statements fairly present the financial condition
and results of operations of the Company and its Subsidiaries as of the date and
periods indicated (subject to normal year-end adjustments and the absence of
footnotes) and (ii) in any event within 30 days after the end of each Fiscal
Quarter, consolidating balance sheets of the Company and its Subsidiaries as of
the end of such Fiscal Quarter and consolidating statements of earnings and cash
flows of the Company and its Subsidiaries for the period from the end of the
last Fiscal Year to the end of such Fiscal Quarter, certified by the President
or the chief financial officer of the Company to the effect that such
consolidating financial statements fairly present the financial condition and
results of operations of the Company and its Subsidiaries.
10.1.3 Compliance Certificate. Concurrently with each set of financial
statements delivered pursuant to Sections 10.1.1 and 10.1.2, a certificate of
the President or the chief financial officer of the Company (a) to the effect
that such officer is not aware of any Event of Default or Unmatured Event of
Default that has occurred and is continuing or, if there is any such event,
describing it in reasonable detail and (b) in the case of any financial
statements relating to the last day of a Fiscal Quarter or Fiscal Year, a
certificate, substantially in the form of Exhibit I (a "Compliance
Certificate"), containing a computation of each of the financial ratios and
restrictions set forth in Section 10.6.
10.1.4 Reports to SEC. Promptly upon the filing or sending thereof, a copy
of (a) any annual, periodic or special report or registration statement
(inclusive of exhibits thereto) filed by the
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Company or any Subsidiary with the SEC or any securities exchange and (b) any
annual, periodic or special report to the Company's shareholders.
10.1.5 Notice of Default, Litigation and ERISA Matters. Immediately upon
becoming aware of any of the following, written notice describing the same and
the steps being taken by the Company or the Subsidiary affected thereby with
respect thereto: (a) the occurrence of an Event of Default or an Unmatured Event
of Default; (b) any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Company to the Lenders which has been
instituted or, to the knowledge of the Company, is threatened against the
Company or any Subsidiary or to which any of the properties of any thereof is
subject which, if adversely determined, is reasonably likely to have a Material
Adverse Effect; (c) the institution of any steps by the Company, any of its
Subsidiaries or any other Person to terminate any Pension Plan, or the failure
to make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a lien under Section 302(f) of ERISA, or the taking
of any action with respect to a Pension Plan which could result in the
requirement that the Company furnish a bond or other security to the PBGC or
such Pension Plan, or the occurrence of any event with respect to any Pension
Plan which could result in the incurrence by the Company of any material
liability, fine or penalty, or any material increase in the contingent liability
of the Company with respect to any post-retirement Welfare Plan benefit; and (d)
any other event or occurrence which has had or is reasonably likely to have a
Material Adverse Effect.
10.1.6 Subsidiaries. Promptly from time to time a written report of any
change in the list of its Subsidiaries.
10.1.7 Management Reports. Promptly from time to time, copies of all
detailed financial and management reports submitted to the Company or any
Subsidiary by independent auditors in connection with each annual or interim
audit made by such auditors of the books of the Company or any Subsidiary.
10.1.8 Projections. As soon as practicable and in any event within 30 days
after the commencement of each Fiscal Year, a budget on a monthly basis for such
Fiscal Year prepared by the Company, including, without limitation, projected
income statements, balance sheets, statements of cash flows and pro forma
calculations of the covenants set forth in Section 10.6 as of the end of each
such month (or, in the case of the pro forma covenant calculations, the end of
each quarter) of such following Fiscal Year.
10.1.9 Insurance Information. Not later than 90 days after the end of each
Fiscal Year, a complete and accurate summary of the property and casualty
insurance program of the Company, containing substantially the same information
with respect to such insurance program as the information set forth on Item 9.16
of Schedule II; and promptly upon the occurrence thereof, a written report of
any change in the Company's insurance program which will materially reduce the
amount or scope of coverage.
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10.1.10 Subordinated Debt Notices. Promptly from time to time, copies of
any notices (including, without limitation, notices of default or acceleration)
received from any holder or trustee of, under or with respect to any
Subordinated Debt.
10.1.11 Other Information. From time to time such other information
concerning the Company and its Subsidiaries as any Lender or the Agent may
reasonably request.
10.2 Books, Records and Inspections. (a) Keep, and cause each Subsidiary
to keep, its books and records reflecting all of its business affairs and
transactions in accordance with sound business practices sufficient to allow the
preparation of financial statements in accordance with GAAP; and (b) permit, and
cause each Subsidiary to permit, any Lender or the Agent or any representative
thereof, at reasonable times and on reasonable notice (or at any time without
notice if an Event of Default exists), to visit any or all of its offices, to
discuss its financial matters with its officers and its independent auditors
(and the Company hereby authorizes such independent auditors to discuss such
financial matters with any Lender or the Agent or any representative thereof),
and to examine (and, at the Company's or such Subsidiary's expense, make copies
of) any of its books or other corporate records.
10.3 Insurance. Maintain, and cause each Subsidiary to maintain, with
responsible and financially-sound insurance companies or associations (rated at
least "A" by A.M. Best & Co.), insurance in such amounts and covering such risks
as is usually maintained by companies engaged in similar businesses and owning
similar properties similarly situated (and, in any event, such insurance as may
be required by any law, governmental regulation or judicial order); and, upon
request of the Agent or any Lender, furnish to the Agent or such Lender a
certificate describing in reasonable detail the nature and extent of the
insurance maintained by the Company and its Subsidiaries.
10.4 Compliance with Law; Payment of Obligations. (a) Comply, and cause
each Subsidiary to comply, in all material respects with all applicable laws,
rules, regulations and orders; (b) pay, and cause each Subsidiary to pay, prior
to delinquency, all taxes and other governmental charges against it or any of
its property, provided, however, that the foregoing shall not require the
Company or any Subsidiary to pay any such tax or charge so long as it shall
contest the validity thereof in good faith by appropriate proceedings and shall
set aside on its books adequate reserves with respect thereto; and (c) pay and
perform, and cause each Subsidiary to pay and perform, all of its material
obligations under each contract or agreement to which the Company or such
Subsidiary is a party, or by which the assets of the Company or such Subsidiary
are bound, if the failure to so pay or perform would be reasonably likely to
have a Material Adverse Effect.
10.5 Maintenance of Existence, etc. Maintain and preserve, and (subject to
Section 10.7) cause each Subsidiary to maintain and preserve, (a) its existence
and good standing in the jurisdiction of its organization, (b) its foreign
qualification in each other jurisdiction where the nature of its business makes
such qualification necessary (except in those instances in which the failure to
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be qualified or in good standing will not have a Material Adverse Effect) and
(c) all authorizations, rights, licenses and franchises held by the Company or
such Subsidiary, except where the failure to maintain and preserve such
authorizations, rights, licenses and franchises would not be reasonably likely
to have a Material Adverse Effect.
10.6 Financial Ratios and Restrictions.
10.6.1 Interest Coverage Ratio. Not permit the Interest Coverage Ratio for
any Computation Period to be less than the ratio set forth below for such
Computation Period:
Computation
Period Ending Ratio
------------- -----
Effective Date - 6/30/98 2.00:1
9/30/98 - 6/30/99 2.25:1
9/30/99 - 6/30/01 2.50:1
9/30/01 and thereafter 3.00:1.
10.6.2 Fixed Charge Coverage Ratio. Not permit the Fixed Charge Coverage
Ratio for any Computation Period to be less than 1.10 to 1.00.
10.6.3 Leverage Ratio. Not permit the Leverage Ratio as of the last day of
any Computation Period to be greater than the ratio set forth below for such
Computation Period:
Computation
Period Ending Ratio
------------- -----
Effective Date - 6/30/98 5.50:1
9/30/98 4.75:1
12/31/98 - 6/30/99 4.50:1
9/30/99 - 6/30/00 4.00:1
9/30/00 - 6/30/01 3.50:1
9/30/01 and thereafter 3.00:1.
10.7 Mergers, Consolidations, Purchases and Sales. Not, and not permit any
Subsidiary to, be a party to any merger or consolidation, or purchase or
otherwise acquire all or substantially all of the assets or any stock of any
class of, or any partnership or joint venture interest in, any other Person (or
any business unit of any other Person), or, except in the ordinary course of its
business, sell, transfer, convey or lease all or any substantial part of its
assets, or sell or assign with or without recourse any receivables, except for
(i) any such merger or consolidation, sale, transfer, conveyance, lease or
assignment of or by any Subsidiary into, with or to the Company or into, with or
to any wholly-owned Subsidiary; (ii) any such purchase or other acquisition by
the Company or any
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Subsidiary of the assets or stock of any wholly-owned Subsidiary; (iii) any
Subsidiary which is wholly-owned by another Subsidiary may merge with such other
Subsidiary; (iv) Investments (including Investments by way of merger) permitted
by Section 10.10; (v) sales of inventory and dispositions of obsolete, unused,
surplus or unnecessary equipment, in each case in the ordinary course of
business; and (vi) any other Asset Sale (including the stock of any Subsidiary)
so long as (a) at least 85% of the proceeds of such Asset Sale are in cash, (b)
the aggregate Net Cash Proceeds from all such Asset Sales during the term of
this Agreement do not exceed the Maximum Proceeds Amount and (c) the proceeds
thereof are applied as provided in Section 6.2.1; provided that no action
otherwise permitted by clause (i), (ii) or (vi) above shall be permitted at any
time if an Event of Default or Unmatured Event of Default exists or would result
therefrom.
10.8 Debt. Not, and not permit any Subsidiary to, create, incur, assume or
suffer to exist any Debt, except: (i) Debt hereunder; (ii) Debt existing on the
Effective Date and listed on Item 10.8 ("Debt") of Schedule II (provided that
all Debt listed under the heading "Debt to be Repaid" shall be paid in full on
or prior to the Effective Date); (iii) Debt of the Company to any Subsidiary and
of any Subsidiary to the Company or any other Subsidiary (provided that if any
such Debt is evidenced by a promissory note, such note shall have been pledged
to the Agent pursuant to the Security Agreement); (iv) Debt under Capital Leases
to the extent permitted by Section 10.12; (v) Debt incurred in connection with
Liens permitted by Section 10.9; (vi) (x) the 1996 Subordinated Notes and the
1998 Subordinated Notes and Suretyship Liabilities of Subsidiaries of the
Company in respect of each thereof that are subordinated to the obligations of
the Guarantors under the Guaranty in a manner satisfactory to the Agent and (y)
other Subordinated Debt (provided, that the aggregate principal amount of
Subordinated Acquisition Debt outstanding during the term of this Agreement
shall not exceed $10,000,000); (vii) Debt incurred or assumed in connection with
Investments permitted by clauses (k) and (m) of Section 10.10; (viii) the
Company and its Subsidiaries may guaranty obligations of their respective
Subsidiaries arising under contracts entered into in the ordinary course of
business; (ix) the Harris Note; and (x) other Debt not exceeding in the
aggregate $5,000,000.
10.9 Liens. Not, and not permit any Subsidiary to, create or permit to
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature, whether now owned or hereafter acquired, except: (a) Liens
for taxes or other governmental charges not at the time delinquent or thereafter
payable without penalty or being contested in good faith by appropriate
proceedings and, in each case, for which it maintains adequate reserves; (b)
Liens arising in the ordinary course of business (such as (i) Liens of carriers,
warehousemen, mechanics and materialmen and other similar Liens imposed by law
and (ii) Liens incurred in connection with worker's compensation, unemployment
compensation and other types of social security (excluding Liens arising under
ERISA) or in connection with surety and appeal bonds, bids, performance bonds
and similar obligations) for sums not overdue or being contested in good faith
by appropriate proceedings and not involving any deposits or advances or
borrowed money or the deferred purchase price of property or services, and, in
each case, for which it maintains adequate reserves; (c) Liens identified on
Item 10.9 ("Liens") of Schedule II; (d) Liens in connection with Capital Leases
(to the
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extent permitted hereunder); (e) any Lien arising in connection with the
acquisition of property after the date hereof, and attaching only to the
property being acquired, provided that the aggregate amount of all Debt secured
by such Liens shall not exceed $5,000,000; (f) attachments, judgments and other
similar Liens, for sums not exceeding $1,000,000, arising in connection with
court proceedings (provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings); (g) other Liens incidental to the
conduct of the business of the Company or a Subsidiary or the ownership of its
property or assets, including easements, rights of way, restrictions, minor
defects or irregularities in title and other similar Liens, which Liens were not
incurred in connection with the borrowing of money and do not, in any case or in
the aggregate, interfere in any material respect with the ordinary conduct of
the business of the Company or any Subsidiary; (h) building restrictions, zoning
laws and other statutes, laws, rules, regulations, ordinances and restrictions,
and any amendments thereto, now or at any time hereafter adopted by any
Governmental Authority having jurisdiction; (i) any interest or title of a
lessor or secured by a lessor's interest under any lease (other than a Capital
Lease); (j) Liens in connection with Investments permitted by Section 10.10(k);
(k) Liens granted by the Collateral Documents; and (l) other Liens securing
obligations not at any time exceeding $1,500,000.
10.10 Investments. Not, and not permit any Subsidiary to, make, incur,
assume or suffer to exist any Investment in any other Person, except:
(a) Investments existing on the Effective Date and identified in
Item 10.10 ("Investments") of Schedule II;
(b) Cash Equivalent Investments;
(c) Investments by the Company in its Subsidiaries or by any
Subsidiary in any other Subsidiary, in the form of contributions to
capital or loans or advances; provided that, immediately before and after
giving effect to such Investment, no Event of Default or Unmatured Event
of Default shall have occurred and be continuing;
(d) Investments by the Company or any Subsidiary in any Subsidiary,
in the form of capital contributions existing on the date hereof;
(e) loans or advances made by any Subsidiary to the Company;
(f) loans or advances to officers and employees of the Company or of
any Subsidiary (i) for travel or other ordinary business expenses in an
amount not in excess of $100,000 in the aggregate at any time and (ii) to
finance the purchase of stock of the Company or any Subsidiary in an
amount not in excess (in addition to any such loans or advances permitted
under clause (a)) of $1,000,000 in the aggregate at any time;
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(g) loans or advances to, or deposits with, contractors and
suppliers in the ordinary course of business not in excess of $500,000 in
the aggregate at any time;
(h) bank deposits in the ordinary course of business, provided that
the aggregate amount of all such deposits, other than deposits (x) with
any Lender, (y) with any bank which has executed a blocked account
agreement reasonably satisfactory to the Agent and (z) in imprest payroll
accounts, shall not at any time exceed $1,000,000 for more than three
consecutive days;
(i) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods and services in
the ordinary course of business;
(j) shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business;
(k) Permitted Acquisitions (other than the Merger), provided that:
(i) both before and after giving effect to such acquisition,
no Event of Default or Unmatured Event of Default shall exist,
(ii) the Company shall have delivered to the Agent a
duly-completed certificate in the form of Exhibit B (each, an
"Acquisition Certificate"), confirming that the financial conditions
referred to in clause (iv) below with respect to such acquisition
will be satisfied and setting forth the amount of Acquisition
Capital Expenditures to be made in connection with such acquisition,
(iii) after giving effect to such acquisition, the Company
will have aggregate unused availability of not less than $10,000,000
under the Revolving Commitments,
(iv) the Company shall be in compliance with all financial
covenants in Section 10.6 (in each case calculated for the
Computation Period ending on the last day of the most recently-ended
Fiscal Quarter on a pro forma basis as if such acquisition had
occurred (and any resulting Debt had been incurred) on the first day
of such Computation Period), and
(v) the Lenders shall have completed their due diligence with
respect to such acquisition, and all aspects thereof (including,
without limitation, environmental issues, accounting matters, market
review, aggregates supply and competitive position) shall be
reasonably satisfactory to the Required Lenders (provided that the
Company and its Subsidiaries may make acquisitions for a purchase
price not to exceed (x) $15,000,000 for any single acquisition and
(y) $30,000,000 in the
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aggregate for all acquisitions while this Agreement is in effect
without meeting the requirements of this clause (v));
(l) Investments received as proceeds of any sale of assets so long
as such Investments are reasonably satisfactory to the Required Lenders;
(m) Investments not otherwise permitted by the foregoing clauses (a)
through (l) not exceeding $500,000; and
(n) the Merger.
10.11 Restricted Payments. Not, and not permit any Subsidiary to, (a)
declare or pay any dividend (other than stock dividends) or distribution on any
of its capital stock, (b) purchase or redeem any capital stock of the Company or
any Subsidiary (or any warrants, options or other rights in respect thereof),
(c) make any other distribution to shareholders of the Company or any
Subsidiary, (d) prepay, purchase, defease or redeem any Subordinated Debt or (e)
set aside funds for any of the foregoing; provided that (i) any Subsidiary may
declare and pay dividends, or make other distributions, to the Company or to
another Subsidiary of the Company (but not to any other Person); (ii) so long as
such payment is permitted under the terms of the applicable subordination
agreement, Western Rock may make scheduled payments of principal and interest on
the Aldred Notes; (iii) so long as such payment is permitted under the terms of
the Lohja Note, the Company may (x) make scheduled payments of principal and
interest on the Lohja Note and (y) make a prepayment in full of the Lohja Note
so long as at least $1,800,000 of such prepayment is funded by cash equity
capital contributions to the Company; (iv) so long as such payment is permitted
under the terms of the subordination agreement with respect thereto, the Company
may make scheduled payments of principal and interest on the Jensen Note; (v) so
long as no Event of Default or Unmatured Event of Default exists or would result
therefrom, any Subsidiary or the Company may repurchase or redeem its stock from
any former employee or director of, or consultant to, a Subsidiary or the
Company (or the heirs or legal representatives of any such former employee,
director or consultant) in an aggregate amount, for all such purchases, not
exceeding $1,000,000 in any Fiscal Year; (vi) the Company may make scheduled
payments of principal and interest on the 1996 Subordinated Notes and may make
scheduled payments of interest on the 1998 Subordinated Notes subject to the
subordination provisions governing such Subordinated Debt; (vii) the Company may
make scheduled payments of principal and interest on the Cox Notes and Southern
Ready Mix, Inc. may make scheduled payments of principal and interest on the
Vance Notes, in each case subject to the subordination provisions governing such
Subordinated Debt; and (viii) AcquisitionCo may pay the Merger consideration
pursuant to the terms of the Merger Agreement.
10.12 Capital Expenditures, etc. Not, and not permit any Subsidiary to,
make or commit to make any Capital Expenditure in any Fiscal Year, except
Capital Expenditures which do not in the aggregate exceed $15,000,000 in any
Fiscal Year thereafter; provided that any unused amount in any
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Fiscal Year, up to a maximum of $2,000,000, may be carried over and used in the
following Fiscal Year.
10.13 Rental Obligations. Not, and not permit any Subsidiary to, enter
into any arrangement (other than Capital Leases) which involves the leasing by
the Company or such Subsidiary from any lessor of any personal property (or any
interest therein), except (a) rentals of items of equipment for not more than 90
days for use on one or more specific jobs in the ordinary course of business and
(b) arrangements which, together with all other such arrangements which shall
then be in effect, will not require the payment of any aggregate amount of
rentals by the Company and its Subsidiaries in any Fiscal Year in excess of 3.5%
of Net Revenues for the immediately preceding Fiscal Year; provided, however,
that any calculation made for purposes of this Section shall exclude any amounts
required to be expended for maintenance and repairs, insurance, taxes,
assessments and other similar charges.
10.14 Use of Proceeds. Use the proceeds of the Loans to finance the Merger
and to repay existing Debt, for working capital and for other general corporate
purposes, including Permitted Acquisitions; and not use or permit any proceeds
of any Loan to be used, either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of (a) "purchasing or carrying" any Margin
Stock or (b) purchasing or otherwise acquiring any stock of any Person if such
Person (or its board of directors) has (i) announced that it will oppose such
purchase or other acquisition or (ii) commenced any litigation which alleges
that such purchase or other acquisition violates, or will violate, any
applicable law.
10.15 Maintenance of Property. Maintain, and cause each Subsidiary to
maintain, its properties which are material to the conduct of its business in
good working order and condition (ordinary wear and tear excepted).
10.16 Employee Benefit Plans. Maintain, and cause each Subsidiary to
maintain, each Pension Plan in compliance in all material respects with all
applicable requirements of law and regulations.
10.17 Environmental Matters.
10.17.1 Environmental Obligations. (a) Comply, and cause each Subsidiary
to comply, in a reasonable manner with any applicable Federal or state judicial
or administrative order requiring the performance at any real property owned,
operated, or leased by the Company or any Subsidiary of activities in response
to any Release or threatened Release of any Hazardous Material, except for the
period of time that the Company or such Subsidiary is diligently in good faith
contesting such order; (b) use and operate, and cause each Subsidiary to use and
operate, all of its facilities and properties in material compliance with all
Environmental Laws; (c) keep, and cause each Subsidiary to keep, all necessary
permits, approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance therewith; (d)
handle, store,
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transport and dispose of, and cause each Subsidiary to handle, store, transport
and dispose of, all Hazardous Materials in material compliance with all
applicable Environmental Laws; (e) not, and not permit any Subsidiary to,
commence disposal of any Hazardous Material into or onto any real property
owned, operated or leased by the Company or any Subsidiary or into or onto any
other real property which is not, to the best of the Company's knowledge, a
permitted disposal facility for such Hazardous Material; and (f) not allow any
Lien imposed pursuant to any Environmental Law to attach to any real property
owned, operated or leased by the Company or any Subsidiary.
10.17.2 Environmental Information. (a) Promptly notify the Agent of the
receipt by the Company or any Subsidiary of (and provide the Agent a copy of)
any written claim, demand, proceeding, action or notice of liability by any
Person arising out of or relating to the Release or threatened Release of any
Hazardous Material, except for any Release or threatened Release with respect to
which the maximum liability of the Company and its Subsidiaries is reasonably
expected to be less than $500,000; and (b) promptly notify the Agent of any
Release, threatened Release, or disposal of any Hazardous Material reported to
any Governmental Authority at any real property owned, operated or leased by the
Company or any Subsidiary, except for any Release, threat of Release or disposal
with respect to which the maximum liability of the Company and its Subsidiaries
is reasonably expected to be less than $500,000. Notwithstanding the exceptions
set forth in clauses (a) and (b) of the foregoing sentence, the Company shall
promptly notify the Agent if at any time the maximum aggregate liability of the
Company and its Subsidiaries for all Releases, threatened Releases or disposals
of Hazardous Materials described in such clauses is reasonably expected to
exceed $500,000.
10.18 Unconditional Purchase Obligations. Not, and not permit any
Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services.
10.19 Inconsistent Agreements, etc. Not, and not permit any Subsidiary to,
enter into any agreement (other than, in the case of clause (b), any Loan
Document) containing any provision which (a) would be violated or breached by
any borrowing by the Company hereunder or by the performance by the Company or
any Subsidiary of any of its obligations hereunder or under any other Loan
Document, (b) prohibits or limits the ability of any Subsidiary to (i) pay
dividends or make other distributions or prepay any Debt owed to the Company or
any Subsidiary or (ii) make loans or advances to the Company or (c) prohibits or
limits the ability of the Company or any Subsidiary to grant Liens on its assets
securing the Loans and other obligations secured by the Collateral Documents
other than documentation relating to Liens permitted by Section 10.9(d) or (e).
10.20 Transactions with Related Parties. Not, and not permit any
Subsidiary to, enter into or permit to exist any transaction, arrangement or
contract with any Related Party (other than the Company or any wholly-owned
Subsidiary) or any officer or director of the Company or any Related
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Party which is on terms less favorable than would be available from a Person
which is not a Related Party. Without limiting the foregoing, not pay any
management or similar fees to any Related Party other than management fees
payable to GTCR not exceeding $150,000 in any Fiscal Year; provided that no such
fee shall be paid at any time if an Event of Default or Unmatured Event of
Default exists or would result therefrom (it being understood that the Company
may pay GTCR's reasonable out-of-pocket expenses in connection with providing
management services to the Company in an amount not exceeding $25,000 in any
Fiscal Year).
10.21 Business Activities. Not, and not permit any Subsidiary to, engage
in any business activity other than the aggregates, and related materials and
services, business.
10.22 Further Assurances. Take, and cause each Subsidiary to take, such
actions as the Agent may reasonably request from time to time (including,
without limitation, the execution and delivery of guaranties, security
agreements, pledge agreements, Mortgages, stock powers, financing statements and
other documents, the filing or recording of any of the foregoing, and the
delivery of stock certificates and other collateral with respect to which
perfection is obtained by possession) to ensure that (i) the obligations of the
Company hereunder and under the other Loan Documents are secured by
substantially all assets of the Company and all capital stock of all
Subsidiaries (whether owned by the Company or otherwise) and are guaranteed by
all Subsidiaries (including, promptly upon the acquisition or creation thereof,
any Subsidiary created or acquired after the date hereof) and (ii) the
obligations of each Subsidiary under the Guaranty are secured by substantially
all of the assets of such Subsidiary (subject, in the case of both clause (i)
and clause (ii) above, to such exceptions as the Agent or the Required Lenders
may permit from time to time).
10.23 Modification of Certain Agreements. Not consent to any amendment or
other modification of (other than any amendment or modification which is not in
any way adverse to the Lenders), or waive any rights under, any of the terms or
provisions of (a) any Purchase Agreement, (b) the Lohja Note, (c) any agreement
or instrument relating to any Subordinated Debt, (d) the Merger Agreement or (e)
any Harris Note Document.
10.24 Lender Meetings. Participate (and cause each of its key officers and
employees to participate) in a meeting with the Lenders at least once each
Fiscal Year at a location and time reasonably acceptable to the Lenders.
10.25 Interest Rate Protection. Enter into, not later than 180 days after
the Effective Date, one or more Hedging Agreements, each with a term of at least
three years, on an ISDA standard form with one or more Lenders or Affiliates
thereof or with counterparties reasonably acceptable to the Agent to fix the
interest rate with respect to not less than $55,000,000 of the principal amount
of the Term Loans in form and substance reasonably satisfactory to the Agent.
10.26 Fiscal Year. The Company will not change its Fiscal Year.
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10.27 Limitations on Sale and Leaseback Transactions. The Company shall
not, and shall not permit any Subsidiary to, enter into any arrangement with any
Person providing for the leasing by the Company or any Subsidiary of any real or
personal property, which property is or has been sold or transferred by the
Company or any Subsidiary to such Person in contemplation of taking back a lease
thereof in an aggregate amount in excess of $5,000,000.
10.28 Post-Closing Real Estate Matters. (a) Within 90 days after the
Effective Date, deliver to the Agent date down endorsements for each existing
title policy insuring the Mortgages amended by the Amendments to Mortgage
delivered pursuant to Section 11.1.15.
(b) Within 90 days after the Effective Date, deliver to the Agent, with
respect to each parcel of real property leased by Monroc, Treasure Valley
Concrete, Inc. or Big Horn Redi-Mix, Inc. (except to the extent prohibited by a
valid and enforceable prohibition against the grant of a Lien on such leasehold
interest), a duly executed Mortgage, together with:
(i) an ALTA Loan Title Insurance commitment issued by an insurer
acceptable to the Agent, insuring the Agent's Lien on such parcel and
containing such endorsements as the Agent may reasonably require (it being
understood that the amount of coverage, exceptions to coverage and status
of title set forth in such commitment shall be reasonably acceptable to
the Agent); and
(ii) if requested by the Agent, copies of all documents of record
concerning such parcel as shown on such commitment.
Further, if requested by the Agent, the Company will use it best efforts to
obtain a landlord's consent from the owner of such property and a mortgagee's
consent from any mortgagee of such property, in each case reasonably
satisfactory to the Agent.
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING.
The effectiveness of this Agreement and the obligation of each Lender to
make any Loan and of the Issuing Lender to issue any Letter of Credit, is
subject to the following conditions precedent:
11.1 Effectiveness. This Agreement shall become effective, and all Loans
outstanding and the Existing Letters of Credit shall be deemed to be outstanding
and issued hereunder (as more fully set forth in Section 1.4), on the date (the
"Effective Date") on which (i) all conditions precedent set forth in Sections
11.2 and 11.3 have been satisfied and (ii) the Agent shall have received all of
the following, each duly executed and dated the Effective Date (or such earlier
date as shall be satisfactory to the Agent and each Lender), in form and
substance satisfactory to the Agent, and each (except for the Notes, of which
only the originals shall be signed) in sufficient number of signed counterparts
to provide one for each Lender:
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11.1.1 Notes. The Notes.
11.1.2 Resolutions. Certified copies of resolutions of the Board of
Directors of the Company authorizing or ratifying the execution, delivery and
performance by the Company of this Agreement, the Notes and the other Loan
Documents to which the Company is a party.
11.1.3 Consents, etc. Certified copies of all documents evidencing any
necessary corporate action, consents and governmental approvals (if any)
required for the execution, delivery and performance of the Loan Documents by
the Company.
11.1.4 Incumbency and Signature Certificates. A certificate of the
Secretary or an Assistant Secretary of the Company, certifying the names of the
officer or officers of the Company authorized to sign the Loan Documents to
which the Company is a party, together with a sample of the true signature of
each such officer (it being understood that the Agent and each Lender may
conclusively rely on such certificate until formally advised by a like
certificate of any changes therein).
11.1.5 Guaranty. The Guaranty, executed by each Guarantor.
11.1.6 Security Agreement. The Security Agreement, executed by the Company
and each Guarantor.
11.1.7 Pledge Agreements. Pledge Agreements, each substantially in the
form of Exhibit D-1, D-2 or D-3, as appropriate, executed by each of the
Company, each Subsidiary that owns stock of any other Subsidiary and each
Pledgor.
11.1.8 Opinions of Counsel. Opinions, addressed to the Agent and the
Lenders, of (i) Kirkland & Ellis, counsel to the Company and its Subsidiaries,
substantially in the form of Exhibit F-1, (ii) Richards, Brandt, Miller &
Nelson, Utah, Nevada, Idaho and Wyoming counsel to the Company and its
Subsidiaries, substantially in the form of Exhibit F-2, (iii) Lange, Simpson,
Robinson & Somerville LLP, Alabama counsel to the Company and its Subsidiaries,
substantially in the form of Exhibit F-3, (iv) Gust Rosenfeld P.L.C., Arizona
counsel to the Company and its Subsidiaries, substantially in the form of
Exhibit F-4, (v) Bronson, Bronson & McKinnon, LLP, California counsel to the
Company and its Subsidiaries, substantially in the form of Exhibit F-5, (vi)
Smith, Gambrell & Russell, LLP, Georgia counsel to the Company and its
Subsidiaries, substantially in the form of Exhibit F-6, and (vii) Baker,
Donelson, Bearman & Caldwell, Tennessee counsel to the Company and its
Subsidiaries, substantially in the form of Exhibit F-7.
11.1.9 Insurance. Evidence satisfactory to the Agent and each Lender of
the existence of insurance required to be maintained pursuant to Section 10.3,
together with evidence that the Agent has been named as a loss payee and an
additional insured on all related insurance policies.
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11.1.10 Merger, 1996 Subordinated Notes, 1998 Subordinated Notes. (a)
Copies of each of the Merger Agreement and the Note and Warrant Purchase
Agreement, fully executed by the parties thereto and of all material
instruments, agreements and other documents required to be delivered or
furnished thereunder or in connection therewith (including, without limitation,
in the case of opinions of counsel, if any, reliance letters expressly
permitting the Agent and the Lenders to rely thereon as if such opinions had
been addressed thereto) and, except as expressly permitted by the Agent and the
Lenders, none of the material terms of the Merger (including any condition
precedent to AcquisitionCo's or the Company's performance thereof or obligation
to consummate the Merger) shall have been amended, waived or otherwise modified
in any material respect.
(b) Evidence that, after giving effect to the Loans and other credit
extensions to be made hereunder on the Effective Date and the application
thereof by the Company, the Merger has been or will be duly consummated in
accordance with the Merger Agreement without amendment, waiver or other
modification thereof unless the Agent and the Lenders shall have expressly
consented thereto in writing.
11.1.11 Payment of Fees. Evidence of payment by the Company of all accrued
and unpaid fees, costs and expenses to the extent then due and payable on the
Effective Date, together with all reasonable fees and expenses of counsel to the
Agent and the Arranger to the extent invoiced prior to the Effective Date, plus
such additional amounts of reasonable attorneys' fees and expenses as shall
constitute the Agent's reasonable estimate of such fees and expenses incurred or
to be incurred by the Agent or the Arranger through the closing proceedings
(provided that such estimate shall not thereafter preclude final settling of
accounts between the Company and the Agent).
11.1.12 Solvency Certificate. A Solvency Certificate, substantially in the
form of Exhibit N, executed by the chief financial officer of the Company.
11.1.13 Financial Information. (i) Audited financial statements of Monroc
for the fiscal years ending in 1994, 1995 and 1996, (ii) unaudited interim
consolidated financial statements of Monroc for each quarterly period ended
after the latest fiscal year referred to in clause (i) above as to which such
financial statements are available and such financial statements shall not, in
the reasonable judgment of the Lenders, reflect any material adverse change in
the consolidated financial condition of Monroc and its Subsidiaries from what
was reflected in the financial statements or projections previously furnished to
the Lenders and (iii) evidence reasonably satisfactory to the Lenders that the
pro forma EBITDA of the Company and its Subsidiaries for the last twelve months
for which financial information is then available (calculated as if the Merger
had occurred on the first day of such twelve-month period) is at least
$36,800,000.
11.1.14 Pro Forma. A pro forma consolidated balance sheet of Monroc and
its Subsidiaries as at the date of the most recent consolidated balance sheet
delivered pursuant to Section 11.1.13, adjusted to give effect to the
consummation of the Merger and the financings contemplated hereby as if such
transactions had occurred on such date, prepared in a manner reasonably
acceptable to the
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Agent and consistent in all material respects with the sources and uses of cash
for the Merger as previously described to the Lenders and the forecasts
previously provided to the Lenders.
11.1.15 Mortgage Amendments. With respect to each parcel of real property
owned by the Company which has previously been mortgaged to the Agent for the
benefit of the Lenders pursuant to the Existing Loan Agreement (or any
predecessor thereto), an Amendment to Mortgage.
11.1.16 Real Estate Documentation. With respect to each parcel of real
property owned by Monroc, Treasure Valley Concrete, Inc. or Big Horn Redi-Mix,
Inc., a duly executed Mortgage, together with:
(a) an ALTA Loan Title Insurance commitment issued by an insurer
acceptable to the Agent, insuring the Agent's Lien on such parcel and
containing such endorsements as the Agent may reasonably require (it being
understood that the amount of coverage, exceptions to coverage and status
of title set forth in such commitment shall be reasonably acceptable to
the Agent); and
(b) if requested by the Agent, copies of all documents of record
concerning such parcel as shown on such commitment.
11.1.17 Other. Such other documents as the Agent or any Lender may
reasonably request.
11.2 Other Conditions to Initial Credit Extension. The obligation of each
Lender to make its initial credit extension hereunder is, in addition to the
conditions precedent specified in Sections 11.1 and 11.3, subject to the
following conditions precedent:
11.2.1 1998 Subordinated Notes. The Company shall have issued the 1998
Subordinated Notes on terms and conditions satisfactory to the Agent for gross
proceeds of not less than $15,000,000.
11.2.2 Capital Structure; Indebtedness. Substantially all of the existing
indebtedness of Monroc and its Subsidiaries shall have been repaid on terms
satisfactory to the Agent. The capitalization and structure of the Company and
each Guarantor after the Merger shall be reasonably satisfactory to the Agent in
all respects.
11.2.3 1996 Subordinated Notes. The holders of the 1996 Subordinated Notes
shall have approved the Merger and the financing contemplated hereby and the
1998 Subordinated Notes and shall have agreed that all amounts outstanding or
drawable under the Facilities constitute "Senior Debt" for purposes of the 1996
Subordinated Notes. All conditions precedent to the effectiveness of the Note
and Warrant Purchase Agreement, other than the effectiveness of this Agreement,
shall have been satisfied.
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11.2.4 Merger Consideration; Expenses. The Lenders shall have received
evidence satisfactory to them that (i) the aggregate Merger consideration shall
not exceed $72,000,000 and (ii) the aggregate fees and expenses with respect to
the Merger and the financing thereof shall not exceed approximately $5,000,000.
11.3 All Loans and Letters of Credit. The effectiveness of this Agreement,
and the obligation of each Lender to make each Loan and of the Issuing Lender to
issue each Letter of Credit, is subject to the conditions precedent that:
11.3.1 No Default, etc. (a) No Event of Default or Unmatured Event of
Default has occurred and is continuing or will result from the making of such
Loan or the issuance of such Letter of Credit, (b) the warranties of the Company
contained in Section 9 (excluding Sections 9.6 and 9.8) are true and correct as
of the date of the making of such requested Loan or the issuance of such
requested Letter of Credit, with the same effect as though made on such date
(except to the extent relating solely to an earlier date, in which case such
warranty shall have been true and correct as of such earlier date) and (c) since
December 31, 1997, no event has occurred that has resulted in, or is reasonably
likely to result in, a Material Adverse Effect (other than any such event which
has been waived in writing by the Required Lenders).
11.3.2 Confirmatory Certificate. If requested by the Agent or any Lender,
the Agent shall have received (in sufficient counterparts to provide one to each
Lender) a certificate dated the date of the making of such requested Loan or the
issuance of such requested Letter of Credit and signed by a duly authorized
representative of the Company as to the matters set out in Section 11.3.1 (it
being understood that each request by the Company for the making of a Loan or
the issuance of a Letter of Credit shall be deemed to constitute a warranty by
the Company that the conditions precedent set forth in Section 11.3.1 will be
satisfied at the time of the making of such Loan or the issuance of such Letter
of Credit), together with such other documents as the Agent or any Lender may
reasonably request in support thereof.
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement:
12.1.1 Non-Payment of the Loans, etc. Default in the payment when due of
the principal of any Loan; or default, and continuance thereof for three
Business Days, in the payment when due of any interest, fee, reimbursement
obligation or other amount payable by the Company hereunder or under any other
Loan Document.
12.1.2 Defaults in Respect of Other Debt. Any default shall occur under
the terms applicable to any Debt of the Company or any Subsidiary in an
aggregate amount (for all Debt so affected) exceeding $1,000,000 and such
default shall (a) consist of the failure to pay such Debt when due
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(subject to any applicable grace period), whether by acceleration or otherwise,
or (b) accelerate the maturity of such Debt or permit the holder or holders
thereof, or any trustee or agent for such holder or holders, to cause such Debt
to become due and payable prior to its expressed maturity.
12.1.3 Other Material Obligations. Default in the payment when due, or in
the performance or observance of, any material obligation of, or condition
agreed to by, the Company with respect to any purchase or lease of goods or
services involving payments, in the aggregate for all such purchases and leases,
of $1,000,000 or more (except only to the extent that the existence of any such
default is being contested by the Company in good faith and by appropriate
proceedings and appropriate reserves have been made in respect of such default).
12.1.4 Bankruptcy, Insolvency, etc. The Company or any Subsidiary becomes
insolvent or generally fails to pay, or admits in writing its inability or
refusal to pay, debts as they become due; or the Company or any Subsidiary
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for the Company or such Subsidiary or any property
thereof, or makes a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any Subsidiary or for a
substantial part of the property of any thereof and is not discharged within 60
days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of the Company or any
Subsidiary, and if such case or proceeding is not commenced by the Company or
such Subsidiary, it is consented to or acquiesced in by the Company or such
Subsidiary, or remains for 60 days undismissed; or the Company or any Subsidiary
takes any corporate action to authorize, or in furtherance of, any of the
foregoing.
12.1.5 Non-Compliance with Provisions of this Agreement. Failure by the
Company to comply with or to perform any covenant set forth in Sections
10.1.5(a), 10.2(b), 10.5, 10.6.1, 10.6.2, 10.6.3, 10.7, 10.9, 10.11, 10.12,
10.14, 10.18 through 10.23 or 10.27; failure by the Company to comply with or to
perform any covenant set forth in Section 10.8, 10.10, 10.13, 10.25 or 10.26 and
continuance of such failure for 10 days after notice thereof to the Company from
the Agent or any Lender; or failure by the Company to comply with or to perform
any other provision of this Agreement (and not constituting an Event of Default
under any of the other provisions of this Section 12) and continuance of such
failure for 30 days after notice thereof to the Company from the Agent or any
Lender.
12.1.6 Warranties. Any warranty made by the Company or any Subsidiary
herein or in any other Loan Document is breached, false or misleading (in each
case) in any material respect, or any schedule, certificate, financial
statement, report, notice or other writing furnished by the Company or any
Subsidiary to the Agent or any Lender is false or misleading (in each case) in
any material respect on the date as of which the facts therein set forth are
stated or certified.
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12.1.7 Pension Plans. (i) Institution of any steps by the Company or any
other Person to terminate a Pension Plan if as a result of such termination the
Company could be required to make a contribution to such Pension Plan, or could
incur a liability or obligation to such Pension Plan, in excess of $500,000 or
(ii) a contribution failure occurs with respect to any Pension Plan sufficient
to give rise to a Lien under section 302(f) of ERISA.
12.1.8 Judgments. Final judgments which exceed an aggregate of $500,000
(excluding any portion thereof which is covered by insurance to the reasonable
satisfaction of the Required Lenders) shall be rendered against the Company and
shall not have been discharged or vacated or had execution thereof stayed
pending appeal within 30 days after entry or filing of such judgments.
12.1.9 Invalidity of Collateral Documents, etc. Any Collateral Document
shall cease to be in full force and effect, the Company, any Guarantor or any
Pledgor shall fail to comply (subject to any applicable grace period) with or to
perform any applicable provision of any Collateral Document, or the Company, any
Guarantor or any Pledgor, or any Person by, through or on behalf of any such
entity, shall contest in any manner the validity, binding nature or
enforceability of any Collateral Document.
12.1.10 Invalidity of Guaranty, etc. The Guaranty shall cease to be in
full force and effect with respect to any Guarantor, any Guarantor shall fail to
comply (subject to any applicable grace period) with or to perform any
applicable provision of the Guaranty, or any Guarantor, or any Person by,
through or on behalf of any Guarantor shall contest in any manner the validity,
binding nature or enforceability of the Guaranty.
12.1.11 Change in Control or Management. (a) GTCR shall fail to own and
control, free of any Lien, at least 51% of the capital stock of each class of
the Company; or (b) 60 days shall have elapsed after James A. Harris or Michael
J. Stone shall have ceased to have substantially the same duties and
responsibilities as such individual presently has in connection with the
management of the Company and its Subsidiaries and such individual shall not
have been replaced by an individual reasonably satisfactory to the Required
Lenders.
12.1.12 Invalidity of Subordination Provisions, etc. Any subordination
provision in any document or instrument governing Subordinated Debt, or any
subordination provision in any guaranty by any Subsidiary of any Subordinated
Debt shall cease to be in full force and effect, or the Company, any Guarantor
or any other Person shall contest in any manner the validity, binding nature or
enforceability of any such provision.
12.2 Effect of Event of Default. If any Event of Default described in
Section 12.1.4 shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and the Notes and all other obligations
of the Company hereunder shall become immediately due and payable and the
Company shall immediately become obligated to deliver to the Agent cash
collateral in an amount equal to the outstanding face amount of all Letters of
Credit, all without presentment,
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demand, protest or notice of any kind; and, if any other Event of Default occurs
and is continuing, the Agent may (and upon written request of the Required
Lenders shall) declare the Commitments (if they have not theretofore terminated)
to be terminated and/or declare all Notes and all other Obligations to be due
and payable and/or demand that the Company immediately deliver to the Agent cash
collateral in an amount equal to the outstanding face amount of all Letters of
Credit, whereupon the Commitments (if they have not theretofore terminated)
shall immediately terminate and/or all Notes and all other obligations of the
Company hereunder shall become immediately due and payable and/or the Company
shall immediately become obligated to deliver to the Agent cash collateral in an
amount equal to the outstanding face amount of all Letters of Credit, all
without presentment, demand, protest or notice of any kind. The Agent shall
promptly advise the Company of any such declaration, but failure to do so shall
not impair the effect of such declaration. Notwithstanding the foregoing, the
effect as an Event of Default of any event described in Section 12.1.1 or
Section 12.1.4 may be waived by the written concurrence of all of the Lenders,
and the effect as an Event of Default of any other event described in this
Section 12 may be waived by the written concurrence of the Required Lenders. Any
cash collateral delivered hereunder shall be held by the Agent (without
liability for interest thereon) and applied to obligations arising in connection
with any drawing under a Letter of Credit. After the expiration or termination
of all Letters of Credit, such cash collateral shall be applied by the Agent to
any remaining obligations of the Company hereunder and any excess shall be
delivered to the Company or as a court of competent jurisdiction may direct.
SECTION 13 THE AGENT.
13.1 Appointment and Authorization. Each Lender hereby irrevocably
(subject to Sections 13.9 and 13.12) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
13.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
13.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other
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Loan Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of the Lenders for any recital, statement, representation or warranty made by
the Company or any Subsidiary or Affiliate of the Company, or any officer
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of the Company or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Company or any of the Company's Subsidiaries or Affiliates.
13.4 Reliance by Agent. (a) The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate and, if it
so requests, confirmation from the Lenders of their obligation to indemnify the
Agent against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Required Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions specified
in Section 11.1, each Lender that has executed this Agreement shall be deemed to
have consented to, approved or accepted or to be satisfied with, each document
or other matter either sent by the Agent to such Lender for consent, approval,
acceptance or satisfaction, or required thereunder to be consented to or
approved by or acceptable or satisfactory to such Lender.
13.5 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default or Unmatured Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Lenders, unless the
Agent shall have received written notice from a Lender or the Company referring
to this Agreement, describing such Event of Default or Unmatured Event of
Default and stating that such notice is a "notice of default". The Agent will
notify the Lenders of its receipt of any such notice. The Agent shall take such
action with respect to such Event of Default or Unmatured Event of Default as
may be requested by the Required Lenders in accordance with Section 12;
provided,
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however, that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default or Unmatured Event of
Default as it shall deem advisable or in the best interest of the Lenders.
13.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Agent, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any of the
Agent-Related Persons.
13.7 Indemnification. Whether or not the transactions contemplated hereby
are consummated, the Lenders shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; provided, however, that no Lender shall be
liable for the payment to the Agent-Related Persons of any portion of such
Indemnified Liabilities resulting solely from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including reasonable fees of attorneys for the Agent
(including the allocable costs of internal legal services and all disbursements
of internal counsel)) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any other
Loan Document, or any document contemplated by or referred to herein, to the
extent that the Agent is not reimbursed for such expenses by or on behalf of the
Company. The undertaking in this Section shall survive the repayment of the
Loans, the termination of the Letters
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of Credit, cancellation of the Notes and any termination of this Agreement and
the resignation or replacement of the Agent.
13.8 Agent in Individual Capacity. BofA and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, BofA or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to their Loans, BofA and its
Affiliates shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though BofA were not the Agent, and
the terms "Lender" and "Lenders" include BofA and its Affiliates, to the extent
applicable, in their individual capacities.
13.9 Successor Agent. The Agent may, and at the request of the Required
Lenders shall, resign as Agent upon 30 days' notice to the Lenders. If the Agent
resigns under this Agreement, the Required Lenders, after consultation with the
Company, shall appoint from among the Lenders a successor agent for the Lenders.
If no successor agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with the
Lenders and the Company, a successor agent from among the Lenders. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section 13 and
Sections 14.6 and 14.7 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Required Lenders, after consultation with the Company, appoint a successor agent
as provided for above.
13.10 Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
Code, such Lender agrees with and in favor of the Agent, to deliver to the
Agent:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and
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W-8 before the payment of any interest in the first calendar year
and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this
Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year
of such Lender and in each succeeding taxable year of such Lender
during which interest may be paid under this Agreement, and IRS Form
W-9;
(iii) if such Lender is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either IRS Form
1001 or 4224, such Lender shall deliver (A) a certificate
substantially in the form of Exhibit P and (B) two properly
completed and signed copies of IRS Form W-8 certifying that such
Lender is entitled to an exemption from United States withholding
tax with respect to payments of interest to be made under this
Agreement; and
(iv) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form
1001 and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the obligations of the Company to such
Lender, such Lender agrees to notify the Agent of the percentage amount in
which it is no longer the beneficial owner of Obligations of the Company
to such Lender. To the extent of such percentage amount, the Agent will
treat such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the obligations of
the Company to such Lender, such Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed
by Sections 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such
Lender an amount equivalent to the
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applicable withholding tax after taking into account such reduction. If
the forms or other documentation required by subsection (a) of this
Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any
Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify the Agent of a change in
circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Lender shall
indemnify the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses
(including reasonable fees of attorneys for the Agent (including the
allocable costs of internal legal services and all disbursements of
internal counsel)). The obligation of the Lenders under this subsection
shall survive the expiration or termination of the Credit and payment of
the Notes and other liabilities of the Company hereunder and the
resignation or replacement of the Agent.
(f) If any Lender claims exemption from, or reduction of,
withholding tax under the Code by providing IRS Form W-8 and a certificate
in the form of Exhibit P and such Lender sells, assigns, grants a
participation in, or otherwise transfers all or part of the obligations of
the Company to such Lender, such Lender agrees to notify the Agent and the
Company of the percentage amount in which it is no longer the beneficial
owner of obligations of the Company to such Lender. To the extent of such
percentage amount, the Agent and the Company will treat such Lender's IRS
Form W-8 and certificate in the form of Exhibit P as no longer valid.
13.11 Collateral Matters. The Lenders irrevocably authorize the Agent, at
its option and in its discretion, to (a) execute and deliver a subordination
agreement with respect to any Lien granted to or held by the Agent upon the
Collateral to the extent the Lien to which such Lien is subordinated is
expressly permitted by clause (d) or (e) of Section 10.9 or (b) release any Lien
granted to or held by the Agent upon any Collateral (i) upon termination of the
Commitments and payment in full of all Loans and all other obligations (other
than Surviving Obligations) of the Company hereunder and under the other Loan
Documents; (ii) constituting property (including stock of a Subsidiary) sold or
to be sold or disposed of as part of or in connection with any disposition
permitted hereunder; (iii) constituting property in which the Company or the
applicable Subsidiary owned no interest at the time the Lien was granted or at
any time thereafter; (iv) constituting property leased to the Company or a
Subsidiary under a lease which has expired or been terminated in a transaction
permitted under this Agreement or is about to expire and which has not been, and
is not intended by the Company or such Subsidiary to be, renewed or extended; or
(v) subject to the proviso to the second sentence of Section 14.1, if approved,
authorized or ratified in writing by the Required Lenders. Upon request
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by the Agent at any time, the Lenders will confirm in writing the Agent's
authority to release particular types or items of Collateral pursuant to this
Section 13.11.
13.12 Funding Reliance. (a) Unless the Agent receives notice from a Lender
by 11:00 A.M., Chicago time, on the day of a proposed borrowing that such Lender
will not make available to the Agent the amount which would constitute its pro
rata share of such borrowing in accordance with Section 2.3, the Agent may (but
shall not be so required) assume that such Lender has made such amount available
to the Agent and, in reliance upon such assumption, make a corresponding amount
available to the Company. If and to the extent such Lender has not made any such
amount available to the Agent, such Lender and the Company jointly and severally
agree to repay such amount to the Agent forthwith on demand, together with
interest thereon at the interest rate applicable to Loans comprising such
borrowing or, in the case of any Lender which repays such amount within three
Business Days, the Federal Funds Rate (together with such other compensatory
amounts as may be required to be paid by such Lender to the Agent pursuant to
the Rules for Interbank Compensation of the Council on International Banking or
the Clearinghouse Compensation Committee, as applicable, as in effect from time
to time). Nothing set forth in this clause (a) shall relieve any Lender of any
obligation it may have to make any Loan hereunder.
(b) Unless the Agent receives notice from the Company prior to the due
date for any payment hereunder that the Company does not intend to make such
payment, the Agent may (but shall not be so required) assume that the Company
has made such payment and, in reliance upon such assumption, make available to
each Lender its share of such payment. If and to the extent that the Company has
not made any such payment to the Agent, each Lender which received a share of
such payment shall repay such share (or the relevant portion thereof) to the
Agent forthwith on demand, together with interest thereon at the Alternate Base
Rate (or, in the case of any Lender which repays such amount within three
Business Days, the Federal Funds Rate). Nothing set forth in this clause (b)
shall relieve the Company of any obligation it may have to make any payment
hereunder.
13.13 Assignment of Agency Function. The Agent may, at any time and from
time to time, without the consent of any other party to this Agreement, assign
and delegate to an Affiliate of the Agent that is a commercial bank located in
the United States of America or having a branch office in the United States of
America (an "Affiliate Agent") all of its rights, duties and obligations as
Agent hereunder; provided, however, that the Company and the Lenders may
continue to deal solely and directly with the assignor Agent until written
notice of such assignment, together with payment office, address for notice and
related information with respect to the Affiliate Agent, shall have been given
to the Company and the Lenders by the Agent and the Affiliate Agent. From and
after the date of such written notice, (a) the Affiliate Agent shall be a party
hereto, shall be deemed to be the "Agent" hereunder and shall have the rights,
duties and obligations of the Agent hereunder and under the Notes and the
Guaranty and (b) the assignor Agent shall relinquish its rights and be released
from its duties and obligations as Agent hereunder and under the Notes, the
Guaranty and the Collateral Documents; provided, however, that the provisions of
this Section 13 and Section 14.6 shall inure
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to the benefit of the assignor Agent as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement. Immediately upon such an
assignment, this Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the assignment of the assignor Agent's
rights, duties and obligations as Agent to the Affiliate Agent.
SECTION 14 GENERAL.
14.1 Waiver; Amendments. No delay on the part of the Agent or any Lender
in the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by any of them of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy. No amendment, modification or waiver of, or consent or
forbearance in the case of any default with respect to, any provision of this
Agreement or the Notes shall in any event be effective unless the same shall be
in writing and signed and delivered by Lenders having an aggregate Total
Percentage of not less than the aggregate Total Percentage expressly designated
herein with respect thereto or, in the absence of such designation as to any
provision of this Agreement or the Notes, by the Required Lenders, and then any
such amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided that:
(1) no such waiver, amendment or consent shall increase or extend
any Commitment of any Lender (or reinstate any Commitment terminated pursuant to
Section 12.2) without the written consent of such Lender;
(2) no such waiver, amendment or consent shall postpone or delay any
date fixed by this Agreement or any other Loan Document for any payment of
regularly scheduled principal or interest on any Loan without the written
consent of the Lender holding such Loan (provided, that any date fixed for
repayment of principal of any Term Loan may be postponed or delayed (but not
beyond the final maturity date for such Facility) with the consent of Lenders
having a Total Percentage of 66-2/3%);
(3) no such waiver, amendment or consent relating to the definition
of "Mandatory Prepayment Event" or to any provision of this Agreement or any
other Loan Document which would result in any increased or decreased mandatory
prepayment of any Loan, or any increased or decreased mandatory reduction of any
Commitment, shall be made without the written consent of the Required Revolving
Lenders, Required Term A Lenders and Required Term B Lenders;
(4) no such waiver, amendment or consent shall reduce the principal
of, or the rate of interest specified herein on, any Loan without the written
consent of the Lender holding such Loan;
(5) no such waiver, amendment or consent shall reduce any fees
payable hereunder or under any other Loan Document, or postpone or delay any
date fixed by this Agreement or any
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other Loan Document for the payment of fees or any other amounts due to any
Lender hereunder or under any other Loan Document, without the written consent
of the Lender to whom such fee or other amount is owing;
(6) no such waiver, amendment or consent shall (w) change the
aggregate percentage of the Total Percentage which is required for the Lenders
or any of them to take any action hereunder without the written consent of all
Lenders, (x) amend the definition of "Required Revolving Lenders" without the
written consent of all Revolving Lenders, (y) amend the definition of "Required
Term A Lenders" without the written consent of all Term A Lenders or (z) amend
the definition of "Required Term B Lenders" without the written consent of all
Term B Lenders;
(7) no such waiver, amendment or consent shall release the Guaranty
or any Subsidiary from its respective obligations under the Loan Documents to
which it is a party or release all or substantially all of the collateral
securing the obligations under the Loan Documents without the written consent of
all Lenders;
(8) no such waiver, amendment or consent shall amend or waive any
provision of this Section or any other provision herein providing for consent or
other action by all Lenders, without the written consent of all Lenders;
(9) after the making of the Term Loans, Section 2.3, 2.4 (as it
relates to conversions and continuations of Revolving Loans), 2.6, 2.7, 2.8,
2.9, 3.1(a), 6.1 or 6.2(b) may be amended, or the rights or privileges
thereunder waived, with the written consent of the Required Revolving Lenders,
the Company and the Agent;
(10) no amendment, waiver or consent shall, unless in writing and
signed by the Issuing Lender in addition to the Required Lenders or all Lenders,
as the case may be, affect the rights or duties of the Issuing Lender under this
Agreement or any Letter of Credit or Letter of Credit Application relating to
any Letter of Credit issued or to be issued by it; and
(11) no amendment, waiver or consent shall, unless in writing and
signed by the Administrative Agent in addition to the Required Lenders or all
Lenders, as the case may be, affect the rights or duties of the Administrative
Agent under this Agreement or any other Loan Document.
14.2 Confirmations. The Company and each holder of a Note agree from time
to time, upon written request received by it from the other, to confirm to the
other in writing (with a copy of each such confirmation to the Agent) the
aggregate unpaid principal amount of the Loans then outstanding under such Note.
14.3 Notices. Except as otherwise expressly provided herein, all notices
hereunder shall be in writing (including, without limitation, facsimile
transmission) and shall be sent to the applicable party at its address shown
below its signature hereto or at such other address as such party may, by
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written notice received by the other parties hereto, have designated as its
address for such purpose. Notices sent by facsimile transmission shall be deemed
to have been given when sent; notices sent by mail shall be deemed to have been
given three Business Days after the date when sent by registered or certified
mail, postage prepaid; notices sent by overnight courier shall be deemed to have
been given on the Business Day after delivery to such courier; and notices sent
by hand delivery shall be deemed to have been given when received. For purposes
of Sections 2.3, 2.4 and 4.3, the Agent shall be entitled to rely on telephonic
instructions from any person that the Agent in good faith believes is an
authorized officer or employee of the Company, and the Company shall hold the
Agent and each Lender harmless from any loss, cost or expense resulting from any
such reliance.
14.4 Subsidiary References. The provisions of this Agreement relating to
Subsidiaries shall apply only during such times as the Company has one or more
Subsidiaries.
14.5 Regulation U. Each Lender represents that it in good faith is not
relying, either directly or indirectly, upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.
14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand (a)
all reasonable out-of-pocket costs and expenses of the Agent (including the fees
and charges of counsel for the Agent and of local counsel, if any, who may be
retained by said counsel) in connection with the preparation, execution,
delivery and administration of this Agreement, the other Loan Documents and all
other documents provided for herein or delivered or to be delivered hereunder or
in connection herewith (including, without limitation, any amendment, supplement
or waiver to any Loan Document), and (b) all reasonable out-of-pocket costs and
expenses (including reasonable attorneys' fees (including the allocable costs of
internal legal services and all disbursements of internal counsel), court costs
and other legal expenses) incurred by the Agent and each Lender after an Event
of Default in connection with the enforcement of this Agreement, the other Loan
Documents or any such other documents. Each Lender agrees to reimburse the Agent
for such Lender's pro rata share (based on its respective Total Percentage) of
any such costs and expenses of the Agent not paid by the Company. In addition,
the Company agrees to pay, and to save the Agent and the Lenders harmless from
all liability for, any stamp or other taxes which may be payable in connection
with the execution and delivery of this Agreement, the borrowings hereunder, the
issuance of the Notes or the execution and delivery of any other Loan Document
or any other document provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided for in this
Section 14.6 shall survive repayment of the Loans, termination of the Letter of
Credit, cancellation of the Notes and any termination of this Agreement.
14.7 Indemnification by the Company. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and hold the
Agent-Related Persons, and each Lender and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses,
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damages, penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including reasonable fees of attorneys for the Agent (including
the allocable costs of internal legal services and all disbursements of internal
counsel)) of any kind or nature whatsoever which may at any time (including at
any time following repayment of the Loans, the termination of the Letters of
Credit and the termination, resignation or replacement of the Agent or
replacement of any Lender) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement or the Loans or Letters
of Credit or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Company shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities resulting solely
from the gross negligence or willful misconduct of such Indemnified Person.
All obligations provided for in this Section 14.7 shall survive repayment
of the Loans, termination of the Letters of Credit, cancellation of the Notes
and any termination of this Agreement.
14.8 Successors and Assigns. This Agreement shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and the
permitted successors and assigns of the Lenders and the Agent.
14.9 Assignments; Participations.
14.9.1 Assignments. Any Lender may at any time (with the prior written
consent of the Agent and, so long as no Event of Default exists, the Company,
which consents shall not be unreasonably withheld or delayed) assign and
delegate to one or more commercial banks or other Persons (any Person to whom
such an assignment and delegation is to be made being herein called an
"Assignee"), all or any fraction of such Lender's Loans and Commitment (provided
that any assignment and delegation of a portion of such Lender's Revolving Loans
and Revolving Commitment, of such Lender's Term A Loans and Term A Loan
Commitment or such Lender's Term B Loans and Term B Loan Commitment, as the case
may be, shall be of a constant, and not a varying, percentage of the applicable
Loans and Commitment) in a minimum aggregate amount equal to the lesser of (i)
the assigning Lender's remaining Loans (and, if applicable, participations in
Letters of Credit) and (to the extent not used) Commitment and (ii) $5,000,000;
provided, however, that (a) no assignment and delegation may be made to any
Person if, at the time of such assignment and delegation, the Company would be
obligated to pay any greater amount under Section 7.6 or Section 8 to the
Assignee than the Company is then obligated to pay to the assigning Lender under
such Section and (b) the Company and the Agent shall be entitled to continue to
deal
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solely and directly with such Lender in connection with the interests so
assigned and delegated to an Assignee until the date when all of the following
conditions shall have been met:
(x) five Business Days (or such lesser period of time as the Agent
and the assigning Lender shall agree) shall have passed after written
notice of such assignment and delegation, together with payment
instructions, addresses and related information with respect to such
Assignee, shall have been given to the Company and the Agent by such
assigning Lender and the Assignee,
(y) the assigning Lender and the Assignee shall have executed and
delivered to the Company and the Agent an assignment agreement
substantially in the form of Exhibit H (an "Assignment Agreement"),
together with any documents required to be delivered thereunder, which
Assignment Agreement shall have been accepted by the Agent (and, if
applicable, the Company), and
(z) the assigning Lender or the Assignee shall have paid the Agent a
processing fee of $3,500.
From and after the date on which the conditions described above have been met,
(x) such Assignee shall be deemed automatically to have become a party hereto
and, to the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee pursuant to such Assignment Agreement, shall have the
rights and obligations of a Lender hereunder and (y) the assigning Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it pursuant to such Assignment Agreement, shall be released from
its obligations hereunder. Within five Business Days after the effectiveness of
any assignment and delegation, the Company shall execute and deliver to the
Agent (for delivery to the Assignee and, if applicable, the Assignor) a new Note
payable to the Assignee and, if the assigning Lender has retained a Commitment
hereunder, a replacement Note payable to the assigning Lender (such Note to be
in exchange for, but not in payment of, the predecessor Note held by such
assigning Lender). Each such Note shall be dated the effective date of such
assignment. The assigning Lender shall mark the predecessor Note "exchanged" and
deliver it to the Company. Accrued interest on that part of the predecessor Note
being assigned shall be paid as provided in the Assignment Agreement. Accrued
interest and fees on that part of the predecessor Note not being assigned shall
be paid to the assigning Lender. Accrued interest and accrued fees shall be paid
at the same time or times provided in the predecessor Note and in this
Agreement. Any attempted assignment and delegation not made in accordance with
this Section 14.9.1 shall be null and void.
The Company designates the Agent as its agent for maintaining a book entry
record of ownership identifying the Lenders, their respective addresses and the
amount of the respective Loans and Notes which they own. The foregoing
provisions are intended to comply with the registration requirements in Treasury
Regulation Section 5f.103-1 so that the Loans and Notes are considered to be in
"registered form" pursuant to such regulation.
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Notwithstanding the foregoing provisions of this Section 14.9.1 or any
other provision of this Agreement, any Lender may at any time assign all or any
portion of its Loans and its Note to a Federal Reserve Bank (but no such
assignment shall release any Lender from any of its obligations hereunder).
14.9.2 Participations. Any Lender may at any time sell to one or more
commercial banks or other Persons participating interests in any Loan owing to
such Lender, the Note held by such Lender, the Commitment of such Lender or any
other interest of such Lender hereunder (any Person purchasing any such
participating interest being herein called a "Participant"). In the event of a
sale by a Lender of a participating interest to a Participant, (x) such Lender
shall remain the holder of its Note for all purposes of this Agreement, (y) the
Company and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations hereunder and (z)
all amounts payable by the Company shall be determined as if such Lender had not
sold such participation and shall be paid directly to such Lender. No
Participant shall have any direct or indirect voting rights hereunder except
with respect to any of the events that would require the unanimous consent of
the Lenders pursuant to the proviso to the second sentence of Section 14.1. Each
Lender agrees to incorporate the requirements of the preceding sentence into
each participation agreement which such Lender enters into with any Participant.
The Company agrees that if amounts outstanding under this Agreement and the
Notes are due and payable (as a result of acceleration or otherwise), each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement; provided that such right of setoff shall
be subject to the obligation of each Participant to share with the Lenders, and
the Lenders agree to share with each Participant, as provided in Section 7.5.
The Company also agrees that each Participant shall be entitled to the benefits
of Section 7.6 and Section 8 as if it were a Lender (provided that no
Participant shall receive any greater compensation pursuant to Section 7.6 or
Section 8 than would have been paid to the participating Lender if no
participation had been sold). Each Lender which sells a participation will
maintain a book entry record of ownership identifying the Participant(s) and the
amount of such participation(s) owned by such Participant(s). Such book entry
record of ownership shall be maintained by the Lender as agent for the Company
and the Agent. This provision is intended to comply with the registration
requirements in Treasury Regulation Section 5f.103-1 so that the Loans and Notes
are considered to be in "registered form" pursuant to such regulation.
14.10 Governing Law. This Agreement and each Note shall be a contract made
under and governed by the laws of the State of Illinois applicable to contracts
made and to be performed entirely within the State of Illinois. Whenever
possible each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations of the Company and rights
-74-
<PAGE>
of the Agent and the Lenders expressed herein or in any other Loan Document
shall be in addition to and not in limitation of those provided by applicable
law.
14.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement. When
counterparts executed by all of the parties hereto shall have been lodged with
the Agent (or, in the case of any Lender as to which an executed counterpart
shall not have been so lodged, the Agent shall have received confirmation from
such Lender of execution of a counterpart hereof by such Lender), this Agreement
shall become effective as of the date hereof, and at such time the Agent shall
notify the Company and each Lender.
14.12 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. EACH OF THE COMPANY, THE AGENT AND EACH LENDER HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE COMPANY,
THE AGENT AND EACH LENDER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
14.13 Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENT AND EACH LENDER
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE
-75-
<PAGE>
FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
-76-
<PAGE>
Delivered at Chicago, Illinois, as of the day and year first above written.
U.S. AGGREGATES, INC.
By: /s/ Michael Stone
-------------------------------
Title: _______________________________
400 South El Camino Real
Suite 500
San Mateo, California 94402
Attention: Michael J. Stone
Facsimile: 650-401-8718
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Agent
By: /s/ Kevin P. Morrison
-------------------------------
Title: Vice President
-------------------------------
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Kevin P. Morrison
Facsimile: 312-828-3555
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
a Lender and as Issuing Lender
By: /s/ Kevin P. Morrison
-------------------------------
Title: Vice President
-------------------------------
Agency Management Services #5596
1850 Gateway Boulevard
Concord, California 94520
Attention: Elizabeth Chao
-77-
<PAGE>
Facsimile: 510-675-8500
BANKBOSTON, N.A.,
as a Lender
By: /s/ Richard D. Hill
-------------------------------
Title: Managing Director
-------------------------------
100 Federal Street
Boston, Massachusetts 02110
Attention: Gregory Badger
Facsimile: 617-434-4929
NATIONAL CITY BANK,
as a Lender
By: /s/ illegible
-------------------------------
Title: ___________________________
1900 East 9th Street
Cleveland, Ohio 44114
Attention: Brian Cullina
Facsimile: 216-222-0003
BANK OF SCOTLAND,
as a Lender
By: /s/ Annie Chin Tat
-------------------------------
Title: Vice President
-------------------------------
181 West Madison Street
Suite 3525
Chicago, Illinois 60602
Attention: Jim Halley
-78-
<PAGE>
Facsimile: 312-263-1143
-79-
<PAGE>
IBJ SCHRODER BANK AND TRUST COMPANY,
as a Lender
By: /s/ Mark H. Minter
--------------------------------
Title: Managing Director
--------------------------------
One State Street
New York, New York 10004
Attention: Alexander B. Rieght
Facsimile: 212-858-2222
COMERICA BANK - CALIFORNIA,
as a Lender
By: /s/ Scott J. Smith
-------------------------------
Title: Vice President
--------------------------------
155 Grand Avenue
Oakland, California 94612
Attention: Scott T. Smith
Facsimile: 510-645-2220
ZIONS FIRST NATIONAL BANK,
as a Lender
By: /s/ illegible
-------------------------------
Title: Vice President
--------------------------------
40 East St. George Boulevard
St. George, Utah 84770
Attention: Kelly Robertson
Facsimile: 801-656-8796
-80-
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
as a Lender
By: /s/ Nancy A. Perkins
----------------------------------
Title: Vice President
----------------------------------
100 Pringle Avenue, Suite 650
Walnut Creek, California 94596
Attention: Nancy Perkins
Facsimile: 510-943-7442
CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC.
as Attorney-in-Fact and on behalf of First Allmerica
Financial Life Insurance Company as Portfolio Manager
By: /s/ illegible
----------------------------------
Title: Principal
----------------------------------
125 High Street
Oliver Tower
Boston, Massachusetts 02110
Attention: Peter Merrill
Facsimile: 617-946-5680
-81-
<PAGE>
ING HIGH INCOME PRINCIPAL PRESERVATION
FUND HOLDINGS, LDC, as a Lender
By: ING Capital Advisors, Inc., as Investment Advisor
By: /s/ Helen Y. Rhee
---------------------------------------
Title: Vice President & Portfolio Manager
---------------------------------------
333 South Grand Avenue
Los Angeles, California 90071
Attention: Helen Y. Rhee
Facsimile: 213-346-3995
PILGRIM AMERICA PRIME RATE TRUST,
as a Lender
By: /s/ illegible
----------------------------------
Title: Vice President
---------------------------------------
Two Renaissance Square
40 North Central Avenue
Phoenix, Arizona 85004
Attention: Michael Bacevich
Facsimile: 602-417-8327
-82-
<PAGE>
SCHEDULE I
COMMITMENTS AND PERCENTAGES
<TABLE>
<CAPTION>
Revolving Term A Term B
Lender Commitment Revolving Percentage Loan Commitment Term A Percentage Loan Commitment Term B Percentage
- ------ ---------- -------------------- --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Bank of $ 6,315,789.48 15.78947368% $ 8,684,210.52 15.78947368% $28,000,000 46.66666667%
America NT
& SA
BankBoston, $ 5,894,736.85 14.73684210% $ 8,105,263.15 14.73684210% $ 2,000,000 3.33333333%
N.A.
Bank of $ 5,263,157.89 13.15789474% $ 7,236,842.11 13.15789474% $ 1,333,334 2.22222333%
Scotland
National City $ 5,263,157.89 13.15789474% $ 7,236,842.11 13.15789474% $ 1,333,333 2.22222167%
Bank
IBJ Schroder $ 5,263,157.89 13.15789474% $ 7,236,842.11 13.15789474% $ 1,333,333 2.22222167%
Bank and
Trust
Company
Comerica $ 4,000,000.00 10.00% $ 5,500,000.00 10.00% 0 0.00%
Bank
Zions First $ 4,000,000.00 10.00% $ 5,500,000.00 10.00% $ 1,000,000 1.66666667%
National
Bank
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Union Bank $ 4,000,000.00 10.00% $ 5,500,000.00 10.00% 0 0.00%
of California,
N.A.
Cypresstree 0 0.00% 0 0.00% 8,000,000 13.33333333%
Investment
Management,
on behalf of
First
Allmerica
Financial Life
Insurance
Company
ING Capital 0 0.00% 0 0.00% 9,000,000 15.00%
Advisors
Pilgrim 0 0.00% 0 0.00% 8,000,000 13.33333333%
America
Prime Rate
Trust
TOTAL $40,000,000 100.00% $55,000,000 100.00% $60,000,000 100.0%
</TABLE>
<PAGE>
SCHEDULE 1.1A
PRICING SCHEDULE
The Applicable ABR Margin, Applicable Eurodollar Margin and Non-Use Fee
Rate shall be determined based on the Leverage Ratio as set forth below.
(a) initially, the Applicable ABR Margin for Revolving Loans and Term A
Loans shall be 1.125% per annum, the Applicable Eurodollar Margin for
Revolving Loans and Term A Loans shall be 2.125% per annum the Applicable
ABR Margin for Term B Loans shall be 1.50% per annum, the Applicable
Eurodollar Margin for Term B Loans shall be 2.50% per annum and the
Non-Use Fee Rate shall be 0.500% per annum;
(b) on and after any date specified below on which the Applicable ABR
Margin and Applicable Eurodollar Margin for Revolving Loans, Term A Loans
and Term B Loans and the Non-Use Fee Rate are to be adjusted, the rate per
annum set forth in the table below opposite the applicable Leverage Ratio:
<TABLE>
<CAPTION>
====================================================================================================================================
Applicable Applicable
Eurodollar Margin ABR Margin Applicable Applicable ABR
(Revolving Loans (Revolving Loans Non-Use Eurodollar Margin Margin (Term B
Leverage Ratio and Term A Loans) and Term A Loans) Fee Rate (Term B Loans) Loans)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Greater than or 2.125% 1.125% 0.50% 2.50% 1.50%
equal to 4.50:1
- ------------------------------------------------------------------------------------------------------------------------------------
Greater than or 1.875% 0.875% 0.50% 2.50% 1.50%
equal to 4.00:1 but
less than 4.50:1
- ------------------------------------------------------------------------------------------------------------------------------------
Greater than or 1.625% 0.625% 0.425% 2.25% 1.25%
equal to 3.50:1 but
less than 4.00:1
- ------------------------------------------------------------------------------------------------------------------------------------
Greater than or 1.375% 0.375% 0.375% 2.25% 1.25%
equal to 3.00:1 but
less than 3.50:1
- ------------------------------------------------------------------------------------------------------------------------------------
Greater than or 1.125% 0% 0.375% 2.25% 1.25%
equal to 2.50:1 but
less than 3.00:1
- ------------------------------------------------------------------------------------------------------------------------------------
Less than 2.50:1 0.875% 0% 0.35% 1.875% 0.875%.
====================================================================================================================================
</TABLE>
The Applicable ABR Margin, Applicable Eurodollar Margin and Non-Use Fee Rate
shall be adjusted, to the extent applicable, 30 days (or, in the case of the
last Fiscal Quarter of any year, 120 days) after the end of each Fiscal Quarter
(commencing with the Fiscal Quarter ending September
<PAGE>
30, 1998), based on the Leverage Ratio as of the last day of such Fiscal
Quarter; it being understood that if the Company fails to deliver the financial
statements required by Section 10.1.1 or 10.1.2, as applicable, and the related
Compliance Certificate, if any, required by Section 10.1.3 by the 30th day (or,
if applicable, the 120th day) after any Fiscal Quarter, the Applicable ABR
Margin shall be 1.50%, the Applicable Eurodollar Margin shall be 2.50% and the
Non-Use Fee Rate shall be 0.50% until such financial statements and Compliance
Certificate are delivered. In addition, at all times when an Event of Default or
Unmatured Event of Default shall have occurred and be continuing, there shall be
no reduction in the Applicable ABR Margin, the Applicable Eurodollar Margin or
the Non-Use Fee Rate.
<PAGE>
SCHEDULE II
[to be prepared by the Company]
<PAGE>
EXHIBIT A
FORM OF NOTE
________, 1998
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
__________________ at the office of Bank of America National Trust and Savings
Association (the "Agent"), in Concord, California, the aggregate unpaid
principal amount of all Loans made by the payee to the undersigned pursuant to
the Credit Agreement referred to below, such amount to be paid at the times set
forth in the Credit Agreement.
The undersigned further promises to pay interest on the unpaid principal
amount of each Loan evidenced hereby from the date of such Loan until such Loan
is paid in full, payable at the rates and at the times set forth in the Credit
Agreement. Payments of both principal and interest are to be made in lawful
money of the United States of America.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of, the Third Amended and Restated Credit Agreement, dated
as of June 5, 1998 (herein, as amended or otherwise modified from time to time,
called the "Credit Agreement"), between the undersigned, certain financial
institutions (including the payee) and the Agent, to which Credit Agreement
reference is hereby made for a statement of the terms and provisions under which
this Note may or must be paid prior to its due date or may have its due date
accelerated.
In addition to and not in limitation of the foregoing and the provisions
of the Credit Agreement, the undersigned further agrees, subject only to any
limitation imposed by applicable law, to pay all reasonable expenses, including
reasonable attorneys' fees and legal expenses, incurred by the holder of this
Note in endeavoring to collect any amounts payable hereunder which are not paid
when due, whether by acceleration or otherwise.
[This Note is a replacement of the Note of the undersigned dated October
15, 1996 payable to the order of the payee (the "Original Note") and nothing
contained herein shall be construed (i) to deem paid or forgiven the unpaid
principal amount of, or unpaid accrued interest on, the Original Note
outstanding at the time of its replacement by this Note, or (ii) to release,
cancel, terminate or otherwise adversely affect all or any part of any security
interest or other encumbrance heretofore granted to or for the benefit of the
payee of the Original Note which has not otherwise been expressly released or
(iii) to constitute a novation of the indebtedness evidenced by the Original
Note.]
<PAGE>
This Note is made under and governed by the laws of the State of Illinois
applicable to contracts made and to be entirely performed in such State.
U.S. AGGREGATES, INC.
By_____________________________
Title_______________________
-2-
<PAGE>
EXHIBIT J
NOTICE OF BORROWING
Date: __________________, ____
To: Bank of America National Trust and Savings Association as Agent for
the Lenders parties to the Third Amended and Restated Credit
Agreement dated as of June 5, 1998 (as extended, renewed, amended or
restated from time to time, the "Agreement") among U.S. Aggregates,
Inc., certain Lenders which are signatories thereto and Bank of
America National Trust and Savings Association, as Agent.
Ladies and Gentlemen:
The undersigned, U.S. Aggregates, Inc. (the "Company"), refers to
the Agreement, the terms defined therein being used herein as therein defined,
and hereby gives you notice irrevocably, pursuant to Section 2.3 of the
Agreement, of the borrowing specified below:
1. The Business Day of the proposed borrowing is _____________, ____.
2. The aggregate amount of the proposed borrowing is $______ [of which
$________ shall be Revolving Loans, $_______ shall be Term A Loans and $_______
shall be Term B Loans].
3. The borrowing is to be comprised of $ of [ABR] [Eurodollar] Loans.
[4. The duration of the Interest Period for the Eurodollar Loans included
in the Borrowing shall be months.]
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed borrowing, before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the warranties of the Company contained in Section 9 (excluding
Sections 9.6 and 9.8) of the Agreement are true and correct as though made on
and as of such date (except to the extent such warranties relate solely to an
earlier date, in which case they were true and correct as of such date);
(b) no Event of Default or Unmatured Event of Default has occurred and is
continuing, or would result from such proposed borrowing; and
<PAGE>
(c) the proposed borrowing will not cause the aggregate principal amount
of all outstanding Revolving Loans plus the aggregate Stated Amount of all
outstanding Letters of Credit to exceed the combined Revolving Commitments of
the Revolving Lenders.
U.S. AGGREGATES, INC.
By:__________________________
Title:_______________________
-2-
<PAGE>
EXHIBIT K
NOTICE OF CONVERSION
Date: __________________, ____
To: Bank of America National Trust and Savings Association as Agent for the
Lenders parties to the Third Amended and Restated Credit Agreement dated
as of June 5, 1998 (as extended, renewed, amended or restated from time to
time, the "Agreement") among U.S. Aggregates, Inc., certain Lenders which
are signatories thereto and Bank of America National Trust and Savings
Association, as Agent.
Ladies and Gentlemen:
The undersigned, U.S. Aggregates, Inc. (the "Company"), refers to the
Agreement, the terms defined therein being used herein as therein defined, and
hereby gives you notice irrevocably, pursuant to Section 2.4 of the Agreement,
of the conversion of the Loans specified herein, that:
1. The conversion date is ______________, ____.
2. The aggregate amount of the Loans to be converted is $__________.
3. The Loans are to be converted into [Eurodollar] [ABR] Loans.
4. The Loans being converted are [Revolving Loans] [Term A Loans] [Term B
Loans] [with an Interest Period ending on ________________, ____.].
5. [If applicable:] The duration of the Interest Period for the Eurodollar
Loans resulting from such conversion shall be months.
The undersigned hereby certifies that the no Event of Default or Unmatured
Event of Default has occurred and is continuing or would result from such
proposed conversion.
U.S. AGGREGATES, INC.
By:________________________
Title:_____________________
<PAGE>
EXHIBIT L
NOTICE OF CONTINUATION
Date: __________________, ____
To: Bank of America National Trust and Savings Association as Agent for the
Lenders parties to the Third Amended and Restated Credit Agreement dated
as of June 5, 1998 (as extended, renewed, amended or restated from time to
time, the "Agreement") among U.S. Aggregates, Inc., certain Lenders which
are signatories thereto and Bank of America National Trust and Savings
Association, as Agent.
Ladies and Gentlemen:
The undersigned, U.S. Aggregates, Inc. (the "Company"), refers to the
Agreement, the terms defined therein being used herein as therein defined, and
hereby gives you notice irrevocably, pursuant to Section 4.3 of the Agreement,
of the continuation of the Loans specified herein, that:
1. The continuation date is ______________, ____.
2. The aggregate amount of the Loans to be continued is $__________.
3. The Loans being continued are [Revolving Loans] [Term A Loans] [Term B
Loans].
