AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 1999.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
U.S. CONCRETE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3273 76-0586680
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1360 POST OAK BLVD., SUITE 800
HOUSTON, TEXAS 77056
(713) 350-6017
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
EUGENE P. MARTINEAU
CHIEF EXECUTIVE OFFICER
1360 POST OAK BLVD., SUITE 800
HOUSTON, TEXAS 77056
(713) 350-6028
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPY TO:
TED W. PARIS, ESQ. MICHAEL C. BLANEY, ESQ.
BAKER & BOTTS, L.L.P. ANDREWS & KURTH L.L.P.
3000 ONE SHELL PLAZA 4200 CHASE TOWER
HOUSTON, TEXAS 77002-4995 HOUSTON, TEXAS 77002
FAX: (713) 229-1522 FAX: (713) 220-4285
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the 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,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list 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 statement 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>
=========================================================================================================================
PROPOSED
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(1) PRICE(2),(3) REGISTRATION FEE
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value(4) $ $41,515,000 $11,542
=========================================================================================================================
</TABLE>
(1) In accordance with Rule 475(o) of the Securities Act, the number of shares
being registered and the proposed maximum offering price per share are not
included in this table.
(2) Includes shares of Common Stock issuable on exercise of the Underwriters'
over-allotment option.
(3) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a).
(4) Includes the associated rights to purchase preferred stock.
------------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<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.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH , 1999
3,800,000 SHARES
U.S. CONCRETE, INC.
COMMON STOCK
------------------------
U.S. Concrete, Inc. is selling all the 3,800,000 shares of common stock
this offering includes through underwriters in a firm commitment underwriting.
This is our initial public offering, and no public market currently exists for
our shares. We and the underwriters expect the public offering price to be
between $7.50 and $9.50 per share. We have applied to have the common stock
quoted on the Nasdaq National Market under the symbol "RMIX."
U.S. Concrete, Inc. was recently formed to acquire operating businesses in
the ready-mixed concrete industry and intends to become a leading supplier of
ready-mixed concrete to the construction industry in the United States.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
PER SHARE TOTAL
--------- --------------
Public Offering Price................ $8.50 $ 32,300,000
Underwriting Discount................ $0.60 $ 2,280,000
Proceeds, before expenses, to U.S.
Concrete, Inc. ...................... $7.90 $ 30,020,000
We have granted the underwriters a 30-day option to purchase up to an
additional 570,000 shares at the public offering price, less the underwriting
discount, to cover any over-allotments.
The underwriters expect to deliver the shares to purchasers on or about
, 1999.
------------------------
SCOTT & STRINGFELLOW, INC. SANDERS MORRIS MUNDY
The date of this prospectus is , 1999
<PAGE>
TABLE OF CONTENTS
PAGE
-----
Prospectus Summary................... 3
Risk Factors......................... 9
The Company.......................... 16
Use of Proceeds...................... 18
Dividend Policy...................... 18
Capitalization....................... 19
Dilution............................. 20
Selected Financial Information....... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 23
Business............................. 32
Management........................... 42
Certain Transactions................. 50
Security Ownership of Certain
Beneficial Owners and Management..... 53
Shares Eligible for Future Sale...... 54
Description of Capital Stock......... 55
Underwriting......................... 60
Legal Matters........................ 62
Experts.............................. 62
Where You Can Find More
Information.......................... 63
Index to Financial Statements........ F-1
------------------------
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about our company, including, among other matters:
o our internal growth and acquisition strategies;
o our ability to integrate companies we acquire;
o the trends we anticipate in the ready-mixed concrete industry;
o future expenditures for capital projects;
o our ability to control costs and maintain quality; and
o the risks we describe in "Risk Factors" beginning on page 9.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events this prospectus discusses might not occur.
------------------------
You should rely only on the information this prospectus contains. We have
not, and the underwriters have not, authorized anyone to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not, and the underwriters are
not, making an offer to sell these securities in any jurisdiction that does not
permit that offer or sale. You should assume that the information in this
prospectus is accurate only as of the date of this prospectus. Our business,
financial condition, results of operations and prospects may have changed since
that date.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY
NOT CONTAIN ALL 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.
CONCURRENTLY WITH THE CLOSING OF THIS OFFERING, WE PLAN TO ACQUIRE, IN
SEPARATE TRANSACTIONS, IN EXCHANGE FOR SHARES OF OUR COMMON STOCK AND CASH, SIX
BUSINESSES: CENTRAL CONCRETE SUPPLY CO., INC.; WALKER'S CONCRETE, INC.; BAY
CITIES BUILDING MATERIALS CO., INC.; OPPORTUNITY CONCRETE CORPORATION; BAER
CONCRETE, INCORPORATED; AND R.G. EVANS/ASSOCIATES D/B/A SANTA ROSA CAST PRODUCTS
CO. IN THIS PROSPECTUS, WE SOMETIMES REFER TO THOSE COMPANIES AS THE "FOUNDING
COMPANIES." UNLESS OTHERWISE INDICATED, REFERENCES IN THIS PROSPECTUS TO
"USC," "WE," "US" OR "OUR" EACH MEAN U.S. CONCRETE, INC., AND REFERENCES
TO THE "COMPANY" MEAN U.S. CONCRETE, INC. AND THE FOUNDING COMPANIES
COLLECTIVELY. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (1)
GIVES EFFECT TO OUR ACQUISITIONS OF THE FOUNDING COMPANIES, (2) ASSUMES THE
UNDERWRITERS DO NOT EXERCISE THEIR OVER-ALLOTMENT OPTION AND (3) GIVES EFFECT TO
A 10,000-FOR-1 STOCK SPLIT OF THE COMMON STOCK AND A RECAPITALIZATION WE
EFFECTED IN MARCH 1999 AND THE AUTOMATIC CONVERSION OF OUR OUTSTANDING CLASS A
COMMON STOCK INTO OUR COMMON STOCK THAT WILL OCCUR IMMEDIATELY PRIOR TO THE
CLOSING OF THIS OFFERING.
THE COMPANY
We intend to become a leading value-added provider of ready-mixed concrete
and related products and services to the construction industry in major markets
in the United States. The Company currently serves all segments of the
construction industry in the San Francisco, San Jose, Oakland and Sacramento,
California and Washington, D.C. metropolitan areas and northern New Jersey. The
Company currently operates 26 concrete plants that produced over 2.5 million
cubic yards of concrete in 1998. Its operations consist principally of
formulating, preparing, and delivering ready-mixed concrete at the job sites of
its customers. The Company provides services to reduce customers' overall
construction costs by lowering the installed, or "in-place," cost of concrete.
These services include the formulation of new mixtures for specific design uses,
on-site and lab-based product quality control and delivery programs configured
to meet customers' time-sensitive needs.
The Company's pro forma combined sales increased from $128.3 million in
fiscal 1996 to $165.4 million in 1997 and to $194.1 million in 1998, or by 28.9%
and 17.4%, respectively. Of the Company's 1998 pro forma combined sales, we
estimate that approximately 44%, 33%, 18% and 5% were to commercial and
industrial construction contractors, residential construction contractors,
street and highway construction and paving contractors and other public works
and infrastructure contractors, respectively. In 1998, repeat customers
accounted for an estimated 85% of the Company's sales. We believe the Company's
current size places it among the leading independent ready-mixed concrete
companies in the United States.
Annual usage of ready-mixed concrete in the United States is currently at a
record level and is projected to continue growing. According to the National
Ready-Mixed Concrete Association (the "NRMCA"), total sales from production
and delivery of ready-mixed concrete in the United States grew from $17.6
billion in 1996 to $19.3 billion in 1997 and to $21.3 billion in 1998, or 9.7%
and 10.4%, respectively. It is estimated that those revenues will grow to $22.1
billion in 1999. We believe that, in addition to favorable trends in the overall
economy of the United States, three significant factors have been expanding the
market for ready-mixed concrete, in particular: (1) the increased level of
industry-wide promotional and marketing activities; (2) the development of new
and innovative uses for ready-mixed concrete; and (3) the enactment of the
federal Transportation Equity Act for the 21st Century ("TEA-21"), which
provides for $218 billion in federal highway funding from 1998 to 2003,
reflecting a 43% increase in funding over the prior six years.
3
<PAGE>
Based on information the NRMCA has provided us, the ready-mixed concrete
industry in the United States is highly fragmented, with more than 3,500
independent producers operating a total of approximately 5,300 plants. Given the
large size and fragmentation of the ready-mixed concrete industry, we believe
numerous potential acquisition candidates exist both within the markets the
Company currently serves and in other large metropolitan and high growth
markets. We intend to continue to make acquisitions to enhance our position in
existing markets and expand into new markets. We believe that a significant
consolidation opportunity exists for a company that can consistently offer
high-quality, value-added services to large users of ready-mixed concrete.
OUR BUSINESS STRATEGY
Our objective is to expand the geographic scope of our operations and
become the leading value-added provider of ready-mixed concrete and related
services in each of our markets. The significant costs and regulatory
requirements involved in building new plants make acquisitions an important
element of our growth strategy. We plan to (1) make acquisitions in our existing
markets and new geographic markets and (2) implement a national operating
strategy aimed at increasing revenue growth and market share, achieving cost
efficiencies and enhancing profitability. We intend to manage our operations on
a decentralized basis to allow acquired businesses to focus on their existing
customer relationships and local strategy. Our executive management team will be
responsible for executing our company-wide strategy, including acquisition
planning, execution and integration and initiating and overseeing operational
improvements.
HOW TO REACH US
Our principal executive offices are located at 1360 Post Oak Blvd., Suite
800, Houston, Texas 77056. Our telephone number at that address is (713)
350-6017. USC is incorporated in Delaware.
4
<PAGE>
THIS OFFERING
<TABLE>
<S> <C>
Common stock we are offering......... 3,800,000 shares
Common stock to be outstanding
immediately after this
offering(1)........................ 15,638,543 shares
Use of proceeds...................... We expect that our net proceeds from this offering (after
deducting our expenses and the underwriting discount) will be
approximately $27.0 million. When this offering closes, we will
use $23.3 million of these proceeds to pay the cash portion of the
purchase prices for our initial acquisitions which then will be
due and apply the balance to repay a portion of the indebtedness
we will assume as a result of those acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market
trading symbol..................... RMIX
</TABLE>
- - ------------
(1) Includes (1) 3,800,000 shares we will sell in this offering, (2) 8,985,288
shares we will issue as part of the purchase prices for our initial
acquisitions, (3) 450,000 shares our management and non-employee directors
own, (4) 801,000 shares American Ready-Mix, L.L.C. owns and (5) 1,602,255
shares Main Street Merchant Partners II, L.P. ("Main Street") owns.
Excludes (1) options to purchase an aggregate of 1,150,000 shares which we
expect to grant on consummation of this offering and (2) warrants for
200,000 shares which we will issue to the representatives of the
underwriters for this offering for services they will render through the
date this offering closes. See "Management," "Certain Transactions" and
"Underwriting."
5
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
We will acquire the Founding Companies simultaneously with and as a
condition to the consummation of this offering. The following summary unaudited
pro forma combined financial information presents information for us, as
adjusted for (1) the effects of the acquisitions of the Founding Companies, (2)
the effects of pro forma adjustments to the historical financial statements we
describe below and (3) the consummation of, and our application of the net
proceeds from, this offering. See "Selected Financial Information," the
Unaudited Pro Forma Combined Financial Statements and the Notes thereto and the
historical financial statements of USC and certain of the Founding Companies and
the Notes thereto elsewhere in this prospectus.
PRO FORMA
YEAR ENDED
DECEMBER 31, 1998
-----------------------
(IN THOUSANDS, EXCEPT
SHARE AND
PER SHARE INFORMATION)
STATEMENT OF OPERATIONS
INFORMATION(1):
Sales........................... $ 194,076
Cost of goods sold.............. 158,913
-----------------------
Gross profit.................... 35,163
Selling, general and
administrative expenses(2)...... 13,320
Depreciation and
amortization(3)................. 4,832
-----------------------
Income from operations.......... 17,011
Other expense, net(4)........... (103)
-----------------------
Income before provision for
income taxes.................... 16,908
Provision for income taxes(5)... 7,606
-----------------------
Net income...................... $ 9,302
=======================
Net income per share............ $ 0.59
=======================
Shares used in computing pro
forma net income per
share(6)...................... 15,638,543
=======================
OTHER INFORMATION:
EBITDA(7)....................... $ 21,843
=======================
PRO FORMA
AS OF DECEMBER 31, 1998
-------------------------------
COMBINED(1) AS ADJUSTED(8)
------------ ---------------
(IN THOUSANDS)
BALANCE SHEET INFORMATION:
Working capital (deficit)(9).... $(15,961) $ 7,351
Total assets.................... 132,519 132,164
Total debt, including current
portion(9)...................... 42,465 15,426
Stockholders' equity............ 64,702 91,386
- - ------------
(1) The statement of operations information assumes that we completed the
following transactions and events on January 1, 1998: (1) the closing of
this offering and the application of our estimated net proceeds therefrom;
(2) our acquisitions of the Founding Companies; (3) our refinancing of the
indebtedness of the Founding Companies with borrowings under our credit
facility; and (4) our issuances of 450,000 shares of our common stock to
members of our management and non-employee directors and 801,000 shares of
our common stock to American Ready-Mix, L.L.C. This information is
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
6
<PAGE>
not necessarily indicative of the consolidated results we would have
attained had these events and transactions actually occurred then or of our
future consolidated results. The pro forma balance sheet information assumes
those transactions and events (other than the closing of this offering and
our application of the net proceeds therefrom) and our net incurrence of
indebtedness since December 31, 1998 occurred on that date. The pro forma
combined financial information (1) is based on preliminary estimates,
available information and assumptions we deem appropriate and (2) should be
read in conjunction with the financial statements and notes thereto this
prospectus includes.
(2) The statement of operations information includes the effects of: (1) $3.5
million of reductions in compensation and benefits to which owners of the
Founding Companies have prospectively agreed; (2) the elimination of a $2.7
million non-cash, non-recurring compensation charge by us for the year ended
December 31, 1998 (net of a $330,000 charge for recurring salary changes of
management).
(3) Reflects amortization of the goodwill that will result from our acquisitions
of the Founding Companies over a 40-year period and computed on the basis
the notes to the Unaudited Pro Forma Combined Financial Statements describe.
(4) Reflects the net increase in interest expense of $0.2 million for 1998
attributable to our refinancing of $14.1 million of historical debt of the
Founding Companies and additional borrowings to fund our acquisitions with
borrowings under our credit facility.
(5) Assumes all pretax income before non-deductible goodwill and other permanent
items is subject to an estimated 40.6% combined tax rate.
(6) Includes (1) 8,985,288 shares of common stock we will issue to the owners of
the Founding Companies, (2) 2,853,255 shares of common stock our current
stockholders and executive officers own and (3) the 3,800,000 shares of
common stock we will sell in this offering.
(7) "EBITDA" means income from operations plus depreciation and amortization
and is a supplemental financial measurement we use to evaluate our business.
We are not presenting EBITDA as an alternative measure of operating results
or cash flow from operations or any other measure of performance in
accordance with generally accepted accounting principles. EBITDA does not
give effect to cash used for debt service requirements and thus does not
reflect funds available for dividends, reinvestment or other discretionary
uses. In addition, our presentation of EBITDA may not be comparable to
similarly titled measures other companies report.
(8) Reflects the closing of this offering and our application of our net
proceeds therefrom. See "Use of Proceeds."
(9) The pro forma combined amount includes the $23.3 million cash purchase price
payable in the acquisitions and $4.9 million, which represents the amount by
which the maximum amount we may pay to the owners of four Founding Companies
as additional cash consideration pursuant to post-closing adjustment
provisions in our acquisition agreements ($9.8 million) exceeds the assumed
S corporation distributions of two of those companies ($4.9 million). The
additional cash consideration is subject to decrease, but not increase, if
cash balances or working capital (as defined) in the applicable Founding
Companies do not meet specified levels.
7
<PAGE>
SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL INFORMATION
The following table presents certain summary historical financial
information for each Founding Company for its three most recently completed
fiscal years (calendar years 1996, 1997 and 1998 for each, except that, for Baer
Concrete, Incorporated, fiscal 1996 is its fiscal year ended March 31, 1997).
The information for Opportunity Concrete Corporation and Baer Concrete,
Incorporated, for fiscal 1996 and 1997 is unaudited, while the information for
Santa Rosa Cast Products Company for all periods is unaudited. We have not
adjusted this historical income statement information for the pro forma
adjustments that relate to reductions in compensation and benefits to which
owners of the Founding Companies have prospectively agreed, or any of the other
pro forma adjustments reflected in the Unaudited Pro Forma Combined Financial
Statements this prospectus includes. You should read this information in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto this
prospectus includes.
FISCAL YEAR
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
CENTRAL CONCRETE SUPPLY CO., INC.
Sales........................... $ 39,204 $ 53,631 $ 66,499
Gross profit.................... 5,802 9,837 12,525
Income from operations.......... 955 4,242 6,883
WALKER'S CONCRETE, INC.
Sales........................... $ 31,008 $ 37,990 $ 41,615
Gross profit.................... 4,553 6,192 7,087
Income from operations.......... 1,631 2,411 3,169
BAY CITIES BUILDING MATERIALS CO.,
INC.
Sales........................... $ 30,496 $ 45,312 $ 53,600
Gross profit.................... 3,209 5,020 6,834
Income from operations.......... 661 1,784 2,367
OPPORTUNITY CONCRETE CORPORATION
Sales........................... $ 19,737 $ 15,551 $ 16,180
Gross profit.................... 4,197 3,969 4,884
Income from operations.......... 2,654 2,223 2,287
BAER CONCRETE, INCORPORATED
Sales........................... $ 4,811 $ 9,712 $ 11,973
Gross profit.................... 400 965 2,063
Income (loss) from operations... (585) 261 456
SANTA ROSA CAST PRODUCTS CO.
Sales........................... $ 3,032 $ 3,176 $ 4,209
Gross profit.................... 1,116 1,312 1,770
Income from operations.......... 186 292 728
8
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. THIS
PROSPECTUS CONTAINS STATEMENTS OF OUR EXPECTATIONS, OBJECTIVES AND PLANS AND
OTHER FORWARD-LOOKING STATEMENTS THAT INVOLVE A NUMBER OF RISKS, UNCERTAINTIES
AND ASSUMPTIONS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE THE
FORWARD-LOOKING STATEMENTS PROJECT AS A RESULT OF ANY NUMBER OF FACTORS,
INCLUDING THE RISK FACTORS THIS PROSPECTUS SETS FORTH BELOW. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING FACTORS, AS WELL AS THE OTHER INFORMATION THIS
PROSPECTUS CONTAINS.
AFTER THIS OFFERING, WE MAY NOT HAVE SUFFICIENT FUNDS TO FULLY IMPLEMENT OUR
BUSINESS STRATEGIES
This offering will not provide us with any funds for use in implementing
our business strategies beyond making our initial acquisitions. When this
offering closes, we will use our net proceeds from this offering to pay the cash
portion of the purchase prices for our initial acquisitions which then will be
due ($23.3 million) and apply the balance (approximately $3.7 million) to repay
a portion of the indebtedness we will assume as a result of these acquisitions.
In addition, we will borrow under our anticipated $75 million credit facility to
refinance the remaining amount of that assumed indebtedness. We will require
additional funds in the future to fully implement our business strategies,
including our plan to grow through acquisitions. If we are unable to obtain
additional funds, we may not be able to fully implement our business strategies.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Combined."
WE HAVE NO COMBINED OPERATING HISTORY, AND WE MAY FAIL TO INTEGRATE THE
BUSINESSES WE ACQUIRE INTO A COHESIVE, EFFICIENT ENTERPRISE
We have not conducted any operations or generated any revenues to date. We
expect to acquire six operating businesses in separate transactions that will
close when this offering closes. These businesses have operated, and will
continue to operate before this offering closes, as separate, independent
companies. Until we establish centralized accounting, information and other
administrative systems, we will rely on their existing systems. Our success will
depend, in part, on the extent to which we are able to institute the necessary
Company-wide information and management systems, establish effective cost and
other control mechanisms and otherwise integrate these businesses and all
additional businesses we hereafter may acquire into a cohesive, efficient
enterprise that achieves the cost savings and revenue enhancements we expect.
Our inability to integrate successfully the businesses we acquire would
materially adversely affect our business, financial condition and results of
operations and render unlikely that our strategies for growth will succeed.
WE EXPECT TO GROW RAPIDLY, AND EFFECTIVELY MANAGING OUR GROWTH MAY BE DIFFICULT
We expect to grow rapidly. This growth will place a significant strain on
our resources and systems. Our executive management has assembled only recently
and, apart from our chief executive officer, have no experience in our industry.
To manage our growth, they must be able to:
o work together effectively;
o recruit and integrate additional senior level managers; and
o train and manage our operations management and employees to achieve
the disciplines a public company requires.
Our business, financial condition and results of operations could suffer
materially if we do not effectively manage our growth.
WE MAY NOT BE ABLE TO REALIZE OUR BUSINESS STRATEGY OF GROWING THROUGH
ACQUISITIONS
We may not be able to grow significantly through acquisitions. The success
of our strategy to grow through acquisitions will depend on the extent to which
we are able to (1) identify suitable acquisition candidates available for sale
at reasonable prices and on other reasonable terms and (2) use our own
securities or funds or raise additional funds to pay for acquisitions. See
"Management's Discussion and
9
<PAGE>
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Combined." If we are unable to effect additional
acquisitions in the Company's existing markets or in new markets we enter, we
will not have the opportunity to realize the cost savings and customer
cross-selling opportunities we expect that increasing market share in those
markets would produce.
ACQUISITIONS MAY DISRUPT OR OTHERWISE ADVERSELY IMPACT OUR BUSINESS
Our acquisition strategy presents risks that, singly or in any combination,
could materially adversely affect our business and financial performance. These
risks include:
o the adverse effects on existing operations which could result from
the diversion of our management's attention and resources to
acquisitions;
o the adverse effects of competition for acquisition candidates in
our industry, which could include increases in the cost of
acquiring additional businesses;
o the possible loss of acquired customers and key personnel;
o the contingent and latent risks (including environmental risks)
associated with the past operations of and other unanticipated
problems arising in the acquired businesses; and
o the possible adverse effects of increasing our amortizable goodwill
as a result of accounting for acquisitions in accordance with the
purchase method of accounting.
See "Business -- Business Strategy."
WE MAY NOT BE ABLE TO REALIZE OUR BUSINESS STRATEGY OF REDUCING COSTS AND
ACHIEVING REVENUE ENHANCEMENTS IN OUR OPERATIONS
We may not be able to realize our business strategy of reducing costs and
achieving revenue enhancements in our operations. Factors that will affect our
ability to do so will include the extent to which we are able to:
o eliminate duplicative functions and otherwise reduce operating and
overhead costs;
o translate increases in our share of our local and regional markets
as a result of acquisitions into additional revenue opportunities;
o improve the dispatch systems for our mixer trucks;
o develop a sophisticated, knowledgeable sales force; and
o expand our technical expertise in the design and variation of
concrete mixes.
OUR SUCCESS WILL DEPEND ON OUR RETAINING OR ADEQUATELY REPLACING PERSONNEL
The extent to which we will be able to carry out our business plan will
depend on the continuing efforts of our executive officers, including Eugene P.
Martineau, our chief executive officer, and the senior management of the
businesses we initially acquire and likely will depend on the senior management
of any significant businesses we acquire in the future. Our success also will
depend on the continuing efforts of our plant managers and technicians and
drivers. If some of these persons do not continue in their respective roles and
we are unable to attract and retain qualified replacements, the resulting
vacancies could materially adversely affect our business, financial condition
and results of operations. We do not intend to carry key-person life insurance
on any of our employees. See "Management."
WE WILL HAVE A SIGNIFICANT AMOUNT OF GOODWILL ON OUR BALANCE SHEET, AND ANY
CHANGE IN HOW WE AMORTIZE IT MAY MATERIALLY REDUCE FUTURE EARNINGS
Our unaudited pro forma combined balance sheet at December 31, 1998
includes goodwill representing approximately 55.3% of assets and 79.9% of
stockholders' equity. An intangible asset, goodwill, arises when a buyer
accounts for a business acquisition under the purchase method of accounting and
the purchase price exceeds the fair value of the tangible and separately
measurable intangible net assets of that business. Generally accepted accounting
principles require that the buyer amortize this and all other intangible assets
10
<PAGE>
over the period benefited. This amortization represents a noncash deduction in
the determination of current operating net income which does not affect cash
flows, but does reduce reported earnings.
We have determined the estimated benefit period for our initial goodwill to
be no less than 40 years. If we have understated or overlooked a material
intangible asset having a benefit period less than 40 years, or have overlooked
factors indicating that a shorter benefit period for goodwill is appropriate,
(1) earnings we report in periods immediately following the acquisition will be
overstated and (2) we subsequently would be burdened by a continuing charge
against earnings without the associated benefit to income that we expected in
arriving at the consideration we will pay for our initial acquisitions. Our
earnings in later years also could be significantly affected if our management
then determines that our remaining balance of goodwill has become impaired. We
have reviewed all the factors and related future cash flows we have considered
in arriving at the amount we will pay for our initial acquisitions. We have
concluded that (1) the anticipated future cash flows associated with the
intangible assets we will recognize in these acquisitions will continue
indefinitely and (2) no persuasive evidence exists that any material portion
will dissipate over a period shorter than 40 years. Our conclusion may prove to
be incorrect. Moreover, if generally accepted accounting principles are amended,
as the Financial Accounting Standards Board has tentatively decided, to require
us to amortize purchase goodwill over a period of less than 20 years, the value
of our Common Stock could drop as a result of a perception that the higher
noncash charges would adversely affect our financial condition or results of
operations. We do not anticipate that any increase in our amortization rate will
have any impact on our ability to borrow under our credit facility.
WE EXPECT THAT OUR QUARTERLY RESULTS WILL FLUCTUATE, AND THESE FLUCTUATIONS MAY
ADVERSELY AFFECT OUR STOCK PRICE
We expect our quarterly operating results will fluctuate significantly as a
result of many factors, including:
o the high seasonality of demand for ready-mixed concrete which
results from the seasonal nature of construction activity (the
six-month period of May through October being the peak demand
period and, as a result, our sales being materially lower in the
first and fourth calendar quarters);
o postponements or delays of projects during sustained periods of
inclement weather and other extreme weather conditions;
o the cyclical nature of the construction industry, both nationally
and in the local and regional markets we serve;
o our fixed costs that continue during periods of low demand for our
products;
o competitive conditions in our industry; and
o the magnitude and timing of future acquisitions.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "-- Factors That May Affect Our Future Operating
Results." Because many of these factors are beyond our control, our operating
results in one or more quarters may not meet the estimates of securities
analysts or the expectations of our stockholders. Any failure by us to meet
those estimates or expectations could materially adversely affect the price of
our Common Stock.
WE MAY BE UNABLE TO COMPETE FAVORABLY IN OUR HIGHLY COMPETITIVE INDUSTRY
We may be unable to compete favorably in our highly competitive industry.
Our competitive position in a given market will depend largely on the location
and operating costs of our ready-mixed concrete plants and prevailing prices in
that market. Price is the primary competitive factor among suppliers for small
or simple jobs, principally in residential construction, while timeliness of
delivery and consistency of quality and service as well as price are the
principal competitive factors among suppliers for large or complex jobs. Our
competitors will range from small, owner-operated private companies offering
simple mixes to subsidiaries or operating units of large, vertically integrated
cement manufacturing and concrete products
11
<PAGE>
companies. Competitors having lower operating costs than we do or having the
financial resources to enable them to accept lower margins than we do will have
a competitive advantage over us for jobs that are particularly price-sensitive.
Competitors having greater financial resources than we do to invest in new mixer
trucks, build plants in new areas or pay for acquisitions also will have
competitive advantages over us.
GOVERNMENTAL REGULATIONS, INCLUDING ENVIRONMENTAL REGULATIONS, MAY ADVERSELY
AFFECT OUR BUSINESS
A wide range of federal, state and local laws, ordinances and regulations
(collectively, "laws") will apply to our operations, 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 certificates,
permits or licenses in order to conduct our business. Our failure to maintain
required certificates, permits or licenses or to comply with applicable laws
could result in substantial fines or possible revocation of our authority to
conduct some of our operations. Delays in obtaining approvals for the transfer
or grant of certificates, permits or licenses, or failure to obtain new
certificates, permits or licenses, could impede the implementation of our
acquisition program.
Environmental laws that will impact our operations include those relating
to air quality, solid waste management and water quality. Environmental laws are
complex and subject to frequent change. They impose strict liability in some
cases without regard to negligence or fault and expose us to liability for the
conduct of or conditions caused by others, or for our acts that complied with
all applicable laws when we performed them. Our compliance with amended, new or
more stringent laws, stricter interpretations of existing laws or the future
discovery of environmental conditions may require us to make material
expenditures we currently do not anticipate. In addition, although we intend to
conduct appropriate investigations with respect to environmental matters in
connection with future acquisitions, we may fail to identify or obtain
indemnification from all potential environmental liabilities of any acquired
business. See "Business -- Governmental Regulation and Environmental Matters."
COLLECTIVE BARGAINING AGREEMENTS, WORK STOPPAGES AND OTHER LABOR RELATIONS
MATTERS MAY ADVERSELY IMPACT OUR BUSINESS
At March 15, 1999, approximately 75% of the employees of the businesses we
initially will acquire were represented by labor unions having collective
bargaining agreements with five of those businesses. Any inability by us to
negotiate acceptable new contracts with these unions could cause strikes or
other work stoppages by the affected employees, and new contracts could result
in increased operating costs attributable to both union and non-union employees.
If any such strikes or other work stoppages were to occur, or if other of our
employees were to become represented by a union, we could experience a
significant disruption of our operations and higher ongoing labor costs which
could materially adversely affect our business, financial condition and results
of operations. In addition, the coexistence of union and non-union employees may
lead to conflicts between union and non-union employees or impede our ability to
integrate our operations efficiently. See "Business -- Employees." Labor
relations matters affecting our suppliers of cement and aggregates could
adversely impact our business from time to time.
OUR OPERATIONS ARE SUBJECT TO VARIOUS HAZARDS THAT MAY CAUSE PERSONAL INJURY OR
PROPERTY DAMAGE
Operating mixer trucks, particularly when loaded, exposes our drivers and
others to traffic hazards. Our drivers are subject to the usual hazards
associated with providing services on construction sites, while 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 loss of life, damage to
or destruction of property, plant and equipment and environmental damage.
Although we will conduct training programs designed to reduce the risks of these
occurrences, we cannot eliminate these risks. The businesses we initially will
acquire maintain insurance coverage in amounts and against the risks we believe
accord with industry
12
<PAGE>
practice, but this insurance 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.
WE MAY INCUR MATERIAL COSTS AND LOSSES AS A RESULT OF CLAIMS OUR PRODUCTS DO NOT
MEET REGULATORY REQUIREMENTS OR CONTRACTUAL SPECIFICATIONS
Our operations generally will involve providing mixed designs of concrete
which must meet building code or other regulatory requirements and contractual
specifications for durability, stress-level capacity, weight-bearing capacity
and other characteristics. The businesses we initially will acquire generally
warrant to their customers that the concrete they provide: (1) in its plastic
state on site will be delivered on time and in conformity with applicable tests
and contractual specifications; and (2) in its hardened state will satisfy any
applicable industry compressive strength test conducted by an independent
testing laboratory. If we fail to provide product in accordance with these
requirements and specifications, claims may arise against us or our reputation
may be damaged. The businesses we initially will acquire have not experienced
any material claims of this nature in recent periods, but we may experience such
claims in the future.
THE YEAR 2000 PROBLEM MAY MATERIALLY ADVERSELY AFFECT US
A significant percentage of the software that runs most computers worldwide
relies on two-digit codes to reflect the last two digits of a year in performing
computations and decision-making functions. These programs may fail beginning on
January 1, 2000, because of their inability to interpret information codes
properly (for example, misinterpreting "00" as the year 1900 rather than
2000). After reviewing the computer programs and systems of the businesses we
initially will acquire to determine whether they will be Year 2000 compliant, we
have determined that some systems are Year 2000 compliant, but we will have to
replace some existing systems and upgrade others. We presently believe that the
Year 2000 problem should not pose material operational problems for us or
require expenditures material to our financial condition or results of
operations, but we may not be successful in dealing with the Year 2000 problem
at a cost that is not material to our financial condition, and any failure on
our part to have Year 2000 compliant programs and systems timely in place could
have a material adverse effect on our business, financial condition and results
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Year 2000 Compliance -- Combined."
CERTAIN STOCKHOLDERS AND OUR MANAGEMENT WILL CONTROL A MAJORITY OF OUR STOCK,
AND THEIR INTERESTS MAY CONFLICT WITH THOSE OF OUR OTHER STOCKHOLDERS
When our initial acquisitions and this offering close, the former owners of
the businesses we initially will acquire and our directors, executive officers
and current stockholders will beneficially own in the aggregate approximately
75.7% of our outstanding Common Stock. If these persons were to act in concert,
they would be able to exercise control over our affairs, including the election
of our entire Board of Directors and (subject to the Delaware General
Corporation Law) the disposition of any matter submitted to a vote of our
stockholders. See "Security Ownership of Certain Beneficial Owners and
Management." The interests of these persons with respect to matters potentially
or actually involving or affecting us, such as future acquisitions, financings
and other corporate opportunities and attempts to acquire us, may conflict with
the interests of our other stockholders.
NO PUBLIC MARKET HAS EXISTED FOR OUR STOCK PRIOR TO THIS OFFERING
Prior to this offering, no public market for our Common Stock has existed,
and the initial public offering price, which the representatives of the
Underwriters and we will negotiate, may not be indicative of the price at which
our Common Stock will trade after this offering. See "Underwriting" for the
factors those representatives and we will consider in determining the initial
public offering price. We have applied to have our Common Stock approved for
quotation on the Nasdaq National Market, but an active trading market for the
Common Stock may not develop or, if it develops, continue to exist.
13
<PAGE>
OUR STOCK PRICE MAY BE VOLATILE AFTER THIS OFFERING
The market price of our Common Stock after this offering may fluctuate
significantly in response to numerous factors, including:
o variations in our annual or quarterly financial results or those of
our competitors or consolidators having growth strategies similar
to ours in other industries;
o changes by securities analysts in their estimates of our future
earnings;
o changing conditions in our industry or in the local and regional
economies in which we operate;
o unfavorable publicity or changes in laws or regulations which
adversely affect our industry or us; and
o price and volume volatility in the stock market generally or in the
"micro-cap" sector in which we will be grouped with other
companies having market capitalizations similar to ours.
SALES OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK MAY ADVERSELY AFFECT OUR STOCK
PRICE AND MAKE FUTURE OFFERINGS TO RAISE CAPITAL MORE DIFFICULT
When this offering closes, approximately 75.7% of the outstanding shares of
our Common Stock will be contractually restricted from resale until the first
anniversary of this offering. Subsequent sales of these shares or sales of
substantial amounts of other shares in the open market, or the perception that
those sales might occur, could materially adversely affect the price of our
Common Stock and make it more difficult for us to raise funds through future
offerings of Common Stock. See "Shares Eligible for Future Sale."
YOU WILL EXPERIENCE IMMEDIATE, SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK
VALUE OF THE SHARES YOU PURCHASE
Purchasers of our Common Stock in this offering (1) will experience
immediate, substantial dilution in the net tangible book value of their stock of
$7.33 per share and (2) may experience further dilution in that value from
issuances of our Common Stock in the future. See "Dilution."
WE MAY ISSUE PREFERRED STOCK WHOSE TERMS COULD ADVERSELY AFFECT THE RIGHTS OF
HOLDERS OF OUR COMMON STOCK
Our Certificate of Incorporation, as amended (our "Charter"), authorizes
us to issue, without the approval of our stockholders, one or more classes or
series of preferred stock having such preferences, powers and relative,
participating, optional and other rights (including preferences over our Common
Stock respecting dividends and distributions) as our Board of Directors may
determine. The terms of one or more classes or series of preferred stock could
adversely impact the rights of holders of our Common Stock. See "Description of
Capital Stock."
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<PAGE>
PROVISIONS IN OUR CORPORATE DOCUMENTS AND DELAWARE LAW COULD DELAY OR PREVENT A
CHANGE IN CONTROL OF OUR COMPANY, WHICH COULD ADVERSELY AFFECT OUR STOCK PRICE
The existence of some provisions in our corporate documents and Delaware
law could delay or prevent a change in control of our Company, which could
adversely affect the price of our Common Stock. Our Certificate of Incorporation
and Bylaws contain some provisions that may make acquiring control of our
Company difficult, including:
o provisions relating to the classification, nomination and removal
of our directors;
o provisions limiting the right to call special meetings of our Board
and our stockholders;
o provisions regulating the ability of our stockholders to bring
matters for action at annual meetings of our stockholders;
o a prohibition of action by our stockholders without a meeting by
less than their unanimous written consent; and
o the authorization of "blank check" preferred stock.
In addition, we have adopted a stockholder rights plan that would cause extreme
dilution to any person or group who attempts to acquire a significant interest
in our Company without advance approval of our Board of Directors, while the
Delaware General Corporation Law would impose some restrictions on mergers and
other business combinations between us and any holder of 15% or more of our
outstanding Common Stock. See "Description of Capital Stock."
15
<PAGE>
THE COMPANY
Recently formed, we intend to become a leading value-added provider of
ready-mixed concrete and related products and services to the construction
industry in major markets in the United States. Concurrently with and as a
condition to the closing of this offering, we will acquire six operating
businesses (the "Founding Companies"). They operate in the San Francisco, San
Jose, Oakland and Sacramento, California and Washington, D.C. metropolitan areas
and northern New Jersey markets and have been in business an average of 45
years. For the year ended December 31, 1998, they generated pro forma combined
sales, income from operations and net income of $194.1 million, $17.0 million
and $9.3 million, respectively.
THE FOUNDING COMPANIES
CENTRAL. Central Concrete Supply Co., Inc. ("Central") was founded in
1948 and is headquartered in San Jose, California. It owns six ready-mixed
concrete plants, of which five are operating, in San Jose and elsewhere in the
San Francisco Bay Area and has a fleet of 94 mixer trucks. Central also sells
concrete-related building materials and tools to concrete contractors. Central
recently supplied ready-mixed concrete for the following projects, among others,
in the San Francisco Bay Area: a new facility for Cisco Systems; a new facility
for Adobe Systems; a new facility for Silicon Graphics and the new Interstate
Highway 24/680 interchange. Its sales totaled approximately $66.5 million during
1998.
WALKER'S. Walker's Concrete, Inc. ("Walker's") was founded in 1949 and
is headquartered in Hayward, California. It operates five ready-mixed concrete
plants in Oakland, San Jose and elsewhere in the San Francisco Bay Area and has
a fleet of 91 mixer trucks. Walker's has recently supplied ready-mixed concrete
for the following projects, among others: a new complex for Sun Microsystems; a
highway interchange in Oakland; two single-family home developments in San Jose;
and four new multi-family apartment complexes in San Jose and Oakland. Its sales
totaled approximately $41.6 million during 1998.
BAY CITIES. Bay Cities Building Materials Co., Inc. ("Bay Cities") was
founded in 1957 and is headquartered in South San Francisco, California. It
operates 10 ready-mixed concrete plants, including three portable plants, in
South San Francisco and the Sacramento, California metropolitan area and has a
fleet of 112 mixer trucks. Bay Cities recently supplied ready-mixed concrete for
the following projects, among others: various renovation and expansion projects
at the San Francisco Airport; addition and extension projects at the Moscone
Center in San Francisco; various sewer improvement projects for the City of San
Francisco; a terminal project at the Sacramento International Airport; and a
large parking garage and the Natomas Marketplace in Sacramento. Its sales
totaled approximately $53.6 million during 1998.
OPPORTUNITY. Opportunity Concrete Corporation ("Opportunity") was
founded in 1975 and is headquartered in Washington, D.C. It operates one
ready-mixed concrete plant in the District of Columbia and has a fleet of 35
mixer trucks. Opportunity has recently supplied concrete for the following local
projects, among others: the Federal Triangle; reconstruction of the 14th Street
Bridge; Market Square; the MCI Arena; the Hyattsville Justice Center; Ronald
Reagan Airport and assorted Metro lines and stations. Its sales totaled
approximately $16.2 million during 1998.
BAER. Baer Concrete, Incorporated ("Baer") was founded in 1946 and is
headquartered in Roseland, New Jersey. It operates five ready-mixed concrete
plants in northern New Jersey and has a fleet of 45 mixer trucks. Baer has
recently supplied ready-mixed concrete for the following projects in northern
New Jersey, among others: Yogi Berra Stadium and Floyd Hall Arena at Montclair
State University; the Bergen County Jail; a new Academic Support Building at
Seton Hall University; and the New Jersey Shakespeare Theatre at Drew
University. Its sales totaled approximately $12.0 million during 1998.
SANTA ROSA. R.G. Evans/Associates d/b/a/ Santa Rosa Cast Products Co.
("Santa Rosa") was founded in 1958 and is headquartered in Santa Rosa,
California, near Sacramento. It manufactures precast concrete products and
produces over 200 standard products, specialty precast structures and related
accessories. Its customers are generally located within a 250-mile radius of
Santa Rosa and include public works departments, cities, water districts,
general contractors and paving, plumbing, underground and other specialty
contractors. Its sales totaled approximately $4.2 million during 1998.
16
<PAGE>
SUMMARY OF TERMS OF THE ACQUISITIONS
The aggregate consideration we will pay to acquire the Founding Companies,
excluding the post-closing adjustments we describe below, consists of (1)
approximately $23.3 million in cash and (2) 8,985,288 shares of our Common
Stock. We will also assume all the indebtedness of the Founding Companies (which
totaled approximately $19.2 million as of December 31, 1998 on a pro forma
basis), which we will repay with a portion of our net proceeds from this
offering (approximately $3.7 million) or refinance with our initial borrowings
under our credit facility. For information relating to the consideration we will
pay for each Founding Company, see "Certain Transactions -- Organization of the
Company."
Changes in the working capital (defined as current assets minus total
liabilities) of the Founding Companies from December 31, 1998 to the date this
offering closes may result in upward or downward adjustments to the purchase
prices we pay for them. If any of four of the Founding Companies has working
capital when this offering closes which (1) exceeds a specified minimum and (2)
includes cash and cash equivalents that also exceed a specified minimum, we will
pay the former owners of that Founding Company, as additional purchase price,
cash in the amount equal to the lesser of that excess in cash or cash
equivalents or a specified amount. The maximum increase in the cash purchase
price we will pay for all the Founding Companies is approximately $9.8 million.
We intend to effect the adjustments approximately 90 days after this offering
closes.
Three Founding Companies are S Corporations. Before this offering closes,
they will make distributions in the form of cash, other assets or short-term
notes to their owners in amounts equal to the balances of their retained
earnings on which those owners have paid or will pay income taxes, including
1999 earnings. At December 31, 1998 these distributions would have totaled
approximately $11.9 million. Also before this offering closes, one Founding
Company will distribute to its owners life insurance policies and other assets
having an aggregate book value of approximately $1.1. million.
We negotiated the purchase price we will pay for each Founding Company
through arm's-length negotiations between one or more owners or representatives
of that Founding Company and us. We used the same general valuation methodology
to determine the purchase price we were willing to pay for each Founding
Company.
The closing of each Acquisition is subject to customary conditions,
including, among others: (1) the continuing accuracy of the representations and
warranties made by the applicable Founding Company, its stockholders and us; (2)
the performance of each of their respective covenants in their acquisition
agreement; and (3) the absence of any legal action or proceeding reasonably
likely to result in a material adverse change in the business, results of
operations or financial condition of the Founding Company prior to the closing
date.
Any Founding Company's acquisition agreement may be terminated under
certain circumstances prior to closing, including: (1) by the mutual consent of
the owner or owners of that Founding Company and us; or (2) if a material breach
or default under the agreement by one party occurs and is not waived.
17
<PAGE>
USE OF PROCEEDS
We estimate the proceeds we will receive from this offering, net of the
underwriting discount and $3.0 million of estimated offering expenses we have
paid or will pay (including approximately $2.5 million of offering expenses we
expect to pay with advances from Main Street and which we will repay out of the
gross proceeds of this offering), will be approximately $27.0 million
(approximately $31.5 million if the Underwriters exercise their over-allotment
option in full), assuming an initial public offering price of $8.50 per share.
When this offering closes, we will use $23.3 million of these net proceeds to
pay the aggregate cash portion of the purchase prices for our initial
acquisitions which then will be due and apply the balance to repay a portion of
the indebtedness we will assume as a result of those acquisitions (which totaled
approximately $19.2 million at December 31, 1998 on a pro forma basis). See
"Certain Transactions -- Organization of the Company."
We will refinance the assumed indebtedness we do not repay with proceeds of
this offering with our initial borrowings under a new credit facility we intend
to have in place when this offering closes. On the basis of our recent
negotiations with lenders that we expect will provide us with this facility, we
expect this facility will allow us to borrow up to $75 million for use in
connection with acquisitions, working capital and other general corporate
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Combined."
The owners of the businesses we acquire when this offering closes have
guaranteed some of the indebtedness we will assume and repay or refinance. Some
of those businesses owe some of that indebtedness to their owners. The assumed
indebtedness bears interest at rates ranging from 4.73% to 10.6%. That
indebtedness would otherwise mature at various dates through January 2005.
If the working capitals (as defined) of four of our initial acquired
businesses on the date this offering closes meet specified levels, we may have
to increase the cash portion of the purchase prices for those businesses by up
to a total of approximately $9.8 million, which we would pay approximately 90
days after this offering closes with cash on hand or a borrowing under our
credit facility. See "Certain Transactions -- Organization of the Company."
DIVIDEND POLICY
We currently intend to retain all our earnings to finance the growth,
development and expansion of our business and do not anticipate paying any cash
dividends on our Common Stock in the foreseeable future. Any future dividends
will be at the discretion of our Board of Directors after taking into account
various factors, including our financial condition and performance, cash needs
and expansion plans, income tax consequences and the restrictions Delaware and
other applicable laws and our credit arrangements then impose. In addition, we
expect the terms of our credit facility will prohibit the payment of cash
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Combined."
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<PAGE>
CAPITALIZATION
The following table sets forth our short-term debt and current maturities
of long-term obligations and capitalization as of December 31, 1998: (1) on a
pro forma combined basis after giving effect to our initial acquisitions and our
net incurrence of indebtedness since December 31, 1998; and (2) on that pro
forma basis, as adjusted to give effect to this offering and our application of
our estimated net proceeds therefrom. See "Use of Proceeds" and the Unaudited
Pro Forma Combined Financial Statements and the notes thereto this prospectus
includes.
DECEMBER 31, 1998
-----------------------------
PRO FORMA
COMBINED(1) AS ADJUSTED
------------- ------------
(IN THOUSANDS)
Payable to founders(2)............... $ 23,312 $ --
============= ============
New credit facility.................. 19,153 15,426
Stockholders' equity:
Preferred Stock: $.001 par
value, 5,000,000 shares,
authorized; no shares issued
and outstanding...............
Common Stock: $.001 par value,
40,000,000 shares authorized;
11,838,543 shares issued and
outstanding, pro forma; and
15,638,543 shares issued and
outstanding, as adjusted(3)... 114 152
Additional paid-in capital........... 64,588 91,234
Retained earnings.................... -- --
------------- ------------
Total stockholders' equity...... 64,702 91,386
------------- ------------
Total capitalization....... $ 83,855 $106,812
============= ============
- - ------------
(1) Combines the respective accounts of USC and the Founding Companies as
reflected in the Pro Forma Combined Balance Sheet as of December 31, 1998.
(2) The pro forma combined amount includes the $23.3 million cash portion of the
purchase price. We may pay a maximum amount of $9.8 million to the owners of
four Founding Companies as additional cash consideration pursuant to
post-closing adjustment provisions in our acquisition agreements. The
additional cash consideration is subject to decrease, if cash balances or
working capital (as defined) in the applicable Founding Companies do not
meet specified levels.
(3) Excludes (1) options to purchase an aggregate of 1,150,000 shares which we
expect to grant on consummation of this offering and (2) warrants for
200,000 shares which we will issue to the representatives of the
underwriters for this offering for services they will render through the
date this offering closes. See "Management," "Certain Transactions" and
"Underwriting."
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<PAGE>
DILUTION
Our pro forma combined net tangible book deficit as of December 31, 1998
was approximately $8.3 million or approximately $0.70 per share, after giving
effect to our initial acquisitions and our net incurrence of indebtedness since
December 31, 1998. This deficit per share represents the amount by which our pro
forma combined total liabilities exceed our pro forma combined tangible assets
as of December 31, 1998, divided by the number of shares of Common Stock to be
outstanding after giving effect to the acquisitions. After giving effect to the
closing of this offering, the estimated underwriting discount and our estimated
offering expenses, our pro forma combined net tangible book value as of December
31, 1998 would have been approximately $18.3 million or approximately $1.17 per
share of Common Stock, based on an assumed initial public offering price of
$8.50 per share. This represents an immediate increase in pro forma net tangible
book value of approximately $1.87 per share to existing stockholders and an
immediate dilution of approximately $7.33 per share to new investors purchasing
shares in this offering. The following table illustrates this pro forma
dilution:
Assumed initial public offering price
per share............................ $ 8.50
Pro forma net tangible book
deficit per share before this
offering....................... $ (0.70)
Increase in pro forma net
tangible book value per share
attributable to new
investors...................... 1.87
---------
Pro forma net tangible book value per
share after this offering............ 1.17
---------
Dilution per share to new
investors............................ $ 7.33
=========
The following table sets forth, on a pro forma basis to give effect to the
acquisitions and the closing of this offering and our application of our
estimated net proceeds therefrom as of December 31, 1998, the number of shares
of Common Stock we have sold, the total consideration we have been paid and the
average price per share we have been paid by existing stockholders (including
persons who will acquire Common Stock in the acquisitions) and new investors
purchasing shares from us in this offering (before deducting the underwriting
discount and our estimated offering expenses):
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION(1) AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 11,838,543 75.7% $(8,345,000) (34.8)% $ (0.70)
New investors........................ 3,800,000 24.3% 32,300,000 134.8% 8.50
---------- ------- ----------- -------
Total........................... 15,638,543 100.0% $23,955,000 100.0%
========== ======= =========== =======
</TABLE>
- - ------------
(1) Total consideration paid by existing stockholders represents our pro forma
stockholders' equity less pro forma goodwill before giving effect to the
post-merger adjustments set forth in our Unaudited Pro Forma Combined
Balance Sheet this prospectus includes.