4. The duration of the Interest Period for the Loans included in the
continuation shall be months.
The undersigned hereby certifies that no Event of Default or Unmatured
Event of Default has occurred and is continuing or would result from such
proposed continuation.
U.S. AGGREGATES, INC.
By:___________________________
Title:________________________
<PAGE>
EXHIBIT M
NOTICE OF VOLUNTARY PREPAYMENT
Date: ________________
To: Bank of America National Trust and Savings Association, as Agent for the
Lenders parties to the Third Amended and Restated Credit Agreement dated
as of June 5, 1998 (as extended, renewed, amended or restated from time to
time, the "Agreement") among U.S. Aggregates, Inc., a Delaware
corporation, certain Lenders which are signatories thereto and Bank of
America National Trust and Savings Association, as Agent.
Ladies and Gentlemen:
The undersigned, U.S. Aggregates, Inc. (the "Company"), refers to the
Agreement, the terms defined therein being used herein as therein defined, and
hereby gives you irrevocable notice, pursuant to Section 6.2.2 of the Agreement,
of the Company's intention to make a voluntary prepayment of the following
Loan(s):
Category of Loan(s): [Revolving Loan] [Term A Loan] [Term B Loan]
Value Date: _________
___ ABR Loan in the amount of _________
___ Eurodollar Loan in the amount of _________
with accrued interest (if applicable) of _________
Pursuant to standing instructions, we also authorize our account administrator
to debit our account 78-19625 on the value date for the principal amount and, if
applicable, the interest amount stated above.
U.S. AGGREGATES, INC.
By: ______________________
Name:
Title:
<PAGE>
EXHIBIT O
FORM OF PREPAYMENT OPTION NOTICE
Attention [ ]
Telecopy No. [ ]
Ladies and Gentlemen:
The undersigned, Bank of America National Trust and Savings Association,
as agent (in such capacity, the "Agent") for the Lenders, refers to the Third
Amended and Restated Credit Agreement, dated as of June 5, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among U.S. Aggregates, Inc., the Lenders from time to time parties thereto and
the Agent. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The Agent
hereby gives notice of an offer of prepayment made by the Company pursuant to
Section 6.2.3 of the Credit Agreement of the Term B Prepayment Amount. Amounts
applied to prepay the Term B Loans shall be applied pro rata to the Term B Loan
held by you. The portion of the prepayment amount to be allocated to the Term B
Loan held by you and the date on which such prepayment will be made to you
(should you elect to receive such prepayment) are set forth below:
(A) Total Term B Loan Prepayment Amount __________
(B) Portion of Term B Loan Prepayment
Amount to be received by you __________
(C) Prepayment Date (10 Business Days after
the date of this Prepayment Option Notice) __________
IF YOU DO NOT WISH TO RECEIVE ALL OF THE TERM B LOAN PREPAYMENT AMOUNT TO
BE ALLOCATED TO YOU ON THE PREPAYMENT DATE INDICATED IN PARAGRAPH (B) ABOVE,
please sign this notice in the space provided below and indicate the percentage
of the Term B Loan Prepayment Amount otherwise payable which you do not wish to
receive. Please return this notice as so completed via telecopy to the attention
of Elizabeth Chao, Agency Management Services, #5596 at the Agent, no later than
10:00 a.m., San Francisco time, on the Prepayment Date, at Telecopy No. (510)
675-8500. IF YOU DO NOT RETURN THIS NOTICE, YOU WILL RECEIVE 100% OF THE TERM B
LOAN PREPAYMENT ALLOCATED TO YOU ON THE PREPAYMENT DATE.
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: ___________________________________
Name:
Title:
[________________]LENDER
By: ___________________________________
Name:
Title:
Percentage of Term B
Prepayment Amount
Declined:_________%
-2-
<PAGE>
EXHIBIT P
FORM OF EXEMPTION CERTIFICATE
Reference is made to the Third Amended and Restated Credit Agreement,
dated as of June 5, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among U.S. Aggregates, Inc. (the
"Company"), the several banks and other financial institutions from time to time
parties thereto (the "Lenders") and Bank of America National Trust and Savings
Association, as agent for the Lenders hereunder (in such capacity, the "Agent").
Capitalized terms used herein that are not defined herein shall have the
meanings ascribed to them in the Credit Agreement. _____________________ (the
"Non-U.S. Lender") is providing this certificate pursuant to Section
13.10(a)(iii) of the Credit Agreement. The Non-U.S. Lender hereby represents and
warrants that:
1. The Non-U.S. Lender is the sole record and beneficial owner of the
Loans or the obligations evidenced by Note(s) in respect of which it is
providing this certificate.
2. The Non-U.S. Lender is not a "bank" for purposes of Section
881(c)(3)(A) of the Code. In this regard, the Non-U.S. Lender further represents
and warrants that:
(a) the Non-U.S. Lender is not subject to regulatory or other legal
requirements as a bank in any jurisdiction; and
(b) the Non-U.S. Lender has not been treated as a bank for purposes
of any tax, securities law or other filing or submission made to any
Governmental Authority, any application made to a rating agency or
qualification for any exemption from tax, securities law or other
legal requirements;
(c) The Non-U.S. Lender is not a 10-percent shareholder of the
Company within the meaning of Section 881(c)(3)(B) of the Code; and
(d) The Non-U.S. Lender is not a controlled foreign corporation
receiving interest from a related person within the meaning of
Section 881(c)(3)(C) of the Code.
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this certificate.
[NAME OF NON-U.S. LENDER]
By: ___________________________________
Name:
Title:
Dated: _____________________
-2-
<PAGE>
FIRST AMENDMENT
THIS FIRST AMENDMENT dated as of April 14, 1999 (this "AMENDMENT")
is to the Third Amended and Restated Credit Agreement (the "CREDIT
AGREEMENT") dated as of June 5, 1998 among U.S. AGGREGATES, INC., a Delaware
corporation (the "COMPANY"), various financial institutions (the "LENDERS")
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the
Lenders (the "AGENT"). Unless otherwise defined herein, terms defined in the
Credit Agreement are used herein as defined in the Credit Agreement.
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective on (and subject to the occurrence
of) the Amendment Effective Date (as defined below):
1.1 (a) The definition of "Capital Expenditures" in Section 1.1 of
the Agreement shall be amended and restated to read in its entirety as
follows:
CAPITAL EXPENDITURES means all expenditures which, in
accordance with GAAP, would be required to be capitalized and shown on
the consolidated balance sheet of the Company, but excluding (a)
Investments in preferred stock issued by Dekalb Stone (to the extent
such payments or investments constitute capital expenditures), (b)
expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (i) from insurance
proceeds (or other similar recoveries) paid on account of the loss of
or damage to the assets being replaced or restored or (ii) with awards
of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced, (c) Acquisition Capital
Expenditures to the extent that Acquisition Capital Expenditures during
the Fiscal Year or Computation Period in question do not exceed
$7,500,000 and (d) Capital Expenditures incurred in the second, third
and fourth Fiscal Quarters of 1999 in connection with certain 1999
capital expansion projects to the extent that such Capital Expenditures
do not exceed $21,000,000.
(b) The definitions of "Harris Note" and "Harris Note Documents" in
Section 1.1 of the Credit Agreement shall be amended and restated to read in
their entireties as follows:
HARRIS NOTE means the $17,500,000 Unsecured Note dated April
15, 1999 of the Company payable to Harris Trust and Savings Bank.
<PAGE>
HARRIS NOTE DOCUMENTS means the Harris Note, the Guaranty of
Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR IV") of the Harris
Note dated April 14, 1999 and the letter agreement dated April 14, 1999
among GTCR IV, Harris Trust and Savings Bank, the Agent, The Prudential
Life Insurance Company of America and the Company.
1.2 Section 3.1(c) of the Credit Agreement shall be amended by
replacing the table in such Section with the following:
<TABLE>
<CAPTION>
Amount of
Period Term B Loans Payable
------ --------------------
<S> <C>
6/30/99-12/31/05 $150,000
3/31/06 $55,950,000.
</TABLE>
1.3 Section 10.13 of the Credit Agreement shall be amended and restated
to read in its entirety as follows:
10.13 RENTAL OBLIGATIONS. Not, and not permit any Subsidiary
to, enter into any arrangement (other than Capital Leases) which
involves the leasing by the Company or such Subsidiary from any lessor
of any personal property (or any interest therein), except (a) rentals
of items of equipment for not more than 90 days for use on one or more
specific jobs in the ordinary course of business and (b) arrangements
which, together with all other such arrangements which shall then be in
effect, will not require the payment of any aggregate amount of rentals
by the Company and its Subsidiaries in any Fiscal Year in excess of 4%
of Net Revenues for such Fiscal Year, tested as of the end of such
Fiscal Year; PROVIDED, HOWEVER, that any calculation made for purposes
of this Section shall exclude any amounts required to be expended for
maintenance and repairs, insurance, taxes, assessments and other
similar charges.
1.4 Section 10.25 of the Credit Agreement shall be amended by deleting
the words "not later than 180 days after the Effective Date" where they appear
in such Section and inserting in lieu thereof the words "not later than July 1,
1999".
1.5 The Revolving Commitments of the Lenders on the Amendment Effective
Date shall be as set forth on Schedule I hereto (subject to adjustment as set
forth in the definition of "Revolving Commitment").
SECTION 2 WAIVER OF DEFAULT. Effective on (and subject to the
occurrence of) the Amendment Effective Date, the Required Lenders hereby waive
the Event of Default created by the Company's noncompliance with Section 10.25
of the Credit Agreement prior to the date hereof.
SECTION 3 REPRESENTATIONS AND WARRANTIES. The Company represents and
-2-
<PAGE>
warrants to the Agent and the Lenders that (a) the representations and
warranties made in Section 9 (excluding Sections 9.6 and 9.8) of the Credit
Agreement are true and correct on and as of the Amendment Effective Date with
the same effect as if made on and as of the Amendment Effective Date (except to
the extent relating solely to an earlier date, in which case they were true and
correct as of such earlier date); (b) no Event of Default or Unmatured Event of
Default exists or will result from the execution of this Amendment; (c) no event
or circumstance has occurred since the Effective Date that has resulted, or
would reasonably be expected to result, in a Material Adverse Effect; (d) the
execution and delivery by the Company of this Amendment and the performance by
the Company of its obligations under the Credit Agreement as amended hereby (as
so amended, the "AMENDED CREDIT AGREEMENT") (i) are within the corporate powers
of the Company, (ii) have been duly authorized by all necessary corporate
action, (iii) have received all necessary approval from any Governmental
Authority and (iv) do not and will not contravene or conflict with any provision
of any law, rule or regulation or any order, decree, judgment or award which is
binding on the Company or any Guarantor or any of their respective Subsidiaries
or of any provision of the certificate of incorporation or bylaws or other
organizational documents of the Company or of any agreement, indenture,
instrument or other document which is binding on the Company or any Guarantor or
any of their respective Subsidiaries; and (e) the Amended Credit Agreement is
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
SECTION 4 EFFECTIVENESS. The amendments set forth in SECTION 1 above
and the waiver set forth in SECTION 2 above shall become effective on such date
(the "AMENDMENT EFFECTIVE DATE") when the Agent shall have received (a) a
counterpart of this Amendment executed by the Company, the Required Lenders and
each Revolving Lender that has agreed to increase its Revolving Commitment on
the Amendment Effective Date (each, an "INCREASING LENDER") (or, in the case of
any party other than the Company from which the Agent have not received a
counterpart hereof, facsimile confirmation of the execution of a counterpart
hereof by such party), (b) for the account of each Increasing Lender, pro rata
in accordance with the amount of the increase in the Revolving Commitment of
such Increasing Lender effected hereby, an upfront fee in the amount set forth
in a separate letter between such Increasing Lender, the Agent and the Company,
(c) for the account of BofA, a fee in the amount set forth in a separate letter
between BofA and the Company, (d) for each of the undersigned Lenders who have
executed and delivered a counterpart of this Amendment to counsel to the Agent
by 5:00 p.m. on April 14, 1999, an amendment fee in an amount equal to 0.125% of
the sum of such Lender's Revolving Commitment (before giving effect hereto) plus
the outstanding Term Loans of such Lender, (e) evidence satisfactory to it that
(1) clause (i) of the definition of "Senior Debt" in Section 12E of the Note and
Warrant Purchase Agreement shall have been amended and restated in its entirety
to read "One Hundred Ninety-Five Million Dollars ($195,000,000)" and such
definition shall not be otherwise amended or modified, (2) Section 8D of the
Note and Warrant Purchase Agreement shall have been amended in a manner
satisfactory to the Agent and (3) the definition of "Consolidated Capital
Expenditures" in Section 13B of the Note
-3-
<PAGE>
and Warrant Purchase Agreement shall have been amended in a manner satisfactory
to the Agent and (f) each of the following documents, each in form and substance
satisfactory to the Agent:
4.1 REAFFIRMATIONS. Counterparts of the Reaffirmations of Loan
Documents, substantially in the forms of EXHIBIT A-1 and A-2, executed by the
Company, each Guarantor and each Pledgor.
4.2 RESOLUTIONS. Certified copies of resolutions of the Board of
Directors of the Company authorizing or ratifying the execution, delivery and
performance by the Company of this Amendment, the Amended Credit Agreement and
each other Loan Document contemplated by this Amendment to which the Company is
a party.
4.3 INCUMBENCY AND SIGNATURE CERTIFICATES. A certificate of the
Secretary or an Assistant Secretary of the Company, certifying the names of the
officer or officers of the Company authorized to sign this Amendment and the
other Loan Documents contemplated hereby to which the Company is a party,
together with a sample of the true signature of each such officer.
4.4 OPINION. An opinion, addressed to the Agent and the Lenders, of
Kirkland & Ellis, counsel to the Company and its Subsidiaries, substantially in
the form of EXHIBIT B.
4.5 OTHER DOCUMENTS. Such other documents as the Agent or any Lender
may reasonably request.
SECTION 5 MISCELLANEOUS.
5.1 CONTINUING EFFECTIVENESS, ETC. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Amendment Effective Date, all references in
the Credit Agreement, the Notes, each other Loan Document and any similar
document to the "Credit Agreement" or similar terms shall refer to the Amended
Credit Agreement. The waiver contained in SECTION 2 hereof is limited strictly
to its terms and shall not apply to non-compliance with any other term of the
Credit Agreement or the Amended Credit Agreement.
5.2 COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.
5.3 EXPENSES. The Company agrees to pay the reasonable costs and
expenses of the Agent (including reasonable fees and disbursements of counsel,
including, without duplication, the allocable costs of internal legal services
and all disbursements of internal legal counsel) in connection with the
preparation, execution and delivery of this Amendment.
5.4 GOVERNING LAW. This Amendment shall be a contract made under and
governed by
-4-
<PAGE>
the laws of the State of Illinois applicable to contracts made and to be wholly
performed within the State of Illinois.
5.5 SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and the
successors and assigns of the Lenders and the Agent.
5.6 FEES. The fees referred to in SECTIONS 4(b) and (c) hereof are not
subject to Section 7.5 of the Credit Agreement.
5.7 ADJUSTMENTS TO REVOLVING LOAN PERCENTAGES. On the Amendment
Effective Date, the Agent shall notify the Revolving Lenders and the Company, on
or before 1:00 p.m. (Chicago time), by facsimile of the occurrence of the
Amendment Effective Date. Each Increasing Lender shall, before 2:00 p.m.
(Chicago time) on the Amendment Effective Date, make available to the Agent in
immediately available funds an amount equal to the excess of (1) such Increasing
Lender's Revolving Loan Percentage (as in effect immediately following the
effectiveness of this Amendment) of the Revolving Loans then outstanding over
(2) such Increasing Lender's Revolving Loan Percentage (as in effect immediately
prior to the effectiveness of this Amendment) of the Revolving Loans then
outstanding. After the Agent's receipt of such funds from each such Increasing
Lender, the Agent will promptly thereafter cause to be distributed like funds to
each Revolving Lender that is not an Increasing Lender in an amount to such
Revolving Lender such that the aggregate amount owing to each Revolving Lender
after giving effect to such distribution equals such Lender's Revolving Loan
Percentage (as in effect immediately following the effectiveness of this
Amendment) of the Revolving Loans then outstanding. If the Amendment Effective
Date shall occur on a date that is not the last day of the Interest Period for
all Revolving Loans then outstanding that are Eurodollar Loans, (x) the Company
shall pay any amounts owing pursuant to SECTION 8.4 of the Credit Agreement to
any Revolving Lender whose proportionate share of any outstanding Revolving Loan
that is a Eurodollar Loan is decreased as a result of the distributions to
Revolving Lenders under this Section and (y) for each outstanding Revolving Loan
that is a Eurodollar Loan the respective Revolving Loans made by the Increasing
Lenders pursuant to this Section shall be deemed to be funded at the applicable
Eurodollar Rate (Reserve Adjusted) for such Loan.
5.8 MORTGAGE AMENDMENTS. Within 60 days after the Amendment Effective
Date, the Company shall, or shall cause its applicable Subsidiaries to, deliver
to the Agent, with respect to each parcel of real property owned by the Company
or any Subsidiary which has previously been mortgaged to the Agent for the
benefit of the Lenders pursuant to the Credit Agreement, an amendment to the
Mortgage increasing the amount of indebtedness secured thereby such as to
include the aggregate amount of Revolving Commitments (after giving effect to
the increase to the Revolving Commitments effected hereby) and otherwise
satisfactory to the Agent.
-5-
<PAGE>
Delivered as of the day and year first above written.
U.S. AGGREGATES, INC.
By: /s/ Michael Stone
--------------------------------
Title:
-----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Agent
By: /s/ illegible
--------------------------------
Title: Vice President
-----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Lender and as
Issuing Lender
By: /s/ illegible
--------------------------------
Title: Vice President
-----------------------------
BANKBOSTON, N.A., as a Lender
By: /s/ illegible
--------------------------------
Title:
-----------------------------
NATIONAL CITY BANK, as a Lender
By: Brian J. Cullina
--------------------------------
Title: Senior Vice President
-----------------------------
-6-
<PAGE>
BANK OF SCOTLAND, as a Lender
By: /s/ Annie Chin Tat
--------------------------------
Title: Senior Vice President
-----------------------------
IBJ SCHRODER BANK AND TRUST
COMPANY, as a Lender
By: /s/ Mark H. Minter
--------------------------------
Title: Managing Director
-----------------------------
COMERICA BANK - CALIFORNIA, as a Lender
By: /s/ Scott J. Smith
--------------------------------
Title: Vice President
-----------------------------
ZIONS FIRST NATIONAL BANK, as a Lender
By: /s/ illegible
--------------------------------
Title: Vice President
-----------------------------
UNION BANK OF CALIFORNIA, N.A., as a
Lender
By: /s/ Nancy A. Perkins
--------------------------------
Title: Vice President
-----------------------------
-7-
<PAGE>
CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
as Attorney-in-Fact and on behalf of First
Allmerica Financial Life Insurance Company as
Portfolio Manager, as a Lender
By: /s/ Timothy M. Barns
--------------------------------------
Title: Managing Director
-----------------------------------
CYPRESSTREE INVESTMENT PARTNERS II,
LTD.
By: CypressTree Investment Management
Company, Inc., as Portfolio Manager
By: /s/ Timothy M. Barns
--------------------------------------
Title: Managing Director
-----------------------------------
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC, as
a Lender
By: ING Capital Advisors, Inc., as Investment
Advisor
By: /s/ Michael J. Campbell
--------------------------------------
Title: Senior Vice President & Portfolio
Manager
-----------------------------------
PILGRIM PRIME RATE TRUST, as a Lender
By: Pilgrim Investments, Inc., as its Investment
Manager
By: /s/ Michel Prince
--------------------------------------
Title: Vice President
-----------------------------------
-8-
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By: /s/ Scott H. Page
--------------------------------
Title: Vice President
-----------------------------
EATON VANCE INSTITUTIONAL SENIOR
LOAN FUND
By: Eaton Vance Management, as Investment
Advisor
By: /s/ Scott H. Page
--------------------------------
Title: Vice President
-----------------------------
-9-
<PAGE>
KZH-CYPRESSTREE - 1 LLC
By: /s/ Virginia Conway
--------------------------------
Title: Authorized Agent
-----------------------------
KZH-HIGHLAND - 2 LLC
By: /s/ Virginia Conway
--------------------------------
Title: Authorized Agent
-----------------------------
-10-
<PAGE>
ARCHIMEDES FUNDING II, LLC
By: ING Capital Advisors, LLC, as Collateral
Manager
By: /s/ Michael J. Campbell
--------------------------------
Title: Senior Vice President Portfolio
Manager
-----------------------------
-11-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Revolving
Lender Commitment Revolving Percentage
- ------ ---------- --------------------
<S> <C> <C>
Bank of $10,655,262.86 17.75877143%
America NT
& SA
Union Bank $ 9,000,000.00 15.00%
of California
IBJ Whitehall $ 7,894,736.84 13.15789474%
Bank and
Trust
Company
Bank of $ 7,894,736.84 13.15789474%
Scotland
National City $ 6,660,526.63 11.10087772%
Bank
Comerica $ 6,000,000.00 10.00%
Bank -
California
Zions First $ 6,000,000.00 10.00%
National Bank
BankBoston, $ 5,894,736.84 9.82456140%
N.A.
TOTAL $60,000,000 100.00%
</TABLE>
<PAGE>
EXHIBIT A-1
FORM OF REAFFIRMATION OF
LOAN DOCUMENTS
April 14, 1999
Bank of America National Trust
and Savings Association, as Agent
and the other parties
to the Third Amended and
Restated Credit Agreement
referred to below
1455 Market Street
San Francisco, California 94103
Attn: Agency Management Services #5596
RE: REAFFIRMATION OF LOAN DOCUMENTS --
COMPANY AND SUBSIDIARIES
Ladies and Gentlemen:
Please refer to:
1. The Amended and Restated Security Agreement dated as of June
5, 1998 (the "SECURITY AGREEMENT") among U.S. Aggregates, Inc.
(the "COMPANY"), Western Aggregates Holding Corporation, a
Delaware corporation, Jensen Construction and Development,
INC., a Nevada corporation, Sandia Construction, Inc., a
Nevada corporation, Cox Rock Products Inc., a Utah
corporation, Cox Transport Corporation, a Utah corporation,
SRM Holdings Corp., a Delaware Corporation, Southern Ready
Mix, Inc., an Alabama corporation, A-Block Company, Inc., an
Arizona corporation, A-Block Company, Inc., a California
corporation, Mohave Concrete and Materials, Inc., an Arizona
corporation, Mohave Concrete and Materials, Inc., a Nevada
corporation, Mulberry Rock Corporation, a Georgia corporation,
Valley Asphalt, Inc., a Utah Corporation, Southern Nevada
Aggregates, Inc., a Nevada corporation, BHY Ready Mix, Inc., a
Tennessee corporation, Falcon Ridge Construction, Inc., a Utah
corporation, Geodyne Transport, Inc., a Utah corporation,
Western Rock Products Corp., a Utah corporation, Tri-state
Testing Laboratories, Inc., a Utah Corporation, Dekalb Stone,
Inc., a Georgia corporation, Beck Paving, Inc., a Utah
corporation, Bradley Stone & Sand, Inc., a Tennessee
corporation, Big Horn Redi
<PAGE>
Mix, Inc., a Wyoming corporation, Treasure Valley Concrete,
Inc., an Idaho corporation, Monroc, Inc., a Delaware
corporation, Western Aggregates, Inc., a ________ corporation,
and Bank of America National Trust and Savings Association in
its capacity as Agent (in such capacity, the "AGENT");
2. The Amended and Restated Guaranty dated as of June 5, 1998
(the "GUARANTY") executed in favor of the Agent and various
other parties by Western Aggregates Holding Corporation,
Jensen Construction and Development, Inc., Sandia
Construction, Inc., Cox Rock Products Inc., Cox Transport
Corporation, SRM Holdings Corp., Southern Ready Mix, Inc.,
A-Block Company, Inc., A-Block Company, Inc., Mohave Concrete
and Materials, Inc., Mohave Concrete and Materials, Inc.,
Mulberry Rock Corporation, Valley Asphalt, Inc., Southern
Nevada Aggregates, Inc., BHY Ready Mix, Inc., Falcon Ridge
Construction, Inc., Geodyne Transport, Inc., Western Rock
Products Corp., Tri-state Testing Laboratories, Inc., Dekalb
Stone, Inc., Beck Paving, Inc., Bradley Stone & Sand, Inc.,
Big Horn Redi Mix, Inc., Treasure Valley Concrete, Inc., and
Monroc, Inc.;
3. The following Pledge Agreements:
(a) the Amended and Restated Company Pledge Agreement
dated as of June 5, 1998 between the Company and the
Agent, and
(b) the Amended and Restated Subsidiary Pledge Agreement
dated as of June 5, 1998 between Western Aggregates
Holding Corp., Western Rock Products Corp., SRM
Holdings Corp., Southern Ready Mix, Inc., Monroc,
Inc., and the Agent,
(all of the foregoing Pledge Agreements, in each case as
heretofore amended, being collectively referred to herein as
the "PLEDGE AGREEMENTS").
4. The Aircraft Security Agreement dated as of July 19, 1996
between Treasure Valley Concrete, Inc. and the Agent (the
"AIRCRAFT SECURITY AGREEMENT").
5. The Patent Security Agreement made as of March 30, 1995 by Cox
Rock Products Inc. in favor of the Agent (the "PATENT SECURITY
AGREEMENT").
The Security Agreement, the Guaranty, the Pledge Agreements, the
Aircraft Security Agreement and the Patent Security Agreement, in each case as
heretofore amended, are collectively referred to herein as the "LOAN DOCUMENTS".
Capitalized terms not otherwise defined herein will have the meanings given in
the Credit Agreement referred to below.
<PAGE>
Each of the undersigned acknowledges that the Company, the Banks and
the Agent have executed the First Amendment (the "AMENDMENT") to the Third
Amended and Restated Credit Agreement dated as of June 5, 1998 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT").
Each of the undersigned hereby confirms that each Loan Document to
which such undersigned is a party remains in full force and effect after giving
effect to the effectiveness of the Amendment and that, upon such effectiveness,
all references in such Loan Document to the "Credit Agreement" shall be
references to the Credit Agreement as amended by the Amendment.
The letter agreement may be signed in counterparts and by the various
parties as herein on separate counterparts. This letter agreement shall be
governed by the laws of the State of Illinois applicable to contracts made and
to be performed entirely within such State.
U.S. AGGREGATES, INC.
By:
-------------------------------
Title:
----------------------------
SRM HOLDINGS CORP.
By:
-------------------------------
Title:
----------------------------
WESTERN AGGREGATES HOLDING CORP.
By:
-------------------------------
Title:
----------------------------
WESTERN ROCK PRODUCTS CORP.
<PAGE>
By:
-------------------------------
Title:
----------------------------
JENSEN CONSTRUCTION & DEVELOPMENT,
INC.
By:
-------------------------------
Title:
----------------------------
SANDIA CONSTRUCTION, INC.
By:
-------------------------------
Title:
----------------------------
SOUTHERN NEVADA AGGREGATES, INC.
By:
-------------------------------
Title:
----------------------------
TRI-STATE TESTING LABORATORIES, INC.
By:
-------------------------------
Title:
----------------------------
<PAGE>
MOHAVE CONCRETE AND MATERIALS, INC.,
a Nevada corporation
By:
-------------------------------
Title:
----------------------------
MOHAVE CONCRETE AND MATERIALS, INC.,
an Arizona corporation
By:
-------------------------------
Title:
----------------------------
A-BLOCK COMPANY, INC.,
an Arizona corporation
By:
-------------------------------
Title:
----------------------------
A-BLOCK COMPANY, INC.,
a California corporation
By:
-------------------------------
Title:
----------------------------
COX ROCK PRODUCTS, INC.
By:
-------------------------------
Title:
----------------------------
<PAGE>
COX TRANSPORT CORPORATION
By:
-------------------------------
Title:
----------------------------
VALLEY ASPHALT, INC.
By:
-------------------------------
Title:
----------------------------
GEODYNE TRANSPORT, INC.
By:
-------------------------------
Title:
----------------------------
FALCON RIDGE CONSTRUCTION, INC.
By:
-------------------------------
Title:
----------------------------
BECK PAVING, INC.
By:
-------------------------------
Title:
----------------------------
<PAGE>
SOUTHERN READY MIX, INC.
By:
-------------------------------
Title:
----------------------------
DEKALB STONE, INC.
By:
-------------------------------
Title:
----------------------------
MULBERRY ROCK CORPORATION
By:
-------------------------------
Title:
----------------------------
BHY READY MIX, INC.
By:
-------------------------------
Title:
----------------------------
BRADLEY STONE & SAND, INC.
By:
-------------------------------
Title:
----------------------------
<PAGE>
BIG HORN REDI MIX, INC.
By:
-------------------------------
Title:
----------------------------
TREASURE VALLEY CONCRETE, INC.
By:
-------------------------------
Title:
----------------------------
MONROC, INC.
By:
-------------------------------
Title:
----------------------------
WESTERN AGGREGATES, INC.
By:
-------------------------------
Title:
----------------------------
ACKNOWLEDGED AND AGREED
as of the date first written above
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
--------------------------------
Title:
-----------------------------
<PAGE>
EXHIBIT A-2
FORM OF
REAFFIRMATION OF SHAREHOLDER PLEDGE AGREEMENTS
April 14, 1999
Bank of America National Trust
and Savings Association, as Agent
and the other parties
to the Third Amended and
Restated Credit Agreement
referred to below
1455 Market Street
San Francisco, California 94103
Attn: Agency Management Services #5596
RE: REAFFIRMATION OF SHAREHOLDER PLEDGE AGREEMENTS
Ladies and Gentlemen:
Please refer to the Amended and Restated Shareholder Pledge
Agreement (the "PLEDGE AGREEMENT") dated as of June 5, 1998 among Clifford S.
Reed, Wayne Smith, Gilman Fife, Darrell G. Whitney, Duane C. Bauer, Bart
Smith, Ronnie J. Cox, Larry W. Cox, Dennis Cox, Lee J. Cox, Reid M. Cox,
Michael Cox, Cecil F. Greene, Rowan D. Smith, Richard P. Summerville, Garland
C. Braswell, Edward E. Buckley, Brian Stocks, Lonnie Larsen, Ron Chandler,
Mickey Cox, Barry Fullmer, Ted Reynolds and the Agent
Capitalized terms not otherwise defined herein will have the
meanings given in the Third Amended and Restated Credit Agreement referred to
below.
Each of the undersigned acknowledges that the Company, the Banks and
the Agent have executed the First Amendment (the "AMENDMENT") to the Third
Amended and Restated Credit Agreement dated as of June 5, 1998 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT").
Each of the undersigned hereby confirms that the Pledge Agreement to
which such undersigned is a party remains in full force and effect after
giving effect to the effectiveness of the Amendment and that, upon such
effectiveness, all references in such Pledge Agreement to the
<PAGE>
"Credit Agreement" shall be references to the Credit Agreement as amended by
the Amendment.
The letter agreement may be signed in counterparts and by the various
parties as herein on separate counterparts. This letter agreement shall be
governed by the laws of the State of Illinois applicable to contracts made and
to be performed entirely within such State.
--------------------------------------
Clifford S. Reed
--------------------------------------
Wayne Smith
--------------------------------------
Gilman Fife
--------------------------------------
Darrell G. Whitney
--------------------------------------
Duane C. Bauer
--------------------------------------
Bart Smith
--------------------------------------
Ronnie J. Cox
--------------------------------------
Larry W. Cox
--------------------------------------
Dennis Cox
<PAGE>
--------------------------------------
Lee J. Cox
--------------------------------------
Reid M. Cox
--------------------------------------
Michael Cox
--------------------------------------
Cecil F. Greene
--------------------------------------
Rowan D. Smith
--------------------------------------
Richard P. Summerville
--------------------------------------
Garland C. Braswell
--------------------------------------
Edward E. Buckley
--------------------------------------
Brian Stocks
--------------------------------------
Lonnie Larsen
--------------------------------------
Ron Chandler
-3-
<PAGE>
--------------------------------------
Mickey Cox
--------------------------------------
Barry Fullmer
--------------------------------------
Ted Reynolds
-4-
<PAGE>
ACKNOWLEDGED AND AGREED
as of the date first written above
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
--------------------------------
Title:
-----------------------------
-5-
<PAGE>
EXHIBIT 4.2
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "AGREEMENT") dated
as of June 5, 1998 is among U.S. AGGREGATES, INC., a Delaware corporation (the
"COMPANY"), WESTERN AGGREGATES HOLDING CORPORATION, a Delaware corporation,
JENSEN CONSTRUCTION AND DEVELOPMENT, INC., a Nevada corporation, SANDIA
CONSTRUCTION, INC., a Nevada corporation, COX ROCK PRODUCTS INC., a Utah
corporation, COX TRANSPORT CORPORATION, a Utah corporation, SRM HOLDINGS CORP.,
a Delaware corporation, SOUTHERN READY MIX, INC., an Alabama corporation,
A-BLOCK COMPANY, INC., an Arizona corporation, A-BLOCK COMPANY, INC., a
California corporation, MOHAVE CONCRETE AND MATERIALS, INC., an Arizona
corporation, MOHAVE CONCRETE AND MATERIALS, INC., a Nevada corporation, MULBERRY
ROCK CORPORATION, a Georgia corporation, VALLEY ASPHALT, INC., a Utah
corporation, SOUTHERN NEVADA AGGREGATES, INC., a Nevada corporation, BHY READY
MIX, INC., a Tennessee corporation, FALCON RIDGE CONSTRUCTION, INC., a Utah
corporation, GEODYNE TRANSPORT, INC., a Utah corporation, WESTERN ROCK PRODUCTS
CORP., a Utah corporation, TRI-STATE TESTING LABORATORIES, INC., a Utah
corporation, DEKALB STONE, INC., a Georgia corporation, BECK PAVING, INC., a
Utah corporation, BRADLEY STONE & SAND, INC., a Tennessee corporation, BIG HORN
REDI MIX, INC., a Wyoming corporation, TREASURE VALLEY CONCRETE, INC., an Idaho
corporation, MONROC, INC., a Delaware corporation, and such other persons or
entities which from time to time become parties hereto as debtors (collectively,
including the Company, the "DEBTORS" and individually each a "DEBTOR") and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION in its capacity as agent for
the Lenders referred to below (in such capacity, the "AGENT").
W I T N E S S E T H
WHEREAS, the Company has entered into a Third Amended and Restated
Credit Agreement dated as of June 5, 1998 (as amended or otherwise modified from
time to time, the "CREDIT AGREEMENT") by and among the Company, various
financial institutions (collectively the "LENDERS" and individually each a
"LENDER") and the Agent, pursuant to which the Lenders have agreed to make loans
to, and issue or participate in letters of credit for the account of, the
Company;
WHEREAS, the Credit Agreement amends and restates a Second Amended and
Restated Credit Agreement dated as of October 15, 1996 among the Company,
various financial institutions and the Agent (as thereafter amended, the
"EXISTING CREDIT AGREEMENT");
WHEREAS, in connection with the Existing Credit Agreement, certain of
the Debtors entered into a Security Agreement dated as of July 13, 1994, as
heretofore amended (as so amended, the "EXISTING AGREEMENT");
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WHEREAS, each of the Debtors (other than the Company) has executed and
delivered a guaranty (as amended or otherwise modified from time to time, the
"GUARANTY") of the obligations of the Company under the Credit Agreement; and
WHEREAS, the obligations of the Company under the Credit Agreement and
the obligations of each other Debtor under the Guaranty are to be secured
pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Company by the
Lenders or any of them, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Existing Agreement
is hereby amended and restated in its entirety, and the parties hereto agree, as
follows:
1. DEFINITIONS. When used herein, (a) the terms CERTIFICATED SECURITY,
CHATTEL PAPER, COMMODITY ACCOUNT, COMMODITY CONTRACT, DEPOSIT ACCOUNT, DOCUMENT,
EQUIPMENT, FIXTURE, GOODS, INVENTORY, INVESTMENT, INSTRUMENT, INVESTMENT
PROPERTY, SECURITY, SECURITY ENTITLEMENT, SECURITIES ACCOUNT and UNCERTIFICATED
SECURITY shall have the respective meanings assigned to such terms in the
Uniform Commercial Code (as defined below), (b) capitalized terms used but not
defined have the meanings assigned to such terms in the Credit Agreement and (c)
the following terms have the following meanings (such definitions to be
applicable to both the singular and plural forms of such terms):
ACCOUNT DEBTOR means the party who is obligated on or under any Account
Receivable, Contract Right or General Intangible.
ACCOUNT RECEIVABLE means, with respect to any Debtor, any right of such
Debtor to payment for goods sold or leased or for services rendered.
AGENT - see the PREAMBLE.
AGREEMENT - see the PREAMBLE.
ASSIGNEE DEPOSIT ACCOUNT - see SECTION 4.
COLLATERAL means, with respect to any Debtor, all property and rights
of such Debtor in which a security interest is granted hereunder.
COMPANY - see the PREAMBLE.
COMPUTER HARDWARE AND SOFTWARE means, with respect to any Debtor, (i)
all of such Debtor's rights (including rights as licensee and lessee) with
respect to computer and other electronic data processing hardware, whether now
owned or hereafter acquired by such Debtor, including, without limitation, all
integrated computer systems, central processing units, memory units, display
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terminals, printers, features, computer elements, card readers, tape drives,
hard and soft disk drives, cables, electrical supply hardware, generators, power
equalizers, accessories and all peripheral devices and other related computer
hardware; (ii) all of such Debtor's rights (including rights as licensee and
lessee) with respect to software programs, whether now owned or hereafter
acquired by such Debtor, designed for use on the computers and electronic data
processing hardware described in CLAUSE (i) above, including, without
limitation, all operating system software, utilities and application programs in
whatsoever form (source code and object code in magnetic tape, disk or hard copy
format or any other listings whatsoever); (iii) all of such Debtor's rights
(including rights as licensee and lessee) with respect to any firmware
associated with any of the foregoing, whether now owned or hereafter acquired by
such Debtor; and (iv) all of such Debtor's rights (including rights as licensee
and lessee) with respect to documentation for hardware, software and firmware
described in the preceding CLAUSES (i), (ii) and (iii) above, whether now owned
or hereafter acquired by such Debtor, including, without limitation, flow
charts, logic diagrams, manuals, specifications, training materials, charts and
pseudo codes.
CONTRACT RIGHT means, with respect to any Debtor, any right of such
Debtor to payment under a contract for the sale or lease of goods or the
rendering of services, which right is at the time not yet earned by performance.
CREDIT AGREEMENT - see the RECITALS.
DEBTOR - see the PREAMBLE.
DEFAULT means the occurrence of any of the following events: (a) any
Unmatured Event of Default under Section 12.1.1 or 12.1.4 of the Credit
Agreement; (b) any Event of Default; or (c) any warranty of any Debtor herein is
untrue or misleading in any material respect and, as a result thereof, the
Agent's security interest in, or rights and remedies with respect to, any
material portion of the Collateral of such Debtor is impaired or otherwise
adversely affected.
GENERAL INTANGIBLES means, with respect to any Debtor, all of such
Debtor's "general intangibles" as defined in Uniform Commercial Code as in
effect in Illinois on the date hereof and, in any event, includes (without
limitation) all of such Debtor's trademarks, trade names, patents, copyrights,
trade secrets, customer lists, inventions, designs, software programs, mask
works, goodwill, registrations, licenses, franchises, tax refund claims,
guarantee claims, security interests and rights to indemnification.
GUARANTY - see the RECITALS.
INTELLECTUAL PROPERTY means all past, present and future:
trade secrets and other proprietary information; trademarks,
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service marks, business names, designs, logos, indicia, and/or other source
and/or business identifiers and the goodwill of the business relating thereto
and all registrations or applications for registrations which have heretofore
been or may hereafter be issued thereon throughout the world; copyrights
(including, without limitation, copyrights for computer programs) and copyright
registrations or applications for registrations which have heretofore been or
may hereafter be issued throughout the world and all tangible property embodying
the copyrights; unpatented inventions (whether or not patentable); patent
applications and patents; industrial designs, industrial design applications and
registered industrial designs; license agreements related to any of the
foregoing set forth in this definition and income therefrom; books, records,
writings, computer tapes or disks, flow diagrams, specification sheets, source
codes, object codes and other physical manifestations, embodiments or
incorporations of any of the foregoing set forth in this definition; the right
to sue for all past, present and future infringements of any of the foregoing
set forth in this definition; and all common law and other rights throughout the
world in and to all of the foregoing set forth in this definition.
LENDER - see the recitals.
LIABILITIES means, as to each Debtor, all obligations (monetary or
otherwise) of such Debtor under the Credit Agreement, any Note, the Guaranty,
any other Loan Document or any other document or instrument (including any
Hedging Agreement entered into with any Lender or any affiliate thereof)
executed in connection therewith, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due.
NON-TANGIBLE COLLATERAL means, with respect to any Debtor,
such Debtor's Accounts Receivable, Contract Rights and General
Intangibles.
PERMITTED LIENS - see CLAUSE (i) of SECTION 3.
UNIFORM COMMERCIAL CODE means the Uniform Commercial Code as in effect
in the State of Illinois on the date of this Agreement; provided, however, as
used in SECTION 8 hereof, "Uniform Commercial Code" means the Uniform Commercial
Code as in effect from time to time in the applicable jurisdiction.
2. GRANT OF SECURITY INTEREST. As security for the payment of all
Liabilities, each Debtor hereby mortgages to the Agent for the benefit of the
Lenders, and grants to the Agent for the benefit of the Lenders a continuing
security interest in, the following, whether now or hereafter existing or
acquired:
All of such Debtor's right, title and interest in:
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(i) Accounts Receivable;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with respect
thereto, including, without limitation, any and all licenses,
options, warranties, service contracts, program services, test
rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications, and any
substitutions, replacements, additions or model conversions of
any of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) General Intangibles;
(ix) Goods (including, without limitation, all its Equipment,
Fixtures and Inventory), and all accessions, additions,
attachments, improvements, substitutions and replacements
thereto and therefor;
(x) Instruments;
(xi) Intellectual Property;
(xii) money (of every jurisdiction whatsoever);
(xiii) Commodity Accounts, Commodity Contracts, Investment
Property, Security Entitlements and Securities Accounts;
(xiv) Uncertificated Securities; and
(xv) to the extent not included in the foregoing, all other
personal property of any kind or description;
together with all books, records, writings, data bases,
information and other property relating to, used or useful in
connection with, evidencing, embodying, incorporating or
referring to any of the foregoing, and all proceeds, products,
offspring, rents, issues, profits and returns of and from any of
the foregoing; PROVIDED, HOWEVER, that to the extent that the
provisions of any lease or license of Computer Hardware and
Software or Intellectual Property expressly prohibit (which
prohibition is enforceable under applicable law) the grant of a
security interest therein, such Debtor's rights in such lease or
license shall be excluded from the foregoing grant for so long
as such prohibition continues, IT BEING UNDERSTOOD that upon
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request of the Agent, such Debtor will in good faith use
reasonable efforts to obtain consent for the creation of a
security interest in favor of the Agent in such Debtor's rights
under such lease or license.
3. WARRANTIES. Each Debtor warrants that: (i) no financing statement
(other than any which may have been filed on behalf of the Agent or in
connection with security interests or liens expressly permitted by the Credit
Agreement ("PERMITTED LIENS")) covering any of the Collateral is on file in any
public office; (ii) such Debtor is and will be the lawful owner of all of its
Collateral, free of all liens and claims whatsoever, other than the security
interest hereunder and Permitted Liens, with full power and authority to execute
this Agreement and perform such Debtor's obligations hereunder, and to subject
the Collateral to the security interest hereunder; (iii) all information with
respect to Collateral and Account Debtors set forth in any schedule, certificate
or other writing at any time heretofore or hereafter furnished by such Debtor to
the Agent or any Lender, and all other written information heretofore or
hereafter furnished by such Debtor to the Agent or any Lender, is and will be
true and correct in all material respects as of the date furnished; (iv) such
Debtor's chief executive office is as set forth on SCHEDULE I hereto (and such
Debtor has not maintained its chief executive office at any other location at
any time after January 1, 1998); (v) each location where such Debtor maintains a
place of business is set forth on SCHEDULE II hereto; (vi) such Debtor is not
now known and during the five years preceding the date hereof has not previously
been known by any trade name except as previously disclosed to the Agent and the
Lenders in writing prior to the date hereof; (vii) during the five years
preceding the date hereof, such Debtor has not been known by any legal name
different from the one set forth on the signature page of this Agreement except
as previously disclosed to the Lenders in writing prior to the date hereof, nor
has such Debtor been the subject of any merger or other corporate reorganization
except as previously disclosed to the Lenders in writing prior to the date
hereof; (viii) SCHEDULE III hereto contains a complete listing of all of such
Debtor's Intellectual Property which is subject to registration statutes; (ix)
the execution and delivery of this Agreement and the performance by such Debtor
of its obligations hereunder are within such Debtor's corporate or partnership
powers, have been duly authorized by all necessary corporate or partnership
action, have received all necessary governmental approval (if any shall be
required), and do not and will not contravene or conflict with any provision of
law or of the organizational documents of such Debtor or of any agreement,
indenture, instrument or other document, or any judgment, order or decree, which
is binding upon such Debtor; (x) this Agreement is a legal, valid and binding
obligation of such Debtor, enforceable in accordance with its terms, except that
the enforceability of this Agreement may be limited by bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other
similar laws now or hereafter
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in effect relating to creditors' rights generally and by general principles
of equity (regardless of whether enforcement is sought in a proceeding in
equity or at law); and (xi) such Debtor is in compliance with the
requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every governmental authority, the non-compliance with which would materially
adversely affect any material portion of the Collateral of such Debtor.
4. COLLECTIONS, ETC. Until such time during the existence of a Default
as the Agent shall notify such Debtor of the revocation of such power and
authority, each Debtor (a) may, in the ordinary course of its business, at its
own expense, sell, lease or furnish under contracts of service any of the
Inventory normally held by such Debtor for such purpose, use and consume, in the
ordinary course of its business, any raw materials, work in process or materials
normally held by such Debtor for such purpose, and use, in the ordinary course
of its business (but subject to the terms of the Credit Agreement), the cash
proceeds of Collateral and other money which constitutes Collateral, (b) will,
at its own expense, endeavor to collect, as and when due, all amounts due under
any of the Non-Tangible Collateral, including the taking of such action with
respect to such collection as the Agent may reasonably request or, in the
absence of such request, as such Debtor may deem advisable, and (c) may grant,
in the ordinary course of business, to any party obligated on any of the Non-
Tangible Collateral, any rebate, refund or allowance to which such party may be
lawfully entitled, and may accept, in connection therewith, the return of Goods,
the sale or lease of which shall have given rise to such Non-Tangible
Collateral. The Agent, however, may, at any time that a Default exists, whether
before or after any revocation of such power and authority or the maturity of
any of the Liabilities, notify any parties obligated on any of the Non-Tangible
Collateral to make payment to the Agent of any amounts due or to become due
thereunder and enforce collection of any of the Non-Tangible Collateral by suit
or otherwise and surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder or evidenced thereby. Upon request
of the Agent during the existence of a Default, each Debtor will, at its own
expense, notify any parties obligated on any of the Non-Tangible Collateral to
make payment to the Agent of any amounts due or to become due thereunder.
Upon request by the Agent during the existence of a Default, each
Debtor will forthwith, upon receipt, transmit and deliver to the Agent, in the
form received, all cash, checks, drafts and other instruments or writings for
the payment of money (properly endorsed, where required, so that such items may
be collected by the Agent) which may be received by such Debtor at any time in
full or partial payment or otherwise as proceeds of any of the Collateral.
Except as the Agent may otherwise consent in writing, any such items which may
be so received by any Debtor will not be
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commingled with any other of its funds or property, but will be held separate
and apart from its own funds or property and upon express trust for the Agent
until delivery is made to the Agent. Each Debtor will comply with the terms
and conditions of any consent given by the Agent pursuant to the foregoing
sentence.
During the existence of a Default, all items or amounts which are
delivered by any Debtor to the Agent on account of partial or full payment or
otherwise as proceeds of any of the Collateral shall be deposited to the credit
of a deposit account (each an "ASSIGNEE DEPOSIT ACCOUNT") of such Debtor with
the Agent, as security for payment of the Liabilities. No Debtor shall have any
right to withdraw any funds deposited in the applicable Assignee Deposit
Account. The Agent may, from time to time, in its discretion, and shall upon
request of the applicable Debtor made not more than once in any week, apply all
or any of the then balance, representing collected funds, in the Assignee
Deposit Account, toward payment of the Liabilities, whether or not then due, in
such order of application as the Agent may determine, and the Agent may, from
time to time, in its discretion, release all or any of such balance to the
applicable Debtor.
If and to the extent that a perfected security interest hereunder in
any Collateral shall cease to be perfected for any reason whatsoever (including,
without limitation, release of all or any balance in any Assignee Deposit
Account or use or disposition by any Debtor of any proceeds of Collateral), then
such Collateral (referred to in this paragraph as "released Collateral") shall
be deemed thereby released from the security interest hereunder in exchange, as
of the time of such release, for any other Collateral of equivalent value in
which a perfected security interest hereunder is being obtained
contemporaneously or has been most recently obtained, but only to the extent
such other Collateral does not represent either (a) Collateral in exchange for
which any previously released Collateral shall have been deemed released, or (b)
Collateral of equivalent value to any loan or advance (otherwise than by renewal
or extension) from the Lenders to the Company in which Collateral a perfected
security interest hereunder shall have been obtained contemporaneously with or
most recently prior to such loan or advance.
The Agent is authorized to endorse, in the name of the applicable
Debtor, any item, howsoever received by the Agent, representing any payment on
or other proceeds of any of the Collateral.
5. CERTIFICATES, SCHEDULES AND REPORTS. Each Debtor will from time to
time, as the Agent may reasonably request, deliver to the Agent such schedules,
certificates and reports respecting all or any of the Collateral at the time
subject to the security interest hereunder, and the items or amounts received by
such Debtor in full or partial payment of any of the Collateral, as the Agent
may reasonably request. Any such schedule, certificate or
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report shall be executed by a duly authorized officer of such Debtor and
shall be in such form and detail as the Agent may specify. Each Debtor shall
promptly notify the Agent of the occurrence of any event causing any loss or
depreciation in the value of its Inventory or other Goods which is material
to the Company and its Subsidiaries taken as a whole, and such notice shall
specify the amount of such loss or depreciation.
6. AGREEMENTS OF THE DEBTORS. Each Debtor (a) will, upon request of the
Agent, execute such financing statements and other documents (and pay the cost
of filing or recording the same in all public offices reasonably deemed
appropriate by the Agent) and do such other acts and things (including, without
limitation, delivery to the Agent of any Instruments or Certificated Securities
which constitute Collateral), all as the Agent may from time to time reasonably
request, to establish and maintain a valid security interest in the Collateral
(free of all other liens, claims and rights of third parties whatsoever, other
than Permitted Liens) to secure the payment of the Liabilities; (b) will keep
all its Inventory at, and will not maintain any place of business at any
location other than, its address(es) shown on SCHEDULES I and II hereto or at
such other addresses of which such Debtor shall have given the Agent not less
than 10 days' prior written notice; (c) will keep its records concerning the
Non-Tangible Collateral in such a manner as will enable the Agent or its
designees to determine at any time the status of the Non-Tangible Collateral;
(d) will furnish the Agent such information concerning such Debtor, the
Collateral and the Account Debtors as the Agent may from time to time reasonably
request; (e) will permit the Agent and its designees, from time to time, on
reasonable notice and at reasonable times and intervals during normal business
hours (or at any time without notice during the existence of a Default) to
inspect such Debtor's Inventory and other Goods, and to inspect, audit and make
copies of and extracts from all records and all other papers in the possession
of such Debtor pertaining to the Collateral and the Account Debtors, and will,
upon request of the Agent during the existence of a Default, deliver to the
Agent all of such records and papers; (f) will, upon request of the Agent, stamp
on its records concerning the Collateral, and add on all Chattel Paper
constituting a portion of the Collateral, a notation, in form satisfactory to
the Agent, of the security interest of the Agent hereunder; (g) without limiting
the provisions of Section 10.3 of the Credit Agreement, will at all times keep
all its Inventory and other Goods insured under policies maintained with
reputable, financially sound insurance companies against loss, damage, theft and
other risks to such extent as is customarily maintained by companies similarly
situated, and cause all such policies to provide that loss thereunder shall be
payable to the Agent as its interest may appear and such policies or
certificates thereof shall, if the Agent so requests, be deposited with or
furnished to the Agent; (h) will take such actions as are reasonably necessary
to keep its Inventory in good repair and condition, ordinary wear and tear
excepted; (i) will take such
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actions as are reasonably necessary to keep its Equipment in good repair and
condition and in good working or running order, ordinary wear and tear
excepted; (j) subject to Section 9.12 of the Credit Agreement, will promptly
pay when due all license fees, registration fees, taxes, assessments and
other charges which may be levied upon or assessed against the ownership,
operation, possession, maintenance or use of its Equipment and other Goods;
(k) will, upon request of the Agent, (i) cause to be noted on the applicable
certificate, in the event any of its Equipment is covered by a certificate of
title, the security interest of the Agent in the Equipment covered thereby,
and (ii) deliver all such certificates to the Agent or its designees; (l)
will take all steps reasonably necessary to protect, preserve and maintain
all of its rights in the Collateral; (m) will keep all of the tangible
Collateral in the United States; and (n) will reimburse the Agent for all
expenses, including reasonable attorneys' fees and legal expenses, incurred
by the Agent in seeking to collect or enforce any rights in respect of such
Debtor's Collateral.
Any expenses incurred without gross negligence or wilful misconduct on
the part of the Agent in protecting, preserving and maintaining any Collateral
shall be borne by the applicable Debtor. Whenever a Default shall be existing,
the Agent shall have the right to bring suit to enforce any or all of the
Intellectual Property or licenses thereunder, in which event the applicable
Debtor shall at the request of the Agent do any and all lawful acts and execute
any and all proper documents required by the Agent in aid of such enforcement
and such Debtor shall promptly, upon demand, reimburse and indemnify the Agent
for all reasonable costs and expenses incurred by the Agent in the exercise of
its rights under this SECTION 6. Notwithstanding the foregoing, the Agent shall
have no obligations or liabilities regarding any of the Collateral by reason of,
or arising out of, this Agreement.
7. DEFAULT. Whenever a Default shall be existing, the Agent may
exercise from time to time any rights and remedies available to it under
applicable law. Each Debtor agrees, in case of Default, (i) to assemble, at its
expense, all its Inventory and other Goods (other than Fixtures) at a convenient
place or places acceptable to the Agent, and (ii) at the Agent's request, to
execute all such documents and do all such other things which may be necessary
or desirable in order to enable the Agent or its nominee to be registered as
owner of the Intellectual Property with any competent registration authority.
Any notification of intended disposition of any of the Collateral required by
law shall be deemed reasonably and properly given if given at least ten days
before such disposition. Any proceeds of any disposition by the Agent of any of
the Collateral may be applied by the Agent to payment of expenses in connection
with the Collateral, including reasonable attorneys' fees and legal expenses,
and any balance of such proceeds may be applied by the Agent toward the payment
of such of the Liabilities, and in such order of application, as the Agent may
from time to time elect.
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8. GENERAL. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of any of the Collateral in its possession if it
takes such action for that purpose as any applicable Debtor requests in writing,
but failure of the Agent to comply with any such request shall not of itself be
deemed a failure to exercise reasonable care, and no failure of the Agent to
preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by any Debtor, shall be deemed of itself a failure to exercise
reasonable care in the custody or preservation of such Collateral.
Any notice from the Agent to any Debtor, if mailed, shall be deemed
given five days after the date mailed, postage prepaid, addressed to such Debtor
either at such Debtor's address shown on SCHEDULE I hereto or at such other
address as such Debtor shall have specified in writing to the Agent as its
address for notices hereunder.
Each of the Debtors agrees to pay all expenses (including reasonable
attorney's fees and legal expenses) paid or incurred by the Agent or any Lender
in endeavoring to collect the Liabilities of such Debtor, or any part thereof,
and in enforcing this Agreement against such Debtor, and such obligations will
themselves be Liabilities.
No delay on the part of the Agent in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
the Agent of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.
This Security Agreement shall remain in full force and effect until all
Liabilities have been paid in full and all Commitments have terminated. If at
any time all or any part of any payment theretofore applied by the Agent or any
Lender to any of the Liabilities is or must be rescinded or returned by the
Agent or such Lender for any reason whatsoever (including, without limitation,
the insolvency, bankruptcy or reorganization of any Debtor), such Liabilities
shall, for the purposes of this Agreement, to the extent that such payment is or
must be rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by the Agent or such Lender, and this Agreement
shall continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by the Agent or such Lender had not
been made.
This Agreement has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the laws of the State of Illinois
applicable to contracts made and to be entirely performed in the State of
Illinois, subject, however, to the applicability of the Uniform Commercial Code
of any
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jurisdiction in which any Goods of any Debtor may be located at any given
time. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
The rights and privileges of the Agent hereunder shall inure to the
benefit of its successors and assigns.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute one and the same Agreement. At any time after the date of this
Agreement, one or more additional persons or entities may become parties hereto
by executing and delivering to the Agent a counterpart of this Agreement.
Immediately upon such execution and delivery (and without any further action),
each such additional person or entity will become a party to, and will be bound
by all the terms of, this Agreement.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH DEBTOR HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH DEBTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, TO THE ADDRESS SET FORTH ON SCHEDULE I HERETO (OR SUCH OTHER ADDRESS AS
IT SHALL HAVE SPECIFIED IN WRITING TO THE AGENT AS ITS ADDRESS FOR NOTICES
HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. EACH
DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF EACH DEBTOR, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF)
EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY
OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING
-12-
<PAGE>
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE
FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
-13-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
U.S. AGGREGATES, INC.
By: /s/ Michael Stone
------------------------------
Title:
---------------------------
SRM HOLDINGS CORP.
By: /s/ Michael Stone
------------------------------
Title:
---------------------------
WESTERN AGGREGATES HOLDING CORP.
By: /s/ Michael Stone
------------------------------
Title:
---------------------------
WESTERN ROCK PRODUCTS CORP.
By: /s/ Darrell G. Whitney
------------------------------
Title: President
---------------------------
JENSEN CONSTRUCTION & DEVELOPMENT,
INC.
By: /s/ Darrell G. Whitney
------------------------------
Title: President
---------------------------
SANDIA CONSTRUCTION, INC.
By: /s/ Darrell G. Whitney
------------------------------
Title: President
---------------------------
-14-
<PAGE>
SOUTHERN NEVADA AGGREGATES, INC.
By: /s/ Darrell G. Whitney
------------------------------
Title: President
---------------------------
TRI-STATE TESTING LABORATORIES, INC.
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
MOHAVE CONCRETE AND MATERIALS, INC.,
a Nevada corporation
By: /s/ Darrell G. Whitney
------------------------------
Title: President
---------------------------
MOHAVE CONCRETE AND MATERIALS, INC.,
an Arizona corporation
By: /s/ Darrell G. Whitney
------------------------------
Title: President
---------------------------
A-BLOCK COMPANY, INC.,
an Arizona corporation
By: /s/ Darrell G. Whitney
------------------------------
Title: President
---------------------------
A-BLOCK COMPANY, INC.,
a California corporation
By: /s/ Darrell G. Whitney
------------------------------
Title: President
---------------------------
-15-
<PAGE>
COX ROCK PRODUCTS, INC.
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
COX TRANSPORT CORPORATION
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
VALLEY ASPHALT, INC.
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
GEODYNE TRANSPORT, INC.
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
FALCON RIDGE CONSTRUCTION, INC.
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
BECK PAVING, INC.
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
-16-
<PAGE>
SOUTHERN READY MIX, INC.
By: /s/ Cecil F. Greene
------------------------------
Title: CEO
---------------------------
DEKALB STONE, INC.
By: /s/ Cecil F. Greene
------------------------------
Title: President
---------------------------
MULBERRY ROCK CORPORATION
By: /s/ Cecil F. Greene
------------------------------
Title: President
---------------------------
BHY READY MIX, INC.
By: /s/ Cecil F. Greene
------------------------------
Title: President
---------------------------
BRADLEY STONE & SAND, INC.
By: /s/ Cecil F. Greene
------------------------------
Title: President
---------------------------
BIG HORN REDI MIX, INC.
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
-17-
<PAGE>
TREASURE VALLEY CONCRETE, INC.
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
MONROC, INC.
By: /s/ Micheal Stone
------------------------------
Title:
---------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Agent for the Lenders
By: /s/ Kevin P. Morrison
------------------------------
Title: Vice President
---------------------------
-18-
<PAGE>
Signature page to the Amended and
Restated Security Agreement dated as of
June 5, 1998, as amended, in favor of
Bank of America National Trust and
Savings Association, individually and as
Agent, and the other Lenders which are
party to the Third Amended and Restated
Credit Agreement referred to herein,
dated as of June 5, 1998, among U.S.
Aggregates, Inc., the Lenders and Bank
of America National Trust and Savings
Association, as Agent
The undersigned is executing a
counterpart hereof for purposes of
becoming a party hereto:
[SUBSIDIARY]
By:___________________________
Its:
-19-
<PAGE>
SCHEDULE I
TO SECURITY AGREEMENT
CHIEF EXECUTIVE OFFICE OF ALL DEBTORS
400-4 College Avenue
Clemson, South Carolina 29631
<PAGE>
SCHEDULE II
TO SECURITY AGREEMENT
ADDRESSES OF OTHER LOCATIONS
SRM HOLDINGS CORP.
None.
WESTERN AGGREGATES HOLDING CORP.
None.
<TABLE>
<S> <C>
SOUTHERN READY MIX, INC.
LEASED REAL PROPERTY LESSOR
R/M Plant - Plant I Norfolk Southern Corp.
2653 Ruffner Road Real Estate and Contract
Irondale, AL 35210 Services
(Some parcels are owned) 185 Spring Street, S.W.
Atlanta, GA 30303
R/M Plant - Plant 2 Mr. Joe Yarborough, Sr.
3954 Loma Crest Drive c/o Grayson Valley Country Club
Hoover, AL 35244 Valley Drive 2201 Grayson Valley Drive
(Some parcels are owned) Birmingham, AL 35235
R/M Plant - Plant 5 Sherman International Corp.
26th Street East P. 0. Box 1926
Jasper, AL 35501 Birmingham, AL 35201
Attn: Danny Rogers
R/M Plant - Plant 7 Norfolk Southern Corporation
2026 6th Avenue North Real Estate and Contract Services
Bessemer, AL 35020 185 Spring Street, S.W.
(Some parcels are owned) Atlanta, GA 30303
R/M Plant - Plant 9 Western Steel
Rt. I Box 526 Hwy. 5 P. 0. Box W
Woodstock, AL 35188 Birmingham, AL 35228
Attn: Wynelle Smith
R/M Plant - Plant 13 Alabama State Dock Department
112 Industrial Canal Road P.O. Box 1588
Mobile, AL 36603 Mobile, AL 36633
Tarrant Quarry Drummond Company
2475 Seaboard Road Land Department
Tarrant, AL 35217 P. 0. Box 1549
Jasper, AL 35502
Calera Quarry Blue Circle, Inc.
730 Highway 23 Two Parkway Center
Calera, AL 35040 Suite 1200
<PAGE>
<S> <C>
Marietta, GA 30067
Corporate Office Carter & Associates
4200 Colonnade Parkway 3800 Colonnade Parkway
Suite 100 Suite 110
Birmingham, AL 35243 Birmingham, AL 35243
O'Neal Quarry Chemical Lime Company
3703 Hwy 31 P.O. Box 479
Calera, AL 35040 Montevallo, AL 35115
Attn: Don Robinson
OWNED REAL PROPERTY
R/M Plant - Plant 4
905 14th Street North
Birmingham, AL 35203
R/M Plant - Plant 6
5357 Hwy. 280 East
Birmingham, AL 35242
R/M Plant and Office
6781 Rester Road
Theodore, AL 36582
R/M Plant, Block Plant & Office
1506 Veterans Drive
Florence, AL 35630
R/M Plant and Office
14th Avenue S.W.
Sheffield, AL 35660
R/M Plant, Block Plant & Office
30th and Wilmer
Anniston, AL 36202
R/M Plant
West Francis Avenue
Jacksonville, AL 36265
R/M Plant
111 Industrial Drive
Oxford, AL 36203
R/M Plant
35670 Hwy. 21 North
Talladega, AL 35160
Block and Paver Plant
#1 Selfield Industrial Park
Selma, AL 36701
Vance Quarry
10445 Frog Lady Road
Vance, A: 35490
(Some parcels leased)
<PAGE>
<S> <C>
Alabaster Quarry
1180 Fulton Springs Road
Alabaster, AL 35007
Sandy Key Condominium
Unit 514
13575 Sandy Key Drive
Pensacola, Fl 32509
DEKALB STONE, INC.
OWNED REAL PROPERTY
None.
LEASED REAL PROPERTY LESSOR
DeKalb Quarry Bradley Mountain, Inc.
7262 South Goddard Road 889 Commerce Drive
Lithonia, GA 30038 Suite A
Conyers, GA 30207
MULBERRY ROCK CORPORATION
OWNED REAL PROPERTY
Mulberry Quarry
6580 Mulberry Rock Road
Dallas, GA 30132
LEASED REAL PROPERTY
None.
BHY READY MIX, INC.
OWNED REAL PROPERTY
None.
LEASED REAL PROPERTY LESSOR
R/M Plant BHY Concrete Finishing, Inc.
1900 Central Avenue 601 Cumberland Street, Suite F
Chattanooga, TN 37408 P. 0. Box 3296
Chattanooga, TN 37404
BRADLEY STONE & SAND, INC.
OWNED REAL PROPERTY
Cleveland Quarry
351 Ladd Springs Road, SE
Cleveland, TN 37323
LEASED REAL PROPERTY LESSOR
Jasper Quarry Sam H. Wemer, III & Rosalee Boyd
9247 Hwy. 150 P. 0. Box 219
<PAGE>
<S> <C>
Sequatchie, TN 37374 Tracy City, TN 37387
South Pittsburg Quarry Catherine C. Brown
385 Bolton Point Rd 500 Laurel Avenue
South Pittsburg, TN 37380 South Pittsburg, TN 37380
Swafford, Carter & Kelly
360 Summertown Rd
Jasper, TN 37347
WESTERN ROCK PRODUCTS CORP.
OWNED REAL PROPERTY
Mesquite Pit Property
250 Riverside Drive
Mesquite, NV 89024
Hughes Pit Property
Mohave County
Littlefield, AZ 86432
Panguitch Pit Property
Garfield County
Panguitch, UT 84759
Parowan Pit Property
Iron County
Parowan, UT 84761
Clark Pit Property
Iron County
Cedar City, UT 84720
Cedar Pit and Yard Property
1405 North Bulldog Road
Cedar City, UT 84720
Sorenson Pit Property
Washington County
Washington, Utah 84780
Ft. Pierce Pit Property
Washington County
St. George, Utah 84770
St. George Yard Property
820 North 1080 East
St. George, Utah 84770
A-T Asphalt Yard Property
Washington County
St. George, Utah 84770
LEASED REAL PROPERTY
</TABLE>
<PAGE>
Western Rock Products Corp. leases property located along Highway 91 on the
Shivwit Band of Paiute Indians tribal land from Southwest Stone.
JENSEN CONSTRUCTION & DEVELOPMENT, INC.
OWNED REAL PROPERTY
None
LEASED REAL PROPERTY
None
SANDIA CONSTRUCTION, INC.
OWNED REAL PROPERTY
None
LEASED REAL PROPERTY
None
SOUTHERN NEVADA AGGREGATES, INC.
OWNED REAL PROPERTY
None
LEASED REAL PROPERTY
Southern Nevada Aggregates, Inc. leases property located in Township 20 South,
Range 64 East, M.D.M. Section 8, SW 1/4, All of Section 17, and Section 20 NW
1/4 , N 1/2, NE 1/4 from Pacific Coast Building Products. The lease expires on
March 6, 2002 with an option to renew for an additional 5 years.
TRI-STATE TESTING LABORATORIES, INC.
OWNED REAL PROPERTY
Ence Yard Property
770 North 1080 East
St. George, UT 84770
LEASED REAL PROPERTY
Tri-State Testing Laboratories, Inc. leases approximately 1 acre located in
Spanish Fork, Utah from the Sumsion Family LLC. The lease will expire on
January 1, 2002.
MOHAVE CONCRETE AND MATERIALS, INC. (NEVADA)
OWNED REAL PROPERTY
None
LEASED REAL PROPERTY
-6-
<PAGE>
None
MOHAVE CONCRETE AND MATERIALS, INC. (ARIZONA)
OWNED REAL PROPERTY
None.
LEASED REAL PROPERTY
Mohave Concrete and Materials, Inc. (Arizona) leases the 88-acre property
located at 2699 West Route Highway 66, Kingman, AZ 86401 from Quinto Polidori.
Mohave Concrete and Materials, Inc. has a right of first refusal from Mr.
Polidori with respect to this property.
Mohave Concrete and Materials, Inc. (Arizona) and A-Block Company, Inc.
(Arizona) lease the property located at 4502 Highway 95 North, Lake Havasu City,
Mohave County, Arizona from the State of Arizona. Mohave Concrete and
Materials, Inc. is also a party to a Material Sales Agreement with the State of
Arizona State Land Department and a Special Land Use Permit with the State of
Arizona on sites located at 4502 Highway 95 North, Lake Havasu City, Mohave
County, Arizona.
Mohave Concrete and Materials, Inc. (Arizona) is party to a Sand and Gravel
Permit with the Fort Mojave Indian Tribe Corporate Charter on the site known as
Mohave Concrete #2 at Mohave Valley, Arizona.
A-BLOCK COMPANY, INC. (ARIZONA)
OWNED REAL PROPERTY
None.
LEASED REAL PROPERTY
None.
A-BLOCK COMPANY, INC. (CALIFORNIA)
OWNED REAL PROPERTY
Block Plant Property
I Ice House Road
Needles, San Berndino County, CA
LEASED REAL PROPERTY
None.
COX ROCK PRODUCTS, INC.
OWNED PROPERTY
CENTERFIELD CRUSHER & HOT PLANT:
Beginning 400 East 400 North
Centerfield, UT 84622
1. S10304
2. S-3319
-7-
<PAGE>
3. S-3361
4. S-10115
5. S-10176
6. 3351
7. S-3362
8. S-10115X
9. 10186
10. 10098X
11. SA-9800986
12. SA-9800622
CENTERFIELD CONCRETE BATCH PLANT:
300 East 400 North
Centerfield, UT 84622
1. 10187
CENTERFIELD SPEARMINT COAL SITE:
650 South Main
Centerfield, UT 84622
1. S-3364
2. S-10304X
3. S-10313
4. S-10264
5. S-3368X1
MT. PLEASANT CONCRETE BATCH PLANT:
597 South 600 East
Mt. Pleasant, UT 84647
1. S-16555X1
2. S- 16553
3. S-16554
4. S-10264X
AURORA CONCRETE BATCH PLANT:
3520 South Old Highway 89
Aurora, UT 84620
1. 4-87-11
ELSINORE CRUSHER & HOT PLANT:
1650 North 1450 West
Elsinore, UT 84724
1. 5-20-54
2. 5-20-41
3. 5-20-38
4. 4-87-11
5. 5-20-42
6. 5-20-43
HUNTINGTON CONCRETE BATCH PLANT:
North Highway #10
Huntington, UT 84528
-8-
<PAGE>
1. 1-180-19
2. 1-180-12
CENTERFIELD MAIN OFFICE:
375 East 400 North
Centerfield, UT 84622
1. S-3318
2. S-3363X
3. 3368X2
4. 10190
5. 10192
6. S-10193
7. S-3363
8. S-10189
LEASED PROPERTY
Overlook Point Apartments
4605 South 2850 West
West Valley City, Utah 84119
Unit # 255
COX TRANSPORT CORPORATION
OWNED REAL PROPERTY
None.
LEASED REAL PROPERTY
None.
VALLEY ASPHALT, INC.
OWNED REAL PROPERTY
Main Office: Leland Yard, II 72 South Del Monte Road PO Box 220, Spanish Fork,
UT 84660
Circle K Pit: (Wellington Pit), 3517 Hwy. 6, Wellington, UT, Carbon County
94542
Gomex Pit: 8648 S. Hwy. 6, Sparish Fork, UT, Utah County
Additional 22 acres purchased 1/98
Jorgansen Pit: Wellington, UT, Carbon County
Salem Pit: 209 E. 10800 S., Salem UT, Utah County
Siaperas Pit: 1/4 Miles off Route 6, Wellington, UT, Carbon County
Wintedon Pit: (Red Sand), E. of I- 1 5 (South West of Nephi), Nephi-West UT,
Juab County
Nielson Pit: Mouth of Leamington Pass Canyon, Leamington, UT, Millard County
Previously Leased, purchased 1/98
-9-
<PAGE>
LEASED REAL PROPERTY
<TABLE>
<CAPTION>
LESSOR ADDRESS DATE OF LEASE COUNTY
- ------ ------- ------------- ------
<S> <C> <C> <C>
Perry, Carolyn Moroni, UT October 5. 1994 Sanpete
Owen & Edna
Christensen
Elberta 15894 S. June 19,1996 Utah
Brent R. Sumsion 13556 W.,
& Scott J. Sumsion Elberta, UT
Nile & Barbara 1000 W. Main January 16,1995 Wasatch
Givens Canyon
Wallsburg, UT
Gerald L. Hill 650 W. 7300 S. March 12,1992 Utah
Family Partnership Spanish Fork, UT
McRae & Barbara Nephi, UT August 25, 1994 Sanpete
Justesen
LAVA BENCH Fillmore, UT September 21, 1981 Juab
The State of Utah
through the Board
of State Lands &
Division of State
Lands, Dept. of
Natural Resources
NEPHI I-15 Interchange February 15, 1994 Utah
Preston Lunt Jones Nephi/North UT
Company, Inc.
SANTAQUIN 13419 S. 4500 W. June 19,1996 Utah
Brent R. Sumsion State
and Scott J. Sumsion Santaquin, UT
Harold E. & Ethel 1/2 mile off Airport January 1, 1994 Carbon
Thayn Road, Wellington, UT
Evelyn Hanks Wood 209 E. 10800 February 11, 1998 Utah
Salem, UT
Peck Rock 2 Miles West of September 4, 1997 Utah
Products Redwood Road
Lehi, UT
Shirl L. Ekins Family East Hwy. 6 December 1, 1997 Utah
Trust Genolo, UT
</TABLE>
GEODYNE TRANSPORT, INC.
OWNED REAL PROPERTY
None.
-10-
<PAGE>
LEASED REAL PROPERTY
1616 North Beck Street
Salt Lake City, UT 84116
Lessor: A.C. Financial
5836 S. Meadowcrest Drive
Murray, UT 84107
FALCON RIDGE CONSTRUCTION, INC.
LEASED REAL PROPERTY
None.
OWNED REAL PROPERTY
18-Acre and 30-Acre Quarries located at
1020 N. Victory Road
Salt Lake City, UT 84116
BECK PAVING, INC.
OWNED PROPERTY
None.
LEASED PROPERTY
Office/Shop Building
136 North 600 West
Farmington, UT 84025
U.S. AGGREGATES, INC.
OWNED REAL PROPERTY
None.
LEASED REAL PROPERTY
400-4 College Way
Clemson, SC 29631
Lessor: Morrison-Reed Properties
Clemson, SC 29631
400 S. El Camino Real, Suite 500
San Mateo, CA 94402
Lessor: Glenborough Properties, L.P.
400 South El Camino Real, Suite #450
San Mateo, CA 94402
3800 Colonnade Parkway, Suite 525
Birmingham, AL 35243
Lessor: CSL Colonnade
3800 Colonnade Parkway, #110
Birmingham, AL 35243
-11-
<PAGE>
One S. Main, Suite 2
Manti, UT 84642
Lessor: Zions First National Bank of Manti
1 South Manti
Manti, UT 84642
MONROC, INC.
OWNED REAL PROPERTY
A. BECK STREET PROPERTY
1730 Beck Street
Salt Lake City, UT 84116
B. MURRAY PROPERTY
97 West Vine Street
Murray, Utah
C. POINT OF THE MOUNTAIN, DRAPER PROPERTY
15589 South 500 West
Draper, Utah 84020
D. PARK CITY PROPERTY
4122 Atkinson Road
Park City, Utah 84060
E. HEBER CITY PROPERTY
150 S. 16th West
Heber City, Utah 84032
F. KEARNS PROPERTY
5750 W. 5600 S.
Kearns, Utah 84118
G. GREEN RIVER PROPERTY
property located in Grand County, Utah with the following legal
description:
Beginning 729.3 feet North and 488.9 feet West of the Southeast corner of
Section 3, Township 21 South, Range 16 East, Salt Lake Meridian, thence
West 1032.8 feet, thence Notrh 1198.3 feet, thence West 585 feet, thence
South 1114.6 feet, thence South 18DEG. 26' East 395.3 feet, thence South
65DEG. 46' East 153.5 feet, thence East 1450.5 feet to the West right of
way of the County Road, thence North 15DEG. 24' West along said right of
way 367.5 feet to beginning.
H. WEBER CANYON PROPERTY
Highway 89 I-84
Umtah, Utah
I. POCATELLO PLANT
2300 No. Main Street
Pocatello, Idaho 83201
J. POCATELLO PIT
Siphon Rd.
Pocatello, Idaho
-12-
<PAGE>
K. IDAHO FALLS PROPERTY
1700 Milligan Road
Idaho Falls, Idaho 83405
L. BOISE PROPERTY
2755 East State
Eagle, Idaho 83707
M. TWIN FALLS PROPERTY
Addison Road West
Twin Falls, Idaho 83303
N. WENDELL PROPERTY
Wallace & 'G' Street
Wendell, Idaho 83355
O. KETCHUM PROPERTY
826 No. Washington
Ketchum, Idaho 83340
P. BLACKFOOT PROPERTY
1990 Westridge
Blackfoot, Idaho 83221
Q. MIDDLETON, IDAHO PROPERTY
300 acres of farmland located in Canyon County, Idaho
LEASED REAL PROPERTY
A. BACCHUS PIT 1
5436 South Highway 111
Magna, Utah 84404
Lessor: LLK Properties
BACCHUS PIT 2
5436 South Highway 111
Magna, Utah 84404
Lessor: Rushton Family
B. BELLEVUE PLANT
Bellevue, Idaho 83313
Lessor: Walker Sand & Gravel (no cost)
C. COTTONWOOD PIT
Five Mile North
Shoshone, Idaho 83352
Lessor: Timm Family
D. BARLEY PLANT
419 West 2nd No.
Burley, Idaho 83318
Lessor: Magic Valley Sand & Gravel (no lease cost as long as Monroc buys
aggregates from them) Not a lease for land
-13-
<PAGE>
BIG HORN REDI MIX, INC.
OWNED REAL PROPERTY
CODY PROPERTY
15589 South 500 West
Cody, Wyoming 82414
GREYBULL PROPERTY
600 Industrial Park
Greybull, Wyoming 82426
WORLAND PROPERTY
320 West Big Horn Ave.
Worland, Wyoming 82435
POWELL PROPERTY
361 W. Madison
Powell, Wyoming 82435
LEASED REAL PROPERTY
POWELL BATCH PLANT
355 E. North
Powell, Wyoming
Lessor: Burlington Northern Railroad
CODY PIT
Cody, Wyoming
Lessor: State of Wyoming
WORLAND PIT
Worland, Wyoming
Lessor: Bureau of Land Management
POWELL STORAGE YARD
Powell, Wyoming
Lessor: Burlington Northern Railroad
TREASURE VALLEY CONCRETE, INC.
OWNED REAL PROPERTY
Amity Land
155 E. Amity
Boise, Idaho
NAMPA BATCH PLANT
2515 Chacartequi Lane
Nampa, Idaho 83687
LEASED PROPERTY
AMITY PIT
-14-
<PAGE>
4443 E. Amity
Boise, Idaho
Lessor: Nelson Construction
-15-
<PAGE>
SCHEDULE III
TO SECURITY AGREEMENT
PATENTS
<TABLE>
<CAPTION>
PATENT PATENT/SERIAL NO. COUNTRY CO. NAME HELD IN ISSUE DATE
<S> <C> <C> <C> <C>
Mobile Ramp for 5,297,914 U.S.A. Cox Rock March 29, 1994
Unloading Trucks Products Inc.
TRADEMARKS
<CAPTION>
TRADEMARK NAME REGISTRATION/SERIAL NO. COUNTRY CO. NAME HELD IN ISSUE DATE
<S> <C> <C> <C> <C>
COPYRIGHTS
<CAPTION>
COPYRIGHT NAME COUNTRY CO. NAME HELD IN ISSUE DATE
<S> <C> <C> <C>
</TABLE>
<PAGE>
AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT
THIS AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT (this "Agreement") dated
as of June 5, 1998 is between U.S. AGGREGATES, INC., a Delaware corporation (the
"Company"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (in its
individual capacity, "BofA") in its capacity as agent for the Lenders referred
to below (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Company has entered into a Third Amended and Restated Credit
Agreement dated as of June 5, 1998 (as amended or otherwise modified from time
to time, the "Credit Agreement"; capitalized terms used but not defined herein
are used as defined in the Credit Agreement), with the lenders (individually
each a "Lender" and collectively the "Lenders") as are, or may from time to time
become, parties thereto and the Agent, pursuant to which the Lenders have agreed
to make loans to, and issue or participate in letters of credit for the account
of, the Company;
WHEREAS, the Credit Agreement amends and restates an Amended and Restated
Credit Agreement dated as of October 15, 1996 among the Company, various
financial institutions and the Agent (as amended, the "Existing Credit
Agreement");
WHEREAS, the Company and the Agent entered into a Pledge Agreement dated as
of July 13, 1994, as heretofore amended (the "Existing Agreement");
WHEREAS, as a condition precedent to making of loans and the issuance of
letters of credit under the Credit Agreement, the Company is required to execute
and deliver a pledge agreement in the form of this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Company under or in
connection with the Credit Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Existing Agreement is hereby amended and restated, and the parties hereto agree,
as follows:
1. DEFINITIONS. When used herein, the following terms shall have the
following meanings (such definitions to be applicable to both the singular and
plural forms of such terms):
BUSINESS DAY has the meaning assigned to such term in the Credit Agreement.