20
<PAGE>
SELECTED FINANCIAL INFORMATION
We will acquire the Founding Companies simultaneously with and as a
condition to the consummation of this offering. For financial statement
presentation purposes, however, Central Concrete Supply Co., Inc. ("Central"),
one of the Founding Companies, is the "accounting acquirer." The following
selected historical financial information for Central as of December 31, 1997
and 1998, and for the years ended December 31, 1996, 1997 and 1998, has been
derived from the audited financial statements of Central this prospectus
includes. The following selected historical financial information for Central as
of April 30, 1995 and 1996 and December 31, 1996, and for the years ended April
30, 1995 and 1996, has been derived from Central's unaudited financial
statements, which have been prepared on the same basis as the audited financial
statements and reflect all adjustments consisting of normal recurring
adjustments, necessary for a fair presentation of that information. See the
Unaudited Pro Forma Combined Financial Statements and the Notes thereto and the
historical financial statements of USC and certain of the Founding Companies and
the notes thereto elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 YEAR ENDED DECEMBER 31
-------------------- -------------------------------
1995 1996 1996 1997 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS INFORMATION FOR
THE ACCOUNTING ACQUIRER:
Sales.............................. $ 25,570 $ 37,781 $ 39,204 $ 53,631 $ 66,499
Cost of goods sold................. 23,170 32,040 33,402 43,794 53,974
--------- --------- --------- --------- ---------
Gross profit....................... 2,400 5,741 5,802 9,837 12,525
Selling, general and administrative
expenses......................... 1,700 2,955 3,644 4,265 4,712
Depreciation....................... 474 586 1,203 1,330 930
--------- --------- --------- --------- ---------
Income from operations............. 226 2,200 955 4,242 6,883
Other income (expense), net........ 371 (73) (188) (200) (129)
--------- --------- --------- --------- ---------
Income before provision for income
taxes............................ 597 2,127 767 4,042 6,754
Provision (benefit) for income
taxes............................ 101 937 303 (457) 100
--------- --------- --------- --------- ---------
Net income......................... $ 496 $ 1,190 $ 464 $ 4,499 $ 6,654
========= ========= ========= ========= =========
</TABLE>
PRO FORMA
YEAR ENDED
DECEMBER 31, 1998
----------------------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE
DATA)
COMBINED STATEMENT OF OPERATIONS
INFORMATION(1):
Sales.............................. $ 194,076
Cost of goods sold................. 158,913
----------------------
Gross profit....................... 35,163
Selling, general and administrative
expenses(2)....................... 13,320
Depreciation and goodwill
amortization(3)................... 4,832
----------------------
Income from operations............. 17,011
Other income, net(4)............... (103)
----------------------
Income before provision for income
taxes............................. 16,908
Provision for income taxes(5)...... 7,606
----------------------
Net income......................... $ 9,302
======================
Net income per share............... $ 0.59
======================
Shares used in computing pro forma
net income per share(6)........... 15,638,543
======================
OTHER INFORMATION:
EBITDA(7).......................... $ 21,843
======================
21
<PAGE>
<TABLE>
<CAPTION>
CENTRAL
-----------------------------------------------------
DECEMBER 31, 1998
APRIL 30 DECEMBER 31 -------------------------
-------------------- ------------------------------- PRO FORMA AS
1995 1996 1996 1997 1998 COMBINED(1) ADJUSTED(8)
--------- --------- --------- --------- --------- ----------- -----------
(IN THOUSANDS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital (deficit)(9).......... $ (10) $ 1,074 $ 1,363 $ 4,899 $ 7,431 $ (15,961) $ 7,351
Total assets.......................... 7,789 9,683 13,603 19,837 26,640 132,519 132,164
Long-term debt, including current
maturities(9)...................... 1,465 2,091 1,730 2,660 3,530 42,465 15,426
Total stockholders' equity............ 1,967 3,158 7,599 10,731 15,154 64,702 91,386
</TABLE>
- - ------------
(1) The statement of operations information assumes that we completed the
following transactions and events on January 1, 1998: (1) the closing of
this offering and the application of our estimated net proceeds therefrom;
(2) the acquisitions and related $15.4 million of net borrowings under our
credit facility to pay the maximum aggregate cash consideration for the
acquisitions (assuming we pay the maximum total post-closing adjustments of
$9.8 million); (3) our refinancing of indebtedness of the Founding Companies
with borrowings under our new credit facility; (4) our issuances of 450,000
shares of Common Stock to members of our management and non-employee
directors and 801,000 shares of Common Stock to American Ready-Mix, L.L.C.
and (5) a split of the outstanding Common Stock. This information is not
necessarily indicative of the consolidated results we would have attained
had these events and transactions actually occurred then or of our future
consolidated results. The pro forma balance sheet information assumes those
transactions and events (other than the closing of this offering and our
application of the net proceeds therefrom) and the Company's net incurrence
of indebtedness since December 31, 1998 occurred on that date. The pro forma
combined financial information (1) is based on preliminary estimates,
available information and assumptions we deem appropriate and (2) should be
read in conjunction with the financial statements and notes thereto this
prospectus includes.
(2) The statement of operations information includes the effects of: (1) $3.5
million of reductions in compensation and benefits to which owners of the
Founding Companies have prospectively agreed; and (2) the elimination of a
$2.7 million non-cash, non-recurring compensation charge by USC for the year
ended December 31, 1998 (net of a $330,000 change for recurring salaries of
management).
(3) Reflects amortization of the goodwill that will result from the acquisitions
over a 40-year period and computed on the basis the notes to the Unaudited
Pro Forma Combined Financial Statements describe.
(4) Reflects the increase in interest expense of $0.2 million for 1998
attributable to our refinancing of $14.1 million of historical debt of the
Founding Companies and additional borrowings to fund our acquisitions with
borrowings under our new credit facility.
(5) Assumes all pretax income before non-deductible goodwill and other permanent
items is subject to an estimated 40.6% combined tax rate.
(6) Includes (1) 8,985,288 shares of Common Stock we will issue to the owners of
the Founding Companies, (2) 2,853,255 shares of Common Stock our current
stockholders and executive officers own and (3) the 3,800,000 shares of
Common Stock we will sell in this offering.
(7) "EBITDA" means income from operations plus depreciation and amortization
and is a supplemental financial measurement we use to evaluate our business.
We are not presenting EBITDA as an alternative measure of operating results
or cash flow from operations or any other measure of performance in
accordance with generally accepted accounting principles. EBITDA does not
give effect to cash used for debt service requirements and thus does not
reflect funds available for dividends, reinvestment or other discretionary
uses. In addition, our presentation of EBITDA may not be comparable to
similarly titled measures other companies report.
(8) Reflects the closing of this offering and our application of our net
proceeds therefrom. See "Use of Proceeds."
(9) The pro forma combined amount includes $23.3 million in cash plus $9.8
million, which represents the maximum additional cash consideration payable
pursuant to post-closing adjustment provisions in the acquisition
agreements. The additional cash consideration is subject to decrease, but
not increase, if cash balances or working capital in the applicable Founding
Companies decline from their December 31, 1998 levels.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND RELATED NOTES THIS PROSPECTUS INCLUDES.
OVERVIEW
We expect that we will derive substantially all our sales from our
operations as a supplier of ready-mixed concrete, other concrete products and
related construction materials to the construction industry in the United
States. We will serve all segments of the construction industry, and our
customers will include contractors for commercial, industrial, residential and
public works and infrastructure construction. We typically will sell ready-mixed
concrete pursuant to daily purchase orders that require us to formulate, prepare
and deliver ready-mixed concrete to the job sites of our customers. We generally
will recognize our sales from these orders when we deliver the ordered products.
Our cost of goods sold will consist principally of the costs we will incur
in obtaining the cement, aggregates and admixtures we will combine to produce
ready-mixed concrete and other concrete products in various formulations. We
will obtain all these materials from third parties and generally will have only
one day's supply at each of our concrete plants. Our cost of goods sold also
will include labor costs and the operating, maintenance and rental expenses we
will incur in operating our concrete plants and mixer trucks and other vehicles.
Our selling expenses will include the salary and incentive compensation we
will pay our sales force, the salaries and incentive compensation of our sales
managers and travel, entertainment and other promotional expenses. Our general
and administrative expenses will include the salaries and benefits we pay to our
executive officers, the senior managers of our local and regional operations,
plant managers and administrative staff, as well as office rent and utilities,
communications expenses and professional fees.
Our pro forma combined statement of operations includes pro forma
adjustments to our selling, general and administrative expenses to reflect the
reductions in salaries, bonuses and benefits (the "Compensation Differential")
to which owners of the businesses we initially will acquire have agreed
prospectively will take effect when we acquire them. For 1998, the Compensation
Differential totaled approximately $3.5 million. Our pro forma combined
statement of operations also reflects the substantial increase in income tax
expense which will result from the conversion of three of those businesses from
S corporations into C corporations. For 1998, that pro forma increase was
approximately $3.6 million.
We expect that our integration of the businesses we will acquire will
present opportunities to realize cost savings through the elimination of
duplicative functions and the development of economies of scale. We believe that
we should be able to (1) obtain greater discounts from suppliers, (2) borrow at
lower interest rates, (3) consolidate insurance programs and (4) generate
savings in other general and administrative areas. We cannot currently quantify
these savings and expect that various incremental costs we expect to incur will
partially offset them. These incremental costs include those associated with our
corporate management and administration, our being a public company and our
systems integration, upgrading and replacement. Our pro forma combined statement
of operations reflects neither the cost savings nor the incremental costs we
expect, but cannot quantify.
In connection with our sales of our common stock in 1998, we have recorded
a non-cash, non-recurring compensation charge of $2.7 million in 1998 which
represents the difference between the amounts we were paid for those shares and
the fair value of those shares on their dates of sale. Our pro forma combined
financial statements do not reflect these charges. In the quarter ended March
31, 1999, we will record a non-cash, non-recurring compensation expense (which
we presently estimate will be approximately $0.8 million) as a result of our
sales of 100,000 shares of our common stock during that quarter to management
and non-employee directors at a nominal price.
The pro forma combined financial information this prospectus contains
covers periods during which the businesses we initially will acquire had
different tax structures (S corporations and C corporations) and
23
<PAGE>
operated independently of each other as private, owner-operated companies. This
information reflects the purchase method of accounting we will use to account
for these acquisitions and presents Central as the "accounting acquirer."
FACTORS THAT MAY AFFECT OUR FUTURE OPERATING RESULTS -- COMBINED
Reflecting the levels of construction activity, the demand for ready-mixed
concrete is highly seasonal. We believe that this demand may be as much as three
times greater in a prime summer month than in a slow winter month and that the
six-month period of May through October is the peak demand period. Consequently,
we expect that our sales generally will be materially lower in the first and
fourth calender quarters. Because we incur fixed costs throughout the year
(consisting principally of wages, rent, depreciation and other selling, general
and administrative expenses), we expect our gross profit margins will be
disproportionately lower than our sales in these quarters. Even during
traditional peak periods, sustained periods of inclement weather and other
extreme weather conditions can slow or delay construction and thus slow or delay
our sales.
You should not rely on (1) quarterly comparisons of our revenues and
operating results as indicators of our future performance or (2) the results of
any quarterly period during a year as an indicator of results you may expect for
that entire year.
Demand for ready-mixed concrete and other concrete products depends on the
level of activity in the construction industry. That industry is cyclical in
nature, and the general condition of the economy and a variety of other factors
beyond our control affect its level of activity. These factors include, among
others, the availability of funds for public or infrastructure construction,
commercial and residential vacancy levels, changes in interest rates, the
availability of short- and long-term financing, inflation, consumer spending
habits and employment levels. The construction industry can exhibit substantial
variations in activity across the country as a result of these factors impacting
regional and local economies differently.
Markets for ready-mixed concrete generally are local. Because our
operations will be initially geographically concentrated in four markets, our
results of operations will be initially susceptible to any swings in the level
of construction activity which may occur in those markets.
Ready-mixed concrete is highly price-sensitive. We expect our prices often
will be subject to changes in response to relatively minor fluctuations in
supply and demand, general economic conditions and market conditions, all of
which will be beyond our control. Because of the fixed-cost nature of our
business, our overall profitability will be sensitive to minor variations in
sales volumes and small shifts in the balance between supply and demand.
Competitive conditions in our industry also may affect our future operating
results. See "Business -- Competition."
If we acquire additional businesses in the future and account for those
acquisitions in accordance with the purchase method of accounting, we will
include the operating results of those businesses in our consolidated operating
results from their respective acquisition dates and begin amortizing any
purchase goodwill resulting from those acquisitions on those same dates.
Consequently, the magnitude and timing of our future acquisitions will affect
our operating results.
SELECTED OPERATING INFORMATION -- COMBINED
The following table sets forth selected combined statement of operations
information of the Founding Companies on a historical basis and as a percentage
of total sales for the periods indicated with the exception of Baer, whose
fiscal 1996 is its fiscal year ended March 31, 1997. This information is only a
summation of the sales, cost of goods sold and gross profit of the individual
Founding Companies and does not represent a presentation of that historical
information in accordance with generally accepted accounting principles. The
Founding Companies were not under common control or management during the
periods
24
<PAGE>
presented, and this information may not be indicative of our consolidated sales,
cost of goods sold or gross profit after this offering closes.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------------
1996 1997 1998
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales................................ $ 128,288 100.0% $ 165,372 100.0% $ 194,076 100.0%
Cost of goods sold................... 109,011 85.0% 138,077 83.5% 158,913 81.9%
---------- ---------- ----------
Gross profit......................... 19,277 15.0% 27,295 16.5% 35,163 18.1%
---------- ---------- ----------
</TABLE>
SALES. Combined sales increased by $28.7 million in 1998 and $37.1 million
in 1997, or 17.4% and 28.9%, respectively, as a result of both price and volume
increases. In both years, volumes were higher because of increased construction
activity in the San Francisco Bay area. The price increases in both years
primarily reflected higher cement prices and other cost increases.
GROSS PROFIT. Combined gross profit increased by $7.9 million in 1998 and
$8.0 million in 1997, or 28.8% and 41.6%, respectively. The combined gross
profit margin increased from 15.0% in 1996 to 16.5% in 1997 and to 18.1% in
1998. The increase in gross profit resulted principally from increased sales and
was a function of higher revenues and the strong marginal contribution due to
the fixed cost nature of the ready-mixed concrete business. The improvement in
the gross profit margin was attributable to sales price increases in excess of
cement and other cost increases.
LIQUIDITY AND CAPITAL RESOURCES -- COMBINED
This offering will not provide us with any funds for use in implementing
our business strategies beyond making our initial acquisitions. When this
offering closes, we will use our net proceeds therefrom to pay the cash portion
of the purchase prices for our initial acquisitions which then will be due
($23.3 million) and apply the balance (approximately $3.7 million) to repay a
portion of the indebtedness we will assume as a result of those acquisitions
(which indebtedness totaled approximately $19.2 million as of December 31, 1998
on a pro forma basis). We have initiated discussions with several financial
institutions to establish the terms of a new credit facility. On the basis of
our discussions with the potential lenders, we anticipate this facility will
provide for revolving credit borrowings of up to $75 million. When this offering
closes, we will use borrowings under this facility to repay the remaining
indebtedness we will assume as a result of our initial acquisitions.
We expect our credit facility will require the consent of our lenders for
acquisitions above a specified size, restrict our ability to incur additional
indebtedness and make capital expenditures and require us to comply with various
financial tests. We also expect this facility will prohibit our payment of cash
dividends. These provisions could materially restrict our ability to effect
acquisitions. Our ability to obtain the credit facility is subject to further
negotiation with the potential lenders and the preparation and execution of
appropriate documentation.
After giving effect to our application of our proceeds from this offering
and funds we will borrow under our credit facility when this offering closes,
our pro forma combined working capital would have totaled approximately $7.4
million at December 31, 1998. Except as we discuss below, we anticipate that our
consolidated cash flow from our operations will exceed our normal working
capital needs, debt service requirements and the amount of our planned capital
expenditures for at least the next 12 months. We currently estimate that
purchases of new mixer trucks and other capital expenditures during 1999 will
total approximately $4.5 million During 1998, our pro forma combined purchases
of property, plant and equipment, net of disposed items, totaled approximately
$8.7 million.
Three of the businesses we initially will purchase are S corporations.
Before this offering closes, they will make distributions in the form of cash,
other assets or short-term notes to their owners in amounts equal to the
balances of their retained earnings on which those owners have paid or will pay
income taxes, including 1999 earnings. At December 31, 1998, these distributions
would have totaled approximately $11.9 million.
25
<PAGE>
Approximately 90 days after this offering closes, we will adjust the
purchase prices for our initial acquisitions to take into account changes in
working capital from December 31, 1998 to the date this offering closes. If any
of four businesses we then acquire has working capital that (1) exceeds a
specified minimum and (2) includes cash and cash equivalents that also exceed a
specified minimum, we will pay its former owners additional cash consideration
in an amount equal to the lesser of the amount of that excess in cash and cash
equivalents or a specified amount. At December 31, 1998, we would have paid
approximately $9.8 million as additional cash consideration to the owners of
these four businesses on a pro forma basis, and that amount is the maximum
amount we actually could be required to pay. As a result of (1) the S
corporation distributions, (2) these post-closing payments, if any, and (3) the
interest we will pay on borrowings under our credit facility, we may be required
to borrow substantial amounts under our credit facility to finance our cash
needs on a temporary basis.
Our growth strategy will require substantial capital. We currently intend
to finance future acquisitions with future internally generated cash flow and
through issuances of our Common Stock or debt securities, including convertible
debt securities, and borrowings under our credit facility. Using internally
generated cash or debt to complete acquisitions could substantially limit our
operational and financial flexibility. The extent to which we will be able or
willing to use our Common Stock to make acquisitions will depend on its market
value from time to time and the willingness of potential sellers to accept it as
full or partial payment. Using our Common Stock for this purpose may result in
significant dilution to our then existing stockholders. To the extent we are
unable to use our Common Stock to make future acquisitions, our ability to grow
will be limited by the extent to which we are able to raise capital for this
purpose, as well as to expand existing operations, through debt or additional
equity financings. If we are unable to obtain additional capital on acceptable
terms, we may be required to reduce the scope of our presently anticipated
expansion, which could materially adversely affect our business and the value of
our Common Stock.
We cannot accurately predict the timing, size and success of our
acquisition efforts or our associated potential capital commitments.
YEAR 2000 COMPLIANCE -- COMBINED
Many software applications, computer hardware and related equipment and
systems that use embedded technology (such as microprocessors) rely on two-digit
codes to reflect the last two digits of a year in performing computations and
decision-making functions. These programs, hardware items and systems may fail
beginning on January 1, 2000, because of their inability to interpret
information codes properly (for example, misinterpreting "00" as the year 1900
rather than 2000). This in turn could have an adverse effect on us because of
our direct dependence on our own applications, equipment and systems and our
indirect dependence on those of third parties.
We have reviewed the software, computer hardware and embedded technology
systems that are material to the operations of the businesses we initially will
acquire and have concluded either that those items will function properly in the
Year 2000 and beyond or that we can modify or replace them in the current year
without any material expense or disruption of operations. Accordingly, we do not
expect our costs relating to Year 2000 remediation will be material to our
financial condition or results of operations.
A complete assessment of the Year 2000 issue will involve, among other
things, efforts to obtain representations and assurances from third parties,
including third-party vendors, that their hardware, embedded technology systems
and software we will use or which will impact us are or will be modified to be
Year 2000 compliant. We have yet to begin our evaluation of the Year 2000
compliance of any third parties. As a result, we cannot predict the potential
consequences if third parties are not or do not timely become Year 2000
compliant.
Because we plan to address any significant Year 2000 issues before they
affect us, we have not developed a comprehensive contingency plan. If we
identify significant risks related to Year 2000 compliance or our progress
deviates from our anticipated program, we will develop contingency plans as
necessary. We do not anticipate any material adverse effect from Year 2000
failures, but we have no guarantee of total compliance. Factors that give rise
to uncertainty include our possible failure to identify all
26
<PAGE>
susceptible systems, non-compliance by third parties whose systems and
operations impact us and a possible loss of technical resources to perform the
work. Year 2000 noncompliance could result in a material disruption of our
operations, an interruption in our ability to collect amounts due from
customers, loss of accurate accounting records and various of other
difficulties. Depending on the length of noncompliance and system failure, any
of these situations could have a material adverse impact on our financial
condition and results of operations.
INFLATION -- COMBINED
As a result of the relatively low levels of inflation in the last three
years, inflation did not have a significant effect on the results of operations
in those periods of any of the businesses we initially will acquire.
RESULTS OF OPERATIONS -- CENTRAL
Central owns six ready-mixed concrete batch plants in San Jose and
elsewhere in the San Francisco Bay area. It also sells concrete-related building
materials and tools through its Westside division.
Central was a C corporation until May 1, 1997, when it converted to an S
corporation. As an S corporation, Central is not subject to federal income
taxes, and its stockholders report their respective portions of Central's
taxable earnings or losses in their personal tax returns. In California, S
corporations are subject to taxation at the rate of 1.5%. Central will terminate
its S corporation status when we acquire it.
The following table sets forth selected statement of operations information
of Central as a percentage of sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------
1996 1997 1998
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales................................ $ 39,204 100.0% $ 53,631 100.0% $ 66,499 100.0%
Cost of goods sold................... 33,402 85.2% 43,794 81.7% 53,974 81.2%
--------- --------- --------- --------- --------- ---------
Gross profit.................... 5,802 14.8% 9,837 18.3% 12,525 18.8%
Selling, general and administrative
expenses........................... 3,644 9.3% 4,265 8.0% 4,712 7.1%
Depreciation......................... 1,203 3.1% 1,330 2.5% 930 1.4%
--------- --------- --------- --------- --------- ---------
Income from operations............... $ 955 2.4% $ 4,242 7.9% $ 6,833 10.3%
========= ========= ========= ========= ========= =========
</TABLE>
27
<PAGE>
Central has two reportable business segments - - its ready-mixed concrete
operations and its Westside building materials and tools division. Segment
information for Central as a percentage of sales is as follows for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------
1996 1997 1998
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales
Ready-Mixed..................... $ 33,112 $ 46,077 $ 57,339
Westside........................ 6,135 8,255 9,162
Other*.......................... (43) (701) (2)
--------- --------- ---------
Total sales................ 39,204 53,631 66,499
========= ========= =========
Cost of goods sold
Ready-Mixed..................... 26,933 81.3% 36,301 78.8% 46,465 81.0%
Westside........................ 5,064 82.5% 6,261 75.8% 7,049 76.9%
Other*.......................... 1,415 N/A 1,232 N/A 460 N/A
--------- --------- --------- --------- --------- ---------
Total cost of goods sold... 33,402 85.2% 43,794 81.7% 53,974 81.2%
========= ========= ========= ========= ========= =========
Gross profit
Ready-Mixed..................... 6,189 18.7% 9,776 21.2% 10,874 19.0%
Westside........................ 1,071 17.5% 1,994 24.2% 2,113 23.1%
Other*.......................... (1,458) N/A (1,933) N/A (462) N/A
--------- --------- --------- --------- --------- ---------
Total gross profit......... $ 5,802 14.8% $ 9,837 18.3% $ 12,525 18.8%
========= ========= ========= ========= ========= =========
</TABLE>
- - ------------
* Consists of unallocated administrative items.
1998 COMPARED TO 1997
SALES. Sales increased $12.9 million, or 24.1%, from $53.6 million for
1997 to $66.5 million for 1998, primarily as a result of the strong construction
activity in the Silicon Valley region. Central's long operating history and
strong vendor relationships enable Central to offer competitive pricing. Both
increases in the size of Central's customer base and that base's increased
market share in the San Francisco Bay Area contributed to Central's increase in
sales. Sales for the Ready-Mixed segment increased $11.2 million, or 24.3%, from
$46.1 million for 1997 to $57.3 million for 1998, primarily as a result of
strong demand for commercial building construction. Sales for the Westside
segment increased $0.9 million, or 10.8%, from $8.3 million for 1997 to $9.2
million for 1998, primarily as a result of increased sales efforts. Expanded
product lines for both building materials and equipment also contributed to the
increase in Westside sales.
GROSS PROFIT. Gross profit increased $2.7 million, or 27.6%, from $9.8
million for 1997 to $12.5 million for 1998. Gross margins increased to 18.8%
from 18.3% over these periods because increases in product prices more than
offset increases in union labor rates, additional technical personnel and
increases in costs of raw materials. Gross profit of the Ready-Mixed segment
increased $1.1 million, or 11.2%, from $9.8 million for 1997 to $10.9 million
for 1998. Gross margins decreased to 19.0% from 21.2% over these periods as a
result of cost increases for both raw materials and freight during 1998. Gross
profit of the Westside segment increased $0.1 million, or 5.0%, from $2.0
million for 1997 to $2.1 million for 1998. Gross margins decreased to 23.1% from
24.2% over these periods as a result of major cost increases for raw building
materials during 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.4 million, or 10.5%, from $4.3 million for
1997 to $4.7 million for 1998 as a result of the addition of administrative
infrastructure necessary to support Central's growth.
28
<PAGE>
1997 COMPARED TO 1996
SALES. Sales increased $14.4 million, or 36.7%, from $39.2 million for
1996 to $53.6 million for 1997, primarily because of increased construction
activity by high-tech companies that are expanding in the Silicon Valley region.
Both increases in the size of Central's customers base and that base's increased
market share in the San Francisco Bay Area contributed to Central's increase in
sales. Sales of the Ready-Mixed segment increased $13.0 million, or 39.3%, from
$33.1 million for 1996 to $46.1 million for 1997, as a result of strong
commercial building demand. Sales of the Westside segment increased $2.2
million, or 36.1%, from $6.1 million for 1996, to $8.3 million for 1997 as a
result of increased sales efforts. Westside sales also increased because of
expanded product lines in building materials and equipment sales.
GROSS PROFIT. Gross profit increased $4.0 million, or 69.0%, from $5.8
million for 1996, to $9.8 million for 1997, primarily because reductions in the
cost of materials more than offset increases in the number of union employees,
union labor rates and operating and maintenance expenses. Gross margins
increased from 14.8% to 18.3% for the same reason. Gross profit of the
Ready-Mixed segment increased $3.6 million, or 58.0%, from $6.2 million for 1996
to $9.8 million for 1997. Gross margins of the Ready-Mixed segment increased
from 18.7% to 21.2% over these periods. Gross profit of the Westside segment
increased $0.9 million from $1.1 million for 1996 to $2.0 million for 1997.
Gross margins of the Westside segment improved from 17.5% to gross margins of
24.2% over these periods as a result of increased sales efforts and expanded
product lines.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.7 million, or 19.4%, from $3.6 million for
1998 to $4.3 million for 1997, primarily because of an increase of $0.3 million
in expenses attributable to the hiring of additional personnel. As a percentage
of sales, these expenses decreased over the periods because of Central's sales
growth in 1997.
LIQUIDITY AND CAPITAL RESOURCES -- CENTRAL
Central's operations generated $6.9 million of net cash in 1998, an
increase of $4.6 million from 1997 as a result principally of increases in net
income ($2.2 million) and cash paid on receivables ($2.3 million). Central used
net cash in investing activities of approximately $3.4 million in 1998,
substantially all of which it spent for property, plant and equipment. In 1998,
Central used net cash of $1.2 million in its financing activities, principally
to repay debt and make distributions to its stockholders. At December 31, 1998,
Central had working capital of $7.4 million and total debt of $3.5 million.
Central expects to be able to fund its cash needs such as working capital
through cash it generates from its operations. It generally funds its purchases
of property, plant, and equipment with internally generated cash or debt.
Central maintains a $1.2 million line of credit with a bank. It did not draw on
this line in 1997 or 1998. This line of credit will remain in effect until
notification of termination from either party.
In the first quarter of 1999, Central distributed $1.1 million of property
and $0.6 million in cash to its stockholders.
OTHER -- CENTRAL
For information respecting factors causing seasonal and quarterly
fluctuations in Central's operating results, see "-- Factors That May Affect
Our Future Operating Results -- Combined."
RESULTS OF OPERATIONS -- WALKER'S
Walker's operates ready-mixed concrete plants in Oakland, Hayward and San
Jose, California.
29
<PAGE>
The following table sets forth selected statement of operations information
of Walker's as a percentage of sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------
1996 1997 1998
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales................................ $ 31,008 100.0% $ 37,990 100.0% $ 41,615 100.0%
Cost of goods sold................... 26,455 85.3% 31,798 83.7% 34,528 83.0%
--------- --------- --------- --------- --------- ---------
Gross profit.................... 4,553 14.7% 6,192 16.3% 7,087 17.0%
Selling, general and administrative
expenses........................... 2,155 6.9% 2,953 7.8% 3,022 7.3%
Depreciation......................... 767 2.5% 828 2.2% 896 2.1%
--------- --------- --------- --------- --------- ---------
Income from operations............... $ 1,631 5.3% $ 2,411 6.3% $ 3,169 7.6%
========= ========= ========= ========= ========= =========
</TABLE>
1998 COMPARED TO 1997
SALES. Sales increased $3.6 million, or 9.5%, for 1998, primarily as a
result of the strong construction activity in the Silicon Valley region and
increasing prices for concrete.
GROSS PROFIT. Gross profit increased $0.9 million, or 14.5%, for 1998
because sales price increases more than offset increases in cement prices and
other costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased slightly by $0.07 million, or 2.3%.
1997 COMPARED TO 1996
SALES. Sales increased $7.0 million, or 22.5%, for 1997, primarily as a
result of increased demand as a result of the strong construction activity in
the Silicon Valley region and increasing prices for concrete.
GROSS PROFIT. Gross profit increased $1.6 million, or 36.0%, for 1997.
Gross margins increased to 16.3% from 14.7% over these periods because sales
price increases more than offset increases in cement and other costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.8 million, or 37.0% due to increased
selling and administrative costs to support the growth of Walker's.
LIQUIDITY AND CAPITAL RESOURCES -- WALKER'S
Walker's operations generated $2.6 million of net cash in 1998, an increase
of $0.8 million from1997 as a result principally of increases in net income
($0.5) and cash paid on receivables ($0.07). Walker's used net cash in investing
activities of approximately $2.0 million in 1998, substantially all of which it
spent for property, plant and equipment. At December 31, 1998, Walker's had
working capital of $0.5 million and total debt of $4.4 million.
Walker's expects to be able to fund its cash needs such as working capital
through cash it generates from its operations. It generally funds its purchases
of property, plant and equipment with internally generated cash or debt.
Walker's maintains a $4.0 million line of credit with a bank. At December 31,
1998, it had $3.0 million outstanding under this line of credit.
OTHER -- WALKER'S
For information respecting factors causing seasonal and quarterly
fluctuations in Walker's operating results, see "-- Factors That May Affect Our
Future Operating Results -- Combined."
RESULTS OF OPERATIONS -- BAY CITIES
Bay Cities operates ready-mixed concrete plants in the San Francisco Bay
Area and Sacramento metropolitan area.
30
<PAGE>
The following table sets forth selected statement of operations information
of Bay Cities as a percentage of sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------
1996 1997 1998
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales................................ $ 30,496 100.0% $ 45,312 100.0% $ 53,600 100.0%
Cost of goods sold................... 27,287 89.5% 40,292 88.9% 46,766 87.3%
--------- --------- --------- --------- --------- ---------
Gross profit.................... 3,209 10.5% 5,020 11.1% 6,834 12.7%
Selling, general and administrative
expenses........................... 2,090 6.8% 2,778 6.1% 3,962 7.4%
Depreciation......................... 458 1.5% 458 1.0% 505 0.9%
--------- --------- --------- --------- --------- ---------
Income from operations............... $ 661 2.2% $ 1,784 3.9% $ 2,367 4.4%
========= ========= ========= ========= ========= =========
</TABLE>
1998 COMPARED TO 1997
SALES. Sales increased $8.3 million, or 18.3%, for 1998, primarily as a
result of the strong construction activity in the Silicon Valley region and
increasing prices for concrete.
GROSS PROFIT. Gross profit increased $1.8 million, or 36.1%, for 1998.
Gross margins increased to 12.7% from 11.1% over these periods because sales
price increases more than offset increases in cement and other costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.2 million, or 42.6% due to increased
selling and administrative costs associated with Bay Cities' growth.
1997 COMPARED TO 1996
SALES. Sales increased $14.8 million, or 48.6%, for 1997, primarily as a
result of the strong construction activity in the Silicon Valley region and
increasing prices for concrete.
GROSS PROFIT. Gross profit increased $1.8 million, or 56.4%, for 1997.
Gross margins increased to 11.1% from 10.5% over these periods because sales
price increases more than offset increases in cement and other costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.7 million, or 32.9% due to increased
selling and administrative costs associated with Bay Cities' growth.
LIQUIDITY AND CAPITAL RESOURCES -- BAY CITIES
Bay Cities' operations generated $3.5 million of net cash in 1998, an
increase of $3.0 million from 1997 as a result principally of increases in net
income ($0.4 million) and cash paid on receivables ($5.3 million) offset by an
increase in cash paid for accounts payable ($2.6 million). Bay Cities used net
cash in investing activities of approximately $1.6 million in 1998,
substantially all of which it spent for property, plant and equipment. At
December 31, 1998, Bay Cities had working capital of $2.2 million and total debt
of $2.5 million.
Bay Cities expects to be able to fund its cash needs such as working
capital through cash it generates from its operations. It generally funds its
purchases of property, plant and equipment with internally generated cash or
debt.
OTHER -- BAY CITIES
For information respecting factors causing seasonal and quarterly
fluctuations in Bay Cities' operating results, see "-- Factors That May Affect
Our Future Operating Results -- Combined."
31
<PAGE>
BUSINESS
GENERAL
We intend to become a leading value-added provider of ready-mixed concrete
and related services to the construction industry in major markets in the United
States. The Company currently serves all segments of the construction industry
in the San Francisco, San Jose, Oakland and Sacramento, California and
Washington, D.C. metropolitan areas and northern New Jersey. The Company
currently operates 26 concrete plants and produced over 2.5 million cubic yards
of concrete in 1998. Its operations consist principally of formulating,
preparing, delivering and placing ready-mixed concrete at the job sites of its
customers. The Company provides services to reduce customers' overall
construction costs by lowering the installed, or "in-place," cost of concrete.
These services include the formulation of new mixtures for specific design uses,
on-site and lab-based product quality control and delivery programs configured
to meet customers' needs.
The Company's pro forma combined sales increased from $128.3 million in
fiscal 1996 to $165.4 million in 1997 and to $194.1 million in 1998, or 28.9%
and 17.4%, respectively. Of the Company's 1998 pro forma combined sales,
approximately 44%, 33%, 18% and 5% were to commercial and industrial
construction contractors, residential construction contractors, street and
highway construction and paving contractors and other public works and
infrastructure contractors, respectively. We believe the Company's current size
places it among the leading independent ready-mixed concrete companies in the
United States.
Given the large size and fragmentation of the ready-mixed concrete
industry, we believe numerous potential acquisition candidates exist both within
the markets the Company currently serves and in other large metropolitan and
high growth markets. We intend to continue to make acquisitions to enhance our
position in existing markets and expand into new markets. We believe that a
significant consolidation opportunity exists for a company that can consistently
offer high-quality, value-added services to large users of ready-mixed concrete.
INDUSTRY OVERVIEW
Annual usage of ready-mixed concrete in the United States is currently at a
record level and is projected to continue growing. According to the National
Ready-Mixed Concrete Association (the "NRMCA"), total sales from production
and delivery of ready-mixed concrete in the United States grew from $17.6
billion in 1996 to $19.3 billion in 1997 and to $21.3 billion in 1998, or 9.7%
and 10.4%, respectively, and are expected to grow to $22.1 billion in 1999. This
growth reflects several contributing factors, including (1) general economic
expansion in the United States, (2) enhanced promotional efforts and (3)
development of new applications. Four broad construction sectors comprise the
market for ready-mixed concrete: (1) residential; (2) commercial and industrial;
(3) street and highway; and (4) other public works and infrastructure, including
bridges, aqueducts, dams, tunnels, educational facilities, public utilities,
airports and correctional facilities. For most projects, manufacturers of
ready-mixed concrete act as material suppliers for the projects' general
contractors. According to the NRMCA, of the $21.3 billion in industry-wide sales
in 1998, approximately 22% related to residential construction, 18% related to
commercial and industrial construction, 32% related to streets and highways
construction and paving, 10% related to water treatment facilities, 10% related
to public facilities and buildings and 8% related to other public works and
infrastructure construction.
Ready-mixed concrete is a versatile, low-cost manufactured material the
construction industry uses in substantially all its projects. It is a stone-like
compound that results from combining fine and coarse aggregates (such as sand,
gravel and crushed stone), water and admixtures (chemicals, fibers and minerals)
with cement to create a plastic (malleable) material. Ready-mixed concrete can
be manufactured in thousands of variations which in each instance may reflect a
specific design use. Manufacturers of ready-mixed concrete generally maintain
less than one day's requirements of raw materials and must coordinate their
daily material purchases with the time-sensitive delivery requirements of their
customers.
Ready-mixed concrete begins to harden when mixed and generally becomes
difficult to place within 60 to 90 minutes after mixing. This characteristic
generally limits the market for a permanently installed plant
32
<PAGE>
to an area within a 25-mile radius of its location. Concrete manufacturers
produce ready-mixed concrete in batches at their plants and use mixer and other
trucks to distribute and place it at the job sites of their customers. These
manufacturers generally do not provide paving or other finishing services
construction contractors or subcontractors typically perform.
Manufacturers generally obtain contracts through local sales and marketing
efforts they direct at general contractors, developers and home builders. As a
result, local relationships are very important.
Based on information the NRMCA has provided us, the ready-mixed concrete
industry in the United States is highly fragmented, with more than 3,500
independent producers operating a total of approximately 5,300 plants. Larger
markets generally have numerous producers competing for business on the basis of
price, timing of delivery and reputation for quality and service. We believe, on
the basis of available market information, that the typical ready-mixed concrete
company is family owned and has limited access to capital, limited financial and
technical expertise and limited exit strategies for its owners. Given these
operating constraints, we believe many ready-mixed concrete companies are
finding it difficult to both grow their businesses and compete effectively
against larger, more cost-efficient and technically capable competitors. We
believe these characteristics present consolidation and growth opportunities for
a company with a focused acquisition program and access to low-cost capital.
Barriers to the start-up of a new ready-mixed concrete manufacturing
operation have historically been low. In recent years, however, public concerns
about the dust, noise and heavy mixer and other truck traffic associated with
the operation of ready-mixed concrete plants and their general appearance have
made obtaining the necessary permits and licenses required for new plants more
difficult. Delays in the regulatory process, coupled with the substantial
capital investment start-up operations entail, have substantially raised the
barriers to entry for those operations.
SIGNIFICANT FACTORS IMPACTING THE MARKET FOR READY-MIXED CONCRETE
Based on available industry information, we believe that between 1996 and
1998 ready-mixed concrete sales as a percentage of total construction
expenditures increased 13.2%. In addition to favorable trends in the overall
economy of the United States, we believe three significant factors have been
expanding the market for ready-mixed concrete in particular: (1) the increased
level of industry-wide promotional and marketing activities; (2) the development
of new and innovative uses for ready-mixed concrete; and (3) the enactment of
the federal legislation commonly called TEA-21.
INDUSTRY-WIDE PROMOTIONAL AND MARKETING ACTIVITIES. Management believes
industry participants have only in recent years focused on and benefitted from
promotional activities to increase the industry's share of street and highway
and residential construction expenditures. Many of these promotional efforts
resulted from an industry-wide initiative called RMC 2000, a program that was
established in 1993 under the leadership of the Company's Chief Executive
Officer, Eugene P. Martineau, and has been adopted by the NRMCA, the industry's
largest trade organization. The principal goals of RMC 2000 have been to (1)
promote ready-mixed concrete as a building and paving material and (2) improve
the overall image of the ready-mixed concrete industry. We believe RMC 2000 has
been a catalyst for increased investment in concrete promotional activities.
DEVELOPMENT OF NEW AND INNOVATIVE READY-MIXED CONCRETE
PRODUCTS. Ready-mixed concrete has many attributes that make it a highly
versatile construction material. In recent years, industry participants have
developed various product innovations, including: concrete housing; precast
modular paving stones; prestressed concrete railroad ties to replace timber
ties; continuous-slab rail-support systems for rapid transit and heavy-traffic
intercity rail lines; and concrete bridges, tunnels and other structures for
rapid transit systems. Other examples of successful innovations that have opened
new markets for ready-mixed concrete include highway median barriers, highway
sound barriers, paved shoulders to replace less permanent and increasingly
costly asphalt shoulders, parking lots to ensure a long-lasting and aesthetic
urban environment and colored pavements to mark entrance and exit ramps and
lanes of expressways.
IMPACT OF TEA-21. TEA-21, the largest public works funding bill in the
history of the United States, became effective in June 1998. TEA-21 provides a
$218 billion budget for federal highway, transit and
33
<PAGE>
safety spending for the six-year period from 1998 through 2003. This represents
a 43% increase over the funding levels authorized under similar federal funding
programs covering the immediately preceding six-year period. In addition,
because relatively more of this funding is designated for use in maintenance and
reconstruction projects instead of new construction, we believe the ready-mixed
concrete industry will secure a greater percentage of the work than under
previous federal highway funding measures. Although road and highway
construction and paving has not accounted for a significant portion of the
Company's business in recent years (see "Business -- Customers"), we believe
the Company should benefit from the impact we expect TEA-21 will have on the
overall demand for ready-mixed concrete in the United States.
BUSINESS STRATEGY
Our objective is to expand the geographic scope of the Company's operations
and become the leading value-added provider of ready-mixed concrete and related
services in each of its markets. We plan to achieve this objective by (1) making
acquisitions and (2) implementing a national operating strategy aimed at
increasing revenue growth and market share, achieving cost efficiencies and
enhancing profitability. We intend to manage the Company's operations on a
decentralized basis to allow acquired businesses to focus on their existing
customer relationships and local strategy. Our executive management team will be
responsible for executing our company-wide strategy, including acquisition
planning, execution and integration and initiating and overseeing operational
improvements.
GROWTH THROUGH ACQUISITIONS. The significant costs and regulatory
requirements involved in building new plants make acquisitions an important
element of our growth strategy. We intend to implement an acquisition program
targeting opportunities for (1) expansion within the Company's existing markets
and (2) entering new geographic markets within the United States.
o EXPANDING WITHIN EXISTING MARKETS. We will seek to acquire other
well-established companies operating within our existing markets in
order to expand the market penetration of the Company. By expanding in
existing markets through acquisitions, we expect to realize various
operating synergies, including:
o increased market coverage;
o economies of scale in materials procurement;
o improved utilization and range of mixer trucks because of
access to additional plants;
o customer cross-selling opportunities; and
o reduced operating and overhead costs.
We believe the Founding Companies in the San Francisco Bay Area provide
a clear example of many of the market inefficiencies that confront
local, competing ready-mixed concrete manufacturers. Based on industry
data, we estimate that these Founding Companies realized a combined 30%
share of their market. Among those Founding Companies, the average cost
per yard of concrete delivered during 1998 varied by as much as $1.00
and the average revenue earned per yard delivered varied by as much as
$4.35.
Our acquisitions of the Founding Companies in the San Francisco Bay Area
illustrates our acquisition strategy to expand operations within
existing markets which we intend to replicate in additional markets
throughout the United States. We believe that by properly allocating
production and mixer trucks, as required by shifting demand within a
market, we can improve the utilization rates of our plants and mixer
trucks and maximize our revenues per yard of concrete delivered.
o ENTERING NEW GEOGRAPHIC MARKETS. The Company will seek to enter new
geographic markets that have a balanced mix of residential,
commercial, industrial and public sector concrete consumption and have
demonstrated adequate sustainable demand and prospects for growth. In
each new market the Company enters, we initially will target for
acquisition one or more leading local or regional ready-mixed concrete
companies that can serve as platform businesses into which we can
consolidate other ready-mixed concrete operations. Important criteria
for these acquisition candidates will
34
<PAGE>
include historically successful operating results, established
customer relationships and superior operational management personnel,
whom we generally will seek to retain.
IMPLEMENTATION OF A NATIONAL OPERATING STRATEGY. We intend to implement a
national operating strategy designed to (1) increase revenues and market share
through improved marketing and sales initiatives and enhanced operations and (2)
achieve cost efficiencies.
o IMPROVING MARKETING AND SALES INITIATIVES AND ENHANCING
OPERATIONS. Our basic operating strategy will be to emphasize the sale
of value-added product to customers who are more focused on reducing
their in-place concrete costs than on the price per cubic yard of the
ready-mixed concrete they purchase. Key elements of our
service-oriented strategy include providing corporate-level marketing
and sales expertise, establishing company-wide quality control
improvements and developing and implementing training programs that
emphasize successful marketing, sales and training techniques and the
sale of high-margin concrete mix designs. In addition, we intend to
invest in computer and communications technology at each of the
Company's locations to improve communications, purchasing, accounting,
load dispatch, delivery efficiency and reliability and customer
relations.
o ACHIEVING COST EFFICIENCIES. We expect to reduce the total operating
expenses of the businesses we acquire by eliminating duplicative
administrative functions and consolidating certain functions each
business performed separately prior to its acquisition. In addition, we
believe that, as the Company increases in size, it should experience
reduced costs as a percentage of net sales compared to those of the
individual businesses we acquire in such areas as: materials
procurement; purchases of mixer trucks and other equipment, spare parts
and tools; vehicle and equipment maintenance; financing terms; employee
benefit plans; and insurance and other risk management programs.
PRODUCTS AND SERVICES
READY-MIXED CONCRETE. The Company's ready-mixed concrete products consist
of proportioned mixes it prepares and delivers in unhardened plastic states for
placement and shaping into their designed forms. Selecting the optimum mix for a
job entails determining not only the ingredients that will produce the desired
permeability, strength, appearance and other properties of the concrete after it
has hardened and cured, but also the ingredients necessary to achieve a workable
consistency under the weather and other conditions at the job site. We believe
the Company achieves product differentiation for the mixes it offers because of
the variety of mixes it is able to produce, its volume production capacity and
its scheduling, delivery and placement reliability. We also believe the Company
distinguishes itself with its value-added service approach that emphasizes
reducing its customers' overall construction costs by lowering the in-place cost
of concrete.
From a contractor's perspective, the in-place cost of concrete includes
both the amount paid to the ready-mixed concrete manufacturer and the internal
costs associated with the labor and equipment the contractor provides. For
example, a contractor's unit cost of concrete is often only a small component of
the total in-place cost that takes into account all the labor and equipment
costs required to place and finish the ready-mixed concrete, including the cost
of additional labor and time lost due to substandard products or delivery
delays.
35
<PAGE>
The Company provides a variety of services in connection with its sale of
ready-mixed concrete which help reduce its customers' in-place cost of concrete.
These services include:
o production of new formulations and alternative product
recommendations that reduce construction time;
o quality control, through automated production and laboratory
testing, that ensures consistent results and minimizes the need to
correct completed work;
o automated scheduling and tracking systems that ensure timely
delivery and reduce the downtime incurred by the customer's
finishing crew; and
o innovative pricing discounts that are designed to minimize the time
the customer keeps our trucks on site, thereby resulting in a lower
price to the customer as well as a more efficient use of the
customer's crews and equipment.
The Company produces ready-mixed concrete by combining the desired type of
cement, sand (fine aggregate), gravel and crushed stone (coarse aggregate) with
water and typically one or more admixtures. These admixtures (chemicals,
minerals and fibers) determine the usefulness of the product for particular
applications.
The Company uses a variety of chemical admixtures to achieve one or more of
five basic purposes:
o relieve internal pressure and increase resistance to cracking in
subfreezing weather;
o retard the hardening process to make concrete more workable in hot
weather;
o strengthen concrete by reducing its water content;
o accelerate the hardening process and reduce the time required for
curing; and
o facilitate the placement of concrete having a low water content.
The Company frequently uses various mineral admixtures as supplementary
cementing materials to alter the permeability, strength and other properties of
concrete. These materials include fly ash, ground granulated blast-furnace slag
and silica fume.
The Company also uses fibers, such as steel, glass and synthetic and carbon
filaments, as an additive in various formulations of concrete. Fibers help to
control shrinkage cracking, which reduces permeability and improves abrasion
resistance. In many applications, fibers replace welded steel wire and
reinforcing bars. Relative to the other components of ready-mixed concrete,
these additives generate comparatively high margins.
OTHER PRODUCTS. The Company produces pre-cast concrete products at its
Santa Rosa, California plant. These products include specialty engineered
structures, custom signage, curb inlets and H.D.P.E. lined vaults. In some
locations, the Company also sells concrete-related building materials and
supplies to small residential contractors and large construction companies.
These products include bagged cement, rebar, wire mesh, concrete blocks, framing
forms and various types of concrete and masonry finishing tools. The Company's
pro forma combined sales from the sale of pre-cast concrete products and other
concrete-related building materials and supplies in 1998 totaled approximately
$13.4 million, or approximately 7.0% of the Company's total pro forma combined
sales for 1998.
OPERATIONS
The Company has made substantial capital investment in equipment, systems
and personnel at its plants to facilitate continuous multi-customer deliveries
of highly perishable products. In any given market, the Company may maintain a
number of plants whose production is centrally coordinated to meet customer
production requirements. The Company must constantly adapt to continually
changing delivery schedules.
The Company's ready-mixed concrete plants consist of permanent
installations and portable facilities. Several factors govern the choice of
plant type, including capital availability, production consistency requirements
and daily production capacity requirements. A wet batch plant generally costs
more, but yields greater consistency in the concrete produced and has greater
daily production capacity, than a dry batch
36
<PAGE>
plant. We believe that a wet batch plant having an hourly capacity of 250 cubic
yards currently would cost approximately $1,500,000 to build, while a dry batch
plant having the same capacity currently would cost approximately $700,000 to
build. From time to time the Company uses portable plants, which include both
wet batch and dry batch facilities, to service large, long-term jobs and jobs in
remote locations.
The Company produces ready-mixed concrete in batches. The batch operator in
a dry batch plant simultaneously loads the dry components of stone, sand and
cement with water and admixtures in a mixer truck that begins the mixing process
during loading and completes that process while driving to the job site. In a
wet batch plant, the batch operator blends the dry components and water in a
plant mixer from which he loads the already mixed concrete into the mixer truck,
which leaves for the job site promptly after loading.
The Company's mixer trucks slowly rotate their loads on route to job sites
in order to maintain product consistency. A mixer truck typically has a load
capacity of nine cubic yards (approximately 18 tons) and a useful life of 12
years. After eight years, certain components of the mixer trucks require
refurbishment. A new truck of this size currently costs approximately $125,000.
In the Company's manufacture and delivery of ready-mixed concrete, we
emphasize quality control, pre-job planning, customer service and coordination
of supplies and delivery. The Company often obtains purchase orders for
ready-mixed concrete months in advance of actual delivery to a job site. A
typical order contains various specifications that the contractor requires the
concrete to meet. After receiving the specifications for a particular job, the
Company utilizes computer modeling, industry data and data from previous similar
jobs to formulate a variety of mixtures of cement, aggregates, water and
admixtures which will meet or exceed the contractor's specifications. It
performs testing to determine which mix design is most appropriate to meet the
required specifications. The test results enable the Company to select the
mixture that has the lowest cost and meets or exceeds the job specifications.
The testing center creates and maintains a project file that details the mixture
to be used when the concrete for the job is actually prepared. For quality
control purposes, the testing center is also responsible for maintaining batch
samples of concrete that has been delivered to a job site.
The Company uses computer modeling to prepare bids for particular jobs
based on the size of the job, location, desired margin, cost of raw materials
and the design mixture identified in its testing process. If the job is large
enough, the Company will obtain quotes from its suppliers as to the cost of raw
materials the Company uses in preparing the bid. Once the Company obtains a
quotation from its suppliers, the price of the raw materials for the specified
job is informally established. Several months often elapse from the time a
contractor has accepted the Company's bid until actual delivery of the
ready-mixed concrete begins. During this time, the Company maintains regular
communication with the contractor concerning the status of the job and any
changes in the job's specifications in order to coordinate the multi-sourced
purchases of cement and other materials it will need to fill the job order and
meet the contractor's delivery requirements. The Company must confirm that its
customers are ready to take delivery of manufactured product throughout the
placement process. On any given day, a particular plant may have production
orders for dozens of customers at various locations throughout its area of
operation. To fill an order:
o the dispatch office coordinates the timing and delivery of the
concrete to the job site;
o a load operator supervises and coordinates the receipt of the
necessary raw materials and operates the hopper that dispenses
those materials into the appropriate storage bins;
o a batch operator prepares the specified mixture from the order and
oversees the loading of the dry ingredients and water (in a dry
batch plant) or the already-mixed concrete (in a wet batch plant)
into a mixer truck; and
o the driver of the mixer truck delivers the load to the job site,
places the load and, after washing the truck, departs at the
direction of the dispatch office.
The central dispatch system tracks the status of each of the Company's
mixer trucks as to whether a particular truck is loading concrete, in route to a
particular job site, on the job site, placing concrete, being washed or in route
to a particular plant. The system is continuously updated via signals received
from the individual truck operators as to their status. In this manner, the
dispatcher is able to determine the optimal
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<PAGE>
routing and timing of subsequent deliveries by each mixer truck and to monitor
the performance of each driver.
A plant manager oversees the operation of each plant. The Company also
employs maintenance personnel who perform routine maintenance work throughout
its plants, a full-time staff of mechanics who perform substantially all the
maintenance and repair work on the Company's vehicles, testing center staff who
prepare mixtures for particular job specifications and maintain quality control,
various clerical personnel who are responsible for the day-to-day operations of
the Company and sales personnel who are responsible for identifying potential
customers and maintaining existing customer relationships. The Company generally
operates on a single shift with some overtime operation during the construction
season. On occasion, however, it has projects that require deliveries "around
the clock."
CEMENT AND RAW MATERIALS
The Company obtains most of the materials it uses to manufacture
ready-mixed concrete at each of its facilities on a daily basis. These raw
materials include cement (itself a manufactured product), stone, gravel and
sand. Each plant typically maintains an inventory level of these materials
sufficient to satisfy its operating needs for one day or less. Cement represents
the highest cost material used in the manufacture of ready-mixed concrete,
currently averaging approximately $22 per cubic yard, while the current cost of
stone, gravel and sand ranges from approximately $18 to $20 per cubic yard. In
each of its markets, the Company purchases each of these materials from any one
of several suppliers.
SALES AND MARKETING
General contractors typically select their suppliers of ready-mixed
concrete. In large, complex projects, an engineering firm or division within a
state transportation or public works department may influence the purchasing
decision, particularly where the concrete has complicated design specifications.
In those projects and in government-funded projects generally, the general
contractor or project engineer usually awards supply orders on the basis of
either direct negotiation or competitive bidding. We believe the purchasing
decision in many cases ultimately is relationship-based. Our marketing efforts
will target general contractors, design engineers and architects whose focus
extends beyond the price of ready-mixed concrete to product quality and
consistency and reducing their in-place cost of concrete.
As of March 1, 1999, the Founding Companies collectively employed 26
full-time sales persons. We intend to increase the size of the Company's sales
staff. We also intend to develop and implement training programs to increase the
marketing and sales expertise and technical abilities of that staff. Our goal is
to create a sales force whose service-oriented approach will appeal to our
targeted prospective customers and differentiate the Company from its
competitors.
CUSTOMERS
We estimate that approximately 44%, 33%, 18% and 5% of the Company's sales
in 1998 were to commercial and industrial construction contractors, residential
construction contractors, street and highways construction and paving
contractors and other public works and infrastructure contractors, respectively.
In 1998, the Founding Companies sold concrete to more than 2,500 different
customers, and no single customer or project accounted for more than 4% of the
Company's pro forma combined net sales for 1998.
The Company relies heavily on repeat customers. We estimate that repeat
customer sales in 1998 accounted for approximately 85% of the Company's total
sales. Management and dedicated sales personnel at each of the Founding
Companies have been responsible for developing and maintaining successful long-
term relationships with key customers. We believe that by operating in more
geographic markets, the Company will be in the better position to market to and
service large nationwide and regional contractors.
TRAINING AND SAFETY
The Company's future success will depend, in part, on the extent to which
it is able to attract, retain and motivate qualified employees. We believe that
the Company's ability to do so will depend on the quality of its recruiting,
training, compensation and benefits, the opportunities it affords for
advancement
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<PAGE>
and its safety record. Historically, the Founding Companies have supported and
funded continuing education programs for their employees. We intend to continue
and expand these programs. We will require all field employees to attend
periodic safety training meetings and all drivers to participate in training
seminars followed by certification testing. We expect to hire a safety director
who will supervise a unified, Company-wide safety program.
COMPETITION
The ready-mixed concrete industry is highly competitive. The competitive
position of the Company in a given market will depend largely on the location
and operating costs of its ready-mixed concrete plants and prevailing prices in
that market. Price is the primary competitive factor among suppliers for small
or simple jobs, principally in residential construction, while timeliness of
delivery and consistency of quality and service as well as price are the
principal competitive factors among suppliers for large or complex jobs. Our
competitors will range from small, owner-operated private companies to
subsidiaries or operating units of large, vertically integrated cement
manufacturing and concrete products companies. Competitors having lower
operating costs than we do or having the financial resources to enable them to
accept lower margins than we do will have a competitive advantage over us for
jobs that are particularly price-sensitive. Competitors having greater financial
resources to build plants in new areas or pay for acquisitions also will have
competitive advantages over us.
EMPLOYEES
At March 15, 1999, the Company had approximately 90 salaried employees,
including executive officers, management personnel, sales personnel, technical
personnel, administrative staff and clerical personnel, and approximately 515
hourly personnel it generally employs on an as-needed basis, including 400 truck
drivers. The number of employees fluctuates depending upon the number and size
of projects the Company is supplying at any particular time, which may be
impacted by variations in weather conditions throughout the year.
At March 15, 1999, approximately 450 of the Company's employees were
represented by labor unions having collective bargaining agreements with five
Founding Companies. Generally, these agreements have multiyear terms and expire
on a staggered basis. Under these agreements, the Founding Companies pay
specified wages to their covered employees, observe certain workplace rules and
make payments to multi-employer pension plans and employee benefit trusts rather
than administering the funds on behalf of their employees. None of the Founding
Companies has experienced any strikes or significant work stoppages in the past
10 years. The Company believes its relationships with its employees and union
representatives are satisfactory.
FACILITIES AND EQUIPMENT
The Company operates a fleet of approximately 380 owned and leased mixer
trucks and 195 other vehicles. The Company's own mechanics service most of the
fleet. The Company believes these vehicles are generally well-maintained and
adequate for its present operations. The average age of the Company's mixer
trucks is approximately six years.
When this offering closes, the Company's corporate headquarters will be
located in Houston, Texas. The Founding Companies, collectively, maintain
office, maintenance and/or sales operations at a total of six sites located in
the San Francisco Bay Area, the Sacramento, California metropolitan area,
northern New Jersey and Washington, D.C. The Company also operates batch plants
at 21 sites scattered throughout its prime operating regions.
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The chart below summarizes the Company's operating facilities. The Company
believes that its facilities are sufficient for its current needs. See "Certain
Transactions."
<TABLE>
<CAPTION>
OWNED/
LOCATION TYPE OF FACILITY LEASED 1998 VOLUME
- - ------------------------------------- ---------------------------- ----------- ------------
<S> <C> <C> <C>
(CUBIC YARDS)
Brentwood, CA........................ 2 Dry Batch Plants Owned 95,195
Cameron Park, CA..................... Dry Batch Plant Owned 59,269
Elk Grove, CA........................ Dry Batch Plant Owned 45,749
Hayward, CA.......................... Wet Batch Plant Owned 219,721
Lincoln, CA.......................... Dry Batch Plant Leased 69,977
Oakland, CA.......................... Wet Batch Plant Leased 89,017
Pleasanton, CA....................... Wet Batch Plant/ Leased 166,352
Dry Batch Plant
Redwood City, CA..................... Dry Batch Plant Leased 76,272
Rio Linda, CA........................ 2 Dry Batch Plants Owned 115,765
San Jose, CA......................... 3 Wet Batch Plants/2 Dry 4 Owned 766,498
Batch Plants 1 Leased
Santa Rosa, CA....................... Cast Products Facility Leased N/A
South San Francisco, CA.............. 2 Wet Batch Plants Owned 300,827
Walnut Creek, CA..................... Wet Batch Plant Owned 136,235
Bernardsville, NJ.................... Dry Batch Plant Leased 55,892
North Port, NJ....................... Dry Batch Plant Leased 29,809
Roseland, NJ......................... 2 Wet Batch Plants/ Leased 100,606
Dry Batch Plant
Washington, D.C...................... Wet Batch Plant Leased 230,276
------------
Total........................... 2,557,460
============
</TABLE>
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
A wide range of federal, state and local laws applies to the Company's
operations, including such matters as land usage, street and highway usage,
noise levels and health, safety and environmental matters. In many instances,
the Company must have certificates, permits or licenses in order to conduct its
business. Failure by the Company to maintain required certificates, permits or
licenses or to comply with applicable laws could result in substantial fines or
possible revocation of its authority to conduct some of its operations. Delays
in obtaining approvals for the transfer or grant of certificates, permits or
licenses, or failure to obtain new certificates, permits or licenses, could
impede the implementation of our acquisition program.
Environmental laws that impact the Company's operations include those
relating to air quality, solid waste management and water quality. Environmental
laws are complex and subject to frequent change. These laws impose strict
liability in some cases without regard to negligence or fault. Sanctions for
noncompliance may include revocation of permits, corrective action orders,
administrative or civil penalties and criminal prosecution. Some environmental
laws provide for joint and several strict liability for remediation of spills
and releases of hazardous substances. In addition, businesses may be subject to
claims alleging personal injury or property damage as a result of alleged
exposure to hazardous substances, as well as damage to natural resources. These
laws also may expose the Company to liability for the conduct of or conditions
caused by others, or for acts of the Company which complied with all applicable
laws when performed. We will conduct Phase I investigations to assess
environmental conditions on substantially all the real properties the Founding
Companies own or lease and engaged an independent environmental consulting firm
in that connection. We have not identified any environmental concerns we believe
are likely to have a material adverse effect on the Company's business,
financial condition or results of operations, but you have no assurance material
liabilities will not occur. You also have no assurance the Company's compliance
with amended, new or more stringent laws, stricter interpretations of existing
laws or the future
40
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discovery of environmental conditions will not require additional, material
expenditures by the Company. OSHA regulations establish requirements the
Company's training programs must meet.
We believe the Company has all material permits and licenses required to
conduct its operations and is in substantial compliance with applicable
regulatory requirements relating to its operations. The Company's capital
expenditures relating to environmental matters were not material on a pro forma
combined basis in 1998. We do not currently anticipate any material adverse
effect on the business or financial position of the Company as a result of its
future compliance with existing environmental laws controlling the discharge of
materials into the environment.
LEGAL PROCEEDINGS AND INSURANCE
The Founding Companies have been from time to time, and currently are,
subject to claims and litigation brought by employees, customers and third
parties for personal injuries, property damages, product defects and delay
damages, that have, or allegedly have, resulted from the conduct of their
operations. Currently, the Company does not have pending any litigation that,
separately or in the aggregate, if adversely determined, we believe would have a
material adverse effect on the Company's business, financial condition or
results of operations. We expect that in the future the Company will from time
to time be a party to litigation or administrative proceedings which arise in
the normal course of its business.
The Company's operations often involve providing blends of ready-mixed
concrete that are required to meet building code or other regulatory
requirements and contractual specifications for durability, stress-level
capacity, weight-bearing capacity and other characteristics. If the Company
fails or is unable to provide product in accordance with these requirements and
specifications, claims may arise against the Company or the Company's reputation
could be damaged. Although the Founding Companies have not experienced any
material claims of this nature in recent periods, the Company may experience
such claims in the future. In addition, the Company's employees perform a
significant portion of their work moving and storing large quantities of heavy
raw materials, driving large mixer trucks in heavy traffic conditions or placing
concrete at construction sites or in other areas that may be hazardous. These
operating hazards can cause personal injury and loss of life, damage to or
destruction of property and equipment and environmental damage. The Company
maintains insurance coverage in amounts and against the risks we believe accord
with industry practice, but this insurance may not be adequate to cover all
losses or liabilities the Company may incur in its operations, and the Company
may not be able to maintain insurance of the types or at levels we deem
necessary or adequate or at rates we consider reasonable.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning our directors and
executive officers, and those persons who will become directors following the
closing of this offering (ages are as of March 31, 1999):
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR CLASS
- - -------------------------------------- --- -------------------------------------- --------------
<S> <C> <C> <C>
Eugene P. Martineau................... 58 Director, Chief Executive Officer and I
President
Michael W. Harlan..................... 38 Director, Senior Vice President, Chief I
Financial Officer and Secretary
Charles W. Sommer..................... 34 Corporate Controller
John R. Colson........................ 51 Director(3) II
Peter T. Dameris...................... 39 Director(3) I
Vincent D. Foster..................... 42 Director, Chairman of the Board(1)(2) II
William T. Albanese................... 55 Director(3) III
Michael D. Mitschele.................. 42 Director(3) II
Murray S. Simpson..................... 61 Director(3) III
Neil J. Vannucci...................... 62 Director(3) III
Robert S. Walker...................... 55 Director(3) III
</TABLE>
- - ------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Appointment as a director will become effective when this offering closes.
EUGENE P. MARTINEAU has served as Chief Executive Officer and President of
USC since September 1998 and a director of USC since March 1999. Mr. Martineau
has over 30 years of experience in the ready-mixed concrete industry. From 1992
until joining us, he was Executive Vice-President for the Concrete Products
Group of Southdown, Inc., a publicly traded, integrated cement and ready-mixed
concrete company. From April 1990 through March 1992, Mr. Martineau was
Vice-President and General Manager of Southdown's Florida Mining and Materials.
Prior thereto, Mr. Martineau held various executive management positions with
Allied Ready Mix, Inc., Ready Mix Concrete Company, the Lehigh Portland Cement
Company and Allied Products Company. Since 1996, Mr. Martineau has served as a
director and member of the Executive Committee of NRMCA. He also served as
chairman of NRMCA's Promotion Committee from 1997 through March 1999. From 1994
through 1997, Mr. Martineau served as the National Director of RMC 2000.
MICHAEL W. HARLAN has served as Senior Vice President, Chief Financial
Officer and Secretary of USC since September 1998 and a director of USC since
March 1999. Mr. Harlan served as Senior Vice President and Chief Financial
Officer of Apple Orthodontix, Inc., a publicly traded orthodontic practice
management company from March 1997 to August 1998. From December 1996 to
February 1997, Mr. Harlan served as a consultant to Apple Orthodontix on
financial and accounting matters. From April 1991 through December 1996, Mr.
Harlan held various positions in the finance and acquisitions departments,
including as Treasurer from September 1993 to December 1996, of Sanifill, Inc.,
a publicly traded international environmental services company USA Waste
Services, Inc. acquired in 1996. From May 1982 through April 1991, he held
various positions in the tax and corporate financial consulting services
division of Arthur Andersen LLP, where he had been a manager since July 1986.
Mr. Harlan is a certified public accountant.
CHARLES W. SOMMER has served as Corporate Controller of USC since March
1999. From February 1997 through March 1999, Mr. Sommer was Corporate Controller
of Apple Orthodontix, Inc., a publicly traded orthodontic practice management
company. From February 1996 through January 1997, Mr. Sommer was the Corporate
Controller of Metamor Worldwide, Inc., a publicly traded provider of temporary
services. From November 1993 through February 1996, Mr. Sommer was Assistant
Corporate Controller of Sanifill, Inc., and from July 1986 through November 1993
he held various positions in the audit division of
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<PAGE>
Arthur Andersen LLP, where he had been a manager since July 1990. Mr. Sommer is
a certified public accountant.
JOHN R. COLSON has served as Chief Executive Officer of Quanta Services,
Inc. since December 1997. From 1991 to February 1998, he served as President of
PAR Electrical Contractors, Inc., a company that Quanta Services, Inc. acquired
in February 1998. Mr. Colson is also a director of Quanta Services, Inc.
PETER T. DAMERIS has served as Executive Vice President of Corporate
Development and Secretary of Metamor Worldwide, Inc. since 1998, where he also
served as Senior Vice President, General Counsel and Secretary from September
1996 to 1998 and as Vice President, General Counsel and Secretary from January
1995 to September 1996. Before joining Metamor Worldwide, Inc. in January 1995,
Mr. Dameris was a partner with the law firm of Cochran, Rooke and Craft, LLP,
with whom he had been associated since June 1989.
VINCENT D. FOSTER has been a director of USC since August 1998. Mr. Foster
is a Managing Director of Main Street, a merchant banking firm. Since February
1998, Mr. Foster has served as a nonexecutive Chairman of the Board of Directors
of Quanta Services, Inc., a consolidator in the electrical contracting industry
which Main Street organized. From September 1988 through October 1997, Mr.
Foster was a partner of Andersen Worldwide and Arthur Andersen LLP, where he was
the director of the corporate finance practice and the mergers and acquisitions
practice in the southwestern United States. Mr. Foster specialized in
structuring and executing "roll-up" transactions and in providing merger and
acquisition and corporate finance advisory services to clients in consolidating
industries. Mr. Foster holds a J.D. degree and is a certified public accountant.
WILLIAM T. ALBANESE has been President of Central since 1987. Previously he
served in various other capacities for Central since 1966.
MICHAEL D. MITSCHELE has been President of Baer since 1986 and has been an
employee of Baer in various other positions since 1972. Mr. Mitschele is a
founding board member of the New Jersey Concrete and Aggregate Association and
currently serves as its Vice Chairman. He has been a member of NRMCA for over 20
years and has held several leadership positions with NRMCA, including service as
a member of its board of directors for two terms, Chairman of its membership
committee and visionary leadership taskforce and service on its financial
management committee.
MURRAY S. SIMPSON is a founding member of American Ready-Mix, which was
formed in 1998. He is also a stockholder of Opportunity. From 1975 until 1991,
Mr. Simpson served as President and Chief Executive Officer of Super Concrete
Corporation. Following that company's merger with British construction materials
producer Evered, plc (now known as Aggregate Industries, plc), Mr. Simpson
served in various roles, including Executive Vice President, Corporate
Development, for its United States operations and Director and Counsel for its
mid-Atlantic area subsidiary, Bardon, Inc. Mr. Simpson has served on the board
of directors of the NRMCA for 19 years and as chairman of the board from 1997 to
1998. He has also served as a director of the National Aggregates Association.
NEIL J. VANNUCCI has been President of Bay Cities since 1995. Previously he
served as Vice President of Bay Cities since October 1982. Before joining Bay
Cities, Mr. Vannucci was a self employed, registered architect. Mr. Vannucci
also serves as a Director of First National Bank of Northern California (FNBD),
a publicly traded financial institution.
ROBERT S. WALKER has been President and Chief Operating Officer of Walker's
since 1965.
When this offering closes, our Board of Directors (the "Board") will have
three director classes, each of which, following a transitional period, will
have a three-year term, with one class being elected each year at that year's
annual stockholders' meeting. The initial terms of the Class I directors, the
Class II directors and the Class III directors will expire at the 2000 meeting,
the 2001 meeting and the 2002 meeting, respectively.
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<PAGE>
DIRECTOR COMPENSATION
We will initially pay each director who is not one of our employees (a
"Nonemployee Director") fees of $1,000 for each Board meeting and $500 for each
Board committee meeting the director attends (except for meetings that
committees hold on the same day as Board meetings) and will periodically grant
Nonemployee Directors options to purchase shares of Common Stock pursuant to the
Incentive Plan. See "-- 1999 Incentive Plan -- Nonemployee Director Awards." 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.
EXECUTIVE COMPENSATION
We did not pay any compensation to our executive officers prior to January
1999. We anticipate that during 1999 our most highly compensated executive
officers and their annualized base salaries will be: Eugene P.
Martineau -- $150,000; Michael W. Harlan -- $150,000; and Charles
Sommer -- $110,000. Effective when this offering closes, we will award Messrs.
Martineau, Harlan and Sommer Incentive Plan options to purchase 225,000 shares,
175,000 shares and 65,000 shares, respectively, at the initial per share price
to the public set forth on the front cover page of this prospectus. See
"-- 1999 Incentive Plan."
EMPLOYMENT AGREEMENTS
We intend to enter into employment agreements with Messrs. Martineau,
Harlan and Sommer, which will become effective on the closing of the
Acquisitions and this offering. Each of these agreements will (1) provide for an
annual minimum base salary, (2) entitle the employee to participate in all the
Company's compensation plans (as defined) in which our executive officers
participate and (3) have an initial term of three years (the "Initial Term").
Each agreement is subject to an automatic daily extension beginning in the third
year of the Initial Term so that, beginning with that third year, the agreement
provides for a continuous one-year term, subject to the right of either party to
terminate the employee's employment at any time. If we terminate that employment
without cause (as defined) or the employee terminates that employment for good
reason (as defined), we must pay to the employee monthly for the balance of the
Initial Term (or, if longer, for one year following the date the notice of
termination is given), the amount equal to one-twelfth of the employee's average
annual cash compensation (as defined) during the two years (or such shorter
period of employment) preceding the date the notice of termination is given
(subject to certain adjustments). Each of these agreements also will provide for
certain benefits if the Employee dies or becomes disabled. If the employment of
the employee terminates for any reason other than for cause (if terminated by
the Company) or for good reason (if terminated by the employee), that
termination will not affect the term or exercisability of any Incentive Plan
stock options that employee holds. Copies of these agreements are exhibits to
the Registration Statement of which this prospectus is a part (the
"Registration Statement").
We intend to enter into similar employment agreements with senior managers
of the Founding Companies.
1999 INCENTIVE PLAN
The following summarizes the principal provisions of the Incentive Plan, a
copy of which is an exhibit to the Registration Statement.
GENERAL. The Incentive Plan, which our Board and current stockholders have
approved, aims to (1) attract and retain the services of key employees and
qualified independent directors and contractors and (2) encourage and stimulate
in those persons the sense of proprietorship and self-interest in the
development and financial success of the Company by making performance-based
awards ("Awards") tied to the growth and performance of the Company.
We have reserved 2,000,000 shares of Common Stock for use under the
Incentive Plan. Beginning with the first calendar quarter after the closing of
this offering and continuing each quarter thereafter, the number of shares
available for that use will be the greater of 2,000,000 shares or 15% of the
number of
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<PAGE>
shares of Common Stock outstanding on the last day of the immediately preceding
calendar quarter. Awarded shares that are not issued again will become available
for Awards.
Persons eligible for Awards are (1) employees holding positions of
responsibility with us or any of our subsidiaries and whose performance can have
a significant effect on the success of the Company as well as individuals who
have agreed to become employees within six months of the date of grant
("Employees"), (2) Nonemployee Directors and (3) nonemployee consultants and
other independent contractors providing, or who will provide, services to us or
any of our subsidiaries ("Independent Contractors"). Awards to Employees
("Employee Awards") and Awards to Independent Contractors ("Independent
Contractor Awards") generally are treated alike under the Incentive Plan, and
the following discussion of Employee Awards applies, except as noted, equally to
Independent Contractor Awards. For purposes of Section 16(b) of the Securities
Exchange Act of 1934, as amended (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 is intended to qualify for the exemptions
from that Section which Exchange Act Rule 16b-3 ("Rule 16b-3") provides.
The Compensation Committee of the Board (the "Committee") will administer
the Incentive Plan, except as it applies to Nonemployee Directors, and, to the
extent required for the Rule 16b-3 exemptions, the Committee will at all times
consist of at least two Nonemployee Directors. The Committee has the exclusive
power to administer the Incentive Plan and take all actions specifically
contemplated thereby or necessary or appropriate in connection with the
administration thereof. Except insofar as the Incentive Plan relates to
Nonemployee Directors, the Committee also has the exclusive power to interpret
the Incentive Plan and to adopt such rules, regulations and guidelines for
carrying out its purposes as the Committee may deem necessary or proper in
keeping with the Incentive Plan's objectives. The Committee may, in its
discretion, extend or accelerate the exercisability of, accelerate the vesting
of or eliminate or make less restrictive any restrictions contained in any
Employee Award, waive any restriction or other provision of the Incentive Plan
or in any Employee Award or otherwise amend or modify any Employee Award in any
manner that is either (1) not adverse to that Employee holding the Employee
Award or (2) consented to by that Employee. The Committee also may delegate to
the chief executive officer and other senior officers of USC its duties under
the Incentive Plan, except that no such delegation may be made in the case of
actions respecting participants subject to Section 16 of the Exchange Act.
EMPLOYEE AWARDS. Employee Awards may be in the form of:
o rights to purchase a specified number of shares of Common Stock at
a specified price ("Options") which may be denominated in either
or both of Common Stock or units denominated in Common Stock;
o rights to receive a payment, in cash or Common Stock, equal to the
fair market value or other specified value of a number of shares of
Common Stock on the rights exercise date over a specified strike
price ("SARs");
o restricted or unrestricted grants of Common Stock or units
denominated in Common Stock ("Stock Awards");
o grants denominated in cash ("Cash Awards"); and
o grants denominated in cash, Common Stock, units denominated in
Common Stock or any other property which are made subject to the
attainment of one or more performance goals ("Performance
Awards").
Subject to the limitations described below, the Committee will determine
the recipients of Employee Awards and the terms, conditions and limitations
applicable to each Employee Award, which conditions may, but need not, include
continuous service with the Company, achievement of specific business objectives
or goals, increases in specified indices or other comparable measures of
performance. The Committee may grant Employee Awards (1) singly, (2) in
combination or tandem with other Employee Awards, (3) in replacement of or as
alternatives to prior Employee Awards or (4) in combination or tandem with, in
replacement of or as alternatives to rights under any other employee plan of the
Company or any
45
<PAGE>
acquired entity. The exercise price of an Option may be paid with cash or,
according to methods determined by the Committee, with Common Stock or any other
Employee Award the exerciser has owned for at least six months. Performance
Awards may include more than one performance goal, and a performance goal may be
based on one or more business criteria applicable to the grantee, the Company as
a whole or one or more of the Company's business units and may include any of
the following: increased revenue; net income; stock price; market share;
earnings per share; return on equity or assets; or decreased costs or other
liabilities.
The Incentive Plan parameters respecting Employee Awards include the
following:
o an Option may be either an incentive stock option (an "ISO") that
meets, or a nonqualified stock option (an "NSO") that does not
meet, the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and, unless the Committee
specifies otherwise, must have an exercise price of not less than
the fair market value of a share of Common Stock on the date of
grant;
o the Committee must establish the performance goal or goals for each
Performance Award prior to the earlier to occur of (1) 90 days
after the commencement of the performance measurement period for
that Award and (2) the elapse of 25% of that period, and in any
event while it is substantially uncertain whether the goal or goals
will be met (this limitation does not apply to Independent
Contractor Awards); and
o the Committee may not grant any Employee: (1) during any one-year
period, (a) Options or SARs covering more than 250,000 shares of
Common Stock or (b) Stock Awards covering or relating to more than
10,000 shares of Common Stock (the limitations referred to in this
clause (1) being the "Stock-based Awards Limitations"); or (2)
Cash Awards (including Performance Awards denominated in cash)
having a value determined on the date of grant in excess of $1
million (these limitations do not apply to Independent Contractor
Awards).
We are currently developing a performance-based annual cash bonus program
under the Incentive Plan. Participants in that program would be eligible to earn
bonuses equal to specified percentages of their annual base salaries.
NONEMPLOYEE DIRECTOR AWARDS. Nonemployee Director Awards will be granted
either automatically or at the option of Nonemployee Directors in lieu of
director's fees. On the closing of this offering, we will automatically grant
each Nonemployee Director who is not an owner of a Founding Company NSOs to
purchase 10,000 shares of Common Stock. In addition, on the first business day
of the month following the date on which each annual meeting of our stockholders
is held (each an "Annual Director Award Date"), we will automatically grant each
Nonemployee Director NSOs to purchase 5,000 shares of Common Stock. The Board
may increase subsequent annual Director Awards to not more than 15,000 shares.
We will automatically grant to any person who first becomes a Nonemployee
Director after the date this offering closes otherwise than by election at an
annual meeting of stockholders, on the date of his or her election, NSOs to
purchase the number of shares of Common Stock equal to the product of (1) 10,000
and (2) a fraction, the numerator of which is the number of days between the
election of that Nonemployee Director and the next scheduled Annual Director
Award Date (or, if that date then has not been scheduled, the date that is the
first anniversary of the then immediately preceding Annual Director Award Date,
if any) and the denominator of which is 365. For purposes of any Director Awards
we grant prior to the scheduling of the 2000 annual meeting of stockholders, a
date in the year 2000 approved by the Board will be deemed the initial Annual
Director Award Date. Each NSO granted to Nonemployee Directors will:
o have a five-year term;
o have an exercise price per share equal to the fair market value of
a Common Stock share on the date of grant (the initial public
offering price in the case of NSOs granted on the closing of this
offering), which must be paid in full at the time of exercise to
the extent exercised; and
o become exercisable on the date that is 180 days after the date of
grant.
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If a Nonemployee Director resigns from the Board without the consent of a
majority of the other directors, his or her NSOs may be exercised only to the
extent they were exercisable on the resignation date.
A Nonemployee Director may make an annual election to receive, in lieu of
all or any portion of the director's fees he or she would otherwise receive in
the next year (including both annual retainer fees, if any, and meeting fees), a
restricted Stock Award covering a number of shares of Common Stock having a fair
market value equal to the quotient obtained by dividing (1) the dollar amount of
fees the Nonemployee Director elects to forego in the next year in exchange for
restricted Stock Awards by (2) the fair market value of a share of Common Stock
on the date of the election.
OTHER PROVISIONS. If the Committee approves, payments in respect of
Employee Awards may be deferred, either in the form of installments or a future
lump-sum payment, by any Employee. At the discretion of the Committee, an
Employee may be offered an election to substitute an Award for another Award or
Awards of the same or different type.
We will have the right to deduct applicable taxes from any Employee Award
payment and withhold, at the time of delivery or vesting of cash or shares of
Common Stock under the Incentive Plan, an appropriate amount of cash or number
of shares of Common Stock, or combination thereof, for the payment of taxes. The
Committee may (1) permit withholding to be satisfied by the transfer to USC of
shares of Common Stock previously owned by the holder of the Employee Award for
which withholding is required and (2) cause us to make a short-term or demand
loan to any Employee or Independent Contractor to permit the payment of taxes
required by law.
The Board may amend, modify, suspend or terminate the Incentive Plan for
the purpose of addressing any changes in legal requirements or for any other
lawful purpose, except that no change that would impair the rights of any holder
of an Award with respect to that Award may be made without the consent of that
holder.
If any subdivision, split or consolidation of outstanding shares of Common
Stock, or any declaration of a stock dividend payable in shares of Common Stock,
occurs, the Board will make appropriate adjustments to (1) the number of shares
of Common Stock reserved under the Incentive Plan, (2) the number of shares of
Common Stock covered by outstanding Awards in the form of Common Stock or units
denominated in Common Stock, (3) the exercise or other price in respect of such
Awards, (4) the appropriate fair market value and other price determinations for
Awards in order to reflect such transactions, (5) the number of shares of Common
Stock covered by Options automatically granted to Nonemployee Directors, (6) the
number of shares covered by restricted Stock Awards automatically granted to
Nonemployee Directors and (7) the Stock-based Awards Limitations.
If any recapitalization or capital reorganization of USC, any consolidation
or merger of USC with another corporation or entity, any adoption by USC of any
plan of exchange affecting the Common Stock or any distribution to holders of
Common Stock of securities or property (other than normal cash dividends)
occurs, the Board will make such adjustments or other provisions as it in its
sole discretion may deem equitable, including adjustments to the amounts or
other items referred to in clauses (2), (3), (4), (5), (6) and (7) of the
immediately preceding paragraph, to give effect to such transaction. In the
event of a corporate merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, the Board will be authorized in its
sole discretion, to (1) issue or assume Awards by means of substitution of new
Awards for previously issued Awards or to assume previously issued Awards as
part of such adjustment, (2) make provision, prior to the transaction, for the
acceleration of the vesting and exercisability of, or lapse of restrictions with
respect to, Awards and the termination of options that remain unexercised at the
time of such transaction or (3) provide for the acceleration of the vesting and
exercisability of Options and the cancellation thereof in exchange for such
payment as the Board in its sole discretion determines is a reasonable
approximation of the value thereof.
TAX IMPLICATIONS OF AWARDS. The following summarizes the United States
federal income tax consequences to Employees, Nonemployee Directors and USC as a
result of the grant and exercise of
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Awards under the Incentive Plan. It does not address the consequences of the
Incentive Plan under any other tax laws.
No grant of any Option or SAR will constitute realized taxable income to
the grantee. Each exerciser of an SAR or NSO will (1) recognize ordinary income
in an amount equal to the excess of (a) the amount of cash and the fair market
value of the Common Stock received over (b) the exercise price (if any) paid
therefor and (2) generally have a tax basis in any shares of Common Stock
received pursuant to the exercise of an SAR or the cash exercise of an NSO which
equals the fair market value of those shares on the date of exercise.
An Employee will not have taxable income as a result of exercising an ISO,
but the excess of the fair market value of the shares of Common Stock received
on that exercise ("ISO Stock") over the exercise price may cause the Employee
to incur alternative minimum tax ("AMT"). An Employee's payment of AMT
attributable to an ISO exercise would be allowed as a credit against his regular
tax liability in a later year to the extent his regular tax liability exceeds
his AMT for that year.
On the disposition of ISO Stock that has been held for the requisite
holding period (generally, at least two years from the date of grant and one
year from the date of exercise of the ISO), the Employee generally will
recognize capital gain (or loss) equal to the difference between the amount he
received in the disposition and the amount he paid as the exercise price for the
ISO Stock. If an Employee disposes of ISO Stock he has not held for the
requisite holding period (a "disqualifying disposition"), he will (1)
recognize ordinary income to the extent that the fair market value of the ISO
Stock at the time of exercise of the ISO (or, if less, the amount realized in
the case of an arm's-length disqualifying disposition to an unrelated party)
exceeds the amount he paid as the exercise price for such ISO Stock and (2)
recognize capital gain to the extent the amount realized in the disqualifying
disposition exceeds the fair market value of the ISO Stock on the exercise date.
If the exercise price paid for the ISO Stock exceeds the amount realized in the
disqualifying disposition (in the case of an arm's-length disposition to an
unrelated party), that excess generally would constitute a capital loss.
Under current rulings, if an Option holder uses shares of Common Stock he
already owns (other than ISO Stock he has not held for the requisite holding
period) to pay all or any part of the exercise price of that Option, (1) he will
recognize income respecting the Common Stock he receives as described above, (2)
no additional gain will be recognized as a result of the transfer of shares used
as payment and (3) shares so received, up to the number of shares so used, will
have a tax basis that equals, and a holding period that includes, the tax basis
and holding period of the shares of Common Stock surrendered in satisfaction of
that exercise price. Any additional shares of Common Stock received on exercise
will have a tax basis that equals the amount of cash (if any) paid by the
exerciser.
When cash is paid or first made available to the recipient of a Cash Award
or Performance Award, that cash will constitute ordinary compensation income to
the recipient which is taxable at that time. When Common Stock is delivered
pursuant to a Stock Award or a Performance Award, or when Common Stock or cash
is delivered pursuant to a Stock Award denominated in units of Common Stock, the
recipient generally will recognize ordinary compensation income at that time
which is equal to the amount received (that amount being, in the case of Common
Stock, its fair market value when received), except that: if an Incentive Plan
participant receives Common Stock pursuant to a Stock Award or Performance Award
and that stock then is both nontransferable and subject to a substantial risk of
forfeiture, the participant may elect to recognize ordinary compensation income
equal to the then fair market value of the stock received or to defer such
recognition until such time, if ever, as the stock received first becomes both
transferable and no longer subject to a substantial risk of forfeiture, at which
time the participant would recognize ordinary compensation income equal to the
fair market value at that time of the stock previously received. If dividends
are paid or accrued on Common Stock included in a Stock Award or Performance
Award prior to the time the recipient of that Award recognizes ordinary
compensation income in respect of that stock, those dividends will be taxable as
compensation income rather than as dividend income. The tax basis of Common
Stock an Incentive Plan participant receives pursuant to a Stock Award or
Performance Award
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will be the amount the participant recognizes as compensation income in respect
of that stock, and the holding period of that stock will begin on the date of
that recognition.
When an Employee recognizes compensation income from the exercise of an SAR
or NSO or in respect of Common Stock, cash or other property received pursuant
to a Cash Award, Performance Award or Stock Award, he will be subject to
withholding by USC for federal (and generally for state and local) income tax at
that time.
Subject to the Code limitations described below, we (or one of our
subsidiaries) generally will be entitled to a deduction for federal income tax
purposes which corresponds as to amount and timing with the compensation income
realized by Incentive Plan participants relating to Awards made to them. The
Code limits deductions to amounts constituting both reasonable compensation for
services rendered or to be rendered and ordinary, necessary business expenses.
Code Section 280G, which disallows deductions of amounts constituting excess
parachute payments made or deemed made in connection with a change in control of
an employer, and Code Section 162(m), which generally limits to $1 million the
deductibility of compensation paid to certain employees of USC in any one
taxable year, could limit the ability of USC (or a subsidiary) to deduct amounts
taxable as compensation income to Incentive Plan participants. In the case of
performance-based compensation, exceptions to Code Section 162(m) currently
apply if certain requirements are met. USC intends generally to satisfy these
requirements in connection with the grant and payment of performance-based
Awards (including certain Options and SARS), but no assurance can be given USC
will be able to satisfy these requirements in all cases and USC may, in its sole
discretion, determine in one or more cases that it is in its best interests not
to satisfy these requirements even if it is able to do so.
OTHER PLANS
We intend to adopt deferred compensation, supplemental disability,
supplemental life and retirement or other benefit or welfare plans in which our
executive officers will be eligible to participate.
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CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
We issued and sold 200 shares of Common Stock in October 1997 to Main
Street for $10.00 per share. Mr. Foster, our Chairman of the Board, is a
Managing Director of Main Street. In December 1998, we issued and sold 20 shares
of Common Stock to Mr. Martineau and 15 shares of Common Stock to Mr. Harlan
(and his family trust), in each case for $10 per share. As a result of a March
1999 10,000-for-1 stock split of all these shares and a subsequent
reclassification of Main Street's shares as a share of our Class A Common Stock,
Main Street now owns one share of Class A Common Stock and Messrs. Martineau and
Harlan (and his family trust) own 200,000 and 150,000 shares, respectively, of
the Common Stock. The share of Class A Common Stock automatically will convert
into 1,602,255 shares of Common Stock before this offering closes.
In March 1999, following the stock split, we issued 801,000 shares of
Common Stock to American Ready-Mix, L.L.C. ("American Ready-Mix"), a company
formed by Auburn Capital, L.L.C. and National Acquisition Services, L.L.C., for
nominal consideration. Eugene P. Martineau, our chief executive officer and a
director of USC, and Murray S. Simpson, who will become a director of USC when
this offering closes, each own an equity interest in American Ready-Mix. We
issued 50,000 shares to Charles Sommer in March 1999 for nominal consideration.
As a result of these issuances, Messrs. Martineau, Harlan and Sommer, Main
Street and American Ready-Mix collectively will own 17.9% of the total shares
outstanding immediately after our initial aquisitions and this offering close.
Since August 1998, Main Street has advanced funds to enable us to pay our
expenses in connection with our efforts to effect our initial acquisitions and
this offering. At March 16, 1999, these advances totaled $830,000. The note
evidencing these advances bears interest at the rate of 6% per annum. Our
estimated expenses of this offering ($3.0 million) include these advances, and
we will repay them, plus accrued interest, from our gross proceeds from this
offering.
Concurrently with the closing of this offering, we will close our initial
acquisitions. The aggregate consideration we will pay for these acquisitions at
that time consists of (1) approximately $23.3 million in cash and (2) 8,985,288
shares of Common Stock. We also will assume all the indebtedness of the Founding
Companies (which totaled approximately $19.2 million as of December 31, 1998 on
a pro forma basis), all of which we will either repay with a portion
(approximately $3.7 million) of our net proceeds from this offering or refinance
with our initial borrowings under our credit facility.
The following table sets forth the consideration we will pay to purchase
each of the Founding Companies, excluding additional amounts that may become due
as a result of post-closing adjustments:
SHARES OF
CASH(1) COMMON STOCK
----------- ------------
(DOLLARS IN THOUSANDS)
Central.............................. $ 3,888 3,120,130
Walker's............................. 6,331 2,234,339
Bay Cities........................... 8,602 1,871,310
Opportunity.......................... 1,430 1,034,291
Baer................................. 1,200 423,529
Santa Rosa........................... 1,861 301,689
----------- ------------
$23,312 8,985,288
- - ------------
(1) Excludes possible increases and decreases as a result of working capital
adjustments. In the case of each of Central, Walker's, Bay Cities and
Opportunity, we have agreed that if that Founding Company has working
capital when this offering closes which (1) exceeds a specified minimum and
(2) includes cash and cash equivalents that also exceed a specified minimum,
we will pay that Founding Company's owners additional cash consideration in
an amount equal to the lesser of that excess in cash or cash equivalents or
the following amount: Central -- $3.7 million; Walker's -- $2.5 milion; Bay
Cities -- $2.6 million; and Opportunity -- $1.0 million. Also excludes, in
the case of Baer, approximately $600,000 its former owner will use
immediately after this offering closes to purchase for cash at no more than
their respective fair market values life insurance policies, notes owed by
his family members and other assets.
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Central, Opportunity and Santa Rosa are S corporations. Before this
offering closes, they will make distributions in cash or other assets or
short-term notes to their owners in amounts equal to the balances of their
retained earnings on which those owners have paid or will pay income taxes,
including 1999 earnings. At December 31, 1998, those balances were as follows:
Central -- $8.7 million; Opportunity -- $2.5 million; and Santa Rosa -- $0.7
million. Also, before this offering closes, Central will distribute assets
having a total book value of approximately $1.1 million to it owners.
Also, before this offering closes, Central will distribute assets having a
total book value of approximately $1.1 million to its owners.
We negotiated the purchase price we will pay for each Founding Company
through arm's-length negotiations between us and one or more owners or
representatives of that Founding Company. We used the same general valuation
methodology to determine the purchase price we were willing to pay for each
Founding Company.
The closing of each Acquisition is subject to customary conditions,
including, among others: (1) the continuing accuracy of the representations and
warranties made by the applicable Founding Company, its stockholders and us; (2)
the performance of each of their respective covenants in their acquisition
agreement includes; and (3) the absence of any legal action or proceeding
reasonably likely to result in a material adverse change in the business,
results of operations or financial condition of the Founding Company prior to
the closing date.
When this offering closes, some of the Founding Companies will have
indebtedness outstanding which their owners have personally guaranteed or which
they owe to their owners. We intend to use a portion of our net proceeds from
this offering and borrowings under the Credit Facility to repay substantially
all that indebtedness.
In the acquisition agreements, all principal owners of each of the Founding
Companies have agreed not to compete with us for a period of five years
commencing on the date this offering closes.
In connection with the acquisitions, we will grant registration rights to
former stockholders of the Founding Companies. See "Shares Eligible for Future
Sale."
ACQUISITIONS INVOLVING CERTAIN DIRECTORS, OFFICERS AND STOCKHOLDERS
Persons who will become our directors, executive officers or beneficial
owners of 5% or more of our Common Stock will receive the following
consideration in the acquisitions for their equity interests in the Founding
Companies, excluding additional amounts that may become due as a result of
post-closing adjustments:
SHARES OF
NAME CASH COMMON STOCK
- - ------------------------------------- --------- ------------
William T. Albanese(1)............... $ 1,637 1,313,575
Thomas J. Albanese(2)................ 1,637 1,313,575
Michael D. Mitschele(3).............. 1,200 423,529
Gloria Satterfield................... 4,126 897,667
Murray S. Simpson(4)................. 327 233,760
Neil J. Vannucci..................... 4,126 897,667
Robert S. Walker(5).................. 6,331 2,234,339
--------- ------------
Total........................... $ 19,384 7,314,112
========= ============
- - ------------
(1) Includes amounts deemed beneficially received by Mr. Albanese as co-trustee
of the William T. Albanese 1981 Trust.
(2) Includes amounts deemed beneficially received by Mr. Albanese as co-trustee
of the Thomas J. Albanese Trust, as amended.
(3) Excludes approximately $600,000 in cash Mr. Mitschele will use immediately
after this offering closes to purchase life insurance policies and other
assets from Baer. See "--Real Estate and Other Transactions."
(4) Includes (i) 116,880 shares deemed beneficially received by Mr. Simpson's
wife as trustee of the MSS 1998 GRAT, (ii) 116,880 shares deemed
beneficially received by Mr. Simpson as trustee of the
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
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CSS 1998 GRAT and (iii) 68,085 shares deemed beneficially received through
Mr. Simpson's and his family's ownership in American Ready-Mix.
(5) Includes amounts deemed beneficially received by Mr. Walker as co-trustee of
the Walker Family Trust and as general partner of Karob Investment Co., L.P.
REAL ESTATE AND OTHER TRANSACTIONS
When this offering closes, we will enter into new facilities lease
arrangements (and in some cases, extend existing lease arrangements) with
stockholders (or affiliates thereof) of Central and Baer. Those leases generally
will provide for initial lease terms of 15 to 20 years, with one or more
extension options we may exercise. The following summarizes the initial annual
rentals to be paid to the stockholders (or affiliates thereof) of the indicated
Founding Companies during the initial lease terms:
NUMBER OF AGGREGATE
FOUNDING COMPANY FACILITIES ANNUAL RENTALS
- - ------------------------------------- --------- --------------
Central......................... 2 $272,400
Baer............................ 2 228,000
We believe the consideration to be paid under each of the leases described
above is at fair market rates. William T. Albanese, an owner of Central, and
Michael D. Mitschele, the owner of Baer, will become members of our Board of
Directors when this offering closes.
In January 1999, Central distributed to its stockholders one of the
facilities we will lease from them. The facility has a carrying value of
approximately $1.1 million at the time of distribution.
Central purchases aggregates and related services from time to time from a
company in which two trusts of which William T. Albanese and Thomas J. Albanese
are co-trustees. Central's purchases from this company totaled $81,000 in 1996,
$104,000 in 1997 and $274,000 in 1998. We expect to continue these purchases on
customary terms.
Walker's, one of the Founding Companies, historically has used a company
Robert S. Walker owns for raw materials trucking services. Walker's paid this
company $293,000 in 1996, $657,000 in 1997 and $772,000 in 1998 for these
hauling services. We believe the financial and other terms pursuant to which
this company performs these services are fair and substantially equivalent to
terms we could obtain from an unaffiliated third party. We expect to continue
this arrangement following the closing of this offering. Mr. Walker will become
one of our directors when this offering closes.