COLLATERAL - see SECTION 2.
<PAGE>
DEFAULT means the occurrence of any of the following events: (a) any
Unmatured Event of Default under Section 12.1.1 or 12.1.4 of the Credit
Agreement; (b) any Event of Default; or (c) any warranty of the Company
herein is untrue or misleading in any material respect and, as a result
thereof, the Agent's security interest in, or rights and remedies with
respect to, any material portion of the Collateral is impaired or otherwise
adversely affected.
EVENT OF DEFAULT has the meaning assigned to such term in the Credit
Agreement.
ISSUER means the issuer of any of the shares of stock or other securities
representing all or any of the Collateral.
LIABILITIES means all obligations (monetary or otherwise) of the Company,
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due,
which arise out of or in connection with the Credit Agreement, the Notes or
any other Loan Document to which it is a party.
LOAN DOCUMENT has the meaning assigned to such term in the Credit
Agreement.
UNMATURED EVENT OF DEFAULT has the meaning assigned to such term in the
Credit Agreement.
2. PLEDGE. As security for the payment of all Liabilities, the Company hereby
pledges to the Agent, and grants to the Agent a security interest in, all of the
following:
A. All of the shares of stock and other securities described in SCHEDULE I
hereto, all of the certificates and/or instruments representing such shares of
stock and other securities, and all cash, securities, dividends, rights and
other property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such shares
or other securities;
B. All additional shares of stock of any of the Issuers listed in SCHEDULE I
hereto at any time and from time to time acquired by the Company in any manner,
all of the certificates representing such additional shares, and all cash,
securities, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
C. All other property hereafter delivered to the Agent in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such property, and all cash, securities, interest,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
thereof; and
-2-
<PAGE>
D. All products and proceeds of all of the foregoing.
All of the foregoing are herein collectively called the "Collateral".
The Company agrees to deliver to the Agent, promptly upon receipt and in due
form for transfer (i.e., endorsed in blank or accompanied by stock or bond
powers executed in blank), any Collateral which may at any time or from time to
time be in or come into the possession or control of the Company; and prior to
the delivery thereof to the Agent, such Collateral shall be held by the Company
separate and apart from its other property and in express trust for the Agent.
3. WARRANTIES; FURTHER ASSURANCES. The Company warrants to the Agent and each
Lender that: (a) the Company is (or at the time of any future delivery, pledge,
assignment or transfer thereof will be) the legal and equitable owner of the
Collateral free and clear of all liens, security interests and encumbrances of
every description whatsoever other than the security interest created hereunder;
(b) the pledge and delivery of the Collateral pursuant to this Agreement will
create a valid perfected security interest in the Collateral in favor of the
Agent; (c) all shares of stock referred to in SCHEDULE I hereto are duly
authorized, validly issued, fully paid and non-assessable; (d) as to each Issuer
whose name appears in SCHEDULE I hereto, the Collateral represents on the date
hereof not less than the applicable percent (as shown in SCHEDULE I hereto) of
the total shares of capital stock issued and outstanding of such Issuer; and (e)
the information contained in SCHEDULE I hereto is true and accurate in all
respects.
So long as any of the Liabilities shall be outstanding or any commitment shall
exist on the part of the Agent or any Lender with respect to the creation of any
Liabilities, the Company (i) shall not, without the express prior written
consent of the Agent, sell, assign, exchange, pledge or otherwise transfer,
encumber, or grant any option, warrant or other right to purchase the stock of
any Issuer which is pledged hereunder, or otherwise diminish or impair any of
its rights in, to or under any of the Collateral; (ii) shall execute such
Uniform Commercial Code financing statements and other documents (and pay the
costs of filing and recording or re-filing and re-recording the same in all
public offices deemed necessary or appropriate by the Agent) and do such other
acts and things, all as the Agent may from time to time reasonably request, to
establish and maintain a valid, perfected security interest in the Collateral
(free of all other liens, claims and rights of third parties whatsoever) to
secure the performance and payment of the Liabilities; (iii) will execute and
deliver to the Agent such stock powers and similar documents relating to the
Collateral, satisfactory in form and substance to the Agent, as the Agent may
reasonably request; and (iv) will furnish the Agent or any Lender such
information concerning the Collateral as the Agent or such Lender may from time
to time reasonably request, and will permit the Agent or any Lender or any
designee of the Agent or any Lender, from time to time at reasonable times and
on reasonable notice, to inspect, audit and make copies of and extracts from all
records and all other papers in the possession of the Company which pertain to
the Collateral, and will, upon request of the Agent at any time when a Default
has occurred and is continuing, deliver to the Agent all of such records and
papers.
-3-
<PAGE>
4. HOLDING IN NAME OF AGENT, ETC. The Agent may from time to time after the
occurrence and during the continuance of a Default, without notice to the
Company, take all or any of the following actions: (a) transfer all or any part
of the Collateral into the name of the Agent or any nominee or sub-agent for the
Agent, with or without disclosing that such Collateral is subject to the lien
and security interest hereunder, (b) appoint one or more sub-agents or nominees
for the purpose of retaining physical possession of the Collateral, (c) notify
the parties obligated on any of the Collateral to make payment to the Agent of
any amounts due or to become due thereunder, (d) endorse any checks, drafts or
other writings in the name of the Company to allow collection of the Collateral,
(e) enforce collection of any of the Collateral by suit or otherwise, and
surrender, release or exchange all or any part thereof, or compromise or renew
for any period (whether or not longer than the original period) any obligations
of any nature of any party with respect thereto, and (f) take control of any
proceeds of the Collateral.
5. VOTING RIGHTS, DIVIDENDS, ETC. (a) Notwithstanding certain provisions of
SECTION 4 hereof, so long as the Agent has not given the notice referred to in
PARAGRAPH (b) below:
A. The Company shall be entitled to exercise any and all voting or
consensual rights and powers and stock purchase or subscription rights (but
any such exercise by the Company of stock purchase or subscription rights
may be made only from funds of the Company not comprising part of the
Collateral) relating or pertaining to the Collateral or any part thereof
for any purpose; PROVIDED, HOWEVER, that the Company agrees that it will
not exercise any such right or power in any manner which would have a
material adverse effect on the value of the Collateral or any part thereof.
B. The Company shall be entitled to receive and retain any and all
lawful dividends payable in respect of the Collateral which are paid in
cash by any Issuer if such dividends are permitted by the Credit Agreement,
but all dividends and distributions in respect of the Collateral or any
part thereof made in shares of stock or other property or representing any
return of capital, whether resulting from a subdivision, combination or
reclassification of Collateral or any part thereof or received in exchange
for Collateral or any part thereof or as a result of any merger,
consolidation, acquisition or other exchange of assets to which any Issuer
may be a party or otherwise or as a result of any exercise of any stock
purchase or subscription right, shall be and become part of the Collateral
hereunder and, if received by the Company, shall be forthwith delivered to
the Agent in due form for transfer (i.e., endorsed in blank or accompanied
by stock or bond powers executed in blank) to be held for the purposes of
this Agreement.
C. The Agent shall execute and deliver, or cause to be executed and
delivered, to the Company, all such proxies, powers of attorney, dividend
orders and other instruments as the Company may reasonably request for the
purpose of enabling the Company to exercise the rights and powers which it
is entitled to exercise pursuant to CLAUSE (a) above and to receive the
dividends which it is authorized to retain pursuant to CLAUSE (b) above.
-4-
<PAGE>
(b) Upon notice from the Agent during the existence of a Default, and so long
as the same shall be continuing, all rights and powers which the Company is
entitled to exercise pursuant to SECTION 5(a)(A) hereof, and all rights of the
Company to receive and retain dividends pursuant to SECTION 5(a)(B) hereof,
shall forthwith cease, and all such rights and powers shall thereupon become
vested in the Agent which shall have, during the continuance of such Default,
the sole and exclusive authority to exercise such rights and powers and to
receive such dividends. Any and all money and other property paid over to or
received by the Agent pursuant to this PARAGRAPH (b) shall be retained by the
Agent as additional Collateral hereunder and applied in accordance with the
provisions hereof.
6. REMEDIES. Whenever a Default shall exist, the Agent may exercise from
time to time any rights and remedies available to it under the Uniform
Commercial Code as in effect in Illinois or otherwise available to it. Without
limiting the foregoing, whenever a Default shall exist the Agent (a) may, to the
fullest extent permitted by applicable law, without notice, advertisement,
hearing or process of law of any kind, (i) sell any or all of the Collateral,
free of all rights and claims of the Company therein and thereto, at any public
or private sale or brokers' board and (ii) bid for and purchase any or all of
the Collateral at any such public sale and (b) shall have the right, for and in
the name, place and stead of the Company, to execute endorsements, assignments,
stock powers and other instruments of conveyance or transfer with respect to all
or any of the Collateral. The Company hereby expressly waives, to the fullest
extent permitted by applicable law, any and all notices, advertisements,
hearings or process of law in connection with the exercise by the Agent of any
of its rights and remedies during the continuance of a Default. If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly given
if mailed at least ten (10) days before such disposition, postage prepaid,
addressed to the Company, either at the address of the Company shown below, or
at any other address of the Company appearing on the records of the Agent. Any
proceeds of any of the Collateral may be applied by the Agent to the payment of
expenses in connection with the Collateral, including, without limitation,
reasonable attorneys' fees and legal expenses, and any balance of such proceeds
may be applied by the Agent toward the payment of such of the Liabilities, and
in such order of application, as the Agent may from time to time elect (and,
after payment in full of all Liabilities, any excess shall be delivered to the
Company or as a court of competent jurisdiction shall direct).
The Agent is hereby authorized to comply with any limitation or restriction in
connection with any sale of Collateral as it may be advised by counsel is
necessary in order to (a) avoid any violation of applicable law (including,
without limitation, compliance with such procedures as may restrict the number
of prospective bidders and purchasers and/or further restrict such prospective
bidders or purchasers to Persons who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or resale of such Collateral) or (b) obtain any required approval
of the sale or of the purchase by any governmental regulatory authority or
official, and the Company agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner and that the Agent shall not
-5-
<PAGE>
be liable or accountable to the Company for any discount allowed by reason of
the fact that such Collateral is sold in compliance with any such limitation or
restriction.
7. GENERAL. The Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if it takes such action for that
purpose as the Company shall request in writing, but failure of the Agent to
comply with any such request shall not of itself be deemed a failure to exercise
reasonable care, and no failure of the Agent to preserve or protect any rights
with respect to the Collateral against prior parties, or to do any act with
respect to preservation of the Collateral not so requested by the Company, shall
be deemed a failure to exercise reasonable care in the custody or preservation
of any Collateral.
No delay on the part of the Agent in exercising any right, power or remedy
shall operate as a waiver thereof, and no single or partial exercise of any such
right, power or remedy shall preclude any other or further exercise thereof, or
the exercise of any other right, power or remedy. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement shall be
effective unless the same shall be in writing and signed and delivered by the
Agent, and then such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
All notices hereunder shall be in writing (including, without limitation,
facsimile transmission) and shall be sent to the applicable party at its address
shown below its signature hereto or at such other address as such party may, by
written notice received by the other parties hereto, have designated as its
address for such purpose. Notices sent by facsimile transmission shall be
deemed to have been given when sent; notices sent by mail shall be deemed to
have been given three Business Days after the date when sent by registered or
certified mail, postage prepaid; and notices sent by hand delivery shall be
deemed to have been given when received.
All rights, powers and remedies of the Agent and the Lenders expressed herein
are in addition to all other rights, powers and remedies possessed by them,
including, without limitation, those provided by applicable law or in any other
written instrument or agreement relating to any of the Liabilities or any
security therefor.
This Agreement has been delivered at Chicago, Illinois, and shall be construed
in accordance with and governed by the internal laws of the State of Illinois.
Wherever possible each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
this Agreement.
This Agreement shall be binding upon the Company and the Agent and their
respective successors and assigns, and shall inure to the benefit of the Company
and the Agent and the successors and assigns of the Agent.
-6-
<PAGE>
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed an original but all such counterparts shall together constitute
but one and the same Agreement.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS AGREEMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE
STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. EACH OF THE COMPANY, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF)
EACH LENDER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE. EACH OF THE COMPANY, THE AGENT AND (BY ACCEPTING THE BENEFITS
HEREOF) EACH LENDER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
EACH OF THE COMPANY, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF) EACH
LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
-7-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as of
the day and year first written above.
U.S. AGGREGATES, INC.
By: /s/ Michael Stone
------------------------------------
Title:
----------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Agent
By: /s/ Kevin P. Morrison
-------------------------------------
Vice President
-8-
<PAGE>
SCHEDULE I
TO
COMPANY PLEDGE AGREEMENT
STOCK
<TABLE>
<CAPTION>
Pledged Shares
No. of as % of Total Total Shares of
Certificate Pledged Shares Issued Issuer
Issuer No. Shares and Outstanding Outstanding
- ------ ----------- ------ --------------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
AMENDED AND RESTATED
SUBSIDIARY PLEDGE AGREEMENT
THIS AMENDED AND RESTATED SUBSIDIARY PLEDGE AGREEMENT (this "Agreement")
dated as of June 5, 1998 is among each of the parties identified on the
signature pages hereto as a "Pledgor" (individually each a "Pledgor" and
collectively the "Pledgors") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION in its capacity as agent for the Lenders referred to below (in such
capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, U.S. Aggregates, Inc., a Delaware corporation (the "Company"), has
entered into a Third Amended and Restated Credit Agreement dated as of June 5,
1998 (as amended or otherwise modified from time to time, the "Credit
Agreement"; capitalized terms used but not defined herein are used as defined in
the Credit Agreement) with various financial institutions (individually a
"Lender" and collectively the "Lenders") and the Agent, pursuant to which the
Lenders have agreed to make loans to, and issue or participate in letters of
credit for the account of, the Company;
WHEREAS, the Credit Agreement amends and restates a Second Amended and
Restated Credit Agreement dated as of October 15, 1996 (as thereafter amended,
the "Existing Credit Agreement") among the Company, various financial
institutions and the Agent;
WHEREAS, in connection with the Existing Credit Agreement, certain of
Pledgors (the "Existing Pledgors") have previously entered into Subsidiary
Pledge Agreements with the Agent (collectively, the "Existing Pledge
Agreements");
WHEREAS, each Pledgor has executed and delivered a guaranty of the
obligations of the Company under the Credit Agreement (as amended or otherwise
modified from time to time, the "Guaranty"); and
WHEREAS, as a condition precedent to the making of loans and the issuance
of letters of credit under the Credit Agreement, each Pledgor is required to
execute and deliver this Agreement, it being the intention of the parties hereto
that this Agreement shall not effect a novation of the obligations of any
Existing Pledgor under the Existing Pledge Agreements, but be merely a
restatement, and where applicable, an amendment of the terms governing such
obligations;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to
<PAGE>
the Company under or in connection with the Credit Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each Existing Pledge Agreement is hereby consolidated
into this Agreement and all Existing Pledge Agreements are hereby amended and
restated, and the parties hereto agree, as follows:
1. DEFINITIONS. When used herein, the following terms shall have the
following meanings (such definitions to be applicable to both the singular and
plural forms of such terms):
COLLATERAL means, with respect to any Pledgor, all property in which such
Pledgor has granted the Agent a security interest pursuant to SECTION 2.
DEFAULT means, the occurrence of any of the following events: (a) any
Unmatured Event of Default under Section 12.1.1 or 12.1.4 of the Credit
Agreement; (b) any Event of Default; or (c) any warranty of any Pledgor
herein is untrue or misleading in any material respect and, as a result
thereof, the Agent's security interest in, or rights and remedies with
respect to, any material portion of such Pledgor's Collateral is impaired
or otherwise adversely affected.
EVENT OF DEFAULT has the meaning assigned to such term in the Credit
Agreement.
ISSUER means, the issuer of any of the shares of stock or other securities
representing all or any of the Collateral.
LIABILITIES means, with respect to any Pledgor, all obligations (monetary
or otherwise) of such Pledgor, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, which arise out of or in connection with
the Guaranty, this Agreement or any other Loan Document to which such
Pledgor is a party.
LOAN DOCUMENT has the meaning assigned to such term in the Credit
Agreement.
UNMATURED EVENT OF DEFAULT has the meaning assigned to such term in the
Credit Agreement.
2. PLEDGE. As security for the payment of all Liabilities, each
Pledgor hereby pledges to the Agent, and grants to the Agent a security
interest in, all of the following:
A. All of the shares of stock and other securities described opposite the
name of such Pledgor on SCHEDULE I hereto, all of the certificates and/or
instruments representing such shares of stock and other securities, and all
cash, securities, dividends, rights
-2-
<PAGE>
and other property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares or other securities;
B. All additional shares of stock of any of the Issuers listed on SCHEDULE
I hereto at any time and from time to time acquired by such Pledgor in any
manner, all of the certificates representing such additional shares, and all
cash, securities, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares;
C. All other property hereafter delivered to the Agent by or on behalf of
such Pledgor in substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such property, and all
cash, securities, interest, dividends, rights and other property at any time and
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all thereof; and
D. All products and proceeds of all of the foregoing.
Each Pledgor agrees to deliver to the Agent, promptly upon receipt and in
due form for transfer (i.e., duly endorsed in blank or accompanied by stock or
bond powers duly executed in blank), any Collateral which may at any time or
from time to time be in or come into the possession or control of such Pledgor;
and prior to the delivery thereof to the Agent, such Collateral shall be held by
such Pledgor separate and apart from its other property and in express trust for
the Agent.
3. WARRANTIES; FURTHER ASSURANCES. Each Pledgor warrants to the Agent and
each Lender with respect to all Collateral of such Pledgor that: (a) such
Pledgor is (or at the time of any future delivery, pledge, assignment or
transfer thereof will be) the legal and equitable owner of such Collateral free
and clear of all liens, security interests and encumbrances of every description
whatsoever other than the security interest created hereunder; (b) the pledge
and delivery of such Collateral pursuant to this Agreement will create a valid
perfected security interest in such Collateral in favor of the Agent; (c) all
shares of stock referred to opposite such Pledgor's name on SCHEDULE I hereto
are duly authorized, validly issued, fully paid and non-assessable; (d) as to
each Issuer whose name appears opposite such Pledgor's name on SCHEDULE I
hereto, the shares of stock pledged as Collateral by such Pledgor represent on
the date hereof not less than the applicable percent (as shown on SCHEDULE I
hereto) of the total shares of capital stock issued and outstanding of such
Issuer; and (e) the information contained opposite such Pledgor's name on
SCHEDULE I hereto is true and accurate in all respects.
-3-
<PAGE>
So long as any of the Liabilities shall be outstanding or any commitment
shall exist on the part of the Agent or any Lender with respect to the making of
loans or other financial accommodations under the Credit Agreement, (i) no
Pledgor shall, without the express prior written consent of the Agent, sell,
assign, exchange, pledge or otherwise transfer, encumber, or grant any option,
warrant or other right to purchase the stock of any Issuer which is pledged
hereunder, or otherwise diminish or impair any of its rights in, to or under any
of the Collateral of such Pledgor; (ii) each Pledgor shall execute such Uniform
Commercial Code financing statements and other documents (and pay the costs of
filing and recording or re-filing and re-recording the same in all public
offices deemed necessary or appropriate by the Agent) and do such other acts and
things, all as the Agent may from time to time reasonably request, to establish
and maintain a valid, perfected security interest in the Collateral of such
Pledgor (free of all other liens, claims and rights of third parties whatsoever)
to secure the performance and payment of the Liabilities; (iii) each Pledgor
will execute and deliver to the Agent such stock powers and similar documents
relating to the Collateral of such Pledgor, satisfactory in form and substance
to the Agent, as the Agent may reasonably request; and (iv) each Pledgor will
furnish the Agent or any Lender such information concerning the Collateral of
such Pledgor as the Agent or such Lender may from time to time reasonably
request, and will permit the Agent or any Lender or any designee of the Agent or
any Lender, from time to time at reasonable times and on reasonable notice, to
inspect, audit and make copies of and extracts from all records and all other
papers in the possession of such Pledgor which pertain to the Collateral of such
Pledgor, and will, upon request of the Agent at any time when a Default has
occurred and is continuing, deliver to the Agent all of such records and papers.
4. HOLDING IN NAME OF AGENT, ETC. The Agent may from time to time after
the occurrence and during the continuance of a Default, without notice to any
Pledgor, take all or any of the following actions: (a) transfer all or any part
of the Collateral of any Pledgor into the name of the Agent or any nominee or
sub-agent for the Agent, with or without disclosing that such Collateral is
subject to the lien and security interest hereunder, (b) appoint one or more
sub-agents or nominees for the purpose of retaining physical possession of any
of the Collateral, (c) notify the parties obligated on any of the Collateral to
make payment to the Agent of any amounts due or to become due thereunder, (d)
endorse any checks, drafts or other writings in the name of the applicable
Pledgor to allow collection of any of the Collateral, (e) enforce collection of
any of the Collateral by suit or otherwise, and surrender, release or exchange
all or any part thereof, or compromise or renew for any period (whether or not
longer than the original period) any obligations of any nature of any party with
-4-
<PAGE>
respect thereto and (f) take control of any proceeds of any of the Collateral.
5. VOTING RIGHTS, DIVIDENDS, ETC. (a) Notwithstanding certain provisions
of SECTION 4 hereof, so long as the Agent has not given the notice referred to
in PARAGRAPH (B) below:
A. Each Pledgor shall be entitled to exercise any and all voting or
consensual rights and powers and stock purchase or subscription rights (but
any such exercise by any Pledgor of stock purchase or subscription rights
may be made only from funds of such Pledgor not comprising part of the
Collateral) relating or pertaining to the Collateral of such Pledgor or any
part thereof for any purpose; PROVIDED, HOWEVER, that each Pledgor agrees
that it will not exercise any such right or power in any manner which would
have a material adverse effect on the value of the Collateral of such
Pledgor or any part thereof.
B. Each Pledgor shall be entitled to receive and retain any and all
lawful dividends payable in respect of the Collateral of such Pledgor which
are paid in cash by any Issuer if such dividends are permitted by the
Credit Agreement, but all dividends and distributions in respect of such
Collateral or any part thereof made in shares of stock or other property or
representing any return of capital, whether resulting from a subdivision,
combination or reclassification of Collateral or any part thereof or
received in exchange for Collateral or any part thereof or as a result of
any merger, consolidation, acquisition or other exchange of assets to which
any Issuer may be a party or otherwise or as a result of any exercise of
any stock purchase or subscription right, shall be and become part of the
Collateral hereunder and, if received by such Pledgor, shall be forthwith
delivered to the Agent in due form for transfer (i.e., endorsed in blank or
accompanied by stock or bond powers executed in blank) to be held for the
purposes of this Agreement.
C. The Agent shall execute and deliver, or cause to be executed and
delivered, to each Pledgor, all such proxies, powers of attorney, dividend
orders and other instruments as such Pledgor may reasonably request for the
purpose of enabling such Pledgor to exercise the rights and powers which it
is entitled to exercise pursuant to CLAUSE (A) above and to receive the
dividends which it is authorized to retain pursuant to CLAUSE (B) above.
(b) Upon notice from the Agent during the existence of a Default, and so
long as the same shall be continuing, all rights and powers which the Pledgors
are entitled to exercise pursuant to SECTION 5(a)(A) hereof, and all rights of
the Pledgors to receive
-5-
<PAGE>
and retain dividends pursuant to SECTION 5(a)(B) hereof, shall forthwith
cease, and all such rights and powers shall thereupon become vested in the
Agent which shall have, during the continuance of such Default, the sole and
exclusive authority to exercise such rights and powers and to receive such
dividends. Any and all money and other property paid over to or received by
the Agent pursuant to this PARAGRAPH (b) shall be retained by the Agent as
additional Collateral hereunder and applied in accordance with the provisions
hereof.
6. REMEDIES. Whenever a Default shall exist, the Agent may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code as in effect in Illinois or otherwise available to it.
Without limiting the foregoing, whenever a Default shall exist the Agent (a)
may, to the fullest extent permitted by applicable law, without notice,
advertisement, hearing or process of law of any kind, (i) sell any or all of
the Collateral, free of all rights and claims of any Pledgor therein and
thereto, at any public or private sale or brokers' board and (ii) bid for and
purchase any or all of the Collateral at any such public sale and (b) shall
have the right, for and in the name, place and stead of the applicable
Pledgor, to execute endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or any of the
Collateral. Each Pledgor hereby expressly waives, to the fullest extent
permitted by applicable law, any and all notices, advertisements, hearings or
process of law in connection with the exercise by the Agent of any of its
rights and remedies during the continuance of a Default. If any notification
of intended disposition of any of the Collateral is required by law, such
notification, if mailed, shall be deemed reasonably and properly given if
mailed at least ten (10) days before such disposition, postage prepaid,
addressed to the applicable Pledgor, either at the address of such Pledgor
shown opposite its name below, or at any other address of such Pledgor
appearing on the records of the Agent. Any proceeds of any of the Collateral
may be applied by the Agent to the payment of expenses in connection with the
Collateral, including, without limitation, reasonable attorneys' fees and
legal expenses, and any balance of such proceeds may be applied by the Agent
toward the payment of such of the Liabilities of the applicable Pledgor, and
in such order of application, as the Agent may from time to time elect (and,
after payment in full of all such Liabilities, any excess shall be delivered
to such Pledgor or as a court of competent jurisdiction shall direct).
The Agent is hereby authorized to comply with any limitation or restriction
in connection with any sale of Collateral as it may be advised by counsel is
necessary in order to (a) avoid any violation of applicable law (including,
without limitation, compliance with such procedures as may restrict the number
of prospective bidders and purchasers and/or further restrict such
-6-
<PAGE>
prospective bidders or purchasers to Persons who will represent and agree
that they are purchasing for their own account for investment and not with a
view to the distribution or resale of such Collateral) or (b) obtain any
required approval of the sale or of the purchase by any governmental
regulatory authority or official, and each Pledgor agrees that such
compliance shall not result in such sale being considered or deemed not to
have been made in a commercially reasonable manner and that the Agent shall
not be liable or accountable to any Pledgor for any discount allowed by
reason of the fact that such Collateral is sold in compliance with any such
limitation or restriction.
7. GENERAL. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if it takes such action for
that purpose as the applicable Pledgor shall request in writing, but failure of
the Agent to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care, and no failure of the Agent to preserve or
protect any rights with respect to the Collateral against prior parties, or to
do any act with respect to preservation of the Collateral not so requested by
the applicable Pledgor, shall be deemed a failure to exercise reasonable care in
the custody or preservation of any Collateral.
No delay on the part of the Agent in exercising any right, power or remedy
shall operate as a waiver thereof, and no single or partial exercise of any such
right, power or remedy shall preclude any other or further exercise thereof, or
the exercise of any other right, power or remedy. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement shall be
effective unless the same shall be in writing and signed and delivered by the
Agent, and then such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
All notices hereunder shall be in writing (including, without limitation,
facsimile transmission) and shall be sent to the applicable party at its address
shown below its signature hereto or at such other address as such party may, by
written notice received by the other parties hereto, have designated as its
address for such purpose. Notices sent by facsimile transmission shall be
deemed to have been given when sent; notices sent by mail shall be deemed to
have been given five days after the date when sent by registered or certified
mail, postage prepaid; and notices sent by hand delivery shall be deemed to have
been given when received.
All rights, powers and remedies of the Agent and the Lenders expressed
herein are in addition to all other rights, powers and remedies possessed by
them, including, without limitation, those provided by applicable law or in any
other written instrument or
-7-
<PAGE>
agreement relating to any of the Liabilities or any security therefor.
This Agreement has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State of
Illinois. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions this Agreement.
This Agreement shall be binding upon each Pledgor and the Agent and their
respective successors and assigns, and shall inure to the benefit of the
Pledgors and the Agent and the successors and assigns of the Agent.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed an original but all such counterparts shall together constitute
but one and the same Agreement. At any time after the date of this Agreement,
one or more additional persons or entities may become parties hereto by
executing and delivering to the Agent a counterpart of this Agreement.
Immediately upon such execution and delivery (and without any further action),
each such additional person or entity will become a party to, and will be bound
by all the terms of, this Agreement.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH THIS AGREEMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. EACH OF THE PLEDGORS, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF)
EACH LENDER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE. EACH OF THE PLEDGORS, THE AGENT AND (BY ACCEPTING THE BENEFITS
HEREOF) EACH LENDER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF ILLINOIS. EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
-8-
<PAGE>
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE PLEDGORS, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF) EACH
LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as
of the day and year first written above.
PLEDGORS:
WESTERN AGGREGATES HOLDING CORP.
By: /s/ Michael Stone
----------------------------
Title:
----------------------
WESTERN ROCK PRODUCTS CORP.
By: /s/ Michael Stone
----------------------------
Title:
----------------------
SRM HOLDINGS CORP.
By: /s/ Michael Stone
----------------------------
Title:
----------------------
SOUTHERN READY MIX, INC.
-9-
<PAGE>
By: /s/ Cecil F. Greene
----------------------------
Title: CEO
----------------------
AGENT:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Agent
By Kevin P. Morrison
--------------------------------
Vice President
-10-
<PAGE>
Signature page to the Amended and Restated Subsidiary Pledge Agreement dated as
of June 5, 1998, as amended, among various Subsidiaries of U.S. Aggregates, Inc.
and of Bank of America National Trust and Savings Association, as Agent.
The undersigned is executing a
counterpart hereof for purposes of
becoming a "Pledgor" hereunder:
MONROC, INC.
By: /s/ Michael Stone
----------------------------------
Title:
----------------------------
<PAGE>
SCHEDULE I
TO
AMENDED AND RESTATED SUBSIDIARY PLEDGE AGREEMENT
STOCK
<TABLE>
<CAPTION>
Pledged Shares
No. of as % of Total Total Shares of
Certificate Pledged Shares Issued Issuer
Pledgor Issuer No. Shares and Outstanding Outstanding
------- ------ --- ------ --------------- -----------
<S> <C> <C> <C> <C> <C>
Western Aggregates Cox Rock Products 22 56,000 100% 56,000
Holding Corp. Incorporated
Cox Rock 22 35,000 100% 35,000
Transportation
Mohave Concrete 3 2,650 100% 2,650
and Materials,
Inc., an Arizona
Corporation
Mohave Concrete 2 2,500 100% 2,500
and Materials,
Inc., a Nevada
Corporation
Needles Redi-Mix, 2 100,000 100% 100,000
Inc.
Geodyne Transport, 5,000 100% 5,000
Inc.
Falcon Ridge 4,204 100% 4,204
<PAGE>
<CAPTION>
Pledged Shares
No. of as % of Total Total Shares of
Certificate Pledged Shares Issued Issuer
Pledgor Issuer No. Shares and Outstanding Outstanding
------- ------ --- ------ --------------- -----------
<S> <C> <C> <C> <C> <C>
Construction, Inc.
A-Block Company, 100,000 100% 100,000
Inc., a California
corporation ____
Beck Paving, Inc. ____ 1,000 100% 1,000
Western Rock 1 100% 1
Products Corp. ____
Intermountain 1,000 100% 1,000
Aggregates, Inc. ____
A-Block Company, 3 2,000 100% 2,000
Inc., an Arizona
corporation
Valley Asphalt, 42 83,650 100% 83,650
Inc.
Southern Nevada 1 1 100% 1
Aggregates, Inc.
Tri-State Testing 1 1 100% 1
Laboratories, Inc.
Monroc, Inc. ____ ____ 100% ____
Western Rock Jensen 000003 240 100% 240
Products Corp. Construction &
Development, Inc.
<PAGE>
<CAPTION>
Pledged Shares
No. of as % of Total Total Shares of
Certificate Pledged Shares Issued Issuer
Pledgor Issuer No. Shares and Outstanding Outstanding
------- ------ --- ------ --------------- -----------
<S> <C> <C> <C> <C> <C>
Sandia 3 600 100% 600
Construction, Inc.
Southern Ready DeKalb Stone, Inc. 31 5,250 50% of common 10,500 common
Mix, Inc.
Dekalb Stone, Inc. 1 200 100% of 200 preferred
preferred
Mulberry Rock 2 1,000 100% 1,000
Corporation
Bradley Holdings, 1 1,000 100% 1,000
Inc.
BHY Ready Mix, 2 1,000 100% 1,000
Inc.
Bradley Stone & 6 1,000 100% 1,000
Sand, Inc.
SRM Holdings Corp. Southern Ready S-50 10,500 100% 10,500
Mix, Inc.
</TABLE>
<PAGE>
AMENDED AND RESTATED
SHAREHOLDER PLEDGE AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDER PLEDGE AGREEMENT (this
"Agreement") dated as of June 5, 1998, is among the undersigned (individually
each a "Pledgor" and collectively the "Pledgors") and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (in its individual capacity, "BofA")
in its capacity as agent for the Lenders referred to below (in such capacity,
the "Agent").
W I T N E S S E T H:
WHEREAS, U.S. Aggregates, Inc., a Delaware corporation (the "Company"),
has entered into a Third Amended and Restated Credit Agreement dated as of
June 5, 1998 (as amended or otherwise modified from time to time, the "Credit
Agreement"; capitalized terms used but not defined herein are used as defined
in the Credit Agreement) with various financial institutions (individually
each a "Lender" and collectively the "Lenders") and the Agent, pursuant to
which the Lenders have agreed to make loans to, and issue or participate in
letters of credit for the account of, the Company;
WHEREAS, the Credit Agreement amends and restates a Second Amended and
Restated Credit Agreement dated as of October 15, 1996 (as amended, the
"Existing Credit Agreement") among the Company, various financial
institutions and the Agent;
WHEREAS, in connection with the Existing Credit Agreement, certain of
the undersigned (the "Existing Pledgors") have previously entered into
Shareholder Pledge Agreements with the Agent (collectively, the "Pledge
Agreements");
WHEREAS, each Pledgor is the owner of certain shares of capital stock of
a subsidiary of the Company (such subsidiaries are individually an "Issuer"
and collectively the "Issuers"), as more fully described opposite such
Pledgor's name in Schedule II hereto; and
WHEREAS, each of the Issuers will benefit directly and indirectly from
the making of loans and the issuance of letters of credit under the Credit
Agreement; and
WHEREAS, to induce the Lenders to make such loans and issue such letters
of credit, each Pledgor has agreed to execute and deliver this Agreement and
to pledge to the Agent all stock of each Issuer owned by such Pledgor;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Company under or
in connection with the Credit Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each Pledge Agreement is hereby consolidated into this Agreement and all
Pledge Agreements are hereby amended and restated, and the parties hereto
agree, as follows:
<PAGE>
1. Definitions. When used herein, the following terms shall have the
following meanings (such definitions to be applicable to both the singular
and plural forms of such terms):
Collateral means, with respect to any Pledgor, all property in which
such Pledgor has granted the Agent a Security Interest pursuant to
Section 2.
Default means the occurrence of any of the following events: (a) any
Unmatured Event of Default under Section 12.1.1 or 12.1.4 of the Credit
Agreement; (b) any Event of Default; or (c) any warranty of any Pledgor
herein is untrue or misleading in any material respect and, as a result
thereof, the Agent's security interest in, or rights and remedies with
respect to, any material portion of such Pledgor's Collateral is
impaired or otherwise adversely affected.
Event of Default has the meaning assigned to such term in the Credit
Agreement.
Liabilities means all obligations (monetary or otherwise) of the
Company, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or
to become due, which arise out of or in connection with the Credit
Agreement, the Notes or any other Loan Document to which it is a party.
Loan Document has the meaning assigned to such term in the Credit
Agreement.
Unmatured Event of Default has the meaning assigned to such term in the
Credit Agreement.
2. Pledge. As security for the payment of all Liabilities, each
Pledgor hereby pledges to the Agent, and grants to the Agent a security
interest in, all of the following:
A. All of the shares of stock and other securities described opposite
the name of such Pledgor on Schedule I hereto, all of the certificates and/or
instruments representing such shares of stock and other securities, and all
cash, securities, dividends, rights and other property at any time and from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such shares or other securities;
B. All additional shares of stock of any Issuer at any time and from
time to time acquired by such Pledgor in any manner, all of the certificates
representing such additional shares, and all cash, securities, dividends,
rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of such shares;
C. All other property hereafter delivered to the Agent by or on behalf
of such Pledgor in substitution for or in addition to any of the foregoing,
all certificates and instruments representing or evidencing such property,
and all cash, securities, interest, dividends, rights and other property at
any time and from time to time received, receivable or otherwise distributed
in respect of or in
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<PAGE>
exchange for any or all thereof; and
D. All products and proceeds of all of the foregoing.
Notwithstanding anything to the contrary herein, if any repurchase or
redemption of capital stock of any Issuer from any Pledgor is expressly
permitted by the Credit Agreement, the proceeds of such repurchase or
redemption received by such Pledgor shall not be "Collateral" hereunder.
Each Pledgor agrees to deliver to the Agent, promptly upon receipt and
in due form for transfer (i.e., endorsed in blank or accompanied by stock or
bond powers executed in blank), any Collateral which may at any time or from
time to time be in or come into the possession or control of such Pledgor;
and prior to the delivery thereof to the Agent, such Collateral shall be held
by such Pledgor separate and apart from its other property and in express
trust for the Agent.
3. Warranties; Further Assurances. Each Pledgor warrants to the Agent
and each Lender with respect to all Collateral of such Pledgor that: (a)
such Pledgor is (or at the time of any future delivery, pledge, assignment or
transfer thereof will be) the legal and equitable owner of such Collateral
free and clear of all liens, security interests and encumbrances of every
description whatsoever other than the security interest created hereunder;
and (b) the pledge and delivery of such Collateral pursuant to this Agreement
will create a valid perfected security interest in such Collateral in favor
of the Agent.
So long as any of the Liabilities shall be outstanding or any commitment
shall exist on the part of the Agent or any Lender with respect to the
creation of any Liabilities, (i) no Pledgor shall, without the express prior
written consent of the Agent, sell, assign, exchange, pledge or otherwise
transfer, encumber, or grant any option, warrant or other right to purchase
the stock of any Issuer [(other than pursuant to rights granted to issuers
of stock pursuant to stock purchase agreements)], or otherwise diminish or
impair any of its rights in, to or under any of the Collateral of such
Pledgor; (ii) each Pledgor shall execute such Uniform Commercial Code
financing statements and other documents and do such other acts and things,
all as the Agent may from time to time reasonably request, to establish and
maintain a valid, perfected security interest in the Collateral of such
Pledgor (free of all other liens, claims and rights of third parties
whatsoever) to secure the performance and payment of the Liabilities; and
(iii) each Pledgor will execute and deliver to the Agent such stock powers
and similar documents relating to the Collateral of such Pledgor,
satisfactory in form and substance to the Agent, as the Agent may reasonably
request.
4. Holding in Name of Agent, etc. The Agent may from time to time
after the occurrence and during the continuance of a Default, without notice
to any Pledgor, take all or any of the following actions: (a) transfer all
or any part of the Collateral of any Pledgor into the name of the Agent or
any nominee or sub-agent for the Agent, with or without disclosing that such
Collateral is subject to the lien and security interest hereunder, (b)
appoint one or more sub-agents or nominees for the purpose of retaining
physical possession of any of the Collateral, (c) notify the parties
obligated on any of
-3-
<PAGE>
the Collateral to make payment to the Agent of any amounts due or to become
due thereunder, (d) endorse any checks, drafts or other writings in the name
of the applicable Pledgor to allow collection of the Collateral, (e) enforce
collection of any of the Collateral by suit or otherwise, and surrender,
release or exchange all or any part thereof, or compromise or renew for any
period (whether or not longer than the original period) any obligations of
any nature of any party with respect thereto, and (f) take control of any
proceeds of any of the Collateral.
5. Voting Rights, Dividends, etc. (a) Notwithstanding certain
provisions of Section 4 hereof, so long as the Agent has not given the notice
referred to in paragraph (b) below:
A. Each Pledgor shall be entitled to exercise any and all voting
or consensual rights and powers and stock purchase or subscription
rights (but any such exercise by any Pledgor of stock purchase or
subscription rights may be made only from funds of such Pledgor not
comprising part of the Collateral) relating or pertaining to the
Collateral of such Pledgor or any part thereof for any purpose;
provided, however, that each Pledgor agrees that not to exercise any
such right or power in any manner which would have a material adverse
effect on the value of the Collateral of such Pledgor or any part
thereof.
B. Each Pledgor shall be entitled to receive and retain any and
all lawful dividends payable in respect of the Collateral of such
Pledgor which are paid in cash by any Issuer if such dividends are
permitted by the Credit Agreement, but all dividends and distributions
in respect of such Collateral or any part thereof made in shares of
stock or other property or representing any return of capital, whether
resulting from a subdivision, combination or reclassification of
Collateral or any part thereof or received in exchange for Collateral or
any part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such Issuer may be a
party or otherwise or as a result of any exercise of any stock purchase
or subscription right, shall be and become part of the Collateral
hereunder and, if received by such Pledgor, shall be forthwith delivered
to the Agent in due form for transfer (i.e., endorsed in blank or
accompanied by stock or bond powers executed in blank) to be held for
the purposes of this Agreement.
C. The Agent shall execute and deliver, or cause to be executed
and delivered, to each Pledgor, all such proxies, powers of attorney,
dividend orders and other instruments as such Pledgor may reasonably
request for the purpose of enabling such Pledgor to exercise the rights
and powers which it is entitled to exercise pursuant to clause (A) above
and to receive the dividends which it is authorized to retain pursuant
to clause (B) above.
(b) Upon notice from the Agent during the existence of a Default, and
so long as the same shall be continuing, all rights and powers which the
Pledgors are entitled to exercise pursuant to Section 5(a)(A) hereof, and all
rights of such Pledgor to receive and retain dividends pursuant to Section
5(a)(B) hereof, shall forthwith cease, and all such rights and powers shall
thereupon become vested in the Agent which shall have, during the continuance
of such Default, the sole and exclusive
-4-
<PAGE>
authority to exercise such rights and powers and to receive such dividends.
Any and all money and other property paid over to or received by the Agent
pursuant to this paragraph (b) shall be retained by the Agent as additional
Collateral hereunder and applied in accordance with the provisions hereof.
6. Remedies. Whenever a Default shall exist, the Agent may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code as in effect in Illinois or otherwise available to it.
Without limiting the foregoing, whenever a Default shall exist the Agent (a)
may, to the fullest extent permitted by applicable law, without notice,
advertisement, hearing or process of law of any kind, (i) sell any or all of
the Collateral, free of all rights and claims of any Pledgor therein and
thereto, at any public or private sale or brokers' board and (ii) bid for and
purchase any or all of the Collateral at any such public sale and (b) shall
have the right, for and in the name, place and stead of the applicable
Pledgor, to execute endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or any of the
Collateral. Each Pledgor hereby expressly waives, to the fullest extent
permitted by applicable law, any and all notices, advertisements, hearings or
process of law in connection with the exercise by the Agent of any of its
rights and remedies during the continuance of a Default. If any notification
of intended disposition of any of the Collateral is required by law, such
notification, if mailed, shall be deemed reasonably and properly given if
mailed at least ten (10) days before such disposition, postage prepaid,
addressed to the applicable Pledgor, either at the address of such Pledgor
shown opposite its name below, or at any other address of such Pledgor
appearing on the records of the Agent. Any proceeds of any of the Collateral
may be applied by the Agent to the payment of expenses in connection with the
Collateral, including, without limitation, reasonable attorneys' fees and
legal expenses, and any balance of such proceeds may be applied by the Agent
toward the payment of such of the Liabilities, and in such order of
application, as the Agent may from time to time elect (and, after payment in
full of all Liabilities, any excess shall be delivered to such Pledgor or as
a court of competent jurisdiction shall direct).
The Agent is hereby authorized to comply with any limitation or
restriction in connection with any sale of Collateral as it may be advised by
counsel is necessary in order to (a) avoid any violation of applicable law
(including, without limitation, compliance with such procedures as may
restrict the number of prospective bidders and purchasers and/or further
restrict such prospective bidders or purchasers to Persons who will represent
and agree that they are purchasing for their own account for investment and
not with a view to the distribution or resale of such Collateral) or (b)
obtain any required approval of the sale or of the purchase by any
governmental regulatory authority or official, and each Pledgor agrees that
such compliance shall not result in such sale being considered or deemed not
to have been made in a commercially reasonable manner and that the Agent
shall not be liable or accountable to any Pledgor for any discount allowed by
reason of the fact that such Collateral is sold in compliance with any such
limitation or restriction.
7. General. The Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral if it takes such
action for that purpose as the applicable Pledgor shall request in writing,
but failure of the Agent to comply with any such request shall not of itself
be
-5-
<PAGE>
deemed a failure to exercise reasonable care, and no failure of the Agent to
preserve or protect any rights with respect to the Collateral against prior
parties, or to do any act with respect to preservation of the Collateral not
so requested by the applicable Pledgor, shall be deemed a failure to exercise
reasonable care in the custody or preservation of any Collateral.
No delay on the part of the Agent in exercising any right, power or
remedy shall operate as a waiver thereof, and no single or partial exercise
of any such right, power or remedy shall preclude any other or further
exercise thereof, or the exercise of any other right, power or remedy. No
amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement shall be effective unless the same shall be in
writing and signed and delivered by the Agent, and then such amendment,
modification, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
All notices hereunder shall be in writing (including, without
limitation, facsimile transmission) and shall be sent to the applicable party
at its address shown below its signature hereto or at such other address as
such party may, by written notice received by the other parties hereto, have
designated as its address for such purpose. Notices sent by facsimile
transmission shall be deemed to have been given when sent; notices sent by
mail shall be deemed to have been given five days after the date when sent by
registered or certified mail, postage prepaid; and notices sent by hand
delivery shall be deemed to have been given when received.
All rights, powers and remedies of the Agent and the Lenders expressed
herein are in addition to all other rights, powers and remedies possessed by
them, including, without limitation, those provided by applicable law or in
any other written instrument or agreement relating to any of the Liabilities
or any security therefor.
This Agreement has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State
of Illinois. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions this Agreement.
This Agreement shall be binding upon each Pledgor and the Agent and
their respective successors and assigns, and shall inure to the benefit of
the Pledgors and the Agent and the successors and assigns of the Agent.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed an original but all such counterparts shall together
constitute but one and the same Agreement. At any time after the date of
this Agreement, one or more additional persons or entities may become parties
hereto by executing and delivering to the Agent a counterpart of this
Agreement. Immediately upon such
-6-
<PAGE>
execution and delivery (and without any further action), each such additional
person or entity will become a party to, and will be bound by all the terms
of, this Agreement.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH THIS AGREEMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND. EACH OF THE PLEDGORS, THE AGENT AND (BY
ACCEPTING THE BENEFITS HEREOF) EACH LENDER HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE PLEDGORS, THE
AGENT AND (BY ACCEPTING THE BENEFITS HEREOF) EACH LENDER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. EACH PLEDGOR
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE PLEDGORS, THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF)
EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE,
ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
EACH OF THE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF) EACH LENDER
ACKNOWLEDGES AND AGREES THAT THE PLEDGORS SHALL HAVE NO PERSONAL LIABILITY
WITH RESPECT TO THE LIABILITIES AS A RESULT OF THE EXECUTION AND DELIVERY OF
THIS AGREEMENT AND THE PLEDGE OF COLLATERAL HEREUNDER AND THAT SOLE RECOURSE
OF THE AGENT AND THE
-7-
<PAGE>
LENDERS AGAINST THE PLEDGORS UNDER THIS AGREEMENT SHALL BE TO THE COLLATERAL.
-8-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the day and year first written above.
/s/ Clifford S. Reed
-------------------------------------------------
Clifford S. Reed
/s/ Wayne Smith
-------------------------------------------------
Wayne Smith
/s/ Gilman Fife
-------------------------------------------------
Gilman Fife
/s/ Darrell G. Whitney
-------------------------------------------------
Darrell G. Whitney
/s/ Duane C. Bauer
-------------------------------------------------
Duane C. Bauer
/s/ Bart Smith
-------------------------------------------------
Bart Smith
/s/ Ronnie J. Cox
-------------------------------------------------
Ronnie J. Cox
-9-
<PAGE>
/s/ Larry W. Cox
-------------------------------------------------
Larry W. Cox
/s/ Dennis Cox
-------------------------------------------------
Dennis Cox
/s/ Lee J. Cox
-------------------------------------------------
Lee J. Cox
/s/ Reid M. Cox
-------------------------------------------------
Reid M. Cox
/s/ Michael Cox
-------------------------------------------------
Michael Cox
/s/ Cecil F. Greene
-------------------------------------------------
Cecil F. Greene
/s/ Rowan D. Smith
-------------------------------------------------
Rowan D. Smith
/s/ Richard P. Summerville
-------------------------------------------------
Richard P. Summerville
/s/ Garland C. Braswell
-------------------------------------------------
Garland C. Braswell
-10-
<PAGE>
/s/ Edward E. Buckley
-------------------------------------------------
Edward E. Buckley
/s/ Brian Stocks
-------------------------------------------------
Brian Stocks
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
-------------------------------------------------
By /s/ Kevin P. Morrison
----------------------------------------------
Vice President
-11-
<PAGE>
/s/ Jeff Thomas
-------------------------------------------------
Jeff Thomas
/s/ Brent Sumsion
-------------------------------------------------
Brent Sumsion
/s/ Scott Sumsion
-------------------------------------------------
Scott Sumsion
-12-
<PAGE>
Signature page to the Shareholder Pledge
Agreement dated as of June 5, 1998 relating
to the Credit Agreement with U.S. Aggregates,
Inc.
The undersigned is executing a counterpart
hereof for purposes of becoming a party
hereto as of the date listed opposite each
signature hereto:
/s/ Lonnie Cox Larsen
Dated: September __, 1998 ---------------------------------------------
Lonnie Cox Larsen
/s/ Mickey Cox
Dated: September __, 1998 ---------------------------------------------
Mickey Cox
/s/ Barry J. Fullmer
Dated: September __, 1998 ---------------------------------------------
Barry J. Fullmer
/s/ Ron Chandler
Dated: September __, 1998 ---------------------------------------------
Ron Chandler
/s/ Ronald D. Davis
Dated: September __, 1998 ---------------------------------------------
Ronald D. Davis
/s/ Arthur L. Graviss
Dated: September __, 1998 ---------------------------------------------
Arthur L. Graviss
/s/ L. William Rands
Dated: September __, 1998 ---------------------------------------------
L. William Rands
/s/ Teddy D. Reynolds
Dated: September __, 1998 ---------------------------------------------
Teddy D. Reynolds
-13-
<PAGE>
SCHEDULE I
TO
SHAREHOLDER PLEDGE AGREEMENT
STOCK
<TABLE>
<CAPTION>
No. of
Certificate Pledged
Issuer No. Shares
- ------ ----------- -------
<S> <C> <C>
Western Aggregates Holding Corp. _____ _____
Western Aggregates Holding Corp. _____ _____
Western Aggregates Holding Corp. _____ _____
Western Aggregates Holding Corp. _____ _____
Western Aggregates Holding Corp. _____ _____
Western Aggregates Holding Corp. _____ _____
Western Aggregates Holding Corp. _____ _____
SRM Holdings Corp. _____ _____
</TABLE>
<PAGE>
EXHIBIT 4.6
AMENDED AND RESTATED GUARANTY
THIS AMENDED AND RESTATED GUARANTY dated as of June 5, 1998 is executed in
favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (individually
and as Agent) and the other Lenders that hereafter become parties to the Credit
Agreement referred to below.
W I T N E S S E T H:
WHEREAS, U.S. Aggregates, Inc. (the "Company") has entered into a Third
Amended and Restated Credit Agreement dated as of June 5, 1998 (as amended or
otherwise modified from time to time, the "Credit Agreement"; capitalized terms
used but not defined herein are used as defined in the Credit Agreement), with
various financial institutions (collectively the "Lenders" and individually each
a "Lender") and Bank of America National Trust and Savings Association,
individually and as agent (in its capacity as agent, together with any successor
in such capacity, the "Agent"), pursuant to which the Lenders have agreed to
make loans to, and issue or participate in letters of credit for the account of,
the Company;
WHEREAS, the Credit Agreement amends and restates a Second Amended and
Restated Credit Agreement dated as of October 15, 1996 among the Company,
various financial institutions and the Agent (as amended, the "Prior Credit
Agreement");
WHEREAS, certain of undersigned entered into a Guaranty dated as of July
13, 1994 (the "Existing Guaranty") guaranteeing the obligations of the Company
under the Prior Credit Agreement; and
WHEREAS, each of the undersigned will benefit from the making of loans and
issuance of letters of credit pursuant to the Credit Agreement and is willing to
guaranty the Liabilities (as defined below) as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the undersigned hereby
jointly and severally unconditionally, as primary obligor and not merely as
surety, guarantees the full and prompt payment when due, whether by acceleration
or otherwise, and at all times thereafter, of all obligations (monetary or
otherwise) of the Company to each of the Lenders and the Agent, howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due, including
(without limitation) all obligations which arise out of or in connection with
the Credit Agreement, the Notes (as defined in the Credit Agreement), any other
Loan Document (as defined in the Credit Agreement) or any Hedging Agreement (as
defined in the Credit Agreement), in each case as the same may be amended,
<PAGE>
modified, extended or renewed from time to time (all such obligations being
herein collectively called the "Liabilities"); PROVIDED, HOWEVER, that the
liability of each of the undersigned hereunder shall be limited to the maximum
amount of the Liabilities which such undersigned may guaranty without violating
any fraudulent conveyance or fraudulent transfer law (plus all costs and
expenses paid or incurred by the Agent or any Lender in enforcing this Guaranty
against such undersigned).
Each of the undersigned agrees that, in the event of the dissolution or
insolvency of the Company or any undersigned, or the inability or failure of the
Company or any undersigned to pay debts as they become due, or an assignment by
the Company or any undersigned for the benefit of creditors, or the occurrence
of any other Event of Default (as defined in the Credit Agreement) under Section
12.1.4 of the Credit Agreement, and if such event shall occur at a time when any
of the Liabilities may not then be due and payable, such undersigned will pay to
the Agent for the account of the Lenders forthwith the full amount which would
be payable hereunder by such undersigned if all Liabilities were then due and
payable.
To secure all obligations of each of the undersigned hereunder, the Agent
and each Lender shall have a lien on and security interest in, and may, without
demand or notice of any kind, at any time and from time to time when any
Unmatured Event of Default under Section 12.1.4 of the Credit Agreement or any
Event of Default under the Credit Agreement exists, appropriate and apply toward
the payment of such obligations, in such order of application as the Agent or
the Lenders may elect, any and all balances, credits, deposits, accounts or
moneys of or in the name of such undersigned now or hereafter with the Agent or
such Lender and any and all property of every kind or description of or in the
name of such undersigned now or hereafter, for any reason or purpose whatsoever,
in the possession or control of, or in transit to, the Agent or such Lender or
any agent or bailee for the Agent or such Lender.
This Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect
(notwithstanding, without limitation, the dissolution of any of the undersigned
or that at any time or from time to time no Liabilities are outstanding) until
all Commitments (as defined in the Credit Agreement) have terminated and all
Liabilities have been paid in full.
The undersigned further agree that if at any time all or any part of any
payment theretofore applied by the Agent or any Lender to any of the Liabilities
is or must be rescinded or returned by the Agent or such Lender for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of the Company or any of the undersigned), such Liabilities
shall, for the purposes of this Guaranty, to the extent that such payment is or
must be rescinded or returned, be deemed to have continued in
-2-
<PAGE>
existence, notwithstanding such application by the Agent or such Lender, and
this Guaranty shall continue to be effective or be reinstated, as the case
may be, as to such Liabilities, all as though such application by the Agent
or such Lender had not been made.
The Agent or any Lender may, from time to time, at its sole discretion and
without notice to the undersigned (or any of them), take any or all of the
following actions without affecting the obligations of the undersigned (or any
of them) hereunder: (a) retain or obtain a security interest in any property to
secure any of the Liabilities or any obligation hereunder, (b) retain or obtain
the primary or secondary obligation of any obligor or obligors, in addition to
the undersigned, with respect to any of the Liabilities, (c) extend or renew any
of the Liabilities for one or more periods (whether or not longer than the
original period), alter or exchange any of the Liabilities, or release or
compromise any obligation of any of the undersigned hereunder or any obligation
of any nature of any other obligor with respect to any of the Liabilities, (d)
release its security interest in, or surrender, release or permit any
substitution or exchange for, all or any part of any property securing any of
the Liabilities or any obligation hereunder, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any obligor with respect to
any such property, and (e) resort to the undersigned (or any of them) for
payment of any of the Liabilities when due, whether or not the Agent or such
Lender shall have resorted to any property securing any of the Liabilities or
any obligation hereunder or shall have proceeded against any other of the
undersigned or any other obligor primarily or secondarily obligated with respect
to any of the Liabilities.
Any amounts received by the Agent or any Lender from whatever source on
account of the Liabilities may be applied by it toward the payment of the
Liabilities; and, notwithstanding any payments made by or for the account of any
of the undersigned pursuant to this Guaranty, the undersigned shall not be
subrogated to any rights of the Agent or any Lender until such time as this
Guaranty shall have been discontinued as to all of the undersigned and the Agent
and the Lenders shall have received payment of the full amount of all
liabilities of the undersigned hereunder.
Each of the undersigned hereby expressly waives: (a) notice of the
acceptance by the Agent or any Lender of this Guaranty, (b) notice of the
existence or creation or nonpayment of all or any of the Liabilities, (c)
presentment, demand, notice of dishonor, protest, and all other notices
whatsoever, (d) all diligence in collection or protection of or realization upon
any Liabilities or any security for or guaranty of any Liabilities and (e) any
claim or right which such undersigned may now have or hereafter acquire against
the Company or any other person or entity that arises from the existence,
payment, performance or enforcement of the obligations of such undersigned under
this Guaranty, including
-3-
<PAGE>
(without limitation) any right of subrogation, reimbursement, restitution,
exoneration, contribution or indemnification.
Each of the undersigned further agrees to pay all expenses (including
attorneys' fees and legal expenses) paid or incurred by the Agent or any Lender
in endeavoring to collect the Liabilities of such undersigned, or any part
thereof, and in enforcing this Guaranty against such undersigned.
The creation or existence from time to time of additional Liabilities to
the Agent or the Lenders or any of them is hereby authorized, without notice to
the undersigned (or any of them), and shall in no way affect or impair the
rights of the Agent or the Lenders or the obligations of the undersigned under
this Guaranty, including each of the undersigned's guaranty of such additional
Liabilities.
The Agent and any Lender may from time to time, in accordance with Section
14.9 of the Credit Agreement, without notice to the undersigned (or any of
them), assign or transfer any or all of the Liabilities or any interest therein;
and, notwithstanding any such assignment or transfer or any subsequent
assignment or transfer thereof, such Liabilities shall be and remain Liabilities
for the purposes of this Guaranty, and each and every immediate and successive
assignee or transferee of any of the Liabilities or of any interest therein
shall, to the extent of the interest of such assignee or transferee in the
Liabilities, be entitled to the benefits of this Guaranty to the same extent as
if such assignee or transferee were a Lender.
No delay on the part of the Agent or any Lender in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Agent or any Lender of any right or remedy shall preclude other
or further exercise thereof or the exercise of any other right or remedy; nor
shall any modification or waiver of any provision of this Guaranty be binding
upon the Agent or the Lenders except as expressly set forth in a writing duly
signed and delivered on behalf of the Agent. No action of the Agent or any
Lender permitted hereunder shall in any way affect or impair the rights of the
Agent or any Lender or the obligations of the undersigned under this Guaranty.
For purposes of this Guaranty, Liabilities shall include all obligations of the
Company to the Agent or any Lender arising under or in connection with the
Credit Agreement, any Note, any other Loan Document or any Hedging Agreement,
notwithstanding any right or power of the Company or anyone else to assert any
claim or defense as to the invalidity or unenforceability of any obligation, and
no such claim or defense shall affect or impair the obligations of the
undersigned hereunder.
Pursuant to the Credit Agreement, (a) this Guaranty has been delivered to
the Agent and (b) the Agent has been authorized to enforce this Guaranty on
behalf of itself and each of the Lenders.
-4-
<PAGE>
All payments by the undersigned pursuant to this Guaranty shall be made to
the Agent for the ratable benefit of the Lenders.
This Guaranty shall be binding upon the undersigned and the successors and
assigns of the undersigned; and to the extent that the Company or any of the
undersigned is either a partnership or a corporation, all references herein to
the Company and to the undersigned, respectively, shall be deemed to include any
successor or successors, whether immediate or remote, to such partnership or
corporation. The term "undersigned" as used herein shall mean all parties
executing this Guaranty and each of them, and all such parties shall be jointly
and severally obligated hereunder.
This Guaranty has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State of
Illinois. Wherever possible each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
This Guaranty may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed to be an original but all such counterparts shall together
constitute one and the same Guaranty. At any time after the date of this
Guaranty, one or more additional persons or entities may become parties hereto
by executing and delivering to the Agent a counterpart of this Guaranty.
Immediately upon such execution and delivery (and without any further action),
each such additional person or entity will become a party to, and will be bound
by all of the terms of, this Guaranty.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE UNDERSIGNED HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE
OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE
UNDERSIGNED FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, TO THE ADDRESS SET FORTH OPPOSITE ITS SIGNATURE HERETO
(OR SUCH OTHER ADDRESS AS IT SHALL HAVE SPECIFIED IN WRITING TO THE AGENT AS ITS
ADDRESS FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF ILLINOIS. EACH OF THE UNDERSIGNED HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
-5-
<PAGE>
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE UNDERSIGNED, AND (BY ACCEPTING THE BENEFITS HEREOF) EACH OF THE
AGENT AND EACH LENDER, HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY, ANY OTHER
LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR
ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE
FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
This Guaranty amends and restates the Existing Guaranty; the Existing
Guaranty is superseded in its entirety hereby.
-6-
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered as
of the day and year first above written.
SRM HOLDINGS CORP.
By: /s/ Micheal Stone
----------------------------------
Title:
-------------------------------
WESTERN AGGREGATES HOLDING CORP.
By: /s/ Micheal Stone
----------------------------------
Title:
-------------------------------
WESTERN ROCK PRODUCTS CORP.
By: /s/ Darrell G. Whitney
----------------------------------
Title: President
-------------------------------
JENSEN CONSTRUCTION & DEVELOPMENT,
INC.
By: /s/ Darrell G. Whitney
----------------------------------
Title: President
-------------------------------
SANDIA CONSTRUCTION, INC.
By: /s/ Darrell G. Whitney
----------------------------------
Title: President
-------------------------------
SOUTHERN NEVADA AGGREGATES, INC.
By: /s/ Darrell G. Whitney
----------------------------------
Title: President
-------------------------------
TRI-STATE TESTING LABORATORIES, INC.
-7-
<PAGE>
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
MOHAVE CONCRETE AND MATERIALS, INC.,
a Nevada corporation
By: /s/ Darrell G. Whitney
----------------------------------
Title: President
-------------------------------
MOHAVE CONCRETE AND MATERIALS, INC.,
an Arizona corporation
By: /s/ Darrell G. Whitney
----------------------------------
Title: President
-------------------------------
A-BLOCK COMPANY, INC.,
an Arizona corporation
By: /s/ Darrell G. Whitney
----------------------------------
Title: President
-------------------------------
A-BLOCK COMPANY, INC.,
a California corporation
By: /s/ Darrell G. Whitney
----------------------------------
Title: President
-------------------------------
COX ROCK PRODUCTS, INC.
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
COX TRANSPORT CORPORATION
-8-
<PAGE>
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
VALLEY ASPHALT, INC.
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
GEODYNE TRANSPORT, INC.
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
FALCON RIDGE CONSTRUCTION, INC.
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
BECK PAVING, INC.
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
SOUTHERN READY MIX, INC.
By: /s/ Cecil F. Greene
----------------------------------
Title: CEO
-------------------------------
DEKALB STONE, INC.
-9-
<PAGE>
By: /s/ Cecil F. Greene
----------------------------------
Title: President
-------------------------------
MULBERRY ROCK CORPORATION
By: /s/ Cecil F. Greene
----------------------------------
Title: President
-------------------------------
BHY READY MIX, INC.
By: /s/ Cecil F. Greene
----------------------------------
Title: President
-------------------------------
BRADLEY STONE & SAND, INC.
By: /s/ Cecil F. Greene
----------------------------------
Title: President
-------------------------------
BIG HORN REDI MIX, INC.
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
TREASURE VALLEY CONCRETE, INC.
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
MONROC, INC.
-10-
<PAGE>
By: /s/ Michael Stone
----------------------------------
Title:
-------------------------------
-11-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. AGGREGATES, INC.
------------------------------
AMENDED AND RESTATED
NOTE AND WARRANT PURCHASE AGREEMENT
------------------------------
DATED AS OF JUNE 5, 1998
$30,000,000 10.34% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2006
OF U.S. AGGREGATES, INC.
$15,000,000 10.09% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2008
OF U.S. AGGREGATES, INC.
9,535 WARRANTS TO PURCHASE COMMON STOCK
OF U.S. AGGREGATES, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
PAGE
1. BACKGROUND............................................................. 1
2. AMENDMENT AND RESTATEMENT OF 1996 PURCHASE AGREEMENT................... 2
2A. Agreement and Consent of the Company............................. 2
2B. Agreement and Consent of the Purchaser........................... 2
3. AUTHORIZATION OF ISSUE OF 1998 NOTES AND 1998 WARRANTS................. 2
4. PURCHASE AND SALE OF 1998 NOTES AND 1998 WARRANTS...................... 2
5. CONDITIONS OF CLOSING.................................................. 3
5A. Opinion of Purchaser's Special Counsel........................... 3
5B. Opinion of Company's Counsel; Opinion of Each Guarantor's
Local Counsel.................................................... 4
5C. Representations and Warranties; No Default....................... 4
5D. Purchase Permitted By Applicable Laws............................ 4
5E. 1998 Warrant Agreement; Registration Rights Agreement;
Charter Amendment, etc........................................... 4
5F. Subsidiary Guaranty.............................................. 5
5G. Bank Credit Agreement............................................ 5
5H. Private Placement Numbers........................................ 5
5I. Closing Expenses................................................. 5
5J. Transaction Structuring Fee...................................... 5
5K. Merger Agreement and Related Documents........................... 5
5L. Proceedings Satisfactory......................................... 5
6. PREPAYMENTS............................................................ 6
6A. Required Prepayments............................................. 6
6B. Optional Prepayment With Yield-Maintenance Amount................ 6
6C. Offer to Pay upon Change in Control.............................. 7
6D. Application of Prepayments....................................... 8
6E. No Acquisition of Notes.......................................... 8
6F. Limitations on Payments and Prepayments.......................... 8
7. AFFIRMATIVE COVENANTS.................................................. 8
7A. Financial Statements............................................. 8
7B. Inspection of Property........................................... 10
7C. Covenant to Secure Notes Equally................................. 11
7D. Payment of Taxes and Claims...................................... 11
7E. Maintenance of Properties and Corporate Existence................ 11
7F. Pension Plans.................................................... 12
7G. Payment of Notes and Maintenance of Office....................... 12
7H. Private Offering................................................. 12
7I. Line of Business................................................. 12
U.S. AGGREGATES, INC. i AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
7J. Subsidiary Guaranties............................................ 13
8. NEGATIVE COVENANTS..................................................... 13
8A. Interest Expense Coverage........................................ 13
8B. Fixed Charge Coverage............................................ 13
8C. Leverage Ratio................................................... 13
8D. Rental Obligations............................................... 14
8E. Restricted Payments.............................................. 14
8F. Debt Restrictions................................................ 15
8G. Liens............................................................ 15
8H. Mergers and Consolidations....................................... 16
8I. Sale of Assets; Disposal of Ownership and Debt of a
Restricted Subsidiary............................................ 17
8J. Limitations on Certain Subsidiary Actions........................ 20
8K. Restricted Investments........................................... 20
8L. Limitation on the Sale of Receivables............................ 21
8M. Transactions with Affiliates..................................... 21
9. EVENTS OF DEFAULT...................................................... 21
9A. Acceleration..................................................... 21
9B. Rescission of Acceleration....................................... 24
9C. Notice of Acceleration or Rescission............................. 24
9D. Other Remedies................................................... 24
10. REPRESENTATIONS, COVENANTS AND WARRANTIES.............................. 25
10A. Organization..................................................... 25
10B. Financial Statements............................................. 25
10C. Actions Pending.................................................. 26
10D. Outstanding Debt................................................. 26
10E. Title to Properties.............................................. 26
10F. Taxes............................................................ 26
10G. Transactions Authorized; Obligations are Enforceable............. 26
10H. Conflicting Agreements and Other Matters......................... 27
10I. Offering of 1998 Notes and 1998 Warrants......................... 28
10J. Use of Proceeds.................................................. 28
10K. ERISA............................................................ 28
10L. Governmental Consent............................................. 28
10M. Environmental Compliance......................................... 29
10N. Disclosure....................................................... 29
10O. Capitalization................................................... 29
11. REPRESENTATIONS OF THE PURCHASER....................................... 30
11A. Nature of Purchase............................................... 30
11B. ERISA............................................................ 30
U.S. AGGREGATES, INC. ii AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
12. SUBORDINATION.......................................................... 31
12A. Subordination - General.......................................... 31
12B. Limitation on Remedies........................................... 33
12C. Obligations of the Company Unconditional......................... 33
12D. Subrogation...................................................... 33
12E. Certain Definitions.............................................. 34
13. DEFINITIONS............................................................ 35
13A. Yield-Maintenance Terms.......................................... 35
13B. Other Terms...................................................... 36
13C. Accounting Principles, Terms and Determinations.................. 49
14. MISCELLANEOUS.......................................................... 50
14A. Note Payments.................................................... 50
14B. Expenses......................................................... 50
14C. Consent to Amendments............................................ 50
14D. Form, Registration, Transfer and Exchange of Notes; Lost Notes... 51
14E. Persons Deemed Owners; Participations............................ 51
14F. Survival of Representations and Warranties; Entire Agreement..... 52
14G. Successors and Assigns........................................... 52
14H. Notices.......................................................... 52
14I. Payments Due on Non-Business Days................................ 52
14J. Disclosure to Other Persons...................................... 53
14K. Satisfaction Requirement......................................... 54
14L. Governing Law.................................................... 54
14M. Jurisdiction; Jury Trial......................................... 54
14N. Severability..................................................... 54
14O. Descriptive Headings............................................. 54
14P. Counterparts..................................................... 54
Annex 1 -- Purchaser Schedule
Annex 2 -- Payment Instructions at Closing
Annex 3 -- Information as to Company
Exhibit A1 -- Form of 10.34% Senior Subordinated Note Due November 22, 2006
Exhibit A2 -- Form of 10.09% Senior Subordinated Note Due November 22, 2008
Exhibit B1 -- Form of Company Counsel's Opinion
Exhibit B2 -- Forms of Guarantor Local Counsel Opinions
Exhibit C -- Form of Officer's Certificate
Exhibit D1 -- Form of Company Secretary's Certificate
Exhibit D2 -- Form of Subsidiary Secretary's Certificate
Exhibit E -- Form of Warrant Agreement
Exhibit F -- Form of First Amendment to Registration Rights Agreement
Exhibit G -- Form of Amended and Restated Subsidiary Guaranty
Exhibit H -- Form of Charter Amendment
U.S. AGGREGATES, INC. iii AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
U.S. AGGREGATES, INC.
------------------------------
AMENDED AND RESTATED
NOTE AND WARRANT PURCHASE AGREEMENT
------------------------------
$30,000,000 10.34% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2006
OF U.S. AGGREGATES, INC.
$15,000,000 10.09% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2008
OF U.S. AGGREGATES, INC.
9,535 WARRANTS TO PURCHASE COMMON STOCK
OF U.S. AGGREGATES, INC.
Dated as of June 5, 1998
To the Purchaser Named in the
Purchaser Schedule Attached Hereto
Ladies and Gentlemen:
The undersigned, U.S. AGGREGATES, INC., a Delaware corporation (herein
called the "Company"), hereby agrees with the purchaser named in the Purchaser
Schedule attached hereto (herein called the "Purchaser") as follows:
1. BACKGROUND.
The Company has heretofore issued (a) its 10.34% Senior Subordinated Notes
due November 22, 2006 (collectively, as in effect immediately prior to the
Closing Date, the "1996 Notes") in the aggregate original principal amount of
Thirty Million Dollars ($30,000,000) and (b) an aggregate of Six Thousand Three
Hundred Twenty-Seven (6,327) warrants (collectively, as in effect immediately
prior to the Closing Date, the "1996 Warrants"), pursuant to that certain Note
and Warrant Purchase Agreement (as amended and in effect immediately prior to
the Closing Date, the "1996 Purchase Agreement"), dated as of November 21, 1996,
between the Company and the Purchaser. The Company wishes to amend and restate
certain provisions of the 1996 Purchase Agreement on the terms and conditions
contained herein and, in connection therewith, authorize and issue additional
notes and warrants to the Purchaser, all as more particularly described herein.
2. AMENDMENT AND RESTATEMENT OF 1996 PURCHASE AGREEMENT.
2A. Agreement and Consent of the Company. The Company hereby agrees and
consents to the amendment and restatement in its entirety of the 1996 Purchase
Agreement by this Agreement.
U.S. AGGREGATES, INC. AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
2B. Agreement and Consent of the Purchaser. The Purchaser is the holder of
one hundred percent (100%) in aggregate principal amount of the 1996 Notes. The
Purchaser, subject to the satisfaction of the conditions precedent set forth in
paragraph 5, by its execution of this Agreement, agrees and consents to the
amendment and restatement in its entirety of the 1996 Purchase Agreement by this
Agreement and, upon the satisfaction or waiver of such conditions precedent, the
1996 Purchase Agreement shall be deemed amended and restated in the form of this
Agreement.
3. AUTHORIZATION OF ISSUE OF 1998 NOTES AND 1998 WARRANTS.
(i) Authorization of Issue of 1998 Notes. The Company will authorize
the issue of its senior subordinated promissory notes in the aggregate
principal amount of Fifteen Million Dollars ($15,000,000), to be dated the
date of issue thereof, to mature November 22, 2008, to bear interest,
payable quarterly in arrears, on the unpaid balance thereof from June 5,
1998 until the principal thereof shall have become due and payable at the
rate of ten and nine hundredths percent (10.09%) per annum and on overdue
payments at the rate specified therein, and to be substantially in the
form of Exhibit A2 hereto (the "1998 Notes"). The term "Notes" as used
herein shall include the 1996 Notes and the 1998 Notes. The obligations
evidenced by the Notes are subordinated to the Senior Debt pursuant to the
provisions of paragraph 12 hereof.
(ii) Authorization of Issue of 1998 Warrants. The Company will
authorize the issue of an aggregate of Three Thousand Two Hundred Eight
(3,208) warrants (the "1998 Warrants") to purchase shares of Common Stock
of the Company. The 1998 Warrants shall be issued pursuant to the Warrant
Agreement (the "1998 Warrant Agreement") in the form of Exhibit E hereto,
the certificates representing the 1998 Warrants (the "1998 Warrant
Certificates") shall be in the form of Attachment A to the 1998 Warrant
Agreement, and the 1998 Warrants shall have the terms provided in the 1998
Warrant Certificates and the 1998 Warrant Agreement.
4. PURCHASE AND SALE OF 1998 NOTES AND 1998 WARRANTS.
(i) Purchase and Sale of 1998 Notes and 1998 Warrants. The Company
hereby agrees to sell to the Purchaser and, subject to the terms and
conditions herein set forth, the Purchaser agrees to purchase from the
Company the aggregate principal amount of 1998 Notes set forth opposite
the Purchaser's name in the Purchaser Schedule attached hereto, together
with the aggregate amount of 1998 Warrants set forth opposite the
Purchaser's name in the Purchaser Schedule attached hereto, for an
aggregate consideration equal to Fifteen Million Dollars ($15,000,000).
The Company will deliver to the Purchaser, at the offices of Hebb &
Gitlin, a professional corporation, at One State Street, Hartford,
Connecticut 06103, one or more 1998 Notes registered in the Purchaser's
name, evidencing the aggregate principal amount of 1998 Notes to be
purchased by the Purchaser and in the denomination or denominations
specified with respect to the Purchaser in the Purchaser Schedule,
together with one or more 1998 Warrant Certificates (as set forth in the
Purchaser Schedule), representing the number of 1998 Warrants indicated on
such Purchaser Schedule and registered in the name
U.S. AGGREGATES, INC. 2 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
of the holder indicated on such Purchaser Schedule, against payment of the
purchase price thereof by transfer of immediately available funds, net of
the transaction structuring fee referred to in paragraph 5J, as directed
by the Company on Annex 2, on the date of closing, which shall be June 5,
1998 (herein called the "Closing" or the "Closing Date").
(ii) Original Issue Discount for the 1998 Notes. The Purchaser and
the Company agree that any original issue discount attributable, as a
result of the delivery of such 1998 Warrants, to any 1998 Note issued by
the Company in accordance with the terms and conditions of this Agreement
is less than the product of:
(a) one-quarter of one percent (0.25%) of the stated
redemption price at maturity (as such term is defined in Section
1273(a) of the IRC) of such 1998 Note; multiplied by
(b) the number of complete years to maturity of such 1998
Note.
The Purchaser and the Company agree to use the foregoing for all United
States federal, state and local income tax purposes with respect to the
transactions contemplated by this Agreement, the 1998 Warrant Agreement
and the other Financing Documents. The Purchaser and the Company
acknowledge that such original issue discount represents the Fair Market
Value of such 1998 Warrants as of the Closing Date.
(iii) Original Issue Discount for the 1996 Notes. The Purchaser and
the Company agree that any original issue discount attributable, as a
result of the delivery of the 1996 Warrants, to any 1996 Note issued by
the Company in accordance with the terms and conditions of the 1996
Purchase Agreement is less than the product of:
(a) one-quarter of one percent (0.25%) of the stated
redemption price at maturity (as such term is defined in Section
1273(a) of the IRC) of such 1996 Note; multiplied by
(b) the number of complete years to maturity of such 1996
Note.
The Purchaser and the Company agree to use the foregoing for all United
States federal, state and local income tax purposes with respect to the
transactions contemplated by this Agreement, the 1996 Warrant Agreement
and the other Financing Documents. The Purchaser and the Company
acknowledge that such original issue discount represents the Fair Market
Value of such 1996 Warrants as of the Prior Closing Date.
5. CONDITIONS OF CLOSING. The Purchaser's obligation to purchase and pay
for the 1998 Notes and 1998 Warrants to be purchased by the Purchaser hereunder
and the amendment and restatement of the 1996 Purchase Agreement is subject to
the satisfaction, on or before the Closing Date, of the following conditions:
U.S. AGGREGATES, INC. 3 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
5A. Opinion of Purchaser's Special Counsel. The Purchaser shall have
received from Hebb & Gitlin, a Professional Corporation, who are acting as
special counsel for the Purchaser in connection with this transaction, a
favorable opinion satisfactory to the Purchaser as to such matters incident to
the matters herein contemplated as it may reasonably request.
5B. Opinion of Company's Counsel; Opinion of Each Guarantor's Local
Counsel. The Purchaser shall have received from Kirkland & Ellis, special
counsel for the Company, a favorable opinion satisfactory to the Purchaser and
substantially in the form of Exhibit B1 hereto. The Purchaser shall have
received from special local counsel for each of the Restricted Subsidiaries
executing the Subsidiary Guaranty, a favorable opinion satisfactory to the
Purchaser and substantially in the form of Exhibit B2 hereto.
5C. Representations and Warranties; No Default. The representations and
warranties contained in paragraph 10 shall be true on and as of the Closing
Date, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the Closing Date no Event of Default or
Default; and the Company shall have delivered to the Purchaser an Officer's
Certificate, dated the Closing Date and signed by a Responsible Officer of the
Company, substantially in the form of Exhibit C hereto, certifying as to both
such effects and that the conditions specified in this paragraph 5 have been
fulfilled, and a certificate dated the Closing Date and signed by the Secretary
or an Assistant Secretary of the Company, substantially in the form of Exhibit
D1 hereto, with respect to the matters therein set forth. Each Subsidiary shall
have delivered to the Purchaser a certificate dated the Closing Date and signed
by the Secretary or an Assistant Secretary of such Subsidiary, substantially in
the form of Exhibit D2 hereto, with respect to the matters therein set forth.
5D. Purchase Permitted By Applicable Laws. The purchase of and payment for
the 1998 Notes and the 1998 Warrants to be purchased by the Purchaser on the
Closing Date on the terms and conditions herein provided (including the use of
the proceeds of such 1998 Notes and 1998 Warrants by the Company) shall not
violate any applicable law or governmental regulation (including, without
limitation, section 5 of the Securities Act or Regulation T, U or X of the Board
of Governors of the Federal Reserve System) and shall not subject the Purchaser
to any tax, penalty, liability or other onerous condition under or pursuant to
any applicable law or governmental regulation, and the Purchaser shall have
received such certificates or other evidence as it may request to establish
compliance with this condition.
5E. 1998 Warrant Agreement; Registration Rights Agreement; Charter
Amendment, etc.
(i) 1998 Warrant Agreement. The Company shall have executed and
delivered the 1998 Warrant Agreement. The Company shall have issued to the
Purchaser 1998 Warrants in the amount set forth below the Purchaser's name
on the Purchaser Schedule attached hereto.
(ii) Registration Rights Agreement. The Company, Senior Management
and GTCR LP shall have executed and delivered the First Amendment to
Registration Rights and Stockholders' Agreement in the form of Exhibit F
hereto.