Bay Cities sells materials from time to time to a contracting company in
which Gloria Satterfield, an owner of Bay Cities, has a 50% ownership interest.
Its sales to this company totaled $157,000 in 1996, $62,000 in 1997 and $87,000
in 1998. At December 31, 1998, Bay Cities had an outstanding account receivable
from this company in the amount of $309,000 which we expect Bay Cities will
collect before this offering closes. Bay Cities may continue to make sales to
this company on customary terms.
Immediately following the closing of this offering, Michael D. Mitschele,
the current owner of Baer, will use approximately $600,000 of his cash proceeds
from our acquisition of Baer to purchase from Baer life insurance policies,
notes owed by his family members and other assets at no more than their
respective fair market values (which we estimate will total approximately
$600,000). Mr. Mitschele will become one of our directors when this offering
closes.
COMPANY POLICY
Except as we describe above, in the future, we expect any transactions with
our directors, officers, employees or affiliates will be minimal and will, in
any case, be approved by a majority of our Board, including a majority of its
disinterested members.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of our Common Stock
immediately after this offering closes of: (1) each person who then will
beneficially own more than five percent of the shares of our Common Stock then
outstanding; (2) each of our executive officers; (3) each person who then will
be one of our directors; and (4) all of our directors and executive officers as
a group.
SHARES TO BE
BENEFICIALLY OWNED
----------------------
BENEFICIAL OWNER NUMBER PERCENT
- - ------------------------------------- ----------- -------
Robert S. Walker(1).................. 2,234,339 14.3%
Main Street Merchant Partners II,
L.P................................ 1,602,255 10.2%
Vincent D. Foster(2)................. 1,602,255 10.2%
Thomas T. Albanese(3)................ 1,313,575 8.4%
William T. Albanese(4)............... 1,313,575 8.4%
Gloria Satterfield................... 897,667 5.7%
Neil J. Vannucci..................... 897,667 5.7%
American Ready-Mix L.L.C. ........... 801,000 5.1%
Michael D. Mitschele................. 423,529 2.7%
Murray S. Simpson(5)................. 301,845 1.9%
Eugene P. Martineau(6)............... 300,000 1.9%
Michael W. Harlan(7)................. 150,000 *
Charles W. Sommer.................... 50,000 *
John R. Colson(8).................... 25,000 *
Peter T. Dameris(8).................. 25,000 *
Directors and executive officers as a
group (11 persons)................. 7,323,210 46.8%
- - ------------
* Less than one percent.
(1) Includes amounts deemed beneficially received by Mr. Walker as co-trustee of
the Walker Family Trust and as general partner of Karob Investment Co., L.P.
(2) Includes 1,602,255 shares issued to Main Street Merchant Partners, II, L.P.
of which Mr. Foster is a managing director.
(3) Includes amounts deemed beneficially received by Mr. Albanese as co-trustee
of the Thomas J. Albanese Trust.
(4) Includes amounts deemed beneficially received by Mr. Albanese as co-trustee
of the William T. Albanese 1981 Trust.
(5) Includes (i) 116,880 shares deemed beneficially owned by Mr. Simpson's wife
as trustee of the MSS 1998 GRAT, (ii) 116,880 shares deemed beneficially
owned by Mr. Simpson as trustee of the CSS 1998 GRAT and (iii) 68,085
shares deemed beneficially owned by Mr. Simpson through his family's
ownership in American Ready-Mix, L.L.C. Mr. Simpson disclaims beneficial
ownership of all 301,845 shares.
(6) Includes 100,000 shares owned by American Ready-Mix L.L.C., of which Mr.
Martineau owns a 12.5% interest.
(7) Includes 50,000 shares owned by Michael Harlan, as trustee of the Michael
and Bonnie Harlan 1996 Trust.
(8) Shares shown do not include shares that Messrs. Colson and Dameris intend to
acquire directly from the underwriters in connection with this offering.
Except as otherwise indicated, the address of each person listed in the
above table is U.S. Concrete, Inc., 1360 Post Oak Blvd., Suite 800 Houston,
Texas 77056. All persons listed have sole voting and investment power with
respect to their shares unless otherwise indicated.
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SHARES ELIGIBLE FOR FUTURE SALE
The market price of our Common Stock could drop because of sales of a large
number of shares in the open market after this offering or the perception that
those sales could occur. These factors also could make it more difficult for us
to raise funds through future offerings of Common Stock.
When this offering closes, 15,638,543 shares of Common Stock will be
outstanding. The public may freely trade the shares we sell in this offering. We
have not registered our remaining outstanding shares under the Securities Act,
and their holders may resell them only following their effective registration
under the Securities Act or pursuant to an available exemption from the
Securities Act's registration requirements.
Holders of our currently outstanding shares and those to whom we issue
shares in connection with our initial acquisitions generally will be able to
sell these shares in the open market beginning in , 2000 if they comply
with Securities Act Rule 144. From that time and until , 2001, Rule
144 generally will permit holders of these shares to sell any number of shares
that does not exceed the greater of the following within any three-month period:
o 1% of the then outstanding shares (156,385 shares immediately on
closing of this offering); and
o the average weekly trading volume during a preceding period of four
calendar weeks.
Beginning in , 2001, these volume limitations will not apply to holders of
these shares who are not, at the time of sale or at any time during the
preceding three months, our affiliates.
It is possible that the Securities and Exchange Commission (the "SEC")
will amend Rule 144 to permit holders of our unregistered shares to sell them
sooner and in larger amounts than Rule 144 currently permits.
For a period of 180 days following the date of this prospectus (the
"Lockup Period"), we may issue shares of Common Stock in connection with
acquisitions or pursuant to Incentive Plan Awards or the warrant we refer to
below, but otherwise we may not issue any shares without the prior written
consent of Scott & Stringfellow, Inc.
Our executive officers, directors and current stockholders and the owners
of the Founding Companies have agreed with us that they will not sell any shares
of Common Stock they own when this offering closes for a period of one year
following that closing. After that time, they may exercise "piggyback"
registration rights we have granted them which would enable them to sell those
shares, generally at our expense, as a part of any public offering we register
under the Securities Act to sell additional unissued shares of Common Stock. We
may limit the number of shares we have to register on behalf of these holders in
any offering if the managing underwriter or our financial advisor determines
that market conditions so require.
We intend to register 3,000,000 shares of Common Stock under the Securities
Act shortly after this offering closes for issuance in connection with future
acquisitions. Pursuant to Securities Act Rule 145, the volume limitations and
certain other requirements of Rule 144 will apply to resales of these shares by
affiliates of the businesses we acquire for a period of one year from the date
of their acquisition (or such shorter period as the SEC may prescribe).
Otherwise holders of these shares who are not our affiliates could resell these
shares without restriction in the open market unless we contractually restrict
their sale, and sales of these shares during the Lockup Period would require the
prior written consent of Scott & Stringfellow, Inc.
When this Offering closes, we will have (1) Incentive Plan options
outstanding to purchase up to a total of 1,150,000 shares of Common Stock and
(2) warrants outstanding to purchase up to 200,000 shares of Common Stock which
we will issue to the representatives of the underwriters for this offering for
services they will render through the date this offering closes. See
"Underwriting." We will file a registration statement on Form S-8 under the
Securities Act to register the shares of Common Stock we will issue pursuant to
the Incentive Plan. Holders of these shares generally may resell them publicly,
subject to the volume and other limitations of Rule 144 in the case of holders
who are our affiliates.
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DESCRIPTION OF CAPITAL STOCK
When this offering closes, our restated certificate of incorporation (the
"Charter") will authorize us to issue 40,000,000 shares of Common Stock and
5,000,000 shares of preferred stock, par value $.001 per share ("Preferred
Stock"). At that time, we will have (1) issued 15,638,543 shares of Common
Stock (all of which then will be outstanding and nonassessable), (2) reserved
2,000,000 shares of Common Stock for issuance pursuant to all then outstanding
options (consisting only of Incentive Plan options) and (3) reserved 200,000
shares of Common Stock for issuance pursuant to the warrant we will issue to the
representatives of the underwriters for this offering for services they will
render through the date this offering closes. We will not issue any shares of
Preferred Stock before that time. Our Board does not presently intend to seek
the approval of our stockholders before we issue any of our currently authorized
stock, unless law or the applicable rules of any stock exchange or market
otherwise require. We refer you to the Charter, which is an exhibit to the
Registration Statement, which qualifies the following summary in its entirety by
this reference.
COMMON STOCK
Each share of Common Stock (1) has one vote in the election of each
director and on other corporate matters (other than any matter that solely
relates to the terms of any outstanding series of Preferred Stock or the number
of shares of that series and does not affect the number of authorized shares of
Preferred Stock or the powers, privileges and rights pertaining to the Common
Stock), (2) affords no cumulative voting or preemptive rights and (3) is not
convertible, redeemable, assessable or entitled to the benefits of any sinking
or repurchase fund. Holders of Common Stock will be entitled to dividends in
such amounts and at such times as our Board in its discretion may declare out of
funds legally available therefor. See "Dividend Policy."
PREFERRED STOCK
At the direction of our Board, we may issue shares of Preferred Stock from
time to time. Subject to certain Charter provisions and applicable law, our
Board may, without any action by holders of the Common Stock, (1) adopt
resolutions to issue the shares in one or more classes or series, (2) fix the
number of shares and change the number of shares constituting any class or
series and (3) provide for or change the voting powers, designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including dividend rights
and rates, redemption terms and prices, repurchase obligations, conversion
rights and liquidation preferences, of the shares constituting any class or
series.
We may issue shares of, or rights to purchase, Preferred Stock the terms of
which might (1) discourage an unsolicited proposal to acquire us, (2) facilitate
a particular business combination involving us or (3) adversely affect the
voting power of holders of the Common Stock. Any such action could discourage a
transaction that some or a majority of our stockholders might believe to be in
their best interests or in which our stockholders might receive a premium for
their stock over its then market price.
STOCKHOLDER RIGHTS PLAN
Each share of Common Stock offered hereby includes one right ("Right") to
purchase from us a unit consisting of one one-hundredth of a share (a
"Fractional Share") of our Series A Junior Participating Preferred Stock, par
value $.001 per share (the "Junior Participating Preferred Stock"), at a
purchase price of $ per Fractional Share, subject to adjustment in certain
events (the "Purchase Price"). We refer you to the Rights Agreement between a
rights agent (the "Rights Agent") and us (the "Rights Agreement"), the form
of which is an exhibit to the Registration Statement, which qualifies the
following summary of the Rights in its entirety by this reference.
Initially, (1) the Rights will attach to all certificates representing
outstanding shares of Common Stock, including the shares we sell in this
offering, and (2) we will not distribute separate certificates for the Rights
("Rights Certificates"). The Rights will separate from the Common Stock and a
"Distribution Date" will, with certain exceptions, occur on the earlier of (1)
10 days following a public announcement that a person
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or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding shares of Common Stock (the date of the announcement being
the "Stock Acquisition Date") or (2) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person's
becoming an Acquiring Person. Our Board may defer the Distribution Date in some
circumstances, and some inadvertent acquisitions will not result in a person's
becoming an Acquiring Person if the person promptly divests itself of sufficient
Common Stock. Until the Distribution Date, (1) Common Stock certificates will
evidence the Rights, (2) the Rights will be transferable only with those
certificates, (3) those certificates will contain a notation incorporating the
Rights Agreement by reference and (4) the surrender for transfer of any of those
certificates also will constitute the transfer of the Rights associated with the
stock that certificate represents.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on , 2009, unless we earlier redeem or
exchange them as we describe below.
As soon as practicable after the Distribution Date, the Rights Agent will
mail Rights Certificates to holders of record of Common Stock as of the close of
business on the Distribution Date and, from and after the Distribution Date, the
separate Rights Certificates alone will represent the Rights. We will issue
Rights with all shares of Common Stock we issue prior to the Distribution Date.
We also will issue Rights with shares of Common Stock we issue after the
Distribution Date pursuant to Incentive Plan Awards we grant prior to the
Distribution Date, any other employee plan or arrangement we enter into prior to
the Distribution Date or to the exercise, conversion or exchange of securities,
options, rights or warrants we issue prior to the Distribution Date. Except as
our Board may determine otherwise, we will not issue Rights with any other
shares of Common Stock we issue after the Distribution Date.
In the event (a "Flip-In Event") that a person becomes an Acquiring
Person (except pursuant to a tender or exchange offer for all outstanding shares
of Common Stock at a price and on terms that a majority of the independent
members of the Board determines to be fair to and otherwise in the best
interests of USC and its stockholders (a "Permitted Offer")), each holder of a
Right will thereafter have the right to receive, on exercise of that Right, a
number of shares of Common Stock (or, in certain circumstances, cash, property
or other securities of USC) having a Current Market Price (as defined in the
Rights Agreement) equal to two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of any Triggering Event
(as defined below), all Rights that are, or (under the circumstances the Rights
Agreement specifies) were, beneficially owned by an Acquiring Person (or by
certain related parties) will be null and void in the circumstances the Rights
Agreement specifies. Rights will not become exercisable following the occurrence
of any Flip-In Event until such time as we may no longer redeem them as we
describe below.
In the event (a "Flip-Over Event") that, at any time from and after the
time an Acquiring Person becomes such, (1) we are acquired in a merger or other
business combination transaction (other than certain mergers that follow a
Permitted Offer) or (2) 50% or more of the Company's assets or earning power is
sold or transferred, each holder of a Right (except Rights that previously have
become void as we describe above) shall thereafter have the right to receive, on
exercise of such Right, a number of shares of common stock of the acquiring
company having a Current Market Price equal to two times the exercise price of
the Right. We refer to Flip-In Events and Flip-Over Events collectively as
"Triggering Events."
The number of outstanding Rights associated with a share of Common Stock,
or the number of Fractional Shares of Junior Participating Preferred Stock
issuable on exercise of a Right and the Purchase Price, are subject to
adjustment in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Common Stock occurring prior to the Distribution Date.
The Purchase Price payable, and the number of Fractional Shares of Junior
Participating Preferred Stock or other securities or property issuable, on
exercise of the Rights are subject to adjustment from time to time to prevent
dilution in the event of some transactions affecting the Junior Participating
Preferred Stock.
With some exceptions, the Rights Agreement will not require us to adjust
the Purchase Price until cumulative adjustments amount to at least 1% of the
Purchase Price. It also will not require us to issue fractional shares of Junior
Participating Preferred Stock that are not integral multiples of a Fractional
Share and, in lieu thereof, we will make a cash adjustment based on the market
price of the Junior Participating
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Preferred Stock on the last trading date prior to the date of exercise. Pursuant
to the Rights Agreement, we reserve the right to require prior to the occurrence
of a Triggering Event that, on any exercise of Rights, a number of Rights must
be exercised so that we will issue only whole shares of Junior Participating
Preferred Stock.
At any time until 10 days following the first date of public announcement
of the occurrence of a Flip-In Event, we may redeem the Rights in whole, but not
in part, at a price of $.01 per Right, payable, at our option, in cash, shares
of the Common Stock or such other consideration as our Board may determine.
Immediately on the effectiveness of the action of the Board ordering redemption
of the Rights, the Rights will terminate and the only right of the holders of
Rights as such will be to receive the $.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a person's
becoming the beneficial owner of 50% or more of the shares of Common Stock then
outstanding or the occurrence of a Flip-Over Event, we may, at our option,
exchange the Rights (other than Rights owned by an Acquiring Person or an
affiliate or an associate of an Acquiring Person, which will have become void),
in whole or in part, at an exchange ratio of one share of Common Stock, and/or
other equity securities we deem to have the same value as one share of Common
Stock, per Right, subject to adjustment.
During the time we may redeem the Rights, we may, at the direction of our
Board, amend any of the provisions of the Rights Agreement other than the
redemption price. Thereafter, we may amend the provisions of the Rights
Agreement (other than the redemption price) only (1) to cure any ambiguity,
defect or inconsistency, (2) to make changes that do not materially adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person) or (3) to shorten or lengthen any time period under the Rights
Agreement; provided, however, that we cannot lengthen the time period governing
redemption at such time as the Rights are not redeemable. Until a Right is
exercised, the holder thereof, as such, will have no rights to vote or receive
dividends or any other rights as a stockholder of USC.
The Rights will have certain antitakeover effects. They will cause
substantial dilution to any person or group that attempts to acquire the Company
without the approval of our Board. As a result, the overall effect of the Rights
may be to render more difficult or discourage any attempt to acquire us, even if
that acquisition may be favorable to the interests of our stockholders. Because
our Board can redeem the Rights or approve a Permitted Offer, the Rights should
not interfere with a merger or other business combination the Board approves. We
are issuing the Rights to protect our stockholders from coercive or abusive
takeover tactics and to afford our Board more negotiating leverage in dealing
with prospective acquirers.
STATUTORY BUSINESS COMBINATION PROVISION
As a Delaware corporation, we are subject to Section 203 of the Delaware
General Corporation Law (the "DGCL"). Section 203 prevents an "interested
stockholder" (defined generally as a person owning 15% or more of a Delaware
corporation's outstanding voting stock or any affiliate or associate of such
person) from engaging in a broad range of "business combinations" with the
corporation for three years following the date that person became an interested
stockholder unless:
o before that person became an interested stockholder, the board of
directors of the corporation approved the transaction in which that
person became an interested stockholder or approved the business
combination;
o on consummation of the transaction that resulted in that person's
becoming an interested stockholder, that person owned at least 85%
of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are
also officers of the corporation and by employee stock plans that
do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a
tender or exchange offer); or
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o following the transaction in which that person became an interested
stockholder, both the board of directors of the corporation and the
holders of 66 2/3% of the outstanding voting stock of the
corporation not owned by that person approve the business
combination.
Under Section 203, the restrictions described above also do not apply to certain
business combinations proposed by an interested stockholder following the
announcement or notification of one of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors, if a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed those directors by a majority of those directors
approve or do not oppose that extraordinary transaction.
OTHER MATTERS
Delaware law authorizes Delaware corporations to limit or eliminate the
personal liability of their directors to them and their stockholders for
monetary damages for breach of a director's fiduciary duty of care. The duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations Delaware law authorizes,
directors of Delaware corporations are accountable to those corporations and
their stockholders for monetary damages for conduct constituting gross
negligence in the exercise of their duty of care. Delaware law enables Delaware
corporations to limit available relief to equitable remedies such as injunction
or rescission. The Charter limits the liability of our directors to us or our
stockholders to the fullest extent Delaware law permits, and no member of our
Board will be personally liable for monetary damages for breach of the member's
fiduciary duty as a director, except for liability:
o for any breach of the member's duty of loyalty to us or our
stockholders;
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
o for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL; or
o for any transaction from which the member derived an improper
personal benefit.
This Charter provision could have the effect of reducing the likelihood of
derivative litigation against our directors and may discourage or deter our
stockholders or management from bringing a lawsuit against our directors for
breach of their duty of care, even though such an action, if successful, might
otherwise have benefited our stockholders and us. Our Bylaws provide
indemnification to our officers and directors and certain other persons with
respect to their conduct in various capacities, and we have entered into
agreements with each of our directors and executive officers which indemnify
them to the fullest extent Delaware law and our Charter permit.
Our Charter provides that our stockholders may act only at an annual or
special meeting of stockholders and may not act by written consent. Our Bylaws
provide that only the Chairman of the Board or a majority of the Board may call
a special meeting of our Board or of our stockholders.
Our Charter provides that our Board will consist of three classes of
directors serving for staggered terms. We contemplate that stockholders will
elect approximately one-third of the Board each year. Board classification 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 that party obtains that control.
Our Charter provides that the number of directors will be as the Board
determines from time to time, but will not be less than three. It also provides
that directors may be removed only for cause (as it defines that term), and then
only by the affirmative vote of the holders of at least a majority of all
outstanding voting stock entitled to vote. This provision, in conjunction with
the Charter provisions authorizing the
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Board to fill vacant directorships, will prevent stockholders from removing
incumbent directors without cause and filling the resulting vacancies with their
own nominees.
STOCKHOLDER PROPOSALS
Our Bylaws contain advance-notice and other procedural requirements that
apply to stockholder nominations of persons for election to the Board at any
annual or special meeting of stockholders and to stockholder proposals that
stockholders take any other action at any annual meeting. In the case of any
annual meeting, a stockholder proposing to nominate a person for election to the
Board or proposing that any other action be taken must give our corporate
secretary written notice of the proposal not less than 90 days and not more than
120 days before the anniversary date of the immediately preceding annual meeting
(subject to certain exceptions our Bylaws provide (1) respecting the 2000 annual
meeting and (2) if the pending annual meeting date differs by more than
specified periods from that anniversary date). If the Chairman of the Board or a
majority of the Board call a special meeting of stockholders for the election of
directors, a stockholder proposing to nominate a person for that election must
give our corporate secretary written notice of the proposal not earlier than 120
days prior to that special meeting and not later than the last to occur of (1)
90 days prior to that special meeting or (2) the 10th day following the day we
publicly disclose the date of the special meeting. Our Bylaws prescribe the
specific information any advance written stockholder notice must contain. We
refer to our Bylaws, which are an exhibit to the Registration Statement, which
qualify the foregoing summary by this reference.
TRANSFER AGENT AND REGISTRAR
will serve as the Transfer Agent and Registrar for
the Common Stock.
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UNDERWRITING
Scott & Stringfellow, Inc. and Sanders Morris Mundy Inc. are acting as
representatives of the underwriters named below. Subject to the terms and
conditions in the underwriting agreement by and between the underwriters and us,
we agreed to sell to the underwriters and the underwriters have severally agreed
to purchase from us the number of shares of Common Stock indicated below
opposite their respective names, at the public offering price less the
underwriting discount set forth on the cover page of this prospectus:
NUMBER
UNDERWRITER OF SHARES
- - ---------------------------------------- ---------
Scott & Stringfellow, Inc...............
Sanders Morris Mundy Inc................
---------
Total.............................. 3,800,000
=========
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent, and that the
underwriters are committed to purchase all the shares of Common Stock offered
hereby if they purchase any. If an underwriter fails to keep its purchase
commitment, the underwriting agreement provides that, in certain circumstances,
the purchase commitments of the nondefaulting underwriters may be increased or
the underwriting agreement may be terminated.
The shares of common stock are being offered by the underwriters, subject
to prior sales, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.
The representatives have advised us that the underwriters propose initially
to offer the Common Stock to the public at the public offering price set forth
on the cover page of this prospectus, and to certain dealers at that price less
a concession of not more than $ per share. The underwriters may allow, and
such dealers may reallow, a discount of not more than $ per share to certain
other dealers. After the initial public offering, the representatives may change
the public offering price and the other selling terms. The Common Stock is
offered subject to receipt and acceptance by the underwriters, and to certain
other conditions, including the right to reject orders in whole or in part.
We have granted an option to the underwriters, exercisable during the
30-day period after the date of this prospectus, to purchase up to a maximum of
570,000 additional shares of Common Stock to cover over-allotments, if any, at
the same price per share as the initial shares to be purchased by the
underwriters. To the extent the underwriters exercise that option, each of the
underwriters will be committed, subject to certain conditions, to purchase such
additional shares in approximately the same proportion as the number of shares
to be purchased initially by that underwriter bears to the total number of
shares to be purchased initially by all the underwriters.
We have agreed to grant the representatives of the underwriters warrants to
purchase an aggregate of 200,000 shares of our common stock at the initial
public offering price. The managing underwriters may exercise the warrants at
any time after the first anniversary of this offering. The warrants will expire
on the third anniversary of this offering.
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The following table shows the per share and total public offering price,
the underwriting discount we will pay to the underwriters and the proceeds we
will receive. This information is presented assuming either no exercise or full
exercise by the underwriters of their over-allotment option.
WITH
PER SHARE WITHOUT OPTION OPTION
--------- -------------- ------
Public Offering Price........... $ $ $
Underwriting Discount........... $ $ $
Proceeds to USC................. $ $ $
We estimate our expenses of this offering (exclusive of the underwriting
discount) will be $ .
Our executive officers and directors beneficially holding shares of common
stock prior to the offering have agreed that during the 180-day period following
the date of the prospectus, (the "Lock-Up Period") they will not (1) directly
or indirectly, offer, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer any shares of
common stock or any securities convertible into or exchangeable or exercisable
for common stock or file any registration statement under the Securities Act
with respect to any of the foregoing or (2) enter into any swap or other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the common stock or any
securities convertible into or exercisable or exchangeable for common stock
whether any such swap or transaction described in clause (1) or (2) above is to
be settled by delivery of common stock or such other securities, in cash or
otherwise, without the prior written consent of Scott & Stringfellow, Inc., on
behalf of the Underwriters.
We have agreed that, for a period of 180 days from the date of this
prospectus we will not, without the prior written consent of Scott &
Stringfellow, Inc., offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, Common Stock, except that we may issue shares of Common Stock
(1) in connection with acquisitions and (2) pursuant to awards under the
Incentive Plan.
The representatives have informed us that the underwriters do not expect to
make sales of Common Stock offered by this prospectus to accounts over which
they exercise discretionary authority in excess of 5% of the number of shares of
Common Stock offered hereby.
The underwriting agreement provides that we will indemnify the underwriters
against certain liabilities, including civil liabilities under the Securities
Act, or will contribute to payments the underwriters may be required to make in
respect thereof.
Prior to this offering, there has been no public trading market for the
Common Stock. Consequently, the initial public offering price of the Common
Stock will be determined by negotiations between the representatives and us.
Among the factors they and we will consider in those negotiations are the
operating histories of the Founding Companies viewed on a combined basis, the
future prospects for the Company and the ready-mixed concrete industry, the
present state of the Company's development, an assessment of the Company's
management, the general condition of the economy and the securities markets at
the time of this offering and the market prices of and demand for publicly
traded common stock of comparable companies in recent periods.
We have applied to have the Common Stock quoted on the Nasdaq National
Market under the symbol "RMIX."
Until the distribution of the Common Stock is completed, rules of the SEC
may limit the ability of the underwriters and certain selling group members to
bid for and purchase the Common Stock. As an exception to these rules, the
representatives are permitted to engage in certain transactions that stabilize
the price of the Common Stock. Such transactions consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the Common Stock.
If the underwriters create a short position in the Common Stock in connection
with this offering, that is, if they sell more shares of Common Stock than are
set forth on the cover page of this prospectus, the representatives may reduce
that short position by
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purchasing Common Stock in the open market. The representatives may also elect
to reduce any short position by exercising all or part of the over-allotment
option described above. The representatives may also impose a penalty bid on
certain underwriters and selling group members. This means that if the
representatives purchase shares of Common Stock in the open market to reduce the
underwriters' short position or to stabilize the price of the Common Stock, they
may reclaim the amount of the selling concession from the underwriters and
selling group members who sold those shares as part of this offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security. Neither we nor any of the underwriters
makes any representation or predictions as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Common
Stock. In addition, neither we nor any of the underwriters makes any
representation that the underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
Two shareholders and directors of Sanders Morris Mundy Inc. are limited
partners in Main Street. The shares of Common Stock these two individuals
beneficially own represent less than 1% of the Common Stock to be outstanding
immediately after this offering closes. These two individuals purchased their
limited partnership interests in Main Street in 1997.
LEGAL MATTERS
Certain legal matters in connection with the sale of the Common Stock
offered hereby are being passed on for USC by Baker & Botts, L.L.P., Houston,
Texas, and for the underwriters by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The audited financial statements of USC and each of the Founding Companies
included in this prospectus and elsewhere in the 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 on such reports given upon the authority of said firm as experts in
accounting and auditing in giving said reports.
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WHERE YOU CAN FIND MORE INFORMATION
We have not previously been subject to the reporting requirements of the
Exchange Act. We have filed the Registration Statement on Form S-1 under the
Securities Act with the SEC with respect to this offering. This prospectus does
not contain all the information the Registration Statement sets forth, or the
exhibits and schedules thereto, in accordance with the rules and regulations of
the SEC, and we hereby refer to that omitted information. The statements this
prospectus makes respecting the content of any contract, agreement or other
document that is an exhibit to the Registration Statement are not necessarily
complete, and we qualify them in their entirety by reference to those exhibits
for complete statements of their provisions. Interested persons may (1) inspect
the Registration Statement and the exhibits and schedules thereto, without
charge, at the public reference facilities of the SEC at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at its regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New York, New
York 10048 and (2) obtain copies of all or any portion of the Registration
Statement at prescribed rates from the Public Reference Section of the SEC at
its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. The SEC maintains an Internet web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. The address of that site is
http://www.sec.gov.
As a result of this offering, we will become subject to the full
informational requirements of the Exchange Act. We will fulfill our obligations
with respect to those requirements by filing periodic reports and other
information with the SEC. We intend to furnish our stockholders with annual
reports that will include a description of our operations and audited
consolidated financial statements certified by an independent public accounting
firm.
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INDEX TO FINANCIAL STATEMENTS
PAGE
----
Unaudited Pro Forma Combined
Financial Statements
Basis of Presentation........... F-2
Unaudited Pro Forma Combined
Balance Sheet -- December 31,
1998........................... F-3
Unaudited Pro Forma Combined
Statement of
Operations -- December 31,
1998........................... F-4
Notes to Unaudited Pro Forma
Combined Financial
Statements..................... F-5
Historical Financial Statements
U.S. Concrete, Inc.
Report of Independent Public
Accountants.................... F-10
Balance Sheets.................. F-11
Statements of Operations........ F-12
Statements of Stockholders'
Equity......................... F-13
Statements of Cash Flows........ F-14
Notes to Financial Statements... F-15
Central Concrete Supply Co., Inc.
Report of Independent Public
Accountants.................... F-19
Balance Sheets.................. F-20
Statements of Operations........ F-21
Statements of Stockholders'
Equity......................... F-22
Statements of Cash Flows........ F-23
Notes to Financial Statements... F-24
Walker's Concrete, Inc.
Report of Independent Public
Accountants.................... F-32
Balance Sheets.................. F-33
Statements of Operations........ F-34
Statements of Stockholders'
Equity......................... F-35
Statements of Cash Flows........ F-36
Notes to Financial Statements... F-37
Bay Cities Building Materials Co.,
Inc. And Subsidiary
Report of Independent Public
Accountants.................... F-44
Consolidated Balance Sheets..... F-45
Consolidated Statements of
Operations..................... F-46
Consolidated Statements of
Stockholders' Equity........... F-47
Consolidated Statements of Cash
Flows.......................... F-48
Notes to Financial Statements... F-49
Opportunity Concrete Corporation
Report of Independent Public
Accountants.................... F-55
Balance Sheet................... F-56
Statement of Operations......... F-57
Statement of Stockholders'
Equity......................... F-58
Statement of Cash Flows......... F-59
Notes to Financial Statements... F-60
Baer Concrete, Incorporated
Report of Independent Public
Accountants.................... F-66
Balance Sheet................... F-67
Statement of Operations and
Other Comprehensive Income..... F-68
Statement of Stockholders'
Equity......................... F-69
Statement of Cash Flows......... F-70
Notes to Financial Statements... F-71
F-1
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U.S. CONCRETE, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to (i) the acquisitions by U.S. Concrete, Inc. ("USC" or the "Company") of
the outstanding capital stock of Central Concrete Supply Co., Inc.
("Central"), Walker's Concrete, Inc. ("Walker's"), Bay Cities Building
Materials Co., Inc. ("Bay Cities"), Opportunity Concrete Corporation
("Opportunity"), Baer Concrete, Incorporated ("Baer"), and R. G.
Evans/Associates d/b/a Santa Rosa Cast Products Co. ("Santa Rosa") (together,
the "Founding Companies"), and related transactions and (ii) the closing of
USC's initial public offering (the "Offering"). The acquisitions of the
Founding Companies (the "Acquisitions") will occur simultaneously with the
closing of the Offering and will be accounted for using the purchase method of
accounting. Central has been identified as the accounting acquirer for financial
statement presentation purposes as its former stockholders will represent the
largest voting interest within USC.
The unaudited pro forma combined balance sheet gives effect to the
Acquisitions, various other transactions and events, the Offering and
application of the net proceeds, therefrom, and borrowings under the credit
facility, as if they had occurred on December 31, 1998. The unaudited pro forma
combined statement of operations gives effect to these transactions and events
as if they had occurred on January 1, 1998.
USC has preliminarily analyzed the savings that is expected to be realized
from reductions in salaries, bonuses and certain benefits to the owners. To the
extent the owners of the Founding Companies have contractually agreed to
prospective reductions in salary, bonuses, benefits and lease payments, these
reductions have been reflected in the unaudited pro forma combined statement of
operations.
USC expects that integration of the Founding Companies will present
opportunities to realize cost savings through elimination of duplicative
functions and the development of economies of scale. Management believes the
Company should be able to (1) obtain greater discounts from suppliers, (2)
borrow at lower interest rates, (3) consolidate insurance programs and (4)
generate savings in other general and administrative areas. USC cannot quantify
these savings until completion of the Acquisitions and expects that they will be
substantially offset by USC's corporate management and administration costs
associated with being a public company and the systems integration, upgrading
and replacement. Because these costs cannot be adequately quantified at this
time, they have not been included in the pro forma financial information of USC.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that Company management deems appropriate
and may be revised as additional information becomes available. Based on its
initial assessment, management believes that the historical carrying value of
the Founding Companies' assets and liabilities, with the exception of property,
plant and equipment, will approximate fair value and that there are no other
identifiable intangible assets to which any material purchase price can be
allocated. Management is currently in the process of obtaining appraisals on
certain property, plant and equipment of the Founding Companies and will revise
the purchase price allocations, accordingly, when the appraisals are received.
The pro forma financial data do not purport to represent what USC's financial
position or results of operations would actually have been if such transactions
in fact had occurred on those dates and are not necessarily representative of
USC's financial position or results of operations for any future periods. Since
the Founding Companies were not under common control or management, the pro
forma combined financial statements should be read in conjunction with the
historical financial statements and notes thereto of USC and certain of the
Founding Companies included elsewhere in this Prospectus. See also "Risk
Factors" included elsewhere herein.
F-2
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
USC CENTRAL WALKER BAY CITIES OPPORTUNITY BAER SANTA ROSA COMBINED
--------- -------- --------- ---------- ----------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ -- $ 4,213 $ 1,805 $ 2,642 $ 1,634 $ 1,410 $ 89 $11,793
Trade accounts and notes
receivable....................... -- 10,353 5,279 7,871 477 1,754 488 26,222
Other receivables.................. -- -- 97 309 27 50 -- 483
Inventories........................ -- 792 212 124 72 104 280 1,584
Prepaid expenses................... -- 833 228 15 134 30 8 1,248
Other current assets............... -- 146 -- 500 3 20 -- 669
Deferred tax asset................. -- 10 134 -- -- 46 -- 190
--------- -------- --------- ---------- ----------- --------- ---------- --------
Total current assets............. -- 16,347 7,755 11,461 2,347 3,414 865 42,189
Property, plant and equipment, net... -- 9,138 8,414 5,494 2,060 3,518 148 28,772
Other assets, net.................... 355 1,155 549 212 42 747 5 3,065
Goodwill............................. -- -- -- -- -- -- -- --
--------- -------- --------- ---------- ----------- --------- ---------- --------
Total assets..................... $ 355 $ 26,640 $ 16,718 $ 17,167 $ 4,449 $ 7,679 $ 1,018 $74,026
========= ======== ========= ========== =========== ========= ========== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
debt............................. $ -- $ 1,006 $ 567 $ 335 $ 298 $ 808 $ 35 $ 3,049
Line of credit..................... -- -- 3,005 -- -- -- -- 3,005
Payable to Founders................ -- -- -- -- -- -- -- --
Accounts payable and accrued
liabilities...................... 553 7,910 3,715 8,877 509 1,747 188 23,499
--------- -------- --------- ---------- ----------- --------- ---------- --------
Total current liabilities........ 553 8,916 7,287 9,212 807 2,555 223 29,553
New credit facility.................. -- -- -- -- -- -- -- --
Long-term debt....................... -- 2,524 813 2,209 684 1,774 49 8,053
Deferred tax liability............... -- 46 1,101 706 69 482 -- 2,404
Stockholders' equity
Subscription receivable............ (2) -- -- -- -- -- -- (2)
Common stock....................... -- 70 4 41 14 137 1 267
Additional paid-in capital......... 2,680 554 38 38 7 10 -- 3,327
Treasury stock..................... -- -- -- -- -- (936) -- (936)
Retained earnings.................. (2,876) 14,530 7,475 4,961 2,868 3,657 745 31,360
--------- -------- --------- ---------- ----------- --------- ---------- --------
Total stockholders' equity....... (198) 15,154 7,517 5,040 2,889 2,868 746 34,016
--------- -------- --------- ---------- ----------- --------- ---------- --------
Total liabilities and
stockholders' equity........... $ 355 $ 26,640 $ 16,718 $ 17,167 $ 4,449 $ 7,679 $ 1,018 $74,026
========= ======== ========= ========== =========== ========= ========== ========
<CAPTION>
PRO FORMA PRO FORMA POST MERGER AS
ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ (11,793)a,d $ -- $ -- $ --
Trade accounts and notes
receivable....................... -- 26,222 -- 26,222
Other receivables.................. (77)c 406 -- 406
Inventories........................ -- 1,584 -- 1,584
Prepaid expenses................... -- 1,248 -- 1,248
Other current assets............... (20)c 649 -- 649
Deferred tax asset................. -- 190 -- 190
----------- --------- ----------- ---------
Total current assets............. (11,890) 30,299 -- 30,299
Property, plant and equipment, net... -- 28,772 -- 28,772
Other assets, net.................... (2,664)c,d 401 (355)f 46
Goodwill............................. 73,047d 73,047 -- 73,047
----------- --------- ----------- ---------
Total assets..................... $ 58,493 $132,519 $ (355) $ 132,164
=========== ========= =========== =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
debt............................. $ (3,049) $ -- $ -- $ --
Line of credit..................... (3,005) -- -- --
Payable to Founders................ 23,312b,d 23,312 (23,312)f --
Accounts payable and accrued
liabilities...................... (551) d 22,948 -- 22,948
----------- --------- ----------- ---------
Total current liabilities........ 16,707 46,260 (23,312) 22,948
New credit facility.................. 19,153d 19,153 (3,727) f 15,426
Long-term debt....................... (8,053)d -- -- --
Deferred tax liability............... -- 2,404 -- 2,404
Stockholders' equity
Subscription receivable............ 2d -- -- --
Common stock....................... (153)b,d 114 38e 152
Additional paid-in capital......... 61,261a,b,d 64,588 26,646e,f 91,234
Treasury stock..................... 936d -- -- --
Retained earnings.................. (31,360)a,c,d -- -- --
----------- --------- ----------- ---------
Total stockholders' equity....... 30,686 64,702 26,684 91,386
----------- --------- ----------- ---------
Total liabilities and
stockholders' equity........... $ 58,493 $132,519 $ (355) $ 132,164
=========== ========= =========== =========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-3
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
USC CENTRAL WALKER BAY CITIES OPPORTUNITY BAER SANTA ROSA COMBINED
--------- ------- ------- ----------- ----------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SALES................................ $ -- $66,499 $41,615 $53,600 $16,180 $ 11,973 $4,209 $194,076
COST OF GOODS SOLD................... -- 53,974 34,528 46,766 11,296 9,910 2,439 158,913
--------- ------- ------- ----------- ----------- --------- ---------- --------
Gross profit......................... -- 12,525 7,087 6,834 4,884 2,063 1,770 35,163
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,876 4,712 3,022 3,962 2,352 1,195 1,024 19,143
DEPRECIATION AND AMORTIZATION........ -- 930 896 505 245 412 18 3,006
--------- ------- ------- ----------- ----------- --------- ---------- --------
Income (loss) from operations........ (2,876) 6,883 3,169 2,367 2,287 456 728 13,014
OTHER INCOME
(EXPENSE)..........................
Interest income (expense),
net............................. -- (165) (377) (156) 8 (105) (15) (810)
Other income, net.................. -- 36 307 141 14 379 23 900
--------- ------- ------- ----------- ----------- --------- ---------- --------
Income (loss) before provision for
income taxes....................... (2,876) 6,754 3,099 2,352 2,309 730 736 13,104
PROVISION FOR INCOME TAXES........... -- 100 1,262 962 187 307 12 2,830
--------- ------- ------- ----------- ----------- --------- ---------- --------
--------- ------- ------- ----------- ----------- --------- ---------- --------
NET INCOME (LOSS).................... $ (2,876) $ 6,654 $ 1,837 $ 1,390 $ 2,122 $ 423 $ 724 $ 10,274
========= ======= ======= =========== =========== ========= ========== ========
NET INCOME PER SHARE.................
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE..
<CAPTION>
PRO FORMA AS
ADJUSTMENTS ADJUSTED
----------- ----------
<S> <C> <C>
SALES................................ $ -- $ 194,076
COST OF GOODS SOLD................... -- 158,913
----------- ----------
Gross profit......................... -- 35,163
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... (5,823)a,e 13,320
DEPRECIATION AND AMORTIZATION........ 1,826b 4,832
----------- ----------
Income (loss) from operations........ 3,997 17,011
OTHER INCOME
(EXPENSE)..........................
Interest income (expense),
net............................. (193)c (1,003)
Other income, net.................. -- 900
----------- ----------
Income (loss) before provision for
income taxes....................... 3,804 16,908
PROVISION FOR INCOME TAXES........... 4,776d 7,606
----------- ----------
----------- ----------
NET INCOME (LOSS).................... $ (972) $ 9,302
=========== ==========
NET INCOME PER SHARE................. $ 0.59
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE.. 15,638,543f
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. GENERAL:
U.S. Concrete, Inc. was founded to create a leading provider of ready-mixed
concrete and related services to the construction industry in major markets in
the United States. USC has conducted no operations to date and will acquire the
Founding Companies concurrently with and as a condition to the closing of this
offering.
The historical financial statements reflect the financial position and
results of operations of the Founding Companies and were derived from the
respective Founding Companies' financial statements. The periods included in
these financial statements for the individual Founding Companies are as of and
for the year ended December 31, 1998. The audited historical financial
statements in this prospectus are included in accordance with Regulation S-X,
Rule 3-05, promulgated by the Securities and Exchange Commission.
2. ACQUISITIONS:
Concurrently with and as a condition to the closing of this Offering, USC
will acquire all of the outstanding capital stock of the Founding Companies. The
acquisitions will be accounted for using the purchase method of accounting with
Central being reflected as the accounting acquirer as its stockholders will
represent the largest voting interest with USC.
The following table sets forth the consideration to be paid (a) in cash and
(b) in shares of USC common stock ("Common Stock") to the common stockholders of
each of the Founding Companies. For purposes of computing the estimated purchase
price and resulting goodwill for accounting purposes, the value of shares was
determined using the estimated fair value of $7.65 per share (or $44.9 million),
which is less than the initial public offering price of $8.50 per share
primarily because of the restrictions on the sale and transferability of the
shares to be issued. The total estimated purchase price of $69.2 million for the
acquisitions is calculated as follows: (a) cash -- $19.4 million, (b) value of
shares -- $44.9 million, and (c) the remaining portion of the excess cash
balances of $9.8 million at December 31, 1998, less the cash paid out in the S
corporation Accumulated Adjustment Accounts ("AAA") distribution discussed in
footnote 3a, which reduced the excess cash balances to be paid to $4.9 million.
The estimated purchase price is based upon preliminary estimates and is subject
to certain purchase price adjustments at and following closing. The table does
not reflect (a) S corporation distributions of $1.2 million related to the cash
surrender value of certain insurance policies, (b) S corporation distributions
of the Accumulated Adjustment Accounts of $11.9 million, (c) C corporation
distributions of the cash surrender value of certain insurance policies and
other personal assets of $1.1 million, (d) excess cash balances at December 31,
1998, pursuant to post-closing adjustment provisions in the acquisition
agreements, which we will remit to certain Founding Company owners as additional
cash consideration payable in the Acquisitions and (e) approximately $600,000
one former owner will use immediately after this offering closes to purchase for
cash at no more than their respective fair market values life insurance
policies, notes owed by his family members and other assets. The additional cash
consideration is subject to decrease, but not increase, if cash balances or
working capital in the applicable Founding Companies fall below specified
levels.
COMMON STOCK
----------------------------------
VALUE OF
CASH SHARES SHARES
--------- ----------- --------
(DOLLARS IN THOUSANDS)
Walker's............................. $ 6,331 2,234,339 $ 17,093
Bay Cities........................... 8,602 1,871,310 14,316
Opportunity.......................... 1,430 1,034,291 7,912
Baer................................. 1,200 423,529 3,240
Santa Rosa........................... 1,861 301,689 2,308
--------- ----------- --------
Subtotal........................ $ 19,424 5,865,158 $ 44,869
--------- ----------- --------
Central.............................. $ 3,888 3,120,130 $ 23,869
--------- ----------- --------
Total........................... $ 23,312 8,985,288 $ 68,738
========= =========== ========
F-5
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Additionally, the Common Stock issued to the original USC stockholders has
been accounted for by the Company as a purchase transaction. For purposes of
estimating the purchase price for accounting purposes, the value of the shares
was determined using an estimated fair value of $7.65 per share (or $18.4
million) which is less than the initial public offering price of $8.50 per share
due to restrictions on the sale and transferability of the shares issued.
For purposes of the transactions discussed above, the Company utilized a
$7.65 per share value for the Common Stock in calculating goodwill. These
valuations reflect a 10% discount, from the initial public offering price, based
on the lock-up agreement entered into by the stockholders of each Founding
Company.
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
(a) Records the (i) the payment of the distribution of the S corporation
AAA of $11.9 million and (ii) elimination of these S corporation
retained earnings balances. A portion of the S corporation AAA
distributions will reduce the $9.8 million excess cash balances at
December 31, 1998 to $4.9 million remaining excess cash to be
distributed to the stockholders.
(b) Records the liability for the cash portion of the consideration to be
paid to Central, the accounting acquirer, and the combination of USC
with Central.
(c) Records the transfer of certain net non-operating assets to the
Founding Companies prior to the Acquisition at a price equal to the
net book value of such assets. Management believes that the
historical carrying value of such net non-operating assets
approximates fair value.
(d) Records the purchase of the Founding Companies by USC consisting of
payables to Founding Company stockholders of $19.4 million (to
reflect the cash consideration payable to the Founding Companies
excluding Central) and 5.9 million shares of Common Stock valued at
$7.65 per share (or $44.9 million) and the remaining excess cash
balance of $4.9 million to be paid to stockholders for a total
estimated purchase price of $69.2 million resulting in excess
purchase price of $54.8 million over the net assets acquired of $14.4
million. Additionally, records the 2.4 million shares of Common
Stock, issued to the former USC stockholders valued at $7.65 per
share (or $18.4 million) resulting in excess purchase price of $18.6
million over the net assets acquired and records the $0.5 million
repayment of notes receivables from stockholders. Additionally,
records the refinancing of $14.1 million of indebtedness of the
Founding Companies, the $4.9 million payment to the Founding
Companies of additional cash consideration and the payment of $0.5
million of acquisition costs with borrowings under the credit
facility. Based on its initial assessment, management believes that
the historical carrying value of the Founding Companies' assets and
liabilities, with the exception of property, plant and equipment,
will approximate fair value and that there are no other identifiable
intangible assets to which any material purchase price can be
allocated. Management is currently in the process of obtaining
appraisals on certain property, plant and equipment of the Founding
Companies and will revise the purchase price allocations accordingly
when the appraisals are received. The following table reflects the
assets acquired and liabilities to be assumed in our acquisitions.
F-6
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
ASSETS
Current assets:
Cash and cash equivalents.......... $ 7,580
Trade accounts and notes
receivable........................ 15,869
Other receivables.................. 483
Inventory.......................... 792
Prepaid expenses................... 415
Other current assets............... 523
Deferred tax asset................. 180
----------
Total current assets.......... 25,842
Property, plant and equipment, net...... 19,634
Other assets, net....................... 1,555
----------
Total assets.................. $ 47,031
==========
LIABILITIES
Current liabilities:
Current portion of long-term
debt.............................. 2,043
Line of credit..................... 3,005
Accounts payable and accrued
liabilities....................... 15,036
----------
20,084
Total current liabilities.....
Long term debt.......................... 5,529
Deferred tax liability.................. 2,358
----------
Total liabilities............. $ 27,971
==========
(e) Records the cash proceeds of $27.0 million from the issuance of shares of
Common Stock net of estimated offering costs of $5.3 million. Offering
costs primarily consist principally of underwriting discounts and
commissions, accounting fees, legal fees and printing expenses.
(f) Records (i) payment of the cash portion of the consideration to the
stockholders of the Founding Companies (including Central) of $23.3
million and (ii) the repayment of $3.7 million of borrowings under the
credit facility using the remaining proceeds from the Offering.
F-7
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the unaudited pro forma combined balance sheet
adjustments (in thousands):
<TABLE>
<CAPTION>
PRO FORMA
A B C D ADJUSTMENTS
--------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets --
Cash and cash equivalents........ $ (11,868) $ -- $ -- $ 75 $(11,793)
Other receivables................ -- -- (77) -- (77)
Other current assets............. -- -- (20) -- (20)
--------- --------- --------- --------- ------------
Total current assets........ (11,868) -- (97) 75 (11,890)
Other long-term assets............... -- -- (2,164) (500) (2,664)
Goodwill............................. -- -- -- 73,047 73,047
--------- --------- --------- --------- ------------
Total assets................ $ (11,868) $ -- $ (2,261) $ 72,622 $ 58,493
========= ========= ========= ========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities --
Current maturities of long-term
debt........................... $ -- $ -- $ -- $ (3,049) $ (3,049)
Line of credit................... -- -- -- (3,005) (3,005)
Payables to Founders............. -- 3,888 -- 19,424 23,312
Accounts payable and accrued
liabilities.................... -- -- -- (551) (551)
--------- --------- --------- --------- ------------
Total current liabilities... -- 3,888 -- 12,819 16,707
New credit facility.................. -- -- -- 19,153 19,153
Long term debt....................... -- -- -- (8,053) (8,053)
Subscription receivable.............. -- -- -- 2 2
Common stock......................... -- (39) -- (114) (153)
Additional paid-in capital........... 5,120 (3,849) -- 59,990 61,261
Treasury stock....................... -- -- -- 936 936
Retained earnings.................... (16,988) -- (2,261) (12,111) (31,360)
--------- --------- --------- --------- ------------
Total stockholders'
equity.................... (11,868) (3,888) (2,261) 48,703 30,686
--------- --------- --------- --------- ------------
Total liabilities and
stockholders' equity...... $ (11,868) $ -- $ (2,261) $ 72,622 $ 58,493
========= ========= ========= ========= ============
</TABLE>
ADJUSTMENT
-------------------- POST MERGER
E F ADJUSTMENTS
--------- --------- -----------
ASSETS
Current assets --
Cash and cash equivalents........ $ 27,039 $ (27,039) $ --
--------- --------- -----------
Total current assets........ 27,039 (27,039) --
Other long-term assets............... (355) (355)
--------- --------- -----------
Total assets................ $ 27,039 $ (27,394) $ (355)
========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities --
Payables to Founders............. -- (23,312) (23,312)
--------- --------- -----------
Total current liabilities... -- (23,312) (23,312)
--------- --------- -----------
New credit facility.................. -- (3,727) (3,727)
Common stock......................... 38 -- 38
Additional paid-in capital........... 27,001 (355) 26,646
--------- --------- -----------
Total stockholders'
equity.................... 27,039 (355) 26,684
--------- --------- -----------
Total liabilities and
stockholders' equity...... $ 27,039 $ (27,394) $ (355)
========= ========= ===========
F-8
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:
(a) Reflects the $3.5 million reduction in salaries, bonuses and benefits
to the owners of the Founding Companies. These reductions in
salaries, bonuses and benefits have been agreed to prospectively in
accordance with the terms of employment agreements. Such employment
agreements are primarily for three years, contain restrictions
related to competition and provide severance for termination of
employment in certain circumstances. Additionally, reflects
reductions in expenses associated with certain non-operating assets
that will be transferred to the Founding Companies prior to the
Acquisitions.
(b) Reflects the amortization of goodwill to be recorded as a result of
these Acquisitions over a 40-year estimated life.
(c) Reflects interest expense of $1.0 million on borrowings of $15.4
million necessary to fully fund the acquisition of the Founding
Companies, net of interest savings of $1.2 million on $14.1 million
of historical debt to be repaid using proceeds from the Offering, and
the elimination of $0.4 million in interest income on excess cash
distributed prior to the Acquisitions. The additional $1.0 million of
interest expense was calculated utilizing an annual effective
interest rate of 6.5%.
(d) Reflects the incremental provision for federal and state income taxes
at an approximate 40.6% overall tax rate before goodwill and other
permanent items, relating to the other statement of operations
adjustments and for income taxes on S corporation income not provided
for in the historical financial statements.
(e) Reflects the reversal of $2.7 million non-recurring, non-cash
compensation charge by USC related to the issuance of 350,000 shares
of Common Stock to management during 1998. An additional 50,000
shares of Common Stock was issued to management and 50,000 shares to
two non-employee directors in March 1999. The historical financial
statements of USC include a compensation charge representing the
difference between the amounts paid for the shares issued to USC's
management and their estimated value on the date of the sale as if
the Acquisitions had occurred. This reversal is partially offset by a
$330,000 charge for recurring contractual salaries of management.
(f) Includes: (i) 2,853,255 shares issued by USC prior to the Offering,
(ii) 8,985,288 shares to be issued to the stockholders of the
Founding Companies in connection with the Acquisitions, and (iii)
3,800,000 shares to be issued in connection with the Offering.
Excludes (a) options to purchase an aggregate of 1,150,000 which USC
expects to grant on consummation of this offering and (b) a warrant
for 200,000 shares which USC will issue to the managing underwriters
for this Offering for services it will render through the date this
Offering closes.
The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------------------------------------------- PRO FORMA
A B C D E ADJUSTMENTS
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Selling, general and administrative
expenses........................... $ (3,475) $ -- $ -- $ -- $ (2,348) $(5,823)
Depreciation and amortization........ -- 1,826 -- -- -- 1,826
--------- --------- --------- --------- --------- -----------
Income from operations............... 3,475 (1,826) -- -- 2,348 3,997
Interest income................. -- -- (442) -- -- (442)
Interest expense................ -- -- 249 -- -- 249
--------- --------- --------- --------- --------- -----------
Interest, net........................ -- -- (193) -- -- (193)
--------- --------- --------- --------- --------- -----------
Income before provision for income
taxes.............................. 3,475 (1,826) (193) -- 2,348 3,804
Provision for income taxes........... -- -- -- 4,776 -- 4,776
--------- --------- --------- --------- --------- -----------
Net income (loss).................... $ 3,475 $ (1,826) $ (193) $ (4,776) $ 2,348 $ (972)
========= ========= ========= ========= ========= ===========
</TABLE>
F-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To U.S. Concrete, Inc.:
We have audited the accompanying balance sheets of U.S. Concrete, Inc., (a
Delaware corporation), as of December 31, 1997 and 1998, and the related
statements of operations, cash flows and stockholders' equity (deficit) for the
period from inception (July 15, 1997) through December 31, 1997 and for the year
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 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 financial position of U.S. Concrete, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from inception (July 15, 1997) through December 31, 1997 and for
the year ended December 31, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 16, 1999
F-10
<PAGE>
U.S. CONCRETE, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1997 1998
---- ---------
ASSETS
CASH AND CASH EQUIVALENTS............ $ -- $ --
DEFERRED OFFERING COSTS.............. -- 355
---- ---------
Total assets............... $ -- $ 355
==== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCRUED LIABILITIES AND AMOUNTS DUE
TO STOCKHOLDER..................... $ -- $ 553
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par
value, 5,000,000 authorized,
none issued and outstanding.... -- --
Class A Common stock, $.001 par
value, one share authorized,
issued and outstanding......... -- --
Common stock, $.001 par value,
40,000,000 shares authorized, 0
and 350,000 shares issued and
outstanding, respectively...... -- --
Receivable from stockholders.... (2) (2)
Additional paid-in capital...... 2 2,680
Retained deficit................ -- (2,876)
---- ---------
Total stockholders' equity
(deficit)................ -- (198)
---- ---------
Total liabilities and
stockholders' equity..... $ -- $ 355
==== =========
Reflects a 10,000 for-one stock split effected in March 1999.
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
U.S. CONCRETE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
INCEPTION
(JULY 15, 1997)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1998
----------------- -------------
SALES................................ $ -- $ --
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... -- 2,876
----- -------------
Loss Before Provision for Income
Taxes......................... -- (2,876)
Provision for Income Taxes...... -- --
----- -------------
NET LOSS............................. $ -- $(2,876)
===== =============
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
U.S. CONCRETE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS A TOTAL
COMMON STOCK COMMON STOCK RECEIVABLE ADDITIONAL STOCKHOLDERS'
------------------- ------------------- FROM PAID-IN RETAINED EQUITY
SHARES AMOUNT SHARES AMOUNT STOCKHOLDERS CAPITAL DEFICIT (DEFICIT)
-------- ------- -------- ------- ------------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, INCEPTION (July 15, 1997). -- $ -- -- $ -- $-- $ -- -- $ --
ISSUANCE OF SHARES................. 1 -- -- -- (2) 2 -- --
NET INCOME (LOSS).................. -- -- -- -- -- -- -- --
-------- ------- -------- ------- --- ----------- --------- -------------
BALANCE, December 31, 1997......... 1 $ -- -- $ -- $(2) $ 2 $ -- $ --
ISSUANCE OF ADDITIONAL SHARES TO
MANAGEMENT....................... -- -- 350,000 -- -- 2,678 -- 2,678
NET LOSS........................... -- -- -- -- -- -- (2,876) (2,876)
-------- ------- -------- ------- --- ----------- --------- -------------
BALANCE, December 31, 1998......... 1 $ -- 350,000 $ -- $(2) $ 2,680 $(2,876) $(198)
======== ======= ======== ======= === =========== ========= =============
Reflects a 10,000 for-one stock split effected in March 1999.
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
U.S. CONCRETE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
INCEPTION
(JULY 15, 1997)
THROUGH YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................... $ -- $(2,876)
Non-cash compensation charge....... -- 2,678
Adjustments to reconcile net loss
to net cash used in operating
activities --
Changes in assets and
liabilities --
Increase in deferred
offering costs........ -- (355)
Increase in amounts due
to stockholder........ -- 553
-------- -----------------
Net cash provided
by operating
activities....... -- --
-------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures............... -- --
-------- -----------------
Net cash used in
investing
activities....... -- --
CASH FLOWS FROM FINANCING ACTIVITIES:
Initial capitalization............. 2 --
Receivable from stockholders....... (2) --
-------- -----------------
Net cash provided
by financing
activities....... -- --
-------- -----------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................... -- --
CASH AND CASH EQUIVALENTS, beginning of
period................................ -- --
-------- -----------------
CASH AND CASH EQUIVALENTS, end of
period................................ $ -- $ --
======== =================
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
U.S. CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
U.S. Concrete, Inc., a Delaware corporation ("USC" or the "Company"),
was founded in July 1997 to create a leading provider of ready-mixed concrete
and related services to the construction industry in its selected markets
throughout the United States. USC intends to acquire certain businesses (the
"Acquisitions"), complete an initial public offering (the "Offering") of its
common stock and, subsequent to the Offering, continue to acquire through merger
or purchase similar companies to expand its national and regional operations.
USC has not conducted any operations, and all activities to date have
related to the Offering and the Acquisitions. All expenditures of the Company to
date have been funded by the primary stockholder, on behalf of the Company. The
primary stockholder has also committed to fund future organization expenses and
offering costs. As of December 31, 1998, costs of approximately $355,000 have
been incurred in connection with the Offering, and such costs will be treated as
a reduction of the proceeds from the Offering. USC has treated costs incurred
through December 31, 1998, as deferred offering costs in the accompanying
balance sheet. USC is dependent upon the Offering to execute the pending
Acquisitions and to repay its current primary stockholder for funding deferred
offering costs. There is no assurance that the pending Acquisitions will be
completed. The ability of USC to generate future operating revenues is dependent
upon the ability of the Company to manage the effect on the combined companies
of changes in demand for ready-mixed concrete. The Company's future success is
dependent upon a number of factors which include, among others, the ability to
integrate operations, reliance on the identification and integration of
satisfactory acquisition candidates, reliance on acquisition financing, the
ability to manage growth and attract and retain qualified management and
employees, the ability to comply with government regulations and other
regulatory requirements or contract specifications, and risks associated with
competition, seasonality and quarterly fluctuations. The risk factors are
discussed in more detail in "Risk Factors."
In August 1998, the Company entered into a Funding Agreement with the
primary stockholder, to finance organizational fees and expenses associated with
the Acquisitions. The Funding Agreement allows advances up to $3.0 million and
bears interest at a rate of 6% per annum. The entire principal amount and
accrued interest is due on the earliest of i) September 30, 1999, ii) the date
on which the Company effects the first acquisition of one of the Founding
Companies, or iii) the tenth calendar day after either party terminates the
agreement. At December 31, 1998, these advances totaled $553,000.
2. STOCKHOLDERS' EQUITY:
COMMON STOCK AND PREFERRED STOCK
In connection with the organization and initial capitalization of USC, the
Company issued 2,000,000 shares (as restated for the 10,000 for-one stock split
discussed in Note 5) of common stock at $.001 par value (Common Stock) for
$2,000. In March 1999, the 2,000,000 shares were recapitalized into one (1)
share of Class A common stock which will automatically convert into
approximately 1,602,255 shares of common stock at the effective time of the
Mergers as more fully described in Note 6. In December 1998, the Company issued
350,000 shares of Common Stock (as restated for the 10,000 for-one stock split
discussed in Note 5) to certain members of Company management for $350. As a
result of the issuance of shares to management for nominal consideration, the
Company recorded in December 1998, a non-recurring, non-cash charge of $2.7
million, which has been based on a fair value of such shares which has been
determined to be $7.65 per share (a discount of 10% from the initial public
offering price). The fair value of such shares was based on specific factors
related to the Company and the transactions including restrictions on
transferability and sale of the shares issued.
F-15
<PAGE>
U.S. CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," allows entities to choose between a new fair
value method of accounting for employee stock options or similar equity
instruments and the current method of accounting prescribed by Accounting
Principles Board (APB) Opinion No. 25, under which compensation expense is
recorded to the extent that the fair market value of the related stock is in
excess of the options' exercise price at date of grant. Entities electing to
remain with the accounting in APB Opinion No. 25 must make pro forma disclosures
of net income and earnings per share as if the fair value method of accounting
prescribed in SFAS No. 123 had been applied. The Company will measure
compensation expense attributable to stock options based on the method
prescribed in APB Opinion No. 25 and will provide the required pro forma
disclosure of net income and earnings per share, as applicable, in the notes to
future consolidated annual financial statements.
4. NEW ACCOUNTING PRONOUNCEMENTS:
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" requires that companies report separately information about each
significant operating segment reviewed by the chief operating decision maker.
Management has chosen to organize segments based on differences in products and
services. All segments that meet a threshold of 10% of revenues, reported profit
or loss, or combined assets are defined as significant segments. The Company
will provide the required disclosures of its segments in the notes to future
consolidated annual financial statements.
5. SUBSEQUENT EVENT:
USC effected a 10,000 for-one stock split in March 1999 for each share of
Common Stock of the Company then outstanding. In addition, the Company increased
the number of authorized shares of Common Stock to 40,000,000 and increased the
number of authorized shares of $.001 par value preferred stock to 5,000,000. The
effects of the Common Stock split and the increase in the shares of authorized
Common Stock have been retroactively reflected on the balance sheet, statement
of stockholders' equity and in the accompanying notes.
6. SUBSEQUENT EVENTS TO THE DATE OF AUDITOR'S REPORT (UNAUDITED):
In March 1999, following the 10,000 for-one stock split, the Company
effected a recapitalization which resulted in the primary shareholders 2,000,000
shares of common stock being recapitalized as 1 share of Class A Common Stock.
The Class A Common Stock shall, immediately prior to the effective time of the
first acquisition by the Company of a Founding Company (the "Effective Time"),
automatically convert into such number of issued and outstanding whole shares of
common stock as most nearly equals, but does not exceed, the amount by which (i)
the quotient obtained from dividing (a) the Total Acquisition Consideration by
(b) 37.4460 exceeds (ii) the total number of shares of common stock which will
be outstanding immediately prior to the Effective Time (and before giving effect
to any issuance by the Company of shares of common stock (1) as payment of the
Total Acquisition Consideration or (2) the Company sells in the IPO). Total
Acquisition Consideration means the sum of (i) the product of (a) the total
number of shares of common stock the Company issues on the date on which the
Effective Time occurs as acquisition consideration in its acquisition of the
Founding Companies multiplied by (b) $8.50 and (ii) the total amount of cash the
Company also issues on that date as part of that acquisition consideration
(exclusive of any cash the agreement and plans of reorganization define as
"Additional Cash Consideration"). It is anticipated that the Class A Common
Stock will convert into approximately 1,602,255 shares of common stock.
In March 1999, following the stock split, the Company issued 801,000 shares
of common stock to American Ready-Mix, L.L.C. for nominal consideration in
consideration of the services provided in securing acquisition targets. The
Company will account for such shares issued as additional cost of the
F-16
<PAGE>
U.S. CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Acquisitions at their fair value. The fair value of such shares has been
determined to be $7.65 per share (a discount of 10% from the initial offering
price). The fair value of such shares was based on specific factors related to
the Company and the transactions including restrictions on transferability and
sale of the shares issued.
In addition, when this Offering closes, the Company will issue warrants to
purchase up to 200,000 shares of common stock to the managing underwriters for
this Offering for services they will render through the date this Offering
closes.
In March 1999, following the 10,000 for-one split, the Company issued
50,000 shares of Common Stock (as restated for the 10,000 for-one split
discussed above) to certain members of management for $50 and 25,000 shares each
to two non-employee directors for nominal consideration. As a result of the
issuance of shares to management and the non-employee directors for nominal
consideration, the Company recorded in March 1999, a non-recurring, non-cash
charge of $0.8 million, based on a fair value of such shares, which has been
determined to be $7.65 per share (a discount of 10% from the initial offering
price). The fair value of such shares was based on specific factors related to
the Company and the transactions, including restrictions on transferability and
sale of the shares issued.
In March 1999, the Company reserved 2,000,000 shares of Common Stock for
use under an incentive plan (the "Incentive Plan"). Beginning with the first
calendar quarter after the closing of this Offering and continuing each quarter
thereafter, the number of shares available for that use will be the greater of
2,000,000 shares or 15% of the number of shares of Common Stock outstanding on
the last day of the immediately preceding calendar quarter.
Persons eligible for awards are (1) employees holding positions of
responsbility with us or any of our subsidiaries and whose performance can have
a significant effect on the success of the Company as well as individuals who
have agreed to become employees within six months of the date of grant
("Employees"), (2) nonemployee Directors and (3) nonemployee consultants and
other independent contractors providing, or who will provide, services to us or
any of our subsidiaries ("Independent Contractors").
Except as it applies to Nonemployee Directors, the Compensation Committee
of the Company's Board of Directors will administer the Incentive Plan.
Employee Awards may be in the form of:
o rights to purchase a specified number of shares of Common Stock at a
specified price ("Options") which may be denominated in either or
both of Common Stock or units denominated in Common Stock;
o rights to receive a payment, in cash or Common Stock, equal to the fair
market value or other specified value of a number of shares of Common
Stock on the rights exercise date over a specified strike price
("SARs");
o restricted or unrestricted grants of Common Stock or units denominated
in Common Stock ("Stock Awards");
o grants denominated in cash ("Cash Awards"); and
o grants denominated in cash, Common Stock, units denominated in Common
Stock or any other property which are made subject to the attainment of
one or more performance goals (" Performance Awards").
Under the Incentive Plan, the Company intends to grant options to purchase
an aggregate of 1,150,000 shares of Common Stock on the consummation of this
Offering.
F-17
<PAGE>
U.S. CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
USC has signed definitive agreements to acquire the following entities (the
Founding Companies) to be effective concurrently with the Offering. The entities
to be acquired are:
Central Concrete Supply Co., Inc.
Walker's Concrete, Inc.
Bay Cities Building Materials Co., Inc.
Opportunity Concrete Corporation
Baer Concrete, Incorporated
Santa Rosa Cast Products Company
The aggregate consideration that will be paid by USC to acquire the
Founding Companies consists of (1) approximately $23.3 million in cash plus $4.9
million, which represents the amount at December 31, 1998 by which the maximum
amount USC may pay to the owners of four Founding Companies as additional cash
consideration, pursuant to post-closing adjustment provisions in the acquisition
agreements ($9.8 million) exceeds the assumed S corporation distributions of two
of those Companies ($4.9 million), and (2) 8,985,288 shares of Common Stock.
In addition, the Company will enter into employment agreements with certain
key executives of the Founding Companies and the executive officers of USC.
These employment agreements generally prohibit such individuals from disclosing
confidential information and trade secrets, and restrict such individuals from
competing with the Company for a period of five years from the date of the
employment agreement. The initial term of these employment agreements is three
years with provisions for automatic annual extensions beginning at the end of
the initial term. The Company will also enter into one year consulting
agreements with certain key employees of the Founding Companies.
The Company expects to enter into a $75,000,000 credit facility effective
concurrent with the closing of the Offering to provide funds to be used for
working capital, to finance acquisitions and for other general corporate
purposes. The Company expects that the credit facility will require usual and
customary covenants for a credit facility of this nature including the consent
of the lenders for acquisitions exceeding a certain level of cash consideration.
F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Central Concrete Supply Co., Inc.:
We have audited the accompanying balance sheets of Central Concrete Supply Co.,
Inc. (the Company) (a California corporation), as of December 31, 1997 and 1998,
and the related statements of operations, stockholders' equity and cash flows
for the three years ended December 31, 1996, 1997 and 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 Central Concrete Supply Co.,
Inc., as of December 31, 1997 and 1998, and the results of its operations and
its cash flows for the three years ended December 31, 1996, 1997 and 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Orange County, California
February 4, 1999
F-19
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1997 1998
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 1,945 $ 4,213
Trade accounts receivable, net
of allowance for doubtful
accounts of $80 and $97,
respectively................... 6,650 7,641
Receivables from related
parties......................... 2,091 2,712
Inventories..................... 941 792
Prepaid expenses................ 273 833
Other current assets............ 187 156
--------- ---------
Total current assets....... 12,087 16,347
PROPERTY, PLANT AND EQUIPMENT, net... 6,784 9,138
CASH SURRENDER VALUE OF LIFE
INSURANCE............................ 966 1,155
--------- ---------
Total assets............... $ 19,837 $ 26,640
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt............................ $ 776 $ 1,006
Accounts payable................ 5,427 7,042
Accrued compensation and
benefits........................ 985 868
--------- ---------
Total current
liabilities.................. 7,188 8,916
LONG-TERM DEBT, net of current
portion.............................. 1,884 2,524
DEFERRED TAX LIABILITY............... 34 46
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value;
100,000 shares authorized,
4,572 shares issued and
outstanding.................... 70 70
Additional paid-in capital...... 554 554
Retained earnings............... 10,107 14,530
--------- ---------
Total stockholders'
equity....................... 10,731 15,154
--------- ---------
Total liabilities and
stockholders' equity......... $ 19,837 $ 26,640
========= =========
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
1996 1997 1998
--------- --------- ---------
SALES................................ $ 39,204 $ 53,631 $ 66,499
COST OF GOODS SOLD................... 33,402 43,794 53,974
--------- --------- ---------
Gross profit............... 5,802 9,837 12,525
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 3,644 4,265 4,712
DEPRECIATION......................... 1,203 1,330 930
--------- --------- ---------
Income from operations..... 955 4,242 6,883
OTHER INCOME (EXPENSE):
Interest expense, net........... (185) (226) (165)
Other income (expense), net..... (3) 26 36
--------- --------- ---------
Income before provision for
income taxes............ 767 4,042 6,754
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. 303 (457) 100
--------- --------- ---------
Net income................. $ 464 $ 4,499 $ 6,654
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995........... 4,572 $ 70 $ 554 $ 5,384 $ 6,008
Net income...................... -- -- -- 464 464
------ ------ ---------- --------- -------------
BALANCE, December 31, 1996........... 4,572 70 554 5,848 6,472
Net income...................... -- -- -- 4,499 4,499
Distributions................... -- -- -- (240) (240)
------ ------ ---------- --------- -------------
BALANCE, December 31, 1997........... 4,572 70 554 10,107 10,731
Net income...................... -- -- -- 6,654 6,654
Distributions................... -- -- -- (2,231) (2,231)
------ ------ ---------- --------- -------------
BALANCE, December 31, 1998........... 4,572 $ 70 $ 554 $ 14,530 $15,154
====== ====== ========== ========= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
1996 1997 1998
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 464 $ 4,499 $ 6,654
Adjustments to reconcile net income
to net cash provided by
operating activities --
Depreciation.................. 1,203 1,330 930
Net gain on sale of property,
plant and equipment........ (9) (27) (36)
Change in allowance for
doubtful accounts.......... (159) -- 17
Deferred income tax provision
(benefit).................. (78) (481) 12
Changes in operating assets
and liabilities --
Trade accounts and
related-party notes
receivable, net of
allowances.............. 408 (4,135) (1,836)
Income taxes and other
receivables............. (535) (505) 139
Prepaid expenses........... (60) (6) (560)
Other current assets....... 13 (372) 41
Accounts payable........... 29 1,991 1,615
Accrued compensation and
benefits................ 177 (46) (117)
--------- --------- ---------
Net cash provided by
operating
activities......... 1,453 2,248 6,859
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.......................... (1,842) (2,222) (3,300)
Proceeds from disposals of
property, plant and equipment...... 78 91 52
Increase in cash surrender value of
life insurance..................... (117) (177) (189)
--------- --------- ---------
Net cash used in
investing
activities......... (1,881) (2,308) (3,437)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt....... 1,207 1,570 2,006
Repayments on long-term debt....... (622) (640) (1,136)
Distributions to stockholders...... -- (240) (2,024)
--------- --------- ---------
Net cash provided by
(used in) financing
activities......... 585 690 (1,154)
--------- --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 157 630 2,268
CASH AND CASH EQUIVALENTS, at
beginning of year.................. 1,158 1,315 1,945
--------- --------- ---------
CASH AND CASH EQUIVALENTS, at end of
year............................... $ 1,315 $ 1,945 $ 4,213
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for
interest........................... $ 221 $ 285 $ 344
Cash paid during the year for
income taxes....................... 938 749 78
NONCASH FINANCING ACTIVITY:
Distribution of note receivable to
stockholder........................ $ 207
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Central Concrete Supply Co., Inc. (the "Company"), a California
corporation, is engaged in the production and distribution of ready-mixed
concrete and the sale of building materials and related concrete products in the
San Francisco Bay Area, where the Company has six ready-mixed concrete plants in
three sales areas.
The Company and its stockholders intend to enter into a definitive
agreement with U.S. Concrete, Inc. ("USC"), an entity organized to acquire
ready-mixed concrete companies, pursuant to which, the Company's stockholders
will exchange all the outstanding common stock of the Company for cash and
shares of USC common stock concurrent with the closing of USC's initial public
offering.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The Company has prepared these financial statements on the accrual basis of
accounting. Effective December 31, 1996, the Company was merged with Central
Transport, Inc. ("CTI"), which was wholly-owned by the Company's stockholders.
The statement of operations for the period ended December 31, 1996 reflects the
combined operations of the Company and CTI.
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,
disclosures 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and long-term debt. The
Company believes that the carrying values of these instruments on the
accompanying balance sheets approximate their fair values, because of the length
of their maturities or the existence of interest rates that approximate market
rates.
CASH AND CASH EQUIVALENTS
The Company records as cash equivalents all highly liquid investments
having maturities of three months or less at the date of purchase. At December
31, 1997 and 1998, the Company maintained cash balances in various financial
institutions in excess of federally insured limits.
CONCENTRATION OF CREDIT RISK
The Company sells to various construction contractors that may be affected
by changes in economic or other external conditions. The Company manages its
exposure to credit risk through ongoing credit evaluations and, where
appropriate, requires that its customers furnish adequate collateral before
credit is granted.
INVENTORIES
Inventories consist primarily of raw materials, repair parts and building
materials that the Company holds for use or sale in the ordinary course of
business. The Company uses the first-in, first out method to value inventories
at the lower of cost or market. At December 31, 1997 and 1998, management
believes the Company had incurred no material impairments in the carrying values
of its inventories.
F-24
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PREPAID EXPENSES
Prepaid expenses primarily include amounts the Company has paid for fuel,
property taxes, licenses and insurance. The Company expenses or amortizes all
prepaid amounts as used or over the period of benefit, as applicable.
PROPERTY, PLANT AND EQUIPMENT, NET
The Company states property, plant and equipment at cost. It uses the
straight-line method to compute depreciation of these assets over their
estimated useful lives.
The Company expenses maintenance and repair cost when incurred and
capitalizes and depreciates expenditures for major renewals and betterments that
extend the useful lives of existing assets. When the Company retires or disposes
of property, plant and equipment, it removes the related cost and accumulated
depreciation from the accounts and reflects any resulting gain or loss in its
statements of operations.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company provides an allowance for accounts receivable that it believes
may not be fully collectible.
CASH SURRENDER VALUE OF LIFE INSURANCE
The Company owns various life insurance policies covering its stockholders.
It records the cash surrender value of these policies as an asset. It expenses
the premiums related to these policies to the extent that they exceed the
increase in the underlying cash surrender value of the policies.
SALES AND EXPENSES
The Company derives its sales primarily from the production and delivery of
ready-mixed concrete and distribution of related building materials. The Company
recognizes sales when products are delivered. Cost of goods sold consists
primarily of product costs and operating expenses. Operating expenses consist of
wages and benefits of union employees, and expenses attributable to plant
operations, repairs and maintenance and trucks. Selling expenses consist
primarily of sales commissions, salaries of sales managers, travel and
entertainment expenses and trade show expenses. General and administrative
expenses consist primarily of executive compensation and related benefits,
administrative salaries and benefits, office rent and utilities, communication
expenses and professional fees.
INCOME TAXES
Effective May 1, 1997, the Company elected S Corporation status under the
Internal Revenue Code, whereby the Company is not subject to federal income
taxes and its stockholders report their respective shares of the Company's
taxable earnings or losses in their personal tax returns. As an S Corporation,
the Company is subject to taxation at a rate of 1.5% in the state of California.
The Company will terminate its S Corporation status when USC acquires it.
Prior to May 1, 1997, the Company was a C Corporation and followed the
liability method of accounting for income taxes. Under this method, the Company
recorded deferred income taxes based on temporary differences between the
financial reporting and tax bases of assets and liabilities and measured those
taxes using enacted tax rates and laws that will be in effect when the Company
recovers those assets or settles those liabilities, as the case may be.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its plant assets for impairment. The Company assesses
the recoverability of assets based on its anticipated future cash flows from its
assets. If facts and circumstances lead the Company's management to believe the
cost of one of its assets may be impaired, the Company will
F-25
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(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
that 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 has 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, and, therefore, that those values were not
impaired at that date.
COLLECTIVE BARGAINING AGREEMENTS
The Company is 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 through 2002.
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following:
ESTIMATED DECEMBER 31
USEFUL LIVES ---------------------
IN YEARS 1997 1998
------------ --------- ----------
(IN THOUSANDS)
Land................................. -- $ 296 $ 584
Building and improvements............ 10-40 476 1,019
Machinery and equipment.............. 10-15 5,443 5,827
Mixers, trucks and other vehicles.... 6-12 9,854 11,313
Furniture and fixtures............... 3-10 422 512
--------- ----------
16,491 19,255
Less -- Accumulated depreciation..... (9,707) (10,117)
--------- ----------
Property, plant and equipment,
net........................... $ 6,784 $ 9,138
========= ==========
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Rollforward of allowance for doubtful accounts is as follows (in
thousands):
December 31, 1996............... $ 80
Change in allowance for
doubtful accounts --
---
December 31, 1997............... 80
Increase in allowance for
doubtful accounts......... 17
---
December 31, 1998............... $ 97
===
Receivables from related parties consist of the following:
DECEMBER 31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
Trade accounts receivable from
related party................. $ 1,739 $ 2,712
Notes receivable from
employees/stockholders........ 352 --
--------- ---------
$ 2,091 $ 2,712
========= =========
F-26
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Inventory consists of the following:
DECEMBER 31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
Raw materials........................ $ 236 $ 259
Building materials................... 705 533
--------- ---------
$ 941 $ 792
========= =========
5. LONG-TERM DEBT:
Long-term debt consists of the following:
DECEMBER 31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
Notes payable to various financial
institutions, secured by mixer
trucks, payable in monthly
installments ranging from $6,670 to
$26,313, including interest from
7.5% to 9.7%, maturing from
December 1999 to May 2003.......... $ 2,363 $ 2,860
Notes payable to various financial
institutions, secured by various
equipment and guaranteed by
stockholders, payable in monthly
installments ranging from $2,746 to
$5,949, including interest from
4.73% to 8.8%, maturing from
October 2000 to September 2003..... 243 670
Notes payable to a vendor, secured by
automobiles, payable in monthly
installments ranging from $845 to
$988, including interest from 6.9%
to 8.8%, maturing September 2000... 54 --
--------- ---------
2,660 3,530
Less -- Current portion.............. (776) (1,006)
--------- ---------
$ 1,884 $ 2,524
========= =========
Scheduled maturities of long-term debt are as follows (in thousands):
For the year ending December 31 --
1999............................ $ 1,006
2000............................ 1,083
2001............................ 806
2002............................ 532
2003............................ 103
---------
$ 3,530
=========
The Company maintains a $1.2 million line-of-credit with a bank. It did not
make any draws on this line during 1997 or 1998 and did not have a balance as of
December 31, 1997 or 1998. The line of credit will remain in effect until
notification of termination from either party.
F-27
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. LEASES:
The Company leases equipment and vehicles under operating lease agreements.
These leases are noncancelable and expire on various dates throughout 2003.
Future minimum lease payments are as follows (in thousands):
For the year ending December 31 --
1999............................ $ 321
2000............................ 200
2001............................ 197
2002............................ 160
2003............................ 160
---------
$ 1,038
=========
The Company has certain leases with contingent rentals based on monthly
sales volume.
Total rent expense under all operating leases was approximately $282,000,
$320,000 and $322,000 for the years ended December 31, 1996, 1997 and 1998,
respectively. The contingent portion of rental expense was $47,000, $48,000 and
$68,000 for the years ended December 31, 1996, 1997 and 1998, respectively.
7. INCOME TAXES:
The components of provision (benefit) for federal and state income taxes
are as follows:
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
Federal --
Current......................... $ 296 $ (32) $ --
Deferred........................ (62) (393) --
State --
Current......................... 87 58 89
Deferred........................ (18) (90) 11
--------- --------- ---------
$ 303 $ (457) $ 100
========= ========= =========
Actual income tax expense differs from the income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 35 percent to income
before provision for income taxes due to state income tax, non-deductible
expenses and the Company's 1997 conversion from C Corporation to S Corporation
status.
The deferred state income tax assets result from temporary timing
differences for depreciation calculations. The deferred tax liabilities result
from temporary differences in accruals and reserves.
8. RELATED-PARTY TRANSACTIONS:
The Company made sales to a relative of the stockholders of $5,061,000,
$7,693,000 and $10,654,000 for the years ended December 31, 1996, 1997, and
1998, respectively. This relative has no ownership interest in the Company. The
transactions were completed under terms and prices similar to transactions with
other third parties.
The Company also made purchases of aggregate supplies from a company in
which two stockholders have a financial interest. Purchases from this company
were $81,000, $104,000 and $274,000 for the years
F-28
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ended December 31, 1996, 1997 and 1998, respectively. The payable related to
these purchases was $1,000 and $10,000 at December 31, 1997 and 1998.
The Company leases a facility from its stockholders. The rent paid under
this related party lease was $144,000 for each of the three years ended December
31, 1996, 1997 and 1998.
9. EMPLOYEE BENEFIT PLANS:
RETIREMENT PLANS
The Company maintains defined contribution profit-sharing and money
purchase pension plans (together, the "Plans"), both effective as amended May
1, 1997. Employees who are over 21 years old and whose wages are not governed by
a collective bargaining agreement become participants in the Plans after one
year of service. A participant is 20% vested after three years of service and
100% vested after seven years. The profit-sharing plan allows for the Company to
make discretionary contributions. Under the money purchase pension plan, the
Company makes a minimum contribution equal to 10% of all compensation of all
participants. Contributions for the Plans were $310,000, $404,000 and $404,000
for the years ended December 31, 1996, 1997 and 1998, respectively.
The Company made contributions to employee pension, health and welfare
plans for employees under collective bargaining agreements were $1,628,000,
$2,027,000 and $2,279,000 for the years ended December 31, 1996, 1997 and 1998,
respectively.
10. COMMITMENTS AND CONTINGENCIES:
INSURANCE
The Company carries a standard range of insurance coverages, including
business auto liability, general liability, medical, workers' compensation,
excess liability and commercial property. The Company also has an umbrella
policy. During 1996, 1997 and 1998, the Company has not had any significant
claims or losses on any of these insurance policies.
LITIGATION
In the normal course of doing business, the Company occasionally becomes a
party to a legal case. Specifically, the Company is a party to a legal case
regarding construction defects and delay damages. In the opinion of management,
pending or threatened litigation involving the Company will not have a material
adverse effect on its financial condition or results of operations.
PURCHASE COMMITMENTS
On July 29, 1998, the Company ordered 12 mixer trucks for a total purchase
price of $1,635,000. As of December 31, 1998, the Company had paid a $146,000
deposit to the vendor. It accepted delivery of all 12 trucks during the first
quarter of 1999.
11. SIGNIFICANT CUSTOMERS:
Significant customers of the Company represented sales (as a percentage of
total sales) as follows:
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
Customer A.............................. 13% 14% 16%
Customer B (related party).............. 12 20 22
F-29
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. SIGNIFICANT SUPPLIERS:
Significant suppliers of the Company represented purchases (as a percent of
total purchases) as follows:
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
Supplier A.............................. 22% 23% 22%
Supplier B.............................. 13 16 19
Supplier C.............................. 19 22 18
Supplier D.............................. 13 10 9
The Company purchased all its lightweight aggregates from a single supplier
in 1997 and 1998.
13. SEGMENT REPORTING:
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" requires that companies report separately information about each
significant operating segment reviewed by the chief operating decision maker.
Management has elected to organize segments based on differences in products and
services. All segments that meet a threshold of 10% of revenues, reported profit
or loss, or combined assets are defined as significant segments. Based on these
requirements, management has identified two reportable segments.
The Ready-Mixed segment derives its revenues from the manufacture and sale
of ready-mixed concrete and related concrete products. The Westside segment
generates revenues through the sale of building materials. Information about
other business activities and operating segments that do not meet the reporting
thresholds described above are included in the "Other" category. The "Other"
category for the Company consists of the administrative and accounting
departments.
The Company recognizes sales and cost of goods sold by segment. Selling,
general and administrative, depreciation, interest costs, and other income
(expense) are not monitored by segment. Refer to Note 2 for discussion of types
of costs included in the cost categories. The Company does not maintain balance
sheet information by segment.
Also in 1998, the Company began recording sales discounts, purchase
discounts and miscellaneous charges in the Ready-Mixed and Westside segments
rather than the administrative department.
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------------------------------------------------
1996 1997
------------------------------------------- -------------------------------------------
READY- READY-
MIXED WESTSIDE OTHER TOTAL MIXED WESTSIDE OTHER TOTAL
------- -------- --------- --------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................................ $33,112 $ 6,135 $ (43) $ 39,204 $46,077 $8,255 $ (701) $ 53,631
Cost of goods sold................... 26,923 5,064 1,415 33,402 36,301 6,261 1,232 43,794
------- ------- --------- --------- ------- -------- --------- ---------
Gross profit......................... $ 6,189 $ 1,071 (1,458) 5,802 $ 9,776 $1,994 (1,933) 9,837
======= ======= ======= ========
Selling, general and
administrative...................... 3,644 3,644 4,265 4,265
Depreciation......................... 1,203 1,203 1,330 1,330
Interest income...................... 36 36 60 60
Interest expense..................... (221) (221) (286) (286)
Other income (expense)............... (3) (3) 26 26
--------- ---------
Income before provision for income
taxes............................... 767 4,042
Provision (benefit) for income
taxes............................... 303 (457)
--------- ---------
Net Income........................... $ 464 $ 4,499
========= =========
<CAPTION>
1998
-------------------------------------------
READY-
MIXED WESTSIDE OTHER TOTAL
------- -------- --------- ---------
<S> <C> <C> <C> <C>
Sales................................ $57,339 $9,162 $ (2) $ 66,499
Cost of goods sold................... 46,465 7,049 460 53,974
------- -------- --------- ---------
Gross profit......................... $10,874 $2,113 (462) 12,525
======= ========
Selling, general and
administrative...................... 4,712 4,712
Depreciation......................... 930 930
Interest income...................... 179 179
Interest expense..................... (344) (344)
Other income (expense)............... 36 36
---------
Income before provision for income
taxes............................... 6,754
Provision (benefit) for income
taxes............................... 100
---------
Net Income........................... $ 6,654
=========
</TABLE>
F-30
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
14. SUBSEQUENT EVENT:
In January, 1999, the Company made cash distributions to its stockholders
totaling approximately $551,000. In addition, the Company made a distribution to
stockholders of a building with a carrying amount of approximately $1,087,000.
The Company now leases the building from its stockholders.
15. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
In March 1999, the Company and its stockholders entered into a definitive
agreement with USC providing for USC's acquisition of the Company.
In connection with the acquisition, certain assets with a net book value of
$1,155,000 will be retained by the stockholders. If this transaction had been
recorded at December 31, 1998, the effect on the accompanying balance sheet
would be a decrease in assets and a decrease in stockholders' equity of
$1,155,000.
In addition, prior to the closing of the acquisition, the Company will make
distributions of the Company's estimated S Corporation Accumulated Adjustment
Account which at December 31, 1998 was approximately $8,665,000.
Upon the closing of the acquisition of the Company by USC, the Company will
enter into two new lease agreements with its former stockholders. These leases
will provide for $22,700 in combined monthly rentals over an initial lease term
of 15 years.
F-31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Walker's Concrete, Inc.:
We have audited the accompanying balance sheets of Walker's Concrete, Inc. (the
"Company") (a California corporation) as of December 31, 1997 and 1998, and
the related statements of operations, stockholder's equity, and cash flows for
the years ended December 31, 1996, 1997, and 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 Walker's Concrete, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the years ended December 31, 1996, 1997, and 1998, in conformity with
generally accepted accounting principles.
San Francisco, California
March 8, 1999
F-32
<PAGE>
WALKER'S CONCRETE, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1997 1998
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 1,192 $ 1,805
Trade accounts and notes
receivable, net of allowance
for doubtful accounts of $151
and $238, respectively......... 4,670 5,376
Inventories..................... 257 212
Prepaid expenses................ 148 228
Deferred tax assets............. 125 134
--------- ---------
Total current assets....... 6,392 7,755
NOTE RECEIVABLE FROM STOCKHOLDER..... 384 --
PROPERTY, PLANT, AND EQUIPMENT,
net................................ 7,315 8,414
CASH SURRENDER VALUE OF LIFE
INSURANCE POLICIES................. 426 530
OTHER ASSETS, net.................... 48 19
--------- ---------
Total assets............... $ 14,565 $ 16,718
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt............................ $ 555 $ 567
Line of credit.................. 3,232 3,005
Accounts payable and accrued
liabilities..................... 3,186 3,125
Income tax payable.............. 26 590
--------- ---------
Total current
liabilities.................. 6,999 7,287
LONG-TERM DEBT, net of current
portion.............................. 870 813
DEFERRED TAX LIABILITY............... 976 1,101
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $1 par: 100,000
shares authorized; 4,000 shares
outstanding.................... 4 4
Additional paid-in capital...... 38 38
Retained earnings............... 5,678 7,475
--------- ---------
Total stockholder's
equity....................... 5,720 7,517
--------- ---------
Total liabilities and
stockholder's equity......... $ 14,565 $ 16,718
========= =========
The accompanying notes are an integral part of these statements.
F-33
<PAGE>
WALKER'S CONCRETE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
(IN THOUSANDS)
1996 1997 1998
--------- --------- ---------
SALES................................ $ 31,008 $ 37,990 $ 41,615
COST OF GOODS SOLD................... 26,162 31,141 33,756
COST OF GOODS SOLD FROM RELATED
PARTY................................ 293 657 772
--------- --------- ---------
Gross profit............... 4,553 6,192 7,087
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,155 2,953 3,022
DEPRECIATION AND AMORTIZATION
EXPENSE............................ 767 828 896
--------- --------- ---------
Income from operations..... 1,631 2,411 3,169
OTHER INCOME (EXPENSE):
Interest expense, net........... (339) (379) (377)
Other income, net............... 412 137 307
--------- --------- ---------
Income before provision for
taxes...................... 1,704 2,169 3,099
PROVISION FOR TAXES.................. 793 860 1,262
--------- --------- ---------
Net income................. $ 911 $ 1,309 $ 1,837
========= ========= =========
The accompanying notes are an integral part of these statements.
F-34
<PAGE>
WALKER'S CONCRETE, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995........... 4,000 $ 4 $ 38 $3,518 $3,560
Net income...................... -- -- -- 911 911
Distributions................... -- -- -- (20) (20)
------ ------ --- -------- --------------
BALANCE, December 31, 1996........... 4,000 4 38 4,409 4,451
Net income...................... -- -- -- 1,309 1,309
Distributions................... -- -- -- (40) (40)
------ ------ --- -------- --------------
BALANCE, December 31, 1997........... 4,000 4 38 5,678 5,720
Net income...................... -- -- -- 1,837 1,837
Distributions................... -- -- -- (40) (40)
------ ------ --- -------- --------------
BALANCE, December 31, 1998........... 4,000 $ 4 $ 38 $7,475 $7,517
====== ====== === ======== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-35
<PAGE>
WALKER'S CONCRETE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
(IN THOUSANDS)
1996 1997 1998
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 911 $ 1,309 $ 1,837
Adjustments to reconcile net income to
net cash provided by operating
activities:........................
Depreciation and amortization.... 767 828 896
Net loss (gain) on sale of
property, plant and
equipment..................... (73) 63 (60)
Deferred income tax provision.... 13 250 115
Changes in operating assets and
liabilities:
Trade accounts and notes
receivable, net of
allowances................. (901) (870) (717)
Inventories................... (34) (74) 45
Prepaid expenses and other
assets..................... (69) 4 (64)
Accounts payable and accrued
liabilities................ (639) 567 (61)
Income tax payable............ 134 (348) 564
--------- --------- ---------
Net cash provided by
operating
activities............ 109 1,729 2,555
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in cash surrender
value of life insurance............ (100) 18 (104)
Purchases of property, plant, and
equipment.......................... (1,187) (1,541) (2,066)
Proceeds from sales of property,
plant, and equipment............... 87 40 145
--------- --------- ---------
Net cash used in
investing
activities............ (1,200) (1,483) (2,025)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from line of credit.... 663 929 (227)
Proceeds from long-term debt.......... 710 317 598
Repayments on long-term debt.......... (432) (570) (643)
Dividends paid to stockholders........ -- -- (40)
Repayments on notes receivable to
stockholders....................... 150 270 395
--------- --------- ---------
Net cash provided by
financing
activities............ 1,091 946 83
--------- --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................... -- 1,192 613
CASH AND CASH EQUIVALENTS, at beginning
of year............................... -- -- 1,192
--------- --------- ---------
CASH AND CASH EQUIVALENTS, at end of
year.................................. $ -- $ 1,192 $ 1,805
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for
interest........................... $ 334 $ 377 $ 376
Cash paid during the year for income
taxes.............................. 638 962 583
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTION:
Dividend and reduction of notes
receivable to stockholder.......... (20) (40) --
The accompanying notes are an integral part of these statements.
F-36
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. BUSINESS AND ORGANIZATION:
Walker's Concrete, Inc. (the "Company"), a California corporation, is
engaged in the production and distribution of ready-mix concrete. The Company
operates four plant locations in Hayward, Oakland, and San Jose, California.
The Company and its stockholders intend to enter into a definitive
agreement with U.S. Concrete, Inc. (USC), a recently formed entity organized to
acquire ready mixed companies. Pursuant to this transaction, the Company's
stockholders will exchange all the outstanding common stock of the Company for
cash and shares of USC common stock concurrent with the closing of USC's initial
public offering.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The Company has prepared these financial statements on the accrual basis of
accounting.
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,
disclosures 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, trade accounts and notes receivable, note receivable from
stockholder, a loan receivable, the cash surrender value of life insurance
policies, accounts payable, lines of credit, and long-term debt. The Company
believes that the carrying values of these instruments on the accompanying
balance sheets approximate their fair values, because of the length of their
maturities or existence of interest rates that approximate market rates.
CASH AND CASH EQUIVALENTS
The Company records as cash equivalents all highly liquid investments
having maturities of three months or less at the date of purchase. At December
31, 1997 and 1998, the Company maintained cash balances in various financial
institutions in excess of federally insured limits.
CONCENTRATION OF CREDIT RISK
The Company sells to various construction contractors that may be affected
by changes in economic or other external conditions. The Company manages its
exposure to credit risk through ongoing credit evaluations and, where
appropriate, requires that its customers furnish adequate collateral before
credit is granted. As of December 31, 1997 and 1998, one customer represented
19% and 11% of trade accounts receivable, respectively.
INVENTORIES
Inventories consist primarily of raw materials, repair parts, and building
materials for resale that the Company holds for use or sale in the ordinary
course of business. The Company uses the first-in, first out method to value
inventories at the lower of cost or market. At December 31, 1997 and 1998,
management believes the Company had incurred no material impairments in the
carrying values of its inventories.
F-37
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PREPAID EXPENSES
Prepaid expenses primarily include amounts the Company has paid for fuel,
tires, shop parts, licenses, and insurance. The Company expenses or amortizes
all prepaid amounts as used or over the period of benefit, as applicable.
PROPERTY, PLANT, AND EQUIPMENT, NET
The Company records property, plant, and equipment at cost or, in the case
of equipment acquired under capital leases, at the present value of future lease
payments. It uses the straight-line method to compute depreciation of these
assets over their estimated useful lives or remaining lease terms.
The Company expenses maintenance and repair cost when incurred and
capitalizes and depreciates expenditures for major renewals and betterments that
extend the useful lives of existing assets. When the Company retires or disposes
of property, plant, and equipment, it removes the related cost and accumulated
depreciation from the accounts and reflects any resulting gain or loss in its
statements of operations.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company provides an allowance for accounts receivable that it believes
may not be fully collectible.
CASH SURRENDER VALUE OF LIFE INSURANCE POLICIES
The Company owns various life insurance policies covering its stockholder.
It records the cash surrender value of these policies as an asset. It expenses
the premiums related to these policies to the extent that they exceed the
increase in the underlying cash surrender value of the policies.
SALES AND EXPENSES
The Company derives its sales primarily from supplying ready-mixed concrete
to contractors. The Company recognizes sales when products are delivered. Costs
of goods sold consist primarily of product costs and operating expenses.
Operating expenses consist primarily of repairs and maintenance, gas and oil,
and insurance. Selling expenses consist primarily of sales commissions, salaries
of sales managers, travel and entertainment expenses, trade show expenses, and
automobile allowances. General and administrative expenses consist primarily of
executive compensation and related benefits, administrative salaries and
benefits, office rent and utilities, communication expenses, and professional
fees.