U.S. AGGREGATES, INC. 4 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
(iii) Charter Amendment. The Charter Amendment shall have been duly
filed with the Secretary of State of the State of Delaware.
(iv) Reservation of Shares. The shares of Common Stock issuable upon
exercise of the Warrants shall have been duly authorized and reserved for
issuance upon such exercise.
5F. Subsidiary Guaranty. Each Restricted Subsidiary shall have executed
and delivered the Amended and Restated Subsidiary Guaranty (the "Subsidiary
Guaranty") to the Purchaser in the form of Exhibit G hereto.
5G. Bank Credit Agreement.
(i) No event shall have occurred and no condition shall exist that
shall prohibit the Company from borrowing under the Bank Credit Agreement.
(ii) The Bank Credit Agreement shall have been amended to, inter
alia, permit the execution and delivery of this Agreement by the Company
and the Subsidiary Guaranty by all Subsidiaries identified in Exhibit G
hereto as parties to such Subsidiary Guaranty, and a copy of such
amendment shall have been delivered to the Purchaser.
5H. Private Placement Numbers. The Company shall have obtained or caused
to be obtained private placement numbers for the 1998 Notes and the 1998
Warrants from the CUSIP Service Bureau of Standard & Poor's, a division of
McGraw-Hill, Inc., and the Purchaser shall have been informed of such private
placement numbers.
5I. Closing Expenses. The Company shall have paid at the closing the
statement for fees and disbursements of the special counsel for the Purchaser
presented on the Closing Date.
5J. Transaction Structuring Fee. The Company shall have paid a
non-refundable transaction structuring fee in the aggregate amount of One
Hundred Fifty Thousand Dollars ($150,000) to The Prudential Insurance Company of
America.
5K. Merger Agreement and Related Documents. You shall have received a copy
of the Merger Agreement as executed, together with all exhibits and schedules
thereto, and of each document required under the Merger Agreement to be
delivered or filed in connection with the consummation of the Merger certified
as true, correct and complete by a senior officer of the Company. All conditions
precedent to the consummation of the Merger under the Merger Agreement shall
have occurred, all governmental authorizations, consents, approvals, exemptions
or other actions required in connection with the Merger Agreement shall have
been duly received or taken, and the transactions contemplated by the Merger
Agreement shall have been duly consummated (or shall simultaneously be
occurring) substantially in accordance with the terms of the Merger Agreement.
5L. Proceedings Satisfactory. All proceedings taken in connection with the
issuance and sale of the 1998 Notes and the 1998 Warrants and all documents and
papers relating thereto shall be satisfactory to the Purchaser and its special
counsel. The
U.S. AGGREGATES, INC. 5 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
Purchaser and its special counsel shall have received copies of such documents
and papers as they may reasonably request in connection therewith or in
connection with such special counsel's closing opinion, all in form and
substance satisfactory to the Purchaser and such special counsel.
6. PREPAYMENTS. The unpaid principal amount of the 1996 Notes is due on
November 22, 2006. The unpaid principal amount of the 1998 Notes is due on
November 22, 2008. The Notes shall be subject to prepayment with respect to the
required prepayments specified in paragraph 6A and the optional prepayments
permitted by paragraph 6B, and upon certain changes in control, as set forth in
paragraph 6C.
6A. Required Prepayments.
(i) 1996 Notes. Until the 1996 Notes shall be paid in full, the
Company shall apply to the prepayment of the 1996 Notes, without premium,
the sum of Six Million Dollars ($6,000,000) on November 22 in each of the
years 2003 to 2005, inclusive, and such principal amounts of the 1996
Notes, together with interest thereon to the prepayment dates, shall
become due on such prepayment dates. The remaining principal amount of the
1996 Notes, together with interest accrued thereon, shall become due on
the maturity date of the 1996 Notes.
(ii) 1998 Notes. Until the 1998 Notes shall be paid in full, the
Company shall apply to the prepayment of the 1998 Notes, without premium,
the sum of Four Million Five Hundred Thousand Dollars ($4,500,000) on
November 22, 2006 and November 22, 2007 and such principal amounts of the
1998 Notes, together with interest thereon to the prepayment dates, shall
become due on such prepayment dates. The remaining principal amount of the
1998 Notes, together with interest accrued thereon, shall become due on
the maturity date of the 1998 Notes.
6B. Optional Prepayment With Yield-Maintenance Amount.
(i) Optional Prepayment Right. The Notes shall be subject to
prepayment, in whole at any time or from time to time in part on any
interest payment date (in multiples of One Million Dollars ($1,000,000)),
at the option of the Company at one hundred percent (100%) of the
principal amount so prepaid plus interest thereon to the prepayment date
and the Yield-Maintenance Amount, if any, with respect to each Note.
(ii) Notice of Optional Prepayment. The Company shall give the
holder of each Note irrevocable written notice of any prepayment pursuant
to paragraph 6B(i) hereof not less than ten (10) Business Days prior to
the prepayment date, specifying such prepayment date and the principal
amount of the Notes, and of the Notes held by such holder, to be prepaid
on such date and stating that such prepayment is to be made pursuant to
paragraph 6B(i) hereof. The notice of prepayment shall also set forth in
reasonable detail the Company's calculation of the estimated
Yield-Maintenance Amount payable to each holder of Notes in connection
with such prepayment. Notice of prepayment having been given as aforesaid,
the principal amount of the Notes specified in such notice, together with
interest thereon to the prepayment date and together with the
Yield-Maintenance
U.S. AGGREGATES, INC. 6 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
Amount, if any, with respect thereto, shall become due and payable on such
prepayment date. The Company shall, on or before the day on which it gives
written notice of any prepayment pursuant to paragraph 6B(i) hereto, give
telephonic notice of the principal amount of the Notes to be prepaid and
the prepayment date to each Significant Holder which shall have designated
a recipient of such notices in the Purchaser Schedule attached hereto or
by notice in writing to the Company.
6C. Offer to Pay upon Change in Control.
(i) Notice and Offer. In the event of either
(a) a Change in Control, or
(b) the obtaining of knowledge of a Notice Event by any
Responsible Officer (including, without limitation, via the receipt
of notice of a Notice Event from any holder of Notes),
the Company will, within three (3) Business Days of the occurrence of
either of such events, give written notice (the "Control Event Notice") of
such Change in Control or Notice Event to each holder of Notes. In the
event of a Change in Control, the Control Event Notice shall contain, and
shall constitute, an irrevocable offer to pay all, but not less than all,
the Notes held by such holder on the date specified in such Control Event
Notice (the "Control Payment Date") which shall be thirty (30) days after
the date of such Control Event Notice. If the Control Payment Date shall
not be specified in such Control Event Notice, the Control Payment Date
shall be the thirtieth (30th) day after the date of such holder's receipt
of such Control Event Notice. In no event will the Company take any action
to consummate or finalize a Change in Control unless contemporaneously
with such action the Company gives the Control Event Notice required to be
given in accordance with this paragraph 6C.
(ii) Acceptance and Payment; Rejection. To accept such offered
payment, a holder of Notes shall cause a notice of such acceptance to be
delivered to the Company at least two (2) days prior to the Control
Payment Date. Such offered payment shall be made at one hundred percent
(100%) of the principal amount of the Notes held by holders having
accepted such offer, together with interest on the Notes then being paid
accrued to the Control Payment Date.
(iii) Officer's Certificate. Each offer to pay the Notes pursuant to
this paragraph 6C shall be accompanied by a certificate, executed by a
Responsible Officer and dated the date of such offer, specifying:
(a) the Control Payment Date;
(b) the paragraph of this Agreement under which such offer is
made;
(c) the principal amount of each Note offered to be paid;
U.S. AGGREGATES, INC. 7 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
(d) the interest that would be due on each Note offered to be
paid, accrued to the date fixed for payment;
(e) that the conditions of this paragraph 6C have been
fulfilled; and
(f) in reasonable detail, the nature and date or proposed date
of the Change in Control.
Upon acceptance of any such offer by any holder of Notes, the aggregate
principal amount of the Notes offered to be paid to such holder and
accrued interest thereon shall become due and payable on the Control
Payment Date.
(iv) Certain Definitions. The following terms have the following
meanings:
(a) "Change in Control" means, at any time, the failure of
GTCR LP or its Affiliates and Senior Management to own and control,
free of any Lien, at least fifty-one percent (51%) of all of the
issued and outstanding Voting Stock of each class of the Company.
(b) "Notice Event" means the execution of any written
agreement that, when fully performed by the parties thereto, would
result in a Change in Control.
6D. Application of Prepayments.
(i) Application of Partial Prepayments to Mandatory Prepayments and
Payment at Maturity. Any prepayment of Notes of either Series pursuant to
paragraph 6B or paragraph 6C hereof shall be applied ratably to the
principal amount due on the maturity date of the Notes of such Series so
prepaid and to the mandatory prepayments applicable to the Notes of such
Series so prepaid as set forth in paragraph 6A hereof.
(ii) Partial Prepayments Pro Rata. Upon any partial prepayment of
the Notes of either Series pursuant to paragraph 6A or paragraph 6B, the
principal amount so prepaid shall be allocated to all of the Notes of such
Series so prepaid at the time outstanding in proportion to the respective
outstanding principal amounts thereof.
6E. No Acquisition of Notes. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity (other than by prepayment pursuant
to paragraph 6A, paragraph 6B, or paragraph 6C, or upon acceleration of such
final maturity pursuant to paragraph 9A), or purchase or otherwise acquire,
directly or indirectly, Notes held by any holder unless the Company or such
Subsidiary or Affiliate shall have offered to prepay or otherwise retire or
purchase or otherwise acquire, as the case may be, the same proportion of the
aggregate principal amount of Notes held by each other holder of Notes at the
time outstanding upon the same terms and conditions.
U.S. AGGREGATES, INC. 8 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
6F. Limitations on Payments and Prepayments. Except as specifically set
forth in this Agreement and the Notes, the Notes shall not be subject to
prepayment.
7. AFFIRMATIVE COVENANTS.
7A. Financial Statements. The Company will deliver to each Institutional
Holder in duplicate:
(i) as soon as practicable and in any event within forty-five (45)
days after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidating and consolidated statements of
operations and cash flows of the Company and its Subsidiaries for the
period from the beginning of the current fiscal year to the end of such
quarterly period, and consolidating and consolidated balance sheets of the
Company and its Subsidiaries as at the end of such quarterly period,
setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year, all in reasonable
detail and reasonably satisfactory to the Required Holders and certified
by an authorized financial officer of the Company as fairly presenting, in
all material respects, the financial position of the Company and its
Subsidiaries and their results of operations and cash flows, subject to
changes resulting from year-end adjustments and the absence of footnotes;
(ii) as soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year, consolidating and
consolidated statements of operations, shareholders' equity and cash flows
of the Company and its Subsidiaries for such year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as at the
end of such year, setting forth in the case of such consolidated
statements, in comparative form, corresponding consolidated figures from
the preceding annual audit, all in reasonable detail and reasonably
satisfactory to the Required Holders and, as to the consolidated
statements, certified to the Company by Arthur Andersen LLP or other
independent public accountants of recognized standing selected by the
Company whose certificate shall be without qualification as to going
concern or scope and, as to the consolidating statements, certified by an
authorized financial officer of the Company, such certificates in each
case certifying such financial statements as fairly presenting, in all
material respects, the financial position of the Company and its
Subsidiaries and their results of operations and cash flows;
(iii) concurrently with distribution thereof, a copy of each
certificate or report (together with all attachments thereto) sent to the
Agent or any Bank pursuant to the Bank Credit Agreement (or any agreement
replacing the Bank Credit Agreement) in connection with the acquisition by
the Company or any of its Subsidiaries of the assets or capital stock of
any Person;
(iv) within thirty (30) days after the commencement of each fiscal
year of the Company, a copy of the Company's Budget for such fiscal year;
(v) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it sends to its
public stockholders and copies of all registration statements (without
exhibits) and all
U.S. AGGREGATES, INC. 9 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
reports that it files with the Securities and Exchange Commission (or any
governmental body or agency succeeding to the function of the Securities
and Exchange Commission);
(vi) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any of its Subsidiaries by independent
accountants in connection with any annual, interim or special audit made
by them of the books of the Company or any such Subsidiary (including,
without limitation, any management letters);
(vii) promptly upon releasing the same to the public, copies of any
material press releases;
(viii) promptly after the commencement thereof, written notice of
any action or proceeding relating to the Company or any of its
Subsidiaries in any court or before any Governmental Authority (including,
without limitation, any arbitration board or tribunal) which could, if
determined adversely, reasonably be expected to have a Material Adverse
Effect;
(ix) promptly after any Responsible Officer shall have knowledge
thereof, any condition or occurrence which could reasonably be expected to
have a Material Adverse Effect;
(x) promptly upon the request of any holder of Notes, any
information required to be delivered (to the extent not already delivered
to such holder pursuant to the other requirements of this paragraph 7A) to
any Transferee by Rule 144A (17 C.F.R. ss.230.144A) under the Securities
Act (or any successor provision) as a condition to the transfer of any
Note pursuant to such Rule;
(xi) promptly upon the occurrence thereof, written notice of any
Acquisition Loan, specifying the amount of such Acquisition Loan; and
(xii) with reasonable promptness, such other financial data as such
Institutional Holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Institutional Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company and its Restricted Subsidiaries with the provisions of paragraph 8
and stating that there exists no Event of Default or Default, or, if any Event
of Default or Default exists, specifying the nature and period of existence
thereof and what action the Company proposes to take with respect hereto.
Together with each delivery of financial statements required by clause (ii)
above, the Company will deliver to each Institutional Holder a certificate of
such accountants stating that, in making the audit necessary to the
certification of such financial statements, they have obtained no knowledge of
any Event of Default or Default, or, if they have obtained knowledge of any
Event of Default or Default, specifying the nature and period of existence
thereof. Such accountants, however, shall not be liable to anyone by reason of
their failure to obtain knowledge of any Event of Default or Default that would
not be disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards. The Company also covenants that forthwith
upon a Responsible
U.S. AGGREGATES, INC. 10 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
Officer obtaining knowledge of an Event of Default or Default, it will deliver
to each Institutional Holder a certificate of a Responsible Officer specifying
the nature and period of existence thereof and what action the Company proposes
to take with respect hereto.
7B. Inspection of Property. The Company will permit any Person designated
by any Institutional Holder in writing, at such Institutional Holder's expense
(except as specified in the next succeeding sentence), to visit and inspect any
of the Properties of the Company and its Subsidiaries, to examine the corporate
books and financial records of the Company and its Subsidiaries and make copies
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of any of such corporations with the principal officers of the Company and its
independent public accountants, all during normal business hours and at such
reasonable times and as often as such Institutional Holder may reasonably
request. The Company will reimburse each Institutional Holder, on demand, for
all reasonable expenses which such Institutional Holder may incur in connection
with any such visitation, inspection or discussion if any Default or Event of
Default shall exist at the time of such visitation, inspection or discussion.
7C. Covenant to Secure Notes Equally. If the Company or any of its
Subsidiaries creates or assumes any Lien upon any of its Property, whether now
owned or hereafter acquired, other than Liens permitted by the provisions of
paragraph 8G hereof (unless prior written consent to the creation or assumption
thereof shall have been obtained pursuant to paragraph 14C hereof), the Company
will make, or cause to be made pursuant to such agreements and instruments as
shall be approved by the Required Holders, effective provision whereby the Notes
will be secured by such Lien equally and ratably with any and all other Debt
thereby secured so long as any such other Debt shall be so secured.
7D. Payment of Taxes and Claims. The Company covenants that it will, and
will cause each of its Subsidiaries to, pay before they become delinquent,
(i) all taxes, assessments and governmental charges or levies
imposed upon it or its Property, and
(ii) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons that, if unpaid, might
result in the creation of a Lien upon its Property,
provided that items of the foregoing description need not be paid while being
contested in good faith by appropriate proceedings timely initiated, so long as
(a) enforcement of any Liens relating to such items is
effectively stayed, and
(b) reserves, reasonably determined by the Company or the
Subsidiary, as the case may be, to be adequate, have been
established and maintained.
7E. Maintenance of Properties and Corporate Existence. The Company
covenants that it will, and will cause each of its Subsidiaries to:
U.S. AGGREGATES, INC. 11 AMENDED AND RESTATED NOTE AND
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(i) Property -- maintain its Property in good condition (ordinary
wear and tear and damage by casualty excepted) and timely make all
necessary renewals, replacements, repairs, additions, betterments and
improvements thereto;
(ii) Insurance -- maintain, with financially sound and responsible
insurers having a general policyholders' rating of at least "A" or its
equivalent from A.M. Best Company (or another nationally recognized
insurance rating agency of similar standing if A.M. Best Company is not
then in the business of rating insurance companies), insurance in such
amounts and covering such risks as is customary in the case of
corporations engaged in the same or a similar business and similarly
situated;
(iii) Financial Records -- maintain sound accounting policies and an
adequate and effective system of accounts and internal accounting control
that will safeguard assets, properly record income, expenses and
liabilities, and assure the production of proper financial statements in
accordance with GAAP;
(iv) Corporate Existence and Rights -- do or cause to be done all
things necessary:
(a) to preserve and keep in full force and effect its
existence, rights and franchises, and
(b) to maintain each Subsidiary as a Subsidiary, except as
otherwise permitted by paragraph 8H and paragraph 8I hereof, and
except to the extent such failure to maintain such Subsidiary could
not reasonably be expected to have a Material Adverse Effect; and
(v) Compliance with Law -- comply with all laws, ordinances and
governmental rules and regulations to which it is subject and obtain all
licenses, permits, franchises and other governmental authorizations
necessary to the ownership of its Properties or to the conduct of its
business, except for violations or failures to obtain that, in the
aggregate for all such failures and violations, could not reasonably be
expected to have a Material Adverse Effect.
7F. Pension Plans. The Company will, and will cause each ERISA Affiliate
to, at all times
(i) with respect to each Pension Plan, make timely payments of
contributions required to meet the minimum funding standard set forth in
ERISA or the IRC with respect thereto and, with respect to each
Multiemployer Plan, make timely payment of contributions required to be
paid thereto as provided by Section 515 of ERISA and
(ii) comply with all other provisions of ERISA,
except for such failures to make contributions and failures to comply as could
not reasonably be expected to have a Material Adverse Effect.
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7G. Payment of Notes and Maintenance of Office. The Company covenants that
it will punctually pay, or cause to be paid, the principal and interest (and
Yield-Maintenance Amount, if any) to become due in respect of the Notes
according to the terms thereof and will maintain an office at the address of the
Company set forth in paragraph 14H hereof where notices, presentations and
demands in respect hereof or the Notes may be made upon it. Such office will be
maintained at such address until such time as the Company will notify the
holders of the Notes of any change of location of such office, which will in any
event be located in the United States of America.
7H. Private Offering. The Company will not, and will not permit any Person
acting on its behalf to, offer the Notes or any part thereof or any similar
Securities for issue or sale to, or solicit any offer to acquire any of the same
from, any Person so as to bring the issuance and sale of the Notes within the
provisions of section 5 of the Securities Act.
7I. Line of Business. The Company shall not, nor shall it permit any
Restricted Subsidiary to, engage in any business if, as a result thereof, the
business of the Company and the Restricted Subsidiaries, taken as a whole, would
not be substantially the same as, or substantially similar to, the business,
taken as a whole, engaged in by the Company and the Restricted Subsidiaries on
the date of this Agreement.
7J. Subsidiary Guaranties. The Company will cause each corporation which
becomes a Subsidiary after the Closing Date, and which executes a guaranty of
obligations outstanding under the Bank Credit Agreement, to execute and deliver
to each holder of Notes, simultaneously with its execution and delivery of any
such guaranty of Bank Credit Agreement obligations, a copy of the Joinder
Agreement in the form attached to the Subsidiary Guaranty as Annex 2, duly
executed by such corporation.
8. NEGATIVE COVENANTS.
8A. Interest Expense Coverage. The Company will not permit the ratio of
EBITDA to Consolidated Interest Expense,
(i) for the period of twelve (12) consecutive calendar months most
recently ended as of the Closing Date, to be less than 1.75 to 1.0, and
(ii) for any period of four (4) consecutive fiscal quarters of the
Company ending in any period specified in the table below, to be less than
the ratio set forth opposite such period in such table:
- --------------------------------------------------------------------------------
Fiscal Period Ratio
- --------------------------------------------------------------------------------
Closing Date through September 29, 1999 1.75 to 1.0
- --------------------------------------------------------------------------------
September 30, 1999 through September 29, 2000 2.0 to 1.0
- --------------------------------------------------------------------------------
September 30, 2000 and thereafter 2.25 to 1.0
- --------------------------------------------------------------------------------
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8B. Fixed Charge Coverage. The Company will not permit the ratio of
(i) EBITDA for any period of four (4) consecutive fiscal quarters of
the Company to
(ii) Consolidated Fixed Charges for such period
to be less than 0.90 to 1.00.
8C. Leverage Ratio. The Company will not, as of any Calculation Date in
any period specified in the table below, permit the ratio of
(i) Consolidated Debt (excluding, to the extent included in the
computation of Consolidated Debt at such time, any outstanding
indebtedness for borrowed money evidenced by the Harris Trust Note),
determined on such Calculation Date after giving effect to the incurrence
of any Debt by the Company or any Restricted Subsidiary on such date and
the application of the proceeds thereof, to
(ii) EBITDA for the period of four (4) consecutive fiscal quarters
of the Company most recently ended at such time,
to be greater than the ratio set forth opposite such period in such table:
- --------------------------------------------------------------------------------
Fiscal Period Ratio
- --------------------------------------------------------------------------------
Closing Date up to but not including September 30, 1998 6.0 to 1.0
- --------------------------------------------------------------------------------
September 30, 1998 up to but not including September 30, 1999 5.25 to 1.0
- --------------------------------------------------------------------------------
September 30, 1999 up to but not including September 30, 2000 4.75 to 1.0
- --------------------------------------------------------------------------------
September 30, 2000 and thereafter 4.0 to 1.0
- --------------------------------------------------------------------------------
As used in this paragraph 8C, "Calculation Date" means
(a) the Closing Date,
(b) the last day of each fiscal quarter of the Company, or
(c) the date of any Acquisition Loan,
as the case may be.
8D. Rental Obligations. The Company will not, and will not permit any
Restricted Subsidiary to, enter into at any time any arrangement (other than
Capital Leases) which
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involves the leasing by the Company or such Restricted Subsidiary from any
lessor of any personal Property (or any interest therein), except:
(i) rentals of items of equipment for not more than ninety (90) days
for use on one or more specific jobs in the ordinary course of business
and
(ii) arrangements which, together with all other such arrangements
which shall then be in effect, will not require the payment of rentals by
the Company and its Subsidiaries in any fiscal year of the Company, in the
aggregate, to exceed the greater of
(a) five percent (5%) of Consolidated Net Revenues for the
immediately preceding fiscal year of the Company; and
(b) Four Million Dollars ($4,000,000);
provided, however, that any calculation made for purposes of this paragraph 8D
shall exclude any amounts required to be expended for maintenance and repairs,
insurance, taxes, assessments and other similar charges.
8E. Restricted Payments. The Company will not and will not permit any
Restricted Subsidiary to,
(i) declare or pay any dividend (other than stock dividends) or
distribution on any of its capital stock,
(ii) purchase or redeem any capital stock of the Company or any
Restricted Subsidiary (or any warrants, options or other rights in respect
thereof),
(iii) make any other distribution to shareholders of the Company or
any Restricted Subsidiary,
(iv) prepay, purchase, defease or redeem any Debt subordinate to the
Notes or
(v) set aside funds for any of the foregoing;
provided that (a) any Restricted Subsidiary may declare and pay dividends, or
make other distributions, to the Company or to another Restricted Subsidiary of
the Company (but not to any other Person); and (b) so long as no Default or
Event of Default exists or would result therefrom, any Restricted Subsidiary or
the Company may repurchase or redeem its stock from any former employee,
director of, or consultant to, a Restricted Subsidiary (or any heirs or legal
representatives of any such employee, director or consultant) in an aggregate
amount, for all such purposes, not exceeding $1,000,000 in any fiscal year.
8F. Debt Restrictions. The Company will not, and will not permit any
Restricted Subsidiary to, at any time, directly or indirectly create, incur,
issue, assume, guarantee or otherwise become liable with respect to, any Debt
(including, without limitation, any extension, renewal or refunding of Debt)
except the Notes and:
U.S. AGGREGATES, INC. 15 AMENDED AND RESTATED NOTE AND
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(i) Debt of a Restricted Subsidiary owing to the Company or any
other Restricted Subsidiary and Debt of the Company owing to a Restricted
Subsidiary;
(ii) Debt of the Company or such Restricted Subsidiary existing on
the Closing Date and described on Annex 3;
(iii) Debt under the Bank Credit Agreement and Guaranties thereof
and of the Notes by Restricted Subsidiaries; and
(iv) additional Debt of the Company or any Restricted Subsidiary not
otherwise permitted under this paragraph 8F, provided that immediately
after giving effect thereto and to the application of the proceeds
thereof, no Default (other than a Default under paragraph 9A(vi) or
paragraph 9A(xiii)) or Event of Default shall exist.
8G. Liens. The Company will not, and will not permit any Restricted
Subsidiary to, create or permit to exist any Lien on any of its Property,
whether now owned or hereafter acquired, except:
(i) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in
good faith by appropriate proceedings and, in each case, for which it
maintains adequate reserves;
(ii) Liens arising in the ordinary course of business (such as (A)
Liens of carriers, warehousemen, mechanics and materialmen and other
similar Liens imposed by law and (B) Liens incurred in connection with
workers' compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with
surety and appeal bonds, bids, performance bonds and similar obligations)
for sums not overdue or being contested in good faith by appropriate
proceedings and not involving any deposits or advances or borrowed money
or the deferred purchase price of Property or services, and, in each case,
for which it maintains adequate reserves;
(iii) (a) Liens existing on the Closing Date and described in Item
10.9 of Schedule II of the Bank Credit Agreement, as in effect on
the date hereof, and
(b) Liens securing Senior Debt;
(iv) Liens in connection with Capital Leases (to the extent
permitted hereunder);
(v) any Lien arising in connection with the acquisition of Property
being acquired, provided that the aggregate amount of all Debt secured by
such Liens shall not exceed Seven Million Dollars ($7,000,000);
(vi) attachments, judgments and other similar Liens, for sums not
exceeding One Million Five Hundred Thousand Dollars ($1,500,000), arising
in connection with court proceedings, provided the execution or other
enforcement of
U.S. AGGREGATES, INC. 16 AMENDED AND RESTATED NOTE AND
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<PAGE>
such Liens is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(vii) other Liens incidental to the conduct of the business of the
Company or a Restricted Subsidiary or the ownership of its Property,
including easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens, which Liens were not
incurred in connection with the borrowing of money and do not, in any case
or in the aggregate, interfere in any material respect with the ordinary
conduct of the business of the Company or any Restricted Subsidiary;
(viii) building restrictions, zoning laws and other statutes, laws,
rules, regulations, ordinances and restrictions, and any amendments
thereto, now or at any time hereafter adopted by any Governmental
Authority having jurisdiction;
(ix) any interest or title of a lessor or secured by a lessor's
interest under any lease (other than a Capital Lease);
(x) Liens in connection with Permitted Acquisitions; and
(xi) other Liens securing obligations not at any time exceeding
Three Million Dollars ($3,000,000).
8H. Mergers and Consolidations. The Company will not, and will not permit
any of its Restricted Subsidiaries to, merge or consolidate with or into any
other Person except:
(i) any Restricted Subsidiary may merge or consolidate with or into
the Company, provided that the Company is the continuing or surviving
corporation and immediately prior to, and immediately after giving effect
to, such transaction, no Default or Event of Default would exist;
(ii) any wholly-owned Restricted Subsidiary may merge or consolidate
with or into another wholly-owned Restricted Subsidiary, provided that
immediately prior to, and immediately after giving effect to, such
transaction, no Default or Event of Default would exist;
(iii) the Company may merge or consolidate with or into any other
corporation, provided that the Company is the continuing or surviving
corporation and immediately prior to, and immediately after giving effect
to, such transaction, no Default or Event of Default would exist; and
(iv) any Restricted Subsidiary may merge or consolidate with or into
any other corporation, provided that:
(a) the continuing or surviving corporation (the "Successor
Corporation") shall, immediately after giving effect to such
transaction, be a Restricted Subsidiary,
(b) if such Restricted Subsidiary is not the Successor
Corporation, such Successor Corporation shall have executed and
delivered to each
U.S. AGGREGATES, INC. 17 AMENDED AND RESTATED NOTE AND
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<PAGE>
holder of Notes, prior to giving effect to, or concurrently with the
consummation of, such transaction, a copy of the Joinder Agreement
in the form attached to the Subsidiary Guaranty as Annex 2, duly
executed by such corporation, and
(c) immediately prior to, and immediately after giving effect
to, such transaction, no Default or Event of Default would exist.
8I. Sale of Assets; Disposal of Ownership and Debt of a Restricted
Subsidiary.
(i) Sale of Assets. The Company will not, and will not permit any of
its Restricted Subsidiaries to, make any Transfer, provided that the
foregoing restriction does not apply to a Transfer if:
(a) the Property that is the subject of such Transfer
constitutes inventory held for sale and such Transfer is in the
ordinary course of business (an "Ordinary Course Transfer");
(b) such Transfer is from a Restricted Subsidiary to the
Company or a Wholly-Owned Subsidiary (an "Intergroup Transfer");
(c) such Transfer is permitted under paragraph 8I(ii) or
consists of the grant of a Lien to secure Senior Debt; or
(d) such Transfer is neither an Ordinary Course Transfer nor
an Intergroup Transfer, and either
(I) the Net Proceeds Amount arising therefrom is
applied, within three hundred sixty-five (365) days after such
Transfer, to a Property Reinvestment Application or to the
repayment of Senior Debt, or
(II) all of the following conditions shall have been
satisfied with respect thereto:
(A) immediately after giving effect to the
Transfer, no Default or Event of Default would exist,
and
(B) immediately after giving effect to the
Transfer,
(1) the Disposition Value of all of the
Property that was the subject of a Transfer
permitted by this paragraph 8I(i)(d)(II) during
the then current fiscal year of the Company would
not exceed ten percent (10%) of Consolidated Total
Assets as of the end of the then most recently
ended fiscal year of the Company, and
(2) all of the Property that was the subject
of a Transfer permitted by this paragraph
8I(i)(d)(II)
U.S. AGGREGATES, INC. 18 AMENDED AND RESTATED NOTE AND
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during the then current fiscal year of the Company
would not have contributed more than ten percent
(10%) of EBITDA for any of the three most recently
ended fiscal years of the Company,
provided that notwithstanding the foregoing, no Transfer under
this paragraph 8I(i)(d)(II) shall be permitted if, immediately
after giving effect to such Transfer, the Disposition Value of
all of the Property that was the subject of a Transfer
permitted by clause (II) of this paragraph 8I(i)(d) during the
period commencing on the Closing Date and ending on the date
of such Transfer would exceed twenty percent (20%) of
Consolidated Total Assets as of the end of the then most
recently ended fiscal year of the Company.
(ii) Disposal of Ownership and Debt of a Restricted Subsidiary. The
Company will not, and will not permit any Restricted Subsidiary to, sell,
assign, pledge or otherwise dispose of any shares of Subsidiary Stock or
Debt of any other Restricted Subsidiary, nor will the Company permit any
such Restricted Subsidiary to issue, sell or otherwise dispose of any
shares of its own Subsidiary Stock, provided that the foregoing
restrictions do not apply to:
(a) the Stock and Intercompany Note Pledge;
(b) the Transfer of such Subsidiary Stock or Debt to the
Company or a Wholly-Owned Subsidiary;
(c) the Transfer of all of the Subsidiary Stock and Debt of a
Restricted Subsidiary owned by one or more of the Company and the
Restricted Subsidiaries, provided that the following conditions are
met:
(I) such Transfer could be made pursuant to paragraph
8I(i)(d),
(II) in connection with such Transfer the entire
Investment (whether represented by stock, Debt, claims or
otherwise) of the Company and its other Restricted
Subsidiaries in such Restricted Subsidiary is sold,
transferred or otherwise disposed of to a Person other than
(A) the Company, or (B) another Restricted Subsidiary not
being simultaneously disposed of, and
(III) the Restricted Subsidiary being disposed of has no
continuing Investment in any other Restricted Subsidiary of
the Company not being simultaneously disposed of or in the
Company; or
(d) the issue or sale of the Subsidiary Stock of any
Restricted Subsidiary to any Person or Persons other than the
Company or a Wholly-Owned Subsidiary, provided that after giving
effect to such issuance or sale, the Company would own, directly or
indirectly through one or more Restricted Subsidiaries,
U.S. AGGREGATES, INC. 19 AMENDED AND RESTATED NOTE AND
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(I) eighty percent (80%) or more of the fully diluted
Voting Stock of such Restricted Subsidiary at such time, and
(II) eighty percent (80%) of the shareholders' equity of
such Restricted Subsidiary at such time.
For purposes of this paragraph (d), "fully diluted" means (x) with
respect to Voting Stock of any Restricted Subsidiary at any time,
all shares of Voting Stock of such Restricted Subsidiary which would
be outstanding at such time if all warrants, rights or options to
acquire such Voting Stock had been exercised and all Securities
exchangeable for or convertible into such Voting Stock had been so
exchanged or converted and (y) with respect to such warrants,
rights, options or exchangeable or convertible Securities, means the
number of shares of Voting Stock which may be obtained upon
exercise, exchange or conversion of such warrants, rights, options
or exchangeable or convertible Securities.
(iii) Certain Definitions. As used in this paragraph 8I, the
following terms have the following meanings:
(a) "book value" means, in the case of any Transfer of capital
stock of any Person, the same proportion of the Total Assets of such
Person as shall be equal to the proportion of the equity of such
Person represented by the capital stock subject to such Transfer,
and in the case of any Transfer of any asset other than capital
stock of any Person, the amount at which the same is recorded, or in
accordance with GAAP should have been recorded, in the books of
account of such Person.
(b) "Disposition Value" means, at any time, with respect to
any Transfer, the greater of the Fair Market Value or book value of
the Property subject to such Transfer.
(c) "Net Proceeds Amount" means, with respect to the Transfer
of any Property by the Company or any of its Restricted
Subsidiaries, the aggregate amount of the consideration received by
such Person in connection with such Transfer (net of the direct
costs relating to such Transfer (including, without limitation,
legal, accounting and investment banking fees and sales
commissions)).
(d) "Property Reinvestment Application" means, with respect to
any Transfer, an amount equal to the Net Proceeds Amount shall have
been applied to the acquisition by the Company, or any Restricted
Subsidiary making such Transfer, of Property to be used in the
ordinary course of business of the Company and the Restricted
Subsidiaries, that
(I) is related to the aggregates, or related materials
and services, business, or
(II) consists of equity interests in Persons engaged in
the aggregates, or related materials and services, business.
U.S. AGGREGATES, INC. 20 AMENDED AND RESTATED NOTE AND
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(e) "Total Assets" means, with respect to any Person at any
time, all of the assets of such Person which would be reflected, at
such time, on a balance sheet of such Person prepared in accordance
with GAAP.
(f) "Transfer" means, with respect to any Person, any
transaction in which such Person sells, conveys, transfers, leases
(as lessor) or otherwise disposes of any of its Property, including,
without limitation, capital stock of any Person.
8J. Limitations on Certain Subsidiary Actions. Except as permitted by
Section 10.11 of the Bank Credit Agreement as in effect on the Closing Date, the
Company will not, and will not permit any Restricted Subsidiary to, enter into
any agreement (including any provision in its charter) which would, directly or
indirectly, restrict a Restricted Subsidiary's ability or right to:
(i) pay dividends or make any other distributions to the Company or
any other Restricted Subsidiary; or
(ii) pay any Debt owing to the Company or any other Restricted
Subsidiary.
8K. Restricted Investments. The Company will not, and will not permit any
Restricted Subsidiary to, at any time, directly or indirectly, make any
Restricted Investment, unless immediately after giving effect to the making of
such Restricted Investment:
(i) the aggregate cost of all Restricted Investments made by the
Company and its Restricted Subsidiaries that are outstanding at any time,
less any return of capital in respect thereof, would not exceed five
percent (5%) of Consolidated Net Worth as of the end of the fiscal quarter
of the Company most recently ended at such time; and
(ii) at the time of the declaration or making of such Restricted
Investment no Default or Event of Default exists or would exist;
provided, however, that the Company and its Restricted Subsidiaries may make
Investments of the types described in clauses (i) through (xiii), inclusive, of
the definition of "Restricted Investments," subject to the limitations set forth
therein. Each Person which becomes a Restricted Subsidiary after the Closing
Date will be deemed to have made, on the date such Person becomes a Restricted
Subsidiary, all Restricted Investments of such Person in existence on such date
for purposes of determining compliance with this paragraph 8K.
8L. Limitation on the Sale of Receivables. The Company will not, and will
not permit any Restricted Subsidiary to, sell, discount, transfer, dispose of,
or incur a Lien on, any Receivables of the Company or any Restricted Subsidiary
other than (i) in the ordinary course of business in connection with the
collection or settlement thereof, (ii) intercompany transfers of receivables,
and (iii) Liens to secure Senior Debt.
U.S. AGGREGATES, INC. 21 AMENDED AND RESTATED NOTE AND
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8M. Transactions with Affiliates. Neither the Company nor any Restricted
Subsidiary shall, directly or indirectly, enter into any transaction or series
of transactions, including, without limitation, the purchase, sale, lease or
exchange of Property or the rendering of any service, with any Affiliate thereof
except for any transaction or series of transactions which is or are
(i) in the ordinary course of and pursuant to the reasonable
requirements of the Company's or such Restricted Subsidiary's business,
and
(ii) in the aggregate for such transaction or series of transactions
upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than would obtain in a comparable arm's-length
transaction or series of transactions with a Person not an Affiliate
thereof.
Payments to GTCR, Inc. in accordance with the management agreement between GTCR,
Inc. and the Company shall be deemed to be in compliance with this paragraph 8M,
provided that the aggregate amount paid to GTCR, Inc. pursuant thereto during
any fiscal year of the Company does not exceed One Hundred Seventy-Five Thousand
Dollars ($175,000) for management services relating to the Company and its
Restricted Subsidiaries plus actual out-of-pocket expenses related to such
services.
9. EVENTS OF DEFAULT.
9A. Acceleration. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or
Yield-Maintenance Amount payable with respect to any Note when the same
shall become due, either by the terms thereof or otherwise as herein
provided; or
(ii) the Company defaults in the payment of any interest on any Note
for more than ten (10) Business Days after the date due; or
(iii) (x) the Company or any Restricted Subsidiary defaults (whether
as primary obligor or as guarantor or other surety) in any payment
of principal of or interest on any other obligation for money
borrowed (or any Capital Lease Obligation, any obligation under a
conditional sale or other title retention agreement, any obligation
issued or assumed as full or partial payment for Property, whether
or not secured by a purchase money mortgage or any obligation under
notes payable or drafts accepted representing extensions of credit)
beyond any period of grace applicable thereto, provided that the
aggregate amount of all obligations as to which such a payment
default shall occur and be continuing exceeds One Million Dollars
($1,000,000) (it being understood that a failure to make a
prepayment of a portion of any obligations shall be deemed to be a
payment default in respect of the entire amount of such
obligations), or
(y) the Company or any Restricted Subsidiary fails to perform
or observe any other agreement, term or condition contained in any
U.S. AGGREGATES, INC. 22 AMENDED AND RESTATED NOTE AND
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agreement under which any such obligation is created (or if any
other event thereunder or under any such agreement shall occur and
be continuing) and the effect of such failure or other event is to
cause such obligation to become due (or to be repurchased by the
Company or any Restricted Subsidiary) prior to any stated maturity,
provided that the aggregate amount of all obligations as to which
such a failure or other event causing acceleration (or resale to the
Company or any Restricted Subsidiary) shall occur and be continuing
exceeds Five Million Dollars ($5,000,000); or
(iv) any representation or warranty made by or on behalf of the
Company or any Subsidiary in this Agreement or the Subsidiary Guaranty or
by the Company or any Subsidiary or any of their respective officers in
any writing furnished in connection with or pursuant to this Agreement or
the transactions contemplated hereby shall be false in any material
respect on the date as of which made; or
(v) the Company fails to perform or observe any agreement contained
in paragraph 8; or
(vi) the Company fails to perform or observe any other agreement,
term or condition contained herein and such failure shall not be remedied
within thirty (30) days after any officer of the Company obtains actual
knowledge or notice thereof; or
(vii) the Company or any Restricted Subsidiary makes an assignment
for the benefit of creditors or is generally not paying its debts as such
debts become due; or
(viii) any decree or order for relief in respect of the Company or
any Restricted Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect (herein
called the "Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or any Restricted Subsidiary petitions or applies
to any tribunal for, or consents to, the appointment of, or taking
possession by, a trustee, receiver, custodian, liquidator or similar
official of the Company or any Restricted Subsidiary, or of any
substantial part of the assets of the Company or any Restricted
Subsidiary, or commences a voluntary case under the Bankruptcy Law of the
United States or any proceedings (other than proceedings for the voluntary
liquidation and dissolution of a Restricted Subsidiary) relating to the
Company or any Restricted Subsidiary under the Bankruptcy Law of any other
jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Restricted
Subsidiary and the Company or such Restricted Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein,
or an order, judgment or decree is entered appointing any such trustee,
receiver, custodian, liquidator or similar official, or approving the
petition in any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than sixty (60) days; or
U.S. AGGREGATES, INC. 23 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
sixty (60) days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Restricted Subsidiary decreeing a split-up of
the Company or such Restricted Subsidiary which requires the divestiture
of assets representing a substantial part, or the divestiture of the stock
of a Restricted Subsidiary whose assets represent a substantial part, of
the consolidated assets of the Company and its Subsidiaries (determined in
accordance with GAAP) or which requires the divestiture of assets, or
stock of a Restricted Subsidiary, which shall have contributed a
substantial part of the Consolidated Net Income for any of the three
fiscal years then most recently ended, and such order, judgment or decree
remains unstayed and in effect for more than sixty (60) days; or
(xiii) a final judgment in an amount in excess of One Million
Dollars ($1,000,000) (excluding any portion thereof that is covered by
insurance to the reasonable satisfaction of the Required Holders) is
rendered against the Company or any Restricted Subsidiary and, within 60
days after entry thereof, such judgment is not discharged or execution
thereof stayed pending appeal, or within sixty (60) days after the
expiration of any such stay, such judgment is not discharged; or
(xiv) (a) the Subsidiary Guaranty shall cease to be in full force
and effect or shall be declared by a court or governmental authority
of competent jurisdiction to be void, voidable or unenforceable
against any Subsidiary,
(b) the validity or enforceability of the Subsidiary Guaranty
against any Subsidiary shall be contested by such Subsidiary, the
Company or any Affiliate thereof, or
(c) any Subsidiary, the Company or any Affiliate thereof shall
deny that such Subsidiary has any further liability or obligation
under the Subsidiary Guaranty;
then, subject to paragraph 12B,
(a) if such event is an Event of Default specified in clause (i) or
(ii) of this paragraph 9A, the holder of any Note (other than the Company
or any of its Subsidiaries or Affiliates) may at its option, by notice in
writing to the Company, declare such Note to be, and such Note shall
thereupon be and become, immediately due and payable at par together with
interest accrued thereon, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Company;
(b) if such event is an Event of Default specified in clause (viii),
(ix) or (x) of this paragraph 9A with respect to the Company, all of the
Notes at the time outstanding shall automatically become immediately due
and payable at par together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Company; and
U.S. AGGREGATES, INC. 24 AMENDED AND RESTATED NOTE AND
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<PAGE>
(c) if such event is not an Event of Default specified in clause
(viii), (ix) or (x) of this paragraph 9A with respect to the Company, the
Required Holder(s) may at its or their option, by notice in writing to the
Company, declare all of the Notes to be, and all of the Notes shall
thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield-Maintenance Amount,
if any, with respect to each Note, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company.
9B. Rescission of Acceleration. At any time after any or all of the Notes
shall have been declared immediately due and payable pursuant to paragraph
9A(c), the Required Holder(s) may, by notice in writing to the Company, rescind
and annul such declaration and its consequences if (i) the Company shall have
paid all overdue interest on the Notes, the principal of and Yield-Maintenance
Amount, if any, payable with respect to any Notes which have become due
otherwise than by reason of such declaration, and interest on such overdue
interest and overdue principal and Yield-Maintenance Amount at the rate
specified in the Notes, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 14C, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom. In the event of a
declaration of acceleration of the Notes because an Event of Default has
occurred and is continuing solely as a result of the default in the payment, or
the acceleration, of any Debt described in clause (iii) of paragraph 9A, the
declaration of acceleration of the Notes shall be automatically annulled if the
holders of such Debt have waived the payment default, or, as applicable,
rescinded the declaration of acceleration, in respect of such Debt within thirty
(30) days of the occurrence of such payment default or such acceleration, as
applicable.
9C. Notice of Acceleration or Rescission. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 9A or any such
declaration shall be rescinded and annulled pursuant to paragraph 9B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
9D. Other Remedies. If any Event of Default or Default shall occur and be
continuing, then, subject to paragraph 12B, the holder of any Note may proceed
to protect and enforce its rights under this Agreement and such Note by
exercising such remedies as are available to such holder in respect thereof
under applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any covenant or other agreement contained in
this Agreement or in aid of the exercise of any power granted in this Agreement.
No remedy conferred in this Agreement upon the holder of any Note is intended to
be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
10. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
U.S. AGGREGATES, INC. 25 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
10A. Organization.
(i) The Company is a corporation duly organized and existing in good
standing under the laws of the State of Delaware and each Subsidiary is
duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated.
(ii) Part 10A of Annex 3 sets forth, as of the Closing Date,
(a) the name of each corporation, partnership and joint
venture which is an Affiliate of the Company (excluding, for
purposes of this clause (ii)(a), all funds as to which GTCR, Inc. is
an advisor and all Persons that are Affiliates of the Company by
virtue of investments made by GTCR LP and its affiliated investment
funds), and the nature of the affiliation of such Affiliate, and
(b) the name of each Subsidiary of the Company and its
jurisdiction of incorporation.
(iii) Each of the Company and its Subsidiaries
(a) has all licenses, certificates, permits, franchises and
other governmental authorizations necessary to own and operate its
Properties and to carry on its business as now conducted and as
presently proposed to be conducted, except where the failure to have
such licenses, certificates, permits, franchises and other
governmental authorizations, in the aggregate for all such failures,
could not reasonably be expected to have a Material Adverse Effect,
and
(b) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign
corporation, in each state in the United States of America and in
each other jurisdiction where the nature of its business makes such
qualification necessary, except where the failure to be so qualified
or licensed and authorized and in good standing, in the aggregate
for all such failures, could not reasonably be expected to have a
Material Adverse Effect.
10B. Financial Statements. The Company has furnished the Purchaser with
each of the financial statements described in Part 10B of Annex 3, identified by
a principal financial officer of the Company. Such financial statements
(including any related schedules and notes) are true and correct in all material
respects (subject, as to interim statements, to changes resulting from audits,
year-end adjustments and the absence of footnotes), have been prepared in
accordance with GAAP consistently followed throughout the periods involved and
show all liabilities, direct and contingent, of the Company and its Restricted
Subsidiaries required to be shown in accordance with GAAP. The balance sheets
present fairly, in all material respects, the financial position of the Company
and its Restricted Subsidiaries as at the dates thereof, and the consolidated
statements of operations, shareholders' equity and cash flows present fairly the
results of the operations and cash flows of the Company and its Subsidiaries for
the periods indicated. There has been no material adverse change in the
business, condition or
U.S. AGGREGATES, INC. 26 AMENDED AND RESTATED NOTE AND
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<PAGE>
operations (financial or otherwise) of the Company and its Subsidiaries taken as
a whole since December 31, 1997.
10C. Actions Pending. Except as set forth on Part 10C of Annex 3, there is
no action, suit, investigation or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, or any
properties or rights of the Company or any of its Subsidiaries, by or before any
court, arbitrator or administrative or governmental body that could reasonably
be expected to have a Material Adverse Effect.
10D. Outstanding Debt. Neither the Company nor any of its Subsidiaries has
outstanding any Debt as of the Closing Date except as listed on Part 10D of
Annex 3. There exists no default under the provisions of any instrument
evidencing any Debt of the Company or any of its Subsidiaries or of any
agreement relating thereto.
10E. Title to Properties. Each of the Company and its Subsidiaries has
good and marketable title (subject to Liens of the types described in paragraph
8G(vii)) to its respective real properties (other than properties that it
leases) and good title to all of its other respective Properties, including the
Properties reflected in the most recent audited balance sheet delivered pursuant
to paragraph 7A(ii) (other than Properties disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens permitted by paragraph 8G
hereof. All leases necessary in any material respect for the conduct of the
respective businesses of the Company and its Subsidiaries are valid and
subsisting and are in full force and effect.
10F. Taxes. Each of the Company and its Subsidiaries has filed all
Federal, State and other income tax returns that, to the best knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in
good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP.
10G. Transactions Authorized; Obligations are Enforceable.
(i) Sale of 1998 Notes and 1998 Warrants is Legal and Authorized.
Each of the issuance, sale and delivery of the 1998 Notes and the 1998
Warrants by the Company, the execution and delivery by the Company of this
Agreement and the Financing Documents to which it is a party, and
compliance by the Company with all of the provisions of the Financing
Documents to which it is a party is within the corporate powers of the
Company.
(ii) Subsidiary Guaranty is Legal and Authorized. The execution and
delivery of the Subsidiary Guaranty by each Subsidiary that is a party
thereto, and compliance by each such Subsidiary with all of the provisions
of the Subsidiary Guaranty, is within the corporate powers of each such
Subsidiary.
(iii) Company Obligations are Enforceable. The Company has duly
authorized by all necessary action on its part each of the Financing
Documents to which it is a party. Each of such Financing Documents has
been executed and delivered by one or more duly authorized officers of the
Company, and constitutes
U.S. AGGREGATES, INC. 27 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except that the enforceability thereof may be:
(a) limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium, or other similar laws affecting
the enforceability of creditors' rights generally; and
(b) subject to the availability of equitable remedies.
(iv) Subsidiary Obligations are Enforceable. The Subsidiary Guaranty
has been duly authorized by all necessary action on the part of each
Subsidiary that is a party thereto. The Subsidiary Guaranty has been
executed and delivered by one or more duly authorized officers of each
Subsidiary that is a party thereto and constitutes a legal, valid and
binding obligation of each such Subsidiary, enforceable in accordance with
its terms, except that the enforceability thereof may be:
(a) limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium, or other similar laws affecting
the enforceability of creditors' rights generally; and
(b) subject to the availability of equitable remedies.
10H. Conflicting Agreements and Other Matters.
(i) Conflicting Agreements. Neither the execution nor delivery of
this Agreement or the other Financing Documents, nor the offering,
issuance and sale of the 1998 Notes and the 1998 Warrants, nor fulfillment
of nor compliance with the terms and provisions of this Agreement and the
other Financing Documents will conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or
result in any violation of, or result in the creation of any Lien upon any
of the Properties of the Company or any of its Subsidiaries pursuant to,
the charter or bylaws of the Company or any of its Subsidiaries, any award
of any arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of its Subsidiaries is subject.
(ii) Limitations on Debt. Neither the Company nor any of its
Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing Debt of the Company or such
Subsidiary, any agreement relating thereto or any other contract or
agreement (including its charter) that limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt of the Company of the type
to be evidenced by the Notes except as set forth in the agreements listed
on Part 10H of Annex 3.
10I. Offering of 1998 Notes and 1998 Warrants. Neither the Company nor any
agent acting on its behalf has, directly or indirectly, offered the 1998 Notes
and the 1998 Warrants or any similar Security of the Company for sale to, or
solicited any offers to buy the Notes or any similar Security of the Company
from, or otherwise approached or negotiated with respect hereto with, any Person
other than institutional investors, and
U.S. AGGREGATES, INC. 28 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
neither the Company nor any agent acting on its behalf has taken or will take
any action that would subject the issuance or sale of the 1998 Notes and the
1998 Warrants to the provisions of Section 5 of the Securities Act or to the
provisions of any securities or "blue sky" law of any applicable jurisdiction.
10J. Use of Proceeds. Neither the Company nor any Subsidiary owns or has
any present intention of acquiring any "margin stock" as defined in Regulation U
(12 CFR Part 221) of the Board of Governors of the Federal Reserve System
(herein called "margin stock"). The proceeds from the sale of the 1998 Notes and
the 1998 Warrants will be used to finance the acquisition of Monroc. None of
such proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any margin stock or
for the purpose of maintaining, reducing or retiring any Debt which was
originally incurred to purchase or carry any stock that is currently a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation U. Neither the Company
nor any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the Notes to violate Regulation U, Regulation T or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the Exchange Act, in each case as in effect now or as the same may
hereafter be in effect.
10K. ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the IRC), whether or not waived, exists with respect
to any Pension Plan. No liability to the PBGC has been or is expected by the
Company to be incurred with respect to any Pension Plan by the Company or any of
its Subsidiaries that could reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries has incurred or
presently expects to incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan that could reasonably be expected to have a
Material Adverse Effect. The execution and delivery of this Agreement and the
issuance and sale of the 1998 Notes and the 1998 Warrants will not involve any
transaction that is subject to the prohibitions of section 406 of ERISA or in
connection with which a tax could be imposed pursuant to section 4975 of the
IRC. The representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of the Purchaser's representations in
paragraph 11 hereof as to the source of the funds to be used to pay the purchase
price of the 1998 Notes and 1998 Warrants to be purchased by the Purchaser.
10L. Governmental Consent. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
1998 Notes and the 1998 Warrants is such as to require any authorization,
consent, approval, exemption or other action by or notice to or filing with any
court or administrative or governmental body (other than routine filings after
the Closing Date with the Securities and Exchange Commission and/or state Blue
Sky authorities) in connection with the execution and delivery of this
Agreement, the offering, issuance, sale or delivery of the 1998 Notes and the
1998 Warrants or fulfillment of or compliance with the terms and provisions
hereof or of the other Financing Documents.
10M. Environmental Compliance.
U.S. AGGREGATES, INC. 29 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
(i) Compliance. Each of the Company and its Subsidiaries has been,
since its incorporation, complying with, and, on the Closing Date will be
in compliance with, all Environmental Protection Laws in effect in each
jurisdiction where it is presently doing business where any failure or
failures so to comply could, in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(ii) Liability. Neither the Company nor any of its Subsidiaries is
subject to any liability under any Environmental Protection Laws that, in
the aggregate, could reasonably be expected to have a Material Adverse
Effect.
10N. Disclosure. Neither this Agreement, the other Financing Documents nor
any other document, certificate or statement furnished to the Purchaser by or on
behalf of the Company or any Subsidiary in connection with the sale of the 1998
Notes and the 1998 Warrants contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading.
10O. Capitalization.
(i) Capitalization. Part 10O(i) of Annex 3 correctly sets forth,
after giving effect to the issuance of the 1998 Notes and the 1998
Warrants and all other contemporaneous transactions contemplated hereby on
the Closing Date:
(a) the authorized and outstanding shares of capital stock of
the Company and each Subsidiary;
(b) for each legal and beneficial holder of the capital stock
of the Company and each Subsidiary, the identity of such holder, the
number of shares of each class of capital stock held by such holder
and the percentage of the shares of each class so held; and
(c) all options, warrants and other rights to purchase any
capital stock of the Company or any Subsidiary, together with
descriptions of the terms thereof.
All such outstanding shares of capital stock have been duly
authorized and validly issued and are fully paid, non-assessable, free and
clear of any Lien (other than as specified in Part 10O(i) of Annex 3).
There are no obligations (contingent or otherwise) of the Company or any
Subsidiary to repurchase or otherwise acquire or retire any shares of its
capital stock (or options to purchase the same), other than as set forth
in the charter documents of the Company and the Restricted Subsidiaries,
and the agreements to which they are parties, specified in Part 10O(i) of
Annex 3. There are no preemptive rights, subscription rights, or other
contractual rights similar in nature to preemptive rights with respect to
any capital stock of the Company or any Subsidiary, other than as set
forth in the Stockholders Agreement and in the charter documents of the
Restricted Subsidiaries, and the agreements to which they are parties,
specified in Part 10O(i) of Annex 3.
U.S. AGGREGATES, INC. 30 AMENDED AND RESTATED NOTE AND
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<PAGE>
Part 10O(i) of Annex 3 sets forth (x) the Persons who hold the
options, warrants and other rights referred to in the foregoing clause
(c), together with the respective amounts thereof held by each such
Person, and (y) the maximum percentage of the several classes of capital
stock of the Company and each Subsidiary which each such Person can
obtain, determined on a fully diluted basis as of the Closing Date.
(ii) Reservation of Common Stock for Conversion. The Company has
authorized and unissued, and has reserved for issuance, a sufficient
number of shares of the Common Stock to permit, after giving effect to the
transactions contemplated hereby, the exercise of all of the Warrants and
all other options, warrants and rights exercisable or convertible into the
Common Stock.
Each share of the Common Stock reserved for issuance upon exercise
of the Warrants when issued, will be fully paid and nonassessable, free
and clear of any Lien (other than as specified in Part 10O(ii) of Annex
3), and will not be subject (except as set forth in the Company's
certificate of incorporation and the Stockholders Agreement) to any
preemptive rights.
(iii) Stockholders Agreement. Other than the 1998 Warrant Agreement,
the Stockholders Agreement and as set forth in Part 10O(iii) of Annex 3,
there is no other agreement or understanding between or among the holders
of the capital stock of the Company regarding such capital stock.
11. REPRESENTATIONS OF THE PURCHASER.
11A. Nature of Purchase. You represent that you are not acquiring the 1998
Notes to be purchased by you hereunder with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act, provided
that the disposition of your Property shall at all times be and remain within
your control.
11B. ERISA. You represent:
(i) if you are acquiring the 1998 Notes for your own account with
funds from or attributable to your general account, and in reliance upon
the Company's representations set forth in paragraph 10K, that the amount
of the reserves and liabilities for the general account contracts (as
defined by the annual statement for life insurance companies approved by
the National Association of Insurance Commissioners (the "NAIC Annual
Statement")) held by or on behalf of any Pension Plan together with the
amount of the reserves and liabilities for the general account contracts
held by or on behalf of any other Pension Plans maintained by the same
employer (or affiliate thereof, as such term is defined in section V of
DOL Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995))
or by the same employee organization (as defined in section 3(4) of ERISA)
in the general account do not exceed ten percent (10%) of the total
reserves and liabilities of the general account (exclusive of separate
account liabilities) plus surplus as set forth in the NAIC Annual
Statement filed with the state of domicile of the insurance company; for
purposes of the percentage limitation in this clause (i), the amount of
reserves and liabilities for the general account contracts held by or on
behalf of
U.S. AGGREGATES, INC. 31 AMENDED AND RESTATED NOTE AND
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<PAGE>
a Pension Plan shall be determined before reduction for credits on account
of any reinsurance ceded on a coinsurance basis; or
(ii) if any part of the funds being used by you to purchase the 1998
Notes shall come from assets of an employee benefit plan (as defined in
section 3(3) of ERISA) or a plan (as defined in section 4975(e)(1) of the
IRC):
(a) if such funds are attributable to a "separate account" (as
defined in section 3(17) of ERISA), then
(I) all requirements for an exemption under DOL
Prohibited Transaction Exemption 90-1 (issued January 29,
1990) are met with respect to the use of such funds to
purchase the 1998 Notes, or
(II) the employee benefit plans with an interest in such
separate account have been identified in a writing delivered
by you to the Company;
(b) if such funds are attributable to a "separate account" (as
defined in section 3(17) of ERISA) that is maintained solely in
connection with fixed contracted obligations of an insurance
company, any amounts payable, or credited, to any employee benefit
plan having an interest in such account and to any participant or
beneficiary of such plan (including an annuitant) are not affected
in any manner by the investment performance of the separate account;
(c) if such funds are attributable to an "investment fund"
managed by a "qualified plan asset manager" (as such terms are
defined in Part V of DOL Prohibited Transaction Exemption 84-14,
issued March 13, 1984), all requirements for an exemption under such
Exemption are met with respect to the use of such funds to purchase
the 1998 Notes; or
(d) such employee benefit plan is excluded from the provisions
of section 406 of ERISA by virtue of section 4(b) of ERISA.
12. SUBORDINATION.
12A. Subordination - General. Each holder of the Notes and the Company
covenant and agree that the Debt evidenced by the Notes, including principal,
Yield-Maintenance Amount, if any, and interest, and expenses payable pursuant to
paragraph 14B, shall be subordinate and junior in right of payment to the extent
set forth in subparagraphs (i) to (v), inclusive, below, to all Senior Debt.
(i) If the Company shall default in the payment of any principal of
or interest on any Senior Debt when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration of
acceleration or otherwise, then, unless and until such default shall have
been remedied by payment in full in cash or waived, no holder of the Notes
shall accept or receive
U.S. AGGREGATES, INC. 32 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
any direct or indirect payment for or on account of principal of, or
Yield-Maintenance Amount, if any, or interest on, the Notes.
(ii) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company, and in the
event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Company, whether or not involving insolvency or
bankruptcy proceedings, then all Senior Debt shall first be paid in full
in cash before any payment is made by the Company for or on account of
principal of, or Yield-Maintenance Amount, if any, or interest on, the
Notes.
(iii) During the existence of any default described in subparagraph
(i) above or any proceeding referred to in subparagraph (ii) above, any
payment or distribution of any kind or character, whether in cash,
Property, stock or obligations, which may be payable or deliverable by the
Company in respect of the Notes, shall be paid or delivered directly to
the Agent (or, if the Bank Credit Agreement is no longer in effect, to a
banking institution selected by the court or Person making the payment or
delivery or designated by any holder of Senior Debt) for application in
payment thereof in accordance with the priorities then existing among such
holders, unless and until all Senior Debt shall have been paid in full in
cash, provided, however, that no such delivery shall be made to holders of
Senior Debt of stock or obligations which are issued pursuant to
reorganization proceedings if such stock or obligations are subordinate
and junior (whether by law or agreement) at least to the extent provided
herein to the payment of all Senior Debt then outstanding and to the
payment of any stock or obligations which are issued in exchange or
substitution for any Senior Debt then outstanding.
(iv) No holder of the Notes shall accept or receive any direct or
indirect payment, by set-off or otherwise, for or on account of the Notes,
during a period (a "Stand-Still Period") commencing on the date of receipt
by the Company and the Significant Holders of a Stand-Still Notice, and
ending on the earliest of
(a) the date the relevant Subordination Event of Default shall
have been cured or waived in writing by the requisite holders of the
Senior Debt,
(b) the date such Stand-Still Period shall have been
terminated by written notice to the Company from the requisite
holders of the Senior Debt, and
(c) the date ninety (90) days from the date of receipt of the
applicable Stand-Still Notice.
Notwithstanding the foregoing, (x) during any three hundred sixty-five
(365) day period, the aggregate number of days during which Stand-Still
Periods may be in effect shall not exceed one hundred eighty (180) days,
and (y) in the case of any payment for or on account of any Note which
would (in the absence of the delivery of any such Stand-Still Notice) have
been due and payable on any date during any Stand-Still Period, the
provisions of this subparagraph (iv) shall not prevent such
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WARRANT PURCHASE AGREEMENT
<PAGE>
payment from being made on or after the date immediately following the
last day of such Stand-Still Period unless another Stand-Still Period
shall then be in effect.
(v) If any payment or distribution of any character, whether in
cash, Securities or other Property, shall be received by any holder of
Notes in contravention of any of the terms herein and before all the
Senior Debt shall have been paid in full in cash, such payment or
distribution shall be received in trust for the benefit of the holders of
the Senior Debt at the time outstanding and shall forthwith be paid over
or transferred to the Agent (or, if the Bank Credit Agreement is no longer
in effect, to the holders of Senior Debt).
12B. Limitation on Remedies. So long as any Senior Debt remains
outstanding, no holder of Notes may
(i) declare or join in the declaration of the Notes to be due and
payable or otherwise accelerate the maturity of the principal of the
Notes, accrued interest thereon or other amounts due in respect thereof,
or
(ii) commence any administrative, legal or equitable action against
the Company, including filing or joining in the filing of any insolvency
petition against the Company,
prior to the earlier of
(x) the fifteenth (15th) day after the date upon which any holder of
the Notes shall have given written notice to the holders of Senior Debt
(or the Agent) of their intention to take such action, or
(y) the acceleration of any Senior Debt;
provided, however, that no holder of any Notes may take any action described in
clause (i) or clause (ii) of this paragraph 12B during a Stand-Still Period (so
long as the Senior Debt shall not have been accelerated during such Stand-Still
Period).
12C. Obligations of the Company Unconditional. The provisions of this
paragraph 12 are for the purpose of defining the relative rights of the holders
of Senior Debt on the one hand, and the holders of the Notes on the other hand,
against the Company and its Property, and nothing herein shall impair, as
between the Company and the holders of the Notes, the obligation of the Company,
which is unconditional and absolute, to pay to the holders thereof the principal
thereof and Yield-Maintenance Amount, if any, and interest thereon in accordance
with their terms and the provisions hereof, nor shall anything herein (other
than paragraph 12B) prevent the holders of the Notes from exercising all
remedies otherwise permitted by applicable law or hereunder upon the occurrence
of an Event of Default (including, without limitation, the right to demand
payment and sue for performance of the Notes and to accelerate the maturity
thereof) subject to the rights, if any, of holders of Senior Debt to receive
cash, Property, stock or obligations otherwise payable or deliverable by the
Company to the holders of the Notes.
12D. Subrogation. Upon payment in full in cash of all Senior Debt, the
holders of the Notes shall be subrogated to the rights of the holders of the
Senior Debt to receive
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payments or distributions of assets of the Company made on Senior Debt until the
principal of, and Yield-Maintenance Amount, if any, and interest on, the Notes
shall be paid in full, and, for the purposes of such subrogation, no payments to
the holders of Senior Debt of any cash, Property, stock or obligations to which
the holders of the Notes would be entitled except for the provisions of
paragraph 12A above shall, as between the Company, its creditors (other than the
holders of the Senior Debt) and the holders of the Notes, be deemed to be a
payment by the Company for or on account of Senior Debt.
12E. Certain Definitions. As used in this paragraph 12, the following
terms have the following meanings:
"Senior Debt" shall mean and include all obligations (including,
without limitation, principal, premium, if any, interest, fees, breakage
costs, reimbursement obligations, indemnities and other obligations under
the Bank Credit Agreement, and specifically including interest accruing
subsequent to the occurrence of any event specified in paragraphs 9A(vii),
(viii), (ix) and (x), whether or not the claim for such interest is
allowed or allowable) of the Company under
(i) the Bank Credit Agreement, provided that the aggregate
outstanding principal amount thereof does not exceed the difference
of
(A) One Hundred Seventy-Five Million Dollars
($175,000,000) minus
(B) the aggregate amount of scheduled principal payments
paid in respect of the Term A Loans and the Term B Loans (as
such terms are defined in the Bank Credit Agreement as in
effect on the date hereof); and
(ii) after termination of the Bank Credit Agreement, any
agreement extending or refinancing (without increase in principal
amount) the Debt of the Company outstanding under the Bank Credit
Agreement, provided that such Debt, by its terms, is not pari passu
or subordinated in priority of right of payment to the Notes; and
(iii) all payment obligations of the Company to the Banks or
their Affiliates with respect to interest rate swaps, currency or
commodity swaps, and similar obligations designed to protect the
Company from fluctuations in interest rates, provided that the
aggregate notional amount of all obligations in respect of which
such swap arrangements have been entered into does not at any time
exceed Sixty Million Dollars ($60,000,000).
"Stand-Still Notice" means a written notice from the Agent under the
Bank Credit Agreement to the Company and the Significant Holders,
delivered while a Subordination Event of Default shall be continuing
(other than under circumstances when the terms of subparagraph (ii) of
paragraph 12A hereof are applicable), stating that the holders of Senior
Debt are exercising their rights under subparagraph (iv) of paragraph 12A
hereof.
"Stand-Still Period" has the meaning assigned to it in paragraph
12A(iv).
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"Subordination Event of Default" shall mean (i) any default in the
payment of any principal of or interest on any Senior Debt owing under any
single instrument when the same becomes due and payable, or (ii) any event
of default or unmatured event of default under any agreement evidencing
Senior Debt (other than as a result of any non-payment of any amount owing
in respect of such Senior Debt).
13. DEFINITIONS. For the purpose of this Agreement the following terms
shall have the meanings specified with respect thereto below:
13A. Yield-Maintenance Terms.
"Called Principal" shall mean, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to paragraph 6B hereof (any partial
prepayment being applied in satisfaction of required payments of principal in
inverse order of their scheduled due dates) or is declared to be immediately due
and payable pursuant to paragraph 9A hereof, as the context requires.
"Designated Spread" shall mean one percent (1.00%).
"Discounted Value" shall mean, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on a quarterly
basis) equal to the Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" shall mean, with respect to the Called Principal of
any Note, the sum of the Designated Spread plus the yield to maturity implied by
either,
(i) the yields reported, as of 10:00 A.M. (New York City time) on
the Business Day next preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page 678" on the Dow Jones
Markets Service (or such other display as may replace Page 678 on the Dow
Jones Markets Service) for actively traded U.S. Treasury securities having
a maturity equal to the Remaining Average Life of such Called Principal as
of such Settlement Date, or if such yields shall not be reported as of
such time or the yields reported as of such time shall not be
ascertainable, then
(ii) the Treasury Constant Maturity Series yields reported, for the
latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or
any comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date.
Such implied yield shall be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice, and
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(b) interpolating linearly between reported yields for various
maturities.
"Remaining Average Life" shall mean, with respect to the Called Principal
of any Note, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing
(i) such Called Principal into
(ii) the sum of the products obtained by multiplying
(a) each Remaining Scheduled Payment of such Called Principal
(but not of interest thereon) by
(b) the number of years (calculated to the nearest one-twelfth
(1/12) year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"Settlement Date" shall mean, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 6B hereof or is declared to be immediately due and payable pursuant to
paragraph 9A hereof, as the context requires.
"Yield-Maintenance Amount" shall mean, with respect to any Note, a premium
equal to the excess, if any, of the Discounted Value of the Called Principal of
such Note over the sum of
(i) such Called Principal plus
(ii) interest accrued thereon as of (including interest due on) the
Settlement Date with respect to such Called Principal.
The Yield-Maintenance Amount shall in no event be less than zero.
13B. Other Terms.
"Acquisition Loan" means any loan or other incurrence of Debt made in
connection with a Permitted Acquisition.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, or is controlled by, or is under direct or
indirect common control with, such first Person. For purposes of this Agreement,
Restricted Subsidiaries shall not constitute "Affiliates" of the Company. A
Person shall be deemed to control another Person if such first Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the
U.S. AGGREGATES, INC. 37 AMENDED AND RESTATED NOTE AND
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ownership of voting securities or other equity interests, by contract or
otherwise. In the case of a partnership, such partnership and all partners
therein shall be deemed to be Affiliates of each other.
"Agent" means, at any time, the agent for the Banks under the Bank Credit
Agreement at such time.
"Bank" means each of the institutions identified as a "Bank" under the
Bank Credit Agreement.
"Bank Credit Agreement" means that certain Third Amended and Restated
Credit Agreement, dated as of June 5, 1998, by and among the Company, Bank of
America National Trust and Savings Association (as successor by merger to Bank
of America Illinois), as agent, and the other financial institutions signatory
thereto, as amended from time to time (except as otherwise specifically provided
herein).
"Bankruptcy Law" has the meaning assigned to it in paragraph 9A(viii).
"book value" has the meaning assigned to it in paragraph 8I(iii).
"Budget" means the Company's budget for each of its fiscal years, prepared
on a monthly basis for each such fiscal year and including projected income
statements, balance sheets, statements of cash flows and pro forma calculations
in respect of the covenants set forth in paragraph 8 hereof as of the end of
each such month (or, with respect to covenant compliance which is determined
quarterly, as of the end of each fiscal quarter of such fiscal year).
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or permitted by law
(other than a general banking moratorium or holiday for a period exceeding four
(4) consecutive days) to be closed.
"Calculation Date" has the meaning assigned to it in paragraph 8C.
"Capital Lease" means, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of such Person.
"Capital Lease Obligation" means any rental obligation which, under GAAP,
is or will be required to be capitalized on the books of the Company or any
Subsidiary, taken at the amount thereof accounted for as indebtedness (net of
interest expense) in accordance with GAAP.
"Change in Control" has the meaning assigned to it in paragraph 6C(iv)(a).
"Charter Amendment" means an amendment to the Company's certificate of
incorporation in the form of Exhibit H hereto.
"Closing" has the meaning assigned to it in paragraph 4(i).
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<PAGE>
"Closing Date" has the meaning assigned to it in paragraph 4(i).
"Common Stock" means the outstanding common stock, par value $.01 per
share, of the Company.
"Company" has the meaning assigned to it in the introductory sentence of
this Agreement.
"Competitor" means any Person engaged in the aggregates, or related
materials and services, business; provided that in no event shall any insurance
company, bank, bank holding company, investment company, savings institution or
trust company, investment banking firm, fraternal benefit society, pension,
retirement or profit-sharing trust or fund, or any other similar financial
institution be deemed to be a Competitor for purposes of this Agreement.
"Consolidated Capital Expenditures" means, for any period, all
expenditures which, in accordance with GAAP, would be required to be capitalized
and shown on the consolidated balance sheet of the Company, but excluding (a)
payments on the Lohja Note and Investments in preferred stock issued by Dekalb
Stone (to the extent such payments or Investments constitute capital
expenditures), (b) expenditures made in connection with the replacement,
substitution or restoration of assets to the extent financed (i) from insurance
proceeds (or other similar recoveries) paid on account of the loss of or damage
to the assets being replaced or restored, or (ii) with awards of compensation
arising from the taking by eminent domain or condemnation of the assets being
replaced and (c) Acquisition Capital Expenditures to the extent that Acquisition
Capital Expenditures during such period do not exceed Twelve Million Five
Hundred Thousand Dollars ($12,500,000).
As used in this definition,
"Acquisition Capital Expenditures" means the aggregate amount of all
expenditures of the Company and its Subsidiaries for fixed or capital
assets made in connection with a Permitted Acquisition on or reasonably
near the date of such Permitted Acquisition.
"Lohja Note" means the Promissory Note dated July 13, 1994 issued by
the Company to the order of Lohja Inc. in the original principal amount of
Three Million Seven Hundred Fifty-Nine Thousand Five Hundred Dollars
($3,759,500).
"Consolidated Debt" means, at any time, the sum, without duplication, of
(i) all Debt (other than Debt described in clauses (vi) and (vii) of
the definition of Debt) of the Company and its Restricted Subsidiaries,
plus
(ii) all Suretyship Liabilities of the Company and its Restricted
Subsidiaries in respect of Debt (other than Debt described in clause (vi)
of the definition of Debt) of any other Person,
determined in accordance with GAAP on a consolidated basis at such time after
eliminating all intercompany transactions.
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"Consolidated Fixed Charges" means, in respect of any period of four (4)
consecutive fiscal quarters of the Company, the sum of
(i) Consolidated Interest Expense in respect of such period, plus
(ii) Consolidated Capital Expenditures made during such period, plus
(iii) taxes paid in cash by the Company and its Restricted
Subsidiaries during such period, plus
(iv) all scheduled principal payments due on any Consolidated Debt
during such period, other than any principal payments to be made as a
result of any mandatory reduction of commitments under the Revolving
Credit Facility.
"Consolidated Interest Expense" means, in respect of any period, the
consolidated interest expense (net of consolidated interest income) of the
Company and its Restricted Subsidiaries for such period (excluding any interest
expense in respect of the Harris Trust Note and excluding any interest expense
accrued but not paid on the Notes but including any interest expense with
respect to the Notes which was accrued prior to such period but paid during such
period).
"Consolidated Net Income" means, with respect to the Company and its
Restricted Subsidiaries for any period, the consolidated net income (or loss) of
the Company and its Restricted Subsidiaries for such period before accounting
for minority interests, excluding extraordinary items; provided that there shall
be excluded therefrom the income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions to the Company
(or any other Restricted Subsidiary) by such Restricted Subsidiary of such
income is not at the time permitted by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary.
"Consolidated Net Revenues" means, with respect to the Company and its
Restricted Subsidiaries for any period, the total net sales of the Company and
its Restricted Subsidiaries that would be shown on a statement of operations of
the Company and its Restricted Subsidiaries prepared in accordance with GAAP for
such period.
"Consolidated Net Worth" means, at any time, the total shareholders'
equity of the Company and its Restricted Subsidiaries, determined at such time
in accordance with GAAP.
"Consolidated Total Assets" means, at any time, the total assets of the
Company and its Restricted Subsidiaries which would be shown as assets on a
consolidated balance sheet of the Company and its Restricted Subsidiaries as of
such time prepared in accordance with GAAP, after eliminating all amounts
properly attributable to minority interests, if any, in the stock and surplus of
Restricted Subsidiaries.
"Control Event Notice" has the meaning assigned to it in paragraph 6C(i).
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"Control Payment Date" has the meaning assigned to it in paragraph 6C(i).
"Debt" means, with respect to any Person (without duplication), all of the
following:
(i) all indebtedness of such Person for borrowed money, whether or
not evidenced by bonds, debentures, notes or similar instruments;
(ii) all obligations of such Person as lessee under Capital Leases
which have been recorded as liabilities on the balance sheet of such
Person;
(iii) all obligations of such Person to pay the deferred purchase
price of Property or services (other than current accounts payable and
accrued expenses arising in the ordinary course of business);
(iv) all indebtedness secured by a Lien on the Property of such
Person whether or not such indebtedness shall have been assumed by such
Person;
(v) all obligations, contingent or otherwise, with respect to the
face amount of all letters of credit (whether or not drawn) and banker's
acceptances issued for the account of such Person;
(vi) all obligations of such Person in respect of Hedging
Arrangements;
(vii) all Suretyship Liabilities of such Person; and
(viii) all obligations of the type set forth in clauses (i) through
(vii) of this definition of a partnership of which such Person is a
general partner.
The amount of the Debt of any Person in respect of Hedging Arrangements shall be
deemed to be the unrealized net loss position of such Person thereunder
(determined for each counterparty individually, but netted for all Hedging
Arrangements maintained with such counterparty).
"Dekalb Stone" means Dekalb Stone, Inc., a Georgia corporation.
"Disposition Value" has the meaning assigned to it in paragraph 8I(iii).
"EBITDA" means, in respect of any period, Consolidated Net Income for such
period plus to the extent deducted in the computation of such Consolidated Net
Income, each of the following:
(i) Consolidated Interest Expense,
(ii) taxes imposed on or measured by income or excess profits of the
Company and its Restricted Subsidiaries, and
(iii) the amount of all depreciation, amortization and depletion
allowances of the Company and its Restricted Subsidiaries,
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provided that for purposes of determining compliance with paragraph 8C hereof
only, EBITDA with respect to any such period shall be adjusted to include the
historical EBITDA of any Restricted Subsidiary that was acquired (a) during such
period, and (b) if the Calculation Date is the date of any Acquisition Loan, on
the Calculation Date, as if such Restricted Subsidiary had been acquired on the
first day of such period.
"Environmental Protection Law" means any federal, state, county, regional,
local or foreign law, statute, or regulation (including, without limitation,
CERCLA, RCRA and SARA) enacted in connection with or relating to the protection
or regulation of the environment, including, without limitation, those laws,
statutes, and regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing, or transporting of Hazardous
Substances, and any regulations issued or promulgated in connection with such
statutes by any Governmental Authority and any orders, decrees or judgments
issued by any court of competent jurisdiction in connection with any of the
foregoing.
As used in this definition,
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time (by
SARA or otherwise), and all rules and regulations promulgated in
connection therewith;
"Hazardous Substances" has the meaning assigned to such term in 42
U.S.C. Section 9601(14), as amended from time to time;
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended, and any rules and regulations issued in connection therewith; and
"SARA" means the Superfund Amendments and Reauthorization Act of
1986, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation or trade or business that
(i) is a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the IRC) as the Company,
(ii) is under common control (within the meaning of Section 414(c)
of the IRC) with the Company, or
(iii) is a member of the same affiliated service group (within the
meaning of Section 414(m)(2) of the IRC) as the Company.
"Event of Default" means any of the events specified in paragraph 9A,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and
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"Default" means any of such events, whether or not any such requirement has been
satisfied.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Existing Bank" means any Bank that is a party to the Bank Credit
Agreement as of the Closing Date.
"Fair Market Value" means, at any time with respect to any Property, the
sale value of such Property that would be realized in an arm's-length sale at
such time between an informed and willing buyer, and an informed and willing
seller, under no compulsion to buy or sell, respectively.
"Financing Documents" means this Agreement, the 1998 Notes, the 1998
Warrant Agreement, the 1998 Warrants, the 1998 Warrant Certificates, the
Registration Rights Agreement, the Charter Amendment, the Subsidiary Guaranty
and all other agreements, certificates and instruments to be executed by the
Company or any Subsidiary pursuant to the terms of any of the forgoing, as each
may be amended, restated or otherwise modified from time to time.
"GAAP" means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
"Governmental Authority" means
(i) the government of
(a) the United States of America, any state or other political
subdivision thereof, or
(b) any other jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or that asserts
any jurisdiction over the conduct of the affairs, or the Property,
of the Company or any Subsidiary, and
(ii) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GTCR LP" means Golder, Thoma, Cressey, Rauner Fund IV L.P., an Illinois
limited partnership.
"GTCR, Inc." means Golder, Thoma, Cressey, Rauner, Inc., a Delaware
corporation.