INCOME TAXES
The Company follows the liability method of accounting for income taxes.
Under this method, the Company records deferred income taxes based on temporary
differences between the financial reporting and tax bases of assets and
liabilities and measures those taxes using enacted tax rates and laws that will
be in effect when the Company recovers those assets or settles those
liabilities, as the case may be.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its plant assets for impairment. The Company assesses
the recoverability of assets other than plant based on its anticipated future
cash flows from its assets. If facts and circumstances lead the Company's
management to believe 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
that 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 has determined that the cash flows from each
plant would be sufficient to recover the carrying value of the Company's
long-lived assets as of December 31, 1997 and 1998, and therefore that those
values were not impaired at those dates.
F-38
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COLLECTIVE BARGAINING AGREEMENTS
The Company is 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 through 2002.
3. PROPERTY, PLANT, AND EQUIPMENT, NET:
Property, plant, and equipment consist of the following:
ESTIMATED DECEMBER 31
USEFUL LIVES --------------------
IN YEARS 1997 1998
------------ --------- ---------
(IN THOUSANDS)
Land................................. -- $ 1,757 $ 1,757
Building and improvements............ 7-30 412 412
Machinery and equipment.............. 5-20 4,938 5,811
Mixers, trucks, and other vehicles... 5-12 8,292 9,223
Furniture and fixtures............... 7 129 143
--------- ---------
15,528 17,346
Less: Accumulated depreciation....... (8,213) (8,932)
--------- ---------
Property, plant, and equipment,
net........................... $ 7,315 $ 8,414
========= =========
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Trade accounts receivable and notes receivable consist of the following:
DECEMBER 31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
Accounts receivable, trade........... $ 4,639 $ 5,518
Notes receivable..................... 182 96
--------- ---------
4,821 5,614
Less: Allowance for doubtful
accounts............................. (151) (238)
--------- ---------
Trade accounts and notes receivable,
net.................................. $ 4,670 $ 5,376
========= =========
Notes receivable consist mainly of a note receivable from a third party.
This note is payable in minimum monthly installments of $5,000, with interest
accruing at the rate of 10%. The final payment is due June 2000.
Accounts payable and accrued liabilities consist of the following:
DECEMBER 31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
Accounts payable, trade.............. $ 2,376 $ 2,110
Accrued compensation and benefits.... 509 706
Other accrued liabilities............ 301 309
--------- ---------
$ 3,186 $ 3,125
========= =========
F-39
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. DEBT:
LINE OF CREDIT
The Company has a line of credit agreement with a bank that provides for
borrowings of up to $4,000,000 secured by the Company's accounts receivable.
This agreement expires on October 31, 1999. Interest is paid monthly at the
reference rate plus 1.0%.
This Company is subject to covenants under this debt agreement, including
minimum tangible net worth, maximum ratio of debt to tangible net worth, minimum
debt service coverage ratio, and profitability requirements.
The following information relates to the line of credit for each of the
following periods:
YEAR ENDED DECEMBER
31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
Maximum amount outstanding........... $ 3,575 $ 3,572
Average amount outstanding........... $ 2,846 $ 2,494
Weighted average interest rate....... 9.7% 9.5%
Effective interest rate at end of
period............................... 9.5% 9.5%
Prime interest rate at end of
period............................... 8.5% 8.5%
On February 19, 1999, the Company restructured their debt lines. The effect
of this restructure was to extend the expiration date of the line of credit to
October 31, 2001, modify the debt covenants and grant an additional equipment
loan.
LONG-TERM DEBT
Long-term debt consists of the following as of December 31:
1997 1998
--------- ---------
(IN THOUSANDS)
Mortgage, payable in monthly
principal installments of $6
through July 2004, plus interest at
1.5% over the bank's index rate.
The
interest rate at December 31, 1998,
was 10.6%. This loan is secured by
land............................... $ 450 $ 331
Equipment loan, payable in monthly
principal installments of $13, plus
interest at 8.6%. This loan is
secured by equipment; all unpaid
principal and interest is due on
July 1, 1999....................... 244 90
Equipment loan, payable in monthly
principal installments of $10, plus
interest at 8.59%. This loan is
secured by equipment. All unpaid
principal and interest is due on
April 3, 2000...................... 277 158
Equipment loan, payable in monthly
principal installments of $5, plus
interest at 8.76%. This loan is
secured by equipment; all unpaid
principal and interest is due on
August 3, 2000..................... 158 99
Equipment loan, payable in monthly
principal installments of $7, plus
interest at 9.04%. This loan is
secured by equipment; all unpaid
principal and interest is due on
May 1, 2001........................ 272 192
Equipment loan, payable in monthly
principal installments of $12, plus
interest at 7.8%. This loan is
secured by equipment; all unpaid
principal and interest is due on
May 5, 2002........................ -- 510
Other, payable in monthly principal
installments of $5, including
interest
at 5%. Final payment was made on
May 5, 1998........................ 24 --
--------- ---------
1,425 1,380
Less: Current portion................ (555) (567)
--------- ---------
$ 870 $ 813
========= =========
F-40
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Scheduled maturities of long-term debt are as follows (in thousands):
For the year ending December 31 --
1999............................ $ 567
2000............................ 378
2001............................ 253
2002............................ 132
2003............................ 50
---------
$ 1,380
=========
6. COMMITMENTS AND CONTINGENCIES:
The Company leases certain operating and office facilities under operating
lease agreements. These leases are noncancellable and expire on various dates
throughout 2001. Minimum lease payments under these agreements are as follows
(in thousands):
For the year ending December 31 --
1999............................ $ 85
2000............................ 1
2001............................ 1
---
$ 87
===
Total rent expense under all operating leases was approximately $1,000,
$8,000, and $85,000 for the years ended December 31, 1996, 1997, and 1998,
respectively.
Pursuant to the lease agreement for the San Jose site, the Company is
required to purchase an annual minimum volume of coarse aggregate of $796,000
from the lessor, through December 31, 1999.
7. INCOME TAXES:
The provision for federal and state income taxes is as follows:
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
Federal:
Current......................... $ 604 $ 474 $ 897
Deferred........................ 9 199 92
State:
Current......................... 177 136 250
Deferred........................ 3 51 23
--------- --------- ---------
$ 793 $ 860 $ 1,262
========= ========= =========
F-41
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 35% to income before
provision for income taxes as follows:
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
Provision at the statutory rate......... $ 597 $ 759 $ 1,085
Increase (decrease) resulting from:
State income tax, net of federal
benefit.......................... 117 121 178
Non-deductible expenses............ 79 (20) (1)
--------- --------- ---------
$ 793 $ 860 $ 1,262
========= ========= =========
The tax effects of temporary differences representing deferred tax assets
and liabilities result principally from the following:
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
Deferred income tax assets --
Accrued Expenses................... 128 49 68
Capital Loss Carryover............. 18 18 18
Inventory.......................... -- 15 25
Allowance for Doubtful Accounts.... 68 61 41
Other.............................. 18 -- --
--------- --------- ---------
Total deferred income tax
assets...................... 232 143 152
Valuation Allowance................ (18) (18) (18)
--------- --------- ---------
Total deferred income tax
assets...................... 214 125 134
Deferred income tax liabilities --
Property, Plant & Equipment........ (816) (976) (1,101)
--------- --------- ---------
Net deferred income tax
liabilities................. (602) (851) (967)
========= ========= =========
8. RELATED-PARTY TRANSACTIONS:
The Company's sole stockholder owns a transport business that hauls
material for the Company. For the years ended December 31, 1996, 1997, and 1998,
payments for hauling services totaled $293,000, $657,000, and $772,000,
respectively.
The Company's sole stockholder owns a charter service that provides
executive aircraft services to the Company. For the years ended December 31,
1997 and 1998, payments for executive aircraft services totaled $40,000 and
$38,000, respectively. No services were provided during 1996.
In 1993, the transport company described above loaned the Company $250,000.
The note was payable in minimum monthly principal installments of $5,000 plus
interest at the rate of 7%. The final payment was made on December 31, 1997.
During the year ended December 31, 1997, principal and interest payments made
totaled $60,000 and $2,000, respectively.
In 1994, the Company loaned the sole stockholder $797,000. An additional
amount of $82,000 was loaned on January 1, 1997. The note is payable in minimum
monthly installments of $3,000, with interest accruing at the rate of 7% per
annum. During the years ended December 31, 1997 and 1998, principal payments
totaled $310,000 and $395,000, respectively. Interest earned for the years ended
December 31, 1997 and 1998, was $42,000 and $11,000, respectively.
F-42
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On January 1, 1997, a life insurance policy was transferred from the
Company to its stockholder for consideration of $82,000. This transfer resulted
in a loss to the Company of $68,000 which was expensed in 1997.
9. EMPLOYEE BENEFIT PLANS:
The Company has a money purchase pension plan. The Company annually
contributes a mandatory 15 percent of each eligible employee's salary. To be
eligible, an employee must be nonunion and must accumulate 1,000 hours of
service per year in addition to obtaining age 21.
Benefit expense for the years ended December 31, 1996, 1997, and 1998, was
approximately $128,000, $135,000, and $152,000, respectively.
The Company made contributions to employee pension, health, and welfare
plans for employees under collective bargaining agreements were $674,000,
$840,000, and $908,000 for the years ended December 31, 1996, 1997, and 1998,
respectively.
10. COMMITMENTS AND CONTINGENCIES:
INSURANCE
The Company carries a standard range of insurance coverages, including
business auto liability, general liability, medical, workers' compensation,
excess liability and commercial property. The Company also has an umbrella
policy. During 1996, 1997 and 1998, the Company has not had any significant
claims or losses on any of these insurance policies.
LITIGATION
In the normal course of doing business, the Company occasionally becomes a
party to litigation. In the opinion of management, pending or threatened
litigation involving the Company will not have a material adverse material
effect on its financial condition.
11. SIGNIFICANT CUSTOMERS:
The Company had sales of approximately 12% of total sales to one major
customer for the year ended December 31, 1996, sales of approximately 17% and
11% of total sales to two major customers for the years ended December 31, 1997,
and sales of approximately 17% of total sales to one major customer for the year
ended December 31, 1998.
12. SIGNIFICANT SUPPLIERS:
The Company purchased approximately 39%, 28%, 15%, and 12% of its materials
from four suppliers for 1996; 35%, 30%, and 12% of its materials from three
suppliers for 1997; and 26%, 22%, 18%, and 13% of its materials from five
suppliers for 1998.
13. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
In March 1999, the Company and its stockholders entered into a definitive
agreement with USC providing for USC's acquisition of the Company.
In connection with the acquisition, certain non-operating assets with a net
book value of $500,000 will be retained by the stockholders. Had this
transaction been recorded at December 31, 1998, the effect on the accompanying
balance sheet would be a decrease in assets and a decrease in stockholder's
equity of $500,000.
F-43
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bay Cities Building Materials Co., Inc.:
We have audited the accompanying consolidated balance sheets of Bay Cities
Building Materials Co., Inc. (a California corporation) and subsidiary
(collectively, the "Company") as of December 31, 1997 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1996, 1997 and 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 consolidated financial position of Bay Cities
Building Materials Co., Inc. and subsidiary as of December 31, 1997 and 1998,
and the results of their consolidated operations and their consolidated cash
flows for the years ended December 31, 1996, 1997 and 1998, in conformity with
generally accepted accounting principles.
San Francisco, California
January 29, 1999
F-44
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1997 1998
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 343 $ 2,642
Trade accounts and notes
receivable, net of allowance
for doubtful accounts of $50... 8,503 7,871
Receivables from
related-party................... 250 309
Inventories..................... 106 124
Prepaid expenses................ 18 15
Short-term investment........... 200 500
--------- ---------
Total current assets....... 9,420 11,461
NOTE RECEIVABLE FROM STOCKHOLDERS,
net of unamortized discount of $42
and $34, respectively.............. 193 201
PROPERTY, PLANT AND EQUIPMENT, net... 4,206 5,494
LONG-TERM INVESTMENT................. 500 --
OTHER ASSETS, net.................... 11 11
--------- ---------
Total assets............... $ 14,330 $ 17,167
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt............................ $ 297 $ 335
Accounts payable................ 6,513 6,995
Related-party accounts
payable......................... 122 59
Accrued liabilities and other
payables........................ 1,295 1,823
--------- ---------
Total current
liabilities.................. 8,227 9,212
LONG-TERM DEBT, net of current
portion.............................. 1,875 2,209
DEFERRED TAX LIABILITIES............. 578 706
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $10 par; 20,000
shares authorized, 4,088.58
shares issued and
outstanding.................... 41 41
Additional paid-in capital...... 38 38
Retained earnings............... 3,571 4,961
--------- ---------
Total stockholders'
equity....................... 3,650 5,040
--------- ---------
Total liabilities and
stockholders' equity......... $ 14,330 $ 17,167
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-45
<PAGE>
BAY CITIES BUILDINGS MATERIALS CO., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
1996 1997 1998
--------- --------- ---------
SALES................................ $ 30,496 $ 45,312 $ 53,600
COST OF GOODS SOLD................... 27,287 40,292 46,766
--------- --------- ---------
Gross profit............... 3,209 5,020 6,834
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,090 2,778 3,962
DEPRECIATION AND AMORTIZATION........ 458 458 505
--------- --------- ---------
Income from operations..... 661 1,784 2,367
OTHER INCOME (EXPENSE):
Interest expense, net.............. (186) (136) (156)
Other income, net.................. 177 49 141
--------- --------- ---------
Income before provision for
income taxes............ 652 1,697 2,352
PROVISION FOR INCOME TAXES........... 260 696 962
--------- --------- ---------
Net income................. $ 392 $ 1,001 $ 1,390
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-46
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995........... 4,088.58 $ 41 $ 38 $2,178 $ 2,257
Net income...................... -- -- -- 392 392
---------- ------ --- -------- -------------
BALANCE, December 31, 1996........... 4,088.58 41 38 2,570 2,649
Net income...................... -- -- -- 1,001 1,001
---------- ------ --- -------- -------------
BALANCE, December 31, 1997........... 4,088.58 41 38 3,571 3,650
Net income...................... -- -- -- 1,390 1,390
---------- ------ --- -------- -------------
BALANCE, December 31, 1998........... 4,088.58 $ 41 $ 38 $4,961 $ 5,040
========== ====== === ======== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-47
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 , 1997 AND 1998
(IN THOUSANDS)
1996 1997 1998
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 392 $ 1,001 $ 1,390
Adjustments to reconcile net income
to net cash provided by
operating activities --
Depreciation and
amortization............... 458 458 505
Deferred income tax provision
(benefit).................. 156 420 (25)
Net gain on sale of property
and equipment.............. (155) (12) 128
Changes in operating assets
and liabilities --
Trade accounts and notes
receivable, net of
allowances.............. 250 (4,709) 573
Inventories................ (21) 152 (18)
Prepaid expenses........... (53) 55 3
Other assets............... 33 (5) (9)
Accounts payable........... (847) 3,066 419
Accrued liabilities and
other payables.......... 276 100 528
--------- --------- ---------
Net cash provided by
operating
activities......... 489 526 3,494
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and
equipment.......................... (465) (807) (1,806)
Proceeds from sales of property,
plant and equipment................ 163 12 39
Increase in note receivable from
stockholders, net of unamortized
discount........................ -- (188) --
Purchase of long-term
investments........................ (700) -- --
Proceeds from liquidation of
investment...................... -- -- 200
Repayments on note receivable from
stockholders.................... 1,053 -- --
--------- --------- ---------
Net cash provided by
(used in) investing
activities......... 51 (983) (1,567)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt....... 179 214 913
Repayments on long-term debt....... (295) (334) (541)
--------- --------- ---------
Net cash provided by
(used in) financing
activities......... (116) (120) 372
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH...... 424 (577) 2,299
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR.................. 496 920 343
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... $ 920 $ 343 $ 2,642
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for
interest........................... $ 226 $ 197 $ 217
Cash paid during the year for
income taxes....................... -- 182 315
The accompanying notes are an integral part of these consolidated financial
statements.
F-48
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. BUSINESS AND ORGANIZATION:
Bay Cities Building Materials Co., Inc., a California corporation and its
wholly owned subsidiary (together, the "Company"), as of March 6, 1957, is
engaged in the production and distribution of ready-mixed concrete products in
the San Francisco Bay Area and Sacramento metropolitan area. The Company has 10
batch plants.
The Company and its stockholders intend to enter into a definitive
agreement with U.S. Concrete, Inc. ("USC"), a recently formed entity organized
to acquire ready mixed companies. Pursuant to this transaction, the Company's
stockholders will exchange all the outstanding common stock of the Company for
cash and shares of USC common stock concurrent with the closing of USC's initial
public offering.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The Company has prepared these consolidated financial statements on the
accrual basis of accounting.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Bay Cities
Building Materials Co., Inc., and its subsidiary, B.C.B.M. Transport, Inc.
("BCBM"). BCBM's September 30, 1997 and 1998, year-end balances are
consolidated in these financial statements. All material intercompany
transactions have been eliminated in consolidation.
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,
disclosures 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and
investments in certificates of deposit, accounts receivable, notes receivable,
accounts payable and long-term debt. The Company believes that the carrying
values of these instruments on the accompanying consolidated balance sheets
approximates their fair values because of the length of their maturities or the
existence of interest rates that approximates market rates.
CASH AND CASH EQUIVALENTS
The Company records as cash equivalents all highly liquid investments
having maturities of three months or less at the date of purchase. At December
31, 1997 and 1998, the Company maintained cash balances in various financial
institutions in excess of federally insured limits.
INVESTMENTS
The Company classifies securities with maturities longer than three months
that the Company intends to hold to maturity as investments and, classifies them
as either current or noncurrent assets based on the maturity date of the
security. As of December 31, 1997 and 1998, the Company held $700,000 and
$500,000, respectively, of interest-bearing certificates of deposit, which were
classified as "held-to-maturity" securities. The carrying basis of these
investments approximated fair value.
F-49
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company sells to various construction contractors that may be affected
by changes in economic or other external conditions. The Company manages its
exposure to credit risk through ongoing credit evaluations and, where
appropriate, requires that its customers furnish adequate collateral before
credit is granted. The Company did not have any significant concentration of
credit in any customers as of December 31, 1997 and 1998. The Company had
revenues from one project with multiple contractors that represented 28.1%,
24.9% and 4.0%, of revenues for 1998, 1997 and 1996, respectively.
INVENTORIES
Inventories consist primarily of raw materials for resale that the Company
holds for use in the ordinary course of business. The Company uses the first-in,
first-out method to value inventories at the lower of cost or market. At
December 31, 1997 and 1998, management believes the Company had incurred no
material impairments in the carrying values of its inventories.
PROPERTY, PLANT AND EQUIPMENT, NET
The Company states property, plant and equipment at cost and uses the
straight-line method to compute depreciation of these assets over their
estimated useful lives or remaining lease terms.
Expenditures for maintenance and repairs are charged to expense when
incurred, and the Company capitalizes and depreciates expenditures for major
renewals and betterments that extend the useful lives of existing assets. When
the Company retires or disposes of property, plant and equipment, it removes the
related cost and accumulated depreciation from the accounts, and reflects any
resulting gain or loss in the consolidated statements of operations.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company provides an allowance for accounts receivable that it believes
may not be fully collectible. At December 31, 1997 and 1998, the allowance was
$50,000.
SALES AND EXPENSES
The Company derives its sales primarily from the production and delivery of
ready-mix concrete, building materials for resale and related concrete products.
The Company recognizes sales when products are delivered. Cost of goods sold
consists primarily of product costs and operating expenses. Operating expenses
consist of wages and benefits of union employees, plant operations, repairs and
maintenance, and truck expenses. Selling expenses consist primarily of sales
commissions, salaries of sales managers, travel and entertainment expenses, and
trade show expenses. General and administrative expenses consist primarily of
executive compensation and related benefits, administrative salaries and
benefits, office rent and utilities, communication expenses, and professional
fees.
INCOME TAXES
The Company follows the liability method of accounting for income taxes.
Under this method, the Company records deferred income tax balances based on
temporary differences between the financial reporting and tax bases of assets
and liabilities and measures those taxes using enacted tax rates and laws that
will be in effect when the Company recovers those assets or settles those
liabilities, as the case may be.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its plant assets for impairment. The Company assesses
the recoverability of assets based upon anticipated future cash flows from its
assets. 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 that asset's carrying
amount and (b) write-down that carrying
F-50
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, and, therefore, that those values were
not impaired at that date.
COLLECTIVE BARGAINING AGREEMENTS
The Company is 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 through 2002.
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following:
ESTIMATED
USEFUL DECEMBER 31
LIVES --------------------
IN YEARS 1997 1998
-------------- --------- ---------
(IN THOUSANDS)
Land................................. -- $ 1,766 $ 2,256
Building and improvements............ 7-30 3,577 4,431
Machinery and equipment.............. 3-15 468 468
Mixers, trucks and other vehicles.... 3-12 5,417 5,705
Furniture and fixtures............... 3-15 29 29
--------- ---------
11,257 12,889
Less -- Accumulated depreciation..... (7,051) (7,395)
--------- ---------
Property, plant and equipment,
net........................... $ 4,206 $ 5,494
========= =========
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Trade accounts receivable and notes receivable consist of the following:
DECEMBER 31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
Trade accounts receivable............ $ 8,548 $ 7,889
Notes and other receivables.......... 5 32
Less -- Allowance for doubtful
accounts............................. (50) (50)
--------- ---------
$ 8,503 $ 7,871
========= =========
Accrued liabilities and other payables consist of the following:
DECEMBER 31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
Accrued compensation and benefits.... $ 355 $ 611
Sales tax payable.................... 373 392
Income taxes payable................. 554 754
Other accrued liabilities............ 13 66
--------- ---------
$ 1,295 $ 1,823
========= =========
F-51
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT:
Long-term debt, consists of the following:
DECEMBER 31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
Notes payable to bank with interest
ranging from 6.0% to 10.25%, with
monthly principal and interest
payments, maturing January 1998
through 2005, and ranging from
8.25% to prime plus 1.5% (prime of
7.75% at December 31, 1998), with
monthly principal and interest
payments, maturing January 1999
through 2005, for the years ended
December 31, 1997 and 1998,
respectively, secured by machinery
equipment and land................. $ 1,552 $ 1,704
Note payable at 7.50%, interest only
payable monthly, principal
due 2002, secured by property...... 620 620
Note payable at 7.58%, with monthly
principal and interest payments,
due 2001, secured by equipment..... -- 220
--------- ---------
2,172 2,544
Less -- Current portion.............. (297) (335)
--------- ---------
$ 1,875 $ 2,209
========= =========
Scheduled maturities of long-term debt are as follows (in thousands):
For the year ending December 31 --
1999............................ $ 335
2000............................ 336
2001............................ 349
2002............................ 218
2003............................ 754
Thereafter...................... 552
---------
$ 2,544
=========
6. LEASES:
The Company leases land, equipment, and vehicles under operating lease
agreements. These leases are noncancelable and expire on various dates through
2003. Minimum lease payments under these agreements are as follows (in
thousands):
For the year ending December 31 --
1999............................ $ 1,334
2000............................ 1,160
2001............................ 800
2002............................ 602
2003............................ 223
---------
$ 4,119
=========
Total rent expense under all operating leases was $713,000, $1,045,000, and
$1,296,000 for the years ended December 31, 1996, 1997 and 1998, respectively.
F-52
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES:
The provision for federal and state income taxes is as follows:
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
Federal --
Current......................... $ 164 $ 243 $ 655
Deferred........................ 36 302 98
State --
Current......................... 76 32 180
Deferred........................ (16) 119 29
--------- --------- ---------
$ 260 $ 696 $ 962
========= ========= =========
Actual income tax expense differs from the income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 35% to income before
income taxes as follows:
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
Provision at the statutory rate...... $ 228 $ 595 $ 823
Increase (decrease) resulting from --
State income tax, net of federal
benefit......................... 38 98 136
Nondeductible expenses.......... (6) 3 3
--------- --------- ---------
$ 260 $ 696 $ 962
========= ========= =========
The tax effects of temporary differences representing deferred tax assets
and liabilities principally from the following:
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
Deferred tax assets --
Minimum tax credit.............. 10 95 103
NOL............................. 188 -- --
Other........................... -- 2 --
Allowance for doubtful
accounts........................ 84 20 20
--------- --------- ---------
Total deferred tax
assets..................... 282 117 123
Deferred tax liabilities --
Depreciation expense............ (415) (462) (653)
Investments..................... -- (233) (175)
Other........................... (25) -- --
--------- --------- ---------
Total deferred tax
liabilities................ (440) (695) (828)
--------- --------- ---------
Net deferred tax
liabilities................ $ (158) $ (578) $ (705)
========= ========= =========
The Company believes that all tax assets are realizable and therefore has
not offset any of these balances with a valuation allowance.
F-53
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. RELATED-PARTY TRANSACTIONS:
The Company's sales include $157,000, $62,000 and $87,000 in 1996, 1997 and
1998, respectively, for sales to a contracting company in which one of the
Company's stockholders has an ownership interest.
In 1997, the Company advanced its two principal stockholders $188,000 in
return for a note receivable in the amount of $235,000 and for interest on the
advance at an annual interest rate of 4%. Principal payments to the Company are
not due until February 1, 2003, which is the maturity date of the note. The note
is secured by an apartment building that is owned by the stockholders. As of
December 31, 1997 and 1998, the note receivable from stockholders, net of
unamortized discount, was $193,000 and $201,000, respectively. During the years
ended December 31, 1997 and 1998, the Company recorded interest income of
approximately $10,000 and $16,000, respectively, including discount amortization
of $5,000 and $8,000, respectively.
9. EMPLOYEE BENEFIT PLANS:
The Company offers its nonunion employees a profit-sharing plan (the
"Plan"), which covers all employees who have completed at least 1,000 hours of
service in a 12-month period subsequent to employment. The Company may declare a
discretionary contribution annually, which is placed into a trust fund for the
benefit of Plan participants. The Company made discretionary profit-sharing
contributions of $142,000, $215,000 and $200,000 for the years ended December
31, 1996, 1997 and 1998, respectively.
The Company made contributions to employee pension, health and welfare
plans for employees under collective bargaining agreements were $619,000,
$759,000 and $838,000 for the years ended December 31, 1996, 1997 and 1998,
respectively.
10. COMMITMENTS AND CONTINGENCIES:
INSURANCE
The Company carries a standard range of insurance coverage, including
business auto liability, general liability, medical, workers' compensation,
excess liability and commercial property. The Company also has an umbrella
policy. During 1996, 1997 and 1998, the Company has not had any significant
claims or losses on any of these insurance policies.
LITIGATION
In the normal course of doing business, the Company occasionally becomes a
party to litigation. In the opinion of management, pending or threatened
litigation involving the Company as of December 31, 1998, will not have a
material effect on its financial condition or results of operations.
11. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
In February 1999, the Company and its stockholders entered into a
definitive agreement with USC providing for USC's acquisition of the Company.
F-54
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Opportunity Concrete Corporation:
We have audited the accompanying balance sheet of Opportunity Concrete
Corporation (the Company) (a District of Columbia corporation) as of December
31, 1998, and the related statements of operations, stockholders' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement 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 financial position of Opportunity Concrete
Corporation as of December 31, 1998, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.
January 29, 1999
F-55
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
BALANCE SHEET
AS OF DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 1,634
Accounts receivable............. 504
Inventories..................... 72
Prepaid expenses................ 134
Other current assets............ 3
---------
Total current assets....... 2,347
PROPERTY, PLANT AND EQUIPMENT, net... 2,060
OTHER ASSETS, net.................... 42
---------
Total assets............... $ 4,449
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt............................ $ 298
Accounts payable and accrued
liabilities..................... 509
---------
Total current
liabilities.................. 807
LONG-TERM DEBT, net of current
portion.............................. 684
DEFERRED TAX LIABILITY............... 69
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $100 par; 500
shares authorized, 140 shares
outstanding.................... 14
Additional paid-in capital...... 7
Retained earnings............... 2,868
---------
Total stockholders'
equity....................... 2,889
---------
Total liabilities and
stockholders' equity......... $ 4,449
=========
The accompanying notes are an integral part of this financial statement.
F-56
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
SALES................................ $ 16,180
COST OF GOODS SOLD................... 11,296
---------
Gross profit............... 4,884
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,352
DEPRECIATION AND AMORTIZATION
EXPENSE............................ 245
---------
Operating income........... 2,287
OTHER INCOME:
Interest, net................... 8
Other income, net............... 14
---------
Income before provision for
income taxes.............. 2,309
PROVISION FOR INCOME TAXES........... 187
---------
Net income...................... $ 2,122
=========
The accompanying notes are an integral part of this financial statement.
F-57
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------- ------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997........... 140 $ 14 $ 7 $ 3,016 $ 3,037
Net income...................... -- -- -- 2,122 2,122
Distributions................... -- -- -- (2,270) (2,270)
------- ------- --- --------- -------------
BALANCE, December 31, 1998........... 140 $ 14 $ 7 $ 2,868 $ 2,889
======= ======= === ========= =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-58
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................... $ 2,122
Adjustments to reconcile net
income to net cash provided by
operating activities --
Depreciation and
amortization.............. 245
Net loss on sale of
property, plant and
equipment................. 3
Equity in loss of joint
venture................... 7
Deferred income tax
provision................. 17
Changes in operating assets
and liabilities:
Accounts receivable... 200
Inventories........... 21
Prepaid expenses...... (7)
Other current
assets................ 14
Accounts payable and
accrued liabilities... (210)
---------
Net cash
provided by
operating
activities........ 2,412
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment...................... (463)
Increase in cash surrender value
of life insurance.............. (7)
---------
Net cash used in
investing
activities........ (470)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.... 377
Repayments on long-term debt.... (234)
Distributions to stockholders... (2,270)
---------
Net cash used in
financing
activities........ (2,127)
---------
NET DECREASE IN CASH AND CASH
EQUIVALENTS........................ (185)
CASH AND CASH EQUIVALENTS, at
beginning of year.................. 1,819
---------
CASH AND CASH EQUIVALENTS, at end of
year............................... $ 1,634
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for
interest....................... $ 75
Cash paid during the year for
income taxes................... 187
The accompanying notes are an integral part of this financial statement.
F-59
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Opportunity Concrete Corporation (the "Company"), a District of Columbia
("D.C.") corporation, is engaged in the production and distribution of
ready-mixed concrete throughout the D.C. metropolitan area.
The Company and its stockholders intend to enter into a definitive
agreement with U.S. Concrete, Inc. (USC), an entity organized to acquire
ready-mixed concrete companies, pursuant to which the Company's stockholders
will exchange all the outstanding common stock of the Company for cash and
shares of USC common stock concurrent with the closing of USC's initial public
offering.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The Company has prepared these financial statements on the accrual basis of
accounting.
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,
disclosures 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and long-term debt. The
Company believes that the carrying values of these instruments on the
accompanying balance sheet approximate their fair values, because of the length
of their maturities or the existence of interest rates that approximate market
rates.
CASH AND CASH EQUIVALENTS
The Company records as cash equivalents all highly liquid investments
having maturities of three months or less at the date of purchase. The Company
maintains cash and cash equivalents in various financial institutions in excess
of federally insured limits. Although in excess of these limits, the Company
believes these financial institutions are of high credit quality, reducing risk
of loss.
CONCENTRATION OF CREDIT RISK
The Company sells to various construction contractors that may be affected
by changes in economic or other external conditions. The Company manages its
exposure to credit risk through ongoing credit evaluations and, where
appropriate, requires that its customers furnish adequate collateral before
credit is granted.
INVENTORIES
Inventories consist primarily of raw materials, repair parts and building
materials for resale that the Company holds for use or sale in the ordinary
course of business. The Company uses the first-in, first out method to value
inventories at the lower of cost or market. At December 31, 1998, management
believes the Company had incurred no material impairments in the carrying values
of its inventories.
PREPAID EXPENSES
Prepaid expenses primarily include amounts the Company has paid for
licenses and insurance. The Company expenses or amortizes all prepaid amounts as
used or over the period of benefit, as applicable.
F-60
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT, NET
The Company states property, plant and equipment at cost. It uses the
straight-line method to report depreciation of these assets over their estimated
useful lives or remaining lease terms.
The Company expenses maintenance and repairs cost when incurred and
capitalizes and depreciates expenditures for major renewals and betterments that
extend the useful lives of existing assets. When the Company retires or disposes
of property, plant and equipment, it removes the related cost and accumulated
depreciation from the accounts and reflects any resulting gain or loss in its
statement of operations.
SALES AND EXPENSES
The Company derives its sales primarily from the production and delivery of
ready-mixed concrete to commercial customers in the D.C. metropolitan area. The
Company recognizes sales when products are delivered. Costs of goods sold
consist primarily of product costs, ready-mixed concrete purchases and operating
expenses. Operating expenses consist primarily of salaries and related benefits,
plant operations and repairs and maintenance expenses. Selling expenses consist
primarily of salaries of sales manager and travel and entertainment expenses.
General and administrative expenses consist primarily of administrative salaries
and benefits, office rent and utilities, communication expenses and professional
fees.
INCOME TAXES
The Company's stockholders has elected S Corporation status pursuant to the
Internal Revenue Code. As such, the Company is not subject to federal income
taxes and its stockholders report their respective shares of the Company's
taxable earnings or losses in their personal tax returns. The Company is still
subject to certain state and local income taxes for those areas that do not
recognize S Corporations (D.C. being one). The Company will terminate its S
Corporation status when USC acquires it.
The Company follows the liability method of accounting for income taxes.
Under this method, the Company records deferred income taxes based on temporary
differences between the financial reporting and tax bases of assets and
liabilities and measures those taxes using enacted tax rates and laws that will
be in effect when the Company recovers those assets or settles those
liabilities, as the case may be.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its plant assets for impairment. The Company assesses
the recoverability of assets based on its anticipated future cash flows from its
assets. 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 that 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 has determined that the cash flows would be sufficient to recover the
carrying value of the Company's long lived assets as of December 31, 1998, and,
therefore, that those values were not impaired at those dates.
F-61
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment consist of the following:
ESTIMATED
USEFUL LIVES DECEMBER 31,
IN YEARS 1998
------------ --------------
(IN THOUSANDS)
Leasehold improvements............... 5-7 $ 49
Machinery and equipment.............. 3-20 1,423
Mixers, trucks and other vehicles.... 3-12 2,223
Furniture and fixtures............... 3-8 374
--------------
4,069
Less -- Accumulated depreciation..... (2,009)
--------------
Property, plant and equipment,
net........................... $ 2,060
==============
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Accounts receivable consist of the following:
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
Accounts receivable, trade........... $ 477
Other receivables.................... 27
--------------
$ 504
==============
Accounts payable and accrued liabilities consist of the following:
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
Accounts payable, trade.............. $ 324
Accrued compensation and benefits.... 82
Other accrued liabilities............ 103
--------------
$ 509
==============
F-62
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
Financing institution, at variable
rates averaging 8.2%, maturing July
2001, monthly installments of
$7,760 including interest, secured
by an Erie Strayer Mobile Central
Mix Plant.......................... $ 214
Bank debt, nine (9) notes, maturing
in various amounts between 1999 and
2002, bearing interest at fixed
rates, which range from 8.0% to
8.5%, secured by Company trucks.... 676
Financing institution, interest at
7.64%, monthly principal and
interest payments of $2,023,
maturing July 2003, secured by a
Company truck...................... 92
Financing institution, interest at
9.75%, monthly principal and
interest payments of $484, maturing
December 1998, secured by a Company
truck.............................. --
--------------
982
Less -- Current portion.............. (298)
--------------
$ 684
==============
Scheduled maturities of long-term debt are as follows (in thousands):
For the year ending December 31 --
1999............................ $ 298
2000............................ 319
2001............................ 239
2002............................ 113
2003............................ 13
------------
$ 982
============
At December 31, 1998, the Company had lines of credit with a bank totaling
$500,000, which expire on July 31, 1999. There were no borrowings against this
credit at December 31, 1998.
6. LEASES
The Company leases office space, garage, plant site, equipment and vehicles
under operating lease agreements. These leases are noncancelable and expire on
various dates over the next ten years. Future minimum lease payments under these
agreements are as follows (in thousands):
For the year ending December 31 --
1999............................ $ 177
2000............................ 136
2001............................ 140
2002............................ 143
2003............................ 146
------------
$ 742
============
Total rent expense under all operating leases was approximately $264,000
for the year ended December 31, 1998.
F-63
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES:
The accompanying statement of operations includes a provision for state
income taxes related to Washington, D.C., which does not recognize the S
Corporation status. The deferred tax liability of $69,000 primarily results from
different depreciation and amortization methods used for tax purposes to record
fixed assets.
The components of the provision for state income taxes follows:
FOR THE YEAR ENDING
DECEMBER 31, 1998
-------------------
(IN THOUSANDS)
State:
Current............................ $ 170
Deferred........................... 17
------
$ 187
======
8. EMPLOYEE BENEFIT PLANS:
The Company maintains a 401(k) plan covering substantially all employees of
the Company who have attained age 21, after completion of one year of continuous
employment. Participants' interests in employer contributions become 100% vested
after five years of service. Benefit expense for the year ended December 31,
1998, was approximately $125,000.
9. COMMITMENTS AND CONTINGENCIES:
INSURANCE
The Company carries a standard range of insurance coverages, including
business auto liability, general liability, medical, workers' compensation,
excess liability and commercial property. The Company also has an umbrella
policy. The Company has not had any significant claims or losses on any of these
insurance policies.
LITIGATION
In the normal course of doing business, the Company occasionally becomes a
party to litigation. The Company has received two demand letters from attorneys
representing a former employee claiming wrongful termination.
In November 1998, a grand jury subpoena issued out of the U.S. District
Court was served on the Company for specified documents. The Company is
cooperating with federal authorities to provide the information requested. The
Company has been informed that they are not the target of the grand jury
investigation, but, is considered a subject of the investigation because the
target(s) appear to have used documents in connection with their alleged
misconduct that may have come from the Company's premises. It is impossible to
predict accurately the outcome of such a proceeding because its full nature and
scope have not been disclosed. In the opinion of management, pending or
threatened litigation involving the Company will not have a material effect on
its financial condition or results of operations.
F-64
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. SIGNIFICANT CUSTOMERS:
Sales from significant customers consist of the following:
FOR THE YEAR ENDED
DECEMBER 31, 1998
------------------
Company A............................... 14%
Company B............................... 18
Company C............................... 20
11. SIGNIFICANT SUPPLIERS:
The Company purchased approximately 34% of its materials from two suppliers
in 1998.
12. SUBSEQUENT EVENT:
On January 14, 1999, the Company made distributions to stockholders
totaling $280,000.
13. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
In March 1999, the Company and its stockholders entered into a definitive
agreement with USC providing for USC's acquisition of the Company.
In addition, prior the closing of the acquisition, the Company will make
distributions of the Company's estimated S Corporation Accumulated Adjustment
Account which at December 31, 1998 is approximately $2,868,000.
F-65
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Baer Concrete, Incorporated:
We have audited the accompanying balance sheet of Baer Concrete, Incorporated
(the Company) (a New Jersey corporation), as of December 31, 1998, and the
related statements of operations and comprehensive income, stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 financial position of Baer Concrete, Incorporated, as
of December 31, 1998, and the results of its operations and comprehensive income
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 5, 1999
F-66
<PAGE>
BAER CONCRETE, INCORPORATED
BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 1,410
Available for sale securities... 20
Accounts receivable, net of
allowance for doubtful accounts
of $52......................... 1,754
Receivable from related party... 50
Inventories..................... 104
Deferred tax assets............. 46
Other current assets............ 30
---------
Total current assets....... 3,414
PROPERTY, PLANT AND EQUIPMENT, net... 3,518
CASH SURRENDER VALUE OF LIFE
INSURANCE.......................... 401
STOCKHOLDER'S NOTES RECEIVABLE....... 252
OTHER ASSETS......................... 94
---------
Total assets............... $ 7,679
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt........................... $ 755
Current portion of other
long-term obligations.......... 53
Accounts payable and accrued
liabilities.................... 1,747
---------
Total current
liabilities............... 2,555
LONG-TERM DEBT, net of current
portion............................ 1,675
OTHER LONG-TERM OBLIGATIONS.......... 99
DEFERRED TAX LIABILITY............... 482
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
6% cumulative preferred stock,
$100 par; 3,000 shares
authorized, 1,225 shares
outstanding.................... 123
5% noncumulative preferred
stock, $1 par; 14,000 shares
authorized, 14,000 shares
outstanding.................... 14
Common stock, no par; 2,500
shares authorized, 1,580 shares
outstanding.................... --
Additional paid-in capital...... 10
Treasury stock, at cost (1,350
common shares and 775 preferred
shares)........................ (936)
Unrealized loss on securities
available for sale............. (181)
Retained earnings............... 3,838
---------
Total stockholders'
equity.................... 2,868
---------
Total liabilities and
stockholders' equity...... $ 7,679
=========
The accompanying notes are an integral part of this financial statement.
F-67
<PAGE>
BAER CONCRETE, INCORPORATED
STATEMENT OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
SALES................................... $ 11,973
COST OF GOODS SOLD...................... 9,910
---------
Gross profit.................. 2,063
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 1,195
DEPRECIATION EXPENSE.................... 412
---------
Income from operations........ 456
OTHER INCOME (EXPENSE):
Interest expense, net.............. (105)
Other income, net.................. 379
---------
Income before provision for
income taxes................. 730
PROVISION FOR INCOME TAXES.............. 307
---------
NET INCOME.............................. 423
---------
OTHER COMPREHENSIVE INCOME:
Unrealized loss on securities
available for sale................ (24)
---------
COMPREHENSIVE INCOME.................... $ 399
=========
The accompanying notes are an integral part of this financial statement.
F-68
<PAGE>
BAER CONCRETE, INCORPORATED
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
5%
6% CUMULATIVE NONCUMULATIVE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- --------------- --------------- PAID-IN TREASURY RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK EARNINGS
------ ------ ------ ------ ------ ------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997........... 1,225 $123 14,000 $ 14 1,580 $-- $ 10 $ (936) $ 3,423
Net income......................... -- -- -- -- -- -- -- -- 423
Dividends.......................... -- -- -- -- -- -- -- -- (8)
Unrealized loss on securities
available for sale............... -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ --- -------- ---------
BALANCE, December 31, 1998........... 1,225 $123 14,000 $ 14 1,580 $-- $ 10 $ (936) $ 3,838
====== ====== ====== ====== ====== ====== === ======== =========
<CAPTION>
UNREALIZED
LOSS ON
SECURITIES TOTAL
AVAILABLE FOR STOCKHOLDERS'
SALE EQUITY
------------- -------------
<S> <C> <C>
BALANCE, December 31, 1997........... $(157) $ 2,477
Net income......................... -- 423
Dividends.......................... -- (8)
Unrealized loss on securities
available for sale............... (24) (24)
------------- -------------
BALANCE, December 31, 1998........... $(181) $ 2,868
============= =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-69
<PAGE>
BAER CONCRETE, INCORPORATED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 423
Adjustments to reconcile net income
to net cash provided by
operating activities --
Depreciation and amortization... 412
Net gain on sale of property,
plant and equipment............. (323)
Deferred income tax provision... 244
Changes in operating assets and
liabilities --
Accounts receivable, net of
allowance...................... (106)
Inventories................... (12)
Other assets.................. 37
Accounts payable and accrued
liabilities.................... 450
---------
Net cash provided by
operating activities......... 1,125
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property,
plant and equipment................ 323
Purchases of property, plant and
equipment.......................... (1,022)
---------
Net cash used in investing
activities................... (699)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of stockholder notes
receivable, net.................... 1,257
Repayments of receivable from
related party, net................. 8
Borrowings on line of credit....... 125
Payments on line of credit......... (125)
Proceeds from long-term debt....... 714
Repayments on long-term debt....... (901)
Repayments on other long-term
obligations........................ (100)
Dividends paid..................... (8)
---------
Net cash provided by
financing activities......... 970
---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS.......................... 1,396
CASH AND CASH EQUIVALENTS, at
beginning of year.................... 14
---------
CASH AND CASH EQUIVALENTS, at end of
year................................. $ 1,410
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for
interest........................ $ 211
Cash paid during the year for
income taxes.................... 39
Unrealized loss on securities
available for sale.............. (24)
The accompanying notes are an integral part of this financial statement.
F-70
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Baer Concrete, Incorporated (the "Company"), a New Jersey corporation, is
engaged in the production and distribution of ready mixed concrete, throughout
New Jersey, where the Company has four batch plants.
The Company and its stockholders intend to enter into a definitive
agreement with U.S. Concrete, Inc. ("USC"), a recently formed entity organized
to acquire ready-mixed concrete companies, pursuant to which the Company's
stockholders will exchange all the outstanding common stock of the Company for
cash and shares of USC common stock concurrent with the closing of USC's initial
public offering.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
BASIS OF PRESENTATION
The Company has prepared these financial statements on the accrual basis of
accounting.
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,
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and
short-term investments, accounts receivable, accounts payable, line of credit
and long-term debt. The Company believes that the carrying value of these
instruments on the accompanying balance sheet approximates their fair values,
because of the length of their maturities or the existence of interest rates
that approximates market rates.
CASH AND CASH EQUIVALENTS
The Company records as cash equivalents all highly liquid investments
having maturities of three months or less at the date of purchase. At December
31, 1998, the Company maintained cash balances in various financial institutions
in excess of federally insured limits.
CONCENTRATION OF CREDIT RISK
The Company sells to various construction contractors that may be affected
by changes in economic or other external conditions. The Company manages its
exposure to credit risk through ongoing credit evaluations and, where
appropriate, requires that its customers furnish adequate collateral before
credit is granted or obtains a lien on the customer's assets.
INVENTORIES
Inventories consist primarily of raw materials and are stated at the lower
of cost or market, using the first-in, first out (FIFO) method. At December 31,
1998, management believes the Company had incurred no material impairments in
the carrying values of its inventories.
PROPERTY, PLANT AND EQUIPMENT, NET
The Company states property, plant and equipment at cost. The Company uses
the straight-line method to compute depreciation of these assets over their
estimated useful lives.
The Company expenses maintenance and repair cost when incurred and
capitalizes and depreciates expenditures for major renewals and betterments that
extend the useful lives of existing assets. When the
F-71
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company retires or disposes of property, plant and equipment, it removes the
related cost and accumulated depreciation from the accounts and reflects any
resulting gain or loss in the statement of operations.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company provides an allowance for accounts receivable that it believes
may not be fully collectible.
CASH SURRENDER VALUE OF LIFE INSURANCE
The Company owns life insurance policies on its primary stockholder. It
records the cash surrender value of these policies as an asset. It expenses the
premiums related to these policies to the extent that they exceed the increase
in the underlying cash surrender value of the policies.
SALES AND EXPENSES
The Company derives its sales primarily from the production and delivery of
ready-mixed concrete. The Company recognizes sales when products are delivered.
Cost of goods sold consists primarily of product costs and operating expenses.
Operating expenses consist of wages and benefits of union employees, and
expenses attributable to plant operations, repairs and maintenance and trucks.
Selling expenses consist primarily of sales commissions, salaries of sales
managers, travel and entertainment expenses, and trade show expenses. General
and administrative expenses consist primarily of executive compensation and
related benefits, administrative salaries and benefits, office rent and
utilities, communication expenses and professional fees.
INCOME TAXES
The Company follows the liability method of accounting for income taxes.
Under this method, the Company records deferred income tax balances based on
temporary differences between the financial reporting and tax bases of assets
and liabilities and measures those taxes using enacted tax rates and laws that
will be in effect when the Company recovers those assets or settles those
liabilities, as the case may be.
COLLECTIVE BARGAINING AGREEMENTS
The Company is party to various collective bargaining agreements with
certain employees. The agreements require the Company to pay specified wages and
provide certain benefits to its union employees. These agreements will expire at
various times through 2002.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its plant assets for impairment. The Company assesses
the recoverability of assets based on its anticipated future cash flows from its
assets. 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 that 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 has determined that the cash flows would be sufficient to recover the
carrying value of the Company's long-lived assets as of December 31, 1998, and,
therefore, that those values were not impaired at that date.
COMPREHENSIVE INCOME
In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income," which requires companies to
report all changes in equity during a period in a financial statement for the
period in which they are recognized. The Company has chosen to
F-72
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
disclose comprehensive income, which encompasses unrealized loss on securities
available for sale in the statement of stockholders' equity.
3. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment at December 31, 1998, consists of the
following (dollars in thousands):
ESTIMATED
USEFUL LIVES
IN YEARS
------------
Building and improvements............ 7-30 $ 1,839
Machinery and equipment.............. 3-15 1,735
Mixers, trucks and other vehicles.... 3-12 4,585
Furniture and fixtures............... 3-15 232
---------
8,391
Less -- Accumulated
depreciation.................. (4,873)
---------
Property, plant and
equipment, net.......... $ 3,518
=========
During 1998, the Company sold various trucks and mixers, which resulted in
a gain of $323,000. The gain is classified as other income in the statement of
operations.
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Accounts receivable at December 31, 1998, consist of the following (in
thousands):
Accounts receivable, trade, net of
allowance............................ $ 1,662
Refund receivable.................... 92
---------
$ 1,754
=========
Accounts payable and accrued liabilities at December 31, 1998, consist of
the following (in thousands):
Accounts payable, trade.............. $ 1,503
Accrued compensation and benefits.... 244
---------
$ 1,747
=========
F-73
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LINE OF CREDIT AND LONG-TERM DEBT:
The Company has a $350,000 line of credit payable on demand from a bank.
Interest is payable monthly on any outstanding balance at the bank's prime rate.
The line is secured by the Company's accounts receivable and inventory. There
was no outstanding balance as of December 31, 1998.