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"Guaranty" means, with respect to any Person (for the purposes of this
definition, the "Guarantor"), any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "Primary Obligor") in any manner,
whether directly or indirectly, including, without limitation, obligations
incurred through an agreement, contingent or otherwise, by the Guarantor:
(i) to purchase such indebtedness or obligation or any Property
constituting security therefor;
(ii) to advance or supply funds
(a) for the purchase or payment of such indebtedness, dividend
or obligation, or
(b) to maintain working capital or other balance sheet
condition or any income statement condition of the Primary Obligor
or otherwise to advance or make available funds for the purchase or
payment of such indebtedness, dividend or obligation;
(iii) to lease Property or to purchase Securities or other Property
or services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of the Primary Obligor to make
payment of the indebtedness or obligation; or
(iv) otherwise to assure the owner of the indebtedness or obligation
of the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty, in connection with any
computation of indebtedness or other liability,
(x) in each case where the obligation that is the subject of such
Guaranty is in the nature of indebtedness for money borrowed, it shall be
assumed that the amount of the Guaranty is the amount of the direct
obligation then outstanding, and
(y) in each case where the obligation that is the subject of such
Guaranty is not in the nature of indebtedness for money borrowed, it shall
be assumed that the amount of the Guaranty is the amount (if any) of the
direct obligation that is then due.
Standard contractual indemnities by such Person of its own goods and services in
the ordinary course of business shall be deemed not to be Guaranties.
"Harris Trust Note" means the $9,000,000 Unsecured Note, dated March 12,
1998, of the Company payable on demand to Harris Trust and Savings Bank.
"Hedging Arrangement" means any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
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agreement or arrangement designed to protect a Person against fluctuations in
interest rates.
"Institutional Holder" means each original purchaser of a Notes and any of
its affiliates, and any other holder of a Note that is an insurance company,
bank, trust company, investment company, investment banking firm, pension plan
or trust, profit sharing trust, university, charitable or educational foundation
or other similar Person which, in the ordinary course of its business, acquires
investments such as the Notes.
"Intergroup Transfer" has the meaning assigned to it in paragraph 8I(i).
"Investments" means
(a) any loans or advances to, or purchases or acquisitions of the
Securities or obligations of, any Person, or
(b) the assumption of any liability of another Person,
provided, that no Investment shall be deemed to arise from
(i) the acquisition by the Company or any Restricted Subsidiary of
its capital stock or the Warrants, or
(ii) the sale of inventory in the ordinary course of business.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations promulgated thereunder.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction).
"Material Adverse Effect" means a material adverse effect on (i) the
business, operations, affairs, financial condition, or Properties of the Company
and its Subsidiaries, taken as a whole, (ii) the ability of the Company to
perform its obligations under this Agreement or any other Financing Document,
(iii) the ability of any Subsidiary to perform its obligations under the
Subsidiary Guaranty, or (iv) the validity or enforceability of this Agreement or
the Notes.
"Merger" means the merger of Western Acquisition with and into Monroc
pursuant to the terms of the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
January 29, 1998, and amended and restated as of March 4, 1998, among the
Company, Western Acquisition and Monroc.
"Monroc" means Monroc, Inc., a Delaware corporation.
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"Multiemployer Plan" means any "multiemployer plan" (as such term is
defined in section 3(37) of ERISA) in respect of which the Company or any ERISA
Affiliate is an "employer" (as such term is defined in section 3(5) of ERISA).
"NAIC Annual Statement" has the meaning assigned to it in paragraph
11B(i).
"Net Proceeds Amount" has the meaning assigned to it in paragraph 8I(iii).
"1996 Notes" has the meaning assigned to it in paragraph 1.
"1996 Purchase Agreement" has the meaning assigned to it in paragraph 1.
"1996 Warrants" has the meaning assigned to it in paragraph 1.
"1998 Notes" has the meaning assigned to it in paragraph 3(i).
"1998 Warrant Agreement" has the meaning assigned to it in paragraph
3(ii).
"1998 Warrant Certificates" has the meaning assigned to it in paragraph
3(ii).
"1998 Warrants" has the meaning assigned to it in paragraph 3(ii).
"Notes" has the meaning assigned to it in paragraph 3(i).
"Notice Event" has the meaning assigned to such term in paragraph
6C(iv)(b).
"Officer's Certificate" means a certificate of a Responsible Officer of
the Company.
"Ordinary Course Transfer" has the meaning assigned to it in paragraph
8I(i).
"PBGC" means the Pension Benefit Guaranty Corporation, and its successors
and assigns.
"Pension Plan" means any "employee pension benefit plan" (as such term is
defined in section 3(2) of ERISA) maintained by the Company or any ERISA
Affiliate for employees of the Company or such ERISA Affiliate, excluding any
Multiemployer Plan, but including, without limitation, any Multiple Employer
Pension Plan.
As used in this definition,
"Multiple Employer Pension Plan" means any employee benefit plan
within the meaning of Section 3(3) of ERISA (other than a Multiemployer
Plan), subject to Title IV of ERISA, to which the Company or any ERISA
Affiliate and an employer (as such term is defined in Section 3 of ERISA),
other than an ERISA Affiliate or the Company, contribute.
"Permitted Acquisition" means any purchase or acquisition by the Company
or any Subsidiary of all or substantially all of the assets of any other Person
(or of a particular
U.S. AGGREGATES, INC. 46 AMENDED AND RESTATED NOTE AND
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<PAGE>
business unit of any other Person), or of any equity interest in any other
Person, in each case which is engaged in the aggregates, or related materials
and services, business.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an estate, an unincorporated
organization and a government or any political subdivision or agency or
instrumentality thereof.
"Prior Closing Date" means November 22, 1996.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"Property Reinvestment Application" has the meaning assigned to it in
paragraph 8I(iii).
"Purchaser" has the meaning assigned to it in the introductory sentence of
this Agreement.
"Receivables" means any accounts, contract rights and other forms of
obligations for the payment of money arising from the sale of goods or the
rendering of services by the Company or any of its Restricted Subsidiaries.
"Registration Rights Agreement" means the Registration Rights and
Stockholders' Agreement, dated as of November 21, 1996, by and among the
Company, Senior Management, GTCR LP and The Prudential Insurance Company of
America, as amended by the First Amendment to Registration Rights and
Stockholders' Agreement, dated as of June 5, 1998.
"Required Holders" means the holder or holders of more than fifty percent
(50%) of the aggregate principal amount of the Notes from time to time
outstanding, exclusive of Notes owned by the Company, any Subsidiary or any
Affiliate of the Company.
"Responsible Officer" means each of the President, any Vice President and
the Treasurer of the Company.
"Restricted Investments" means all Investments except the following:
(i) Investments existing on the Closing Date and identified in Part
13A of Annex 3;
(ii) the following Investments (sometimes referred to as "Cash
Equivalent Investments"):
(a) any evidence of Debt, maturing not more than one (1) year
from the date of acquisition thereof, issued or guaranteed by the
United States Government;
(b) commercial paper, maturing not more than one (1) year from
the date of issue, which is issued by
U.S. AGGREGATES, INC. 47 AMENDED AND RESTATED NOTE AND
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<PAGE>
(I) a corporation (except the Company, a Restricted
Subsidiary or an Affiliate of the Company) organized under the
laws of any state of the United States of America or the
District of Columbia and rated at least A-1 by Standard &
Poor's Ratings Group or P-1 by Moody's Investors Service, Inc.
at the time of investment, or
(II) a commercial bank organized in the United States of
America and which has capital and surplus of at least Five
Hundred Million Dollars ($500,000,000) (an "Acceptable Bank"),
or
(III) any Existing Bank;
(c) any certificate of deposit or banker's acceptance or
eurocurrency time deposit, maturing not more than one (1) year from
the date of issue, which is issued by an Acceptable Bank or an
Existing Bank;
(d) any repurchase agreement with a term of one (1) year or
less which
(I) is entered into with an Acceptable Bank or an
Existing Bank,
(II) is secured by a fully perfected Lien in any
obligation of the type described in any of clauses (a) through
(c) above, and
(III) has a market value at the time such repurchase
agreement is entered into of not less than one hundred percent
(100%) of the repurchase obligation of such Acceptable Bank or
Existing Bank thereunder;
(e) Investments in money market mutual funds registered with
the Securities and Exchange Commission meeting the requirements of
Rule 2a-7 promulgated under the Investment Company Act of 1940, as
amended;
(f) participations in short-term loans to any corporation
(other than an Affiliate of the Company) organized under the laws of
any state of the United States of America or the District of
Columbia and rated at least A-1 by Standard & Poor's Ratings Group
or P-1 by Moody's Investors Service, Inc.; or
(g) Investments in short-term asset management accounts
offered by an Acceptable Bank for the purpose of investing in loans
to any corporation (other than an Affiliate of the Company)
organized under the laws of any state of the United States of
America or the District of Columbia and rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Service,
Inc.;
U.S. AGGREGATES, INC. 48 AMENDED AND RESTATED NOTE AND
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<PAGE>
(iii) Investments by the Company in its Restricted Subsidiaries or
by any Restricted Subsidiary in any other Restricted Subsidiary, in the
form of contributions to capital or loans or advances; provided that,
immediately before and after giving effect to such Investment, no Default
or Event of Default shall have occurred and be continuing;
(iv) Investments by the Company or any Restricted Subsidiary in any
Restricted Subsidiary, in the form of capital contributions existing on
the Closing Date;
(v) loans or advances by any Restricted Subsidiary to the Company;
(vi) loans or advances to officers and employees of the Company or
any Restricted Subsidiary (a) for travel or other ordinary business
expenses in an amount not in excess of One Hundred Thousand Dollars
($100,000) in the aggregate at any time and (b) to finance the purchase of
stock of the Company or any Restricted Subsidiary in an amount not in
excess (in addition to any such loans and advances permitted under clause
(i)) of One Million Dollars ($1,000,000) in the aggregate at any time;
(vii) loans or advances to, or deposits with, contractors and
suppliers in the ordinary course of business not in excess of Five Hundred
Thousand Dollars ($500,000) in the aggregate at any time;
(viii) bank deposits in the ordinary course of business, provided
that the aggregate amount of all such deposits, other than deposits (x)
with any Existing Bank, (y) with any bank that has executed a blocked
account agreement reasonably satisfactory to the Required Holders and (z)
in imprest payroll accounts, shall not at any time exceed One Million
Dollars ($1,000,000) for more than three (3) consecutive days;
(ix) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods and services in
the ordinary course of business;
(x) shares of stock, obligations or other securities received by the
Company or any Restricted Subsidiary in settlement of claims arising in
the ordinary course of business;
(xi) Permitted Acquisitions;
(xii) Investments received as proceeds of any sale of assets so long
as such Investments are reasonably satisfactory to the Required Holders;
and
(xiii) Guaranties of the Notes and Senior Debt by Subsidiaries.
"Restricted Subsidiary" means, at any time,
U.S. AGGREGATES, INC. 49 AMENDED AND RESTATED NOTE AND
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<PAGE>
(i) a corporation incorporated in the United States of America of
which the Company owns, directly or indirectly, eighty percent (80%) or
more of the Voting Stock of such corporation at such time; and
(ii) Dekalb Stone, provided that the Company owns, directly or
indirectly, seventy percent (70%) or more of the Voting Stock of Dekalb
Stone at such time.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" has the meaning set forth in Section 2(1) of the Securities
Act.
"Senior Debt" has the meaning assigned to it in paragraph 12E.
"Senior Management" means James A. Harris, the President of the Company,
and Michael J. Stone, the Chief Financial Officer of the Company.
"Series" means the 1996 Notes or the 1998 Notes.
"Significant Holders" shall mean, at any time, (i) The Prudential
Insurance Company of America and (ii) each other holder of at least ten percent
(10%) of the aggregate principal amount of the Notes at such time outstanding,
exclusive of Notes owned by the Company, any Subsidiary or any Affiliate of the
Company.
"Stand-Still Notice" has the meaning assigned to it in paragraph 12E.
"Stand-Still Period" has the meaning assigned to it in paragraph 12E.
"Stock and Intercompany Note Pledge" means the pledge of the capital stock
of Subsidiaries and intercompany notes of the Company and its Subsidiaries as
security for the Senior Debt.
"Stockholders Agreement" means that certain Stockholders Agreement, dated
as of January 24, 1994, by and among the Company (formerly USAI Acquisition
Corp.), a Delaware corporation, GTCR LP, James A. Harris, Michael J. Stone,
Hobart Richey, Edward A. Dougherty (by joinder on August 1, 1994), Charles
Pullin (by joinder on October 31, 1994), and Morris Bishop, Jr. (by joinder on
August 5, 1994).
"Subordination Event of Default" has the meaning assigned to it in
paragraph 12E.
"Subsidiary" means, at any time, a corporation of which the Company owns,
directly or indirectly, more than fifty percent (50%) of the Voting Stock at
such time.
"Subsidiary Guaranty" has the meaning set forth in paragraph 5F.
"Subsidiary Stock" means the stock or equity interests (or any warrants,
rights or options to acquire, or securities exchangeable or convertible into,
such stock or other equity interest) of any Restricted Subsidiary.
"Successor Corporation" has the meaning assigned to it in paragraph
8H(iv).
U.S. AGGREGATES, INC. 50 AMENDED AND RESTATED NOTE AND
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<PAGE>
"Suretyship Liability" means any agreement, undertaking or other
contractual arrangement (but excluding completion and performance bonding in the
ordinary course of business) by which any Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to or otherwise to invest in a debtor, or otherwise to assure a creditor
against loss) any indebtedness, obligation or other liability (including
accounts payable) of any other Person (other than by endorsements of instruments
in the course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. The amount of any Person's
obligation under any Suretyship Liability shall (subject to any limitation set
forth therein) be deemed to be the principal amount of the indebtedness,
obligation or other liability guaranteed thereby.
"Total Assets" has the meaning assigned to it in paragraph 8I(iii).
"Transfer" has the meaning assigned to it in paragraph 8I(iii).
"Transferee" means any direct or indirect transferee of all or any part of
any Note purchased by the Purchaser under this Agreement.
"Voting Stock" means, with respect to any corporation, any shares of
capital stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
"Warrants" means the 1996 Warrants and the 1998 Warrants.
"Western Acquisition" means Western Acquisition, Inc., a Delaware
corporation.
"Wholly-Owned Subsidiary" means any Subsidiary one hundred percent (100%)
of the Voting Stock and equity interests of which are owned by any one or more
of the Company and/or other Wholly-Owned Subsidiaries.
13C. Accounting Principles, Terms and Determinations. All references in
this Agreement to "GAAP" or "generally accepted accounting principles" shall be
deemed to refer to generally accepted accounting principles in effect in the
United States at the time of application thereof. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all unaudited financial statements and certificates and reports as to financial
matters required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles, applied on a basis consistent with the
most recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause (ii) of paragraph 7A.
14. MISCELLANEOUS.
14A. Note Payments. The Company agrees that, so long as the Purchaser
shall hold any Note, it will make payments of principal of, interest on and any
Yield-Maintenance Amount payable with respect to such Note, by wire transfer of
immediately
U.S. AGGREGATES, INC. 51 AMENDED AND RESTATED NOTE AND
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<PAGE>
available funds for credit (not later than 12:00 noon, New York City time, on
the date due) to the Purchaser's account or accounts as specified in the
Purchaser Schedule attached hereto, or such other account or accounts in the
United States as the Purchaser may designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the place of payment.
The Purchaser agrees that, before disposing of any Note, the Purchaser will make
a notation thereon (or on a schedule attached thereto) of all principal payments
previously made thereon and of the date to which interest thereon has been paid.
The Company agrees to afford the benefits of this paragraph 14A to any
Transferee which shall have made the same agreement as the Purchaser has made in
this paragraph 14A.
14B. Expenses. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save the Purchaser and any
Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including (i) all
document production and duplication charges and the fees and expenses of any
special counsel engaged by the Purchaser or such Transferee in connection with
this Agreement, the transactions contemplated hereby and any subsequent proposed
modification of, or proposed consent under, this Agreement, whether or not such
proposed modification shall be effected or proposed consent granted, and (ii)
the costs and expenses, including attorneys' fees, incurred by the Purchaser or
such Transferee in enforcing (or determining whether or how to enforce) any
rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the transactions contemplated hereby or by reason of the
Purchaser's or such Transferee's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case; provided,
however, that the obligations of the Company under this paragraph 14B shall not
include the payment of any fees or expenses arising in connection with any
investigation or proceeding relating to the legal or regulatory status of the
Purchaser or any Transferee. The obligations of the Company under this paragraph
14B shall survive the transfer of any Note or portion thereof or interest
therein by the Purchaser or any Transferee and the payment of any Note.
14C. Consent to Amendments. This Agreement may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holder(s) except
that, without the written consent of the holder or holders of all Notes at the
time outstanding, no amendment to this Agreement shall change the maturity of
any Note, or change the principal of, or the rate or time of payment of interest
on or any Yield-Maintenance Amount payable with respect to any Note, or affect
the time, amount or allocation of any prepayments, or change the proportion of
the principal amount of the Notes required with respect to any consent,
amendment, waiver or declaration. Notwithstanding the foregoing, no amendment
may be made to paragraph 12 (or this sentence) without the consent of the Agent
and the Required Banks (as defined in the Bank Credit Agreement). Each holder of
any Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 14C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note
U.S. AGGREGATES, INC. 52 AMENDED AND RESTATED NOTE AND
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<PAGE>
shall operate as a waiver of any rights of any holder of such Note. As used
herein and in the Notes, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
14D. Form, Registration, Transfer and Exchange of Notes; Lost Notes. The
Notes are issuable as registered notes without coupons in denominations of at
least One Hundred Thousand Dollars ($100,000), except as may be necessary to
reflect any principal amount not evenly divisible by One Hundred Thousand
Dollars ($100,000). The Company shall keep at its principal office a register in
which the Company shall provide for the registration of Notes and of transfers
of Notes. Upon surrender for registration of transfer of any Note at the
principal office of the Company, the Company shall, at its expense, execute and
deliver one or more new Notes of like tenor and of a like aggregate principal
amount, registered in the name of such transferee or transferees; provided that
no holder of any Note shall transfer such Note or any portion there if such
transfer would be to a Competitor. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange. Upon receipt of written notice
from the holder of any Note of the loss, theft, destruction or mutilation of
such Note and, in the case of any such loss, theft or destruction, upon receipt
of such holder's unsecured indemnity agreement, or in the case of any such
mutilation upon surrender and cancellation of such Note, the Company will make
and deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note. Upon receipt of written notice from the Agent or any Bank at any
time, the Company agrees to promptly provide the Agent or such Bank, in writing,
with the names and addresses of the registered holders of the Notes at such
time, and the Agent or such Bank, as the case may be, shall be permitted to rely
conclusively on such written notice from the Company.
14E. Persons Deemed Owners; Participations. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, interest on and any Yield-Maintenance Amount
payable with respect to such Note and for all other purposes whatsoever, whether
or not such Note shall be overdue, and the Company shall not be affected by
notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in such Note to any Person on
such terms and conditions as may be determined by such holder in its sole and
absolute discretion, provided that any such participation shall be in a
principal amount of at least One Hundred Thousand Dollars ($100,000).
14F. Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this
U.S. AGGREGATES, INC. 53 AMENDED AND RESTATED NOTE AND
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<PAGE>
Agreement and the Notes, the transfer by the Purchaser of any Note or portion
thereof or interest therein and the payment of any Note, and may be relied upon
by any Transferee, regardless of any investigation made at any time by or on
behalf of the Purchaser or any Transferee. Subject to the preceding sentence,
this Agreement and the Notes embody the entire agreement and understanding
between the Purchaser and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof, provided that all
representations and warranties contained in the 1996 Purchase Agreement or made
in writing by or on behalf of the Company in connection therewith shall survive
the execution and delivery of this Agreement.
14G. Successors and Assigns. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
14H. Notices. All written communications provided for hereunder shall be
delivered either by nationwide overnight courier or by facsimile transmission
(confirmed by delivery by national overnight courier sent on the day of the
sending of such facsimile transmission), and shall be addressed to the following
addresses:
(i) if to the Purchaser, addressed to the Purchaser at the address
specified for such communications in the Purchaser Schedule attached
hereto, or at such other address as the Purchaser shall have specified to
the Company in writing,
(ii) if to any other holder of any Note, addressed to such other
holder at such address as such other holder shall have specified to the
Company in writing or, if any such other holder shall not have so
specified an address to the Company, then addressed to such other holder
in care of the last holder of such Note which shall have so specified an
address to the Company, and
(iii) if to the Company, addressed to it at 400 South El Camino
Real, Suite 500, San Mateo, California 94402, Attention: Michael J. Stone,
with a copy to Kirkland & Ellis, 200 E. Randolph Drive, Chicago, Illinois
60601, Attention: Linda K. Riley, or at such other address as the Company
shall have specified to the holder of each Note in writing; provided,
however, that any such communication to the Company may also, at the
option of the holder of any Note, be delivered by any other means either
to the Company at its address specified above or to any officer of the
Company.
Any communication addressed and delivered as herein provided shall be deemed to
be received when actually delivered to the address of the addressee (whether or
not delivery is accepted) or received by the telecopy machine of the recipient.
Any communication not so addressed and delivered shall be ineffective.
14I. Payments Due on Non-Business Days. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of, interest on,
or Yield-Maintenance Amount with respect to, any Note that is due on a date
other than a Business Day shall be made on the next succeeding Business Day. If
the date for any payment is extended to the next succeeding Business Day by
reason of the preceding
U.S. AGGREGATES, INC. 54 AMENDED AND RESTATED NOTE AND
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<PAGE>
sentence, the period of such extension shall be included in the computation of
the interest payable on such Business Day.
14J. Disclosure to Other Persons. For purposes of this paragraph 14J,
"Confidential Information" means information delivered to the Purchaser or other
holder of Notes, if any, by or on behalf of the Company or any of the
Subsidiaries in connection with the transactions contemplated by or otherwise
pursuant to this Agreement or any other Financing Document that is proprietary
in nature and that was identified when received by the Purchaser or other
Noteholder as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) was publicly known
or otherwise known to the Purchaser or other holder of Notes prior to the time
of such disclosure, (b) subsequently becomes publicly known through no act or
omission by the Purchaser or other holder of Notes or any Person acting on
behalf of the Purchaser or other holder of Notes, (c) otherwise becomes known to
the Purchaser or other holder of Notes other than through disclosure by the
Company or such Subsidiary or (d) constitutes financial statements delivered to
the holders of Notes pursuant to this Agreement that are otherwise publicly
available. Each holder of Notes will use its best efforts to maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by such holder in good faith to protect confidential information of
third parties delivered to such holder. The Company acknowledges that the holder
of any Note may deliver copies of any financial statements and other documents
delivered to such holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company or any Subsidiary in connection with or
pursuant hereto to:
(i) such holder's directors, officers, employees, agents and
professional consultants,
(ii) any other holder of any Note,
(iii) any Person to which such holder offers to sell such Note or
any part thereof,
(iv) any Person, other than a Competitor, to which such holder sells
or offers to sell a participation in all or any part of such Note,
(v) any federal or state regulatory authority having jurisdiction
over such holder,
(vi) the National Association of Insurance Commissioners or any
similar organization, or
(vii) any other Person to which such delivery or disclosure may be
necessary or appropriate
(a) in compliance with any law, rule, regulation or order
applicable to such holder,
(b) in response to any subpoena or other legal process,
U.S. AGGREGATES, INC. 55 AMENDED AND RESTATED NOTE AND
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<PAGE>
(c) in connection with any litigation to which such holder is
a party, or
(d) in order to protect such holder's investment in such Note.
14K. Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to the Purchaser or to the Required Holder(s), the
determination of such satisfaction shall be made by the Purchaser or the
Required Holder(s), as the case may be, in the sole and exclusive judgment
(exercised in good faith) of the Person or Persons making such determination.
14L. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
14M. Jurisdiction; Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND
INSTRUMENTS CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE OF THE PARTIES HERETO SHALL SEEK
A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
PROCEDURE BASED UPON OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT OR
ANY OF THE NOTES AND EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY SUCH PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
PARAGRAPH 14M.
14N. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
14O. Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
14P. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
[Remainder of page intentionally blank. Next page is signature page.]
U.S. AGGREGATES, INC. 56 AMENDED AND RESTATED NOTE AND
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<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterparts of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement between you
and the Company.
Very truly yours,
U.S. AGGREGATES, INC.
By /s/ Michael Stone
-------------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By /s/ Robert P. Derrick
----------------------------------------
Name: Robert P. Derrick
Title: VP
U.S. AGGREGATES, INC. AMENDED AND RESTATED NOTE AND
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<PAGE>
ANNEX 1
PURCHASER SCHEDULE
- --------------------------------------------------------------------------------
Purchaser Name THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
- --------------------------------------------------------------------------------
Registered Name THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
- --------------------------------------------------------------------------------
Note Registration Number; R-1; $30,000,000
Principal Amount (1996 Note)
Note Registration Number; S-1; $15,000,000
Principal Amount (1998 Note)
- --------------------------------------------------------------------------------
Warrant Certificate WR-1; 6,327 Warrants
Registration Number; Number
of Warrants (1996 Warrant
Certificate)
Warrant Certificate WS-1; 3,208 Warrants
Registration Number;
Number of Warrants (1998
Warrant Certificate)
- --------------------------------------------------------------------------------
Method of Payment Federal Funds Wire Transfer
- --------------------------------------------------------------------------------
Account Information Bank of New York
New York, New York
ABA No.: 021-000-018
Prudential Managed Account No. 890-0304-391
- --------------------------------------------------------------------------------
Accompanying Information for U.S. AGGREGATES, INC.
Note Payments (1996 10.34% Senior Subordinated Notes due November
Transaction) 22, 2006
Invoice Number: 5535
PPN: 90345@ AA 1
Accompanying Information for U.S. AGGREGATES, INC.
Note Payments (1998 10.09% Senior Subordinated Notes due November
Transaction) 22, 2008
Invoice Number: 6039
PPN: 90345@ AB 9
Due Date and Application (as among
principal, premium and interest) of the
payment being made:
- --------------------------------------------------------------------------------
Address/Fax # for Payment The Prudential Insurance Company of America
Notices c/o Investment Operations Group (Privates)
Three Gateway Center, 12th Floor
100 Mulberry Street
Newark, New Jersey 07102-4077
Attn: Manager
Tel: (201) 802-5260
Fax: (201) 802-8055
Recipient of telephonic prepayment notices:
Manager, Investment Structure and Pricing
Tel: (201) 802-6660
Fax: (201) 802-9425
- --------------------------------------------------------------------------------
Address/Fax # for Other The Prudential Insurance Company of America
Notices c/o Prudential Capital Group
One Gateway Center, 11th Floor
Newark, New Jersey 07102-5311
Attn: Managing Director
Tel: (201) 802-9182
Fax: (201) 802-3200
- --------------------------------------------------------------------------------
U.S. AGGREGATES, INC. Annex 1-1 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
- --------------------------------------------------------------------------------
Purchaser Name THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
- --------------------------------------------------------------------------------
Other Instructions (if any) None
- --------------------------------------------------------------------------------
Instructions re: Delivery Law Department of Purchaser
of Note and Warrant
Certificate
- --------------------------------------------------------------------------------
Tax Identification Number 22-1211670
- --------------------------------------------------------------------------------
U.S. AGGREGATES, INC. Annex 1-2 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
ANNEX 2
PAYMENT INSTRUCTIONS AT CLOSING
In accordance with paragraph 4(i) of the Agreement, the Company authorizes
and directs you to make payment for the 1998 Notes and 1998 Warrants being
purchased by you by payment by federal funds wire transfer in immediately
available funds of the purchase price thereof to:
Bank of America Illinois
ABA #:071000039
Account #78-19625
Account Name: U.S. Aggregates, Inc.
U.S. AGGREGATES, INC. Annex 2-1 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
ANNEX 3
INFORMATION AS TO COMPANY
Part 10A: Organization
[To Be Provided by the Company].
Part 10B: Financial Statements
[To Be Provided by the Company].
Part 10C: Actions Pending
[To Be Provided by the Company].
Part 10D: Outstanding Debt
[To Be Provided by the Company].
Part 10H: Limitations on Debt
[To Be Provided by the Company].
Part 10O(i): Capitalization
[To Be Provided by the Company].
Part 10O(ii): Reservation of Common Stock
[To Be Provided by the Company].
Part 10O(iii): Stockholders Agreements, etc.
[To Be Provided by the Company].
Part 13A: Investments
[To Be Provided by the Company].
U.S. AGGREGATES, INC. Annex 3-1 AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. AGGREGATES, INC.
---------------------------------
AMENDMENT NO. 1 TO AMENDED AND RESTATED
NOTE AND WARRANT PURCHASE AGREEMENT
---------------------------------
DATED AS OF APRIL 14, 1999
$30,000,000 10.34% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2006
AND
$15,000,000 10.09% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2008
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
U.S. AGGREGATES, INC.
$30,000,000 10.34% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2006
AND
$15,000,000 10.09% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2008
AMENDMENT NO. 1 TO AMENDED AND RESTATED
NOTE AND WARRANT PURCHASE AGREEMENT
As of April 14, 1999
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Gateway Center, 11 Floor
Newark, New Jersey 07102
Ladies and Gentlemen:
U.S. AGGREGATES., INC., a Delaware corporation (together with its
successors and assigns, the "COMPANY"), agrees with you as follows:
1. PRIOR ISSUANCE OF NOTES.
The Company has entered into an Amended and Restated Note and Warrant
Purchase Agreement, dated as of June 5, 1998 (as in effect immediately prior to
giving effect to the amendments provided for by this Agreement, the "Existing
Note Purchase Agreement" and, as amended pursuant to this Agreement and as may
be further amended, restated or otherwise modified from time to time, the
"Amended Note Purchase Agreement"), pursuant to which $30,000,000 aggregate
principal amount of 10.34% Senior Subordinated Notes due November 22, 2006 and
$15,000,000 aggregate principal amount of 10.09% Senior Subordinated Notes due
November 22, 2008 (such Notes, as may be amended, restated or otherwise modified
from time to time, the "Notes") of the Company have been issued to you and are
currently outstanding.
2. DEFINED TERMS.
Capitalized terms used herein and not otherwise defined have the meanings
ascribed to them in the Existing Note Purchase Agreement.
U.S. AGGREGATES, INC. 1 AMENDMENT NO. 1
<PAGE>
3. REQUEST FOR CONSENT TO AMENDMENTS.
The Company requests that you consent to the amendments to the Existing
Note Purchase Agreement provided for by this Agreement (the "Amendments").
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
To induce you to enter into this Agreement and to consent to the
Amendments, the Company represents and warrants as follows:
4.1 Organization and Existence.
The Company is a corporation duly organized and existing in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to execute and deliver this Agreement and to perform its
obligations under the Amended Note Purchase Agreement.
4.2 Actions Pending.
There are no actions, suits, investigations or proceedings pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, by or before any court, arbitrator or administrative or
governmental body that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
4.3 Amendment Authorized; Obligations Enforceable.
(a) Agreement is Legal and Authorized. The execution and delivery by
the Company of this Agreement, and compliance by the Company with all of
the provisions of the Amended Note Purchase Agreement, are within the
corporate powers of the Company.
(b) Company Obligations are Enforceable. The Company has duly
authorized this Agreement by all necessary action on its part. This
Agreement has been executed and delivered by one or more duly authorized
officers of the Company, and each of this Agreement and the Amended Note
Purchase Agreement constitutes a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, except that the
enforceability thereof may be:
(i) limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium, or other similar laws affecting
the enforceability of creditors' rights generally; and
(ii) subject to the availability of equitable remedies.
4.4 No Conflicts.
Neither the execution nor delivery of this Agreement, nor fulfillment of
nor compliance with the terms and provisions of the Amended Note Purchase
Agreement and the other Financing Documents will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
or result in any violation of, or result in the creation of any Lien upon any of
the Properties of the Company or
U.S. AGGREGATES, INC. 2 AMENDMENT NO. 1
<PAGE>
any of its Subsidiaries pursuant to, the charter or bylaws of the Company or any
of its Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Company or any of its Subsidiaries is subject.
4.5 Governmental Consent.
Neither the execution and delivery of this Amendment, nor the performance
by the Company of its obligations under the Amended Note Purchase Agreement and
the other Financing Documents, is such as to require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court or
administrative or governmental body (other than routine filings with the
Securities and Exchange Commission and/or state Blue Sky authorities) on the
part of the Company in connection with the execution and delivery of this
Agreement or fulfillment of or compliance with the terms and provisions of the
Amended Note Purchase Agreement or of the other Financing Documents.
4.6 Full Disclosure.
This Agreement and the documents, certificates or other writings delivered
to you by or on behalf of the Company in connection with the proposal and
negotiation of the Amendments, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the other documents, certificates and other writings
delivered to you by or on behalf of the Company specifically for use in
connection with the transactions contemplated by the Note Purchase Agreement and
this Agreement.
4.7 Amendment of Bank Credit Agreement.
Attached hereto as Exhibit C is a copy of the First Amendment to the Bank
Credit Agreement (the "First Amendment"), which has been duly executed and
delivered by each of the parties thereto, is true, correct and complete, and
(subject only to the execution and delivery of this Agreement) is in full force
and effect.
4.8 No Defaults.
No event has occurred and no condition exists that, upon the execution and
delivery of this Agreement and the effectiveness of the Amendments and the First
Amendment, would constitute a Default or an Event of Default.
5. AMENDMENTS.
5.1 Amendments to Existing Note Purchase Agreement.
Subject to paragraph 5.2, the Existing Note Purchase Agreement is hereby
amended in the manner specified in Exhibit A to this Agreement.
U.S. AGGREGATES, INC. 3 AMENDMENT NO. 1
<PAGE>
5.2 Effectiveness of Amendments.
The amendments of the Existing Note Purchase Agreement contemplated by
paragraph 5.1 and Exhibit A shall become effective at such time as
(a) the Company and you shall have executed and delivered a
counterpart of this Agreement;
(b) the representations and warranties set forth in paragraph 4
shall be true and correct;
(c) the Company shall have authorized, by all necessary corporate
action, the execution and delivery of this Agreement and the performance
of all obligations of, and the satisfaction of all closing conditions set
forth in, this paragraph 5 by, and the consummation of all transactions
contemplated by this Agreement by, the Company;
(d) each Restricted Subsidiary shall have executed and delivered the
Guarantor Consent in respect of its obligations under the Subsidiary
Guaranty, substantially in the form attached hereto as Exhibit B;
(e) the Company shall have paid you an amendment fee in the amount
of $56,250; and
(f) all proceedings taken in connection with this Agreement and all
documents and papers relating thereto shall be satisfactory to you and
your special counsel, and you and your special counsel shall have received
copies of such documents and papers as you or your special counsel may
reasonably request in connection herewith.
6. EXPENSES.
Whether or not the Amendments become effective, the Company will promptly
(and in any event within 30 days of receiving any statement or invoice therefor)
pay all fees, expenses and costs relating to this Agreement, including, but not
limited to, (a) the cost of reproducing this Agreement and the other documents
delivered in connection herewith and (b) the reasonable fees and disbursements
of your special counsel (namely, Hebb & Gitlin, a Professional Corporation)
incurred in connection with the preparation, negotiation and delivery of this
Agreement. Nothing in this paragraph 6 shall limit the Company's obligations
under paragraph 14B of the Amended Note Purchase Agreement.
7. MISCELLANEOUS.
7.1 Part of Note Purchase Agreement, Future References, etc.
This Agreement shall be construed in connection with and as a part of the
Existing Note Purchase Agreement and, except as expressly amended by this
Agreement, all terms, conditions and covenants contained in the Existing Note
Purchase Agreement and the Notes are hereby ratified and shall be and remain in
full force and effect. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Agreement may refer to the Existing Note Purchase Agreement and the Notes
without making specific reference to this Agreement, but nevertheless all such
references shall include this Agreement unless the context otherwise requires.
U.S. AGGREGATES, INC. 4 AMENDMENT NO. 1
<PAGE>
7.2 Counterparts; Effectiveness.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Delivery of an executed signature page by facsimile transmission
shall be effective as delivery of a manually signed counterpart of this
Agreement.
7.3 Successors and Assigns.
All covenants and other agreements in this Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including, without
limitation, any Transferee) whether so expressed or not.
7.4 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
[Remainder of page intentionally left blank; next page is signature page.]
U.S. AGGREGATES, INC. 5 AMENDMENT NO. 1
<PAGE>
If you are in agreement with the foregoing, please so indicate by signing
the agreement below on the accompanying counterpart of this Agreement and return
it to the Issuer, whereupon the foregoing shall become a binding agreement among
you and the Company.
Very truly yours,
U.S. AGGREGATES, INC.
By: /s/ Michael Stone
-----------------
Name:
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Robert R. Derrick
----------------------------
Name: Robert R. Derrick
Title: Vice President
U.S. AGGREGATES, INC. AMENDMENT NO. 1
<PAGE>
EXHIBIT A
AMENDMENTS
ss.1. Paragraph 8D of the Existing Note Purchase Agreement (Rental Obligations)
is hereby amended and restated in its entirety to read as follows:
8D. Rental Obligations. The Company will not, and will not permit
any Restricted Subsidiary to, enter into at any time any arrangement
(other than Capital Leases) which involves the leasing by the Company or
such Restricted Subsidiary from any lessor of any personal Property (or
any interest therein), except:
(i) rentals of items of equipment for not more than ninety
(90) days for use on one or more specific jobs in the ordinary
course of business and
(ii) arrangements which, together with all other such
arrangements which shall then be in effect, will not require the
payment of rentals by the Company and its Subsidiaries in any fiscal
year of the Company, in the aggregate, to exceed the greater of
(a) five percent (5%) of Consolidated Net Revenues for
such fiscal year; and
(b) Four Million Dollars ($4,000,000);
provided, however, that any calculation made for purposes of this
paragraph 8D shall exclude any amounts required to be expended for
maintenance and repairs, insurance, taxes, assessments and other similar
charges.
ss.2. The definition of "Senior Debt" in Paragraph 12E of the Existing Note
Purchase Agreement (Other Terms) is hereby amended and restated in its
entirety to read as follows:
"Senior Debt" shall mean and include all obligations (including,
without limitation, principal, premium, if any, interest, fees, breakage
costs, reimbursement obligations, indemnities and other obligations under
the Bank Credit Agreement, and specifically including interest accruing
subsequent to the occurrence of any event specified in paragraphs 9A(vii),
(viii), (ix) and (x), whether or not the claim for such interest is
allowed or allowable) of the Company under
(i) the Bank Credit Agreement, provided that the aggregate
outstanding principal amount thereof does not exceed the difference
of
(A) One Hundred Ninety-Five Million Dollars
($195,000,000) minus
(B) the aggregate amount of scheduled principal payments
paid in respect of the Term A Loans and the Term B Loans (as
such terms are defined in the Bank Credit Agreement as in
effect on the date hereof); and
U.S. AGGREGATES, INC. Exhibit A-1 AMENDMENT NO. 1
<PAGE>
(ii) after termination of the Bank Credit Agreement, any
agreement extending or refinancing (without increase in principal
amount) the Debt of the Company outstanding under the Bank Credit
Agreement, provided that such Debt, by its terms, is not pari passu
or subordinated in priority of right of payment to the Notes; and
(iii) all payment obligations of the Company to the Banks or
their Affiliates with respect to interest rate swaps, currency or
commodity swaps, and similar obligations designed to protect the
Company from fluctuations in interest rates, provided that the
aggregate notional amount of all obligations in respect of which
such swap arrangements have been entered into does not at any time
exceed Sixty Million Dollars ($60,000,000).
ss.3. The definitions of "Consolidated Capital Expenditures" and "Harris Note"
and in Paragraph 13B of the Existing Note Purchase Agreement (Other Terms)
are hereby amended and restated in their entirety to read as follows:
"Consolidated Capital Expenditures" means, for any period, all
expenditures which, in accordance with GAAP, would be required to be
capitalized and shown on the consolidated balance sheet of the Company,
but excluding (a) Investments in preferred stock issued by Dekalb Stone
(to the extent such payments or Investments constitute capital
expenditures), (b) expenditures made in connection with the replacement,
substitution or restoration of assets to the extent financed (i) from
insurance proceeds (or other similar recoveries) paid on account of the
loss of or damage to the assets being replaced or restored, or (ii) with
awards of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced, (c) Acquisition Capital
Expenditures to the extent that Acquisition Capital Expenditures during
such period do not exceed Twelve Million Five Hundred Thousand Dollars
($12,500,000), and (d) expenditures incurred in the second, third and
fourth fiscal quarters of the 1999 fiscal year of the Company in
connection with certain 1999 capital expansion projects to the extent that
such expenditures do not exceed Twenty-One Million Dollars ($21,000,000).
As used in this definition,
"Acquisition Capital Expenditures" means the aggregate amount
of all expenditures of the Company and its Subsidiaries for fixed or
capital assets made in connection with a Permitted Acquisition on or
reasonably near the date of such Permitted Acquisition.
"Harris Trust Note" means the $17,500,000 Unsecured Note,
dated April 14, 1999, of the Company payable on demand to Harris
Trust and Savings Bank.
U.S. AGGREGATES, INC. Exhibit A-2 AMENDMENT NO. 1
<PAGE>
EXHIBIT B
[FORM OF GUARANTOR CONSENT]
GUARANTOR CONSENT
Reference is made to that certain Amended and Restated Note and Warrant
Purchase Agreement, dated as of June 5, 1998 (the "Note Purchase Agreement"),
between U.S. Aggregates, Inc. (the "Company") and The Prudential Insurance
Company of America (the "Noteholder"), pursuant to which $30,000,000 principal
amount of 10.34% Senior Subordinated Notes due November 22, 2006 and $15,000,000
principal amount of 10.09% Senior Subordinated Notes due November 22, 2008 (the
"Notes") of the Company have been issued to the Noteholder and are currently
outstanding. Capitalized terms used herein and defined in the Note Purchase
Agreement are used herein with the meanings ascribed to them in the Note
Purchase Agreement. The Note Purchase Agreement is being amended pursuant to the
terms of Amendment No.1 to the Note Purchase Agreement (the "Amendment
Agreement") in the form set forth as Exhibit A hereto.
Each of the undersigned Restricted Subsidiaries (each, a "Guarantor") is a
party to the Subsidiary Guaranty entered into in connection with the execution
and delivery of the Note Purchase Agreement and the issuance and sale of the
Notes. Each Guarantor hereby consents to the Amendment Agreement and
acknowledges and affirms all of its obligations under the terms of the
Subsidiary Guaranty.
Dated: As of April 14, 1999
[Remainder of page intentionally left blank. Next page is signature page.]
U.S. AGGREGATES, INC. Exhibit B-1 AMENDMENT NO. 1
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guarantor Consent to be
executed on its behalf, as of the date first above written, by one of its duly
authorized officers.
SRM HOLDINGS CORP.
By
---------------------------------
Name:
Title:
SOUTHERN READY MIX, INC.
By
---------------------------------
Name:
Title:
WESTERN AGGREGATES
HOLDING CORP.
By
---------------------------------
Name:
Title:
WESTERN ROCK PRODUCTS
CORPORATION
By
---------------------------------
Name:
Title:
COX ROCK PRODUCTS, INCORPORATED
By
---------------------------------
Name:
Title:
U.S. AGGREGATES, INC. Exhibit B-2 AMENDMENT NO. 1
<PAGE>
COX TRANSPORT CORPORATION
By
---------------------------------
Name:
Title:
JENSEN CONSTRUCTION &
DEVELOPMENT, INC.
By
---------------------------------
Name:
Title:
SANDIA CONSTRUCTION, INC.
By
---------------------------------
Name:
Title:
SOUTHERN NEVADA AGGREGATES, INC.
By
---------------------------------
Name:
Title:
MOHAVE CONCRETE AND MATERIALS,
INC. (NEVADA)
By
---------------------------------
Name:
Title:
U.S. AGGREGATES, INC. Exhibit B-3 AMENDMENT NO. 1
<PAGE>
MOHAVE CONCRETE AND MATERIALS,
INC. (ARIZONA)
By
---------------------------------
Name:
Title:
A-BLOCK COMPANY, INC.
(ARIZONA)
By
---------------------------------
Name:
Title:
A-BLOCK COMPANY, INC. (CALIFORNIA)
By
---------------------------------
Name:
Title:
VALLEY ASPHALT, INC.
By
---------------------------------
Name:
Title:
DEKALB STONE, INC.
By
---------------------------------
Name:
Title:
U.S. AGGREGATES, INC. Exhibit B-4 AMENDMENT NO. 1
<PAGE>
GEODYNE TRANSPORT, INC.
By
---------------------------------
Name:
Title:
FALCON RIDGE CONSTRUCTION, INC.
By
---------------------------------
Name:
Title:
BECK PAVING, INC.
By
---------------------------------
Name:
Title:
MULBERRY ROCK CORPORATION
By
---------------------------------
Name:
Title:
BHY READY MIX, INC.
By
---------------------------------
Name:
Title:
U.S. AGGREGATES, INC. Exhibit B-5 AMENDMENT NO. 1
<PAGE>
BRADLEY STONE & SAND, INC.
By
---------------------------------
Name:
Title:
TRI-STATE TESTING LABORATORIES, INC.
By
---------------------------------
Name:
Title:
BIG HORN REDI MIX, INC.
By
---------------------------------
Name:
Title:
TREASURE VALLEY CONCRETE, INC.
By
---------------------------------
Name:
Title:
MONROC, INC.
By
---------------------------------
Name:
Title:
U.S. AGGREGATES, INC. Exhibit B-6 AMENDMENT NO. 1
<PAGE>
EXHIBIT A
TO GUARANTOR CONSENT
[FORM OF AMENDMENT NO. 1]
U.S. AGGREGATES, INC. Exhibit B-7 AMENDMENT NO. 1
<PAGE>
EXHIBIT C
[COPY OF EXECUTED FIRST AMENDMENT]
U.S. AGGREGATES, INC. Exhibit B-8 AMENDMENT NO. 1
<PAGE>
April __, 1999
U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, California 94402
Re: Waiver under Note Agreement
Ladies and Gentlemen:
Please refer to the Amended and Restated Note and Warrant Purchase
Agreement dated as of June 5, 1998 (the "Note Agreement") by and between U.S.
Aggregates, Inc. (the "Company") and The Prudential Insurance Company of America
("Prudential"). Capitalized terms used but not otherwise defined herein have the
meanings assigned thereto in the Note Agreement.
The Company intends to borrow $7,500,000 for working capital and other
general corporate purposes and $8,201,313.82 to repay borrowings under that
certain $9,000,000 Unsecured Note dated March 12, 1998 of the Company payable to
Harris Trust and Savings Bank ("Harris") under a demand note (the "Demand Note")
from Harris and that the Company may borrow additional amounts under the Demand
Note to fund the payment of accrued interest thereon. Golder, Thoma, Cressey,
Rauner Fund IV, L.P. ("GTCR") will unconditionally agree (its "Note Funding
Agreement") for the benefit of Harris, Prudential and the Banks (as defined in
the Bank Credit Agreement) to contribute, upon request from Harris, to the
capital of the Company an amount sufficient to pay in full all principal of, and
accrued interest on, the Demand Note when Harris demands the same or when the
Demand Note otherwise matures, which capital contribution shall be applied to
pay such principal and interest on the Demand Note. Copies of the Demand Note,
the Note Funding Agreement and related documentation are attached hereto as
Exhibit A.
Pursuant to the Company's request and provided that no Event of Default or
Default shall exist under the Note Agreement at the time the transaction
contemplated by the Demand Note is consummated (other than as waived hereby),
Prudential hereby waives any Event of Default caused by the Interest Payment
Transactions or the Note Repayment Transaction (each as defined in the Note
Funding Agreement) (provided, that the waivers in this sentence shall cease to
be effective if the Note Funding Agreement ever ceases to be in full force and
effect). Prudential further agrees that principal and accrued interest on the
Demand Note shall be disregarded for purposes of calculating compliance with the
financial tests set forth in Section 8 of the Note Agreement. The Company agrees
that it shall be an Event of Default in the event that the Demand Note is ever
paid otherwise than with the proceeds of a capital contribution from GTCR
pursuant to the Note Funding Agreement.
The foregoing waiver is limited strictly to its terms and shall not apply
to non-compliance with any other term of the Note Agreement.
<PAGE>
This waiver letter may be executed in any number of counterparts and by
the parties hereto on separate counterparts, and each such counterpart shall be
deemed to be an original but all such counterparts shall together constitute one
and the same waiver letter.
This waiver letter shall be governed by the internal laws of the State of
New York.
Very truly yours,
U.S. AGGREGATES, INC.
By: /s/ Michael Stone
----------------------------
Its:
---------------------------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Robert P. Derrick
----------------------------
Its: Vice President
---------------------------
<PAGE>
AMENDED AND RESTATED GUARANTY
THIS AMENDED AND RESTATED GUARANTY, dated as of June 5, 1998 (as amended
or restated from time to time, this "Guaranty"), by SRM HOLDINGS CORP., a
Delaware corporation (together with its successors and assigns "SRM"), SOUTHERN
READY MIX, INC., an Alabama corporation (together with its successors and
assigns "SOUTHERN"), WESTERN AGGREGATES HOLDING CORP., a Delaware corporation
(together with its successors and assigns "WESTERN AGGREGATES"), WESTERN ROCK
PRODUCTS CORPORATION, a Utah corporation (together with its successors and
assigns "WESTERN ROCK"), COX ROCK PRODUCTS, INCORPORATED, a Utah corporation
(together with its successors and assigns "COX ROCK"), COX TRANSPORT
CORPORATION, a Utah corporation (together with its successors and assigns "COX
TRANSPORT"), JENSEN CONSTRUCTION & DEVELOPMENT, INC., a Nevada corporation
(together with its successors and assigns "JENSEN"), SANDIA CONSTRUCTION, INC.,
a Nevada corporation (together with its successors and assigns "SANDIA"),
SOUTHERN NEVADA AGGREGATES, INC., a Nevada corporation (together with its
successors and assigns "SOUTHERN NEVADA"), MOHAVE CONCRETE AND MATERIALS, INC. a
Nevada corporation (together with its successors and assigns "MOHAVE NEVADA"),
MOHAVE CONCRETE AND MATERIALS, INC., an Arizona corporation (together with its
successors and assigns "MOHAVE ARIZONA"), A-BLOCK COMPANY, INC., an Arizona
corporation (together with its successors and assigns "A-BLOCK ARIZONA"),
A-BLOCK COMPANY, INC., a California corporation (together with its successors
and assigns "A-BLOCK CALIFORNIA"), VALLEY ASPHALT, INC., a Utah corporation
(together with its successors and assigns "VALLEY"), DEKALB STONE, INC., a
Georgia corporation (together with its successors and assigns "DEKALB"), GEODYNE
TRANSPORT, INC., a Utah corporation (together with its successors and assigns
"GEODYNE"), FALCON RIDGE CONSTRUCTION, INC., a Utah corporation (together with
its successors and assigns "FALCON"), BECK PAVING, INC., a Utah corporation
(together with its successors and assigns "BECK"), MULBERRY ROCK CORPORATION, a
Georgia corporation (together with its successors and assigns "MULBERRY"), BHY
READY MIX, INC., a Tennessee corporation (together with its successors and
assigns "BHY"), BRADLEY STONE & SAND, INC., a Tennessee corporation (together
with its successors and assigns "BRADLEY"), TRI-STATE TESTING LABORATORIES,
INC., a Utah corporation (together with its successors and assigns "TRI-STATE"),
BIG HORN REDI MIX, INC., a Wyoming corporation (together with its successors and
assigns "BIG HORN"), TREASURE VALLEY CONCRETE, INC., an Idaho corporation
(together with its successors and assigns "TREASURE"), MONROC, INC., a Delaware
corporation (together with its successors and assigns "MONROC"), in favor of
each of the Noteholders (as such term is hereinafter defined).
1. PRELIMINARY STATEMENT.
1.1 U.S. AGGREGATES, INC. (together with its successors and assigns, the
"Obligor"), a Delaware corporation, has heretofore issued (i) its 10.34% Senior
Subordinated Notes due November 22, 2006 (collectively, as in effect immediately
prior to the Closing Date, and as may be amended or restated from time to time,
the "1996 Notes") in the aggregate original principal amount of Thirty Million
Dollars ($30,000,000) and (ii) an aggregate of Six Thousand Three Hundred
Twenty-Seven (6,327) warrants
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(collectively, as in effect immediately prior to the Closing Date, and as may be
amended or restated from time to time, the "1996 Warrants") to purchase shares
of the Obligor's Common Stock, $.01 par value per share (the "Common Stock"),
pursuant to that certain Note and Warrant Purchase Agreement (as amended and in
effect immediately prior to the Closing Date, the "1996 Purchase Agreement"),
dated as of November 21, 1996, between the Obligor and The Prudential Insurance
Company of America (the "Purchaser").
1.2 In order to induce the Purchaser to purchase the 1996 Notes and the
1996 Warrants, the Obligor caused the Guarantors to enter into that certain
Guaranty dated as of November 21, 1996 (as in effect immediately prior to the
Closing Date, the "Existing Guaranty").
1.3 The Obligor wishes to amend and restate certain provisions of the 1996
Purchase Agreement pursuant to that certain Amended and Restated Note and
Warrant Purchase Agreement (the "Amended and Restated Purchase Agreement"),
dated as of June 5, 1998, between the Obligor and the Purchaser. Pursuant to the
Amended and Restated Purchase Agreement, the Obligor will authorize and issue
(i) its 10.09% Senior Subordinated Notes due November 22, 2008 (as may be
amended or restated from time to time, the "1998 Notes"), in the aggregate
principal amount of Fifteen Million Dollars ($15,000,000), and (ii) an aggregate
of 3,208 warrants (the "1998 Warrants") to purchase Common Stock, subject to
adjustment under certain circumstances as provided in the Warrant Agreement, as
more particularly described in the Amended and Restated Purchase Agreement.
1.4 In order to induce the Purchaser to purchase the 1998 Notes and the
1998 Warrants and to consent to the amendment and restatement of the 1996
Purchase Agreement, the Obligor has agreed, pursuant to the Amended and Restated
Purchase Agreement, that each Subsidiary (including each of the Guarantors) that
enters into a guaranty of Senior Debt will be required to jointly and severally
guaranty unconditionally all of the obligations of the Obligor under and in
respect of the Notes and the Amended and Restated Purchase Agreement pursuant to
the terms and provisions hereof.
1.5 Each Guarantor will receive direct and indirect economic, financial
and other benefits from the indebtedness incurred under the Amended and Restated
Purchase Agreement and the Notes by the Obligor, and under this Guaranty, and
the incurrence of such indebtedness is in the best interests of each Guarantor.
The Obligor and the Guarantors have explicitly induced the Purchaser to purchase
the Notes and the Warrants based upon and in reliance upon the consolidated
financial condition of the Obligor and the Restricted Subsidiaries, including
the Guarantors.
1.6 All acts and proceedings required by law and by the certificate or
articles of incorporation, as the case may be, and by-laws of each Guarantor
necessary to constitute this Guaranty a valid and binding agreement for the uses
and purposes set forth herein in accordance with its terms have been done and
taken, and the execution and delivery hereof have been in all respects duly
authorized.
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2. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS
2.1 Guarantied Obligations.
Each Guarantor, in consideration of the execution and delivery of the
Amended and Restated Purchase Agreement, the amendment and restatement of the
1996 Purchase Agreement affected thereby and the purchase of the 1998 Notes and
the 1998 Warrants by the Purchaser, subject to Section 2.16, hereby irrevocably,
unconditionally, absolutely, jointly and severally guarantees, on a continuing
basis, to each Noteholder, as and for the Guarantor's own debt, until final and
indefeasible payment has been made:
(a) the due and punctual payment by the Obligor of the principal of,
and interest, and the Yield-Maintenance Amount (if any) on, the Notes at
any time outstanding and the due and punctual payment of all other amounts
payable, and all other indebtedness owing, by the Obligor to the
Noteholders under the Amended and Restated Purchase Agreement and the
Notes, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to mandatory or optional prepayment, by
acceleration or otherwise, all in accordance with the terms and provisions
hereof and thereof; it being the intent of the Guarantors that the
guaranty set forth herein shall be a continuing guaranty of payment and
not a guaranty of collection; and
(b) the punctual and faithful performance, keeping, observance, and
fulfillment by the Obligor of all duties, agreements, covenants and
obligations of the Obligor contained in the Amended and Restated Purchase
Agreement and the Notes.
All of the obligations set forth in subsection (a) and subsection (b) of this
Section 2.1 are referred to herein as the "Guarantied Obligations" and the
guaranty thereof contained herein is a primary, original and immediate
obligation of each Guarantor and is an absolute, unconditional, continuing and
irrevocable guaranty of payment and performance and shall remain in full force
and effect until the full, final and indefeasible payment of the Guarantied
Obligations.
2.2 Performance Under the Amended and Restated Purchase Agreement.
Subject to Section 2.19, in the event the Obligor fails to pay, perform,
keep, observe, or fulfill any Guarantied Obligation in the manner provided in
the Notes or in the Amended and Restated Purchase Agreement, the Guarantors
shall cause forthwith to be paid the moneys, or to be performed, kept, observed,
or fulfilled each of such obligations, in respect of which such failure has
occurred in accordance with the terms and provisions of the Amended and Restated
Purchase Agreement and the Notes.
2.3 Undertakings in Amended and Restated Purchase Agreement.
Subject to the same grace and cure periods as are provided in the Amended
and Restated Purchase Agreement, the Guarantors will comply with each of the
undertakings of the Obligor in the Amended and Restated Purchase Agreement in
respect of which the
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Obligor undertakes to cause the Guarantors (in their capacities, respectively,
as a Guarantor and as a Subsidiary) to comply with such undertakings, as if such
undertakings (as they apply to the Guarantors) were set forth at length herein
as the undertakings of the Guarantors.
2.4 Releases.
Each Guarantor consents and agrees that, without any notice whatsoever to
or by such Guarantor and without impairing, releasing, abating, deferring,
suspending, reducing, terminating or otherwise affecting the obligations of such
Guarantor hereunder, each Noteholder, by action or inaction, may:
(a) compromise or settle, renew or extend the period of duration or
the time for the payment, or discharge the performance of, or may refuse
to, or otherwise not, enforce, or may, by action or inaction, release all
or any one or more parties to, any one or more of the Notes, the Amended
and Restated Purchase Agreement, any other guaranty or agreement or
instrument related thereto or hereto;
(b) assign, sell or transfer, or otherwise dispose of, any one or
more of the Notes;
(c) grant waivers, extensions, consents and other indulgences of any
kind whatsoever to the Obligor or any Other Guarantor in respect of any
one or more of the Notes, the Amended and Restated Purchase Agreement, any
other guaranty or any agreement or instrument related thereto or hereto;
(d) amend, modify or supplement in any manner whatsoever and at any
time (or from time to time) any one or more of the Notes, the Amended and
Restated Purchase Agreement, any other guaranty or any agreement or
instrument related hereto;
(e) release or substitute any one or more of the endorsers or
guarantors of the Guarantied Obligations whether parties hereto or not;
and
(f) sell, exchange, release, surrender or enforce, by action or
inaction, any property at any time pledged or granted as security in
respect of the Guarantied Obligations, whether so pledged or granted by
the Obligor, such Guarantor or any Other Guarantor, or pursuant to any
other guaranty or any agreement or instrument related hereto.
2.5 Waivers.
To the fullest extent permitted by law, each Guarantor does hereby waive:
(a) any notice of
(i) acceptance of this Guaranty;
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(ii) any purchase of the Notes under the Amended and Restated
Purchase Agreement, or the creation, existence or acquisition of any
of the Guarantied Obligations, or the amount of the Guarantied
Obligations, subject to such Guarantor's right to make inquiry of
each Noteholder to ascertain the amount of the Guarantied
Obligations owing to such Noteholder at any reasonable time,
provided that such Guarantor will look solely to the Obligor for the
determination of the identities of the Noteholders;
(iii) any transfer of Notes from one Noteholder to another;
(iv) any adverse change in the financial condition of the
Obligor or any other fact that might increase, expand or affect such
Guarantor's risk hereunder;
(v) presentment for payment, demand, protest, and notice
thereof as to the Notes or any other instrument;
(vi) any Default or Event of Default; and
(vii) any kind or nature whatsoever to which such Guarantor
might otherwise be entitled, other than those specifically required
to be given to such Guarantor pursuant to the terms of this
Guaranty;
(b) the right by statute or otherwise to require any Noteholder to
institute suit against the Obligor or any Other Guarantor or to exhaust
the rights and remedies of any Noteholder against the Obligor or any Other
Guarantor;
(c) the benefit of any stay (except in connection with a pending
appeal), valuation, appraisal, redemption or extension law now or at any
time hereafter in force which, but for this waiver, might be applicable to
any sale of property of the Guarantor made under any judgment, order or
decree based on this Guaranty, and the Guarantor covenants that it will
not at any time insist upon or plead, or in any manner claim or take the
benefit or advantage of such law;
(d) any defense or objection to the absolute, primary, continuing
nature, or the validity or enforceability of, or the amount guaranteed
pursuant to, this Guaranty, including, without limitation, any defense
based on (and the primary, continuing nature, and the validity,
enforceability and amount, of this Guaranty shall be unaffected by), any
of the following:
(i) any change in future conditions;
(ii) any change of law;
(iii) any invalidity or irregularity with respect to the
issuance or assumption of any obligations (including, without
limitation, the Amended
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and Restated Purchase Agreement, the Notes or any agreement or
instrument related hereto) by the Obligor or any other Person;
(iv) the execution and delivery of any agreement at any time
hereafter (including, without limitation, the Amended and Restated
Purchase Agreement, the Notes or any agreement or instrument related
hereto) by the Obligor or any other Person;
(v) the genuineness, validity, regularity or enforceability of
any of the Guarantied Obligations;
(vi) any default, failure or delay, willful or otherwise, in
the performance of any obligations by the Obligor or such Guarantor;
(vii) any creditors' rights, bankruptcy, receivership or other
insolvency proceeding of the Obligor or such Guarantor, or
sequestration or seizure of any property of the Obligor or such
Guarantor, or any merger, consolidation, reorganization,
dissolution, liquidation or winding up or change in corporate
constitution or corporate identity or loss of corporate identity of
the Obligor or such Guarantor;
(viii) any disability or other defense of the Obligor or such
Guarantor to payment and performance of all Guarantied Obligations
other than the defense that the Guarantied Obligations shall have
been fully and finally performed and indefeasibly paid;
(ix) impossibility or illegality of performance on the part of
the Obligor or such Guarantor under the Amended and Restated
Purchase Agreement, the Notes or this Guaranty;
(x) any change of the circumstances of the Obligor, such
Guarantor or any other Person, whether or not foreseen or
foreseeable, whether or not imputable to the Obligor or such
Guarantor, including, without limitation, impossibility of
performance through fire, explosion, accident, labor disturbance,
floods, droughts, embargoes, wars (whether or not declared), civil
commotions, acts of God or the public enemy, delays or failure of
suppliers or carriers, inability to obtain materials, economic or
political conditions, or any other causes affecting performance, or
any other force majeure, whether or not beyond the control of the
Obligor or such Guarantor and whether or not of the kind
hereinbefore specified;
(xi) any attachment, claim, demand, charge, Lien, order,
process, encumbrance or any other happening or event or reason,
similar or dissimilar to the foregoing, or any withholding or
diminution at the source, by reason of any taxes, assessments,
expenses, indebtedness, obligations or liabilities of any character,
foreseen or unforeseen, and whether or not valid, incurred by or
against any Person, or any claims, demands, charges or Liens of any
nature, foreseen or unforeseen, incurred by any Person, or
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against any sums payable under the Amended and Restated Purchase
Agreement, the Notes, or any agreement or instrument related hereto
so that such sums would be rendered inadequate or would be
unavailable to make the payment as herein provided;
(xii) any change in the ownership of the equity securities of
the Obligor, such Guarantor or any other Person liable in respect of
the Notes; or
(xiii) any other action, happening, event or reason whatsoever
that shall delay, interfere with, hinder or prevent, or in any way
adversely affect, the performance by the Obligor or such Guarantor
of any of its obligations under the Amended and Restated Purchase
Agreement, the Notes or this Guaranty.
2.6 Waivers of Subrogation, Reimbursement and Indemnity.
No Guarantor shall have any right of subrogation, reimbursement or
indemnity whatsoever in respect of the Guarantied Obligations, or any right of
recourse to or with respect to any assets or property of the Obligor.
2.7 Invalid Payments.
To the extent the Obligor makes a payment or payments to any Noteholder,
which payment or payments or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required, for any of the
foregoing reasons or for any other reason, to be repaid or paid over to a
custodian, trustee, receiver or any other party or officer under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, state or federal law, or any common law or
equitable cause, then to the extent of such payment or repayment, the obligation
or part thereof intended to be satisfied shall be revived and continued in full
force and effect as if said payment had not been made and each Guarantor shall
be primarily liable for such obligation.
2.8 Marshaling.
Neither any Noteholder nor any Person acting for the benefit of any
Noteholder shall be under any obligation to marshal any assets in favor of any
Guarantor or against or in payment of any or all of the Guarantied Obligations.
2.9 Setoff, Counterclaim or Other Deductions.
Except as otherwise required by law, each payment by any Guarantor shall
be made without setoff, counterclaim or other deduction.
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2.10 Election by Guarantors to Perform Obligations.
Any election by the Guarantor to pay or otherwise perform any of the
obligations of the Obligor under the Notes, the Amended and Restated Purchase
Agreement or any agreement or instrument related hereto shall not release the
Obligor, the Guarantor or any other Guarantor from any of such Person's other
obligations under the Notes, the Amended and Restated Purchase Agreement or any
agreement or instrument related hereto.
2.11 No Election of Remedies by Noteholders.
To the extent provided in the Amended and Restated Purchase Agreement,
each Noteholder shall, individually or collectively, have the right to seek
recourse against each Guarantor to the fullest extent provided for herein for
such Guarantor's obligations under this Guaranty in respect of the Guarantied
Obligations. No election to proceed in one form of action or proceeding, or
against any party, or on any obligation, shall constitute a waiver of such
Noteholder's right to proceed in any other form of action or proceeding or
against other parties (including, without limitation, any Other Guarantor)
unless such Noteholder has expressly waived such right in writing. Specifically,
but without limiting the generality of the foregoing, no action or proceeding by
any Noteholder against the Obligor or any Guarantor under any document or
instrument evidencing obligations of the Obligor or such Guarantor to such
Noteholder shall serve to diminish the liability of such Guarantor under this
Guaranty, except to the extent that such Noteholder finally and unconditionally
shall have realized payment by such action or proceeding in respect of the
Guarantied Obligations.
2.12 Separate Action; Other Enforcement Rights.
Upon acceleration of the Notes of any Noteholder in accordance with
paragraph 9A of the Amended and Restated Purchase Agreement, and subject to
paragraph 9B of the Amended and Restated Purchase Agreement, each of the rights
and remedies granted under this Guaranty to each Noteholder in respect of the
Notes held by such Noteholder may be exercised by such Noteholder without notice
by such Noteholder to, or the consent of or any other action by, any other
Noteholder. Each Noteholder may proceed to protect and enforce this Guaranty by
suit or suits or proceedings in equity, at law or in bankruptcy, and whether for
the specific performance of any covenant or agreement contained herein or in
execution or aid of any power herein granted or for the recovery of judgment for
the obligations hereby guarantied or for the enforcement of any other proper,
legal or equitable remedy available under applicable law.
2.13 Delay or Omission; No Waiver.
No course of dealing on the part of any Noteholder and no delay or failure
on the part of any such Person to exercise any right hereunder shall impair such
right or operate as a waiver of such right or otherwise prejudice such Person's
rights, powers and remedies hereunder. Every right and remedy given by this
Guaranty or by law to any Noteholder may be exercised from time to time as often
as may be deemed expedient by such Person.
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2.14 Restoration of Rights and Remedies.
If any Noteholder shall have instituted any proceeding to enforce any
right or remedy under this Guaranty or under any Note held by such Noteholder,
and such proceeding shall have been dismissed, discontinued or abandoned for any
reason, then and in every such case each such Noteholder, the Obligor and each
Guarantor shall, except as may be limited or affected by any determination
(including, without limitation, any determination in connection with any such
dismissal) in such proceeding, be restored severally and respectively to its
respective former positions hereunder and thereunder, and thereafter, subject as
aforesaid, the rights and remedies of such Noteholders shall continue as though
no such proceeding had been instituted.
2.15 Cumulative Remedies.
No remedy under this Guaranty, the Amended and Restated Purchase
Agreement, or the Notes is intended to be exclusive of any other remedy, but
each and every remedy shall be cumulative and in addition to any and every other
remedy given pursuant to this Guaranty, the Amended and Restated Purchase
Agreement or the Notes.
2.16 Limitation on Guarantied Obligations.
It is the intention of each Guarantor and each Noteholder that the maximum
amount of the obligations of any Guarantor hereunder shall be equal to, but not
in excess of, the amount equal to the lesser of
(a) the Guarantied Obligations, and
(b) the maximum amount permitted by applicable law.
To that end, with respect to the determination of the "maximum amount permitted
by applicable law," but only to the extent such obligations would otherwise be
avoidable, the obligations of each Guarantor hereunder shall be limited to the
maximum amount that, after giving effect to the incurrence thereof, would not
render such Guarantor insolvent or generally unable to pay its debts (within the
meaning of Title 11 of the United States Code or as defined in the analogous
applicable law) as they mature or leave such Guarantor with an unreasonably
small capital. The need for any such limitation shall be determined, and any
such needed limitation shall be effective, at the time or times that such
Guarantor is deemed, under applicable law, to incur obligations hereunder. Any
such limitation shall be apportioned among the Guarantied Obligations owed to
the Noteholders pro rata. This Section 2.16 is intended solely to preserve the
rights of each Noteholder hereunder to the maximum extent permitted by
applicable law, and neither the Guarantors nor any other Person shall have any
rights under this Section 2.16 that it would not otherwise have under applicable
law. For the purposes of this Section 2.16, "insolvency", "unreasonably small
capital" and "inability to pay debts (as so defined) as they mature" shall be
determined in accordance with applicable law.
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2.17 Maintenance of Offices.
The Guarantors will maintain an office at the address set forth in Section
5.3 where notices, presentations and demands in respect of this Guaranty may be
made upon them. Such office will be maintained at such address until such time
as any Guarantor shall notify the Noteholders of any change of location of such
office.
2.18 Further Assurances.
Each Guarantor will cooperate with the Noteholders and execute such
further instruments and documents as the Required Holders shall reasonably
request to carry out, to the reasonable satisfaction of the Required Holders,
the transactions contemplated by the Amended and Restated Purchase Agreement,
this Guaranty and the documents and instruments related thereto.
2.19 Subordination of Guarantied Obligations.
(a) Subordination. Each Noteholder covenants and agrees that the
obligations of each Guarantor under this Guaranty shall be subordinate and
junior in right of payment to the extent set forth in subparagraphs (i) to
(v), inclusive, below, to all obligations of such Guarantor in respect of
Senior Debt of the Obligor (without giving effect to any reduction thereto
necessary to render the obligation of such Guarantor with respect thereto
(as guarantor, obligor or otherwise) not voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer) (such
obligations of the Guarantors being "Guarantor Senior Debt").
(i) If the Obligor shall default in the payment of any
principal of or interest on any Senior Debt when the same becomes
due and payable, whether at maturity or at a date fixed for
prepayment or by declaration of acceleration or otherwise, then,
unless and until such default shall have been remedied by payment in
full in cash or waived, no Noteholder shall accept or receive any
direct or indirect payment from any Guarantor for or on account of
the Guarantied Obligations.
(ii) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Obligor or such
Guarantor, and in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of the Obligor or such
Guarantor, whether or not involving insolvency or bankruptcy
proceedings, then all obligations of the Guarantors in respect of
Guarantor Senior Debt shall first be paid in full in cash before any
payment is made by the Guarantors for or on account of the
Guarantied Obligations.
(iii) During the existence of any default described in
subparagraph (i) above or any proceeding of a type referred to in
subparagraph (ii) above with respect to the Obligor or any
Guarantor, any payment or distribution of any kind or character,
whether in cash, Property, stock or obligations, which
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may be payable or deliverable by such Guarantor in respect of the
Guarantied Obligations, shall be paid or delivered directly to the
Agent (or, if the Bank Credit Agreement is no longer in effect, to a
banking institution selected by the court or Person making the
payment or delivery or designated by any holder of Senior Debt) for
application in payment thereof in accordance with the priorities
then existing among such holders, unless and until all Guarantor
Senior Debt shall have been paid in full in cash, provided, however,
that no such delivery shall be made to the holders of Guarantor
Senior Debt of stock or obligations which are issued pursuant to
reorganization proceedings if such stock or obligations are
subordinate and junior (whether by law or agreement) at least to the
extent provided herein to the payment of all Guarantor Senior Debt
then outstanding and to the payment of any stock or obligations
which are issued in exchange or substitution for any Guarantor
Senior Debt then outstanding.
(iv) No Noteholder shall accept or receive any direct or
indirect payment, by set-off or otherwise, for or on account of the
Guarantied Obligations from any Guarantor, during a period (a
"Stand-Still Period") commencing on the date of receipt by the
Obligor and the Significant Holders of a Stand-Still Notice, and
ending on the earliest of
(A) the date the relevant Subordination Event of Default
shall have been cured or waived in writing by the requisite
holders of the Senior Debt,
(B) the date such Stand-Still Period shall have been
terminated by written notice to the Obligor from the requisite
holders of the Senior Debt, and
(C) the date ninety (90) days from the date of receipt
of the applicable Stand-Still Notice.
Notwithstanding the foregoing, (x) during any three hundred
sixty-five (365) day period, the aggregate number of days during
which Stand-Still Periods may be in effect shall not exceed one
hundred eighty (180) days, and (y) in the case of any payment for or
on account of this Guaranty which would (in the absence of the
delivery of any such Stand-Still Notice) have been due and payable
on any date during any Stand-Still Period, the provisions of this
subparagraph (iv) shall not prevent such payment from being made by
any Guarantor on or after the date immediately following the last
day of such Stand-Still Period unless another Stand-Still Period
shall then be in effect.
(v) If any payment or distribution of any character, whether
in cash, Securities or other Property, shall be received by any
Noteholder from any Guarantor in contravention of any of the terms
herein and before all the Guarantor Senior Debt shall have been paid
in full in cash, such payment or distribution shall be received in
trust for the benefit of the
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holders of the Guarantor Senior Debt at the time outstanding and
shall forthwith be paid over or transferred to the Agent (or, if the
Bank Credit Agreement is no longer in effect, to the holders of the
Guarantor Senior Debt).
(b) Limitation on Remedies. So long as any Guarantor Senior Debt
remains outstanding, no Noteholder may
(i) demand payment of, or take any action to collect, amounts
owing under this Guaranty, or
(ii) commence any administrative, legal or equitable action
against any Guarantor, including filing or joining in the filing of
any insolvency petition against any Guarantor,
prior to the earlier of
(x) the fifteenth (15th) day after the date upon which any
Noteholder shall have given written notice to the holders of
Guarantor Senior Debt (or the Agent) of their intention to take such
action, or
(y) the acceleration of any Senior Debt;
provided, however, that no Noteholder may take any action described in
clause (i) or clause (ii) of this Section 2.19(b) during a Stand-Still
Period (so long as the Senior Debt shall not have been accelerated during
such Stand-Still Period).
(c) Obligations of the Guarantors Unconditional. The provisions of
this Section 2.19 are for the purpose of defining the relative rights of
the holders of Guarantor Senior Debt on the one hand, and the Noteholders
on the other hand, against the Guarantors and their respective Properties,
and nothing herein shall impair, as between each Guarantor and the
Noteholders, the obligation of each Guarantor, which is unconditional and
absolute, to pay to the Noteholders thereof all amounts on account of the
Guarantied Obligations in accordance with their terms and the provisions
of the Amended and Restated Purchase Agreement and the Notes, nor shall
anything herein (other than Section 2.19(b)) prevent any Noteholder from
exercising all remedies otherwise permitted by applicable law or hereunder
upon acceleration of the Notes of such Noteholder in accordance with
paragraph 9A of the Amended and Restated Purchase Agreement (including,
without limitation, the right to make demand upon the Guarantors for
payment of the Guarantied Obligations and sue for any failure to make such
payment) subject to the rights, if any, of holders of Guarantor Senior
Debt to receive cash, Property, stock or obligations otherwise payable or
deliverable by the Guarantors to the Noteholders.
(d) Subrogation. Upon payment in full in cash of all Guarantor
Senior Debt, the Noteholders shall be subrogated to the rights of the
holders of the Guarantor Senior Debt to receive payments or distributions
of assets of the
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Guarantors made on the Guarantor Senior Debt until the Guarantied
Obligations shall be paid in full, and, for the purposes of such
subrogation, no payments to the holders of Guarantor Senior Debt of any
cash, Property, stock or obligations to which the Noteholders would be
entitled except for the provisions of Section 2.19(a) above shall, as
between each Guarantor, its creditors (other than the holders of the
Guarantor Senior Debt) and the Noteholders, be deemed to be a payment by
such Guarantor for or on account of Guarantor Senior Debt.
(e) Other Guarantor Debt. Except as provided in this Section 2.19,
each Guarantor covenants that its obligations under this Guaranty do and
will rank at least pari passu with all its other present and future
unsecured Debt that is not in any manner subordinated in right of payment
or security in any respect to the Debt evidenced by this Guaranty or to
any other Debt of such Guarantor.
3. INTERPRETATION OF THIS GUARANTY
3.1 Terms Defined.
As used in this Guaranty, the capitalized terms have the respective
meanings specified in the Amended and Restated Purchase Agreement unless
otherwise specified below or set forth in the section of this Guaranty referred
to immediately following such term (such definitions, unless otherwise expressly
provided, to be equally applicable to both the singular and plural forms of the
terms defined):
A-Block Arizona -- has the meaning assigned to such term in the first
paragraph hereof.
A-Block California -- has the meaning assigned to such term in the first
paragraph hereof.
Affiliate -- means, with respect to any Person, any other Person that
directly or indirectly controls, or is controlled by, or is under direct or
indirect common control with, such first Person. For purposes of this Guaranty,
Restricted Subsidiaries shall not constitute "Affiliates" of the Obligor. A
Person shall be deemed to control another Person if such first Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities or other equity interests, by contract or otherwise. In the
case of a partnership, such partnership and all partners therein shall be deemed
to be Affiliates of each other.
Agent -- means, at any time, the agent for the Banks under the Bank Credit
Agreement at such time.
Amended and Restated Purchase Agreement -- Section 1.3.
Bank Credit Agreement -- means that certain Third Amended and Restated
Credit Agreement, dated as of June 5, 1998, by and among the Obligor, Bank of
America
13
<PAGE>
Illinois, as agent, and the other financial institutions signatory thereto, as
amended from time to time.
Beck -- has the meaning assigned to such term in the first paragraph
hereof.
BHY -- has the meaning assigned to such term in the first paragraph
hereof.
Big Horn -- has the meaning assigned to such term in the first paragraph
hereof.
Bradley -- has the meaning assigned to such term in the first paragraph
hereof.
Common Stock -- Section 1.1.
Cox Rock -- has the meaning assigned to such term in the first paragraph
hereof.
Cox Transport -- has the meaning assigned to such term in the first
paragraph hereof.
Default -- has the meaning assigned to it in paragraph 13B of the Amended
and Restated Purchase Agreement.
DeKalb -- has the meaning assigned to such term in the first paragraph
hereof.
Event of Default -- has the meaning assigned to it in paragraph 13B of the
Amended and Restated Purchase Agreement.
Existing Guaranty -- Section 1.2.
Fair Value -- means the total amount at which the assets of the Obligor
and the Borrower would likely sell as part of a going concern, and for continued
use as part of a going concern, within a commercially reasonable period of time
and to one or more willing buyers with neither party being under any compulsion
to buy or sell and with all parties having reasonable knowledge of the facts.
Falcon -- has the meaning assigned to such term in the first paragraph
hereof.
Geodyne -- has the meaning assigned to such term in the first paragraph
hereof.
Guarantied Obligations -- Section 2.1.
Guarantor -- has the meaning assigned to such term in the first paragraph
hereof.
Guarantor Senior Debt -- Section 2.19(a).
Guaranty, this -- has the meaning assigned to such term in the first
paragraph hereof.
14
<PAGE>
Jensen -- has the meaning assigned to such term in the first paragraph
hereof.
Mohave Arizona -- has the meaning assigned to such term in the first
paragraph hereof.
Mohave Nevada -- has the meaning assigned to such term in the first
paragraph hereof.
Monroc -- has the meaning assigned to such term in the first paragraph
hereof.
Mulberry -- has the meaning assigned to such term in the first paragraph
hereof.
Noteholder -- means, at any time, each Person that is the holder of any
Note at such time.
1996 Notes -- Section 1.1.
1996 Purchase Agreement -- Section 1.1.
1996 Warrants -- Section 1.1.
1998 Notes -- Section 1.3.
1998 Warrants -- Section 1.3.
Notes -- means the 1996 Notes and the 1998 Notes.
Obligor -- Section 1.1.
Other Guarantors -- means, at any time with respect to any Guarantor, each
other Guarantor and all other guarantors of the Obligor's obligations under the
Amended and Restated Purchase Agreement and the Notes at such time.
Property -- means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
Purchaser -- Section 1.1.
Restricted Subsidiary -- means, at any time,
(i) a corporation incorporated in the United States of America of
which the Obligor owns, directly or indirectly, eighty percent (80%) or
more of the Voting Stock of such corporation at such time; and
(ii) Dekalb, provided that the Obligor owns, directly or indirectly,
seventy percent (70%) or more of the Voting Stock of Dekalb at such time.
15
<PAGE>
Sandia -- has the meaning assigned to such term in the first paragraph
hereof.
Senior Debt -- has the meaning assigned to it in paragraph 12E of the
Amended and Restated Purchase Agreement.
Significant Holders -- means, at any time, (a) The Prudential Insurance
Company of America and (b) each other Noteholder holding at least ten percent
(10%) of the aggregate principal amount of the Notes at such time outstanding,
exclusive of Notes owned by the Obligor, any Subsidiary or any Affiliate.
Southern -- has the meaning assigned to such term in the first paragraph
hereof.
Southern Nevada -- has the meaning assigned to such term in the first
paragraph hereof.
SRM -- has the meaning assigned to such term in the first paragraph
hereof.
Stand-Still Notice -- means the notice referred to in paragraph 12A(iv) of
the Amended and Restated Purchase Agreement and defined in paragraph 12E of the
Amended and Restated Purchase Agreement.
Stand-Still Period -- Section 2.19(a)(iv).
Subordination Event of Default -- means (i) any default in the payment of
any principal of or interest on any Senior Debt owing under any single
instrument when the same becomes due and payable, or (ii) any event of default
or unmatured event of default under any agreement evidencing Senior Debt (other
than as a result of any non-payment of any amount owing in respect of such
Senior Debt).
Subsidiary -- means, at any time, a corporation of which the Obligor owns,
directly or indirectly, more than fifty percent (50%) of the Voting Stock at
such time.
Treasure -- has the meaning assigned to such term in the first paragraph
hereof.
Tri-State -- has the meaning assigned to such term in the first paragraph
hereof.
Valley -- has the meaning assigned to such term in the first paragraph
hereof.
Voting Stock -- means, with respect to any corporation, any shares of
capital stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
Warrant Agreement -- means that certain Warrant Agreement, dated as of
June 5, 1998, between the Obligor and the Purchaser.
Warrants -- means the 1996 Warrants and the 1998 Warrants.
16
<PAGE>
Western Aggregates -- has the meaning assigned to such term in the first
paragraph hereof.
Western Rock -- has the meaning assigned to such term in the first
paragraph hereof.
3.2 Section Headings and Construction.
(a) Section Headings, etc. The titles of the Sections appear as a
matter of convenience only, do not constitute a part hereof and shall not
affect the construction hereof. The words "herein," "hereof," "hereunder"
and "hereto" refer to this Guaranty as a whole and not to any particular
Section or other subdivision.
(b) Construction. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each
other covenant contained herein, and compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with one or more other covenants.
4. WARRANTIES AND REPRESENTATIONS
Each Guarantor represents and warrants to each Purchaser, as of the date
of effectiveness hereof, as follows:
4.1 Generally.
(a) Such Guarantor is fully aware of the financial condition of the
Obligor. Such Guarantor delivers this Guaranty based solely upon its own
independent investigation and in no part upon any representation or
statement of any one or more Noteholders with respect thereto. Such
Guarantor is in a position to obtain, and hereby assumes full
responsibility for obtaining, any additional information concerning the
financial condition of the Obligor as such Guarantor may deem material to
its obligations hereunder, and such Guarantor is not relying upon, nor
expecting, any Noteholder to furnish it any information concerning the
financial condition of the Obligor.
(b) There are no presently pending material court or administrative
proceedings or undischarged judgments against such Guarantor; and no tax
liens have been filed or, to the best of such Guarantor's knowledge,
threatened against such Guarantor, nor is such Guarantor in default under
any agreement for borrowed money.
(c) Such Guarantor is a corporation duly organized and existing in
good standing under the laws of its jurisdiction of incorporation. Such
Guarantor has the corporate power to own its properties and carry on its
business as it is now being conducted. Such Guarantor has the valid
authority and the corporate power to enter into and perform, and has taken
all necessary action to authorize its entry
17
<PAGE>
into, and the performance and delivery of, this Guaranty and the
transactions contemplated hereby.
(d) This Guaranty has been duly authorized by all necessary action
on the part of such Guarantor, has been duly executed and delivered by
duly authorized officers of such Guarantor, and constitutes a legal, valid
and binding obligation of such Guarantor.
(e) The entry into and performance of this Guaranty and the
transactions contemplated hereby do not conflict with any applicable law
or regulation or official or judicial order, conflict with the articles or
certificate of incorporation, as the case may be, or by-laws, of such
Guarantor, conflict with any agreement or document to which such Guarantor
is a party or that is binding upon it or any of its properties, or result
in the creation or imposition of any Lien on any of its properties
pursuant to the provisions of any agreement or document.
4.2 Nature of Business of Obligor and Subsidiaries.
The Obligor and the Subsidiaries have sought and obtained the Amended and
Restated Purchase Agreement, the sale of the Notes and the Warrants and the
related transactions based upon their consolidated financial position and the
Obligor and the Subsidiaries understand that the Purchaser is relying upon the
consolidated financial condition of the Obligor and the Subsidiaries in
purchasing the Notes and the Warrants. Nothing herein shall be deemed to
prohibit any transfer by the Obligor or any Subsidiary of any of its or a
Subsidiary's stock otherwise permitted under the terms and provisions of the
Amended and Restated Purchase Agreement.
4.3 Solvency.
The Fair Value of the business and assets of each of the Obligor and the
Guarantors exceeds the amount that will be required to pay its liabilities
(including, without limitation, contingent, subordinated, unmatured and
unliquidated liabilities on existing debts, as such liabilities may become
absolute and matured), in each case after giving effect to the transactions
contemplated by the Amended and Restated Purchase Agreement, the Notes and this
Guaranty, including, without limitation, the provisions of Section 2.16. None of
the Guarantors nor the Obligor, after giving effect to the transactions
contemplated by the Amended and Restated Purchase Agreement, the Notes and this
Guaranty, will be insolvent, be generally unable to pay its debts (within the
meaning of Title 11 of the United States Code or as defined in the analogous
applicable law) as they mature or will be engaged in any business or
transaction, or about to engage in any business or transaction, for which such
Person has unreasonably small assets or capital (within the meaning of the
Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act and
Section 548 of Title 11 of the United States Code), and none of the Guarantors
nor the Obligor has any intent to hinder, delay or defraud any entity to which
it is, or will become, on or after the date of the Closing, indebted or incur
debts that would be beyond its ability to pay as they mature.
18
<PAGE>
5. MISCELLANEOUS
5.1 Successors and Assigns.
(a) Whenever any Guarantor or any of the parties to the Amended and
Restated Purchase Agreement is referred to, such reference shall be deemed
to include the successors and assigns of such party, and all the
covenants, promises and agreements contained in this Guaranty by or on
behalf of such Guarantor shall bind the successors and assigns of such
Guarantor and shall inure to the benefit of each of the Noteholders from
time to time whether so expressed or not and whether or not an assignment
of the rights hereunder shall have been delivered in connection with any
assignment or other transfer of Notes.
(b) Each Guarantor agrees to take such action as may be reasonably
requested by any Noteholder to confirm such Guarantor's guaranty of the
Guarantied Obligations in connection with the transfer of the Notes of
such Noteholder.
5.2 Partial Invalidity.
The unenforceability or invalidity of any provision or provisions hereof
shall not render any other provision or provisions contained herein
unenforceable or invalid.
5.3 Communications.
(a) Method; Address. All communications hereunder shall be in
writing, shall be delivered in the manner required by the Amended and
Restated Purchase Agreement, and shall be addressed, if to the Guarantors,
at the address set forth on Annex 1 hereto, and if to any of the
Noteholders:
(A) if such Noteholder is a Purchaser, at the address set
forth on Annex 1 to the Amended and Restated Purchase Agreement for
such Noteholder, and further including any parties referred to on
such Annex 1 which are required to receive notices in addition to
such Noteholder, and
(B) if such Noteholder is not a Purchaser, at the address set
forth in the register for the registration and transfer of Notes or
Warrants maintained pursuant to paragraph 14D of the Amended and
Restated Purchase Agreement for such Noteholder,
or to any such party at such other address as such party may designate by
notice duly given in accordance with this Section 5.3.
(b) When Given. Any communication addressed and delivered as herein
provided shall be deemed to be received when actually delivered to the
address of the addressee (whether or not delivery is accepted) or received
by the telecopy machine of the recipient. Any communication not so
addressed and delivered shall be ineffective.
19
<PAGE>
5.4 Governing Law.
THIS GUARANTY SHALL BE CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE
WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
5.5 Effective Date.
This Guaranty shall be effective as of the date hereof.
5.6 Benefits of Guaranty Restricted to Noteholders and Banks.
Nothing express or implied in this Guaranty is intended or shall be
construed to give to any Person other than the Guarantors and the Noteholders
any legal or equitable right, remedy or claim under or in respect hereof or any
covenant, condition or provision therein or herein contained, and all such
covenants, conditions and provisions are and shall be held to be for the sole
and exclusive benefit of the Guarantors and the Noteholders; provided that the
provisions set forth in Section 2.19 shall also be for the benefit of the Agent
and the Banks.
5.7 Survival of Representations and Warranties; Entire Agreement.
All representations and warranties contained herein or made in writing by
the Guarantors in connection herewith shall survive the execution and delivery
hereof. All representations and warranties contained in the Existing Guaranty or
made in writing by the Guarantors that are party thereto (as an original party
to the Existing Guaranty, as a party by execution of a Joinder Agreement
attached as Annex 2 to the Existing Guaranty or otherwise) in connection
therewith shall survive the execution and delivery of this Guaranty.
5.8 Expenses.
(a) The Guarantors agree, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save each Purchaser
and any Transferee harmless against liability for the payment of, all
out-of-pocket expenses arising in connection with such transactions,
including (i) all document production and duplication charges and the fees
and expenses of any special counsel engaged by such Purchaser or such
Transferee in connection with this Guaranty, the transactions contemplated
hereby and any subsequent proposed modification of, or proposed consent
under, this Guaranty, whether or not such proposed modification shall be
effected or proposed consent granted, and (ii) the costs and expenses,
including attorneys' fees, incurred by such Purchaser or such Transferee
in enforcing (or determining whether or how to enforce) any rights under
this Guaranty or the Notes or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Guaranty or the transactions contemplated hereby or by reason of such
Purchaser's or such Transferee's having acquired any Note, including
without limitation costs and expenses incurred in any bankruptcy case;
provided, however, that the obligations
20
<PAGE>
of the Guarantors under this Section 5.8(a) (x) shall not include the
payment of any fees or expenses arising in connection with any
investigation or proceeding relating to the legal or regulatory status of
any Noteholder, and (y) shall be subordinate and junior in right of
payment under Section 2.19 in the manner and to the same extent as the
Guarantied Obligations.
(b) If the Guarantors shall fail to pay when due any principal of,
or Yield-Maintenance Amount or interest on, any Note, the Guarantors shall
pay to each Noteholder, to the extent permitted by law, such amounts as
shall be sufficient to cover the costs and expenses, including but not
limited to reasonable attorneys' fees, incurred by such Noteholder in
collecting any sums due on such Notes.
5.9 Amendment.
This Guaranty may be amended only in a writing executed by the Guarantors
and the Required Holders. Notwithstanding the foregoing, no amendment may be
made to Section 2.19 (or this sentence) without the consent of the Agent and the
Required Banks (as defined in the Bank Credit Agreement).
5.10 Jurisdiction; Jury Trial.
EACH OF THE GUARANTORS HERETO IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW
YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY OR ANY OF THE OTHER DOCUMENTS AND INSTRUMENTS CONTEMPLATED HEREBY AND
EACH OF THE GUARANTORS HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT. NONE OF THE GUARANTORS HERETO SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT
OF OR OTHERWISE RELATED TO THIS GUARANTY OR ANY OF THE NOTES AND EACH OF THE
GUARANTORS HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND
ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY SUCH
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 5.10.
5.11 Survival.
So long as the Guarantied Obligations and all payment obligations of the
Guarantors hereunder shall not have been fully and finally performed and
indefeasibly paid, the obligations of the Guarantors hereunder shall survive the
transfer and payment of any Note and the payment in full of all the Notes.
5.12 Entire Agreement.
This Guaranty constitutes the final written expression of all of the terms
hereof and is a complete and exclusive statement of those terms.
21
<PAGE>
5.13 Duplicate Originals, Execution in Counterpart.
Two or more duplicate originals hereof may be signed by the parties, each
of which shall be an original but all of which together shall constitute one and
the same instrument. This Guaranty may be executed in one or more counterparts
and shall be effective as to each party hereto when at least one counterpart
shall have been executed by such party, and each set of counterparts that,
collectively, show execution by each party hereto shall constitute one duplicate
original.
5.14 Additional Guarantors.
In addition to SRM, Southern, Western Aggregates, Western Rock, Cox Rock,
Cox Transport, Jensen, Sandia, Southern Nevada, Mohave Nevada, Mohave Arizona,
A-Block Arizona, A-Block California, Valley, Dekalb, Geodyne, Falcon, Beck,
Mulberry, BHY, Bradley, Tri-State, Big Horn, Treasure and Monroc, other
Subsidiaries may become Guarantors hereunder in accordance with the terms of the
Amended and Restated Purchase Agreement, by execution of the form of Joinder
Agreement attached hereto as Annex 2.
5.15 Release of Guarantors.
Without any action required of any Noteholder, but subject to Section 2.7,
any Guarantor shall be released from its obligations under this Guaranty upon
the disposition of such Guarantor pursuant to paragraph 8H or 8I of the Amended
and Restated Purchase Agreement, provided that immediately after giving effect
to such designation or disposition, as the case may be, no Default or Event of
Default under the Amended and Restated Purchase Agreement would exist. The
Noteholders shall, at the expense of the Obligor or said Guarantor, execute and
deliver such documents as may be reasonably necessary to evidence such release.
[Remainder of page intentionally blank. Next page is signature page.]
22
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
on its behalf by one of its duly authorized officers.
SRM HOLDINGS CORP.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: President,
SOUTHERN READY MIX, INC.
By /s/ Cecil F. Greene
---------------------------------
Name: Cecil F. Greene
Title: CEO
WESTERN AGGREGATES
HOLDING CORP.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
WESTERN ROCK PRODUCTS
CORPORATION
By /s/ Darrell G. Whitney
---------------------------------
Name: Darrell G. Whitney
Title: President
<PAGE>
COX ROCK PRODUCTS, INCORPORATED
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
COX TRANSPORT CORPORATION
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
JENSEN CONSTRUCTION &
DEVELOPMENT, INC.
By /s/ Darrell G. Whitney
---------------------------------
Name: Darrell G. Whitney
Title: President
SANDIA CONSTRUCTION, INC.
By /s/ Darrell G. Whitney
---------------------------------
Name: Darrell G. Whitney
Title: President
SOUTHERN NEVADA AGGREGATES, INC.
By /s/ Darrell G. Whitney
---------------------------------
Name: Darrell G. Whitney
Title: President
<PAGE>
MOHAVE CONCRETE AND MATERIALS,
INC. (NEVADA)
By /s/ Darrell G. Whitney
---------------------------------
Name: Darrell G. Whitney
Title: President
MOHAVE CONCRETE AND MATERIALS,
INC. (ARIZONA)
By /s/ Darrell G. Whitney
---------------------------------
Name: Darrell G. Whitney
Title: President
A-BLOCK COMPANY, INC.
(ARIZONA)
By /s/ Darrell G. Whitney
---------------------------------
Name: Darrell G. Whitney
Title: President
A-BLOCK COMPANY, INC. (CALIFORNIA)
By /s/ Darrell G. Whitney
---------------------------------
Name: Darrell G. Whitney
Title: President
<PAGE>
VALLEY ASPHALT, INC.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
DEKALB STONE, INC.
By /s/ Cecil F. Greene
---------------------------------
Name: Cecil F. Greene
Title: President
GEODYNE TRANSPORT, INC.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
FALCON RIDGE CONSTRUCTION, INC.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
BECK PAVING, INC.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
<PAGE>
MULBERRY ROCK CORPORATION
By /s/ Cecil F. Greene
---------------------------------
Name: Cecil F. Greene
Title: President
BHY READY MIX, INC.
By /s/ Cecil F. Greene
---------------------------------
Name: Cecil F. Greene
Title: President
BRADLEY STONE & SAND, INC.
By /s/ Cecil F. Greene
---------------------------------
Name: Cecil F. Greene
Title: President
TRI-STATE TESTING LABORATORIES, INC.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
BIG HORN REDI MIX, INC.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
<PAGE>
TREASURE VALLEY CONCRETE, INC.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
MONROC, INC.
By /s/ Michael J. Stone
---------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
<PAGE>
Annex 1
Address of Guarantors
The Address of each Guarantor is:
SRM Holdings Corp.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Southern Ready Mix, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Western Aggregates Holding Corp.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Western Rock Products Corporation
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Cox Rock Products, Incorporated
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Cox Transport Corporation
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Jensen Construction & Development, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Annex 1-1
<PAGE>
Sandia Construction, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Southern Nevada Aggregates, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Mohave Concrete and Materials, Inc. (Nevada)
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Mohave Concrete and Materials, Inc. (Arizona)
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
A-Block Company, Inc. (Arizona)
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
A-Block Company, Inc. (California)
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Valley Asphalt, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
DeKalb Stone, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Annex 1-2
<PAGE>
Geodyne Transport, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Falcon Ridge Construction, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Beck Paving, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Mulberry Rock Corporation
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
BHY Ready Mix, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Bradley Stone & Sand, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Tri-State Testing Laboratories, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Big Horn Redi Mix, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Annex 1-3
<PAGE>
Treasure Valley Concrete, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Monroc, Inc.
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Annex 1-4
<PAGE>
Annex 2
[FORM OF JOINDER AGREEMENT]
[DATE]
To each of the Noteholders (as defined in the Amended and
Restated Guaranty hereinafter referred to)
Ladies and Gentlemen:
Reference is made to the Amended and Restated Guaranty dated as of June 5,
1998 (as amended or restated from time to time, the "Guaranty"), among SRM
HOLDINGS CORP., a Delaware corporation, SOUTHERN READY MIX, INC., an Alabama
corporation, WESTERN AGGREGATES HOLDING CORP., a Delaware corporation, WESTERN
ROCK PRODUCTS CORPORATION, a Utah corporation, COX ROCK PRODUCTS, INCORPORATED,
a Utah corporation, COX TRANSPORT CORPORATION, a Utah corporation, JENSEN
CONSTRUCTION & DEVELOPMENT, INC., a Nevada corporation, SANDIA CONSTRUCTION,
INC., a Nevada corporation, SOUTHERN NEVADA AGGREGATES, INC., a Nevada
corporation, MOHAVE CONCRETE AND MATERIALS, INC. a Nevada corporation, MOHAVE
CONCRETE AND MATERIALS, INC., an Arizona corporation, A-BLOCK COMPANY, INC., an
Arizona corporation, A-BLOCK COMPANY, INC., a California corporation, VALLEY
ASPHALT, INC., a Utah corporation, DEKALB STONE, INC., a Georgia corporation,
GEODYNE TRANSPORT, INC., a Utah corporation, FALCON RIDGE CONSTRUCTION, INC., a
Utah corporation, BECK PAVING, INC., a Utah corporation, MULBERRY ROCK
CORPORATION, a Georgia corporation, BHY READY MIX, INC., a Tennessee
corporation, BRADLEY STONE & SAND, INC., a Tennessee corporation, TRI-STATE
TESTING LABORATORIES, INC., a Utah corporation, BIG HORN REDI MIX, INC., a
Wyoming corporation, TREASURE VALLEY CONCRETE, INC., an Idaho corporation,
MONROC, INC., a Delaware corporation, in favor of each of the Noteholders.
Capitalized terms used herein and not otherwise defined have the meanings
ascribed to such terms in the Guaranty.
[NEW GUARANTOR], a [jurisdiction of incorporation] corporation (the
"Company"), agrees with you as follows:
1. Guaranty. The Company hereby unconditionally and expressly agrees to
become a party to the Guaranty and to perform and observe each and every one of
the covenants, agreements, terms, conditions, obligations, duties and
liabilities of a Guarantor thereunder, and that all references to the Guarantors
in the Guaranty or any document, instrument or agreement executed and delivered
or furnished, or to be executed and delivered or furnished, in connection
therewith shall be deemed to be references which include the Company, as a
Guarantor.
Annex 2-1
<PAGE>
2. Warranties and Representations. The Company hereby warrants and
represents that each of the warranties and representations set forth in Sections
4.1 through 4.3, inclusive, of the Guaranty, are true and correct with respect
to the Company as of the date hereof and such warranties and representations are
incorporated by reference herein in their entirety. Such representations and
warranties shall survive the execution and delivery hereof.
3. Further Assurances. The Company agrees to cooperate with the
Noteholders and execute such further instruments and documents as the Required
Holders shall reasonably request to effect, to the reasonable satisfaction of
the Required Holders, the purposes of this Agreement.
4. Amendment. This Agreement may be amended only in a writing executed by
the Company and the Required Holders unless such amendment shall affect Section
2.19 of the Guaranty, in which event the written consent of the Agent and the
Required Banks (as defined in the Bank Credit Agreement) shall also be
necessary.
5. Binding Effect. This Agreement shall be binding upon the Company and
shall inure to the benefit of the Noteholders and their respective successors
and assigns.
6. Governing Law; Submission to Jurisdiction; Agent for Service of
Process. This Agreement shall be construed, interpreted and enforced in
accordance with, and governed by, the internal laws of the State of New York.
The provisions of Section 5.10 of the Guaranty shall apply to this Agreement as
if each reference to "this Guaranty" therein were a reference to this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by one of its duly authorized officers.
[NEW GUARANTOR] CORPORATION
By
---------------------------------
Name:
Title:
Annex 2-2
<PAGE>
REGISTRATION RIGHTS AND STOCKHOLDERS' AGREEMENT
This REGISTRATION RIGHTS AND STOCKHOLDERS' AGREEMENT, dated as of November
21, 1996, is made by and among each of U.S. AGGREGATES, INC., a Delaware
corporation (together with its successors and assigns, the "Company"), JAMES A.
HARRIS ("Harris"), MICHAEL J. STONE ("Stone;" Stone and Harris being
collectively referred to herein as "Senior Management"), GOLDER, THOMA, CRESSEY,
RAUNER FUND IV, L.P., a Delaware limited partnership (the "Investor"), and THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential"). Capitalized terms used
herein have the meanings ascribed thereto in Section 13.
Senior Management and the Investor have previously acquired shares of the
voting common stock, $.01 par value, of the Company. Prudential is acquiring
warrants to purchase Common Stock pursuant to a Note and Warrant Purchase
Agreement, dated as of even date herewith (the "Note Agreement"), between
Prudential and the Company, subject to the condition, inter alia, that this
Agreement shall be executed and delivered by the parties hereto.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Incidental Registration.
(a) Filing of Registration Statement. If the Company at any time
proposes to register any of its Common Stock (a "Registration") under the
Securities Act (other than pursuant to a registration statement on Form
S-4 or Form S-8 or any successor forms thereto, in connection with an
offer made solely to existing Security holders or employees of the
Company), for sale to the public in a Public Offering, it will, on each
such occasion, give prompt written notice to all holders of Registrable
Securities of its intention to do so, which notice shall be given to all
such holders at least thirty (30) Business Days prior to the date that a
registration statement relating to such registration is proposed to be
filed with the SEC. Upon the written request of any such holder to include
its shares under such registration statement (which request shall be made
within fifteen (15) Business Days after the receipt of any such notice and
shall specify the Registrable Securities intended to be disposed of by
such holder), the Company will use its best efforts to effect the
registration of all Registrable Securities that the Company has been so
requested to register by such holder; provided, however, that if, at any
time after giving written notice of its intention to register any Common
Stock and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any
reason not to register such Common Stock, the Company may, at its
election, give written notice of such determination to each such holder
and, thereupon, shall be relieved of its obligation to register any
Registrable Securities of such Persons in connection with such
registration.
<PAGE>
(b) Selection of Underwriters. Notice of the Company's intention to
register such Common Stock shall designate the proposed underwriters of
such offering (which shall be one or more underwriting firms of recognized
standing) and shall contain the Company's agreement to use its best
efforts, if requested to do so, to arrange for such underwriters to
include in such underwriting the Registrable Securities that the Company
has been so requested to sell pursuant to this Section 1, it being
understood that the holders of Registrable Securities shall have no right
to select different underwriters for the disposition of their Registrable
Securities.
(c) Priority on Incidental Registrations. If the managing
underwriter shall advise the Company in writing (with a copy to each
holder of Registrable Securities requesting sale) that, in such
underwriter's opinion, the number of shares of Common Stock requested to
be included in such Registration exceeds the number that can be sold in
such offering within a price range acceptable to the Company (such writing
to state the basis of such opinion and the approximate number of shares of
Common Stock that may be included in such offering without such effect),
the Company will include in such Registration, to the extent of the number
of shares of Common Stock that the Company is so advised can be sold in
such offering:
(i) in the case of any registration initiated by the Company
for the purpose of selling Common Stock for its own account:
(A) first, the shares that the Company proposes to issue
and sell for its own account,
(B) second, the Registrable Securities requested to be
sold by members of the Registrable Securityholder Group, on
the one hand, and the Issuable Shares requested to be sold by
the Equity Securityholder Group, on the other hand, ratably in
accordance with the number of Issuable Shares requested to be
so sold by each such Group, and
(C) third, other Securities of the Company requested to
be included in such Registration; and
(ii) in the case of a registration initiated by any member of
the Equity Securityholder Group:
(A) first, the Registrable Securities requested to be
sold by members of the Registrable Securityholder Group, on
the one hand, and the Issuable Shares requested to be sold by
the Equity Securityholder Group, on the other hand, ratably in
accordance with the number of Issuable Shares requested to be
so sold by each such Group, and
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<PAGE>
(B) second, other Securities of the Company requested to
be included in such Registration.
Shares of Registrable Securities to be included in any Registration to
which this Section 1(c) shall apply shall be allocated ratably among the
members of the Registrable Securityholder Group in accordance with the
number of shares each such member has proposed to include in such
Registration.
2. Registration Procedures. The Company will use its best efforts to
effect each Registration, and to cooperate with the sale of Registrable
Securities in accordance with the intended method of disposition thereof, as
quickly as practicable, and the Company will as expeditiously as possible:
(a) subject to the proviso to Section 1(a), prepare and file with
the SEC the registration statement and use its best efforts to cause the
Registration to become effective; provided, however, that before filing
any registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the holders of the Registrable
Securities covered by such registration statement, their counsel, and the
underwriters, if any, and their counsel, successive drafts of all such
documents proposed to be filed at such times as will permit a reasonable
period for the review thereof; the Company will not file any registration
statement or amendment thereto or any prospectus or any supplement thereto
(including such documents incorporated by reference) to which the
Requisite Holders shall reasonably object based on their review of such
drafts;
(b) subject to the proviso to Section 1(a), prepare and file with
the SEC such amendments and post-effective amendments to any registration
statement and any prospectus used in connection therewith as may be
necessary to keep such registration statement effective until the earlier
of (i) one hundred twenty (120) days following the effective date of such
registration statement or (ii) the sale of all Registrable Securities
covered thereby, and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by
such registration statement; and cause the prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act;
(c) furnish to each holder of Registrable Securities included in
such Registration and the underwriter or underwriters, if any, without
charge, at least one (1) signed copy of the registration statement and any
post-effective amendment thereto, upon request, and such number of
conformed copies thereof and such number of copies of the prospectus
(including each preliminary prospectus and each prospectus filed under
Rule 424 under the Securities Act), any amendments or supplements thereto
and any documents incorporated by reference therein, as such holder or
underwriter may reasonably request in order to facilitate the disposition
of the Registrable Securities being sold by such holder (it being
understood that the Company consents to the use of the prospectus and any
amendment or supplement
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<PAGE>
thereto by each holder of Registrable Securities covered by such
registration statement and the underwriter or underwriters, if any, in
connection with the offering and sale of the Registrable Securities
covered by the prospectus or any amendment or supplement thereto);
(d) notify each holder of the Registrable Securities of any stop
order or other order suspending the effectiveness of any registration
statement issued or threatened by the SEC in connection therewith, and
take all reasonable actions required to prevent the entry of such stop
order or to remove it or obtain its withdrawal at the earliest possible
moment if entered;
(e) if requested by the managing underwriter or underwriters, if
any, or any holder of Registrable Securities in connection with any sale
pursuant to a registration statement, promptly incorporate in a prospectus
supplement or post-effective amendment such information relating to such
underwriting as the managing underwriter or underwriters, if any, or such
holder reasonably requests to be included therein; and make all required
filings of such prospectus supplement or post-effective amendment as soon
as practicable after being notified of the matters incorporated in such
prospectus supplement or post-effective amendment;
(f) on or prior to the date on which a Registration is declared
effective, use its best efforts to register or qualify, and cooperate with
the holders of Registrable Securities included in such Registration, the
underwriter or underwriters, if any, and their counsel, in connection with
the registration or qualification of, the Registrable Securities covered
by such Registration for offer and sale under the securities or "blue sky"
laws of each state and other jurisdiction of the United States as any such
holder or the managing underwriter, if any, reasonably requests in
writing; use its best efforts to keep each such registration or
qualification effective, including through new filings, or amendments or
renewals, during the period such registration statement is required to be
kept effective; and do any and all other acts or things necessary or
advisable to enable the disposition in all such jurisdictions reasonably
requested by the holders of Registrable Securities covered by such
Registration; provided, however, that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then
so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so
subject;
(g) in connection with any sale pursuant to a Registration,
cooperate with the holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legends)
representing Securities to be sold under such Registration, and enable
such Securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or such holders may
request;
(h) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities within the United States and
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<PAGE>
having jurisdiction over the Company or any Subsidiary as may reasonably
be necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Securities;
(i) enter into such agreements (including underwriting agreements in
customary form) and take such other actions as the Requisite Holders shall
reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities;
(j) use its best efforts to obtain:
(i) at the time of effectiveness of each Registration, a
"comfort letter" from the Company's independent certified public
accountants covering such matters of the type customarily covered by
"cold comfort letters" as the Requisite Holders and the underwriters
reasonably request; and
(ii) at the time of any underwritten sale pursuant to the
registration statement, a "bring-down comfort letter," dated as of
the date of such sale, from the Company's independent certified
public accountants covering such matters of the type customarily
covered by comfort letters as the Requisite Holders and the
underwriters reasonably request;
(k) use its best efforts to obtain, at the time of effectiveness of
each Registration and at the time of any sale pursuant to each
Registration, an opinion or opinions, favorable to the Requisite Holders
in form and scope, from counsel for the Company in customary form;
(l) notify each seller of Registrable Securities covered by such
Registration, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and promptly prepare, file with the SEC
and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers or prospective purchasers of such
Securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they are made;
(m) otherwise comply with all applicable rules and regulations of
the SEC, and make generally available to its security holders (as
contemplated by Section 11(a) under the Securities Act) an earnings
statement satisfying the provisions of Rule 158 under the Securities Act
no later than ninety (90) days after the end of the twelve (12) month
period beginning with the first month of the Company's first fiscal
quarter commencing after the
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<PAGE>
effective date of the registration statement, which statement shall cover
said twelve (12) month period;
(n) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by each Registration from
and after a date not later than the effective date of such Registration;
and
(o) cause all Registrable Securities covered by such Registration to
be listed on each securities exchange on which similar equity Securities
issued by the Company are then listed and, if not so listed, to be listed
on the Nasdaq National Market ("Nasdaq Market") and, if listed on the
Nasdaq Market, use its best efforts to secure designation of all such
Registrable Securities covered by such registration statement as a Nasdaq
"National Market System security" within the meaning of Rule 11Aa2-1 of
the SEC or, failing that, to secure Nasdaq Market authorization for such
Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such
with respect to such Registrable Securities with the National Association
of Securities Dealers, Inc.
The Company may require each holder of Registrable Securities that will be
included in such Registration to furnish the Company with such information in
respect of such holder of its Registrable Securities that will be included in
such Registration as the Company may reasonably request in writing and as is
required by applicable laws or regulations.
3. Reasonable Investigation. The Company shall:
(a) give the holders of Registrable Securities, their underwriters,
if any, and their respective counsel and accountants the opportunity to
participate in the preparation of the registration statement, each
prospectus included therein or filed with the SEC and each amendment
thereof or supplement thereto;
(b) give each such holder and underwriter reasonable opportunities
to discuss the business of the Company with its officers, counsel and the
independent public accountants who have certified its financial
statements;
(c) make available for inspection by any holder of Registrable
Securities included in any Registration, any underwriter participating in
any disposition pursuant to any Registration, and any attorney, accountant
or other agent retained by any such seller or underwriter, all financial
and other records, pertinent corporate documents and properties of the
Company; and
(d) cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Person in connection with
such Registration;
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<PAGE>
in each such case, as shall be reasonably necessary, in the opinion of such
holder or such underwriter, to enable it to conduct a "reasonable investigation"
within the meaning of the section 11(b)(3) of the Securities Act and to satisfy
the requirement of reasonable care imposed by section 12(a)(2) of the Securities
Act.
4. Registration Expenses. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities, including,
without limitation, any such registration not effected by the Company.
5. Indemnification; Contribution.
(a) Indemnification by the Company. The Company shall indemnify, to
the fullest extent permitted by law, each holder of Registrable
Securities, its officers, directors and agents, if any, and each Person,
if any, who controls such holder within the meaning of section 15 of the
Securities Act, against all losses, claims, damages, liabilities (or
proceedings in respect thereof) and expenses (under the Securities Act or
common law or otherwise), joint or several, resulting from any violation
by the Company of the provisions of the Securities Act or any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented if
amended or supplemented) or any preliminary prospectus or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case
of any prospectus, in light of the circumstances under which they were
made) not misleading, except to the extent that such losses, claims,
damages, liabilities (or proceedings in respect thereof) or expenses are
caused by any untrue statement or alleged untrue statement contained in or
by any omission or alleged omission from information concerning any holder
of Registrable Securities furnished in writing to the Company by such
holder expressly for use therein. If the offering pursuant to any
registration statement provided for under this Section 5 is made through
underwriters, no action or failure to act on the part of such underwriters
(whether or not such underwriter is an Affiliate of any holder of
Registrable Securities) shall affect the obligations of the Company to
indemnify any holder of Registrable Securities or any other Person
pursuant to the preceding sentence.
(b) Indemnification by the Holders. In connection with any
registration statement in which a holder of Registrable Securities is
participating, each such holder, severally and not jointly, shall
indemnify, to the fullest extent permitted by law, the Company, each
underwriter (if the underwriter so requires) and their respective
officers, directors and agents, if any, and each Person, if any, who
controls the Company or such underwriter within the meaning of section 15
of the Securities Act, against any losses, claims, damages, liabilities
(or proceedings in respect thereof) and expenses resulting from any untrue
statement or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in the
registration statement or prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or necessary to
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<PAGE>
make the statements therein (in the case of any prospectus, in light of
the circumstances under which they were made) not misleading, but only to
the extent that such untrue statement is contained in or such omission is
from information concerning a holder furnished in writing by such holder
expressly for use therein; provided, however, that such holder's
obligations hereunder shall be limited to an amount equal to the proceeds
to such holder of the Registrable Securities sold pursuant to such
registration statement.
(c) Control of Defense. Any Person entitled to indemnification under
the provisions of this Section 5 shall give prompt notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties
may exist in respect of such claim, permit such indemnifying party to
assume the defense of such claim, with counsel reasonably satisfactory to
the indemnified party; and if such defense is so assumed, such
indemnifying party shall not enter into any settlement without the consent
of the indemnified party if such settlement attributes liability to the
indemnified party and such indemnifying party shall not be subject to any
liability for any settlement made without its consent (which shall not be
unreasonably withheld); and any underwriting agreement entered into with
respect to any registration statement provided for under this Agreement
shall so provide. In the event an indemnifying party shall not be entitled
(or elects not) to assume the defense of a claim, such indemnifying party
shall not be obligated to pay the fees and expenses of more than one
counsel or firm of counsel for all parties indemnified by such
indemnifying party in respect of such claim, unless in the reasonable
judgment of any such indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties
in respect to such claim.
(d) Contribution. If for any reason the foregoing indemnity is
unavailable, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages, liabilities or expenses:
(i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative
benefits received by the indemnifying party on the one hand and the
indemnified party on the other but also the relative fault of the
indemnifying party and the indemnified party as well as any other
relevant equitable considerations.
Notwithstanding the foregoing, no holder of Registrable Securities shall
be required to contribute any amount in excess of the amount such holder
would have been required to pay to an indemnified party if the indemnity
under Section 5(b) were available. No Person guilty
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<PAGE>
of fraudulent misrepresentation (within the meaning of section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation. The obligation of any
Person to contribute pursuant to this Section 5 shall be several and not
joint.
(e) Timing of Payments. An indemnifying party shall make payments of
all amounts required to be made pursuant to the foregoing provisions of
this Section 5 to or for the account of the indemnified party from time to
time promptly upon receipt of bills or invoices relating thereto or when
otherwise due or payable.
(f) Survival. The indemnity and contribution agreements contained in
this Section 5 shall remain in full force and effect regardless of any
investigation made by or on behalf of a participating holder of
Registrable Securities, its officers, directors, agents or any Person who
controls such holder as aforesaid, and shall survive the transfer of such
Securities by such holder.
6. Holdback Agreements; Registration Rights to Others.
(a) In connection with each underwritten sale of Registrable
Securities, the Company agrees, and each holder of Registrable Securities
by acquisition of such Registrable Securities agrees, to enter into
customary holdback agreements concerning sale or distribution of
Registrable Securities and other equity Securities of the Company, except,
in the case of any holder of Registrable Securities, to the extent that
such holder is prohibited by applicable law or exercise of fiduciary
duties from agreeing to withhold Registrable Securities from sale or is
acting in its capacity as a fiduciary or investment adviser. Without
limiting the scope of the term "fiduciary," a holder shall be deemed to be
acting as a fiduciary or an investment adviser if its actions or the
Registrable Securities proposed to be sold are subject to the Employee
Retirement Income Security Act of 1974, as amended, or the Investment
Company Act of 1940, as amended, or if such Registrable Securities are
held in a separate account under applicable insurance law or regulation.
(b) If the Company shall at any time after the date hereof provide
to any holder of any Securities of the Company rights with respect to the
registration of such Securities under the Securities Act, such rights
shall not be in conflict with or adversely affect any of the rights
provided in this Agreement to the holders of Registrable Securities,
without the written consent of the Required Holders.
7. Other Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of Warrants or conversion of
any class of Common Stock into any other class of Common Stock require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
conversion, the Company will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be.
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8. Availability of Information. At any time that any class of the Common
Stock is registered under section 12(b) or section 12(g) of the Exchange Act,
the Company will comply with the reporting requirements of sections 13 and 15(d)
of the Exchange Act (whether or not it shall be required to do so pursuant to
such Sections) and will comply with all other public information reporting
requirements of the SEC from time to time in effect. In addition, the Company
shall file such reports and information, and shall make available to the public
and to the holders of Registrable Securities such information, as shall be
necessary to permit such holders to offer and sell Issuable Shares pursuant to
the provisions of Rules 144 and 144A promulgated under the Securities Act. The
Company will also cooperate with each such holder in supplying such information
as may be necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the SEC as a condition to the
availability of an exemption from the registration provisions of the Securities
Act in connection with the sale of any Issuable Shares. The Company will furnish
to each such holder, promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or made
available generally by the Company to its stockholders, and copies of all
regular and periodic reports and all registration statements and prospectuses
filed by the Company with any securities exchange or with the SEC.
9. Tag-Along Rights in Respect of Sales of Equity Securityholder Group
Shares.
(a) Right to Sell Proportionate Number of Shares. Each member of the
Equity Securityholder Group hereby agrees that it will not Transfer all or
any portion of the Issuable Shares owned by it (other than in an Exempt
Transfer) to any third party unless, as part of such transaction, the
Registrable Securityholder Group shall have the right (but, subject to
Section 10, not the obligation) to Transfer Warrant Shares equal to the
Securityholder Percentage of all Issuable Shares to be purchased by such
third party at the same price and on the same terms as the Equity
Securityholder Group. Each member of the Registrable Securityholder Group
shall have the right to Transfer its Warrant Shares ratably in accordance
with the respective number of Warrant Shares held by all other such
members that will be Transferring Warrant Shares to such third party.
(b) Definition of Securityholder Percentage. "Securityholder
Percentage" means the quotient, expressed as a percentage, of (a) the
number of Issuable Shares held by the Registrable Securityholder Group
immediately prior to such Transfer, divided by (b) the aggregate number of
Issuable Shares held by the Equity Securityholder Group and the
Registrable Securityholder Group immediately prior to such Transfer.
(c) Notice of Proposed Sale. Any member of the Equity Securityholder
Group intending to sell any Issuable Shares shall provide to each member
of the Registrable Securityholder Group written notice of its intention to
sell such Issuable Shares not less than twenty-five (25) days prior to the
closing of such proposed sale. Such written notice (the "Notice of Sale")
shall
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(i) specify in detail the terms of such proposed sale
(including the type of Security proposed to be sold, the number of
Issuable Shares of the Equity Securityholder Group offered to be
sold, the price per share, and the number of Issuable Shares which
will be held by the Equity Securityholder Group immediately prior to
such proposed sale),
(ii) state the date on which such proposed sale is to be
consummated, and
(iii) designate one party to whom notice of the determination
to participate in such proposed sale should be delivered.
Promptly upon the written request of any member of the Equity
Securityholder Group, the Company shall supply such holder with the names
and addresses for notices to the members of the Registrable Securityholder
Group.
(d) Election by Holders. Upon receipt of a Notice of Sale, each
member of the Registrable Securityholder Group shall have twenty (20) days
to deliver written notice of its election to participate in such sale,
which notice shall specify the number of Warrant Shares that it elects to
sell and the number of Warrant Shares which will be held immediately prior
to such proposed sale.
(e) Closing of Sale. Each member of the Registrable Securityholder
Group electing to participate in a sale described in any Notice of Sale
shall deliver to the purchaser specified in such Notice of Sale, against
payment of the total purchase price for the Warrant Shares to be purchased
(at the price per share specified in such Notice of Sale), on the closing
date specified in such Notice of Sale, a certificate or certificates
representing the number of Warrant Shares that it has elected to sell
pursuant to this Section 9, together with appropriate instruments of
transfer duly endorsed in blank, and a certificate containing
representations and warranties as to such holder's title to such Warrant
Shares, the absence of Liens thereon, and such holder's authority to
convey such Warrant Shares.
(f) Expenses of Sale. All members of the Equity Securityholder Group
and the Registrable Securityholder Group will bear their own expenses and
costs of any sale of Warrant Shares or Issuable Shares, as the case may
be, pursuant to this Section 9.
10. Restrictions on Transfer of Warrant Shares.
(a) Transfer of Warrant Shares. No holder of Warrant Shares shall
sell, transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by
operation of law) any interest in such holder's Warrant Shares (a
"Transfer"), except pursuant to the provisions of this Section 10,
pursuant to a Public Sale, or pursuant to any transfer subsequent to a
Public Sale. No holder of Warrant Shares shall consummate any Transfer
(other than pursuant to a
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<PAGE>
Public Sale, or pursuant to any transfer subsequent to a Public Sale)
until thirty (30) days after the delivery to the Company and the Investor
of such holder's Offer Notice, unless the parties to the Transfer have
been finally determined pursuant to this Section 10 prior to the
expiration of such thirty (30) day period (the "Election Period").
(b) First Offer Right. At least thirty (30) days prior to making any
Transfer of any Warrant Shares (other than pursuant to a Public Sale, or
pursuant to any transfer subsequent to a Public Sale), the transferring
Stockholder (the "Transferring Stockholder") shall deliver a written
notice (an "Offer Notice") to the Company and the Investor. The Offer
Notice shall disclose in reasonable detail the proposed number of Warrant
Shares to be transferred, the proposed terms and conditions of the
Transfer and the identity of the prospective transferee(s) (if known). The
Company may elect to purchase all (but not less than all) of the Warrant
Shares specified in the Offer Notice at the price and on the terms
specified therein by delivering written notice of such election to the
Transferring Stockholder and the Investor as soon as practical but in any
event within ten (10) days after the delivery of the Offer Notice. If the
Company has not elected to purchase all of the Warrant Shares within such
ten (10) day period, the Investor may elect to purchase all (but not less
than all) of the Warrant Shares specified in the Offer Notice at the price
and on the terms specified therein by delivering written notice of such
election to the Transferring Stockholder as soon as practical but in any
event within twenty (20) days after delivery of the Offer Notice. If the
Company or the Investor has elected to purchase Warrant Shares from the
Transferring Stockholder, the transfer of such shares shall be consummated
as soon as practical after the delivery of the election notice to the
Transferring Stockholder, but in any event within fifteen (15) days after
the expiration of the Election Period. If neither the Company nor the
Investor has elected to purchase all of the Warrant Shares being offered,
the Transferring Stockholder may, within one hundred twenty (120) days
after the expiration of the Election Period and subject to the provisions
of Section 10(c), transfer such Warrant Shares to one or more third
parties at a price no less than the price per share specified in the Offer
Notice and on other terms no more favorable to the transferees thereof
than offered to the Company and the Investor in the Offer Notice. Any
Warrant Shares not transferred within such one hundred twenty (120) day
period shall be reoffered to the Company and the Investor under this
Section 10(b) prior to any subsequent Transfer. The purchase price
specified in any Offer Notice shall be payable solely in cash at the
closing of the transaction or in installments over time.
(c) Transfer. Prior to transferring any Warrant Shares (other than
pursuant to a Public Sale, pursuant to any transfer subsequent to a Public
Sale, or a Sale of the Company) to any Person, the Transferring
Stockholder shall cause the prospective transferee to execute and deliver
to the Company a counterpart of this Agreement.
(d) Competitors. No holder of Warrant Shares, prior to a Public Sale
thereof, shall Transfer any of such Warrant Shares to a Competitor.
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(e) Termination of Restrictions. The restrictions set forth in this
Section 10 shall continue with respect to each Registrable Security until
the earlier of (i) the date on which such Registrable Security has been
transferred in a Public Sale or (ii) the date on which such Registrable
Security has been transferred to the Company or the Investor pursuant to
this Section 10.
11. Public Sale. In the event that a Public Sale is an underwritten
offering and the managing underwriters advise the Company in writing that in
their opinion the Company's capital stock structure would adversely affect the
marketability of the Issuable Shares to be sold in such Public Sale, each holder
of Warrant Shares shall consent to and vote for a recapitalization,
reorganization and/or exchange of the Warrant Shares into Securities that the
managing underwriters, the Board of Directors and the Investor find acceptable
and shall take all necessary or desirable actions in connection with the
consummation of such recapitalization, reorganization and/or exchange; provided
that the Securities into which the Warrant Shares have been converted shall
reflect and are consistent with the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Public Sale; provided, further, that each holder of Warrant Shares shall only be
required to take any such necessary or desirable actions if the costs and
expenses thereof, if any, are paid by the Company and, in the reasonable
judgment of such holder, such actions do not involve any risk of liability to
such holder.
12. Sale of the Company.
(a) If the Board of Directors and the holders of a majority of the
shares of Common Stock then outstanding approve a Sale of the Company (an
"Approved Sale"), each holder of Warrant Shares shall vote for, consent to
and raise no objections against such Approved Sale. If the Approved Sale
is structured as (i) a merger or consolidation, each holder of Warrant
Shares shall waive any dissenters' rights, appraisal rights or similar
rights in connection with such merger or consolidation or (ii) a sale of
stock, each holder of Warrant Shares shall agree to sell all of its
Warrant Shares on the terms and conditions approved by the Board of
Directors and the holders of a majority of the Common Stock then
outstanding for the sale of all Common Stock in such Approved Sale;
provided that the maximum liability to each such holder arising from such
terms and conditions shall not exceed the amount it shall have received
for the sale of its Warrant Shares in connection with such Approved Sale.
Each holder of Warrant Shares shall take all necessary or desirable
actions in connection with the consummation of the Approved Sale as
requested by the Company; provided that each holder of Warrant Shares
shall only be required to take any such necessary or desirable actions if
the costs and expenses thereof, if any, are paid by the Company and, in
the reasonable judgment of such holder, such actions do not involve any
risk of liability to such holder in excess of the amount it shall have
received for the sale of its Warrant Shares in connection with such
Approved Sale and then only if any such risk is borne proportionately by
all sellers of Common Stock in such Approved Sale.
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(b) The obligations of the holders of Warrant Shares with respect to
the Approved Sale of the Company are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, each
holder of a class of stock shall receive the same form of consideration
and the same amount of consideration per share as any other holders of
such class of stock; (ii) if any holders of a class of stock are given an
option as to the form and amount of consideration to be received, each
holder of such class of stock shall be given the same option; and (iii)
each holder of then currently exercisable rights to acquire shares of a
class of stock shall be given a reasonable opportunity to exercise such
rights prior to the consummation of the Approved Sale and participate in
such sale as holders of such class of stock upon the consummation of the
Approved Sale.
13. Definitions. For the purpose of this Agreement, the following terms
shall have the meanings set forth below or set forth in the Section hereof
following such term:
Affiliate -- means at any time, with respect to any Person, any other
Person (other than a member of the Equity Securityholder Group or the
Registrable Securityholder Group):
(a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such
Person;
(b) that beneficially owns or holds five percent (5%) or more of any
class of the Voting Stock of such Person;
(c) five percent (5%) or more of the Voting Stock (or in the case of
a Person that is not a corporation, five percent (5%) or more of the
equity interest) of which is beneficially owned or held, directly or
indirectly, by such Person; or
(d) that is a partner of such first Person if such first Person is a
partnership;
in each case at such time.
As used in this definition,
control -- means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
Voting Stock -- means, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time any stock of any other class or
classes shall have or might have voting power by reason of the happening
of any contingency).
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Agreement, this -- and references thereto shall mean this
Registration Rights and Stockholders' Agreement, as it may from time to
time be amended or supplemented.
Approved Sale -- has the meaning set forth in Section 12(a).
Board of Directors -- means the board of directors of the Company or
any committee thereof that, in the instance, shall have the lawful power
to exercise the power and authority of such board of directors.
Business Day -- means a day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or permitted by
law (other than a general banking moratorium or holiday for a period
exceeding four (4) consecutive days) to be closed.
Common Stock -- means the shares of voting common stock, $.01 par
value, of the Company, and any other shares of stock of the Company of any
class that is not preferred, as to payment of dividends, payment upon a
liquidation or dissolution of the Company, or both, over any other class
of capital stock of the Company.
Company -- has the meaning specified in the introductory paragraph
hereof.
Competitor -- means any Person engaged in the aggregates, or related
materials and services, business; provided that in no event shall any
insurance company, bank, bank holding company, investment company, savings
institution or trust company, investment banking firm, fraternal benefit
society, pension, retirement or profit-sharing trust or fund, or any other
similar financial institution be deemed to be a Competitor for purposes of
this Agreement.
Election Period -- has the meaning specified in Section 10(a).
Equity Securityholder Group -- means Senior Management and the
Investor.
Exchange Act -- means the Securities Exchange Act of 1934, as
amended from time to time.
Exempt Transfer -- means, with respect to any Issuable Shares of the
Equity Securityholder Group, (i) any sale of such Issuable Shares in
connection with a Public Offering, (ii) any sale of Issuable Shares
pursuant to Rule 144 under the Securities Act so long as the volume
limitations set forth in such Rule apply to such sale, (iii) any Transfer
among members of the Equity Securityholder Group or to the Company, or
(iv) any Transfer among Affiliates of the Investor, among family members
of the Equity Securityholder Group, or pursuant to the laws of descent and
distribution; provided, however, that the Company, in the case of any
Transfer to the Company pursuant to clause (iii) in contemplation of a
subsequent reissuance thereof, and any transferee, in the case of a
Transfer pursuant to clause (iv), shall agree in writing to be bound
15
<PAGE>
by the provisions of Section 9 with respect to the Issuable Shares that
were the subject of such Transfer.
Expiration Date -- has the meaning specified in the Warrant
Agreement.
Group -- means either or both of the Equity Securityholder Group and
the Registrable Securityholder Group, as the context requires.
Harris -- has the meaning specified in the introductory paragraph
hereof.
Independent Third Party -- means any Person that (a) does not own in
excess of five percent (5%) of the Common Stock on a fully-diluted basis,
(b) is not controlling, controlled by or under common control with any
such five percent (5%) owner of the Common Stock, (c) is not the spouse,
ancestor or descendant (by birth or adoption) of any such five percent
(5%) owner of the Common Stock, and (d) is not an Affiliate.
Investor -- has the meaning specified in the introductory paragraph
hereof.
Issuable Share -- means and includes at any time,
(a) a share of issued and outstanding Common Stock; and
(b) a Right (including, without limitation, a Warrant), and (without
duplication) all shares of Common Stock issuable upon exercise of such
Right, in each case at such time.
For purposes of this definition of "Issuable Share," a Right to acquire
one share of Common Stock shall constitute one Issuable Share, and a
Person shall be deemed to own an Issuable Share if such Person has a Right
to acquire such share whether or not such Right is exercisable at such
time.
Lien -- means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any
jurisdiction).
Majority Equity Securityholders -- means, at any time, any group
comprised of members of the Equity Securityholder Group holding, in the
aggregate, a majority by number of Issuable Shares held by the Equity
Securityholder Group at such time.
Nasdaq Market -- has the meaning set forth in Section 2(o).
Note Agreement -- has the meaning set forth in the second paragraph
of this Agreement.
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<PAGE>
Notice of Sale -- has the meaning specified in Section 9(c).
Offer Notice -- has the meaning specified in Section 10(b).
Person -- means an individual, partnership, corporation, limited
liability company, joint venture, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
Preferred Stock -- means and includes all capital stock of the
Company of any class which is preferred, as to payment of dividends,
payment upon a liquidation or dissolution of the Company or both, over the
Common Stock.
Property -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
Prudential -- has the meaning specified in the introductory
paragraph hereof.
Public Offering -- means, with respect to any Issuable Shares, any
sale thereof in a transaction either registered under, or requiring
registration under, section 5 of the Securities Act.
Public Sale -- means any sale of Issuable Shares to the public
pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions
of Rule 144 adopted under the Securities Act.
Registrable Securities -- means:
(a) any shares of Common Stock that have been issued upon the
exercise of any Warrant; and
(b) any shares of Common Stock that are issuable upon the
exercise of the Warrants.
For purposes of Section 1 and the definition of "Requisite Holders"
herein, holders of Warrants at any time shall be deemed to be holders of
Registrable Securities described in clause (b) of this definition that are
at such time issuable upon exercise in full of such Warrants.
As to any particular Registrable Securities once issued, such
Securities shall cease to be Registrable Securities:
(i) when a registration statement with respect to the sale of
such Securities shall have become effective under the Securities Act
and such Securities shall have been disposed of in accordance with
such registration statement;
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<PAGE>
(ii) when such Securities shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the
Securities Act;
(iii) when such Securities shall have been otherwise
transferred and subsequent disposition of them shall not require
registration or qualification under the Securities Act or any
similar state law then in force; or
(iv) when such Securities shall have ceased to be outstanding
or (with respect to Registrable Securities described in clause (b)
of this definition) issuable upon exercise of the Warrants.
Registrable Securityholder Group -- means, at any time, the holders
(other than the Company, any Subsidiary or any Affiliate of the Company)
of Registrable Securities at such time.
Registration -- has the meaning specified in Section 1(a).
Registration Expenses -- means all expenses incident to the
Company's performance of or compliance with Section 1, including, without
limitation:
(a) all registration and filing fees;
(b) fees and expenses of compliance with securities or blue
sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable
Securities);
(c) expenses of printing certificates for the Registrable
Securities in a form eligible for deposit with Depositary Trust
Company;
(d) messenger and delivery expenses;
(e) internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal
or accounting duties);
(f) fees and disbursements of counsel for the Company and its
independent certified public accountants (including the expenses of
any management review, cold comfort letters or any special audits
required by or incident to such performance and compliance);
(g) securities acts liability insurance (if the Company elects
to obtain such insurance);
(h) the reasonable fees and expenses of any special experts
retained by the Company in connection with such registration;
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(i) fees and expenses of other Persons retained by the
Company; and
(j) fees and expenses of counsel for holders of Registrable
Securities, selected by the Requisite Holders;
but not including any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities or fees and expenses of
more than one counsel representing the holders of Registrable Securities
or any other selling expenses, discounts or commissions incurred in
connection with the sale of Registrable Securities.
Required Holders -- means, at any time, the holders of a majority of
the Registrable Securities at such time.
Requisite Holders -- means, with respect to any registration or
proposed registration of Registrable Securities pursuant to Section 1, any
holder or holders of at least a majority of the shares of Registrable
Securities (excluding any shares of Registrable Securities directly or
indirectly held by the Company or any Subsidiary or Affiliate of the
Company) to be so registered.
Right -- means and includes:
(a) any warrant (including, without limitation, any Warrant)
or any option (including, without limitation, employee stock
options) to acquire Common Stock;
(b) any right issued to holders of the Common Stock, or any
class thereof, permitting the holders thereof to subscribe to shares
of additional Common Stock (pursuant to a rights offering or
otherwise);
(c) any right to acquire Common Stock pursuant to the
provisions of any Security convertible or exchangeable into Common
Stock; and
(d) any similar right permitting the holder thereof to
subscribe for or purchase shares of Common Stock.
Sale of the Company -- means the sale of the Company to an
Independent Third Party pursuant to which such party or parties acquire
(i) capital stock of the Company possessing the voting power under normal
circumstances to elect a majority of the Board of Directors (whether by
merger, consolidation or sale or transfer of the Company's capital stock)
or (ii) all or substantially all of the Company's assets determined on a
consolidated basis.
SEC -- means, at any time, the Securities and Exchange Commission or
any other federal agency at such time administering the Securities Act.
Securities Act -- means the Securities Act of 1933, as amended.
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Security -- has the meaning specified in section 2(1) of the
Securities Act.
Securityholder Percentage -- has the meaning set forth in Section
9(b).
Senior Management -- has the meaning specified in the introductory
paragraph hereof.
Stone -- has the meaning specified in the introductory paragraph
hereof.
Subsidiary -- means, at any time, each corporation, association,
limited liability company or other business entity which qualifies as a
subsidiary of the Company that is properly included in a consolidated
financial statement of the Company and its subsidiaries in accordance with
generally accepted accounting principles at such time.
Transfer -- means, with respect to any Warrants or other Issuable
Shares, to sell, transfer or otherwise dispose of such Warrants or other
Issuable Shares, as the case may be, or any interest therein.
Transferring Stockholder -- has the meaning set forth in Section
10(b).
Warrant -- shall mean each Warrant to purchase shares of the Common
Stock issued pursuant to the Warrant Agreement.
Warrant Agreement -- means the Warrant Agreement, dated as of even
date herewith, between Prudential and the Company, as it may from time to
time be amended or supplemented.
Warrant Shares -- means the following:
(a) any of the Warrants; or
(b) any shares of Common Stock that have been issued upon the
exercise of any Warrant.
14. MISCELLANEOUS
14.1 Notices. All communications hereunder shall be in writing and shall
be delivered either by national overnight courier or by facsimile transmission
(confirmed by delivery by national overnight courier sent on the day of the
sending of such facsimile transmission), and shall be addressed to the following
addresses:
(a) if to Harris, Stone, the Investor or Prudential, at such
holder's address set forth on Annex 1 to this Agreement, or at such other
address as such holder shall have specified to the Company in writing;
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<PAGE>
(b) if to any registered transferee of all or any part of any
Registrable Securities, addressed to such transferee at such address as
such transferee shall have specified to the Company in writing or, if such
transferee shall not have so specified an address to the Company, then
addressed to such transferee in care of the last holder of such
Registrable Securities that shall have so specified an address to the
Company; and
(c) if to the Company, at the address set forth on Annex 2 to this
Agreement, or at such other address as the Company shall have specified to
each holder of Registrable Securities in writing.
Any communication addressed and delivered as herein provided shall be deemed to
be received when actually delivered to the address of the addressee (whether or
not delivery is accepted) or received by the telecopy machine of the recipient.
Any communication not so addressed and delivered shall be ineffective.
14.2 Amendment and Waiver.
(a) The provisions of Section 14, and of any term defined in Section
13 as used in such Section, may be amended, modified or supplemented, and
compliance with such Section waived, only by a writing duly executed by or
on behalf of the Required Holders and the Company.
(b) The provisions of Sections 1 through 8, inclusive, and of
Sections 11 and 12, and any term defined in Section 13 as used in any such
Section, may be amended, modified or supplemented only by a writing duly
executed by or on behalf of the Required Holders and the Company;
provided, however, that compliance by the Company with the provisions of
any such Section with respect to any particular registration may be waived
by the Requisite Holders; and provided, further, however, that no such
amendment, modification or supplement of Section 1(c)(i) or 1(c)(ii) that
adversely affects any member of either Group shall be effective as against
such member unless consented to in writing by such member.
(c) The provisions of Sections 9 and 10, and of any term defined in
Section 13 as used in either such Section, may be amended, modified or
supplemented, and compliance with such Section waived, only by a writing
duly executed by or on behalf of the Required Holders, the Majority Equity
Securityholders and the Company.
14.3 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
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14.4 Jurisdiction; Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND
INSTRUMENTS CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE OF THE PARTIES HERETO SHALL SEEK
A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
PROCEDURE BASED UPON OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT
AND EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY SUCH PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 14.4.
14.5 Directly or Indirectly. Where any provision in this Agreement refers
to any action to be taken by any Person, or that such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person, including actions taken by or on behalf of any
partnership in which such Person is a general partner.
14.6 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
14.7 Successors and Assigns. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto, whether so expressed or not. Notwithstanding the foregoing sentence, the
Company may not assign any of its rights, duties or obligations hereunder
without the prior written consent of all holders of Registrable Securities.
14.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
14.9 Descriptive Headings. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
14.10 Preferred Stock.
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(a) Consideration. The Company agrees that it will not issue any
Preferred Stock for less than the stated liquidation value thereof or
having a dividend rate higher than prevailing market dividend terms at the
time of the issue thereof. The restrictions set forth in this Section
14.10(a) shall terminate on the date any Warrant Shares are sold pursuant
to a Public Sale.
(b) Terms. After giving effect to the amendment of the Company's
certificate of incorporation effected on November 21, 1996, the Company
will not, at any time on or prior to the Expiration Date,
(i) amend or modify any term or provision of its certificate
of incorporation which would increase the dividend or liquidation
value of the Preferred Stock authorized as of the date hereof, or
(ii) authorize any other class of Preferred Stock having
redemption terms and provisions that are not subject to the
restrictions set forth in Section 4L of the Company's certificate of
incorporation as of the date of this Agreement.
14.11 Registration Rights and Stockholders' Agreement. Each holder of
Warrant Shares shall be bound to vote such Warrant Shares to achieve the results
set forth in clauses (i) to (iv), inclusive, of Section 1(a) of the
Stockholders' Agreement, dated as of January 24, 1994, by and among the Company
(formerly USAI Acquisition Corp.), Golder, Thoma, Cressey, Rauner Fund IV L.P.,
a Delaware limited partnership, James A. Harris, Michael J. Stone, Hobart
Richey, Edward A. Dougherty (by joinder on August 1, 1994), Charles Pullin (by
joinder on October 31, 1994), Morris Bishop, Jr. (by joinder on August 5, 1994),
and Bruce A. Walters (by joinder on November 1, 1994), as in effect on the date
hereof, so long as the Company shall have given adequate advance written notice
of the manner in which the Warrant Shares should be voted to achieve such
results.
[Remainder of page intentionally blank. Next page is signature page.]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed and delivered (in the case of each corporation which is a party
hereto, by one of its duly authorized officers or representatives).
U.S. AGGREGATES, INC.
By: /s/ Michael J. Stone
-----------------------------------
Name: Michael J. Stone
Title: Executive Vice President-
Development,
Chief Financial Officer,
Treasurer and Secretary
JAMES A. HARRIS
/s/ James A. Harris
-----------------------------------
MICHAEL J. STONE
/s/ Michael J. Stone
-----------------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By:/s/ David A. Donnini
-------------------------------------
Name: David A. Donnini
Title: Principal
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Robert R. Derrick
-------------------------------------
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Name: Robert R. Derrick
Title: Senior Vice-President
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ANNEX 1
ADDRESSES OF HARRIS, STONE, THE INVESTOR AND PRUDENTIAL
James A. Harris
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Michael J. Stone
c/o U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, IL 60606
Attention: David A. Donnini
Prudential Capital Group
One Gateway Center, 11th Floor
100 Mulberry Street
Newark, NJ 07102-5311
Annex 1-1
<PAGE>
ANNEX 2
ADDRESS OF COMPANY
U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Annex 2-1
<PAGE>
FIRST AMENDMENT TO REGISTRATION
RIGHTS AND STOCKHOLDERS' AGREEMENT
This FIRST AMENDMENT TO REGISTRATION RIGHTS AND STOCKHOLDERS' AGREEMENT,
dated as of June 5, 1998 (this "Agreement"), is made by and among each of U.S.
AGGREGATES, INC., a Delaware corporation (together with its successors and
assigns, the "Company"), JAMES A. HARRIS ("Harris"), MICHAEL J. STONE ("Stone;"
Stone and Harris being collectively referred to herein as "Senior Management"),
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P., a Delaware limited partnership
(the "Investor"), and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential;"
Prudential, Senior Management and the Investor being collectively referred to
herein as the "Securities Holders").
Senior Management and the Investor have previously acquired shares of the
voting common stock, $.01 par value, of the Company. Prudential has previously
acquired warrants to purchase Common Stock pursuant to a Note and Warrant
Purchase Agreement, dated as of November 21, 1996, between Prudential and the
Company.
The Company, and each of the Securities Holders entered into that certain
Registration Rights and Stockholders' Agreement, dated as of November 21, 1996
(as in effect immediately prior to the effectiveness of this Agreement, the
"Existing Registration Rights Agreement," and, as amended by this Agreement, the
"Amended Registration Rights Agreement"), pursuant to which the Company granted,
to each of such Securities Holders, certain rights with respect to their
interests in the Company.
Prudential is acquiring additional warrants to purchase Common Stock
pursuant to an Amended and Restated Note and Warrant Purchase Agreement, dated
as of June 5, 1998 (the "Amended and Restated Purchase Agreement"), between
Prudential and the Company, subject to the condition, inter alia, that this
Agreement shall be executed and delivered by the parties hereto.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
SECTION 1. AMENDMENT TO EXISTING REGISTRATION RIGHTS AGREEMENT.
Section 13 of the Existing Registration Rights Agreement is hereby amended
by amending and restating the definitions of "Warrant" and "Warrant Agreement,"
and by adding, in alphabetical order, definitions of "1996 Warrant Agreement and
"1998 Warrant Agreement," to read in their entirety as follows:
Warrant -- shall mean each Warrant to purchase shares of the Common
Stock issued pursuant to the Warrant Agreement.
Warrant Agreement -- means, collectively, the 1996 Warrant Agreement
and the 1998 Warrant Agreement.
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1996 Warrant Agreement -- means the Warrant Agreement, dated as of
November 21, 1996, between Prudential and the Company, as it may from time
to time be amended or supplemented.
1998 Warrant Agreement -- means the Warrant Agreement, dated as of
June 5, 1998, between Prudential and the Company, as it may from time to
time be amended or supplemented.
SECTION 2. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective unless all of the following
conditions precedent shall have been satisfied in full on or before 5:00 p.m.
(Hartford, Connecticut time) on June 5, 1998 (the date of such satisfaction
being herein referred to as the "Effective Date"):
2.1 Execution and Delivery of this Agreement.
The Company shall have executed and delivered to each of the Securities
Holders an original counterpart of this Agreement.
2.2 No Defaults; Warranties and Representations True.
No Default or Event of Default shall exist, and the warranties and
representations set forth in the Amended and Restated Purchase Agreement shall
be true and correct on the Effective Date.
2.3 Authorization of Transactions.
The Company shall have authorized, by all necessary corporate action, the
execution and delivery of this Agreement and the performance of its obligations
and the satisfaction of all conditions pursuant to this Section 2.
SECTION 3. MISCELLANEOUS.
3.1 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
3.2 Jurisdiction; Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND
INSTRUMENTS CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE OF THE PARTIES HERETO SHALL SEEK
A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
PROCEDURE BASED UPON OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT
AND EACH OF THE
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PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND
ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY SUCH
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 3.2.
3.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
3.4 Descriptive Headings. The descriptive headings of the several Sections
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
3.5 Capitalized Terms. Capitalized terms used herein and not defined
herein shall have the meanings assigned to such terms in the Amended
Registration Rights Agreement.
[Remainder of page intentionally blank. Next page is signature page.]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed and delivered (in the case of each corporation which is a party
hereto, by one of its duly authorized officers or representatives).
U.S. AGGREGATES, INC.
By: /s/ Michael J. Stone
-------------------------------------
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
JAMES A. HARRIS
/s/ James A. Harris
------------------------------------
MICHAEL J. STONE
/s/ Michael J. Stone
------------------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By: /s/ David A. Donnini
-------------------------------------
Name: David A. Donnini
Title: Principal
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Robert R. Derrick
-------------------------------------
Name: Robert R. Derrick
Title: Vice President
<PAGE>
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U.S. AGGREGATES, INC.
-----------------------------------
WARRANT AGREEMENT
-----------------------------------
DATED AS OF NOVEMBER 21, 1996
6,327 WARRANTS TO PURCHASE COMMON STOCK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES................. 1
1.1 Form of Warrant Certificates................................... 1
1.2 Execution of Warrant Certificates; Registration Books.......... 2
1.3 Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Lost or Stolen Warrant Certificates.............. 2
1.4 Subsequent Issuance of Warrant Certificates.................... 3
1.5 Effect of Issuance in Registered Form.......................... 3
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE...................... 3
2.1 Exercise of Warrants........................................... 3
2.2 Issuance of Common Stock....................................... 4
2.3 Unexercised Warrants........................................... 4
2.4 Cancellation and Destruction of Warrant Certificates........... 4
2.5 Deemed Exercise of Warrants Prior to Expiration Date........... 4
2.6 Fractional Shares.............................................. 5
3. AGREEMENTS OF THE COMPANY............................................ 5
3.1 Reservation of Common Stock.................................... 5
3.2 Common Stock To Be Duly Authorized and Issued, Fully Paid and
Nonassessable.................................................. 5
3.3 Transfer Taxes................................................. 5
3.4 Common Stock Record Date....................................... 6
3.5 Rights in Respect of Common Stock.............................. 6
3.6 CUSIP Number.................................................. 6
3.7 Right of Action............................................... 6
3.8 Notice of Certain Events...................................... 6
3.9 Changes in Capital Structure.................................. 7
4. ANTI-DILUTION ADJUSTMENTS............................................ 7
4.1 Mechanical Adjustments......................................... 7
4.2 Stock Dividends, Subdivisions and Combinations................. 7
4.3 Dividends and Distributions.................................... 8
4.4 Issuances of Additional Common Stock or Rights................. 9
4.5 Expiration of Rights........................................... 9
4.6 Reorganization, Reclassification, Consolidation, Merger or
Sale; Appraisal Procedure...................................... 10
4.7 De Minimis Changes in Purchase Price........................... 10
4.8 Adjustment of Number of Shares Issuable Pursuant to Warrants... 10
4.9 Miscellaneous.................................................. 11
4.10 Other Securities............................................... 11
4.11 Additional Agreements of the Company........................... 11
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TABLE OF CONTENTS (continued)
(Not Part of Agreement) Page
5. REPORTING COVENANTS.................................................. 12
5.1 Financial and Business Information............................. 12
5.2 Information Concerning Anti-Dilution Adjustments............... 13
6. INTERPRETATION OF THIS AGREEMENT..................................... 13
6.1 Certain Defined Terms.......................................... 13
6.2 Descriptive Headings........................................... 20
6.3 Governing Law.................................................. 20
7. MISCELLANEOUS........................................................ 20
7.1 Expenses....................................................... 20
7.2 Amendment and Waiver........................................... 21
7.3 Transferability................................................ 21
7.4 Directly or Indirectly......................................... 21
7.5 Survival of Representations and Warranties; Entire Agreement... 21
7.6 Successors and Assigns......................................... 22
7.7 Notices........................................................ 22
7.8 Satisfaction Requirement....................................... 22
7.9 Severability................................................... 22
7.10 Counterparts................................................... 23
7.11 Jurisdiction; Jury Trial....................................... 23
Annex 1 -- Address of Purchasers
Annex 2 -- Address of Company
Attachment A -- Form of Warrant Certificate
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<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of November 21, 1996, among U.S. AGGREGATES,
INC., a Delaware corporation (together with its successors and assigns, the
"Company"), and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (together with its
successors and assigns, the "Purchaser").
RECITALS
A. The Board of Directors has authorized the issuance of an aggregate of
Six Thousand Three Hundred Twenty-Seven (6,327) warrants (as further defined in
Section 6, the "Warrants") of the Company, each Warrant representing the right
to purchase, upon the terms and subject to the conditions hereinafter set forth,
and subject to adjustment as set forth herein, one (1) share of Common Stock on
the terms and subject to the conditions hereinafter set forth.
B. The Company and the Purchaser have entered into a Note and Warrant
Purchase Agreement (as may be amended from time to time, the "Note Agreement"),
dated as of even date herewith, pursuant to which the Company agreed to sell,
and the Purchaser agreed to purchase, Thirty Million Dollars ($30,000,000) in
aggregate principal amount of the Company's 10.34% Senior Subordinated Notes due
November 22, 2006 (the "Notes") and the Warrants, for an aggregate consideration
of Thirty Million Dollars ($30,000,000) in cash.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties to this Agreement hereby agree as follows:
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES
1.1 Form of Warrant Certificates. The warrant certificates (individually,
a "Warrant Certificate" and, collectively, the "Warrant Certificates")
evidencing the Warrants, and the forms of assignment and of election to purchase
shares to be attached to such certificates, shall be substantially in the form
set forth in Attachment A hereto and may have such letters, numbers or other
marks of identification or designation as may be required to comply with any law
or with any rule or regulation of any governmental authority, stock exchange or
self-regulatory organization made pursuant thereto. Each Warrant Certificate
shall be dated the date of issuance thereof by the Company, either upon initial
issuance or upon transfer or exchange, and on its face shall initially entitle
the holder thereof to purchase a number of shares of Common Stock equal to the
number of Warrants represented by such Warrant Certificate at a price per share
equal to the Purchase Price, but the number of such shares and the Purchase
Price shall be subject to adjustment as provided herein.
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1.2 Execution of Warrant Certificates; Registration Books.
(a) Execution of Warrant Certificates. The Warrant Certificates
shall be executed on behalf of the Company by an officer of the Company
authorized by the Board of Directors. In case the officer of the Company
who shall have signed any Warrant Certificate shall cease to be such an
officer of the Company before issuance and delivery by the Company of such
Warrant Certificate, such Warrant Certificate nevertheless may be issued
and delivered with the same force and effect as though the individual who
signed such Warrant Certificate had not ceased to be such an officer of
the Company, and any Warrant Certificate may be signed on behalf of the
Company by any individual who, at the actual date of the execution of such
Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this
Agreement any such individual was not such an officer.
(b) Registration Books. The Company will keep or cause to be kept at
its office maintained at the address of the Company set forth in Section
7.7, or at such other office of the Company in the United States of
America of which the Company shall have given notice to each holder of
Warrant Certificates, books for registration and transfer of the Warrant
Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Warrant Certificates, the
registration number and the number of Warrants evidenced on its face by
each of the Warrant Certificates and the date of each of the Warrant
Certificates.
1.3 Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Lost or Stolen Warrant Certificates.
(a) Transfer, Split Up, etc. Any Warrant Certificate, with or
without other Warrant Certificates, may be transferred, split up, combined
or exchanged for another Warrant Certificate or Warrant Certificates,
entitling the registered holder or Transferee thereof to purchase a like
number of shares of Common Stock as the Warrant Certificate or Warrant
Certificates surrendered then entitled such registered holder to purchase.
Any registered holder desiring to transfer, split up, combine or exchange
any Warrant Certificate shall make such request in writing delivered to
the Company, and shall surrender the Warrant Certificate or Warrant
Certificates to be transferred, split up, combined or exchanged at the
office of the Company referred to in Section 1.2(b), whereupon the Company
shall deliver promptly to the Person entitled thereto a Warrant
Certificate or Warrant Certificates, as the case may be, as so requested.
(b) Loss, Theft, etc. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate (which evidence shall
be, in the case of the Purchaser or another institutional investor, notice
from such institutional investor of such ownership (or of ownership by
such institutional investor's nominee) and such loss, theft, destruction
or mutilation), and:
(i) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company; provided, however, that if
the holder of such Warrant
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Certificate is the Purchaser or another institutional investor, or a
nominee of the Purchaser or another institutional investor, the
Purchaser's or institutional investor's own unsecured agreement of
indemnity shall be deemed to be satisfactory; or
(ii) in the case of mutilation, upon surrender and
cancellation thereof;
the Company at its own expense will execute and deliver, in lieu thereof,
a new Warrant Certificate, dated the date of such lost, stolen, destroyed
or mutilated Warrant Certificate and of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant Certificate.
1.4 Subsequent Issuance of Warrant Certificates. Subsequent to the
original issuance, no Warrant Certificates shall be issued except:
(a) Warrant Certificates issued upon any transfer, combination,
split up or exchange of Warrants pursuant to Section 1.3(a);
(b) Warrant Certificates issued in replacement of mutilated,
destroyed, lost or stolen Warrant Certificates pursuant to Section 1.3(b);
and
(c) Warrant Certificates issued pursuant to Section 2.3 upon the
partial exercise of any Warrant Certificate to evidence the unexercised
portion of such Warrant Certificate.
1.5 Effect of Issuance in Registered Form. Every holder of a Warrant
Certificate by accepting the same consents and agrees with the Company and with
every other holder of a Warrant Certificate that:
(a) the Warrant Certificates are transferable only on the registry
books of the Company if surrendered at the office of the Company referred
to in Section 1.2(b), duly endorsed or accompanied by an instrument of
transfer (in the form attached hereto) and payment of any applicable
transfer tax or stamp tax; and
(b) the Company may deem and treat the Person in whose name each
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced thereby (notwithstanding any notations of ownership or
writing on the Warrant Certificates made by anyone other than the Company)
for all purposes whatsoever, and the Company shall not be affected by any
notice to the contrary.
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE
2.1 Exercise of Warrants.
(a) Manner of Exercise. At any time and from time to time on or
prior to the Expiration Date, the holder of any Warrant Certificate may
exercise the Warrants evidenced thereby, in whole or in part (but not, in
the case of any exercise in part, to the extent that such exercise would
result in the issuance of a fractional share of Common Stock), by
surrender of such Warrant Certificate, with an election to purchase (a
form of which is
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attached to each Warrant Certificate) attached thereto duly executed, to
the Company at its office referred to in Section 1.2(b).
(b) Payment of Purchase Price. It is understood and agreed that the
aggregate Purchase Price (as may be adjusted from time to time pursuant to
Section 4 of this Agreement) for all of the Warrants has been paid in full
to the Company on the date of this Agreement.
2.2 Issuance of Common Stock. Upon timely receipt of a Warrant
Certificate, with the form of election to purchase duly executed, accompanied by
an amount equal to any applicable transfer tax (if not payable by the Company as
provided in Section 3.3), the Company shall thereupon promptly cause
certificates representing the number of whole shares of Common Stock then being
purchased to be delivered to or upon the order of the registered holder of such
Warrant Certificate, registered in such name or names as may be designated by
such holder, and, promptly after such receipt deliver the cash, if any, to be
paid in lieu of fractional shares pursuant to Section 2.6 to or upon the order
of the registered holder of such Warrant Certificate.
2.3 Unexercised Warrants. In case the registered holder of any Warrant
Certificate shall exercise less than all the Warrants evidenced thereby, a new
Warrant Certificate evidencing Warrants equal in number to the number of
Warrants remaining unexercised shall be issued by the Company to the registered
holder of such Warrant Certificate or to its duly authorized assigns.
2.4 Cancellation and Destruction of Warrant Certificates. All Warrant
Certificates surrendered to the Company for the purpose of exercise, exchange,
substitution or transfer shall be cancelled by it, and no Warrant Certificates
shall be issued in lieu thereof except as expressly permitted by any of the
provisions of this Agreement. The Company shall cancel and retire any other
Warrant Certificates purchased or acquired by the Company otherwise than upon
the exercise thereof.
2.5 Deemed Exercise of Warrants Prior to Expiration Date.
(a) The Company acknowledges that it has received an executed
election to purchase for all of the Warrants, dated as of the day
immediately prior to the Expiration Date, together with the aggregate
Purchase Price therefor. To the extent that any Warrants have not been
exercised as of the day immediately preceding the Expiration Date, the
Company agrees that all such unexercised Warrants shall be deemed to have
been exercised as of such day and waives the requirement for prior
delivery of any outstanding Warrant Certificate in respect of unexercised
Warrants. The Company agrees to provide written notice to each holder of
unexercised Warrants promptly, and in any event within thirty (30) days
thereafter, of such deemed exercise.
(b) The Company shall not be required to deliver shares of Common
Stock, following the deemed exercise pursuant to Section 2.5(a), until it
has received Warrant Certificates in respect thereof.
(c) The provisions of this Section 2.5 shall not affect the
provisions of this Agreement applying to the exercise of Warrants at any
time prior to the day immediately
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preceding the Expiration Date, except that the Company acknowledges that
the Purchase Price for each such election to purchase has been paid to the
Company on the date of this Agreement.
2.6 Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock upon the exercise of any Warrant. Upon the
exercise of any Warrant, there shall be paid to the holder thereof, in lieu of
any fractional share of Common Stock resulting therefrom, an amount of cash
equal to the product of:
(a) the fractional amount of such share; times
(b) the Market Price, as determined on the trading day immediately
prior to the date of exercise of such Warrant.
3. AGREEMENTS OF THE COMPANY
3.1 Reservation of Common Stock. The Company covenants and agrees that it
will at all times cause to be reserved and kept available out of its authorized
and unissued shares of Common Stock such number of shares of Common Stock as
will be sufficient to permit the exercise in full of all Warrants issued
hereunder and all other Rights exercisable or convertible into Common Stock.
3.2 Common Stock To Be Duly Authorized and Issued, Fully Paid and
Nonassessable. The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock delivered
upon the exercise of any Warrants, at the time of delivery of the certificates
representing such shares, shall be duly and validly authorized and issued and
fully paid and nonassessable, free of any preemptive rights in favor of any
Person in respect of such issuance and free of any Lien created by, or arising
out of actions of, the Company, any Subsidiary or any Affiliate.
3.3 Transfer Taxes. The Company covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges that
may be payable in respect of the initial issuance or delivery of:
(a) each Warrant Certificate;
(b) each Warrant Certificate issued in exchange for any other
Warrant Certificate pursuant to Section 1.3(a) or Section 2.3; and
(c) each share of Common Stock issued upon the exercise of any
Warrant.