Long-term debt at December 31, 1998, consists of the following (in
thousands):
Notes payable to banks at a range of
7.91% to 10.5% with monthly principal
and interest payments, maturing from
April 2000 through August 2003,
secured by machinery and equipment.... $ 1,837
Notes payable to bank at prime plus 1%
(prime of 7.75% at December 31, 1998),
with monthly principal and interest
payments, maturing from October 2000
through December 2001, secured by
vehicles.............................. 116
Note payable at a range of 5.6% to 9.5%,
with monthly principal and interest
payments, maturing from May 2000
through November 2001, collateralized
by equipment and vehicles............. 477
---------
2,430
Less -- Current portion................. (755)
---------
$ 1,675
=========
Scheduled maturities of long-term debt are as follows (in thousands):
For the year ending December 31 --
1999............................... $ 755
2000............................... 620
2001............................... 497
2002............................... 389
2003............................... 129
Thereafter......................... 40
---------
$ 2,430
=========
6. OTHER LONG-TERM OBLIGATIONS:
In February 1993, the Company entered into noncompete covenants with two of
the employees/stockholders whose shares were redeemed as part of a
reorganization of the Company. The covenants of these former employees provide
for annual payments over a period of nine years. The related noncompete
covenants were amortized by the Company over five years and expired in 1998.
Future annual payments under these agreements are as follows (in
thousands):
For the year ending December 31 --
1999............................... $ 53
2000............................... 53
2001............................... 34
2002............................... 12
---------
$ 152
=========
F-74
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES:
The components of provision for federal and state income taxes follow:
FOR THE YEAR ENDED
DECEMBER 31, 1998
------------------
(IN THOUSANDS)
Federal --
Current............................ $ 63
Deferred........................... 177
State --
Current............................ --
Deferred........................... 67
------
$ 307
======
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 35% to income before
provision for income taxes as follows:
FOR THE YEAR ENDED
DECEMBER 31, 1998
------------------
(IN THOUSANDS)
Provision at the statutory rate......... $ 255
Increase resulting from --
State income tax, net of federal
benefit.......................... 44
Nondeductible expenses............. 8
------
$ 307
======
The tax effects of temporary differences representing deferred tax assets
and liabilities result principally from the following:
DECEMBER 31, 1998
-----------------
(IN THOUSANDS)
Current deferred income taxes:
Allowance for doubtful accounts.... $ 21
Accrued expenses................... 19
Other.............................. 6
-------
Net current deferred income
tax assets................. $ 46
=======
Noncurrent deferred income taxes:
Noncurrent assets --
Net operating loss................. 57
Capital loss....................... 146
Minimum tax credit................. 14
-------
217
Valuation allowance................ (146)
-------
Total noncurrent assets....... 71
Noncurrent liabilities
Depreciation....................... (479)
Loss on investment................. (74)
-------
Total noncurrent
liabilities................ (553)
-------
Net noncurrent deferred income
tax liabilities............ $ (482)
=======
F-75
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. RELATED-PARTY TRANSACTIONS:
In December 1998, the Company entered into two debt agreements with the
primary stockholders for a total of $252,000. The agreement stipulates the notes
will accrue interest at 7%, payable annually. The notes are payable upon demand.
The balance outstanding was $252,000 at December 31, 1998.
The Company loaned funds to a company owned by the primary stockholder's
brother. The loan is noninterest bearing and has no scheduled repayments. The
balance outstanding was $50,000 at December 31, 1998.
9. EMPLOYEE BENEFIT PLANS:
During 1995, the Company established a 401(k) plan. All employees not
subject to collectively bargained agreements are eligible to participate in the
plan. The Company contributes 50% of the first 5% of the employee's elective
deferral. Company contributions for December 31, 1998, totaled $7,000.
Effective March 1, 1998, the Company established an employee stock
ownership plan (ESOP). No contributions were made to the ESOP for the year ended
December 31, 1998.
The Company made contributions to employee pension, health and welfare
plans for employees under collective bargaining agreements of $189,000 for the
year ended December 31, 1998.
11. COMMITMENTS AND CONTINGENCIES:
GUARANTEES
The Company has provided a guarantee for a mortgage for a company owned by
its principal stockholder. At December 31, 1998, the mortgage totaled $1.5
million.
OPERATING LEASE AGREEMENTS
The Company leases one of its operating facilities from the principal
stockholder under a long-term noncancelable operating lease agreement. The lease
expires in 2,015. Total rent paid for the year ended December 31, 1998, was
$156,000. The lease require the Company to pay taxes, maintenance, insurance and
certain operating costs of the properties. The Company also leases certain
office equipment under long term noncancelable operating lease agreements which
expire in 2001. Total rent paid under these leases was approximately $2,000 for
the year ended December 31, 1998.
Future minimum lease payments required under noncancelable operating leases
(including related party lease) are as follows (in thousands):
For the year ending December 31 --
1999............................ $ 167,000
2000............................ 167,000
2001............................ 165,000
2002............................ 156,000
2003............................ 156,000
Thereafter...................... 1,876,000
------------
$ 2,687,000
============
INSURANCE
The Company carries a standard range of insurance coverage, including
business auto liability, general liability, medical, workers' compensation,
excess liability and commercial property. The Company also has an umbrella
policy. During 1998, the Company has not incurred significant claims or losses
on any of these insurance policies.
F-76
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LITIGATION
The Company has been named as a co-defendant in a lawsuit whereby the
plaintiff alleges, among other things, deficiencies in the design and
construction of a parking structure completed in 1989. The Company supplied
concrete to the general contractor on the project who has also been named as a
defendant. The plaintiff is alleging damages of approximately $1.1 million.
Management intends to vigorously defend itself and believes the Company has
meritorious defenses. Management believes the loss, if any, would be partially
covered by insurance. The ultimate outcome of this matter, however, can not be
determined at this time.
12. SUBSEQUENT EVENT:
On January 1, 1999 the Company entered into a noncancelable operating lease
agreement with a company owned by the principal stockholder for one of its
operating facilities. For the plant lot, the lease term is twenty years and
requires monthly payments of $3,750. For the two expansion lots, the lease term
is month-to-month and requires 180 day notification of cancellation. The monthly
payment on each expansion lot is $1,750.
13. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
In March, 1999, the Company and its stockholders entered into a definitive
agreement with USC providing for USC's acquisition of the Company.
In connection with the acquisition, certain assets with a net book value of
$600,000 will be retained by the stockholders. Had this transaction been
recorded at December 31, 1998, the effect on the accompanying balance sheet
would be a decrease in assets and a decrease in stockholders' equity of
$600,000.
Upon the closing of the acquisition of the Company by USC, the Company will
enter into new lease agreements with its former stockholders. These leases will
provide for $19,000 in combined monthly rentals over initial lease terms of 20
years, excluding the month-to-month leases discussed above.
F-77
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Through and including , 1999 (the 25th day after the date
of this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this 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.
3,800,000 SHARES
U.S. CONCRETE, INC.
COMMON STOCK
-------------------
PROSPECTUS
-------------------
SCOTT & STRINGFELLOW, INC.
SANDERS MORRIS MUNDY
, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(1)
The following table sets forth the expenses (other than underwriting
discounts and commissions) in connection with this offering, all of which shall
be paid by USC. All of these amounts (except the SEC Registration Fee, the NASD
filing fee and the NASDAQ National Market Listing fee) are estimated.
SEC Registration Fee................. $ 11,542
NASD Filing Fee...................... 4,652
NASDAQ National Market Listing Fee... *
Accounting Fees and Expenses......... *
Legal Fees and Expenses.............. *
Printing Expenses.................... *
Transfer Agent's Fees................ *
Miscellaneous........................ *
---------
Total........................... $ *
=========
- - ------------
* To be provided by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
DELAWARE GENERAL CORPORATION LAW
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
II-1
<PAGE>
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL states that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be made (1) by a
majority vote of the directors who were not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of
Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office.
Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of Section 145.
Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent, and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director (1) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (2) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (3) under Section 174 of the DGCL, or (4) for any transaction from which
the director derived an improper personal benefit.
CERTIFICATE OF INCORPORATION
Article Eighth of USC's Amended and Restated Certificate of Incorporation
states that:
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article Eighth
shall not eliminate or limit the liability of a director to the extent provided
by applicable law (1) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law,
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<PAGE>
(3) under Section 174 of the DGCL or (4) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of this
Article Eighth shall apply to, or have any effect on, the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal. If the
DGCL is amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
In addition, Article VI of USC's Bylaws further provides that USC shall
indemnify its officers, directors and employees to the fullest extent permitted
by law.
INDEMNIFICATION AGREEMENTS
USC intends to enter into indemnification agreements with each of its
executive officers and directors.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides that the Underwriters will, under certain conditions,
indemnify USC, its officers and directors, and persons who control USC within
the meaning of the Securities Act against certain liabilities.
USC intends to maintain liability insurance for the benefit of its
directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is certain information concerning all sales of securities
we issued during the past three years that were not registered under the
Securities Act.
We issued and sold 200 shares of Common Stock on October 15, 1997 to Main
Street Merchant Partners II, L.P. ("Main Street") for $10.00 per share. Mr.
Foster, our Chairman of the Board, is a Managing Director of Main Street. In
December 1998, we issued and sold 20 shares of Common Stock to Eugene P.
Martineau, our chief executive officer, and 15 shares of Common Stock to Michael
W. Harlan (and his family trust), in each case for $10.00 per share. As a result
of a March 1999 10,000-for-1 stock split of all these shares and a subsequent
reclassification of Main Street's shares as a share of our Class A Stock, Main
Street now owns one share of Class A Stock and Messrs. Martineau and Harlan (and
his family trust) own 200,000 and 150,000 shares, respectively of the Common
Stock. The share of Class A Stock automatically will convert into 1,602,255
shares of Common Stock before this offering closes. Those sales were exempt from
the registration requirements of the Securities Act by virtue of Section 4(2)
thereof as transactions not involving any public offering.
In March 1999, we sold 801,000 shares of Common Stock to American Ready
Mix, L.L.C., 50,000 shares of Common Stock to our controller, Charles W. Sommer
and 25,000 shares of Common Stock to two of our non-employee directors, John R.
Colson and Peter T. Dameris, in each case for a purchase price of $.001 per
share. Those sales were exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof as transactions not involving
any public offering.
Concurrently with the closing of this offering, we will issue 8,985,288
shares of Common Stock in connection with the acquisitions of the Founding
Companies. Those issuances will be exempt from the registration requirements of
the Securities Act by virtue of Section 4(2) thereof as transactions not
involving any public offering.
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<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
------------ ---------------------
1.1* -- Form of Underwriting Agreement.
2.1 -- Agreement and Plan of Reorganization
dated as of March 22, 1999 by and
among USC, OCC Acquisition, Inc.,
Opportunity Concrete Corporation and
the stockholders named therein.
2.2 -- Agreement and Plan of Reorganization
dated as of March 22, 1999 by and
among USC, Walker's Acquisition,
Inc., Walker's Concrete, Inc. and the
stockholders named therein.
2.3 -- Agreement and Plan of Reorganization
dated as of March 22, 1999 by and
among USC, Central Concrete
Acquisition, Inc., Central Concrete
Supply Co., Inc. and the stockholders
named therein.
2.4 -- Agreement and Plan of Reorganization
dated as of March 22, 1999 by and
among USC, Bay Cities Acquisition,
Inc., Bay Cities Building Materials
Co., Inc. and the stockholders named
therein.
2.5 -- Agreement and Plan of Reorganization
dated as of March 22, 1999 by and
among USC, Baer Acquisition, Inc.,
Baer Concrete Incorporated and the
stockholders named therein.
2.6 -- Agreement and Plan of Reorganization
dated as of March 22, 1999 by and
among USC, Santa Rosa Acquisition,
Inc., R. G. Evans/Associates d/b/a
Santa Rosa Cast Products Company and
the stockholders named therein.
2.7 -- Uniform Provisions for the
Acquisitions (incorporated into the
agreements filed as Exhibits 2.1
through 2.6 hereto).
3.1* -- Restated Certificate of Incorporation
of USC.
3.2* -- Bylaws of USC.
4.1* -- Form of Certificate representing
Common Stock.
4.2* -- Form of Registration Rights Agreement
by and among the Company and the
stockholders listed on the signture
pages thereto.
4.9* -- Funding Agreement dated as of
September 10, 1999 by and between USC
and Main Street.
4.10* -- Forms of Rights Agreement by and
between the Company and ,
including form of Rights Certificate
attached as Exhibit B thereto.
The Company and certain of its
subsidiaries are parties to certain
debt instruments under which the
total amount of securities authorized
does not exceed 10% of the total
assets of the Company and its
subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii)A) of
Item 601(b) of Regulation S-K, the
Company agrees to furnish a copy of
such instruments to the Commission on
request.
5.1* -- Opinion of Baker & Botts, L.L.P.
10.1* -- 1999 Incentive Plan of U.S. Concrete,
Inc.
10.2 -- Employment Agreement between USC and
William T. Albanese.
10.3* -- Employment Agreement between USC and
Michael W. Harlan
10.4* -- Employment Agreement between USC and
Eugene P. Martineau
10.5 -- Employment Agreement between USC and
Michael D. Mitschele.
II-4
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------------ ---------------------
10.6* -- Employment Agreement between USC and
Charles W. Sommer.
10.7 -- Employment Agreement between USC and
Neil J. Vannucci.
10.8 -- Employment Agreement between USC and
Robert S. Walker.
10.9* -- Form of Indemnification Agreement
between the Company and each of its
directors and officers.
21.1* -- Subsidiaries of the Company.
23.1 -- Consent of Arthur Andersen LLP.
23.3* -- Consent of Baker & Botts, L.L.P.
(contained in Exhibit 5.1 hereto).
23.4 -- Consent of William T. Albanese, as a
nominee for directorship.
23.5 -- Consent of John R. Colson, as a
nominee for directorship.
23.6 -- Consent of Peter T. Dameris, as a
nominee for directorship.
23.7 -- Consent of Michael D. Mitschele, as a
nominee for directorship.
23.8 -- Consent of Murray S. Simpson, as a
nominee for directorship.
23.9 -- Consent of Neil J. Vannucci, as a
nominee for directorship.
23.10 -- Consent of Robert S. Walker, as a
nominee for directorship.
24.1 -- Power of Attorney (included on the
signature page hereto).
27.1* -- Financial Data Schedule.
- - ------------
* To be filed by Amendment.
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
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.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act, 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 (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.
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<PAGE>
(2) That for the purpose of determining any liability under the
Securities Act, 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.
(3) To provide to the Underwriters, at the closing specified in the
underwriting agreement, certificates representing the shares of Common
Stock offered hereby in such denominations and registered in such names as
required by the Underwriters to permit prompt delivery to each purchaser.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on March 22, 1999.
U.S. CONCRETE, INC.
By: /s/ EUGENE P. MARTINEAU
EUGENE P. MARTINEAU
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Each person whose signature appears below hereby constitutes and appoints
Eugene P. Martineau and Michael W. Harlan, and each of them, each of whom may
act without the joinder of the others, his true and lawful attorneys-in-fact and
agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any subsequent
registration statements filed by the Registrant pursuant to Rule 462(b) of the
Securities Act of 1933, which relates to this offering, and to file same, with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
appropriate or necessary to be done in and about the premises, as fully and for
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
CAPACITY IN
SIGNATURE WHICH SIGNED DATE
-------------- ------------------- ---------
<C> <S> <C>
/s/ EUGENE P. MARTINEAU President and Chief Executive Officer March 22, 1999
EUGENE P. MARTINEAU and Director
(Principal Executive Officer)
/s/ MICHAEL W. HARLAN Chief Financial Officer and March 22, 1999
MICHAEL W. HARLAN Director (Principal Financial
and Accounting Officer)
/s/ VINCENT D. FOSTER Director March 22, 1999
VINCENT D. FOSTER
</TABLE>
II-7
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 22, 1999
BY AND AMONG
U.S. CONCRETE, INC.,
OCC ACQUISITION INC.,
OPPORTUNITY CONCRETE CORPORATION
AND
THE STOCKHOLDERS NAMED HEREIN
Reverse Triangular Merger; Non-Delaware Company; Multiple Stockholders; Company
Financial Statements
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of March 22, 1999 by and among U.S. Concrete, Inc., a Delaware corporation
("USC"), OCC Acquisition Inc., a Delaware corporation and a wholly owned
subsidiary of USC ("USC Sub"), Opportunity Concrete Corporation, a District of
Columbia corporation (the "Company"), and the persons and trustees listed on the
signature page hereof under the caption "Stockholders" (collectively, the
"Stockholders," and each of those persons, individually, a "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination pursuant to which:
(a) USC Sub will merge into the Company on the terms and subject to
the conditions set forth herein (that merger being the "Merger");
(b) USC will acquire the stock of all or some of the entities listed
in the accompanying Addendum 1 (each, other than the Company, an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") pursuant to agreements that are (i) similar to this Agreement
and (ii) entered into among those entities and their equity owners, USC
and subsidiaries of USC (collectively, the "Other Agreements"); and
(c) USC will effect a public offering of shares of its common stock
and issue and sell those shares.
The respective boards of directors of USC, USC Sub and the Company
have approved and adopted this Agreement to effect a transaction subject to
Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings this Agreement contains, the
parties hereto hereby agree as follows:
Paragraph 1 CERTAIN DEFINED TERMS. The following terms this
Agreement uses have the meanings this Paragraph 1 specifies. Capitalized terms
this Agreement uses, but this Paragraph 1 does not define, have the meanings the
preamble to this Agreement, the Preliminary Statement above or Article IX of the
Uniform Provisions, as the case may be, specifies.
"Acquired Business" means the Company.
"Acquisition" means the Merger.
"Acquisition Consideration" has the meaning Paragraph 2 specifies.
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<PAGE>
"Additional Cash Consideration" means the product of (i) the
quotient obtained from dividing (A) the sum of the amount of cash
Paragraph B of Schedule 2(D) sets forth and the 1998 Restricted Payment
Amount by (B) $8.50 multiplied by (ii) the amount, if any, by which (A)
the IPO Price exceeds (B) $8.50.
"Ceiling Amount" means the sum of (i) $11,721,962, (ii) the
Additional Cash Consideration, if any, (iii) the Positive Net Adjustment,
if any, and (iv) the Negative Net Adjustment, if any; provided, however,
that, for purposes of Sections 6.06(b) and 7.06(b), the Ceiling Amount is
$8,791,471.
"Closing" has the meaning Paragraph 3 specifies.
"Closing Date" means the IPO Pricing Date.
"Company Capital Stock" means the Common Stock, par value $100.00
per share, of the Company.
"Company Financial Statements" means (i) the audited balance sheet
of the Company as of December 31, 1998 and the related audited statements
of operations, cash flows and shareholders' equity for the year ended
December 31, 1998, together with the related audit report of the
Independent Accountants.
"Counsel for the Company and the Stockholders" means Dow, Lohnes &
Albertson, PLLC.
"Counsel for USC and USC Sub" means Baker & Botts, L.L.P.
"Current Balance Sheet" means the audited balance sheet of the
Company as of December 31, 1998.
"Current Balance Sheet Date" means December 31, 1998.
"Current Balance Sheet Date Working Capital" means $787,000.
"DCBCA" means the District of Columbia Business Corporation Act.
"Effective Date" means the IPO Closing Date.
"Executive Employment Agreement" means the Employment Agreement
entered into effective as of the IPO Closing Date between the Company and
Monte E. Newman.
"Initial Financial Statements" means the Company Financial
Statements.
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<PAGE>
"Minimum Cash Balance" means $250,000.
"Pro Rata Share" of a Stockholder means: (i) 54.28% in the case of
the Monte E. Newman, trustee of the Monte E. Newman Revocable Trust;
11.43% in the case of Murray S. Simpson, trustee of the CSS 1998 GRAT;
(iii) 11.43% in the case of Cora S. Simpson, trustee of the MSS 1998 GRAT;
(iv) 11.43% in the case of Edmund G. Simpson; and (v) 11.43% in the case
of Virginia A. Simpson.
"Responsible Officer" means Monte E. Newman.
"Surviving Corporation" means the Company, which the Certificate of
Merger will designate as the surviving corporation of the Merger.
"Termination Date" means May 31, 1999; provided, however, that if
(i) USC has filed the Registration Statement with the SEC prior to that
date and (ii) the Stockholders would not be entitled to terminate this
Agreement on that date otherwise than pursuant to Section 11.01(a)(ii),
"Termination Date" means September 30, 1999.
"Uniform Provisions" has the meaning Paragraph 4 specifies.
"USC Award Agreements" means the award agreements, each in the form
of Exhibit 1-A, pursuant to which USC, on the Closing Date, will grant to
certain key employees of the Company Monte E. Newman has designated by
written notice to USC and USC has approved by written notice to the
Responsible Officer (which approval USC will not unreasonably withhold)
prior to the Closing Date, pursuant to the U.S. Concrete, Inc. 1999
Employee Incentive Plan, or other similar stock option plan, options to
purchase an aggregate of 55,203 shares of USC Common Stock at a per share
exercise price equal to the IPO Price.
"USC Sub Common Stock" means the Common Stock, par value $1.00 per
share, of USC Sub.
"1998 Restricted Payment Amount" means $2,500,000.
Paragraph 2 (A) CERTIFICATE OF MERGER. Subject to the terms and
conditions hereof, the Company will cause the Certificate of Merger to be duly
executed and delivered on or promptly after the Closing Date and delivered and
filed with the Mayor of the District of Columbia and the Secretary of State of
the State of Delaware on the business day immediately preceding the IPO Closing
Date.
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<PAGE>
(B) THE EFFECTIVE TIME. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., Houston, Texas time, on the Effective Date.
(C) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective Time,
(1) USC Sub will be merged with and into the Company in accordance with the
provisions of the DCBCA and the DGCL, (2) USC Sub will cease to exist as a
separate legal entity, (3) the articles of incorporation of the Company will be
amended to change the Company's authorized shares of capital stock to 1,000
shares, par value $1.00 per share, of Common Stock, (4) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
DCBCA and the DGCL, (a) possess all the properties and rights, and be subject to
all the restrictions and duties, of the Company and USC Sub and (b) be governed
by the laws of the District of Columbia, (5) the Charter Documents of the
Company then in effect (after giving effect to the amendment to the Company's
articles of incorporation specified in clause (3) of this sentence) will become
and thereafter remain (until changed in accordance with (a) applicable law (in
the case of the articles of incorporation) or (b) their terms (in the case of
the bylaws)) the Charter Documents of the Surviving Corporation, (6) the initial
board of directors of the Surviving Corporation will be the persons Schedule
2(C) names as such, and those persons will hold the office of director of the
Surviving Corporation, subject to the provisions of the applicable laws of the
District of Columbia and the Charter Documents of the Surviving Corporation, and
(7) the initial officers of the Surviving Corporation will be as Schedule 2(C)
sets forth, and each of those persons will serve in each office Schedule 2(C)
specifies for that person, subject to the provisions of the Charter Documents of
the Surviving Corporation, until that person's successor is duly elected to,
and, if necessary, qualified for, that office.
(D) EFFECT OF THE MERGER ON CAPITAL STOCK. As of the Effective Time,
as a result of the Merger and without any action on the part of any holder
thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) convert into the right to
receive, subject to the provisions of Paragraph 2(E), without interest, on
surrender of the certificates evidencing those shares, the amount of cash
and the number of whole and fractional shares of USC Common Stock Schedule
2(D) sets forth and, if any, the Additional Cash Consideration (the
"Acquisition Consideration"), (b) cease to be outstanding and to exist and
(c) be canceled and retired;
(2) each share of Company Capital Stock held in the treasury of the
Company or any Company Subsidiary will (a) cease to be outstanding and to
exist and (b) be canceled and retired; and
(3) each share of USC Sub Common Stock issued and outstanding
immediately prior to the Effective Time will convert into one share of
Common Stock, par value $1.00
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<PAGE>
per share, of the Surviving Corporation and the shares of Common Stock of
the Surviving Corporation issued on that conversion will constitute all
the issued and outstanding shares of Capital Stock of the Surviving
Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without interest,
the Acquisition Consideration and the additional cash, if any, owing with
respect to those shares as provided in Paragraph 2(F).
(E) DELIVERY, EXCHANGE AND PAYMENT. (1) At or after the Effective
Time: (a) the Stockholders, as holders of certificates representing shares of
Company Capital Stock, will, on surrender of those certificates to USC (or any
agent that USC may appoint for purposes of this Paragraph 2(E)), receive,
subject to the provisions of this Paragraph 2(E) and Paragraph 2(F), the
Acquisition Consideration; and (b) until any certificate representing Company
Capital Stock has been surrendered and replaced pursuant to this Paragraph 2(E),
that certificate will, for all purposes, be deemed to evidence ownership of the
number of whole shares of USC Common Stock included in the Acquisition
Consideration payable in respect of that certificate pursuant to Paragraph 2(D).
All shares of USC Common Stock issuable in the Merger will be deemed for all
purposes to have been issued by USC at the Effective Time.
(2) Each Stockholder will deliver to USC (or any agent that USC may
appoint for purposes of this Paragraph 2(E)) on or before the IPO Closing Date
the certificates representing all the Company Capital Stock owned by that
Stockholder, duly endorsed in blank, or accompanied by stock powers in blank
duly executed, by that Person, and with all necessary transfer tax and other
revenue stamps, acquired at that Person's expense, affixed and canceled. Each
Stockholder will cure any deficiencies in the endorsement of the certificates or
other documents of conveyance respecting, or in the stock powers accompanying,
the certificates representing Company Capital Stock that Person delivers.
(3) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to USC Common Stock and payable to
the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company Capital
Stock for which whole shares of USC Common Stock have been issued in the Merger
until those certificates are surrendered as provided herein, but (a) on that
surrender USC will cause to be paid, to the Person in whose name the
certificates representing those whole shares of USC Common Stock will then be
issued, the amount of dividends or other distributions previously paid with
respect to those whole shares of USC Common Stock with a record date, or which
have accrued, subsequent to the Effective Time, but prior to that surrender, and
the amount of any cash payable to that Person for and in lieu of fractional
shares pursuant to Paragraph 2(F) and (b) at the appropriate payment date or as
soon as practicable thereafter, USC will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which have
been accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to
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<PAGE>
surrender, which are payable with respect to those whole shares of USC Common
Stock, subject in all cases to any applicable escheat laws. No interest will be
payable with respect to the payment of those dividends or other distributions or
cash for and in lieu of fractional shares on surrender of outstanding
certificates.
(F) Notwithstanding any other provision herein, USC will not issue
any fractional shares of USC Common Stock, and if any Stockholder would be
entitled hereunder to receive a fractional share of USC Common Stock but for
this Paragraph 2(F), that Stockholder will be entitled hereunder to receive a
cash payment for and in lieu thereof in the amount (rounded upward to the
nearest whole cent) equal to that Stockholder's fractional interest in a share
of USC Common Stock multiplied by the IPO Price.
Paragraph 3 THE CLOSING. On or before the Closing Date, the parties
hereto will take all actions necessary to (A) effect the Acquisition (including,
as permitted by the DCBCA and the DGCL, (i) the execution of a Certificate of
Merger (a) meeting the requirements of the DCBCA and the DGCL and (b) providing
that the Merger will become effective on the Effective Date and (ii) the
transmitting for filing of that Certificate of Merger with the Mayor of the
District of Columbia (which notwithstanding the foregoing will take place on the
business day immediately preceding the IPO Closing Date) and the Secretary of
State of the State of Delaware), (B) verify the existence and ownership of the
certificates evidencing the Company Capital Stock to be exchanged for the
Acquisition Consideration pursuant to Paragraph 2(E) and (C) satisfy the
document delivery requirements on which the obligations of the parties to effect
the Acquisition and the other transactions contemplated hereby are conditioned
by the provisions of Article V (all those actions collectively being the
"Closing"). The Closing will take place at the offices of Baker & Botts, L.L.P.,
30th Floor, 910 Louisiana, Houston, Texas at 10:00 a.m., Houston time, on the
Closing Date, or at such later time on the Closing Date as USC specifies by
written notice to the Responsible Officer. The actions taken at the Closing will
not include the delivery of the Company Capital Stock to USC or the payment of
the Acquisition Consideration to the Stockholders. Instead, on the IPO Closing
Date, the Company Capital Stock will be surrendered in exchange for the
Acquisition Consideration (with the cash portion of the Acquisition
Consideration being paid by wire transfer pursuant to instructions the
Stockholders deliver to USC prior to Closing or, in the absence of those
instructions, a USC check), and all transactions contemplated by this Agreement
to be closed or completed on or before the IPO Closing Date will be closed and
completed, as the case may be.
Paragraph 4 INCORPORATION OF UNIFORM PROVISIONS. (A) The U.S.
Concrete, Inc. Uniform Provisions for the Acquisition of Founding Companies
attached hereto as Annex 1 (the "Uniform Provisions") hereby are incorporated in
this Agreement by this reference and constitute a part of this Agreement with
the same force and effect as if set forth at length herein.
(B) The Uniform Provisions are hereby amended by adding a Section
1.08 which reads in its entirety as follows:
SECTION 1.08 TRUSTS.
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<PAGE>
(a) Schedule 1.08 sets forth the legal name of each
Stockholder that is a trustee (the "Trustee"), the name of the trust
over which that Trustee serves (each a "Trust"), the state or other
jurisdiction which governs that Trustee's duties with respect to
that Trust, and the name of each beneficiary of that Trust (the
"Beneficiaries").
(b) There has not been any challenge to (i) the authority,
appointment or capacity of any Trustee to serve as such over the
applicable Trust or (ii) the validity of any Trust.
(c) Full and complete copies of all documents under which each
Trust was created and all documents otherwise pertaining to each
Trust or the duties and obligations of each Trustee serving over
each Trust and all amendments, supplements or modifications thereto
have been provided to USC.
(d) The Trustees set forth opposite the name of each Trust on
Schedule 1.08 are the sole Trustees of that Trust and each Trustee
listed is a duly acting and qualified trustee of that Trust. Each of
the Trustees has all requisite power and authority to execute and
deliver each Transaction Document, to consummate the transactions
contemplated thereby and to perform all the terms and conditions
thereof to be performed by that Trustee.
(e) No notice is required to be given to and no consent or
joinder is required to be acquired from any Beneficiary in
connection with the Transaction Documents or any of the transactions
contemplated thereby and no objection has been received from any
Beneficiary relating to the Transaction Documents or any of the
transactions contemplated thereby.
(C) Section 4.03 is hereby amended by adding at the end thereof the
following:
; provided, however, that the Company may make Restricted Payments
to its Stockholders as dividends consisting of: (i) cash or
Permitted Promissory Notes (valued at the principal amount thereof)
in an aggregate amount not to exceed the amount by which (A) the
1998 Restricted Payment Amount exceeds (B) the sum of all Restricted
Payments the Company has made from and after January 1, 1999 to the
date of this Agreement; and (ii) cash or Permitted Promissory Notes
in an aggregate amount not to exceed the 1999 Restricted Payment
Amount. As used herein, "Permitted Promissory Note" means an
unsecured promissory note of the Company which bears interest from
the date of its issue until paid at the rate of 6% per annum and
will become due and payable no earlier than the Adjustment
Determination Date.
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<PAGE>
(D) Section 6.02 is hereby amended by adding a second paragraph
which reads in its entirety as follows:
The Stockholders will have the right to prepare the initial draft of
the Company's income tax Returns for the period from January 1, 1999
through the Closing Date, provided that (i) they deliver such draft
Returns to USC at least 45 days prior to their due dates and (ii) they
prepare such draft Returns in accordance with the Company's past practices
and consistent with applicable Governmental Requirements. USC will have
the right to review and revise such draft Returns before filing, provided
that USC (i) will consult in good faith with the Responsible Officer
regarding any such revision before it makes such filing and (ii) will not
make any such revision without the consent of the Responsible Officer
(which will not be unreasonably withheld or delayed) if such revision
would be inconsistent with the Company's past practices, to the extent
those practices were consistent with applicable Governmental Requirements.
USC will not file any amendments to any income tax Return covering any
period ending on or prior to the Effective Date without the consent of the
Responsible Officer (which will not be unreasonably withheld or delayed),
unless USC determines that such amendment is required by applicable
Governmental Requirements.
(E) Section 7.02(a) is hereby amended by adding the following to the
end of that Section:
Notwithstanding the foregoing, the Stockholders shall have no
liability to indemnify or hold harmless any USC Indemnified Party in
respect of any liability pursuant to clause (iii) of the previous
sentence in respect of the termination, cancellation, revocation or
loss of any of the certifications set forth in Section C of Schedule
2.15.
(F) Notwithstanding the provisions of Section 10.07, Article VIII
and the rights and obligations thereunder of the parties thereto will be
governed by and construed in accordance with the substantive laws of the
District of Columbia without regard to the conflicts of law provisions thereof.
Paragraph 5 CERTAIN CONDITIONS TO CLOSING AND CONSUMMATION. (A) The
obligations of the Stockholders with respect to the actions to be taken on the
IPO Closing Date are subject to the satisfaction of the following condition in
addition to those set forth or referred to in Section 5.02(b): (i) the Executive
Employment Agreement then will be in full force and effect and (ii) USC shall
have tendered the USC Award Agreements to the respective recipients thereof,
duly signed on its behalf by an authorized officer of USC.
(B) The obligations of USC and USC Sub with respect to the actions
to be taken on the IPO Closing Date are subject to the satisfaction of the
following condition in addition to those set forth or referred to in Section
5.03(b): the Executive Employment Agreement then will be in full force and
effect.
-8-
<PAGE>
Paragraph 6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
Paragraph 7 NOTICES. For purposes of Section 10.06, notices will be
initially addressed to the Stockholders and the Company, as follows:
(A) if to a Stockholder, addressed to him or her at:
Mr. Monte E. Newman
9455 Howes Road
Dunkirk, Maryland 20754
or
Mr. Murray S. Simpson
5809 Devonshire Drive
Bethesda, Maryland 20816
or
Ms. Cora S. Simpson
5809 Devonshire Drive
Bethesda, Maryland 20816
or
Mr. Edmund G. Simpson
5811 Hillburne Way
Chevy Chase, Maryland 20815
or
Ms. Virginia A. Simpson
5811 Hillburne Way
Chevy Chase, Maryland 20815
; and
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<PAGE>
(B) if to the Company, addressed to it at:
Opportunity Concrete Corporation
1601 South Capitol Street, S.W.
P.O. Box 70579
Washington, D.C. 20024
Fax No.: (202) 479-0675
Attn: Monte E. Newman
with copies (which will not constitute notice for purposes of this
Agreement) to:
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W., Suite 800
Washington, D.C. 20036-6802
Fax No.: (202) 776-2222
Attn: John Byrnes
Paragraph 8 ABANDONMENT OF MERGER. If this Agreement is terminated
pursuant to Section 11.01, the Merger will be deemed for all purposes to have
been abandoned and of no force or effect and, if the Certificate of Merger has
been filed with the Secretary of State of the Company's Organization State prior
to that termination, USC will take all actions that Counsel for the Company and
the Stockholders advises USC are required by the applicable laws of the
Company's Organization State and the State of Delaware to rescind the Merger or
provide the Stockholders with the substantive equivalent thereof.
[Signatures on following page]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
U.S. CONCRETE, INC.
By:_______________________________________
Eugene P. Martineau
President and Chief Executive Officer
OCC ACQUISITION INC.
By:_______________________________________
Eugene P. Martineau
President
Opportunity Concrete Corporation
By:_______________________________________
Monte E. Newman
President
Stockholders:
___________________________________________
Monte E. Newman, trustee of the Monte E.
Newman Revocable Trust
___________________________________________
Murray S. Simpson, trustee of the CSS 1998
GRAT
__________________________________________
Cora S. Simpson, trustee of the MSS 1998
GRAT
__________________________________________
Edmund G. Simpson
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<PAGE>
__________________________________________
Virginia A. Simpson
The undersigned hereby joins in the execution of this Agreement
individually as if the undersigned was a Stockholder individually for purposes
of Article VIII.
__________________________________________
Monte E. Newman
__________________________________________
Murray S. Simpson
__________________________________________
Cora S. Simpson
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<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Opportunity Concrete Corporation
are parties
A. Capitalized terms this Addendum uses, but does not define, have the
meanings the captioned Agreement specifies.
B. The Founding Companies are:
Baer Concrete, Incorporated
Bay Cities Building Materials Co., Inc.
Central Concrete Supply Co., Inc.
Opportunity Concrete Corporation
R. G. Evans/Associates d/b/a Santa Rosa Cast Products Co.
Walker's Concrete, Inc.
<PAGE>
SCHEDULE 2(C)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Opportunity Concrete Corporation
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows: Eugene P. Martineau and Michael W. Harlan.
C. The officers of the Surviving Corporation immediately after the
Effective Time are as follows:
President.................................. Monte E. Newman
Senior Vice President...................... Eugene P. Martineau
Vice President, Treasurer and Secretary.... Michael W. Harlan
End of Schedule
<PAGE>
SCHEDULE 2(D)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Opportunity Concrete Corporation
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. Subject to increase by the amount of the Positive Net Adjustment,
if any, and to decrease by the amount of the Negative Net Adjustment, if any,
the aggregate Acquisition Consideration will be comprised of (1) $1,430,491 in
cash, (2) 1,034,291 shares of USC Common Stock and (3) the Additional Cash
Consideration.
C. Each Stockholder will be entitled to receive his Pro Rata Share
of the Acquisition Consideration pursuant to Paragraph 2(D), subject to the
provisions of Paragraphs 2(E) and 2(F).
End of Schedule
EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 22, 1999
BY AND AMONG
U.S. CONCRETE, INC.,
WALKER'S ACQUISITION INC.,
WALKER'S CONCRETE, INC.
AND
THE STOCKHOLDERS NAMED HEREIN
Reverse Triangular Merger; Non-Delaware Company; Multiple Stockholders; Company
Financial Statements
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of March 22, 1999 by and among U.S. Concrete, Inc., a Delaware corporation
("USC"), Walker's Acquisition Inc., a Delaware corporation and a wholly owned
subsidiary of USC ("USC Sub"), Walker's Concrete, Inc., a California corporation
(the "Company"), and the persons listed on the signature page hereof under the
caption "Stockholders" (the "Stockholders").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination pursuant to which:
(a) USC Sub will merge into the Company on the terms and subject to
the conditions set forth herein (that merger being the "Merger");
(b) USC will acquire the stock of all or some of the entities listed
in the accompanying Addendum 1 (each, other than the Company, an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") pursuant to agreements that are (i) similar to this Agreement
and (ii) entered into among those entities and their equity owners, USC
and subsidiaries of USC (collectively, the "Other Agreements"); and
(c) USC will effect a public offering of shares of its common stock
and issue and sell those shares.
The respective boards of directors of USC, USC Sub and the Company
have approved and adopted this Agreement to effect a transaction subject to
Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings this Agreement contains, the
parties hereto hereby agree as follows:
Paragraph 1 CERTAIN DEFINED TERMS. The following terms this
Agreement uses have the meanings this Paragraph 1 specifies. Capitalized terms
this Agreement uses, but this Paragraph 1 does not define, have the meanings the
preamble to this Agreement, the Preliminary Statement above or Article IX of the
Uniform Provisions, as the case may be, specifies.
"Acquired Business" means the Company.
"Acquisition" means the Merger.
"Acquisition Consideration" has the meaning Paragraph 2 specifies.
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<PAGE>
"Additional Cash Consideration" means the product of (i) the
quotient obtained from dividing (A) the sum of (i) the amount of cash
Paragraph B of Schedule 2(D) sets forth in dollars and (ii) the 1998
Permitted Restricted Payment Amount by (B) $8.50 multiplied by (ii) the
amount, if any, by which (A) the IPO Price exceeds (B) $8.50.
"Ceiling Amount" means the sum of (i) $25,322,511, (ii) the
Additional Cash Consideration, if any, (iii) the Positive Net Adjustment,
if any, and (iv) the Negative Net Adjustment, if any; provided, however,
that, for purposes of Sections 6.06(b) and 7.06(b), the Ceiling Amount is
$18,991,883.
"CGCL" means the General Corporation Law of the State of California.
"Closing" has the meaning Paragraph 3 specifies.
"Closing Date" means the IPO Pricing Date.
"Company Capital Stock" means the Common Stock, par value $1.00 per
share, of the Company.
"Company Financial Statements" means (i) the audited balance sheets
of the Company as of December 31, 1997 and December 31, 1998 and the
related audited statements of operations, cash flows and shareholders'
equity for each of the years in the three-year period ended December 31,
1998, together with the related audit report of the Independent
Accountants.
"Counsel for the Company and the Stockholders" means Ferrari, Olsen,
Ottoboni & Bebb, LLP.
"Counsel for USC and USC Sub" means Baker & Botts, L.L.P.
"Current Balance Sheet" means the audited balance sheet of the
Company as of December 31, 1998.
"Current Balance Sheet Date" means December 31, 1998.
"Current Balance Sheet Date Working Capital" means ($1,446,000).
"Effective Date" means the IPO Closing Date.
"Executive Employment Agreement" means the Employment Agreement
entered into effective as of the IPO Closing Date between the Company and
Robert S. Walker.
"Initial Financial Statements" means the Company Financial
Statements.
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<PAGE>
"Minimum Cash Balance" means $25,000.
"Pro Rata Share" of a Stockholder means (1) 71.25% in the case of
Robert S. Walker and Karen Walker (jointly), trustees of the Walker Family
Trust and (2) 28.75% in the case of Karob Investment Co., LP.
"Responsible Officer" means Robert S. Walker.
"Surviving Corporation" means the Company, which the Certificate of
Merger will designate as the surviving corporation of the Merger.
"Termination Date" means May 31, 1999; provided, however, that if
(i) USC has filed the Registration Statement with the SEC prior to that
date and (ii) the Stockholders would not be entitled to terminate this
Agreement on that date otherwise than pursuant to Section 11.01(a)(ii),
"Termination Date" means September 30, 1999.
"Uniform Provisions" has the meaning Paragraph 4 specifies.
"USC Award Agreements" means the award agreements, each in the form
of Exhibit 1-A, pursuant to which USC, on the Closing Date, will grant to
certain key employees of the Company Robert S. Walker has designated by
written notice to USC and USC has approved by written notice to the
Responsible Officer (which approval USC will not unreasonably withhold)
prior to the Closing Date, pursuant to the U.S. Concrete, Inc. 1999
Employee Incentive Plan, or other similar stock option plan, options to
purchase an aggregate not to exceed 119,252 shares of USC Common Stock at
a per share exercise price equal to the IPO Price.
"USC Sub Common Stock" means the Common Stock, par value $1.00 per
share, of USC Sub.
"1998 Restricted Payment Amount" means $0.
Paragraph 2 (A) CERTIFICATE OF MERGER. Subject to the terms and
conditions hereof, the Company will cause the Certificate of Merger to be duly
executed and delivered on or promptly after the Closing Date and filed with the
Secretary of State of the State of California and the Secretary of State of the
State of Delaware.
(B) THE EFFECTIVE TIME. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., Houston, Texas time, on the Effective Date.
(C) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective Time,
(1) USC Sub will be merged with and into the Company in accordance with the
provisions of the CGCL and the
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<PAGE>
DGCL, (2) USC Sub will cease to exist as a separate legal entity, (3) the
articles of incorporation of the Company will be amended to change the Company's
authorized shares of capital stock to 1,000 shares, par value $1.00 per share,
of Common Stock, (4) the Company will be the Surviving Corporation and, as such,
will, all with the effect provided by the CGCL and the DGCL, (a) possess all the
properties and rights, and be subject to all the restrictions and duties, of the
Company and USC Sub and (b) be governed by the laws of the State of California,
(5) the Charter Documents of the Company then in effect (after giving effect to
the amendment to the Company's articles of incorporation specified in clause (3)
of this sentence) will become and thereafter remain (until changed in accordance
with (a) applicable law (in the case of the articles of incorporation) or (b)
their terms (in the case of the bylaws)) the Charter Documents of the Surviving
Corporation, (6) the initial board of directors of the Surviving Corporation
will be the persons Schedule 2(C) names as such, and those persons will hold the
office of director of the Surviving Corporation, subject to the provisions of
the applicable laws of the State of California and the Charter Documents of the
Surviving Corporation, and (7) the initial officers of the Surviving Corporation
will be as Schedule 2(C) sets forth, and each of those persons will serve in
each office Schedule 2(C) specifies for that person, subject to the provisions
of the Charter Documents of the Surviving Corporation, until that person's
successor is duly elected to, and, if necessary, qualified for, that office.
(D) EFFECT OF THE MERGER ON CAPITAL STOCK. As of the Effective Time,
as a result of the Merger and without any action on the part of any holder
thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) convert into the right to
receive, subject to the provisions of Paragraph 2(E), without interest, on
surrender of the certificates evidencing those shares, the amount of cash
and the number of whole and fractional shares of USC Common Stock Schedule
2(D) sets forth and, if any, the Additional Cash Consideration (the
"Acquisition Consideration"), (b) cease to be outstanding and to exist and
(c) be canceled and retired;
(2) each share of Company Capital Stock held in the treasury of the
Company or any Company Subsidiary will (a) cease to be outstanding and to
exist and (b) be canceled and retired; and
(3) each share of USC Sub Common Stock issued and outstanding
immediately prior to the Effective Time will convert into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation and
the shares of Common Stock of the Surviving Corporation issued on that
conversion will constitute all the issued and outstanding shares of
Capital Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without interest,
the Acquisition Consideration and the additional cash, if any, owing with
respect to those shares as provided in Paragraph 2(F).
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<PAGE>
(E) DELIVERY, EXCHANGE AND PAYMENT. (1) At or after the Effective
Time: (a) the Stockholders, as holders of certificates representing shares of
Company Capital Stock, will, on surrender of those certificates to USC (or any
agent that USC may appoint for purposes of this Paragraph 2(E)), receive,
subject to the provisions of this Paragraph 2(E) and Paragraph 2(F), the
Acquisition Consideration; and (b) until any certificate representing Company
Capital Stock has been surrendered and replaced pursuant to this Paragraph 2(E),
that certificate will, for all purposes, be deemed to evidence ownership of the
number of whole shares of USC Common Stock included in the Acquisition
Consideration payable in respect of that certificate pursuant to Paragraph 2(D).
All shares of USC Common Stock issuable in the Merger will be deemed for all
purposes to have been issued by USC at the Effective Time.
(2) Each Stockholder will deliver to USC (or any agent that USC may
appoint for purposes of this Paragraph 2(E)) on or before the IPO Closing Date
the certificates representing all the Company Capital Stock owned by that
Stockholder, duly endorsed in blank, or accompanied by stock powers in blank
duly executed, by that Person, and with all necessary transfer tax and other
revenue stamps, acquired at that Person's expense, affixed and canceled. Each
Stockholder will cure any deficiencies in the endorsement of the certificates or
other documents of conveyance respecting, or in the stock powers accompanying,
the certificates representing Company Capital Stock that Person delivers.
(3) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to USC Common Stock and payable to
the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company Capital
Stock for which whole shares of USC Common Stock have been issued in the Merger
until those certificates are surrendered as provided herein, but (a) on that
surrender USC will cause to be paid, to the Person in whose name the
certificates representing those whole shares of USC Common Stock will then be
issued, the amount of dividends or other distributions previously paid with
respect to those whole shares of USC Common Stock with a record date, or which
have accrued, subsequent to the Effective Time, but prior to that surrender, and
the amount of any cash payable to that Person for and in lieu of fractional
shares pursuant to Paragraph 2(F) and (b) at the appropriate payment date or as
soon as practicable thereafter, USC will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which have
been accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to those whole
shares of USC Common Stock, subject in all cases to any applicable escheat laws.
No interest will be payable with respect to the payment of those dividends or
other distributions or cash for and in lieu of fractional shares on surrender of
outstanding certificates.
(F) Notwithstanding any other provision herein, USC will not issue
any fractional shares of USC Common Stock, and if a Stockholder would be
entitled hereunder to receive a fractional share of USC Common Stock but for
this Paragraph 2(F), that Stockholder will be entitled hereunder to receive a
cash payment for and in lieu thereof in the amount (rounded upward to the
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<PAGE>
nearest whole cent) equal to that Stockholder's fractional interest in a share
of USC Common Stock multiplied by the IPO Price.
Paragraph 3 THE CLOSING. On or before the Closing Date, the parties
hereto will take all actions necessary to (A) effect the Acquisition (including,
as permitted by the CGCL and the DGCL, (i) the execution of a Certificate of
Merger (a) meeting the requirements of the CGCL and the DGCL and (b) providing
that the Merger will become effective on the Effective Date and (ii) the
transmitting for filing of that Certificate of Merger with the Secretary of
State of the State of California and the Secretary of State of the State of
Delaware), (B) verify the existence and ownership of the certificates evidencing
the Company Capital Stock to be exchanged for the Acquisition Consideration
pursuant to Paragraph 2(E) and (C) satisfy the document delivery requirements on
which the obligations of the parties to effect the Acquisition and the other
transactions contemplated hereby are conditioned by the provisions of Article V
(all those actions collectively being the "Closing"). The Closing will take
place at the offices of Baker & Botts, L.L.P., 30th Floor, 910 Louisiana,
Houston, Texas at 10:00 a.m., Houston time, on the Closing Date, or at such
later time on the Closing Date as USC specifies by written notice to the
Responsible Officer. The actions taken at the Closing will not include the
delivery of the Company Capital Stock to USC or the payment of the Acquisition
Consideration to the Stockholders. Instead, on the IPO Closing Date, the Company
Capital Stock will be surrendered in exchange for the Acquisition Consideration
(with the cash portion of the Acquisition Consideration being paid by wire
transfer pursuant to instructions the Stockholders deliver to USC prior to
Closing or, in the absence of those instructions, a USC check), and all
transactions contemplated by this Agreement to be closed or completed on or
before the IPO Closing Date will be closed and completed, as the case may be.