The Company shall not, however, be required to:
(i) pay any transfer tax that may be payable in respect of the
transfer or delivery of certificates representing Warrant Shares in a name
other than that of the registered holder of the certificate surrendered
for exercise, conversion, transfer or exchange (any such tax being payable
by the holder of such certificate at the time of surrender); or
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(ii) issue or deliver any such certificates referred to in the
foregoing clause (i) until any such tax referred to in the foregoing
clause (i) shall have been paid.
3.4 Common Stock Record Date. Each Person in whose name any certificate
for shares of Common Stock is issued upon the exercise of Warrants shall for all
purposes be deemed to have become the holder of record of the Common Stock
represented thereby on, and such certificate shall be dated, the date upon which
the Warrant Certificate evidencing such Warrants was duly surrendered with an
election to purchase attached thereto duly executed and payment of any
applicable transfer taxes, if payable by such Person, was made.
3.5 Rights in Respect of Common Stock. Except as otherwise set forth
herein, prior to the exercise of the Warrants evidenced thereby, the holder of a
Warrant Certificate shall not be entitled to any rights of a stockholder in the
Company with respect to shares for which the Warrants shall be exercisable,
including, without limitation, the right to vote in respect of any matter upon
which the holders of Common Stock may vote or the right to receive dividends or
other distributions and, except as expressly set forth herein, shall not be
entitled to receive any notice of any proceedings of the Company. Prior to the
exercise of the Warrants evidenced thereby, the holders of the Warrant
Certificates shall not have any obligation or any liability as stockholders of
the Company, whether such obligation or liabilities are asserted by the Company
or by creditors of the Company.
3.6 CUSIP Number. The Company acknowledges that the Purchaser has obtained
a private placement number in respect of the Warrants from the CUSIP Service
Bureau of Standard & Poor's, a division of McGraw-Hill, Inc., and covenants not
to take any action to revoke such number.
3.7 Right of Action. All rights of action in respect of the Warrants are
vested in the respective registered holders of the Warrant Certificates, and any
registered holder of any Warrant Certificate, without the consent of the holder
of any other Warrant Certificate, may, on its own behalf and for its own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, its right to
exercise the Warrants evidenced by such Warrant Certificate in the manner
provided in such Warrant Certificate and in this Agreement.
3.8 Notice of Certain Events.
(a) Dividends and Distributions. In the event that the Company shall
declare any dividend or other distribution in respect of its Common Stock,
the Company shall give written notice of such declaration to each holder
of Warrants not less than thirty (30) days prior to the record date for
the determination of the registered holders of Common Stock entitled to
receive such dividend or distribution, which notice shall:
(i) state that the Company has declared a dividend, or is
otherwise making a distribution, in respect of its Common Stock;
(ii) describe in reasonable detail the consideration per share
of Common Stock of such dividend or distribution;
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(iii) set forth the record date for the determination of the
registered holders of Common Stock entitled to receive such dividend
or distribution; and
(iv) set forth the number of shares of Common Stock into which
each Warrant is then exercisable.
(b) Organic Changes. In the event that the Company will engage in
any Organic Change, the Company shall give written notice thereof to each
holder of Warrants not less than thirty (30) days prior to the record date
for the determination of the registered holders of Common Stock entitled
to receive any consideration in exchange for such Common Stock, which
notice shall
(i) describe in reasonable detail such Organic Change;
(ii) describe in reasonable detail the consideration per share
of Common Stock to be received by holders of Common Stock in
exchange therefor;
(iii) set forth the record date for the determination of the
registered holders of Common Stock entitled to receive such
consideration; and
(iv) set forth the number of shares of Common Stock into which
each Warrant is then exercisable.
3.9 Changes in Capital Structure. The Company shall not, without the
written consent of each holder of Warrants, amend the Charter so as to change or
modify the powers, preferences or rights of the Common Stock in a manner which
adversely affects the holders of the Warrants as a separate class.
4. ANTI-DILUTION ADJUSTMENTS
4.1 Mechanical Adjustments. The number of shares of Common Stock
purchasable upon the exercise of each Warrant, and the Purchase Price, shall be
subject to adjustment as set forth in this Section 4.
4.2 Stock Dividends, Subdivisions and Combinations. In the event that the
Company shall, on or after the date hereof:
(a) pay a dividend in shares of Additional Common Stock or make a
distribution in shares of Additional Common Stock;
(b) reclassify by subdivision its outstanding shares of Common Stock
into a greater number of shares; or
(c) reclassify by combination its outstanding shares of Common Stock
into a smaller number of shares;
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then, and in each such case, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision or
combination shall be adjusted to that price determined by multiplying the
Purchase Price in effect immediately prior to such event by the quotient of:
(i) the total number of outstanding shares of Common Stock
immediately prior to such event; divided by
(ii) the total number of outstanding shares of Common Stock
immediately after such event.
An adjustment made pursuant to this Section 4.2 shall become effective on the
effective date of such event.
4.3 Dividends and Distributions. In the event that the Company shall make
or pay any dividend of, or distribute to holders of shares of Common Stock
(including, without limitation, any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation)
shares of capital stock (other than Common Stock), other Securities, evidences
of its indebtedness, any of its Property (other than cash or Rights), then in
each case, the Purchase Price in effect after the record date in respect of
which such stock, other Securities, indebtedness, or Property were dividended or
distributed shall be adjusted by multiplying the Purchase Price in effect
immediately prior to such record date by the quotient of:
(a) the difference of:
(i) the Reference Price on such record date; minus
(ii) the quotient of:
(A) the then fair value of the shares of stock, other
Securities, evidences of indebtedness or Property so
distributed or of such Rights so issued, such fair value to be
determined by the Required Warrantholders and the Company or,
if in the Company's view after reasonable negotiation no such
agreement can be reached, by the Valuation Agent, whose
determination, if so made, shall be conclusive; divided by
(B) the number of shares of Common Stock outstanding on
the record date;
divided by
(b) the Reference Price on such record date.
Such adjustment shall be made whenever any such dividend or distribution is
made, and shall become effective on the date of such dividend or distribution.
If the determination referred to in Section 4.3(a)(ii)(A) is to be made by the
Valuation Agent, each of the Company and the Required Warrantholders shall
submit, in writing, their respective determinations of the fair value referred
to
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in such Section at the time the Valuation Agent is requested to make such
determination. If the Valuation Agent's determination of such fair value is
closer to the Company's determination thereof, the holders of the Warrants shall
reimburse the Company, ratably in accordance with the number of Warrants held by
each of them, for the costs and expenses of the Valuation Agent incurred in
making such determination; if the Valuation Agent's determination of such fair
value is closer to the determination thereof of the Required Warrantholders, the
Company shall pay such costs and expenses.
4.4 Issuances of Additional Common Stock or Rights. In the event that the
Company shall issue or sell shares of Additional Common Stock or Rights
(excluding Excluded Securities) for no consideration or at a Consideration Per
Share lower than the Reference Price in effect on the date of such issuance or
sale, or if the Company shall amend the provisions of any Rights such as to
reduce the Consideration Per Share applicable thereto, then the Purchase Price
in effect immediately after such event shall be adjusted by multiplying the
Purchase Price in effect immediately prior to such event by the quotient of:
(a) the sum of:
(i) the number of shares of Common Stock outstanding
immediately prior to such event; plus
(ii) the quotient of:
(A) the Aggregate Consideration Receivable; divided by
(B) the Reference Price;
in each case immediately prior to such event;
divided by
(b) the sum of:
(i) the number of shares of Common Stock outstanding
immediately prior to such event; plus
(ii) the number of shares of Additional Common Stock so issued
or sold (or initially issuable pursuant to such Rights).
4.5 Expiration of Rights. Upon the expiration of any Rights in respect of
the issuance of which adjustment was made pursuant to Section 4.3 or Section
4.4, without the exercise thereof, the Purchase Price and the number of shares
of Common Stock purchasable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter be such Purchase Price and such
number of shares of Common Stock as would have been had such Purchase Price and
such number of shares of Common Stock been originally adjusted (or had the
original adjustment not been required, as the case may be) as if:
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(a) the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the exercise of such
Rights; and
(b) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all of such Rights, whether or not exercised;
provided that no such readjustment shall have the effect of increasing the
Purchase Price by an amount in excess of the amount of the reduction
initially made in respect of the issuance, sale, or grant of such Rights.
4.6 Reorganization, Reclassification, Consolidation, Merger or Sale;
Appraisal Procedure. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
or other transaction, which in each case is effected in such a way that the
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change." Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision to insure that each holder of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or in addition to (as the case may be)
the Warrant Shares immediately theretofore acquirable and receivable upon the
exercise of such holder's Warrant, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of
Warrant Shares immediately theretofore acquirable and receivable upon exercise
of such holder's Warrant had such Organic Change not taken place. The Company
shall not effect any such Organic Change, unless prior to the consummation
thereof, the successor entity (if other than the Company) resulting from such
Organic Change or the entity purchasing such assets assumes, by written
instrument, the obligation to deliver to each such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.
4.7 De Minimis Changes in Purchase Price. No adjustment in the Purchase
Price shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the Purchase Price; provided that any
adjustments that, at the time of the calculation thereof, are less than one
percent (1%) of the Purchase Price at such time and by reason of this Section
4.7 are not required to be made at such time shall be carried forward and added
to any subsequent adjustment or adjustments for purposes of determining whether
such subsequent adjustment or adjustments, as so supplemented, exceed the one
percent (1%) amount set forth in this Section 4.7 and, if any such subsequent
adjustment, as so supplemented or otherwise, should exceed such one percent (1%)
amount, all adjustments deferred prior thereto and not previously made shall
then be made. In any case, all such adjustments being carried forward pursuant
to this Section 4.7 shall be given effect upon the exercise of any Warrants by
any holder thereof for purposes of determining the Purchase Price thereof. All
calculations shall be made to the nearest ten-thousandth of a dollar ($0.0001).
4.8 Adjustment of Number of Shares Issuable Pursuant to Warrants. Upon
each adjustment of the Purchase Price as a result of any calculations made
pursuant to Section 4.2, Section 4.3 or Section 4.4, each Warrant outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest one-hundredth (.01)) obtained by
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multiplying the number of shares of Common Stock covered by such Warrant
immediately prior to such adjustment by the quotient of:
(a) the Purchase Price in effect immediately prior to such
adjustment, divided by
(b) the Purchase Price in effect immediately after such adjustment.
All Warrants originally issued by the Company hereunder shall, subsequent to any
adjustment made to the Purchase Price hereunder, evidence the right to purchase,
at the adjusted Purchase Price, the number of shares of Common Stock determined
to be purchasable from time to time hereunder upon exercise of such Warrants,
all subject to further adjustment as provided herein. Each such adjustment shall
be valid and binding upon the Company and the holders of Warrants irrespective
of whether the Warrant Certificates theretofore and thereafter issued express
the Purchase Price per share of Common Stock and the number of shares of Common
Stock that were expressed upon the initial Warrant Certificates issued
hereunder.
4.9 Miscellaneous.
(a) Adjustments shall be made pursuant to this Section 4
successively whenever any of the events referred to in Section 4.2 through
Section 4.6, inclusive, shall occur.
(b) If any Warrant shall be exercised subsequent to the record date
for any of the events referred to in Section 4.2 through Section 4.6,
inclusive, but prior to the effective date thereof, appropriate
adjustments shall be made immediately after such effective date so that
the holder of such Warrant on such record date shall have received, in the
aggregate, the kind and number of shares of Common Stock or other
Securities or Property that it would have owned or been entitled to
receive on such effective date had such Warrant been exercised prior to
such record date.
(c) Shares of Common Stock owned by or held for the account of the
Company or any Subsidiary shall not, for purposes of the adjustments set
forth in this Section 4, be deemed outstanding.
4.10 Other Securities. In the event that at any time, as a result of an
adjustment made pursuant to this Section 4, each holder of Warrants shall become
entitled to purchase any Securities of the Company other than shares of Common
Stock, the number or amount of such other Securities so purchasable and the
Purchase Price of such Securities shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions contained in Section 4.2 through Section 4.6, inclusive, hereof, and
all other relevant provisions of this Section 4 that are applicable to shares of
Common Stock shall be applicable to such other Securities.
4.11 Additional Agreements of the Company. The Company covenants and
agrees that:
(a) The Company shall not, by amendment to its Charter, or through
any reorganization, transfer of assets, consolidation, merger,
dissolution, liquidation, issuance
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or sale of Securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but shall at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such actions as may be necessary or appropriate in order
to protect the rights of the holders of the Warrant Certificates against
dilution or other impairment.
(b) Before taking any action that would result in an adjustment to
the then current Purchase Price to a price that would be below the then
current par value of Common Stock issuable upon exercise of any Warrant,
the Company will take or cause to be taken any and all necessary corporate
or other action that may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common
Stock upon payment of such Purchase Price as so adjusted.
(c) If the Company shall, at any time after the date hereof, issue
any Right either (i) entitling the holder of such Right to receive all or
any part of dividends paid in cash on the Common Stock, or (ii) containing
provisions for an anti-dilution adjustment in the event that the Company
shall declare or pay a dividend all or partly in cash, then the Company
shall provide prompt written notice of such fact to each holder of
Warrants. The Company agrees, upon written request therefor delivered by
the holder of any Warrant, at its expense to cause to be prepared, and to
enter into, one or more amendments of this Agreement providing for
substantially the same cash dividend or anti-dilution adjustment provision
as provided for in the instrument or agreement governing such other Right.
5. REPORTING COVENANTS
5.1 Financial and Business Information. To the extent not otherwise
delivered, the Company will, until a Public Offering shall have been
consummated, deliver to each holder of Warrant Shares that is an institutional
investor, in duplicate:
(a) Quarterly Financial Statements -- as soon as practicable and in
any event within forty-five (45) days after the end of each quarterly
period (other than the last quarterly period) in each fiscal year,
consolidating and consolidated statements of operations and cash flows of
the Company and its Subsidiaries for the period from the beginning of the
current fiscal year to the end of such quarterly period, and consolidating
and consolidated balance sheets of the Company and its Subsidiaries as at
the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding period in the preceding
fiscal year, all in reasonable detail and certified by an authorized
financial officer of the Company as fairly presenting, in all material
respects, the financial position of the Company and its Subsidiaries and
their results of operations and cash flows, subject to changes resulting
from year-end adjustments and the absence of footnotes; and
(b) Audited Annual Financial Statements -- as soon as practicable
and in any event within one hundred twenty (120) days after the end of
each fiscal year, consolidating and consolidated statements of operations,
shareholders' equity and cash flows of the Company and its Subsidiaries
for such year, and consolidating and consolidated balance sheets of the
Company and its Subsidiaries as at the end of such year, setting forth in
the case of such consolidated statements, in comparative form,
corresponding consolidated
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figures from the preceding annual audit, all in reasonable detail and, as
to the consolidated statements, certified to the Company by Arthur
Andersen LLP or other independent public accountants of recognized
standing selected by the Company and, as to the consolidating statements,
certified by an authorized financial officer of the Company, such
certificates in each case certifying such financial statements as fairly
presenting, in all material respects, the financial position of the
Company and its Subsidiaries and their results of operations and cash
flows.
5.2 Information Concerning Anti-Dilution Adjustments.
(a) Notice of Adjustment. Whenever the number of shares of Common
Stock issuable upon the exercise of Warrants is adjusted or the Purchase
Price in respect thereof is adjusted, as herein provided, the Company
shall promptly give to each holder of Warrants written notice of such
adjustment or adjustments setting forth:
(i) the number of shares of Common Stock issuable upon the
exercise of each Warrant and the Purchase Price of such shares after
such adjustment;
(ii) a brief statement of the facts requiring such adjustment;
and
(iii) the computation by which such adjustment was made.
(b) Confirmation by Accountants. At the request of the Required
Warrantholders, the Company shall obtain a certificate from the
independent certified public accountants of the Company confirming or
correcting the adjustment or adjustments set forth in the notice referred
to in Section 5.2(a); provided that if such accountants shall give such
confirmation, or shall give such confirmation subject to de minimis
corrections, such holder shall reimburse the Company for the costs and
expenses of the accountants incurred in making such confirmation, and if
such accountants shall correct such adjustment or adjustments (other than
de minimis corrections), the Company shall pay such costs and expenses.
6. INTERPRETATION OF THIS AGREEMENT
6.1 Certain Defined Terms. For the purpose of this Agreement, the
following terms shall have the meanings set forth below or set forth in the
Section hereof following such term:
Additional Common Stock -- means Common Stock, including treasury shares,
issued after the date hereof, except Common Stock issued upon the exercise of
any one or more Warrants.
Affiliate -- means, at any time, a Person (other than a Subsidiary or the
Purchaser):
(a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company;
(b) that beneficially owns or holds five percent (5%) or more of any
class of the Voting Stock of the Company; or
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(c) five percent (5%) or more of the Voting Stock (or in the case of
a Person that is not a corporation, five percent (5%) or more of the
equity interest) of which is beneficially owned or held by the Company or
any Subsidiary;
at such time.
As used in this definition,
control -- means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
Aggregate Consideration Receivable -- means, in the case of a sale of
shares of Additional Common Stock, the aggregate amount paid to the Company in
connection therewith and, in the case of an issuance or sale of Rights, or any
amendment thereto, the sum of:
(a) the aggregate amount paid to the Company for such Rights; plus
(b) the aggregate consideration or premiums stated in such Rights to
be payable for the shares of Additional Common Stock covered thereby;
in each case without deduction for any fees, expenses or underwriters'
discounts.
Agreement, this -- and references thereto shall mean this Warrant
Agreement as it may from time to time be amended or supplemented.
Board of Directors -- means the board of directors of the Company or any
committee thereof that, in the instance, shall have the lawful power to exercise
the power and authority of such board of directors.
Charter -- means the certificate of incorporation of the Company, as in
effect immediately after giving effect to the Charter Amendment (as defined in
the Note Agreement).
Closing Price -- means, per share of Common Stock, on any date specified
herein:
(a) the last sale price, regular way, on such date or, if no such
sale takes place on such date, the average of the closing bid and asked
prices on such date, in each case as officially reported on the principal
national securities exchange on which the Common Stock is then listed or
admitted to trading; and
(b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange, but is designated as a national market
system security by the NASD, the last trading price of the Common Stock on
such date, or if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the reported closing bid
and asked prices on such date as shown by the NASDAQ.
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Common Stock -- means the voting common stock, $.01 par value, of the
Company.
Company -- shall have the meaning specified in the introductory paragraph
hereof.
Consideration Per Share -- means, with respect to shares of Common Stock
or Rights, the quotient of:
(a) the Aggregate Consideration Receivable in respect of such shares
of Common Stock or such Rights; divided by
(b) the total number of such shares of Common Stock or, in the case
of Rights, the total number of shares of Common Stock into which such
Rights are exercisable or convertible.
Excluded Securities -- means and includes:
(a) shares of Common Stock or Rights issued in any of the
transactions described in Section 4.2 through Section 4.6, inclusive, and
in respect of which an adjustment has been made pursuant to such Section;
(b) shares of Common Stock issuable upon exercise of the Warrants or
any other Rights outstanding on the date hereof;
(c) shares of Common Stock issued to the public in a bona fide
public offering registered under the Securities Act to Persons other than:
(i) Affiliates;
(ii) employees of the Company; or
(iii) existing holders of Common Stock or Rights;
provided, however, that a bona fide public offering sold through an
underwriter and held open to the public generally shall not fail to meet
the requirements of this clause (c) merely by virtue of the fact that one
or more Affiliates, employees or existing holders of Common Stock or
Rights may have been purchasers from the underwriters therein so long as
not more than twenty percent (20%) of such offering is sold to Affiliates,
employees or existing holders; and
(d) shares of Common Stock issued to employees or directors of the
Company or its Subsidiaries, and Rights consisting of employee or director
stock options and shares of Common Stock issued upon exercise of such
Rights, issued to employees or directors of the Company or its
Subsidiaries pursuant to any stock option plan or agreement approved by
the Board of Directors at any time, so long as, and to the extent that:
(i) the aggregate number of shares of Common Stock issuable
upon exercise of such stock options (whether or not then currently
exercisable) at such
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time, together with all shares of Common Stock previously issued
upon exercise of such stock options, does not exceed Twenty-One
Thousand Ninety (21,090) shares, such number of shares to be
appropriately adjusted in respect of the occurrence of any of the
events described in Section 4; and
(ii) no other holder of any Rights or any other Securities of
the Company shall have the right to any preemptive, subscription or
similar right in respect of such issuance.
Expiration Date -- means the final maturity date of the Notes, provided,
however, that if the Notes are prepaid in full prior to their final maturity
date, the Expiration Date shall be the date of such prepayment in full.
Fair Value -- means, with respect to any share of Common Stock, the
quotient of:
(a) the difference of:
(i) the sum of:
(A) the fair salable value of the Company as a going
concern, giving effect to all Property thereof and subject to
all liabilities thereof (including, without limitation,
indebtedness) that would be realized in an arm's length sale
between an informed and willing buyer and an informed and
willing seller, under no compulsion to buy or sell,
respectively, as of a date that is within fifteen (15) days of
the date as of which the determination is to be made, such
determination in either case to be made without regard to the
absence of a liquid or ready market for such Common Stock;
plus
(B) the aggregate exercise or conversion price of all
Warrants and all other Valuable Rights (including, without
limitation, Valuable Rights in respect of any shares of
Preferred Stock convertible at such time into shares of Common
Stock) in existence and remaining unexercised on such date;
minus
(ii) in the case of any outstanding shares of Preferred Stock
(other than Preferred Stock convertible at such time into shares of
Common Stock, which shares represent Valuable Rights at such time),
the aggregate liquidation preference of (or, if less, the aggregate
price, if any, at which the Company could elect to redeem) such
shares of Preferred Stock (together with all accrued and unpaid
dividends thereon);
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divided by
(b) the sum of:
(i) the total number of shares of Common Stock then
outstanding; plus
(ii) the aggregate number of shares of Common Stock issuable
in respect of all Valuable Rights (including, without limitation,
Valuable Rights in respect of any shares of Preferred Stock
convertible at such time into shares of Common Stock) at such time.
The determination referred to in clause (a)(i)(A) of this definition shall be
made by agreement among the Relevant Warrantholders and the Company and if, in
the Company's view after reasonable negotiation, no such agreement can be
reached, by the Valuation Agent selected by the Company and reasonably
acceptable to the Relevant Warrantholders. If such determination is to be made
by the Valuation Agent, each of the Company and the Relevant Warrantholders
shall submit, in writing, their respective determinations of the fair salable
value referred to in such Section at the time the Valuation Agent is requested
to make such determination. If the Valuation Agent's determination of such fair
salable value is closer to the Company's determination thereof, the
Warrantholders in respect of which such determination has been made shall
reimburse the Company, ratably in accordance with the number of Warrants held by
each of them, for the costs and expenses of the Valuation Agent incurred in
making such determination; if the Valuation Agent's determination of such fair
salable value is closer to the determination thereof of the Relevant
Warrantholders, the Company shall pay such costs and expenses.
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
Initial Purchase Price -- means One Cent ($.01) per share.
Lien -- means any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property (for purposes of this
definition, the "Owner"), whether such interest is based on the common law,
statute or contract, and includes but is not limited to:
(a) the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes, and the filing of any financing statement
under the Uniform Commercial Code of any jurisdiction, or an agreement to
give any of the foregoing;
(b) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting real Property;
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(c) stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements affecting the Owner's rights in
stock owned by the Owner; and
(d) any interest in any Property held by the Owner evidenced by a
conditional sale agreement, capitalized lease or other arrangement
pursuant to which title to such Property has been retained by or vested in
some other Person for security purposes.
The term "Lien" does not include negative pledge clauses in loan agreements and
equal and ratable security clauses in loan agreements.
Market Price -- means, per share of Common Stock, as of any date of
determination, the arithmetic mean of the daily Closing Prices for the twenty
(20) consecutive trading days before such date of determination; provided that
if the Common Stock is then neither listed nor admitted to trading on any
national securities exchange, designated as a national market system security by
the NASD or quoted by NASDAQ, then "Market Price" means the Fair Value of one
(1) share of Common Stock.
NASD -- means the National Association of Securities Dealers, Inc.
NASDAQ -- means the National Association of Securities Dealers Automated
Quotation System.
Note Agreement -- has the meaning set forth in Recital B.
Notes -- has the meaning set forth in Recital B.
Organic Change -- has the meaning set forth in Section 4.6.
Person -- means an individual, partnership, corporation, limited liability
company, joint venture, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
Preferred Stock -- means and includes all capital stock of the Company of
any class which is preferred, as to payment of dividends, payment upon a
liquidation or dissolution of the Company or both, over the Common Stock.
Property -- means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
Public Offering -- has the meaning set forth in the Registration Rights
and Stockholders' Agreement.
Purchase Price -- means, prior to any adjustment pursuant to Section 4,
the Initial Purchase Price, and thereafter, the Initial Purchase Price as
thereafter successively adjusted and readjusted from time to time.
Purchaser -- shall have the meaning specified in the introductory
paragraph hereof.
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Reference Price -- means, per share of Common Stock, as of any date of
determination, ninety-five percent (95%) of the Market Price as of such date.
Registration Rights and Stockholders' Agreement -- means the Registration
Rights and Stockholders' Agreement, dated as of even date herewith, among the
Company, the Purchaser, James A. Harris, Michael J. Stone, and Golder, Thoma,
Cressey, Rauner Fund IV L.P., as it may from time to time be amended or
supplemented.
Relevant Warrantholders -- means (i) in connection with any determination
of Market Price pursuant to Section 2.1(d) or Section 2.6, the holder or holders
of Warrants delivering Warrant Certificates for exercise, and (ii) in connection
with any determination of Reference Price pursuant to Section 4.3 or Section
4.4, the Required Warrantholders.
Required Warrantholders -- means, at any time, the holders of at least a
majority of all Warrants then outstanding (excluding any Warrants directly or
indirectly held by the Company, any Subsidiary or any Affiliate) at such time.
Right -- means and includes:
(a) any warrant (including, without limitation, any Warrant) or any
option (including, without limitation, employee stock options) to acquire
Common Stock;
(b) any right issued to holders of the Common Stock, or any class
thereof, permitting the holders thereof to subscribe to shares of
Additional Common Stock (pursuant to a rights offering or otherwise);
(c) any right to acquire Common Stock pursuant to the provisions of
any Security convertible or exchangeable into Common Stock; and
(d) any similar right permitting the holder thereof to subscribe for
or purchase shares of Common Stock.
Securities Act -- means the Securities Act of 1933, as amended.
Security -- shall have the meaning specified in section 2(1) of the
Securities Act.
Subsidiary -- means, at any time, each corporation, association, limited
liability company or other business entity which qualifies as a subsidiary of
the Company that is properly included in a consolidated financial statement of
the Company and its subsidiaries in accordance with GAAP at such time.
Transferee -- means any registered transferee of all or any part of any
one or more Warrant Certificates acquired by the Purchaser under this Agreement.
Valuable Right -- means, at any time, a Right, the effective conversion,
exercise or purchase price of which on the date of determination is less than
the Fair Value in respect of the
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shares of Common Stock issuable upon conversion, exercise or purchase pursuant
to such Right on such date.
Valuation Agent -- means a firm of independent certified public
accountants, an investment banking firm or appraisal firm (which firm shall own
no Securities of, and shall not be an Affiliate, Subsidiary or a related Person
of, the Company) of recognized national standing, retained by the Company and
reasonably acceptable to the Relevant Warrantholders.
Voting Stock -- means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time any stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
Warrant -- shall mean each Warrant to purchase shares of the Common Stock
issued pursuant to this Agreement.
Warrant Certificate -- has the meaning set forth in Section 1.1.
Warrant Shares -- means, without duplication:
(a) any shares of Common Stock that have been issued upon the
exercise of any Warrant; and
(b) any shares of Common Stock that are issuable upon the exercise
of the Warrants referred to in clause (a) above.
6.2 Descriptive Headings. The descriptive headings of the several Sections
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
6.3 Governing Law. THIS AGREEMENT AND THE WARRANT CERTIFICATES SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
7. MISCELLANEOUS
7.1 Expenses. The Company agrees to pay, and save the Purchaser and any
Transferees harmless against liability for the payment of, all out-of-pocket
expenses (including, without limitation, the reasonable fees and disbursements
of special counsel for the Purchaser and any Transferee) arising in connection
with the transactions herein contemplated, including, without limitation:
(a) the cost, if any, of complying with Section 3.6;
(b) any subsequent proposed modification of, or proposed consent
requested or initiated by or on behalf of the Company under, this
Agreement, the Registration Rights and Stockholders' Agreement, the
Warrant Certificates or the Warrants, whether or not such
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proposed modification shall be effected or proposed consent granted
(including, without limitation, all document production and duplication
charges and the reasonable fees and expenses of one special counsel
engaged by the holders of Warrants in connection therewith); and
(c) the enforcement of (or determination of whether or how to
enforce) any rights under this Agreement, the Registration Rights and
Stockholders' Agreement, the Warrant Certificates or the Warrants or in
responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the
Registration Rights and Stockholders' Agreement, or the transactions
contemplated hereby or thereby, or by reason of the Purchaser's or any
Transferee's having acquired any Warrant Certificate, including, without
limitation, the reasonable fees and expenses of one special counsel
engaged by the holders of the Warrant Shares and incurred by the holders
of the Warrant Shares and the costs and expenses incurred in any
bankruptcy case involving the Company or any Subsidiary.
The obligations of the Company under this Section 7.1 shall survive the transfer
of any Warrant Certificate or portion thereof or interest therein by the
Purchaser or any Transferee and the exercise or expiration of any Warrant.
7.2 Amendment and Waiver. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with and only with the
written consent of the Company and the Required Warrantholders; provided,
however, that:
(a) no such amendment or waiver of any of the provisions of this
Agreement pertaining to the Purchase Price or the number or kind of shares
of Common Stock that may be purchased upon exercise of each Warrant,
(b) no change accelerating the occurrence of the Expiration Date,
and
(c) no such amendment or waiver of any of the provisions of this
Section 7.2,
shall be effective as to the holder of any Warrant unless consented to in
writing by such holder.
7.3 Transferability. The Warrants shall only be transferable upon
compliance with the provisions applicable to the transfer of Warrant Shares (as
defined in the Registration Rights and Stockholders' Agreement referred to
below) set forth in Section 10 of the Registration Rights and Stockholders'
Agreement, dated as of November 21, 1996, among the Company, The Prudential
Insurance Company of America and certain stockholders of the Company, as amended
from time to time, the Warrants being deemed to be Warrant Shares (as defined in
such Registration Rights and Stockholders' Agreement) solely for purposes of
applying such Section to the Warrants.
7.4 Directly or Indirectly. Where any provision in this Agreement refers
to any action to be taken by any Person, or that such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person, including actions taken by or on behalf of any
partnership in which such Person is a general partner.
21
<PAGE>
7.5 Survival of Representations and Warranties; Entire Agreement. This
Agreement and the Warrant Certificates embody the entire agreement and
understanding between the Company and the Purchaser, and supersede all prior
agreements and understandings, relating to the subject matter hereof.
7.6 Successors and Assigns. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not. Notwithstanding the foregoing sentence, the Company may not assign any of
its rights, duties or obligations hereunder or under the Warrants without the
prior written consent of all holders of the Warrants then outstanding.
7.7 Notices. All communications hereunder or under the Warrants shall be
in writing and shall be delivered either by national overnight courier (with
charges prepaid) or by facsimile transmission (confirmed by delivery by national
overnight courier sent on the day of the sending of such facsimile
transmission), and shall be addressed to the following addresses:
(a) if to the Purchaser, at its address set forth on Annex 1 to this
Agreement, or at such other address as the Purchaser shall have specified
to the Company in writing;
(b) if to any other holder of any Warrant Certificate, addressed to
such other holder at such address as such other holder shall have
specified to the Company in writing or, if any such other holder shall not
have so specified an address to the Company, then addressed to such other
holder in care of the last holder of such Warrant Certificate that shall
have so specified an address to the Company; and
(c) if to the Company, at the address set forth on Annex 2 to this
Agreement, or at such other address as the Company shall have specified to
each holder of Warrants in writing.
Any communication addressed and delivered as herein provided shall be deemed to
be received when actually delivered to the address of the addressee (whether or
not delivery is accepted) or received by the telecopy machine of the recipient.
Any communication not so addressed and delivered shall be ineffective.
7.8 Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to the Purchaser or to any holder or holders of
Warrant Certificates, the determination of such satisfaction shall, unless
specifically required herein in any instance to be "reasonable" or words to
similar effect, be made by such Purchaser, holder or holders, as the case may
be, in the sole and exclusive judgment (exercised in good faith) of the Person
or Persons making such determination.
7.9 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
22
<PAGE>
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
7.11 Jurisdiction; Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND
INSTRUMENTS CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE OF THE PARTIES HERETO SHALL SEEK
A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
PROCEDURE BASED UPON OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT OR
ANY OF THE WARRANTS AND EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY SUCH PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 7.11.
[Remainder of page intentionally left blank;
next page is a signature page.]
23
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed and delivered by one of its duly authorized officers or
representatives.
U.S. AGGREGATES, INC.
By: /s/ Michael J. Stone
------------------------------------
Name: Michael J. Stone
Title: Executive Vice President-
Development, Chief Financial
Officer, Treasurer and
Secretary
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Robert R. Derrick
------------------------------------
Name: Robert R. Derrick
Title: Senior Vice President
24
<PAGE>
ANNEX 1
ADDRESS OF PURCHASER
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Gateway Center, 11th Floor
7-45 Raymond Boulevard West
Newark, New Jersey 07102-5311
Annex 1-1
<PAGE>
ANNEX 2
ADDRESS OF COMPANY
400 South El Camino Real
Suite 500
San Mateo, California 94402
Attention: Michael J. Stone
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: John Schoenfeld, Esq.
Annex 2-1
<PAGE>
ATTACHMENT A
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
A TRANSACTION REGISTERED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT.
WARRANT CERTIFICATE
U.S. AGGREGATES, INC.
No. WR-___ __________ Warrants
Date: ________ PPN: 90345@ 11 1
This Warrant Certificate certifies that ___________________, or registered
assigns, is the registered holder of ___________ (________) Warrants. Each
Warrant entitles the owner thereof to purchase at any time on or prior to the
Expiration Date, one (1) fully paid and nonassessable share of Common Stock, par
value $.01 per share (the "Common Stock"), of U.S. AGGREGATES, INC., a Delaware
corporation (together with its successors and assigns, the "Company"), at a
Purchase Price (subject to adjustment as provided therein) of One Cent ($.01)
per share, upon presentation and surrender of this Warrant Certificate with a
form of election to purchase duly executed and delivered to the Company in the
manner set forth in the Warrant Agreement. The number of shares of Common Stock
that may be purchased upon exercise of each Warrant and the Purchase Price are
the number and the Purchase Price as of the date hereof, and are subject to
adjustment as referred to below.
The Warrants are issued pursuant to the Warrant Agreement (as it may from
time to time be amended or supplemented, the "Warrant Agreement"), dated as of
November 21, 1996, between the Company and the investor named therein, and are
subject to all of the terms, provisions and conditions thereof, which Warrant
Agreement is hereby incorporated herein by reference and made a part hereof and
to which Warrant Agreement reference is hereby made for a full description of
the rights, obligations, duties and immunities of the Company and the holders of
the Warrant Certificates. Capitalized terms used, but not defined, herein have
the respective meanings ascribed to them in the Warrant Agreement.
As provided in the Warrant Agreement, the Purchase Price and the number of
shares of Common Stock that may be purchased upon the exercise of the Warrants
evidenced by this Warrant Certificate are, upon the happening of certain events,
subject to modification and adjustment.
This Warrant Certificate shall be exercisable, at the election of the
holder, either as an entirety or in part from time to time (but not, in the case
of any exercise in part, as to a fractional Warrant). If this Warrant
Certificate shall be exercised in part, the holder shall be entitled to receive,
Attachment A-1
<PAGE>
upon surrender hereof, another Warrant Certificate or Warrant Certificates for
the number of Warrants not exercised. This Warrant Certificate, with or without
other Warrant Certificates, upon surrender in the manner set forth in the
Warrant Agreement, may be exchanged for another Warrant Certificate or Warrant
Certificates of like tenor evidencing Warrants entitling the holder to purchase
a like aggregate number of shares of Common Stock as the Warrants evidenced by
the Warrant Certificate or Warrant Certificates surrendered shall have entitled
such holder to purchase.
Except as expressly set forth in the Warrant Agreement, no holder of this
Warrant Certificate shall be entitled to vote or receive dividends or be deemed
for any purpose the holder of shares of Common Stock or of any other Securities
of the Company that may at any time be issued upon the exercise hereof, nor
shall anything contained in the Warrant Agreement or herein be construed to
confer upon the holder hereof, as such, any of the rights of a holder of a share
of Common Stock in the Company or any right to vote upon any matter submitted to
holders of shares of Common Stock at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
stock, reclassification of Securities, change of par value, consolidation,
merger, conveyance, or otherwise), or to receive dividends or subscription
rights, or otherwise, until the Warrant or Warrants evidenced by this Warrant
Certificate shall have been exercised as provided in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY,
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
WITNESS the signature of a duly authorized officer of the Company as of
the date first above written.
U.S. AGGREGATES, INC.
By:
------------------------------------
Name:
Title:
Attachment A-2
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if
such holder desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED, _______________________________________ hereby sells,
assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee.)
the accompanying Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint:
________________________________________________________________________________
attorney, to transfer the accompanying Warrant Certificate on the books of the
Company with full power of substitution.
Dated: ____________________, ________.
[HOLDER]
By______________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the accompanying Warrant Certificate or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.
Attachment A-3
<PAGE>
[FORM OF ELECTION TO PURCHASE]
(To be executed by the registered holder if
such holder desires to exercise the Warrant Certificate)
To U.S. AGGREGATES, INC.:
The undersigned hereby irrevocably elects to exercise
______________________________ Warrants represented by the accompanying Warrant
Certificate to purchase the shares of Common Stock issuable upon the exercise of
such Warrants and requests that certificates for such shares be issued in the
name of:
________________________________________________________________________________
(Please print name and address.)
________________________________________________________________________________
(Please insert social security or other identifying number.)
If such number of Warrants shall not be all the Warrants evidenced by the
accompanying Warrant Certificate, a new Warrant Certificate for the balance
remaining of such Warrants shall be registered in the name of and delivered to:
________________________________________________________________________________
(Please print name and address.)
________________________________________________________________________________
(Please insert social security or other identifying number.)
Attachment A-4
<PAGE>
As stated in Section 2.1(b) of the Warrant Agreement, the Purchase Price
for the shares of Common Stock to be issued on the exercise of the foregoing
Warrants was paid to the Company on the date of the execution of the Warrant
Agreement.
Dated: __________________, ______.
[HOLDER]
By______________________________________
NOTICE
The signature to the foregoing Election to Purchase must correspond to the
name as written upon the face of the accompanying Warrant Certificate or any
prior assignment thereof in every particular, without alteration or enlargement
or any change whatsoever.
Attachment A-5
<PAGE>
U.S. AGGREGATES, INC.
-----------------------------------
WARRANT AGREEMENT
-----------------------------------
DATED AS OF JUNE 5, 1998
3,208 WARRANTS TO PURCHASE COMMON STOCK
OF U.S. AGGREGATES, INC.
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES........... 1
1.1 Form of Warrant Certificates............................. 1
1.2 Execution of Warrant Certificates; Registration Books.... 2
1.3 Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Lost or Stolen Warrant Certificates........ 2
1.4 Subsequent Issuance of Warrant Certificates.............. 3
1.5 Effect of Issuance in Registered Form.................... 3
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE................ 3
2.1 Exercise of Warrants..................................... 3
2.2 Issuance of Common Stock................................. 4
2.3 Unexercised Warrants..................................... 4
2.4 Cancellation and Destruction of Warrant Certificates..... 4
2.5 Deemed Exercise of Warrants Prior to Expiration Date..... 4
2.6 Fractional Shares........................................ 5
3. AGREEMENTS OF THE COMPANY...................................... 5
3.1 Reservation of Common Stock.............................. 5
3.2 Common Stock To Be Duly Authorized and Issued, Fully Paid
and Nonassessable........................................ 5
3.3 Transfer Taxes........................................... 5
3.4 Common Stock Record Date................................. 6
3.5 Rights in Respect of Common Stock........................ 6
3.6 CUSIP Number............................................. 6
3.7 Right of Action.......................................... 6
3.8 Notice of Certain Events................................. 6
3.9 Changes in Capital Structure............................. 7
4. ANTI-DILUTION ADJUSTMENTS...................................... 7
4.1 Mechanical Adjustments................................... 7
4.2 Stock Dividends, Subdivisions and Combinations........... 7
4.3 Dividends and Distributions.............................. 8
4.4 Issuances of Additional Common Stock or Rights........... 9
4.5 Expiration of Rights..................................... 9
4.6 Reorganization, Reclassification, Consolidation, Merger
or Sale; Appraisal Procedure............................. 10
4.7 De Minimis Changes in Purchase Price..................... 10
4.8 Adjustment of Number of Shares Issuable Pursuant to
Warrants................................................. 10
4.9 Miscellaneous............................................ 11
4.10 Other Securities......................................... 11
4.11 Additional Agreements of the Company..................... 11
i
<PAGE>
TABLE OF CONTENTS (continued)
(Not Part of Agreement) Page
5. REPORTING COVENANTS........................................... 12
5.1 Financial and Business Information...................... 12
5.2 Information Concerning Anti-Dilution Adjustments........ 13
6. INTERPRETATION OF THIS AGREEMENT.............................. 13
6.1 Certain Defined Terms................................... 13
6.2 Descriptive Headings.................................... 20
6.3 Governing Law........................................... 20
7. MISCELLANEOUS................................................. 20
7.1 Expenses................................................ 20
7.2 Amendment and Waiver.................................... 21
7.3 Transferability......................................... 21
7.4 Directly or Indirectly.................................. 21
7.5 Survival of Representations and Warranties; Entire
Agreement............................................... 22
7.6 Successors and Assigns.................................. 22
7.7 Notices................................................. 22
7.8 Satisfaction Requirement................................ 22
7.9 Severability............................................ 22
7.10 Counterparts............................................ 23
7.11 Jurisdiction; Jury Trial................................ 23
Annex 1 -- Address of Purchaser
Annex 2 -- Address of Company
Attachment A -- Form of Warrant Certificate
ii
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of June 5, 1998, between U.S. AGGREGATES,
INC., a Delaware corporation (together with its successors and assigns, the
"Company"), and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (together with its
successors and assigns, the "Purchaser").
RECITALS
A. The Board of Directors has authorized the issuance of an aggregate of
Three Thousand Two Hundred Eight (3,208) warrants (as further defined in Section
6, the "Warrants") of the Company, each Warrant representing the right to
purchase, upon the terms and subject to the conditions hereinafter set forth,
and subject to adjustment as set forth herein, one (1) share of Common Stock on
the terms and subject to the conditions hereinafter set forth.
B. The Company and the Purchaser have entered into an Amended and Restated
Note and Warrant Purchase Agreement (as may be amended from time to time, the
"Note Agreement"), dated as of even date herewith, pursuant to which the Company
agreed to sell, and the Purchaser agreed to purchase, Fifteen Million Dollars
($15,000,000) in aggregate principal amount of the Company's 10.09% Senior
Subordinated Notes due November 22, 2008 (the "Notes") and the Warrants, for an
aggregate consideration of Fifteen Million Dollars ($15,000,000) in cash.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties to this Agreement hereby agree as follows:
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES
1.1 Form of Warrant Certificates. The warrant certificates (individually,
a "Warrant Certificate" and, collectively, the "Warrant Certificates")
evidencing the Warrants, and the forms of assignment and of election to purchase
shares to be attached to such certificates, shall be substantially in the form
set forth in Attachment A hereto and may have such letters, numbers or other
marks of identification or designation as may be required to comply with any law
or with any rule or regulation of any governmental authority, stock exchange or
self-regulatory organization made pursuant thereto. Each Warrant Certificate
shall be dated the date of issuance thereof by the Company, either upon initial
issuance or upon transfer or exchange, and on its face shall initially entitle
the holder thereof to purchase a number of shares of Common Stock equal to the
number of Warrants represented by such Warrant Certificate at a price per share
equal to the Purchase Price, but the number of such shares and the Purchase
Price shall be subject to adjustment as provided herein.
1
<PAGE>
1.2 Execution of Warrant Certificates; Registration Books.
(a) Execution of Warrant Certificates. The Warrant Certificates
shall be executed on behalf of the Company by an officer of the Company
authorized by the Board of Directors. In case the officer of the Company
who shall have signed any Warrant Certificate shall cease to be such an
officer of the Company before issuance and delivery by the Company of such
Warrant Certificate, such Warrant Certificate nevertheless may be issued
and delivered with the same force and effect as though the individual who
signed such Warrant Certificate had not ceased to be such an officer of
the Company, and any Warrant Certificate may be signed on behalf of the
Company by any individual who, at the actual date of the execution of such
Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this
Agreement any such individual was not such an officer.
(b) Registration Books. The Company will keep or cause to be kept at
its office maintained at the address of the Company set forth in Section
7.7, or at such other office of the Company in the United States of
America of which the Company shall have given notice to each holder of
Warrant Certificates, books for registration and transfer of the Warrant
Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Warrant Certificates, the
registration number and the number of Warrants evidenced on its face by
each of the Warrant Certificates and the date of each of the Warrant
Certificates.
1.3 Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Lost or Stolen Warrant Certificates.
(a) Transfer, Split Up, etc. Any Warrant Certificate, with or
without other Warrant Certificates, may be transferred, split up, combined
or exchanged for another Warrant Certificate or Warrant Certificates,
entitling the registered holder or Transferee thereof to purchase a like
number of shares of Common Stock as the Warrant Certificate or Warrant
Certificates surrendered then entitled such registered holder to purchase.
Any registered holder desiring to transfer, split up, combine or exchange
any Warrant Certificate shall make such request in writing delivered to
the Company, and shall surrender the Warrant Certificate or Warrant
Certificates to be transferred, split up, combined or exchanged at the
office of the Company referred to in Section 1.2(b), whereupon the Company
shall deliver promptly to the Person entitled thereto a Warrant
Certificate or Warrant Certificates, as the case may be, as so requested.
(b) Loss, Theft, etc. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate (which evidence shall
be, in the case of the Purchaser or another institutional investor, notice
from such institutional investor of such ownership (or of ownership by
such institutional investor's nominee) and such loss, theft, destruction
or mutilation), and:
2
<PAGE>
(i) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company; provided, however, that if
the holder of such Warrant Certificate is the Purchaser or another
institutional investor, or a nominee of the Purchaser or another
institutional investor, the Purchaser's or institutional investor's
own unsecured agreement of indemnity shall be deemed to be
satisfactory; or
(ii) in the case of mutilation, upon surrender and
cancellation thereof;
the Company at its own expense will execute and deliver, in lieu thereof,
a new Warrant Certificate, dated the date of such lost, stolen, destroyed
or mutilated Warrant Certificate and of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant Certificate.
1.4 Subsequent Issuance of Warrant Certificates. Subsequent to the
original issuance, no Warrant Certificates shall be issued except:
(a) Warrant Certificates issued upon any transfer, combination,
split up or exchange of Warrants pursuant to Section 1.3(a);
(b) Warrant Certificates issued in replacement of mutilated,
destroyed, lost or stolen Warrant Certificates pursuant to Section 1.3(b);
and
(c) Warrant Certificates issued pursuant to Section 2.3 upon the
partial exercise of any Warrant Certificate to evidence the unexercised
portion of such Warrant Certificate.
1.5 Effect of Issuance in Registered Form. Every holder of a Warrant
Certificate by accepting the same consents and agrees with the Company and with
every other holder of a Warrant Certificate that:
(a) the Warrant Certificates are transferable only on the registry
books of the Company if surrendered at the office of the Company referred
to in Section 1.2(b), duly endorsed or accompanied by an instrument of
transfer (in the form attached hereto) and payment of any applicable
transfer tax or stamp tax; and
(b) the Company may deem and treat the Person in whose name each
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced thereby (notwithstanding any notations of ownership or
writing on the Warrant Certificates made by anyone other than the Company)
for all purposes whatsoever, and the Company shall not be affected by any
notice to the contrary.
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE
3
<PAGE>
2.1 Exercise of Warrants.
(a) Manner of Exercise. At any time and from time to time on or
prior to the Expiration Date, the holder of any Warrant Certificate may
exercise the Warrants evidenced thereby, in whole or in part (but not, in
the case of any exercise in part, to the extent that such exercise would
result in the issuance of a fractional share of Common Stock), by
surrender of such Warrant Certificate, with an election to purchase (a
form of which is attached to each Warrant Certificate) attached thereto
duly executed, to the Company at its office referred to in Section 1.2(b).
(b) Payment of Purchase Price. It is understood and agreed that the
aggregate Purchase Price (as may be adjusted from time to time pursuant to
Section 4 of this Agreement) for all of the Warrants has been paid in full
to the Company on the date of this Agreement.
2.2 Issuance of Common Stock. Upon timely receipt of a Warrant
Certificate, with the form of election to purchase duly executed, accompanied by
an amount equal to any applicable transfer tax (if not payable by the Company as
provided in Section 3.3), the Company shall thereupon promptly cause
certificates representing the number of whole shares of Common Stock then being
purchased to be delivered to or upon the order of the registered holder of such
Warrant Certificate, registered in such name or names as may be designated by
such holder, and, promptly after such receipt deliver the cash, if any, to be
paid in lieu of fractional shares pursuant to Section 2.6 to or upon the order
of the registered holder of such Warrant Certificate.
2.3 Unexercised Warrants. In case the registered holder of any Warrant
Certificate shall exercise less than all the Warrants evidenced thereby, a new
Warrant Certificate evidencing Warrants equal in number to the number of
Warrants remaining unexercised shall be issued by the Company to the registered
holder of such Warrant Certificate or to its duly authorized assigns.
2.4 Cancellation and Destruction of Warrant Certificates. All Warrant
Certificates surrendered to the Company for the purpose of exercise, exchange,
substitution or transfer shall be cancelled by it, and no Warrant Certificates
shall be issued in lieu thereof except as expressly permitted by any of the
provisions of this Agreement. The Company shall cancel and retire any other
Warrant Certificates purchased or acquired by the Company otherwise than upon
the exercise thereof.
2.5 Deemed Exercise of Warrants Prior to Expiration Date.
(a) The Company acknowledges that it has received an executed
election to purchase for all of the Warrants, dated as of the day
immediately prior to the Expiration Date, together with the aggregate
Purchase Price therefor. To the extent that any Warrants have not been
exercised as of the day immediately preceding the Expiration Date, the
Company agrees that all such unexercised Warrants shall be deemed to have
been exercised as of such day and waives the
4
<PAGE>
requirement for prior delivery of any outstanding Warrant Certificate in
respect of unexercised Warrants. The Company agrees to provide written
notice to each holder of unexercised Warrants promptly, and in any event
within thirty (30) days thereafter, of such deemed exercise.
(b) The Company shall not be required to deliver shares of Common
Stock, following the deemed exercise pursuant to Section 2.5(a), until it
has received Warrant Certificates in respect thereof.
(c) The provisions of this Section 2.5 shall not affect the
provisions of this Agreement applying to the exercise of Warrants at any
time prior to the day immediately preceding the Expiration Date, except
that the Company acknowledges that the Purchase Price for each such
election to purchase has been paid to the Company on the date of this
Agreement.
2.6 Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock upon the exercise of any Warrant. Upon the
exercise of any Warrant, there shall be paid to the holder thereof, in lieu of
any fractional share of Common Stock resulting therefrom, an amount of cash
equal to the product of:
(a) the fractional amount of such share; times
(b) the Market Price, as determined on the trading day immediately
prior to the date of exercise of such Warrant.
3. AGREEMENTS OF THE COMPANY
3.1 Reservation of Common Stock. The Company covenants and agrees that it
will at all times cause to be reserved and kept available out of its authorized
and unissued shares of Common Stock such number of shares of Common Stock as
will be sufficient to permit the exercise in full of all Warrants issued
hereunder and all other Rights exercisable or convertible into Common Stock.
3.2 Common Stock To Be Duly Authorized and Issued, Fully Paid and
Nonassessable. The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock delivered
upon the exercise of any Warrants, at the time of delivery of the certificates
representing such shares, shall be duly and validly authorized and issued and
fully paid and nonassessable, free of any preemptive rights in favor of any
Person in respect of such issuance and free of any Lien created by, or arising
out of actions of, the Company, any Subsidiary or any Affiliate.
3.3 Transfer Taxes. The Company covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges that
may be payable in respect of the initial issuance or delivery of:
(a) each Warrant Certificate;
5
<PAGE>
(b) each Warrant Certificate issued in exchange for any other
Warrant Certificate pursuant to Section 1.3(a) or Section 2.3; and
(c) each share of Common Stock issued upon the exercise of any
Warrant.
The Company shall not, however, be required to:
(i) pay any transfer tax that may be payable in respect of the
transfer or delivery of certificates representing Warrant Shares in a name
other than that of the registered holder of the certificate surrendered
for exercise, conversion, transfer or exchange (any such tax being payable
by the holder of such certificate at the time of surrender); or
(ii) issue or deliver any such certificates referred to in the
foregoing clause (i) until any such tax referred to in the foregoing
clause (i) shall have been paid.
3.4 Common Stock Record Date. Each Person in whose name any certificate
for shares of Common Stock is issued upon the exercise of Warrants shall for all
purposes be deemed to have become the holder of record of the Common Stock
represented thereby on, and such certificate shall be dated, the date upon which
the Warrant Certificate evidencing such Warrants was duly surrendered with an
election to purchase attached thereto duly executed and payment of any
applicable transfer taxes, if payable by such Person, was made.
3.5 Rights in Respect of Common Stock. Except as otherwise set forth
herein, prior to the exercise of the Warrants evidenced thereby, the holder of a
Warrant Certificate shall not be entitled to any rights of a stockholder in the
Company with respect to shares for which the Warrants shall be exercisable,
including, without limitation, the right to vote in respect of any matter upon
which the holders of Common Stock may vote or the right to receive dividends or
other distributions and, except as expressly set forth herein, shall not be
entitled to receive any notice of any proceedings of the Company. Prior to the
exercise of the Warrants evidenced thereby, the holders of the Warrant
Certificates shall not have any obligation or any liability as stockholders of
the Company, whether such obligation or liabilities are asserted by the Company
or by creditors of the Company.
3.6 CUSIP Number. The Company acknowledges that the Purchaser has obtained
a private placement number in respect of the Warrants from the CUSIP Service
Bureau of Standard & Poor's, a division of McGraw-Hill, Inc., and covenants not
to take any action to revoke such number.
3.7 Right of Action. All rights of action in respect of the Warrants are
vested in the respective registered holders of the Warrant Certificates, and any
registered holder of any Warrant Certificate, without the consent of the holder
of any other Warrant Certificate, may, on its own behalf and for its own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act
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in respect of, its right to exercise the Warrants evidenced by such Warrant
Certificate in the manner provided in such Warrant Certificate and in this
Agreement.
3.8 Notice of Certain Events.
(a) Dividends and Distributions. In the event that the Company shall
declare any dividend or other distribution in respect of its Common Stock,
the Company shall give written notice of such declaration to each holder
of Warrants not less than thirty (30) days prior to the record date for
the determination of the registered holders of Common Stock entitled to
receive such dividend or distribution, which notice shall:
(i) state that the Company has declared a dividend, or is
otherwise making a distribution, in respect of its Common Stock;
(ii) describe in reasonable detail the consideration per share
of Common Stock of such dividend or distribution;
(iii) set forth the record date for the determination of the
registered holders of Common Stock entitled to receive such dividend
or distribution; and
(iv) set forth the number of shares of Common Stock into which
each Warrant is then exercisable.
(b) Organic Changes. In the event that the Company will engage in
any Organic Change, the Company shall give written notice thereof to each
holder of Warrants not less than thirty (30) days prior to the record date
for the determination of the registered holders of Common Stock entitled
to receive any consideration in exchange for such Common Stock, which
notice shall
(i) describe in reasonable detail such Organic Change;
(ii) describe in reasonable detail the consideration per share
of Common Stock to be received by holders of Common Stock in
exchange therefor;
(iii) set forth the record date for the determination of the
registered holders of Common Stock entitled to receive such
consideration; and
(iv) set forth the number of shares of Common Stock into which
each Warrant is then exercisable.
3.9 Changes in Capital Structure. The Company shall not, without the
written consent of each holder of Warrants, amend the Charter so as to change or
modify the powers, preferences or rights of the Common Stock in a manner which
adversely affects the holders of the Warrants as a separate class.
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4. ANTI-DILUTION ADJUSTMENTS
4.1 Mechanical Adjustments. The number of shares of Common Stock
purchasable upon the exercise of each Warrant, and the Purchase Price, shall be
subject to adjustment as set forth in this Section 4.
4.2 Stock Dividends, Subdivisions and Combinations. In the event that the
Company shall, on or after the date hereof:
(a) pay a dividend in shares of Additional Common Stock or make a
distribution in shares of Additional Common Stock;
(b) reclassify by subdivision its outstanding shares of Common Stock
into a greater number of shares; or
(c) reclassify by combination its outstanding shares of Common Stock
into a smaller number of shares;
then, and in each such case, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision or
combination shall be adjusted to that price determined by multiplying the
Purchase Price in effect immediately prior to such event by the quotient of:
(i) the total number of outstanding shares of Common Stock
immediately prior to such event; divided by
(ii) the total number of outstanding shares of Common Stock
immediately after such event.
An adjustment made pursuant to this Section 4.2 shall become effective on the
effective date of such event.
4.3 Dividends and Distributions. In the event that the Company shall make
or pay any dividend of, or distribute to holders of shares of Common Stock
(including, without limitation, any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation)
shares of capital stock (other than Common Stock), other Securities, evidences
of its indebtedness, or any of its Property (other than cash or Rights), then in
each case, the Purchase Price in effect after the record date in respect of
which such stock, other Securities, indebtedness, or Property were dividended or
distributed shall be adjusted by multiplying the Purchase Price in effect
immediately prior to such record date by the quotient of:
(a) the difference of:
(i) the Reference Price on such record date; minus
(ii) the quotient of:
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(A) the then fair value of the shares of stock, other
Securities, evidences of indebtedness or Property so
distributed or of such Rights so issued, such fair value to be
determined by the Required Warrantholders and the Company or,
if in the Company's view after reasonable negotiation no such
agreement can be reached, by the Valuation Agent, whose
determination, if so made, shall be conclusive; divided by
(B) the number of shares of Common Stock outstanding on
the record date;
divided by
(b) the Reference Price on such record date.
Such adjustment shall be made whenever any such dividend or distribution is
made, and shall become effective on the date of such dividend or distribution.
If the determination referred to in Section 4.3(a)(ii)(A) is to be made by the
Valuation Agent, each of the Company and the Required Warrantholders shall
submit, in writing, their respective determinations of the fair value referred
to in such Section at the time the Valuation Agent is requested to make such
determination. If the Valuation Agent's determination of such fair value is
closer to the Company's determination thereof, the holders of the Warrants shall
reimburse the Company, ratably in accordance with the number of Warrants held by
each of them, for the costs and expenses of the Valuation Agent incurred in
making such determination; if the Valuation Agent's determination of such fair
value is closer to the determination thereof of the Required Warrantholders, the
Company shall pay such costs and expenses.
4.4 Issuances of Additional Common Stock or Rights. In the event that the
Company shall issue or sell shares of Additional Common Stock or Rights
(excluding Excluded Securities) for no consideration or at a Consideration Per
Share lower than the Reference Price in effect on the date of such issuance or
sale, or if the Company shall amend the provisions of any Rights such as to
reduce the Consideration Per Share applicable thereto, then the Purchase Price
in effect immediately after such event shall be adjusted by multiplying the
Purchase Price in effect immediately prior to such event by the quotient of:
(a) the sum of:
(i) the number of shares of Common Stock outstanding
immediately prior to such event; plus
(ii) the quotient of:
(A) the Aggregate Consideration Receivable; divided by
(B) the Reference Price;
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in each case immediately prior to such event;
divided by
(b) the sum of:
(i) the number of shares of Common Stock outstanding
immediately prior to such event; plus
(ii) the number of shares of Additional Common Stock so issued
or sold (or initially issuable pursuant to such Rights).
4.5 Expiration of Rights. Upon the expiration of any Rights in respect of
the issuance of which adjustment was made pursuant to Section 4.3 or Section
4.4, without the exercise thereof, the Purchase Price and the number of shares
of Common Stock purchasable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter be such Purchase Price and such
number of shares of Common Stock as would have been had such Purchase Price and
such number of shares of Common Stock been originally adjusted (or had the
original adjustment not been required, as the case may be) as if:
(a) the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the exercise of such
Rights; and
(b) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all of such Rights, whether or not exercised;
provided that no such readjustment shall have the effect of increasing the
Purchase Price by an amount in excess of the amount of the reduction
initially made in respect of the issuance, sale, or grant of such Rights.
4.6 Reorganization, Reclassification, Consolidation, Merger or Sale;
Appraisal Procedure. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
or other transaction, which in each case is effected in such a way that the
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change." Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision to insure that each holder of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or in addition to (as the case may be)
the Warrant Shares immediately theretofore acquirable and receivable upon the
exercise of such holder's Warrant, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of
Warrant Shares immediately theretofore acquirable and receivable upon exercise
of such holder's Warrant had such Organic Change not taken place. The Company
shall not effect any such Organic Change, unless prior to the consummation
thereof, the successor entity (if other than the
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Company) resulting from such Organic Change or the entity purchasing such assets
assumes, by written instrument, the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
4.7 De Minimis Changes in Purchase Price. No adjustment in the Purchase
Price shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the Purchase Price; provided that any
adjustments that, at the time of the calculation thereof, are less than one
percent (1%) of the Purchase Price at such time and by reason of this Section
4.7 are not required to be made at such time shall be carried forward and added
to any subsequent adjustment or adjustments for purposes of determining whether
such subsequent adjustment or adjustments, as so supplemented, exceed the one
percent (1%) amount set forth in this Section 4.7 and, if any such subsequent
adjustment, as so supplemented or otherwise, should exceed such one percent (1%)
amount, all adjustments deferred prior thereto and not previously made shall
then be made. In any case, all such adjustments being carried forward pursuant
to this Section 4.7 shall be given effect upon the exercise of any Warrants by
any holder thereof for purposes of determining the Purchase Price thereof. All
calculations shall be made to the nearest ten-thousandth of a dollar ($0.0001).
4.8 Adjustment of Number of Shares Issuable Pursuant to Warrants. Upon
each adjustment of the Purchase Price as a result of any calculations made
pursuant to Section 4.2, Section 4.3 or Section 4.4, each Warrant outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest one-hundredth (.01)) obtained by
multiplying the number of shares of Common Stock covered by such Warrant
immediately prior to such adjustment by the quotient of:
(a) the Purchase Price in effect immediately prior to such
adjustment, divided by
(b) the Purchase Price in effect immediately after such adjustment.
All Warrants originally issued by the Company hereunder shall, subsequent to any
adjustment made to the Purchase Price hereunder, evidence the right to purchase,
at the adjusted Purchase Price, the number of shares of Common Stock determined
to be purchasable from time to time hereunder upon exercise of such Warrants,
all subject to further adjustment as provided herein. Each such adjustment shall
be valid and binding upon the Company and the holders of Warrants irrespective
of whether the Warrant Certificates theretofore and thereafter issued express
the Purchase Price per share of Common Stock and the number of shares of Common
Stock that were expressed upon the initial Warrant Certificates issued
hereunder.
4.9 Miscellaneous.
(a) Adjustments shall be made pursuant to this Section 4
successively whenever any of the events referred to in Section 4.2 through
Section 4.6, inclusive, shall occur.
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(b) If any Warrant shall be exercised subsequent to the record date
for any of the events referred to in Section 4.2 through Section 4.6,
inclusive, but prior to the effective date thereof, appropriate
adjustments shall be made immediately after such effective date so that
the holder of such Warrant on such record date shall have received, in the
aggregate, the kind and number of shares of Common Stock or other
Securities or Property that it would have owned or been entitled to
receive on such effective date had such Warrant been exercised prior to
such record date.
(c) Shares of Common Stock owned by or held for the account of the
Company or any Subsidiary shall not, for purposes of the adjustments set
forth in this Section 4, be deemed outstanding.
4.10 Other Securities. In the event that at any time, as a result of an
adjustment made pursuant to this Section 4, each holder of Warrants shall become
entitled to purchase any Securities of the Company other than shares of Common
Stock, the number or amount of such other Securities so purchasable and the
Purchase Price of such Securities shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions contained in Section 4.2 through Section 4.6, inclusive, hereof, and
all other relevant provisions of this Section 4 that are applicable to shares of
Common Stock shall be applicable to such other Securities.
4.11 Additional Agreements of the Company. The Company covenants and
agrees that:
(a) The Company shall not, by amendment to its Charter, or through
any reorganization, transfer of assets, consolidation, merger,
dissolution, liquidation, issuance or sale of Securities or any other
voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but
shall at all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such actions as may
be necessary or appropriate in order to protect the rights of the holders
of the Warrant Certificates against dilution or other impairment.
(b) Before taking any action that would result in an adjustment to
the then current Purchase Price to a price that would be below the then
current par value of Common Stock issuable upon exercise of any Warrant,
the Company will take or cause to be taken any and all necessary corporate
or other action that may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common
Stock upon payment of such Purchase Price as so adjusted.
(c) If the Company shall, at any time after the date hereof, issue
any Right either (i) entitling the holder of such Right to receive all or
any part of dividends paid in cash on the Common Stock, or (ii) containing
provisions for an anti-dilution adjustment in the event that the Company
shall declare or pay a dividend all or partly in cash, then the Company
shall provide prompt written notice of such fact to each holder of
Warrants. The Company agrees, upon written
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request therefor delivered by the holder of any Warrant, at its expense to
cause to be prepared, and to enter into, one or more amendments of this
Agreement providing for substantially the same cash dividend or
anti-dilution adjustment provision as provided for in the instrument or
agreement governing such other Right.
5. REPORTING COVENANTS
5.1 Financial and Business Information. To the extent not otherwise
delivered, the Company will, until a Public Offering shall have been
consummated, deliver to each holder of Warrant Shares that is an institutional
investor, in duplicate:
(a) Quarterly Financial Statements -- as soon as practicable and in
any event within forty-five (45) days after the end of each quarterly
period (other than the last quarterly period) in each fiscal year,
consolidating and consolidated statements of operations and cash flows of
the Company and its Subsidiaries for the period from the beginning of the
current fiscal year to the end of such quarterly period, and consolidating
and consolidated balance sheets of the Company and its Subsidiaries as at
the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding period in the preceding
fiscal year, all in reasonable detail and certified by an authorized
financial officer of the Company as fairly presenting, in all material
respects, the financial position of the Company and its Subsidiaries and
their results of operations and cash flows, subject to changes resulting
from year-end adjustments and the absence of footnotes; and
(b) Audited Annual Financial Statements -- as soon as practicable
and in any event within one hundred twenty (120) days after the end of
each fiscal year, consolidating and consolidated statements of operations,
shareholders' equity and cash flows of the Company and its Subsidiaries
for such year, and consolidating and consolidated balance sheets of the
Company and its Subsidiaries as at the end of such year, setting forth in
the case of such consolidated statements, in comparative form,
corresponding consolidated figures from the preceding annual audit, all in
reasonable detail and, as to the consolidated statements, certified to the
Company by Arthur Andersen LLP or other independent public accountants of
recognized standing selected by the Company and, as to the consolidating
statements, certified by an authorized financial officer of the Company,
such certificates in each case certifying such financial statements as
fairly presenting, in all material respects, the financial position of the
Company and its Subsidiaries and their results of operations and cash
flows.
5.2 Information Concerning Anti-Dilution Adjustments.
(a) Notice of Adjustment. Whenever the number of shares of Common
Stock issuable upon the exercise of Warrants is adjusted or the Purchase
Price in respect thereof is adjusted, as herein provided, the Company
shall promptly give to each holder of Warrants written notice of such
adjustment or adjustments setting forth:
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(i) the number of shares of Common Stock issuable upon the
exercise of each Warrant and the Purchase Price of such shares after
such adjustment;
(ii) a brief statement of the facts requiring such adjustment;
and
(iii) the computation by which such adjustment was made.
(b) Confirmation by Accountants. At the request of the Required
Warrantholders, the Company shall obtain a certificate from the
independent certified public accountants of the Company confirming or
correcting the adjustment or adjustments set forth in the notice referred
to in Section 5.2(a); provided that if such accountants shall give such
confirmation, or shall give such confirmation subject to de minimis
corrections, such holder shall reimburse the Company for the costs and
expenses of the accountants incurred in making such confirmation, and if
such accountants shall correct such adjustment or adjustments (other than
de minimis corrections), the Company shall pay such costs and expenses.
6. INTERPRETATION OF THIS AGREEMENT
6.1 Certain Defined Terms. For the purpose of this Agreement, the
following terms shall have the meanings set forth below or set forth in the
Section hereof following such term:
Additional Common Stock -- means Common Stock, including treasury shares,
issued after the date hereof, except Common Stock issued upon the exercise of
any one or more Warrants.
Affiliate -- means, at any time, a Person (other than a Subsidiary or the
Purchaser):
(a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company;
(b) that beneficially owns or holds five percent (5%) or more of any
class of the Voting Stock of the Company; or
(c) five percent (5%) or more of the Voting Stock (or in the case of
a Person that is not a corporation, five percent (5%) or more of the
equity interest) of which is beneficially owned or held by the Company or
any Subsidiary;
at such time.
As used in this definition,
control -- means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
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Aggregate Consideration Receivable -- means, in the case of a sale of
shares of Additional Common Stock, the aggregate amount paid to the Company in
connection therewith and, in the case of an issuance or sale of Rights, or any
amendment thereto, the sum of:
(a) the aggregate amount paid to the Company for such Rights; plus
(b) the aggregate consideration or premiums stated in such Rights to
be payable for the shares of Additional Common Stock covered thereby;
in each case without deduction for any fees, expenses or underwriters'
discounts.
Agreement, this -- and references thereto shall mean this Warrant
Agreement as it may from time to time be amended or supplemented.
Board of Directors -- means the board of directors of the Company or any
committee thereof that, in the instance, shall have the lawful power to exercise
the power and authority of such board of directors.
Charter -- means the certificate of incorporation of the Company, as in
effect immediately after giving effect to the Charter Amendment (as defined in
the Note Agreement).
Closing Price -- means, per share of Common Stock, on any date specified
herein:
(a) the last sale price, regular way, on such date or, if no such
sale takes place on such date, the average of the closing bid and asked
prices on such date, in each case as officially reported on the principal
national securities exchange on which the Common Stock is then listed or
admitted to trading; and
(b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange, but is designated as a national market
system security by the NASD, the last trading price of the Common Stock on
such date, or if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the reported closing bid
and asked prices on such date as shown by the NASDAQ.
Common Stock -- means the voting common stock, $.01 par value, of the
Company.
Company -- shall have the meaning specified in the introductory paragraph
hereof.
Consideration Per Share -- means, with respect to shares of Common Stock
or Rights, the quotient of:
(a) the Aggregate Consideration Receivable in respect of such shares
of Common Stock or such Rights; divided by
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(b) the total number of such shares of Common Stock or, in the case
of Rights, the total number of shares of Common Stock into which such
Rights are exercisable or convertible.
Excluded Securities -- means and includes:
(a) shares of Common Stock or Rights issued in any of the
transactions described in Section 4.2 through Section 4.6, inclusive, and
in respect of which an adjustment has been made pursuant to such Section;
(b) shares of Common Stock issuable upon exercise of the Warrants or
any other Rights outstanding on the date hereof;
(c) shares of Common Stock issued to the public in a bona fide
public offering registered under the Securities Act to Persons other than:
(i) Affiliates;
(ii) employees of the Company; or
(iii) existing holders of Common Stock or Rights;
provided, however, that a bona fide public offering sold through an
underwriter and held open to the public generally shall not fail to meet
the requirements of this clause (c) merely by virtue of the fact that one
or more Affiliates, employees or existing holders of Common Stock or
Rights may have been purchasers from the underwriters therein so long as
not more than twenty percent (20%) of such offering is sold to Affiliates,
employees or existing holders; and
(d) shares of Common Stock issued to employees or directors of the
Company or its Subsidiaries, and Rights consisting of employee or director
stock options and shares of Common Stock issued upon exercise of such
Rights, issued to employees or directors of the Company or its
Subsidiaries pursuant to any stock option plan or agreement approved by
the Board of Directors at any time, so long as, and to the extent that:
(i) the aggregate number of shares of Common Stock issuable
upon exercise of such stock options (whether or not then currently
exercisable) at such time, together with all shares of Common Stock
previously issued upon exercise of such stock options, does not
exceed Twenty-One Thousand Ninety (21,090) shares, such number of
shares to be appropriately adjusted in respect of the occurrence of
any of the events described in Section 4; and
(ii) no other holder of any Rights or any other Securities of
the Company shall have the right to any preemptive, subscription or
similar right in respect of such issuance.
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Expiration Date -- means the final maturity date of the Notes, provided,
however, that if the Notes are prepaid in full prior to their final maturity
date, the Expiration Date shall be the date of such prepayment in full.
Fair Value -- means, with respect to any share of Common Stock, the
quotient of:
(a) the difference of:
(i) the sum of:
(A) the fair salable value of the Company as a going
concern, giving effect to all Property thereof and subject to
all liabilities thereof (including, without limitation,
indebtedness) that would be realized in an arm's length sale
between an informed and willing buyer and an informed and
willing seller, under no compulsion to buy or sell,
respectively, as of a date that is within fifteen (15) days of
the date as of which the determination is to be made, such
determination in either case to be made without regard to the
absence of a liquid or ready market for such Common Stock;
plus
(B) the aggregate exercise or conversion price of all
Warrants and all other Valuable Rights (including, without
limitation, Valuable Rights in respect of any shares of
Preferred Stock convertible at such time into shares of Common
Stock) in existence and remaining unexercised on such date;
minus
(ii) in the case of any outstanding shares of Preferred Stock
(other than Preferred Stock convertible at such time into shares of
Common Stock, which shares represent Valuable Rights at such time),
the aggregate liquidation preference of (or, if less, the aggregate
price, if any, at which the Company could elect to redeem) such
shares of Preferred Stock (together with all accrued and unpaid
dividends thereon);
divided by
(b) the sum of:
(i) the total number of shares of Common Stock then
outstanding; plus
(ii) the aggregate number of shares of Common Stock issuable
in respect of all Valuable Rights (including, without limitation,
Valuable Rights in respect of any shares of Preferred Stock
convertible at such time into shares of Common Stock) at such time.
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The determination referred to in clause (a)(i)(A) of this definition shall be
made by agreement among the Relevant Warrantholders and the Company and if, in
the Company's view after reasonable negotiation, no such agreement can be
reached, by the Valuation Agent selected by the Company and reasonably
acceptable to the Relevant Warrantholders. If such determination is to be made
by the Valuation Agent, each of the Company and the Relevant Warrantholders
shall submit, in writing, their respective determinations of the fair salable
value referred to in such Section at the time the Valuation Agent is requested
to make such determination. If the Valuation Agent's determination of such fair
salable value is closer to the Company's determination thereof, the
Warrantholders in respect of which such determination has been made shall
reimburse the Company, ratably in accordance with the number of Warrants held by
each of them, for the costs and expenses of the Valuation Agent incurred in
making such determination; if the Valuation Agent's determination of such fair
salable value is closer to the determination thereof of the Relevant
Warrantholders, the Company shall pay such costs and expenses.
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
Initial Purchase Price -- means One Cent ($.01) per share.
Lien -- means any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property (for purposes of this
definition, the "Owner"), whether such interest is based on the common law,
statute or contract, and includes but is not limited to:
(a) the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes, and the filing of any financing statement
under the Uniform Commercial Code of any jurisdiction, or an agreement to
give any of the foregoing;
(b) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting real Property;
(c) stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements affecting the Owner's rights in
stock owned by the Owner; and
(d) any interest in any Property held by the Owner evidenced by a
conditional sale agreement, capitalized lease or other arrangement
pursuant to which title to such Property has been retained by or vested in
some other Person for security purposes.
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The term "Lien" does not include negative pledge clauses in loan agreements and
equal and ratable security clauses in loan agreements.
Market Price -- means, per share of Common Stock, as of any date of
determination, the arithmetic mean of the daily Closing Prices for the twenty
(20) consecutive trading days before such date of determination; provided that
if the Common Stock is then neither listed nor admitted to trading on any
national securities exchange, designated as a national market system security by
the NASD or quoted by NASDAQ, then "Market Price" means the Fair Value of one
(1) share of Common Stock.
NASD -- means the National Association of Securities Dealers, Inc.
NASDAQ -- means the National Association of Securities Dealers Automated
Quotation System.
Note Agreement -- has the meaning set forth in Recital B.
Notes -- has the meaning set forth in Recital B.
Organic Change -- has the meaning set forth in Section 4.6.
Person -- means an individual, partnership, corporation, limited liability
company, joint venture, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
Preferred Stock -- means and includes all capital stock of the Company of
any class which is preferred, as to payment of dividends, payment upon a
liquidation or dissolution of the Company or both, over the Common Stock.
Property -- means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
Public Offering -- has the meaning set forth in the Registration Rights
and Stockholders' Agreement.
Purchase Price -- means, prior to any adjustment pursuant to Section 4,
the Initial Purchase Price, and thereafter, the Initial Purchase Price as
thereafter successively adjusted and readjusted from time to time.
Purchaser -- shall have the meaning specified in the introductory
paragraph hereof.
Reference Price -- means, per share of Common Stock, as of any date of
determination, ninety-five percent (95%) of the Market Price as of such date.
19
<PAGE>
Registration Rights and Stockholders' Agreement -- means the Registration
Rights and Stockholders' Agreement, dated as of even date herewith, among the
Company, the Purchaser, James A. Harris, Michael J. Stone, and Golder, Thoma,
Cressey, Rauner Fund IV L.P., as amended by the First Amendment to Registration
Rights and Stockholders' Agreement, dated as of June 5, 1998, and as it may from
time to time be further amended or supplemented.
Relevant Warrantholders -- means (i) in connection with any determination
of Market Price pursuant to Section 2.6, the holder or holders of Warrants
delivering Warrant Certificates for exercise, and (ii) in connection with any
determination of Reference Price pursuant to Section 4.3 or Section 4.4, the
Required Warrantholders.
Required Warrantholders -- means, at any time, the holders of at least a
majority of all Warrants then outstanding (excluding any Warrants directly or
indirectly held by the Company, any Subsidiary or any Affiliate) at such time.
Right -- means and includes:
(a) any warrant (including, without limitation, any Warrant) or any
option (including, without limitation, employee stock options) to acquire
Common Stock;
(b) any right issued to holders of the Common Stock, or any class
thereof, permitting the holders thereof to subscribe to shares of
Additional Common Stock (pursuant to a rights offering or otherwise);
(c) any right to acquire Common Stock pursuant to the provisions of
any Security convertible or exchangeable into Common Stock; and
(d) any similar right permitting the holder thereof to subscribe for
or purchase shares of Common Stock.
Securities Act -- means the Securities Act of 1933, as amended.
Security -- shall have the meaning specified in section 2(1) of the
Securities Act.
Subsidiary -- means, at any time, each corporation, association, limited
liability company or other business entity which qualifies as a subsidiary of
the Company that is properly included in a consolidated financial statement of
the Company and its subsidiaries in accordance with GAAP at such time.
Transferee -- means any registered transferee of all or any part of any
one or more Warrant Certificates acquired by the Purchaser under this Agreement.
Valuable Right -- means, at any time, a Right, the effective conversion,
exercise or purchase price of which on the date of determination is less than
the Fair Value in respect of the shares of Common Stock issuable upon
conversion, exercise or purchase pursuant to such Right on such date.
20
<PAGE>
Valuation Agent -- means a firm of independent certified public
accountants, an investment banking firm or appraisal firm (which firm shall own
no Securities of, and shall not be an Affiliate, Subsidiary or a related Person
of, the Company) of recognized national standing, retained by the Company and
reasonably acceptable to the Relevant Warrantholders.
Voting Stock -- means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time any stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
Warrant -- shall mean each Warrant to purchase shares of the Common Stock
issued pursuant to this Agreement.
Warrant Certificate -- has the meaning set forth in Section 1.1.
Warrant Shares -- means, without duplication:
(a) any shares of Common Stock that have been issued upon the
exercise of any Warrant; and
(b) any shares of Common Stock that are issuable upon the exercise
of the Warrants referred to in clause (a) above.
6.2 Descriptive Headings. The descriptive headings of the several Sections
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
6.3 Governing Law. THIS AGREEMENT AND THE WARRANT CERTIFICATES SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
7. MISCELLANEOUS
7.1 Expenses. The Company agrees to pay, and save the Purchaser and any
Transferees harmless against liability for the payment of, all out-of-pocket
expenses (including, without limitation, the reasonable fees and disbursements
of special counsel for the Purchaser and any Transferee) arising in connection
with the transactions herein contemplated, including, without limitation:
(a) the cost, if any, of complying with Section 3.6;
(b) any subsequent proposed modification of, or proposed consent
requested or initiated by or on behalf of the Company under, this
Agreement, the Registration Rights and Stockholders' Agreement, the
Warrant Certificates or the Warrants, whether or not such proposed
modification shall be effected or
21
<PAGE>
proposed consent granted (including, without limitation, all document
production and duplication charges and the reasonable fees and expenses of
one special counsel engaged by the holders of Warrants in connection
therewith); and
(c) the enforcement of (or determination of whether or how to
enforce) any rights under this Agreement, the Registration Rights and
Stockholders' Agreement, the Warrant Certificates or the Warrants or in
responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the
Registration Rights and Stockholders' Agreement, or the transactions
contemplated hereby or thereby, or by reason of the Purchaser's or any
Transferee's having acquired any Warrant Certificate, including, without
limitation, the reasonable fees and expenses of one special counsel
engaged by the holders of the Warrant Shares and incurred by the holders
of the Warrant Shares and the costs and expenses incurred in any
bankruptcy case involving the Company or any Subsidiary.
The obligations of the Company under this Section 7.1 shall survive the transfer
of any Warrant Certificate or portion thereof or interest therein by the
Purchaser or any Transferee and the exercise or expiration of any Warrant.
7.2 Amendment and Waiver. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with and only with the
written consent of the Company and the Required Warrantholders; provided,
however, that:
(a) no such amendment or waiver of any of the provisions of this
Agreement pertaining to the Purchase Price or the number or kind of shares
of Common Stock that may be purchased upon exercise of each Warrant,
(b) no change accelerating the occurrence of the Expiration Date,
and
(c) no such amendment or waiver of any of the provisions of this
Section 7.2,
shall be effective as to the holder of any Warrant unless consented to in
writing by such holder.
7.3 Transferability. The Warrants shall only be transferable upon
compliance with the provisions applicable to the transfer of Warrant Shares (as
defined in the Registration Rights and Stockholders' Agreement) set forth in
Section 10 of the Registration Rights and Stockholders' Agreement, the Warrants
being deemed to be Warrant Shares (as defined in the Registration Rights and
Stockholders' Agreement) solely for purposes of applying such Section to the
Warrants.
7.4 Directly or Indirectly. Where any provision in this Agreement refers
to any action to be taken by any Person, or that such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person, including actions taken by or on behalf of any
partnership in which such Person is a general partner.
22
<PAGE>
7.5 Survival of Representations and Warranties; Entire Agreement. This
Agreement and the Warrant Certificates embody the entire agreement and
understanding between the Company and the Purchaser, and supersede all prior
agreements and understandings, relating to the subject matter hereof.
7.6 Successors and Assigns. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not. Notwithstanding the foregoing sentence, the Company may not assign any of
its rights, duties or obligations hereunder or under the Warrants without the
prior written consent of all holders of the Warrants then outstanding.
7.7 Notices. All communications hereunder or under the Warrants shall be
in writing and shall be delivered either by national overnight courier (with
charges prepaid) or by facsimile transmission (confirmed by delivery by national
overnight courier sent on the day of the sending of such facsimile
transmission), and shall be addressed to the following addresses:
(a) if to the Purchaser, at its address set forth on Annex 1 to this
Agreement, or at such other address as the Purchaser shall have specified
to the Company in writing;
(b) if to any other holder of any Warrant Certificate, addressed to
such other holder at such address as such other holder shall have
specified to the Company in writing or, if any such other holder shall not
have so specified an address to the Company, then addressed to such other
holder in care of the last holder of such Warrant Certificate that shall
have so specified an address to the Company; and
(c) if to the Company, at the address set forth on Annex 2 to this
Agreement, or at such other address as the Company shall have specified to
each holder of Warrants in writing.
Any communication addressed and delivered as herein provided shall be deemed to
be received when actually delivered to the address of the addressee (whether or
not delivery is accepted) or received by the telecopy machine of the recipient.
Any communication not so addressed and delivered shall be ineffective.
7.8 Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to the Purchaser or to any holder or holders of
Warrant Certificates, the determination of such satisfaction shall, unless
specifically required herein in any instance to be "reasonable" or words to
similar effect, be made by such Purchaser, holder or holders, as the case may
be, in the sole and exclusive judgment (exercised in good faith) of the Person
or Persons making such determination.
23
<PAGE>
7.9 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
7.11 Jurisdiction; Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND
INSTRUMENTS CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE OF THE PARTIES HERETO SHALL SEEK
A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
PROCEDURE BASED UPON OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT OR
ANY OF THE WARRANTS AND EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY SUCH PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 7.11.
[Remainder of page intentionally left blank;
next page is a signature page.]
24
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed and delivered by one of its duly authorized officers or
representatives.
U.S. AGGREGATES, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Executive Vice President,
Chief Financial Officer
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Robert R. Derrick
Name: Robert R. Derrick
Title: Vice President
<PAGE>
ANNEX 1
ADDRESS OF PURCHASER
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Gateway Center, 11th Floor
Newark, New Jersey 07102-5311
Annex 1-1
<PAGE>
ANNEX 2
ADDRESS OF COMPANY
400 South El Camino Real
Suite 500
San Mateo, California 94402
Attention: Michael J. Stone
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: John Schoenfeld, Esq.
Annex 2-1
<PAGE>
ATTACHMENT A
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
A TRANSACTION REGISTERED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT.
WARRANT CERTIFICATE
U.S. AGGREGATES, INC.
No. WS-___ __________ Warrants
Date: ________ PPN: 90345@ 12 9
This Warrant Certificate certifies that ___________________, or registered
assigns, is the registered holder of ___________ (________) Warrants. Each
Warrant entitles the owner thereof to purchase at any time on or prior to the
Expiration Date, one (1) fully paid and nonassessable share of Common Stock, par
value $.01 per share (the "Common Stock"), of U.S. AGGREGATES, INC., a Delaware
corporation (together with its successors and assigns, the "Company"), at a
Purchase Price (subject to adjustment as provided therein) of One Cent ($.01)
per share, upon presentation and surrender of this Warrant Certificate with a
form of election to purchase duly executed and delivered to the Company in the
manner set forth in the Warrant Agreement. The number of shares of Common Stock
that may be purchased upon exercise of each Warrant and the Purchase Price are
the number and the Purchase Price as of the date hereof, and are subject to
adjustment as referred to below.
The Warrants are issued pursuant to the Warrant Agreement (as it may from
time to time be amended or supplemented, the "Warrant Agreement"), dated as of
June 5, 1998, between the Company and the investor named therein, and are
subject to all of the terms, provisions and conditions thereof, which Warrant
Agreement is hereby incorporated herein by reference and made a part hereof and
to which Warrant Agreement reference is hereby made for a full description of
the rights, obligations, duties and immunities of the Company and the holders of
the Warrant Certificates. Capitalized terms used, but not defined, herein have
the respective meanings ascribed to them in the Warrant Agreement.
As provided in the Warrant Agreement, the Purchase Price and the number of
shares of Common Stock that may be purchased upon the exercise of the Warrants
evidenced by this Warrant Certificate are, upon the happening of certain events,
subject to modification and adjustment.
This Warrant Certificate shall be exercisable, at the election of the
holder, either as an entirety or in part from time to time (but not, in the case
of any exercise in part, as
Attachment A-1
<PAGE>
to a fractional Warrant). If this Warrant Certificate shall be exercised in
part, the holder shall be entitled to receive, upon surrender hereof, another
Warrant Certificate or Warrant Certificates for the number of Warrants not
exercised. This Warrant Certificate, with or without other Warrant Certificates,
upon surrender in the manner set forth in the Warrant Agreement, may be
exchanged for another Warrant Certificate or Warrant Certificates of like tenor
evidencing Warrants entitling the holder to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered shall have entitled such holder to purchase.
Except as expressly set forth in the Warrant Agreement, no holder of this
Warrant Certificate shall be entitled to vote or receive dividends or be deemed
for any purpose the holder of shares of Common Stock or of any other Securities
of the Company that may at any time be issued upon the exercise hereof, nor
shall anything contained in the Warrant Agreement or herein be construed to
confer upon the holder hereof, as such, any of the rights of a holder of a share
of Common Stock in the Company or any right to vote upon any matter submitted to
holders of shares of Common Stock at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
stock, reclassification of Securities, change of par value, consolidation,
merger, conveyance, or otherwise), or to receive dividends or subscription
rights, or otherwise, until the Warrant or Warrants evidenced by this Warrant
Certificate shall have been exercised as provided in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY,
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
WITNESS the signature of a duly authorized officer of the Company as of
the date first above written.
U.S. AGGREGATES, INC.
By:
-------------------------------------
Name:
Title:
Attachment A-2
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if
such holder desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED, _______________________________________ hereby sells,
assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee.)
the accompanying Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint:
________________________________________________________________________________
attorney, to transfer the accompanying Warrant Certificate on the books of the
Company with full power of substitution.
Dated: ____________________, ________.
[HOLDER]
By _____________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the accompanying Warrant Certificate or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.
Attachment A-3
<PAGE>
[FORM OF ELECTION TO PURCHASE]
(To be executed by the registered holder if
such holder desires to exercise the Warrant Certificate)
To U.S. AGGREGATES, INC.:
The undersigned hereby irrevocably elects to exercise
______________________________ Warrants represented by the accompanying Warrant
Certificate to purchase the shares of Common Stock issuable upon the exercise of
such Warrants and requests that certificates for such shares be issued in the
name of:
________________________________________________________________________________
(Please print name and address.)
________________________________________________________________________________
(Please insert social security or other identifying number.)
If such number of Warrants shall not be all the Warrants evidenced by the
accompanying Warrant Certificate, a new Warrant Certificate for the balance
remaining of such Warrants shall be registered in the name of and delivered to:
________________________________________________________________________________
(Please print name and address.)
________________________________________________________________________________
(Please insert social security or other identifying number.)
Attachment A-4
<PAGE>
As stated in Section 2.1(b) of the Warrant Agreement, the Purchase Price
for the shares of Common Stock to be issued on the exercise of the foregoing
Warrants was paid to the Company on the date of the execution of the Warrant
Agreement.
Dated: __________________, ______.
[HOLDER]
By______________________________________
NOTICE
The signature to the foregoing Election to Purchase must correspond to the
name as written upon the face of the accompanying Warrant Certificate or any
prior assignment thereof in every particular, without alteration or enlargement
or any change whatsoever.
Attachment A-5
<PAGE>
GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606-6402
April 15, 1999
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Ladies and Gentlemen:
Reference is hereby made to that certain Promissory Note (the
"Note") of even date herewith by and between U.S. Aggregates, Inc., a Delaware
corporation (the "Borrower"), and Harris Trust and Savings Bank (the "Bank").
Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware limited
partnership ("GTCR"), is the legal and beneficial owner of a portion of the
issued and outstanding capital stock of the Borrower. To induce the Bank to
enter into the Note, GTCR hereby agrees (the "Note Funding Agreement"), subject
to the remaining provisions of this letter and for so long as this letter
remains in effect, to contribute cash to the capital of the Borrower which shall
be used by the Borrower for the purpose of funding payment of the Note and all
accrued and unpaid interest thereon (the "Cash Contribution"), to the extent the
Note is then due and payable ("Note Obligations"); provided, however, that the
maximum obligation of GTCR under the Note Funding Agreement shall not exceed the
original principal amount of $15,701,313.82 plus any additional amounts borrowed
by the Borrower under the Note to fund the payment of accrued interest under the
outstanding Note Obligations (the "Interest Payment Transactions"); and
provided, further, that GTCR shall not be deemed to be in breach or default of
its obligations under this Note Funding Agreement to contribute cash to the
capital of the Borrower unless, within five Business Days after receipt of a
written request from the Bank (a "Funding Request"), GTCR has not contributed to
the capital of the Borrower the amount of cash specified in the Funding Request
(which request shall in no event exceed the amount due under the Note
Obligations).
If the Note shall not have been paid in full on December 31, 1999,
then, pursuant to this Note Funding Agreement, GTCR shall contribute the Cash
Contribution. Each of the undersigned agrees that, notwithstanding the terms of
any other agreement (other than any guaranty of the Note), upon receipt by the
Borrower of the Cash Contribution, such Cash Contribution shall be used solely
to pay the Note in full and all accrued and unpaid interest thereon (the "Note
Repayment Transaction" and, together with the Interest Payment Transactions, the
"Transactions").
In the event that GTCR pays the obligations owed by the Borrower
under the Note through the Cash Contribution, any guaranty of such Note or
through any other method, GTCR
<PAGE>
agrees that any claim GTCR may have against the Borrower as a result of GTCR's
payment of such Note shall be converted to equity of the Borrower.
The Borrower hereby (i) agrees to take all reasonable actions
necessary to effectuate the Transactions and (ii) grants all waivers and
consents under all agreements by or among the parties hereto solely to the
extent required or necessary to effectuate the Transactions. Notwithstanding
anything to the contrary contained herein, nothing herein shall impair or
otherwise affect the rights of the Bank under the Note or any guaranty thereof.
GTCR further agrees to pay on demand, if not paid by or on behalf of
the Borrower, all reasonable costs and expenses of every kind incurred by the
Bank in enforcing this letter ("Enforcement Costs"). "Costs and expenses" as
used in the preceding sentence shall include, without limitation, reasonable
attorneys' fees incurred by the Bank in retaining counsel in connection with any
claim, suit, appeal, any insolvency or other proceedings under the Bankruptcy
Code or otherwise.
GTCR represents and warrants to the undersigned that: (a) GTCR is a
limited partnership duly formed, validly existing and in good standing under the
laws of the jurisdiction of its formation, and has full partnership power,
authority and legal right to own its property and assets and to transact the
business in which it is engaged; (b) GTCR has full partnership power, authority
and legal right to execute and deliver, and to perform its obligations under,
this letter, and has taken all necessary action to authorize its obligations
hereunder on the terms and conditions of this letter and to authorize the
execution, delivery and performance of this letter; and (c) this letter has been
duly executed and delivered by GTCR as of the date hereof and constitutes a
legal, valid and binding obligation of GTCR enforceable against GTCR in
accordance with its terms, except to the extent that such enforceability is
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and moratorium laws and other laws of general application affecting
enforcement of creditors' rights generally, or the availability of equitable
remedies, which are subject to the discretion of the court before which an
action may be brought.
This letter and all of GTCR's obligations hereunder shall remain in
full force and effect until the Note shall be finally and irrevocably paid in
full (the "Termination Event"). Upon the occurrence of the Termination Event,
this letter and all of GTCR's obligations hereunder shall automatically and
forever terminate. After the termination of this letter as set forth above, the
Bank shall take such action and execute such documents as GTCR may reasonably
request in order to evidence the termination of this letter.
The parties hereto expressly and affirmatively acknowledge and agree
that this letter is for the sole benefit of the undersigned parties and that
nothing herein shall confer any rights or remedies upon any party, other than
such parties and their respective successors and permitted assigns. The parties
hereto further acknowledge and agree that each of the undersigned parties may
enforce the obligations hereunder of any other undersigned party.
- 2 -
<PAGE>
This letter is absolute and unconditional and shall not be changed
or affected by any representation, oral agreement, act or event whatsoever,
except as herein provided. This letter is intended to be the final, complete and
exclusive expression among the undersigned relating to the subject matter
hereof. No modification or amendment of any provision of this letter shall be
effective unless in writing and signed by a duly authorized officer of each of
the undersigned.
Prior to the termination of this letter, no course of dealing among
the undersigned and no act, delay or omission by the undersigned in exercising
any right or remedy hereunder or with respect to any of the Note Obligations
shall operate as a waiver thereof or of any other right or remedy, and no single
or partial exercise thereof shall preclude any other or further exercise thereof
or the exercise of any other right or remedy. This letter shall inure to the
benefit of the Bank under the Note.
If any provision of this letter is unenforceable in whole or in part
for any reason, the remaining provisions shall continue to be effective. GTCR
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS LETTER AND GTCR HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE BANK TO BRING PROCEEDINGS AGAINST GTCR IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY GTCR AGAINST THE BANK OR ANY
AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LETTER SHALL BE BROUGHT ONLY
IN A COURT IN CHICAGO, ILLINOIS. THIS LETTER AND THE TRANSACTIONS EVIDENCED
HEREBY SHALL BE CONSTRUED UNDER THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF
LAWS PROVISIONS) AND DECISIONS OF THE STATE OF ILLINOIS.
All notices, approval, requests, demands and other communications
hereunder shall be in writing and delivered by hand or by nationally recognized
overnight courier, or sent by first class mail, sent to the address specified in
this letter.
GTCR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND EXEMPTION
LAWS. GTCR WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS LETTER, OR THE TRANSACTIONS
CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY THE BANK. GTCR AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, GTCR
- 3 -
<PAGE>
FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS LETTER OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LETTER.
- 4 -
<PAGE>
This letter may be executed in multiple counterparts (including by
means of telecopied signature pages), all of which shall be considered one and
the same letter and shall become effective when one or more of such counterparts
have been signed by each of the parties and delivered to the other party.
Very truly yours,
GOLDER, THOMA, CRESSEY, RAUNER FUND
IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
Its: General Partner
By: /s/ David A. Donnini
-------------------------------
Its:_______________________________
Acknowledged and agreed to
this 1st day of April, 1999:
___
HARRIS TRUST AND SAVINGS BANK
By: /s/ illegible
-------------------------------
Its:_______________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ illegible
------------------------------
Its: Vice President
------------------------------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ illegible
------------------------------
Its: Vice President
______________________________
U.S. AGGREGATES, INC.
By: /s/ Michael Stone
------------------------------
Its: ______________________________
- 5 -
<PAGE>
EXHIBIT 4.13
FLOATING RATE LOAN - PROCEDURES LETTER
Harris Trust and Savings Bank
111I West Monroe Street
Chicago, Illinois 60690
Gentlemen:
U.S. Aggregates, Inc., a Delaware corporation (the "Company") hereby
requests that borrowings under its $17,500,000 revolving line of credit granted
by Harris Trust and Savings Bank be made and documented upon the following terms
and conditions. You agree until further notice that upon oral advice by
telephone received by you from time to time from authorized persons listed in
this letter that we wish to borrow money, you will lend and deposit to our
account with Bank of America Illinois. ABA #071000039, known as Account Number
78-19625 (the "Account") such sums of money as may be mutually agreed upon. We
agree to confirm such borrowings in writing by mailing on the same day a letter
in the to attached hereto as Exhibit A signed by any one of the following
officers:
Michael J. Stone
It is understood, however, that pending receipt of such letter by you in the
ordinary course of the mails, that any sums of money borrowed by telephone on
advice of an authorized person or a person purporting to be an authorized person
in accordance with the foregoing arrangement shall immediately be credited to
the Account, and we shall be obligated to repay to you the sums so borrowed at
the time and with the interest set forth in this letter notwithstanding that any
such borrowing, is not confirmed as contemplated above.
All such borrowings shall be repaid by us upon your demand, but they may,
at our election in any instance, be repaid at any time upon telephonic advice to
you.
All borrowings made by us under our line of credit from you shall bear
interest prior to maturity at a rate per annum which is equal to the rate per
annum which is equal at all times to the rate from time to time announced by you
as your prime commercial rate, with any change in the interest rate on such
borrowings by virtue of a change in such prime commercial rate to be and become
effective as of and on the date of the relevant change in such prime commercial
rate. Interest shall be computed on the basis of a year of 360 days and actual
days elapsed and shall be payable on the last day of each quarter and upon
demand.
All borrowings hereunder shall be made against and evidenced by a
promissory note of the Company payable to your order in the aggregate principal
amount of $17,500,000, such note to mature as set forth in, and to be otherwise
in the form of Exhibit B attached hereto (the "Note"). You agree that
notwithstanding the fact that the Note is in the principal amount of
$17,500,000, it shall evidence only the actual principal amount of borrowings
made by us from
<PAGE>
time to time under our line of credit from you and you agree that if you
transfer or assign the Note you will stamp thereon a statement of the actual
principal amount evidenced thereby at the time of transfer. We agree that in any
action or proceeding instituted to collect or enforce collection of the Note,
the amount shown as owing you on your records shall be prima facie evidence of
the unpaid balance of principal and interest on the Note.
The officers authorized to give you telephonic instructions to lend money and
repay borrowings in accordance with the foregoing are:
Michael J. Stone
In accepting telephonic advices from any of such officers and/or employees in
accordance with the terms of this Agreement. you shall be entitled to rely on
advices given by any person purporting to be any one of such officers and shall
have no liability to us on account of any action taken by you pursuant to such
telephonic advices provided you have acted in good faith in connection
therewith. You are. of course. authorized to lend money to us upon the written
instructions of any officers and/or employees authorized to borrow funds by
telephonic advice.
This Procedures Letter and the arrangements and authorizations herein
contemplated shall remain in full force and effect. and shall be applicable to
any renewals of. or replacements or substitutions for, our present revolving
line of credit from you. unless and until you have received written notice from
the Company of the termination or modification of this Procedures Letter at your
office in Chicago, Illinois or unless and until the Company has received such a
notice at its address as shown on your records from you; provided that no such
termination or modification by the Company shall affect any transaction which
occurred prior to the receipt of such notice by you nor shall any such
termination or modification become effective without your written consent unless
and until all amounts which shall have been borrowed hereunder shall have been
repaid in full. This Procedures Letter and your acceptance of this Procedures
Letter as hereinafter contemplated do not constitute any commitment on your part
to make any credit available to the Company, it being understood that the making
of credit available to the Company by you from time to time shall be under and
pursuant to the revolving line of credit arrangement that this Company has with
you and shall be subject to the terms and conditions incidental to such
revolving line of credit. This Procedures Letter and the rights and remedies of
the parties hereto shall be governed by the laws of Illinois.
If you are in agreement with the foregoing, please sign in the appropriate
place on the enclosed counterpart and return such counterpart to us. whereupon
this letter shall become a binding agreement between you and us.
<PAGE>
Dated this 15th day of April, 1999.
Very truly yours.
U.S. AGGREGATES, INC.
By: /s/ Michael J. Stone
-------------------------------------
Its: Executive Vice President and
Secretary
------------------------------------
Accepted as of the date last above written.
HARRIS TRUST AND SAVINGS BANK
By: /s/ illegible
------------------------------------
Its: Vice President
------------------------------------
<PAGE>
Exhibit A
CONFIRMATION
________________, 19__
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Attention: John M. Dillon111/10E
Gentlemen:
This will confirm the telephone conversation Ms./Mr. Michael J. Stone had
with your office today whereby we arranged under the Procedures Letter currently
in effect between us to increase/decrease our demand loan with you from $_____
to $_____ effective today, an increase/decrease of $___________. We promise to
pay such loan on demand.
It is our understanding that the amount of the increase/decrease shown in
the above paragraph was deposited/withdrawn from our account with you today.
Very truly yours,
U.S. AGGREGATES, INC.
By: /s/ Michael J. Stone
-------------------------------------
Its: Executive Vice President and
Secretary
------------------------------------
<PAGE>
UNSECURED
NOTE
$17,500,000.00 April 15, 1999
ON DEMAND, for value received. the undersigned, U.S. Aggregates, Inc., a
Delaware corporation (the "Company"), promises to pay to the order of HARRIS
TRUST AND SAVINGS BANK (the "Bank") at its offices at 111 West Monroe Street,
Chicago, Illinois, the principal sum of SEVENTEEN MILLION FIVE HUNDRED THOUSAND
and 00/100 Dollars ($17,500,000.00) or, if less, the amount outstanding under
the letter agreement referred to below together with interest (computed on the
basis of a year of 360 days and actual days elapsed) on the principal amount
from time to time remaining unpaid hereon from the date hereof to the maturity
thereof (whether by demand or otherwise) at the rate per annum equal to the rate
announced from time to time by Harris Trust and Savings Bank as its prime
commercial rate (with any change in the interest rate hereon by reason of a
change in said prime commercial rate to be and become effective as of and on the
date of the relevant change in said prime commercial rate) and after the
maturity thereof until paid at the rate per annum of two percent (2%) above the
interest rate applicable to this Note (determined as aforesaid) at such
maturity. Interest shall be payable on the last day of each quarter and upon
demand.
This Note evidences borrowings by the Company under that certain
Procedures Letter dated as of even date herewith between the Company and the
Bank and this Note and the holder hereof are entitled to all the benefits
provided for under the Procedures Letter, to which reference is hereby made for
a statement thereof. The Company hereby waives presentment and notice of
dishonor. The Company agrees to pay to the holder hereof all expenses incurred
or paid by such holder, including attorney's fees and court costs, in connection
with the collection of this Note. It is agreed that this Note and the rights and
remedies of the holder hereof shall be construed in accordance with and governed
by the laws of Illinois.
U.S. AGGREGATES, INC.
By: /s/ Michael J. Stone
-------------------------------------
Its: Executive Vice President and
Secretary
------------------------------------
<PAGE>
For value received and in consideration of advances made or to be made, or
credit given or to be given, or other financial accommodation afforded or to be
afforded to U.S. Aggregates, Inc. (hereinafter designated as "Borrower") by
Harris Trust and Savings Bank (hereinafter called the "Bank"), from time to
time, the undersigned hereby guarantees the full and prompt payment to the Bank
at maturity and at all times thereafter of any and all indebtedness, obligations
and liabilities of every kind and nature of the Borrower to the Bank (including
liabilities of partnerships created or arising while the Borrower may have been
or may be a member thereof) howsoever evidenced, whether now existing or
hereafter created or arising, whether direct or indirect, absolute or contingent
or joint or several, and howsoever owned, held or acquired, whether through
discount, overdraft, purchase, direct loan or as collateral, or otherwise
(hereinafter all such indebtedness, obligations and liabilities being
collectively referred to as the "Indebtedness"); and the undersigned further
agrees to pay all expenses, legal and/or otherwise (including court costs and
reasonable attorneys' fees), paid or incurred by the Bank in endeavoring to
collect the Indebtedness, or any part thereof, and in protecting, defending or
enforcing the guaranty in any liquidation, bankruptcy or insolvency proceedings
or otherwise. The liability of the undersigned hereunder is limited to
$17,500,000.00 plus interest on all loans and/or advances hereunder and all
expenses hereinbefore mentioned.
The undersigned further acknowledges and agrees with the Bank that:
1. This guaranty is a continuing, absolute and unconditional guaranty, and
shall remain in full force and effect until written notice of its discontinuance
shall be actually received by the Bank, and also until any and all of the
indebtedness created, existing or committed to before receipt of such notice
shall be fully paid. The death or dissolution of the undersigned shall not
terminate this guaranty until such notice shall be fully paid. The granting of
credit from time to time by the Bank to the Borrower in excess of the amount to
which the right of recovery under this guaranty is limited and without notice to
the undersigned, is hereby also authorized and shall in no way affect or impair
this guaranty.
2. In case of the death, incompetency, dissolution, liquidation or insolvency
(howsoever evidenced) of, or the institution of bankruptcy or receivership
proceedings against the Borrower or the undersigned, all of the Indebtedness
then existing shall, at the option of the Bank, immediately become due or
accrued and payable from the undersigned. All dividends or other payments
received from the Borrower or on account of the Indebtedness from whatsoever
source shall be taken and applied as payment in gross, and this guaranty shall
apply to and secure any ultimate balance that shall remain owing to the Bank.
3. The liability hereunder shall in no wise be affected or
<PAGE>
impaired by (and the Bank is hereby authorized to make from time to time,
without notice to anyone), any sale, pledge, surrender, compromise,
settlement, release, renewal, extension, indulgence, alteration,
substitution, exchange, change in, modification or other disposition of any
of the Indebtedness, either express or implied, or of any contract or
contracts evidencing any of the Indebtedness, or of any, security or
collateral therefor. The liability hereunder shall in no wise be affected or
impaired by any acceptance by the Bank of any security for, or other
guarantors upon, any of the Indebtedness, or by any failure, neglect or
omission an the part of the Bank to realize upon or protect any of the
Indebtedness, or any collateral or security therefor, or to exercise any lien
upon or right of appropriation at any moneys, credits or property of the
Borrower, possessed by the Bank, toward the liquidation of the Indebtedness,
or by any application of payments or credits, if any, shall be made on the
Indebtedness, or any part thereof, in order to hold the undersigned liable
hereunder, there shall be no obligation on the part of the Bank, at any time,
to resort for payment to the Borrower or to any other guaranty, or to any
other persons or corporations, their properties or estates, or resort to any
collateral, security, property, liens or other rights or remedies whatsoever,
and the Bank shall have the right to enforce this guaranty irrespective of
whether or not other proceedings or steps seeking resort or realization upon
or from any of the foregoing are pending.
4. All diligence in collection or protection, and all presentment, demand,
protest and/or notice, as to any and everyone, whether or not the Borrower or
the undersigned or others, of dishonor and of default and of non-payment and of
the creation and existence of any and all of the Indebtedness, and of any
security and collateral therefor, and at the acceptance of this guaranty, and of
any and all extensions of credit and Indulgence hereunder, are waived. No act of
commission or omission of any kind, or at any time, upon the part of the Bank in
respect to any matter whatsoever, shall in any way affect or impair this
guaranty.
5. The undersigned will not exercise or enforce any fight of exoneration,
contribution, reimbursement, recourse or subrogation available to the
undersigned against any person liable for payment of the Indebtedness, or as to
any security therefor, unless and until the full amount owing to the Bank on the
Indebtedness has been paid and the payment by the undersigned at any amount
pursuant to this guaranty shall not in any wise entitle the undersigned to any
right, title or interest (whether by way of subrogation or otherwise) in and to
any of the Indebtedness or any proceeds thereof or any security therefore unless
and until the full amount owing to the Bank on the Indebtedness has been paid.
*See Rider I
6. The Bank may, without any notice whatsoever to anyone, sell, assign or
transfer all of the Indebtedness. or any part thereof, or grant participations
therein, and in that event each and every immediate and successive assignee,
transferee, or holder of or participant in all or any part of the Indebtedness,
shall have the
<PAGE>
right to enforce this guaranty, by suit or otherwise, for the benefit of such
assignee, transferee, holder or participant, as fully as if such assignee,
transferee, holder or participant were herein by name specifically given such
rights, powers and benefits; but the Bank shall have an unimpaired right to
enforce this guaranty for the benefit of the Bank or any such participant, as
to so much of the Indebtedness that it has not sold, assigned or transferred.
7. The undersigned waives any and all defenses, claims and discharges of the
Borrower, or any other obligor, pertaining to the Indebtedness, except the
defense of discharge by payment in full. Without limiting the generality of the
foregoing, the undersigned will not assert, plead or enforce against the Bank
any defense of waiver, release, discharge in bankruptcy, statute at limitations,
res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity,
minority, usury, illegality or unenforceability which may be available to the
Borrower or any other person liable in respect of any of the Indebtedness, or
any setoff available against the Bank to the Borrower or any such other person,
whether of not on account of a related transaction. The undersigned agrees that
the undersigned shall be and remain liable for arty deficiency remaining after
foreclosure of any mortgage or security interest securing the Indebtedness,
whether or not the liability of the Borrower or any other obligor for such
deficiency is discharged pursuant to statute or judicial decision.
8. If any payment applied by the Bank to the Indebtedness is thereafter set
aside, recovered, rescinded or required to be returned for any reason (including
without limitation, the bankruptcy, insolvency or reorganization of the Borrower
or any other obligor), the Indebtedness to which such payment was applied shall
for the purposes of this guaranty be deemed to have continued in existence.
notwithstanding such application, and this guaranty shall be enforceable as to
such of the Indebtedness as fully as if such application had never been made.
9. The liability of the undersigned under this guaranty is in addition to and
shall be cumulative with all other liabilities of the undersigned to the Bank as
guarantor of the Indebtedness, without any limitation as to amount, unless the
instrument or agreement evidencing or creating such other liability specifically
provides to the contrary. *See Rider I
10. Any invalidity or unenforceability of any provision or application of this
guaranty shall not effect other lawful provisions and applications hereof, and
to this end the provisions of this guaranty are declared to be severable. This
guaranty shall be construed according to the laws of the State of Illinois, in
which Stale it shall be performed by the undersigned and may not be waived,
amended, released or otherwise changed except by a writing signed by the Bank,
11. This guaranty and every part thereof shall be effective upon
<PAGE>
delivery to the Bank, without further act, condition or acceptance by the
Bank, shall be binding upon the undersigned, jointly and severally, and upon
the heirs, legal representatives, successors and assigns of the undersigned,
and shall inure to the benefit of the Bank, its successors, legal
representatives and assigns. The undersigned waives notice of the Bank's
acceptance hereof.
SIGNED AND DELIVERED by the undersigned at ________ this 15th day of April,
1999. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS GUARANTY
AS OF THE TIME OF EXECUTION,
Golder, Thoma, Cressey, Rauner, Fund Golder, Thoma, Cressey, Rauner Fund
IV, L.P. IV, L.P.
6100 Sears Tower By: GTCR IV, L.P., Its General
Chicago, IL 60606 Partner
By: Golder, Thoma, Cressey, Rauner,
Inc.
Its: General Partner
By: /s/ David A. Donnini
--------------------------------
Its: Principal
<PAGE>
IMPORTANT NOTICE TO GUARANTORS
YOU ARE BEING ASKED TO GUARANTEE THIS DEBT, AS WELL AS ALL FUTURE DEBTS OF
THE BORROWER ENTERED INTO WITH THIS BANK. THINK CAREFULLY BEFORE YOU DO. IF THE
BORROWER DOESN'T PAY THE DEBT, YOU WILL HAVE TO. BE SURE YOU CAN AFFORD TO PAY
IF YOU HAVE TO, AND THAT YOU WENT TO ACCEPT THIS RESPONSIBILITY.
YOU MAY HAVE TO PAY UP TO THE FULL AMOUNT OF THE DEBT IF THE BORROWER DOES
NOT PAY. YOU MAY ALSO HAVE TO PAY LATE FEES OR COLLECTION COSTS, WHICH INCREASE
THIS AMOUNT.
THE BANK CAN COLLECT THIS DEBT FROM YOU WITHOUT FIRST TRYING TO COLLECT
FROM THE BORROWER. THE BANK CAN USE THE SAME COLLECTION METHODS AGAINST YOU
THAT CAN BE USED AGAINST THE BORROWER, SUCH AS SUING YOU, GARNISHING YOUR WAGES,
ETC. IF THIS DEBT IS EVER IN DEFAULT, THAT FACT MAY BECOME PART AT YOUR CREDIT
RECORD.
THIS NOTICE IS NOT THE CONTRACT THAT MAKES YOU LIABLE FOR THE DEBT.
<PAGE>
RIDER I TO GUARANTY
PARAGRAPH 5. Notwithstanding anything contained herein to the contrary, this
paragraph 5 shall not prohibit the undersigned from enforcing any of its direct
claims (arising in the ordinary course of the Borrowers and the undersigned's
business as presently conducted) against the Borrower which are unrelated to the
Indebtedness, this guaranty or the obligations of the undersigned hereunder.
PARAGRAPH 9. The liability of the undersigned under this guaranty Is in
addition to and shall be cumulative with all other liabilities to the Bank under
that certain letter agreement from the undersigned to the Bank of even date
herewith.
<PAGE>
EXHIBIT 5.1
[Kirkland & Ellis Letterhead]
July 14, 1999
U.S. Aggregates, Inc.
400 South El Camino Real, Suite 500
San Mateo, California 94402
Ladies and Gentlemen:
We are acting as special counsel to U.S. Aggregates, Inc., a Delaware
corporation (the "Company"), in connection with the proposed registration by the
Company of 7,986,111 shares of its Common Stock, par value $.01 per share (the
"Common Stock"), including 1,041,667 shares of its Common Stock to cover
over-allotments, if any, pursuant to a Registration Statement on Form S-1,
originally filed with the Securities and Exchange Commission (the "Commission")
on May 24, 1999 under the Securities Act of 1933, as amended (the"Act") (such
Registration Statement, as amended or supplemented, is hereinafter referred to
as the "Registration Statement"). Of the shares of Common Stock to be registered
pursuant to the Registration Statement, up to 6,944,444 shares are being offered
by the Company (the "Primary Shares") and up to 1,041,667 shares to cover
over-allotments, if any, are being offered by certain selling stockholders (the
"Secondary Shares").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the corporate and organizational documents of the Company
and (ii) minutes and records of the corporate proceedings of the Company with
respect to the issuance and sale of the Primary Shares and the original issuance
of the Secondary Shares.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the legal capacity of
all natural persons, the genuineness of the signatures of persons signing all
documents in connection with which this opinion is rendered, the authority of
such persons signing on behalf of the parties thereto other than the Company and
the due authorization, execution and delivery of all documents by the parties
thereto other than the Company. As to any facts material to the opinions
expressed herein which we have not independently established or verified, we
have relied upon statements and representations of officers and other
representatives of the Company and others.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
<PAGE>
(1) The Company is a corporation existing and in good standing
under the General Corporation Law of the State of Delaware.
(2) The Primary Shares have been duly authorized, and, when
the Registration Statement becomes effective under the Act, when the
Board of Directors of the Company has taken all necessary action to
approve the issuance and sale of the Primary Shares and when
appropriate certificates representing the Primary Shares are duly
countersigned and registered by the Company's transfer agent/registrar
and delivered to the Company's underwriters against payment of the
agreed consideration therefor in accordance with the U.S. Underwriting
Agreement and the International Underwriting Agreement, the Primary
Shares will be validly issued, fully paid and nonassessable.
(3) When appropriate certificates representing the Secondary
Shares are duly countersigned and registered by the Company's transfer
agent/registrar and delivered to the Company's underwriters against
payment of the agreed consideration therefor in accordance with the
U.S. Underwriting Agreement and the International Underwriting
Agreement, the Secondary Shares will be validly issued, fully paid and
nonassessable.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of
(i) any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law),
(iii) public policy considerations which may limit the rights of parties to
obtain certain remedies and (iv) any laws except the General Corporation Law of
the State of Delaware. We advise you that issues addressed by this letter may be
governed in whole or in part by other laws, but we express no opinion as to
whether any relevant difference exists between the laws upon which our opinions
are based and any other laws which may actually govern. For purposes of the
opinion in paragraph 1, we have relied exclusively upon a recent certificate
issued by the Delaware Secretary of State and such opinion is not intended to
provide any conclusion or assurance beyond that conveyed by such certificate. We
have assumed without investigation that there has been no relevant change or
development between the date of such certificate and the date of this letter.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission. This opinion and consent may be incorporated by
reference in a subsequent registration statement on Form S-1 filed pursuant to
Rule 462(b) under the Act with respect to the registration of additional
securities for sale in the offering or offerings contemplated by the
Registration Statement.
<PAGE>
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the issuance and sale of the Primary
Shares and the sale of the Secondary Shares.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the General
Corporation Law of the State of Delaware be changed by legislative action,
judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Sincerely,
/S/ KIRKLAND & ELLIS
Kirkland & Ellis
<PAGE>
CANCELLATION OF PROFESSIONAL SERVICES AGREEMENT
CANCELLATION OF PROFESSIONAL SERVICES AGREEMENT ("CANCELLATION
AGREEMEENT"), dated as of July 9, 1999, by and between Golder, Thoma,
Cressey, Rauner, Inc., a Delaware corporation ("GTCR"), and U.S. Aggregates,
Inc., a Delaware corporation (the "COMPANY").
WHEREAS, GTCR and the Company (f/k/a USAI Acquisition Corp.) are
parties to that certain Professional Services Agreement, dated as of January
24, 1994 (the "PROFESSIONAL SERVICES AGREEMENT");
WHEREAS, the Company is contemplating an initial public offering of
its Common Stock (the "INITIAL PUBLIC STOCK OFFERING"); and
WHEREAS, GTCR and the Company no longer wish to be bound by the
Professional Services Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, GTCR
and the Company hereby agree to cancel the Professional Services Agreement
effective upon consummation of the Initial Public Stock Offering.
IN WITNESS WHEREOF, GTCR and the Company have caused this
Cancellation Agreement to be duly executed and delivered this 9th day of
July, 1999.
GOLDER, THOMA, CRESSEY, RAUNER, INC.
By: /S/ DAVID A. DONNINI
-----------------------------------
Its: Principal
U.S. AGGREGATES, INC.
By: /S/ MICHAEL J. STONE
-----------------------------------
Its: Executive Vice President
<PAGE>
SENIOR MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of August 5, 1994, between U.S.
Aggregates, Inc., a Delaware corporation (the "Company"), and Morris Bishop, Jr.
("Executive").
The Company and Executive desire to enter into an agreement pursuant
to which Executive shall purchase 1,692 shares of the Company's common stock,
par value $.01 per share (the "Common Stock"). All shares of Common Stock
received hereunder by Executive and all shares of Common Stock hereafter
acquired by Executive are referred to herein as "Executive Stock." Certain
definitions are set forth in Section 5 of this Agreement.
The execution and delivery of this Agreement by the Company and
Executive is in connection with that certain employment agreement between the
Executive and the Company dated as of the date hereof (the "Employment
Agreement").
The parties hereto agree as follows:
1. Purchase and Sale of Executive Stock.
(a) Upon execution of this Agreement (the "Closing"), the Company
will sell to Executive and Executive will purchase 1,692 shares of Common Stock
at a price of $10 per share. The Company will deliver to Executive the
certificate representing such Common Stock, and Executive will deliver to the
Company a check or wire transfer of funds in an amount of $16.92 and a
promissory note in the form of Exhibit A attached hereto in an aggregate
principal amount of $16,903.08 (the "Executive Note"). Executive's obligations
under the Executive Note will be secured by a pledge of all of the shares of
Executive Stock to the Company and in connection therewith Executive shall enter
into a pledge agreement in the form of Exhibit B attached hereto.
(b) If upon the fifth anniversary of the date hereof (a) Golder,
Thoma, Cressey, Rauner Fund IV Limited Partnership and its affiliated entities
(the "Investor") have not invested in the aggregate at least $40,000,000 in
equity securities of the Company and (b) the Executive remains an employee of
the Company or any of its Subsidiaries, the Executive may, so long as the
Executive is an employee of the Company or any of its Subsidiaries, purchase
upon written notice to the Company's Board of Directors (the "Board") up to 995
shares of the Common Stock at a price of $10 per share (as adjusted from time to
time as a result of stock dividends, stock splits, recapitalizations and similar
events). At the time of any such purchase, the Company shall be entitled to
receive, and the Executive shall be obligated to deliver, satisfactory
<PAGE>
representations and warranties similar to (and in addition to) those contained
in paragraph (c) below and all other information and documentation as the
Company may reasonably request. The Executive may purchase such shares of common
Stock with cash or by delivery of a promissory note substantially in the form of
Exhibit A attached hereto and a pledge agreement substantially in the form of
Exhibit B attached hereto.
(c) In connection with the purchase and sale of the Executive Stock
hereunder, Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive pursuant to this
Agreement will be acquired for Executive's own account and not with a view
to, or intention of, distribution thereof in violation of the Securities
Act, or any applicable state securities laws, and the Executive Stock will
not be disposed of in contravention of the Securities Act or any
applicable state securities laws.
(ii) Executive is an executive officer of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his investment
in the Executive Stock for an indefinite period of time because the
Executive Stock has not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of Executive
Stock and has had full access to such other information concerning the
Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does
not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Executive is a party or any
judgment, order or decree to which Executive is subject.
(d) As an inducement to the Company to issue the Executive Stock to
Executive, as a condition thereto, Executive acknowledges and agrees that:
(i) neither the issuance of the Executive Stock to Executive nor any
provision contained herein shall affect any of the rights of the Company
set forth in the Employment Agreement; and
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<PAGE>
(ii) the Company shall have no duty or obligation to disclose to
Executive, and Executive shall have no right to be advised of, any
material information regarding the Company and its Subsidiaries at any
time prior to, upon or in connection with the repurchase of Executive
Stock upon the termination of Executive's employment with the Company and
its Subsidiaries or as otherwise provided hereunder.
2. Vesting of Executive Stock.
(a) The Executive Stock acquired hereunder will become vested in
accordance with the following schedule, if as of each such date Executive is
still employed by the Company or any of its Subsidiaries:
Cumulative
Percentage of
Executive Stock
Date Vested
---- ------
At the purchase of any Executive Stock 25%
1st Anniversary of the purchase of any
Executive Stock 50%
2nd Anniversary the purchase of any
Executive Stock 75%
3rd Anniversary the purchase of any
Executive Stock 100%
(b) If Executive ceases to be employed by the Company and its
Subsidiaries on any date other than any anniversary date prior to the third
anniversary of the Closing, the cumulative percentage of Executive Stock to
become vested will be determined on a pro rata basis according to the number of
days elapsed since the prior anniversary date. Upon the occurrence of a Sale of
the Company, all shares of Executive Stock which have not yet become vested
shall become vested at the time of such event. Shares of Executive Stock which
have become vested are referred to herein as "Vested Shares," and all other
shares of Executive Stock are referred to herein as "Unvested Shares."
(c) Within 30 days after the date of this Agreement, Executive will
make an effective election with the Internal Revenue Service under Section 83(b)
of the Internal Revenue Code and the regulations promulgated thereunder in the
form of Exhibit C attached hereto for the shares of Executive Stock.
3. Repurchase Option.
(a) In the event Executive ceases to be employed by the Company and
its Subsidiaries for any reason (the "Termination"), the Executive Stock
(whether held by Executive or one or more of
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<PAGE>
Executive's transferees) will be subject to repurchase by the Company and the
Investor pursuant to the terms and conditions set forth in this Section 3 (the
"Repurchase Option").
(b) The purchase price for each Unvested Share of Executive Stock
will be the lower of the Executive's Original Cost and the Fair Market Value for
such shares, and the purchase price for each Vested Share of Executive Common
Stock will be the higher of the Executive's Original Cost and the Fair Market
Value for such share.
(c) The Board may elect to purchase all, but not less than all, of
the Executive Stock by delivering written notice (the "Repurchase Notice") to
the holder or holders of such Executive Stock within one year after the
Termination (it being understood that an election to purchase Executive Stock
hereunder shall not be an election to purchase the stock acquired pursuant to
the senior management agreements with other executives of the Company). The
Repurchase Notice will set forth the number of shares to be acquired from each
holder, the aggregate consideration to be paid for such shares and the time and
place for the closing of the transaction.
(d) If for any reason the Company does not elect to purchase all of
the Executive Stock pursuant to the Repurchase Option, the Investor shall be
entitled to exercise the Repurchase Option for the shares of Executive Stock the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable after the Company has determined that there will be Available
Shares, but in any event within ten months after the Termination, the Company
shall give written notice (the "Option Notice") to the Investor setting forth
the number of Available Shares and the purchase price for the Available Shares.
The Investor may elect to purchase any or all of the Available Shares by giving
written notice to the Company within one month after the Option Notice has been
given by the Company. As soon as practicable, and in any event within ten days
after the expiration of the one-month period set forth above, the Company shall
notify each holder of Executive Stock as to the number of shares being purchased
from such holder by the Investor (the "Supplemental Repurchase Notice"). At the
time the Company delivers the Supplemental Repurchase Notice to the holder(s) of
Executive Stock, the Company shall also deliver written notice to the Investor
setting forth the number of shares the Investor is entitled to purchase, the
aggregate purchase price and the time and place of the closing of the
transaction.
(e) In the event that (i) the Executive's employment is terminated
by the Company without Cause (as defined in the Employment Agreement), (ii)
neither the Company nor the Investor has elected to purchase all of the
Executive Stock hereunder and (iii) at the time of such Termination, the Company
is meeting all budget projections set forth by the Board for that fiscal year,
the Executive may require the Company to purchase all but not less than
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<PAGE>
all, of the Executive Stock by delivering written notice (the "Put Notice") to
the Company within one year after such Termination. The Put Notice will set
forth the number of shares to be acquired from each holder and the time and
place for the closing of the transaction.
(f) The closing of the purchase of the Executive Stock pursuant to
the Repurchase Option or the Put Notice shall take place on the date designated
by the Company in the case of either the Repurchase Notice or the Supplemental
Repurchase Notice or by the Executive in the case of the Put Notice, which date
shall not be more than one month nor less than five days after the delivery of
the later of any such notice to be delivered. The company and/or the Investor
will pay for the Executive Stock to be purchased pursuant to the Repurchase
Option by delivery of a check or wire transfer of funds in the aggregate amount
of the purchase price for such shares; provided, however, that the company may
elect to pay for the Executive Stock to be purchased pursuant to the Put Notice
by delivery of a promissory note from the Company having a term no longer than
five years, payable in sixty equal installments, a market rate of interest and
other typical market terms. In addition, the Company may pay the purchase price
for such shares by offsetting amounts outstanding under any bona fide debts owed
by Executive to the Company including, without limitation, debts owed under the
Executive Note. The Company and the Investor will be entitled to receive
customary representations and warranties from the sellers regarding such sale
and to require all sellers' signatures be guaranteed.
(g) The right of the Company and the Investor to repurchase Vested
Shares pursuant to this Section 3 and the obligation of the Company to
repurchase the Executive Stock pursuant to paragraph (e) above shall terminate
upon the first to occur of the Sale of the Company or a Qualified Public
Offering.
(h) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
4. Restrictions on Transfer.
(a) Legend. The certificates representing the Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS
OF AUGUST 5, 1994, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
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<PAGE>
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
SENIOR MANAGEMENT AGREEMENT BETWEEN U.S. AGGREGATES, INC. (THE "COMPANY")
AND MORRIS BISHOP, JR. DATED AS OF AUGUST 5, 1994. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE."
(b) Opinion of Counsel. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
5. Definitions.
"Executive Stock" will continue to be Executive Stock in the hands
of any holder other than Executive (except for the Company and the Investor and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Stock will succeed to all rights and
obliga tions attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to Executive Stock by way of a stock split, stock dividend or other
recapitalization. Notwithstanding the foregoing, all Unvested Shares shall
remain Executive Stock after any Transfer thereof.
"Fair Market Value" of each share of Executive Stock means the
average of the closing prices of the sales of the Company's Common Stock on all
securities exchanges on which the Common Stock may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, or, if on any day the Common Stock is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which the Fair
Market Value is being determined and the 20 consecutive business days prior to
such day. If at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair
Market Value will be the fair value of the Common Stock determined in good faith
by the Board.
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<PAGE>
"Original Cost" of each share of Common Stock issued hereunder will
be equal to $10 each as proportionately adjusted for all subsequent stock
splits, stock dividends and other recapitalizations).
"Public Sale" means any sale pursuant to a registered public
offering under the Securities Act or any sale to the public pursuant to Rule 144
promulgated under the Securities Act effected through a broker, dealer or market
maker.
"Qualified Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $30 million.
"Sale of the Company" means any transaction or series of related
transaction pursuant to which any person or entity acquires (i) capital stock of
the Company possessing the voting power to elect a majority of the Company's
board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock or otherwise) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
6. Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
U.S. Aggregates, Inc.
400-4 College Avenue
Clemson, S.C. 29631
Attn: President
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Kevin R. Evanich
John A. Schoenfeld
If to the Executive:
Morris Bishop, Jr.
8109 Brenthaven Drive
Brentwood, Tennessee 37027
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<PAGE>
If to the Investor:
Golder, Thoma, Cressey, Rauner Fund IV
Limited Partnership
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Bruce V. Rauner
David A. Donnini
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Kevin R. Evanich
John A. Schoenfeld
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
7. General Provisions.
(a) Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Executive Stock in violation of any provision of this Agreement
shall be void, and the Company shall not record such Transfer on its books or
treat any purported transferee of such Executive Stock as the owner of such
stock for any purpose.
(b) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(d) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original
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<PAGE>
and all of which taken together constitute one and the same agreement.
(e) Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Company, the Investor and their respective successors and assigns
(including subsequent holders of Executive Stock); provided that the rights and
obligations of Executive under this Agreement shall not be assignable except in
connection with a permitted transfer of Executive Stock hereunder.
(f) Choice of Law. The corporate law of the State of Illinois will
govern all questions concerning the relative rights of the Company and its
stockholders. All other questions con cerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
(g) Remedies. Each of the parties to this Agreement (including the
Investor) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorneys' fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(h) Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company, Executive
and the Investor.
(i) Business Days. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or holiday in the
state in which the Company's chief executive office is located, the time period
shall be automatically extended to the business day immediately following such
Saturday, Sunday or holiday.
(j) Termination. This Agreement shall survive the termination of
Executive's employment with the Company and shall remain in full force and
effect after such termination.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first written above.
U.S. AGGREGATES, INC.
By /s/ illegible
----------------------------
Its ----------------------------
/s/ Morris Bishop, Jr.
--------------------------------
Morris Bishop, Jr.
Agreed and Accepted:
GOLDER, THOMA, CRESSEY, RAUNER FUND IV
LIMITED PARTNERSHIP
By /s/ illegible
-------------------------
Its ________________________
[Provision for Community Property Jurisdictions]
CONSENT
The undersigned spouse of Executive hereby acknowledges that I have
read the foregoing Senior Management Agreement and that I understand its
contents. I am aware that the Agreement provides for the repurchase of my
spouse's shares of Common Stock under certain circumstances and imposes other
restrictions on the transfer of such Common Stock. I agree that my spouse's
interest in the Common Stock is subject to this Agreement and any interest I may
have in such Common Stock shall be irrevocably bound by this Agreement and
further that my community property interest, if any, shall be similarly bound by
this Agreement.
________________________________
[Spouse]
________________________________
Witness
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<PAGE>
PROMISSORY NOTE
$16,903.08 August 5, 1994
For value received, Morris Bishop, Jr. ("Executive") promises to pay
on August 5, 1994 to the order of U.S. Aggregates, Inc., a Delaware corporation
(the "Company"), at its offices in Clemson, South Carolina, or such other place
as designated in writing by the holder hereof, the aggregate principal sum of
$16,903.08. This Note was issued pursuant to and is subject to the terms of the
Senior Management Agreement (the "Agreement"), dated as August 5, 1994, between
the Company and Executive.
Interest will accrue on the outstanding principal amount of this
Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate
permitted by applicable law, and shall be payable at such time as the principal
of this Note becomes due and payable; provided, however, interest shall cease to
accrue upon the date on which a Repurchase Notice is delivered to Executive
pursuant to Section 3(c) of the Agreement.
The amounts due under this Note are secured by a pledge of 1,692
shares of the Company's Common Stock. The payment of the principal amount of
this Note is subject to certain offset rights under the Senior Management
Agreement.
In the event Executive fails to pay any amounts due hereunder when
due, Executive shall pay to the holder hereof, in addition to such amounts due,
all costs of collection, including reasonable attorneys fees.
Executive, or his successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
nonpayment of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all without in
any way affecting the liability of Executive hereunder.
This Note shall be governed by the internal laws, not the laws of
conflicts, of the State of Illinois.
________________________________
Morris Bishop, Jr.
<PAGE>
EXECUTIVE STOCK PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of August 5, 1994, between Morris
Bishop, Jr. ("Pledgor"), and U.S. Aggregates, Inc., a Delaware corporation (the
"Company").
The Company and Pledgor are parties to an Senior Management
Agreement, dated August 5, 1994, pursuant to which Pledgor purchased 1,692
shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for
an aggregate purchase price of $16,920. The Company has allowed Pledgor to
purchase the Pledged Shares by delivery to the Company of a promissory note (the
"Note") in the aggregate principal amount of $16,903.08. This Pledge Agreement
provides the terms and conditions upon which the Note is secured by a pledge to
the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein
and other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, and in order to induce the Company to accept the Note
as payment for the Pledged Shares, Pledgor and the Company hereby agree as
follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants to the
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment sufficient
to transfer title thereto to the Company.
3. Voting Rights; Cash Dividends. Notwithstanding anything to the
contrary contained herein, during the term of this Pledge Agreement until such
time as there exists a default in the payment of principal or interest on the
Note or any other default under the Note, Pledgor shall be entitled to all
voting rights with respect to the Pledged Shares and shall be entitled to
receive all cash dividends paid in respect of the Pledged Shares. Upon the
occurrence of and during the continuance of any such default, the Company shall
retain all such cash dividends payable on the Pledged Shares as additional
security hereunder.
4. Stock Dividends; Distributions, etc. If, while this Pledge
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares
<PAGE>
(whether as a distribution in connection with any recapitalization,
reorganization or reclassification, a stock dividend or otherwise), Pledgor
shall accept such securities or other property on behalf of and for the benefit
of the Company as additional security for Pledgor's obligations under the Note
and shall promptly deliver such additional security to the Company together with
duly executed forms of assignment, and such additional security shall be deemed
to be part of the Pledged Shares hereunder.
5. Default. If Pledgor defaults in the payment of the principal or
interest under the Note as it becomes due (whether upon demand, acceleration or
otherwise) or any other event of default under the Note occurs (including the
bankruptcy or insolvency of Pledgor), the Company may exercise any and all the
rights, powers and remedies of any owner of the Pledged Shares (including the
right to vote the shares and receive dividends and distributions with respect to
such shares) and shall have and may exercise without demand any and all the
rights and remedies granted to a secured party upon default under the Uniform
Commercial Code of Delaware or otherwise available to the Company under
applicable law. Without limiting the foregoing, the Company is authorized to
sell, assign and deliver at its discretion, from time to time, all or any part
of the Pledged Shares at any private sale or public auction, on not less than
ten days written notice to Pledgor, at such price or prices and upon such terms
as the Company may deem advisable. Pledgor shall have no right to redeem the
Pledged Shares after any such sale or assignment. At any such sale or auction,
the Company may bid for, and become the purchaser of, the whole or any part of
the Pledged Shares offered for sale. In case of any such sale, after deducting
the costs, attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided, however, that after payment in full of the
indebtedness evidenced by the Note, the balance of the proceeds of sale then
remaining shall be paid to Pledgor and Pledgor shall be entitled to the return
of any of the Pledged Shares remaining in the hands of the Company. Pledgor
shall be liable for any deficiency if the remaining proceeds are insufficient to
pay the indebtedness under the Note in full, including the fees of any attorneys
employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses, including
reasonable attorneys' fees, incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon
payment in full of the indebtedness evidenced by the
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<PAGE>
Note, the Company shall surrender the Pledged Shares to Pledgor together with
all forms of assignment.
8. Further Assurances. Pledgor agrees that at any time and from time
to time upon the written request of the Company, Pledgor will execute and
deliver such further documents and do such further acts and things as the
Company may reasonably request in order to effect the purposes of this Pledge
Agreement.
9. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10. No Waiver; Cumulative Remedies. The Company shall not by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company, and then only to the extent therein set forth. A waiver by the
Company of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Company would otherwise have
on any future occasion. No failure to exercise nor any delay in exercising on
the part of the Company, any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
11. Waivers, Amendments; Applicable Law. None of the terms or
provisions of this Pledge Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by the parties hereto. This
Agreement and all obligations of the Pledgor hereunder shall together with the
rights and remedies of the Company hereunder, inure to the benefit of the
Company and its successors and assigns. This Pledge Agreement shall be governed
by, and be construed and interpreted in accordance with, the laws of the State
of Illinois.
* * * * * * * * * *
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<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of
the date first above written.
________________________________
Morris Bishop, Jr.
U.S. AGGREGATES, INC.
By _______________________________
Its ______________________________
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<PAGE>
August 5, 1994
ELECTION TO INCLUDE STOCK IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned purchased shares of Common Stock, par value $.01 per
share (the "Shares"), of U.S. Aggregates, Inc. on August 5, 1994. Under certain
circumstances, the Company has the right to repurchase the Shares at cost from
the undersigned (or from the holder of the Shares, if different from the
undersigned) should the undersigned cease to be employed by the Company and its
subsidiaries. Hence, the Shares are subject to a substantial risk of forfeiture
and are non-transferable. The undersigned desires to make an election to have
the Shares taxed under the provision of Code ss.83(b) at the time he purchased
the Shares.
Therefore, pursuant to Code ss.83(b) and Treasury Regulation
ss.1.83-2 promulgated thereunder, the undersigned hereby makes an election, with
respect to the Shares (described below), to report as taxable income for
calendar year 1993 the excess (if any) of the Shares' fair market value on
August 5, 1994 over purchase price thereof.
The following information is supplied in accordance with Treasury
Regulation ss.1.83-2(e):
1. The name, address and social security number of the undersigned:
Morris Bishop, Jr.
8109 Brenthaven Drive
Brentwood, TN 37027
2. A description of the property with respect to which the election
is being made: 1,692 shares of US Aggregates, Inc. Common Stock, par value $.01
per share.
3. The date on which the property was transferred: August 5, 1994.
The taxable year for which such election is made: calendar 1994.
4. The restrictions to which the property is subject: If during the
first three years after the purchase of the Shares the undersigned ceases to be
employed by the Company or any of its subsidiaries, the unvested portion of the
Shares will be subject to repurchase by the Company at the lower of fair market
value and
<PAGE>
cost, and at any time prior to a public offering by the Company or a sale of the
Company the undersigned ceases to be employed by the Company or any of its
subsidiaries, the vested portion of the Shares will be subject to repurchase by
the Company at the higher of cost and fair market value. One-fourth of the
Shares will become vested shares upon purchase and one-fourth of the Shares will
become vested shares on each of the first three anniversary dates of the
purchase of the Shares.
5. The fair market value on August 5, 1994, of the property with
respect to which the election is being made, determined without regard to any
lapse restrictions: $10 per share of Common Stock.
6. The amount paid for such property: $10 per share of Common Stock.
A copy of this election has been furnished to the Secretary of the
Company pursuant to Treasury Regulations ss.1.83- 2(e)(7).
Dated: August 5, 1994 ___________________________________
Morris Bishop, Jr.
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<PAGE>
STOCKHOLDERS JOINDER AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of December 31, 1997,
by and among U.S. Aggregates, Inc., a Delaware corporation (the "Company"),
Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership ("GTCR"), and Jeanne
T. Richey (the "Executive").
WHEREAS, the Company, GTCR and certain other stockholders of the
Company are parties to a Stockholders Agreement, dated as of January 24, 1994,
as amended (the "Stockholders Agreement").
WHEREAS, the Company and Hobart Richey, the spouse of the Executive,
have entered into a Consultant Stock Agreement, dated as of January 24, 1994,
pursuant to which Hobart Richey has acquired shares of the Company's Common
Stock, par value $.01 per share ("Common Stock"), such Common Stock being
subsequently transferred to Executive.
WHEREAS, the Company and GTCR desire to provide the Executive rights
under the Stockholders Agreement as set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Addition of the Executive. The parties hereto agree that, by and
upon execution of this Agreement, the Executive shall be a party to the
Stockholders Agreement, shall be an Executive (as defined in the Stockholders
Agreement), a Stockholder (as defined in the Stockholders Agreement) and a
holder of Executive Stock (as defined in the Stockholders Agreement) and
Stockholder Shares (as defined in the Stockholders Agreement) and shall be
entitled to the rights and benefits and subject to the duties and obligations of
an Executive, a Stockholder, and a holder of Executive Stock and Stockholder
Shares thereunder, as fully as if the Executive had been an original signatory
thereto in such capacity.
2. Continuing Effect. This Agreement shall not constitute an
amendment or waiver of any provision of the Stockholders Agreement, which shall
continue and remain in full force and effect in accordance with its terms.
3. Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
4. Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the internal law, and not the law of conflicts, of Delaware.
<PAGE>
5. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * * * * *
- 2 -
<PAGE>
IN WITNESS WHEREOF, this Agreement has been entered into as of the
date first written above.
U.S. AGGREGATES, INC.
/s/ Michael Stone
--------------------------------------
By: Michael Stone
--------------------------------------
Its:
--------------------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV LIMITED PARTNERSHIP
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
/s/ David Donnini
----------------------------------
By: David Donnini
-------------------------------
Its: Principal
-------------------------------
/s/ Jeanne T. Richey
----------------------------------
Jeanne T. Richey
- 3 -
<PAGE>
DONEGAL CO.
Edward A. Dougherty
15 Makin Grade
P.O. Box 635
Ross, Ca. 94957
(415) 458-1770
Personal & Confidential
Attention: Mr. James A. Harris April 18, 1998
U.S. Aggregates, Inc.
400-4 College Avenue
Clemson, SC 29631
Gentlemen:
Donegal Co. ("Donegal") is pleased to act as financial advisor to U.S.
Aggregates, Inc. (the "Company") in connection with the Company's proposed sale,
merger transaction or initial public offering (the "Liquidity Event"). This
letter is to confirm our understanding with respect to the Liquidity Event
engagement. As used in this letter, the term "Merger Transaction" means (a) any
sale, merger, consolidation, reorganization or other business combination
pursuant to which the business of the Merger Candidate is combined with that of
the Company, or (b) the merger, directly or indirectly, by the Company of more
than 50% of the capital stock, or all or a substantial portion of the assets, by
way of tender or exchange offer, negotiated purchase or otherwise, whether
effected, in either such case, in one transaction or a series of transactions.
The term "Initial Public Offering" means the sale of common equity securities to
the public in a registered offering.
Donegal will assist the Company in analyzing, structuring, negotiating and
effecting the proposed Liquidity Event on reasonable terms and conditions.
If, during the period Donegal is retained by the Company or within one year
thereafter, a Liquidity Event is consummated, the Company agrees to pay Donegal
a transaction fee as follows: In the event of a Merger Transaction, in an
amount equal to .30% of the cash or market value of securities received by the
common equity holders in such transaction if the value received is $150 million
or less; in an amount equal to .35% of the cash or market value of securities
received by the common equity holders in such transaction if the value received
is greater than $150 million but less than $200 million, and; in an amount equal
to .40% of the cash or market value of securities received by the common equity
holders in such transaction if the value received is $200 million or greater.
In the event that the Liquidity Event is the result of an Initial Public
Offering then the transaction fee shall be in the amount of $200,000. In either
case such amount is payable in cash upon the closing of such Merger Transaction
or Initial Public offering. In addition, the Company will pay Donegal a
non-refundable monthly retainer of $10,000, upon signing this agreement and
promptly thereafter on the 15th of each month during the term of this agreement.
The total of these monthly retainer
<PAGE>
payments paid during the term of this agreement shall be creditable against
any Transaction Fee payable as described above.
In addition to any fees that may be payable to Donegal under this letter, the
Company agrees to reimburse Donegal, upon request made from time to time, for
its reasonable out-of-pocket expenses incurred in connection with Donegal's
activities under this letter, provided however, such expenses are approved in
advance by the Company and appropriate receipts are submitted, which approval
shall not be unreasonably withheld.
The Company will furnish Donegal with such information as Donegal believes
appropriate to its assignment (all such information so furnished being the
"Information"). The Company recognizes and confirms that Donegal (a) will use
and rely primarily on the Information and on information available from
generally recognized public sources in performing the services contemplated by
this letter without having independently verified the same, (b) does not assume
responsibility for the accuracy or completeness of the Information and such
other information and (c) will not make an appraisal of any assets of the
Company or of any Merger Candidate. If requested Donegal will enter into a
confidentiality agreement.
The Company agrees to indemnify Donegal and its controlling persons (the Firm
and each such person being an "Indemnified Party") from and against all losses,
claims, damages and liabilities, joint and several, to which such Indemnified
Party may become subject under any federal or state law, or otherwise, related
to or arising out of any Liquidity Event contemplated by this letter or state
law, or otherwise, related to or arising out of any Liquidity Event contemplated
by this letter or the engagement of Donegal pursuant to, and the performance by
Donegal of the service contemplated by, this letter and will reimburse any
Indemnified Party for all expenses (including counsel fees and expenses) as they
are incurred in connection with the investigation of, preparation for or the
defense of any pending or threatened claim or action or proceeding arising
therefrom, whether or not such Indemnified Party is a party. The Company will
not be liable under the foregoing indemnification provision to the extent that
any loss, claim, damage, liability or expense is found in a final judgment by a
court to have resulted primarily from Donegal's willful misconduct or gross
negligence.
The term of this agreement shall be from the date of this letter to
September 30, 1998. Donegal's engagement hereunder may be terminated by the
Company at any time upon written notice to that effect to the other party, it
being understood that the provisions relating to the payment of transaction
fees, expenses and indemnification will survive any such termination.
<PAGE>
Please confirm that the foregoing correctly sets forth our agreement by signing
and returning to Donegal the duplicate copy of this letter enclosed herewith.
Very truly yours,
/s/ Edward A. Dougherty
- -----------------------
Edward A. Dougherty
Accepted and agreed to as of
the date first written above:
By: /s/ James A. Harris
-------------------
James A. Harris
U.S. Aggregates, Inc.
Copy: Michael J. Stone
<PAGE>
DONEGAL CO.
Edward A. Dougherty
15 Makin Grade
P.O. Box 635
Ross, Ca. 94957
(415) 458-1770
Personal & Confidential
Attention: Mr. James A. Harris April 18, 1998
U.S. Aggregates, Inc.
400-4 College Avenue
Clemson, SC 29631
Gentlemen:
Donegal Co. ("Donegal") is pleased to act as exclusive financial advisor to U.S.
Aggregates, Inc. (the "Company") in connection with the Company's efforts to
accomplish the acquisition of Monroc, Inc. (the "Target") and arrange certain
related financing transactions (the "Transaction"). This letter is to confirm
our understanding with respect to the engagement.
Donegal will assist the Company in analyzing, structuring, negotiating and
effecting the proposed acquisition and financing transaction(s).
If within one year of the date of this letter, the Transaction is consummated,
the Company agrees to pay Donegal a fee (the "Transaction Fee") in the amount
equal to $250,000. Such amount is payable in cash upon the closing(s) of such
Transaction.
In addition, the Company will pay Donegal, a non-refundable monthly retainer of
$10,000, on the 1st of each month, beginning with January 1998 and extending
through April 1998. The total of these four monthly retainer payments paid
during the months of January, February, March and April of 1998 shall be
creditable against the Transaction Fee payable as described in the preceding
paragraph. No other payments which might be received by Donegal, whether with
respect to other services rendered during the term of this engagement or
otherwise, shall be included under the crediting arrangement described above.
In addition to any fees that may be payable to Donegal under this letter, the
Company agrees to reimburse Donegal, upon request made from time to time, for
its reasonable out-of-pocket expenses incurred in connection with Donegal's
activities under this letter, provided however, such expenses are approved in
advance by U.S. Aggregates, Inc., and appropriate receipts are submitted, which
approval shall not be unreasonably withheld.
<PAGE>
The Company will furnish Donegal with such information as Donegal believes
appropriate to its assignment (all such information so furnished being the
"Information"). The Company recognizes and confirms that Donegal (a) will use
and rely primarily on the Information and on information available from
generally recognized public sources in performing the services contemplated by
this letter without having independently verified the same, (b) does not assume
responsibility for the accuracy or completeness of the Information and such
other information and (c) will not make an appraisal of any assets of the Target
or the Company.
The Company agrees to indemnify Donegal and its controlling persons (the Firm
and each such person being an "Indemnified Party") from and against all losses,
claims, damages and liabilities, joint and several, to which such Indemnified
Party may become subject under any federal or state law, or otherwise, related
to or arising out of the acquisition or any financing transaction contemplated
by this letter or the engagement of Donegal pursuant to, and the performance by
Donegal of the service contemplated by, this letter and will reimburse any
Indemnified Party for all expenses (including counsel fees and expenses) as they
are incurred in connection with the investigation of, preparation for or the
defense of any pending or threatened claim or action or proceeding arising
therefrom, whether or not such Indemnified Party is a party. The Company will
not be liable under the foregoing indemnification provision to the extent that
any loss, claim, damage, liability or expense is found in a final judgment by a
court to have resulted primarily from Donegal's willful misconduct or gross
negligence.
Donegal's engagement hereunder may be terminated by either the Company or
Donegal at any time upon written notice to that effect to the other party, it
being understood that the provisions relating to the payment of the Transaction
Fee, expenses and indemnification will survive any such termination.
<PAGE>
Please confirm that the foregoing correctly sets forth our agreement by signing
and returning to Donegal the duplicate copy of this letter enclosed herewith.
Very truly yours,
/s/ Edward A. Dougherty
- -----------------------
Edward A. Dougherty
Accepted and agreed to as of
the date first written above:
By: /s/ James A. Harris
-------------------
James A. Harris
U.S. Aggregates, Inc.
Copy: Michael J. Stone
<PAGE>
DONEGAL CO.
Edward A. Dougherty
15 Makin Grade
P.O. Box 635
Ross, Ca. 94957
(415) 458-1770
Personal & Confidential
Attention Mr. Michael J. Stone December 30, 1998
U.S. Aggregates, Inc.
400 South El Camino
Suite 500
San Mateo, Ca. 94402
Gentlemen:
Donegal Co. ("Donegal") is pleased to act as financial advisor to U.S.
Aggregates, Inc. (the "Company") in connection with the Company's efforts to
arrange certain financing transactions (the "Transaction") related to the Pride
Quarry and the 1999 Capital and Acquisition Plan. This letter is to confirm our
understanding with respect to the engagement.
Donegal will assist the Company in analyzing, structuring, negotiating and
effecting the proposed acquisition and financing transaction(s).
If within one year of the date of this letter, the Transaction is consummated,
the Company agrees to pay Donegal a fee (the "Transaction Fee") in the amount
equal to $150,000. Such amount is payable in cash upon the closing(s) of such
Transaction.
In addition, the Company will pay Donegal, a non-refundable monthly retainer of
$10,000, on the 1st of each month, beginning with January 1999. The monthly
retainer payments paid shall be creditable against the Transaction Fee payable
as described in the preceding paragraph. No other payments which might be
received by Donegal, whether with respect to other services rendered during the
term of this engagement or otherwise, shall be included under the crediting
arrangement described above.
In addition to any fees that may be payable to Donegal under this letter, the
Company agrees to reimburse Donegal, upon request made from time to time, for
its reasonable out-of-pocket expenses incurred in connection with Donegal's
activities under this letter, provided however, such expenses are approved in
advance by U.S. Aggregates, Inc., and appropriate receipts are submitted, which
approval shall not be unreasonably withheld.
<PAGE>
The Company will furnish Donegal with such information as Donegal believes
appropriate to its assignment (all such information so furnished being the
"Information"). The Company recognizes and confirms that Donegal (a) will use
and rely primarily on the Information and on information available from
generally recognized public sources in performing the services contemplated by
this letter without having independently verified the same, (b) does not assume
responsibility for the accuracy or completeness of the Information and such
other information and (c) will not make an appraisal of any assets of the Target
or the Company. If requested Donegal will enter into a confidentiality
agreement.
The Company agrees to indemnify Donegal and its controlling persons (the Firm
and each such person being an "Indemnified Party") from and against all losses,
claims, damages and liabilities, joint and several, to which such Indemnified
Party may become subject under any federal or state law, or otherwise, related
to or arising out of any acquisition or any financing transaction contemplated
by this letter or the engagement of Donegal pursuant to, and the performance by
Donegal of the service contemplated by, this letter and will reimburse any
Indemnified Party for all expenses (including counsel fees and expenses) as they
are incurred in connection with the investigation of, preparation for or the
defense of any pending or threatened claim or action or proceeding arising
therefrom, whether or not such Indemnified Party is a party. The Company will
not be liable under the foregoing indemnification provision to the extent that
any loss, claim, damage, liability or expense is found in a final judgment by a
court to have resulted primarily from Donegal's willful misconduct or gross
negligence.
Donegal's engagement hereunder may be terminated by either the Company or
Donegal at any time upon written notice to that effect to the other party, it
being understood that the provisions relating to the payment of the Transaction
Fee, expenses and indemnification will survive any such termination.
<PAGE>
Please confirm that the foregoing correctly sets forth our agreement by signing
and returning to Donegal the duplicate copy of this letter enclosed herewith.
Very truly yours,
/s/ Edward A. Dougherty
- -----------------------
Edward A. Dougherty
Accepted and agreed to as of
the date first written above:
By: /s/ Michael J. Stone
--------------------
Michael J. Stone
U.S. Aggregates, Inc.
<PAGE>
[DATE]
U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, CA 94402
Deutsche Banc Securities Inc.
135 East Baltimore Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
The undersigned understands that Deutsche Banc Securities Inc.
("Deutsche Banc"), as representative (the "Representative") of the several
underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with U.S. Aggregates, Inc. (the
"Company"), providing for the initial public offering by the Underwriters,
including the Representative, of common stock (the "Common Stock"), of the
Company (the "Public Offering").
In consideration of the Underwriters' agreement to make the Initial Public
Offering and for other good and valuable consideration, receipt and sufficiency
of which is hereby acknowledged, the undersigned agrees that, without the prior
written consent of Deutsche Banc, the undersigned will not, directly or
indirectly offer, sell, pledge, contract to sell, (including any short sale),
grant any option to purchase or otherwise dispose of any shares of Common Stock
(including, without limitation, shares of Common Stock of the Company which may
be deemed to be beneficially owned by the undersigned on the date hereof in
accordance with the rules and regulations of the Securities and Exchange
Commission and shares of Common Stock which may be issued upon exercise of a
stock option or warrant) or enter into any Hedging Transaction (as defined
below) relating to the Common Stock (each of the foregoing referred to as a
"Disposition") for a period of 180 days after the effective date of the
registration statement relating to the Public Offering (the "Lock-Up Period").
The foregoing restriction is expressly intended to preclude the undersigned from
engaging in any Hedging Transaction or other transaction which is designed to or
reasonably expected to lead to or result in a Disposition during the Lock-Up
Period even
<PAGE>
U.S. Aggregates, Inc.
Deutsche Banc Securities Inc.
[DATE]
Page
2
if the securities would be disposed of by someone other than the undersigned.
"Hedging Transaction" means any short sale (whether or not against the box) or
any purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Common Stock.
Notwithstanding the foregoing, the undersigned may transfer any or all
of the Shares by gift, will or intestacy; provided, however, that in any such
case it shall be a condition to the transfer that the transferee execute an
agreement stating that the transferee is receiving and holding the Shares
subject to the provisions of this Agreement, and there shall be no further
transfer of such Shares except in accordance with this Agreement.
Without limiting the restrictions herein, any Disposition by the
undersigned shall remain at all times subject to applicable securities laws,
including without limitation the resale restrictions imposed by Rule 144
promulgated under the Securities Act of 1933.
The undersigned agrees that the Company may, and that the undersigned
will, (i) with respect to any shares for which the undersigned is the record
holder, cause the transfer agent for the Company to note stop transfer
instructions with respect to such shares on the transfer books and records of
the Company and (ii) with respect to any shares for which the undersigned is the
beneficial holder but not the record holder, cause the record holder of such
shares to cause the transfer agent for the Company to note stop transfer
instructions with respect to such shares on the transfer books and records of
the Company.
The undersigned understands that the Company, the Underwriters and the
Representatives will proceed with the Public Offering in reliance on this
Lock-up Agreement.
<PAGE>
U.S. Aggregates, Inc.
Deutsche Banc Securities Inc.
[DATE]
Page
3
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this letter agreement. All authority
herein conferred or agreed to be conferred shall survive the death or incapacity
of the undersigned and any obligations of the undersigned shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Very truly yours,
___________________________
______
Number of shares owned or Certificate numbers:
subject to warrants, options
or convertible securities:
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
<PAGE>
SUBSIDIARIES OF U.S. AGGREGATES, INC.
<TABLE>
<CAPTION>
COMPANY JURISDICTION OF INTEREST
INCORPORATION
<S> <C> <C>
SRM Holdings Corp. Delaware 100% Owned Subsidiary
Western Aggregates Holding Delaware 100% Owned Subsidiary
Corp.
Southern Ready Mix, Inc. Alabama 100% Owned Subsidiary
Western Rock Products Utah 100% Owned Subsidiary
Corporation
Cox Rock Products, Inc. Utah 100% Owned Subsidiary
Cox Transport Corporation Utah 100% Owned Subsidiary
Jensen Construction & Nevada 100% Owned Subsidiary
Development, Inc.
Sandia Construction, Inc. Nevada 100% Owned Subsidiary
Mohave Concrete and Nevada 100% Owned Subsidiary
Materials, Inc. (Nevada)
Mohave Concrete and Arizona 100% Owned Subsidiary
Materials, Inc. (Arizona)
A-Block Company, Inc. Arizona 100% Owned Subsidiary
(Arizona)
A-Block Company, Inc. California 100% Owned Subsidiary
(California)
Valley Asphalt, Inc. Utah 100% Owned Subsidiary
Dekalb Stone, Inc. Georgia 70.6667% of the Common
Stock and 100% of the
Preferred Stock
Mulberry Rock Corporation Georgia 100% Owned Subsidiary
BHY Ready Mix, Inc. Tennessee 100% Owned Subsidiary
Bradley Stone & Sand, Inc. Tennessee 100% Owned Subsidiary
Tri-State Testing Utah 100% Owned Subsidiary
Laboratories, Inc.
Beck Paving, Inc. Utah 100% Owned Subsidiary
<PAGE>
Geodyne Transport, Inc. Utah 100% Owned Subsidiary
Monroc, Inc. Delaware 100% Owned Subsidiary
Treasure Valley Concrete, Idaho 100% Owned Subsidiary
Inc.
Western Aggregates, Inc. Utah 100% Owned Subsidiary
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated January 29, 1999 and to all references to our firm included in or
made a part of this registration statement.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
San Francisco, California
July 13, 1999
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-79209 of U.S. Aggregates, Inc., on Form S-1 of our report dated March 31,
1998, appearing in the Prospectus, which is part of such Registration Statement,
and to the reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Salt Lake City, Utah
July 12, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have issued our report dated February 11, 1997 accompanying the
consolidated financial statements of Monroc, Inc. and Subsidiary as of and for
the year ended December 31, 1996 contained in the Form S-1 Registration
Statement and Prospectus of U.S. Aggregates, Inc. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus and to the
use of our name as it appears under the caption "Experts".
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Salt Lake City, Utah
July 12, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 2,849 2,226
<SECURITIES> 0 0
<RECEIVABLES> 46,970 56,909
<ALLOWANCES> (1,163) (1,293)
<INVENTORY> 25,480 27,506
<CURRENT-ASSETS> 78,102 91,751
<PP&E> 253,910 280,596
<DEPRECIATION> (21,591) (26,029)
<TOTAL-ASSETS> 337,611 374,362
<CURRENT-LIABILITIES> 48,748 65,719
<BONDS> 0 0
43,563 45,768
0 0
<COMMON> 61 61
<OTHER-SE> 11,486 12,379
<TOTAL-LIABILITY-AND-EQUITY> 337,611 374,362
<SALES> 228,739 126,939
<TOTAL-REVENUES> 228,739 126,939
<CGS> (168,220) (91,966)
<TOTAL-COSTS> (204,319) (112,558)
<OTHER-EXPENSES> (1,104) (479)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (14,351) (8,841)
<INCOME-PRETAX> 8,965 5,061
<INCOME-TAX> (3,748) (1,898)
<INCOME-CONTINUING> 4,832 3,124
<DISCONTINUED> 0 0
<EXTRAORDINARY> (338) 0
<CHANGES> 0 0
<NET-INCOME> 4,494 3,124
<EPS-BASIC> 0.12 0.15
<EPS-DILUTED> 0.11 0.14
</TABLE>