Paragraph 4 INCORPORATION OF UNIFORM PROVISIONS. (A) The U.S.
Concrete, Inc. Uniform Provisions for the Acquisition of Founding Companies
attached hereto as Annex 1 (the "Uniform Provisions") hereby are incorporated in
this Agreement by this reference and constitute a part of this Agreement with
the same force and effect as if set forth at length herein.
(B) The Uniform Provisions are hereby amended by adding a Section
1.08 which reads in its entirety as follows:
SECTION 1.08 TRUSTS.
(a) Schedule 1.08 sets forth the legal name of each
Stockholder that is a trustee (the "Trustees"), the name of the
trust over which that Trustee serves (each a "Trust"), the state or
other jurisdiction which governs that Trustee's duties with respect
to that Trust, and the name of each beneficiary of that Trust (the
"Beneficiaries").
(b) There has not been any challenge to (i) the authority,
appointment or capacity of any Trustee to serve as such over the
applicable Trust or (ii) the validity of any Trust.
-6-
<PAGE>
(c) Full and complete copies of all documents under which each
Trust was created and all documents otherwise pertaining to each
Trust or the duties and obligations of each Trustee serving over
each Trust and all amendments, supplements or modifications thereto
have been provided to USC.
(d) The Trustees set forth opposite the name of each Trust on
Schedule 1.08 are the sole Trustees of that Trust and each Trustee
listed is a duly acting and qualified trustee of that Trust. Each of
the Trustees has all requisite power and authority to execute and
deliver each Transaction Document, to consummate the transactions
contemplated thereby and to perform all the terms and conditions
thereof to be performed by that Trustee.
(e) No notice is required to be given to and no consent or
joinder is required to be acquired from any Beneficiary in
connection with the Transaction Documents or any of the transactions
contemplated thereby and no objection has been received from any
Beneficiary relating to the Transaction Documents or any of the
transactions contemplated thereby.
(C) Section 2.23(vi) is hereby amended by replacing "$25,000" with
"$50,000."
(D) Section 6.07 is hereby amended by deleting the definition of
"Current Balance Sheet Date Adjusted Working Capital" contained therein and
replacing it with the following:
"Current Balance Sheet Date Adjusted Working Capital" means
the amount by which (i) the Current Balance Sheet Date Working
Capital exceeds (ii) the sum of (A) the Current Balance Sheet Excess
Cash, (B) the 1998 Restricted Payment Amount and (C) $976,000.
(E) Notwithstanding the provisions of Section 10.07, Article VIII
and the rights and obligations thereunder of the parties thereto will be
governed by and construed in accordance with the substantive laws of the State
of California without regard to the conflicts of law provisions thereof.
Paragraph 5 CERTAIN CONDITIONS TO CLOSING AND CONSUMMATION. (A) The
obligations of the Stockholders with respect to the actions to be taken on the
IPO Closing Date are subject to the satisfaction of the following condition in
addition to those set forth or referred to in Section 5.02(b): (i) the Executive
Employment Agreement then will be in full force and effect and (ii) USC shall
have tendered the USC Award Agreements to the respective recipients thereof,
duly signed on its behalf by an authorized officer of USC.
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<PAGE>
(B) The obligations of USC and USC Sub with respect to the actions
to be taken on the IPO Closing Date are subject to the satisfaction of the
following condition in addition to those set forth or referred to in Section
5.03(b): the Executive Employment Agreement then will be in full force and
effect.
Paragraph 6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
Paragraph 7 NOTICES. For purposes of Section 10.06, notices will be
initially addressed to the Stockholders and the Company, as follows:
(A) if to a Stockholder, addressed to that Stockholder, in care of:
Mr. Robert S. Walker
86 Red Birch Court
Danville, California 94506
; and
(B) if to the Company, addressed to it at:
Walker's Concrete Inc.
1844 West Winton Avenue
Hayward, California 94545
Fax No.: (510) 782-1068
Attn: Robert S. Walker
with copies (which will not constitute notice for purposes of this
Agreement) to:
Ferrari, Olsen, Ottoboni & Bebb, LLP
333 West Santa Clara Street, Suite 700
San Jose, California 95113
Fax No.: (408) 280-0151
Attn: Richard S. Bebb
Paragraph 8 ABANDONMENT OF MERGER. If this Agreement is terminated
pursuant to Section 11.01, the Merger will be deemed for all purposes to have
been abandoned and of no force or effect and, if the Certificate of Merger has
been filed with the Secretary of State of the Company's Organization State prior
to that termination, each of the Company and USC Sub is authorized to execute
and file with the Secretary of State of the Company's Organization State a
certificate of that termination pursuant to Section 110 of the CGCL.
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<PAGE>
[Signatures on following page]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
U.S. CONCRETE, INC.
By:________________________________________
Eugene P. Martineau
President and Chief Executive Officer
WALKER'S ACQUISITION INC.
By:________________________________________
Eugene P. Martineau
President
WALKER'S CONCRETE, INC.
By:________________________________________
Robert S. Walker
President
Stockholders:
___________________________________________
Robert S. Walker, co-trustee of the
Walker Family Trust
___________________________________________
Karen Walker, co-trustee of the
Walker Family Trust
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<PAGE>
Karob Investment Co., LP.
By:_______________________________________
Robert S. Walker, general partner
Karob Investment Co., LP.
By:________________________________________
Karen Walker, general partner
Each of the undersigned hereby joins in the execution of this Agreement
individually to be bound as if the undersigned was a Stockholder individually
for the purposes of Article VIII.
___________________________________________
Robert S. Walker
___________________________________________
Karen Walker
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Walker's Concrete, Inc.
are parties
A. Capitalized terms this Addendum uses, but does not define, have the
meanings the captioned Agreement specifies.
B. The Founding Companies are:
Baer Concrete, Incorporated
Bay Cities Building Materials Co., Inc.
Central Concrete Supply Co., Inc.
Opportunity Concrete Corporation
R.G. Evans/Associates d/b/a Santa Rosa Cast Products Co.
Walker's Concrete, Inc.
<PAGE>
SCHEDULE 2(C)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Walker's Concrete, Inc.
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows: Eugene P. Martineau and Michael W. Harlan.
C. The officers of the Surviving Corporation immediately after the
Effective Time are as follows:
President ................................. Robert S. Walker
Senior Vice President...................... Eugene P. Martineau
Vice President, Treasurer and Secretary.... Michael W. Harlan
End of Schedule
<PAGE>
SCHEDULE 2(D)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Walker's Concrete, Inc.
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. Subject to increase by the amount of the Positive Net Adjustment,
if any, and to decrease by the amount of the Negative Net Adjustment, if any,
the aggregate Acquisition Consideration will be comprised of (1) $6,330,628 in
cash, (2) 2,234,339 shares of USC Common Stock and (3) the Additional Cash
Consideration.
C. Each Stockholder will be entitled to receive that Stockholder's
Pro Rata Share of the Acquisition Consideration pursuant to Paragraph 2(D),
subject to the provisions of Paragraphs 2(E) and 2(F).
End of Schedule
EXHIBIT 2.3
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 22, 1999
BY AND AMONG
U.S. CONCRETE, INC.,
CENTRAL CONCRETE ACQUISITION INC.,
CENTRAL CONCRETE SUPPLY CO., INC.
AND
THE STOCKHOLDERS NAMED HEREIN
Reverse Triangular Merger; Non-Delaware Company; Multiple Stockholders; Company
Financial Statements
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of March 22, 1999 by and among U.S. Concrete, Inc., a Delaware corporation
("USC"), Central Concrete Acquisition Inc., a Delaware corporation and a wholly
owned subsidiary of USC ("USC Sub"), Central Concrete Supply Co., Inc., a
California corporation (the "Company"), and the persons and trustees listed on
the signature page hereof under the caption "Stockholders" (collectively, the
"Stockholders," and each of those persons, individually, a "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination pursuant to which:
(a) USC Sub will merge into the Company on the terms and subject to
the conditions set forth herein (that merger being the "Merger");
(b) USC will acquire the stock of all or some of the entities listed
in the accompanying Addendum 1 (each, other than the Company, an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") pursuant to agreements that are (i) similar to this Agreement
and (ii) entered into among those entities and their equity owners, USC
and subsidiaries of USC (collectively, the "Other Agreements"); and
(c) USC will effect a public offering of shares of its common stock
and issue and sell those shares.
The respective boards of directors of USC, USC Sub and the Company
have approved and adopted this Agreement to effect a transaction subject to
Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings this Agreement contains, the
parties hereto hereby agree as follows:
Paragraph 1 CERTAIN DEFINED TERMS. The following terms this
Agreement uses have the meanings this Paragraph 1 specifies. Capitalized terms
this Agreement uses, but this Paragraph 1 does not define, have the meanings the
preamble to this Agreement, the Preliminary Statement above or Article IX of the
Uniform Provisions, as the case may be, specifies.
"Acquired Business" means the Company.
"Acquisition" means the Merger.
"Acquisition Consideration" has the meaning Paragraph 2 specifies.
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<PAGE>
"Additional Cash Consideration" means the product of (i) the
quotient obtained from dividing (A) the sum of (i) the amount of cash
Paragraph B of Schedule 2(D) sets forth in dollars and (ii) the 1998
Restricted Payment Amount by (B) $8.50 multiplied by (ii) the amount, if
any, by which (A) the IPO Price exceeds (B) $8.50.
"Ceiling Amount" means the sum of (i) $35,361,472, (ii) the
Additional Cash Consideration, if any, (iii) the Positive Net Adjustment,
if any, and (iv) the Negative Net Adjustment, if any; provided, however,
that, for purposes of Sections 6.06(b) and 7.06(b), the Ceiling Amount is
$26,521,104
"CGCL" means the General Corporation Law of the State of California.
"Closing" has the meaning Paragraph 3 specifies.
"Closing Date" means the IPO Pricing Date.
"Company Capital Stock" means the Common Stock, no par value, of the
Company.
"Company Financial Statements" means the audited balance sheets of
the Company as of December 31, 1997 and December 31, 1998 and the related
audited statements of operations, cash flows and shareholders' equity for
each of the years in the three-year period ended December 31, 1998,
together with the related audit report of the Independent Accountants.
"Counsel for the Company and the Stockholders" means Ferrari, Olsen,
Ottoboni & Bebb, LLP.
"Counsel for USC and USC Sub" means Baker & Botts, L.L.P.
"Current Balance Sheet" means the audited balance sheet of the
Company as of December 31, 1998.
"Current Balance Sheet Date" means December 31, 1998.
"Current Balance Sheet Date Working Capital" means $4,861,000.
"Effective Date" means the IPO Closing Date.
"Executive Employment Agreements" means the Employment Agreement
entered into effective as of the IPO Closing Date between the Company and
each of William T. Albanese and Thomas J. Albanese.
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<PAGE>
"Facilities" means the real property and improvements located at 610
McKendrie Street, San Jose California and 755 Stockton Avenue, San Jose,
California, as more fully described in the Facilities Lease.
"Facilities Leases" means the leases in the form thereof attached
hereto as Exhibit 1-A and Exhibit 1-B pursuant to which the Stockholders
will lease the Facilities to the Company for the period and on the other
terms specified therein.
"Initial Financial Statements" means the Company Financial
Statements.
"Minimum Cash Balance" means $500,000.
"Pro Rata Share" of a Stockholder means: (i) 42.10% in the case of
William T. Albanese and Mari C. Albanese (jointly), trustees of the
William T. Albanese 1981 Trust, as amended; (ii) 42.10% in the case of
Thomas J. Albanese and Maureen H. Albanese (jointly), trustees of the
Thomas T. Albanese Trust, as amended; (iii) 4.17% in the case of Daniel C.
Albanese; (iv) 4.17% in the case of Lauren M. Albanese; (v) 2.49% in the
case of Nicole M. Albanese; (vi) 2.49% in the case of Jennifer A.
Albanese; and (vii) 2.48% in the case of Michelle L. Albanese.
"Responsible Officer" means William T. Albanese.
"Surviving Corporation" means the Company, which the Certificate of
Merger will designate as the surviving corporation of the Merger.
"Termination Date" means May 31, 1999; provided, however, that if
(i) USC has filed the Registration Statement with the SEC prior to that
date and (ii) the Stockholders would not be entitled to terminate this
Agreement on that date otherwise than pursuant to Section 11.01(a)(ii),
"Termination Date" means September 30, 1999.
"Uniform Provisions" has the meaning Paragraph 4 specifies.
"USC Award Agreements" means the award agreements, each in the form
of Exhibit 1-C, pursuant to which USC, on the Closing Date, will grant to
certain key employees of the Company William T. Albanese has designated by
written notice to USC and USC has approved by written notice to the
Responsible Officer (which approval USC will not unreasonably withhold)
prior to the Closing Date, pursuant to the U.S. Concrete, Inc. 1999
Employee Incentive Plan, or other similar stock option plan, options to
purchase an aggregate not to exceed 166,529 shares of USC Common Stock at
a per share exercise price equal to the IPO Price.
"USC Sub Common Stock" means the Common Stock, par value $1.00 per
share, of USC Sub.
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<PAGE>
"1998 Restricted Payment Amount" means $4,952,000.
Paragraph 2 (A) CERTIFICATE OF MERGER. Subject to the terms and
conditions hereof, the Company will cause the Certificate of Merger to be duly
executed and delivered on or promptly after the Closing Date and filed with the
Secretary of State of the State of California and the Secretary of State of the
State of Delaware.
(B) THE EFFECTIVE TIME. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., Houston, Texas time, on the Effective Date.
(C) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective Time,
(1) USC Sub will be merged with and into the Company in accordance with the
provisions of the CGCL and the DGCL, (2) USC Sub will cease to exist as a
separate legal entity, (3) the articles of incorporation of the Company will be
amended to change the Company's authorized shares of capital stock to 1,000
shares, par value $1.00 per share, of Common Stock, (4) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
CGCL and the DGCL, (a) possess all the properties and rights, and be subject to
all the restrictions and duties, of the Company and USC Sub and (b) be governed
by the laws of the State of California, (5) the Charter Documents of the Company
then in effect (after giving effect to the amendment to the Company's articles
of incorporation specified in clause (3) of this sentence) will become and
thereafter remain (until changed in accordance with (a) applicable law (in the
case of the articles of incorporation) or (b) their terms (in the case of the
bylaws)) the Charter Documents of the Surviving Corporation, (6) the initial
board of directors of the Surviving Corporation will be the persons Schedule
2(C) names as such, and those persons will hold the office of director of the
Surviving Corporation, subject to the provisions of the applicable laws of the
State of California and the Charter Documents of the Surviving Corporation, and
(7) the initial officers of the Surviving Corporation will be as Schedule 2(C)
sets forth, and each of those persons will serve in each office Schedule 2(C)
specifies for that person, subject to the provisions of the Charter Documents of
the Surviving Corporation, until that person's successor is duly elected to,
and, if necessary, qualified for, that office.
(D) EFFECT OF THE MERGER ON CAPITAL STOCK. As of the Effective Time,
as a result of the Merger and without any action on the part of any holder
thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) convert into the right to
receive, subject to the provisions of Paragraph 2(E), without interest, on
surrender of the certificates evidencing those shares, the amount of cash
and the number of whole and fractional shares of USC Common Stock Schedule
2(D) sets forth and, if any, the Additional Cash Consideration (the
"Acquisition Consideration"), (b) cease to be outstanding and to exist and
(c) be canceled and retired;
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<PAGE>
(2) each share of Company Capital Stock held in the treasury of the
Company or any Company Subsidiary will (a) cease to be outstanding and to
exist and (b) be canceled and retired; and
(3) each share of USC Sub Common Stock issued and outstanding
immediately prior to the Effective Time will convert into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation and
the shares of Common Stock of the Surviving Corporation issued on that
conversion will constitute all the issued and outstanding shares of
Capital Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without interest,
the Acquisition Consideration and the additional cash, if any, owing with
respect to those shares as provided in Paragraph 2(F).
(E) DELIVERY, EXCHANGE AND PAYMENT. (1) At or after the Effective
Time: (a) the Stockholders, as holders of certificates representing shares of
Company Capital Stock, will, on surrender of those certificates to USC (or any
agent that USC may appoint for purposes of this Paragraph 2(E)), receive,
subject to the provisions of this Paragraph 2(E) and Paragraph 2(F), the
Acquisition Consideration; and (b) until any certificate representing Company
Capital Stock has been surrendered and replaced pursuant to this Paragraph 2(E),
that certificate will, for all purposes, be deemed to evidence ownership of the
number of whole shares of USC Common Stock included in the Acquisition
Consideration payable in respect of that certificate pursuant to Paragraph 2(D).
All shares of USC Common Stock issuable in the Merger will be deemed for all
purposes to have been issued by USC at the Effective Time.
(2) Each Stockholder will deliver to USC (or any agent that USC may
appoint for purposes of this Paragraph 2(E)) on or before the IPO Closing Date
the certificates representing all the Company Capital Stock owned by that
Stockholder, duly endorsed in blank, or accompanied by stock powers in blank
duly executed, by that Person, and with all necessary transfer tax and other
revenue stamps, acquired at that Person's expense, affixed and canceled. Each
Stockholder will cure any deficiencies in the endorsement of the certificates or
other documents of conveyance respecting, or in the stock powers accompanying,
the certificates representing Company Capital Stock that Person delivers.
(3) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to USC Common Stock and payable to
the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company Capital
Stock for which whole shares of USC Common Stock have been issued in the Merger
until those certificates are surrendered as provided herein, but (a) on that
surrender USC will cause to be paid, to the Person in whose name the
certificates representing those whole shares of USC Common Stock will then be
issued, the amount of dividends or other distributions
-5-
<PAGE>
previously paid with respect to those whole shares of USC Common Stock with a
record date, or which have accrued, subsequent to the Effective Time, but prior
to that surrender, and the amount of any cash payable to that Person for and in
lieu of fractional shares pursuant to Paragraph 2(F) and (b) at the appropriate
payment date or as soon as practicable thereafter, USC will cause to be paid to
that Person the amount of dividends or other distributions with a record date,
or which have been accrued, subsequent to the Effective Time, but which are not
payable until a date subsequent to surrender, which are payable with respect to
those whole shares of USC Common Stock, subject in all cases to any applicable
escheat laws. No interest will be payable with respect to the payment of those
dividends or other distributions or cash for and in lieu of fractional shares on
surrender of outstanding certificates.
(F) Notwithstanding any other provision herein, USC will not issue
any fractional shares of USC Common Stock, and if any Stockholder would be
entitled hereunder to receive a fractional share of USC Common Stock but for
this Paragraph 2(F), that Stockholder will be entitled hereunder to receive a
cash payment for and in lieu thereof in the amount (rounded upward to the
nearest whole cent) equal to that Stockholder's fractional interest in a share
of USC Common Stock multiplied by the IPO Price.
Paragraph 3 THE CLOSING. On or before the Closing Date, the parties
hereto will take all actions necessary to (A) effect the Acquisition (including,
as permitted by the CGCL and the DGCL, (i) the execution of a Certificate of
Merger (a) meeting the requirements of the CGCL and the DGCL and (b) providing
that the Merger will become effective on the Effective Date and (ii) the
transmitting for filing of that Certificate of Merger with the Secretary of
State of the State of California and the Secretary of State of the State of
Delaware), (B) verify the existence and ownership of the certificates evidencing
the Company Capital Stock to be exchanged for the Acquisition Consideration
pursuant to Paragraph 2(E) and (C) satisfy the document delivery requirements on
which the obligations of the parties to effect the Acquisition and the other
transactions contemplated hereby are conditioned by the provisions of Article V
(all those actions collectively being the "Closing"). The Closing will take
place at the offices of Baker & Botts, L.L.P., 30th Floor, 910 Louisiana,
Houston, Texas at 10:00 a.m., Houston time, on the Closing Date, or at such
later time on the Closing Date as USC specifies by written notice to the
Responsible Officer. The actions taken at the Closing will not include the
delivery of the Company Capital Stock to USC or the payment of the Acquisition
Consideration to the Stockholders. Instead, on the IPO Closing Date, the Company
Capital Stock will be surrendered in exchange for the Acquisition Consideration
(with the cash portion of the Acquisition Consideration being paid by wire
transfer pursuant to instructions the Stockholders deliver to USC prior to
Closing or, in the absence of those instructions, a USC check), and all
transactions contemplated by this Agreement to be closed or completed on or
before the IPO Closing Date will be closed and completed, as the case may be.
Paragraph 4 INCORPORATION OF UNIFORM PROVISIONS. (A) The U.S.
Concrete, Inc. Uniform Provisions for the Acquisition of Founding Companies
attached hereto as Annex 1 (the "Uniform Provisions") hereby are incorporated in
this Agreement by this reference and constitute a part of this Agreement with
the same force and effect as if set forth at length herein.
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<PAGE>
(B) The Uniform Provisions are hereby amended by adding a Section
1.08 which reads in its entirety as follows:
SECTION 1.08 TRUSTS.
(a) Schedule 1.08 sets forth the legal name of each
Stockholder that is a trustee (the "Trustees"), the name of the
trust over which that Trustee serves (each a "Trust"), the state or
other jurisdiction which governs that Trustee's duties with respect
to that Trust, and the name of each beneficiary of that Trust (the
"Beneficiaries").
(b) There has not been any challenge to (i) the authority,
appointment or capacity of any Trustee to serve as such over the
applicable Trust or (ii) the validity of any Trust.
(c) Full and complete copies of all documents under which each
Trust was created and all documents otherwise pertaining to each
Trust or the duties and obligations of each Trustee serving over
each Trust and all amendments, supplements or modifications thereto
have been provided to USC.
(d) The Trustees set forth opposite the name of each Trust on
Schedule 1.08 are the sole Trustees of that Trust and each Trustee
listed is a duly acting and qualified trustee of that Trust. Each of
the Trustees has all requisite power and authority to execute and
deliver each Transaction Document, to consummate the transactions
contemplated thereby and to perform all the terms and conditions
thereof to be performed by that Trustee.
(e) No notice is required to be given to and no consent or
joinder is required to be acquired from any Beneficiary in
connection with the Transaction Documents or any of the transactions
contemplated thereby and no objection has been received from any
Beneficiary relating to the Transaction Documents or any of the
transactions contemplated thereby.
(C) Section 2.23(vi) is hereby amended by replacing "$25,000" with
"$50,000."
(D) Section 4.03 is hereby amended by adding at the end thereof the
following:
; provided, however, that the Company may make Restricted Payments to its
Stockholders as dividends consisting of: (i) cash or Permitted Promissory
Notes (valued at the principal amount thereof) in an aggregate amount not
to exceed the amount by which (A) the 1998 Restricted Payment Amount
exceeds (B) the sum of all Restricted Payments the Company has made from
and after January 1, 1999 to the date of this Agreement; and (ii)
Permitted
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<PAGE>
Promissory Notes in an aggregate principal amount not to exceed the 1999
Restricted Payment Amount. As used herein, "Permitted Promissory Note"
means an unsecured promissory note of the Company which bears interest
from the date of its issue until paid at the rate of 6% per annum and will
become due and payable no earlier than the Adjustment Determination Date.
(E) Section 6.02 is hereby amended by adding a second paragraph
which reads in its entirety as follows:
The Stockholders will have the right to prepare the initial draft of
the Company's income tax Returns for the period from January 1, 1999
through the Closing Date, provided that (i) they deliver such draft
Returns to USC at least 45 days prior to their due dates and (ii) they
prepare such draft Returns in accordance with the Company's past practices
and consistent with applicable Governmental Requirements. USC will have
the right to review and revise such draft Returns before filing, provided
that USC (i) will consult in good faith with the Responsible Officer
regarding any such revision before it makes such filing and (ii) will not
make any such revision without the consent of the Responsible Officer
(which will not be unreasonably withheld or delayed) if such revision
would be inconsistent with the Company's past practices, to the extent
those practices were consistent with applicable Governmental Requirements.
USC will not file any amendments to any income tax Return covering any
period ending on or prior to the Effective Date without the consent of the
Responsible Officer (which will not be unreasonably withheld or delayed),
unless USC determines that such amendment is required by applicable
Governmental Requirements.
(F) Notwithstanding the provisions of Section 10.07, Article VIII
and the rights and obligations thereunder of the parties thereto will be
governed by and construed in accordance with the substantive laws of the State
of California without regard to the conflicts of law provisions thereof.
Paragraph 5 CERTAIN CONDITIONS TO CLOSING AND CONSUMMATION. (A) The
obligations of the Stockholders with respect to the actions to be taken on the
IPO Closing Date are subject to the satisfaction of the following condition in
addition to those set forth or referred to in Section 5.02(b): (i) each of the
Executive Employment Agreements and the Facilities Leases then will be in full
force and effect and (ii) USC shall have tendered the USC Award Agreements to
the respective recipients thereof, duly signed on its behalf by an authorized
officer of USC.
(B) The obligations of USC and USC Sub with respect to the actions
to be taken on the IPO Closing Date are subject to the satisfaction of the
following condition in addition to those set forth or referred to in Section
5.03(b): each of the Executive Employment Agreements and the Facilities Leases
then will be in full force and effect.
-8-
<PAGE>
Paragraph 6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
Paragraph 7 NOTICES. For purposes of Section 10.06, notices will be
initially addressed to the Stockholders and the Company, as follows:
(A) if to a Stockholder, addressed to him or her at:
Mr. William T. Albanese and Mrs. Mari C. Albanese
17070 Lon Road
Los Gatos, California 95033
or
Mr. Daniel C. Albanese
272 Bieber Avenue
San Jose, California 95123
or
Ms. Lauren M. Albanese
111 Edelen Avenue
Los Gatos, California 90530
or
Mr. Thomas J. Albanese and Mrs. Maureen H. Albanese
15435 Pepper Lane
Saratoga, California 95070
or
Ms. Nicole M. Albanese
15435 Pepper Lane
Saratoga, California 95070
or
Ms. Jennifer A. Albanese
15435 Pepper Lane
Saratoga, California 95070
-9-
<PAGE>
or
Ms. Michelle L. Albanese
15435 Pepper Lane
Saratoga, California 95070
; and
(B) if to the Company, addressed to it at:
Central Concrete Supply Co., Inc.
610 McKendrie Street
San Jose, California 95110
Fax No.: (408) 294-3162
Attn: William T. Albanese
with copies (which will not constitute notice for purposes of this
Agreement) to:
Ferrari, Olsen, Ottoboni & Bebb, LLP
333 West Santa Clara Street, Suite 700
San Jose, California 95113
Fax No.: (408) 280-0151
Attn: Richard S. Bebb
Paragraph 8 ABANDONMENT OF MERGER. If this Agreement is terminated
pursuant to Section 11.01, the Merger will be deemed for all purposes to have
been abandoned and of no force or effect and, if the Certificate of Merger has
been filed with the Secretary of State of the Company's Organization State prior
to that termination, each of the Company and USC Sub is authorized to execute
and file with the Secretary of State of the Company's Organization State a
certificate of that termination pursuant to Section 110 of the CGCL.
[Signatures on following page]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
U.S. CONCRETE, INC.
By:_______________________________________
Eugene P. Martineau
President and Chief Executive Officer
CENTRAL CONCRETE ACQUISITION INC.
By:_______________________________________
Eugene P. Martineau
President
CENTRAL CONCRETE SUPPLY CO., INC.
By:________________________________________
William T. Albanese
President
Stockholders:
____________________________________________
William T. Albanese, trustee under the
Revocable Trust Agreement dated March 17,
1981, as amended, for the benefit of William
T. Albanese
____________________________________________
Mari C. Albanese, trustee under the
Revocable Trust Agreement dated March 17,
1981, as amended, for the benefit of William
T. Albanese
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<PAGE>
____________________________________________
Daniel C. Albanese
____________________________________________
Lauren M. Albanese Cerrito
____________________________________________
Thomas J. Albanese, trustee under the
Revocable Trust Agreement dated March 17,
1981, as amended, for the benefit of Thomas
J. Albanese
____________________________________________
Maureen H. Albanese, trustee under the
Revocable Trust Agreement dated March 17,
1981, as amended, for the benefit of Thomas
J. Albanese
____________________________________________
Nicole M. Albanese
____________________________________________
Jennifer A. Albanese
____________________________________________
Michelle L. Albanese
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<PAGE>
Each of the undersigned hereby joins in the execution of this
Agreement individually to be bound as if the undersigned was a Stockholder
individually for the purposes of Article VIII.
____________________________________________
William T. Albanese
____________________________________________
Maureen H. Albanese
____________________________________________
Thomas J. Albanese
____________________________________________
Mari C. Albanese
THE UNDERSIGNED, being the spouse of Lauren M. Albanese Cerrito, hereby
joins in the execution of this Agreement to reflect the undersigned's
understanding and agreement to the terms herein contained, and to consent to the
Merger and the conversion of the entire interest of that Stockholder in the
shares of Company Capital Stock (including any community interest the
undersigned may have in those shares) into that Stockholder's Pro Rata Share of
the Acquisition Consideration on the terms and for the consideration herein
expressed.
____________________________________________
Joseph Cerrito
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<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Central Concrete Supply Co., Inc.
are parties
A. Capitalized terms this Addendum uses, but does not define, have the
meanings the captioned Agreement specifies.
B. The Founding Companies are:
Baer Concrete, Incorporated
Bay Cities Building Materials Co., Inc.
Central Concrete Supply Co., Inc.
Opportunity Concrete Corporation
R.G. Evans/Associates d/b/a Santa Rosa Cast Products Co.
Walker's Concrete, Inc.
<PAGE>
SCHEDULE 2(C)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Central Concrete Supply Co., Inc.
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows: Eugene P. Martineau and Michael W. Harlan.
C. The officers of the Surviving Corporation immediately after the
Effective Time are as follows:
President.................................. William T. Albanese
Senior Vice President...................... Eugene P. Martineau
Vice President, Treasurer and Secretary.... Michael W. Harlan
End of Schedule
<PAGE>
SCHEDULE 2(D)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Central Concrete Supply Co., Inc.
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. Subject to increase by the amount of the Positive Net Adjustment,
if any, and to decrease by the amount of the Negative Net Adjustment, if any,
the aggregate Acquisition Consideration will be comprised of (1) $3,888,368 in
cash, (2) 3,120,130 shares of USC Common Stock and (3) the Additional Cash
Consideration.
C. Each Stockholder will be entitled to receive his Pro Rata Share
of the Acquisition Consideration pursuant to Paragraph 2(D), subject to the
provisions of Paragraphs 2(E) and 2(F).
End of Schedule
EXHIBIT 2.4
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 22, 1999
BY AND AMONG
U.S. CONCRETE, INC.,
BAY CITIES ACQUISITION INC.,
BAY CITIES BUILDING MATERIALS CO., INC.
AND
THE STOCKHOLDERS NAMED HEREIN
Reverse Triangular Merger; Non-Delaware Company; Multiple Stockholders; Company
Financial Statements
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of March 22, 1999 by and among U.S. Concrete, Inc., a Delaware corporation
("USC"), Bay Cities Acquisition Inc., a Delaware corporation and a wholly owned
subsidiary of USC ("USC Sub"), BAY CITIES BUILDING MATERIALS CO., INC., a
California corporation (the "Company"), and the persons listed on the signature
page hereof under the caption "Stockholders" (collectively, the "Stockholders,"
and each of those persons, individually, a "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination pursuant to which:
(a) USC Sub will merge into the Company on the terms and subject to
the conditions set forth herein (that merger being the "Merger");
(b) USC will acquire the stock of all or some of the entities listed
in the accompanying Addendum 1 (each, other than the Company, an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") pursuant to agreements that are (i) similar to this Agreement
and (ii) entered into among those entities and their equity owners, USC
and subsidiaries of USC (collectively, the "Other Agreements"); and
(c) USC will effect a public offering of shares of its common stock
and issue and sell those shares.
The respective boards of directors of USC, USC Sub and the Company
have approved and adopted this Agreement to effect a transaction subject to
Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings this Agreement contains, the
parties hereto hereby agree as follows:
Paragraph 1 CERTAIN DEFINED TERMS. The following terms this
Agreement uses have the meanings this Paragraph 1 specifies. Capitalized terms
this Agreement uses, but this Paragraph 1 does not define, have the meanings the
preamble to this Agreement, the Preliminary Statement above or Article IX of the
Uniform Provisions, as the case may be, specifies.
"Acquired Business" means the Company.
"Acquisition" means the Merger.
"Acquisition Consideration" has the meaning Paragraph 2 specifies.
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"Additional Cash Consideration" means the product of (i) the
quotient obtained from dividing (A) the sum of (i) $5,302,046 and (ii) the
1998 Permitted Restricted Payment by (B) $8.50 multiplied by (ii) the
amount, if any, by which (A) the IPO Price exceeds (B) $8.50.
"BCBM" means BCBM Transport, Inc., a California corporation, and
wholly owned subsidiary of the Company.
"Ceiling Amount" means the sum of (i) $24,508,185, (ii) the
Additional Cash Consideration, if any, (iii) the Positive Net Adjustment,
if any, and (iv) the Negative Net Adjustment, if any; provided, however,
that, for purposes of Sections 6.06(b) and 7.06(b), the Ceiling Amount is
$15,906,139.
"CGCL" means the General Corporation Law of the State of California.
"Closing" has the meaning Paragraph 3 specifies.
"Closing Date" means the IPO Pricing Date.
"Company Capital Stock" means the Common Stock, no par value, of the
Company.
"Company Financial Statements" means the audited balance sheets of
the Company as of December 31, 1997 and December 31, 1998 and the related
audited statements of operations, cash flows and shareholders' equity for
each of the years in the three-year period ended December 31, 1998,
together with the related audit report of the Independent Accountants.
"Counsel for the Company and the Stockholders" means Ferrari, Olsen,
Ottoboni & Bebb, LLP.
"Counsel for USC and USC Sub" means Baker & Botts, L.L.P.
"Current Balance Sheet" means the audited balance sheet of the
Company as of December 31, 1998.
"Current Balance Sheet Date" means December 31, 1998.
"Current Balance Sheet Date Working Capital" means ($666,000).
"Effective Date" means the IPO Closing Date.
"Executive Employment Agreement" means the Employment Agreement
entered into effective as of the IPO Closing Date between the Company and
Neil J. Vannucci.
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"Initial Financial Statements" means the Company Financial
Statements.
"Minimum Cash Balance" means $500,000.
"Pro Rata Share" of a Stockholder means: (i) 47.97% in the case of
Neil J. Vannucci; (ii) 47.97% in the case of Gloria Satterfield; (iii)
2.03% in the case of Nino Campagna; and (iv) 2.03% in the case of William
Monlux.
"Responsible Officer" means Neil J. Vannucci.
"Surviving Corporation" means the Company, which the Certificate of
Merger will designate as the surviving corporation of the Merger.
"Termination Date" means May 31, 1999; provided, however, that if
(i) USC has filed the Registration Statement with the SEC prior to that
date and (ii) the Stockholders would not be entitled to terminate this
Agreement on that date otherwise than pursuant to Section 11.01(a)(ii),
"Termination Date" means September 30, 1999.
"Uniform Provisions" has the meaning Paragraph 4 specifies.
"USC Award Agreements" means the award agreements, each in the form
of Exhibit 1-A, pursuant to which USC, on the Closing Date, will grant to
certain key employees of the Company Neil J. Vannucci has designated by
written notice to USC and USC has approved by written notice to the
Responsible Officer (which approval USC will not unreasonably withhold)
prior to the Closing Date, pursuant to the U.S. Concrete, Inc. 1999
Employee Incentive Plan, or other similar stock option plan, options to
purchase an aggregate not to exceed 115,418 shares of USC Common Stock at
a per share exercise price equal to the IPO Price.
"USC Sub Common Stock" means the Common Stock, par value $1.00 per
share, of USC Sub.
"1998 Permitted Restricted Payment" means $0.
Paragraph 2 (A) CERTIFICATE OF MERGER. Subject to the terms and
conditions hereof, the Company will cause the Certificate of Merger to be duly
executed and delivered on or promptly after the Closing Date and filed with the
Secretary of State of the State of California and the Secretary of State of the
State of Delaware.
(B) THE EFFECTIVE TIME. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., Houston, Texas time, on the Effective Date.
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(C) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective Time,
(1) USC Sub will be merged with and into the Company in accordance with the
provisions of the CGCL and the DGCL, (2) USC Sub will cease to exist as a
separate legal entity, (3) the articles of incorporation of the Company will be
amended to change the Company's authorized shares of capital stock to 1,000
shares, par value $1.00 per share, of Common Stock, (4) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
CGCL and the DGCL, (a) possess all the properties and rights, and be subject to
all the restrictions and duties, of the Company and USC Sub and (b) be governed
by the laws of the State of California, (5) the Charter Documents of the Company
then in effect (after giving effect to the amendment to the Company's articles
of incorporation specified in clause (3) of this sentence) will become and
thereafter remain (until changed in accordance with (a) applicable law (in the
case of the articles of incorporation) or (b) their terms (in the case of the
bylaws)) the Charter Documents of the Surviving Corporation, (6) the initial
board of directors of the Surviving Corporation will be the persons Schedule
2(C) names as such, and those persons will hold the office of director of the
Surviving Corporation, subject to the provisions of the applicable laws of the
State of California and the Charter Documents of the Surviving Corporation, and
(7) the initial officers of the Surviving Corporation will be as Schedule 2(C)
sets forth, and each of those persons will serve in each office Schedule 2(C)
specifies for that person, subject to the provisions of the Charter Documents of
the Surviving Corporation, until that person's successor is duly elected to,
and, if necessary, qualified for, that office.
(D) EFFECT OF THE MERGER ON CAPITAL STOCK. As of the Effective Time,
as a result of the Merger and without any action on the part of any holder
thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) convert into the right to
receive, subject to the provisions of Paragraph 2(E), without interest, on
surrender of the certificates evidencing those shares, the amount of cash
and the number of whole and fractional shares of USC Common Stock Schedule
2(D) sets forth and, if any, the Additional Cash Consideration (the
"Acquisition Consideration"), (b) cease to be outstanding and to exist and
(c) be canceled and retired;
(2) each share of Company Capital Stock held in the treasury of the
Company or any Company Subsidiary will (a) cease to be outstanding and to
exist and (b) be canceled and retired; and
(3) each share of USC Sub Common Stock issued and outstanding
immediately prior to the Effective Time will convert into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation and
the shares of Common Stock of the Surviving Corporation issued on that
conversion will constitute all the issued and outstanding shares of
Capital Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without interest,
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the Acquisition Consideration and the additional cash, if any, owing with
respect to those shares as provided in Paragraph 2(F).
(E) DELIVERY, EXCHANGE AND PAYMENT. (1) At or after the Effective
Time: (a) the Stockholders, as holders of certificates representing shares of
Company Capital Stock, will, on surrender of those certificates to USC (or any
agent that USC may appoint for purposes of this Paragraph 2(E)), receive,
subject to the provisions of this Paragraph 2(E) and Paragraph 2(F), the
Acquisition Consideration; and (b) until any certificate representing Company
Capital Stock has been surrendered and replaced pursuant to this Paragraph 2(E),
that certificate will, for all purposes, be deemed to evidence ownership of the
number of whole shares of USC Common Stock included in the Acquisition
Consideration payable in respect of that certificate pursuant to Paragraph 2(D).
All shares of USC Common Stock issuable in the Merger will be deemed for all
purposes to have been issued by USC at the Effective Time.
(2) Each Stockholder will deliver to USC (or any agent that USC may
appoint for purposes of this Paragraph 2(E)) on or before the IPO Closing Date
the certificates representing all the Company Capital Stock owned by that
Stockholder, duly endorsed in blank, or accompanied by stock powers in blank
duly executed, by that Person, and with all necessary transfer tax and other
revenue stamps, acquired at that Person's expense, affixed and canceled. Each
Stockholder will cure any deficiencies in the endorsement of the certificates or
other documents of conveyance respecting, or in the stock powers accompanying,
the certificates representing Company Capital Stock that Person delivers.
(3) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to USC Common Stock and payable to
the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company Capital
Stock for which whole shares of USC Common Stock have been issued in the Merger
until those certificates are surrendered as provided herein, but (a) on that
surrender USC will cause to be paid, to the Person in whose name the
certificates representing those whole shares of USC Common Stock will then be
issued, the amount of dividends or other distributions previously paid with
respect to those whole shares of USC Common Stock with a record date, or which
have accrued, subsequent to the Effective Time, but prior to that surrender, and
the amount of any cash payable to that Person for and in lieu of fractional
shares pursuant to Paragraph 2(F) and (b) at the appropriate payment date or as
soon as practicable thereafter, USC will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which have
been accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to those whole
shares of USC Common Stock, subject in all cases to any applicable escheat laws.
No interest will be payable with respect to the payment of those dividends or
other distributions or cash for and in lieu of fractional shares on surrender of
outstanding certificates.
(F) Notwithstanding any other provision herein, USC will not issue
any fractional shares of USC Common Stock, and if any Stockholder would be
entitled hereunder to receive a
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fractional share of USC Common Stock but for this Paragraph 2(F), that
Stockholder will be entitled hereunder to receive a cash payment for and in lieu
thereof in the amount (rounded upward to the nearest whole cent) equal to that
Stockholder's fractional interest in a share of USC Common Stock multiplied by
the IPO Price.
Paragraph 3 THE CLOSING. On or before the Closing Date, the parties
hereto will take all actions necessary to (A) effect the Acquisition (including,
as permitted by the CGCL and the DGCL, (i) the execution of a Certificate of
Merger (a) meeting the requirements of the CGCL and the DGCL and (b) providing
that the Merger will become effective on the Effective Date and (ii) the
transmitting for filing of that Certificate of Merger with the Secretary of
State of the State of California and the Secretary of State of the State of
Delaware), (B) verify the existence and ownership of the certificates evidencing
the Company Capital Stock to be exchanged for the Acquisition Consideration
pursuant to Paragraph 2(E) and (C) satisfy the document delivery requirements on
which the obligations of the parties to effect the Acquisition and the other
transactions contemplated hereby are conditioned by the provisions of Article V
(all those actions collectively being the "Closing"). The Closing will take
place at the offices of Baker & Botts, L.L.P., 30th Floor, 910 Louisiana,
Houston, Texas at 10:00 a.m., Houston time, on the Closing Date, or at such
later time on the Closing Date as USC specifies by written notice to the
Responsible Officer. The actions taken at the Closing will not include the
delivery of the Company Capital Stock to USC or the payment of the Acquisition
Consideration to the Stockholders. Instead, on the IPO Closing Date, the Company
Capital Stock will be surrendered in exchange for the Acquisition Consideration
(with the cash portion of the Acquisition Consideration being paid by wire
transfer pursuant to instructions the Stockholders deliver to USC prior to
Closing or, in the absence of those instructions, a USC check), and all
transactions contemplated by this Agreement to be closed or completed on or
before the IPO Closing Date will be closed and completed, as the case may be.
Paragraph 4 INCORPORATION OF UNIFORM PROVISIONS. (A) The U.S.
Concrete, Inc. Uniform Provisions for the Acquisition of Founding Companies
attached hereto as Annex 1 (the "Uniform Provisions") hereby are incorporated in
this Agreement by this reference and constitute a part of this Agreement with
the same force and effect as if set forth at length herein.
(B) Section 2.23(vi) is hereby amended by replacing "$25,000" with
"$50,000."
(C) The provisions of Article VIII will not prohibit Neil J.
Vannucci from developing, owning and operating a cement and/or aggregates import
terminal in the San Francisco Bay Area, provided that (i) USC (or any one or
more of its Subsidiaries it designates) has the contractual right to purchase at
least 90% of the cement and aggregates that terminal imports each year at prices
equal to or less than then prevailing market prices, (ii) USC (or any one or
more of its Subsidiaries it designates) has the contractual right to operate any
ready-mixed concrete operation at the terminal location for its own benefit and
(iii) USC is granted an option to purchase the terminal facility, exercisable at
any time from the start-up of the terminal's operations to the 10th anniversary
of that date at a purchase price determined by an appraisal firm USC selects
which is reasonably acceptable to Mr. Vannucci.
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<PAGE>
(D) Notwithstanding the provisions of Section 10.07, Article VIII
and the rights and obligations thereunder of the parties thereto will be
governed by and construed in accordance with the substantive laws of the State
of California without regard to the conflicts of law provisions thereof.
Paragraph 5 CERTAIN CONDITIONS TO CLOSING AND CONSUMMATION. (A) The
obligations of the Stockholders with respect to the actions to be taken on the
IPO Closing Date are subject to the satisfaction of the following condition in
addition to those set forth or referred to in Section 5.02(b): (i) the Executive
Employment Agreement then will be in full force and effect and (ii) USC shall
have tendered the USC Award Agreements to the respective recipients thereof,
duly signed on its behalf by an authorized officer of USC.
(B) The obligations of USC and USC Sub with respect to the actions
to be taken on the IPO Closing Date are subject to the satisfaction of the
following condition in addition to those set forth or referred to in Section
5.03(b): the Executive Employment Agreement then will be in full force and
effect.
Paragraph 6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
Paragraph 7 NOTICES. For purposes of Section 10.06, notices will be
initially addressed to the Stockholders and the Company, as follows:
(A) if to a Stockholder, addressed to him or her at:
Neil J. Vannucci
1981 Eucalyptus Ave.
San Carlos, California 94070
or
Gloria Satterfield
2811 Crestmoor Dr.
San Bruno, California 94066
or
Nino Campagna
934 Larkspur Dr.
Millbrae, California 94030
or
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William Monlux
5128 Brophy Dr.
Fremont, California 94536
; and
(B) if to the Company, addressed to it at:
BAY CITIES BUILDING MATERIALS CO., INC.
150 So. Linden Avenue
So. San Francisco, California 94080
Fax No.: (650) 871-5745
Attn: Neil J. Vannucci
with copies (which will not constitute notice for purposes of this
Agreement) to:
Ferrari, Olsen, Ottoboni & Bebb, LLP
333 West Santa Clara Street, Suite 700
San Jose, California 95113
Fax No.: (408) 280-0151
Attn: Richard S. Bebb
Paragraph 8 ABANDONMENT OF MERGER. If this Agreement is terminated
pursuant to Section 11.01, the Merger will be deemed for all purposes to have
been abandoned and of no force or effect and, if the Certificate of Merger has
been filed with the Secretary of State of the Company's Organization State prior
to that termination, each of the Company and USC Sub is authorized to execute
and file with the Secretary of State of the Company's Organization State a
certificate of that termination pursuant to Section 110 of the CGCL.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
U.S. CONCRETE, INC.
By:________________________________________
Eugene P. Martineau
President and Chief Executive Officer
BAY CITIES ACQUISITION INC.
By:________________________________________
Eugene P. Martineau
President
BAY CITIES BUILDING MATERIALS CO., INC.
By:________________________________________
Neil J. Vannucci
President
Stockholders:
____________________________________________
Neil J. Vannucci
____________________________________________
Gloria Satterfield
____________________________________________
Nino Campagna
____________________________________________
William Monlux
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THE UNDERSIGNED, being the spouse of Neil J. Vannucci, hereby joins in the
execution of this Agreement to reflect the undersigned's understanding and
agreement to the terms herein contained, and to consent to the Merger and the
conversion of the entire interest of that Stockholder in the shares of Company
Capital Stock (including any community interest the undersigned may have in
those shares) into that Stockholder's Pro Rata Share of the Acquisition
Consideration on the terms and for the consideration herein expressed.
____________________________________________
Margaret Ann Vannucci
THE UNDERSIGNED, being the spouse of Gloria L. Satterfield, hereby joins
in the execution of this Agreement to reflect the undersigned's understanding
and agreement to the terms herein contained, and to consent to the Merger and
the conversion of the entire interest of that Stockholder in the shares of
Company Capital Stock (including any community interest the undersigned may have
in those shares) into that Stockholder's Pro Rata Share of the Acquisition
Consideration on the terms and for the consideration herein expressed.
____________________________________________
Curtis H. Satterfield
THE UNDERSIGNED, being the spouse of Nino Campagna, hereby joins in the
execution of this Agreement to reflect the undersigned's understanding and
agreement to the terms herein contained, and to consent to the Merger and the
conversion of the entire interest of that Stockholder in the shares of Company
Capital Stock (including any community interest the undersigned may have in
those shares) into that Stockholder's Pro Rata Share of the Acquisition
Consideration on the terms and for the consideration herein expressed.
____________________________________________
Millie Campagna
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ADDENDUM 1
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
BAY CITIES BUILDING MATERIALS CO., INC
are parties
A. Capitalized terms this Addendum uses, but does not define, have the
meanings the captioned Agreement specifies.
B. The Founding Companies are:
Baer Concrete, Incorporated
Bay Cities Building Materials Co., Inc.
Central Concrete Supply Co., Inc.
Opportunity Concrete Corporation
R.G. Evans/Associates d/b/a Santa Rosa Cast Products Co.
Walker's Concrete, Inc.
<PAGE>
SCHEDULE 2(C)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
BAY CITIES BUILDING MATERIALS CO., INC
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. The directors of the Surviving Corporation and BCBM immediately
after the Effective Time are as follows: Eugene P. Martineau and Michael W.
Harlan.
C. The officers of the Surviving Corporation and BCBM immediately
after the Effective Time are as follows:
President.................................. Neil J. Vannucci
Senior Vice President...................... Eugene P. Martineau
Vice President, Treasurer and Secretary.... Michael W. Harlan
End of Schedule
<PAGE>
SCHEDULE 2(D)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
BAY CITIES BUILDING MATERIALS CO., INC
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. Subject to increase by the amount of the Positive Net Adjustment,
if any, and to decrease by the amount of the Negative Net Adjustment, if any,
the aggregate Acquisition Consideration will be comprised of (1) $8,602,046 in
cash, (2) 1,871,310 shares of USC Common Stock and (3) the Additional Cash
Consideration.
C. Each Stockholder will be entitled to receive his Pro Rata Share
of the Acquisition Consideration pursuant to Paragraph 2(D), subject to the
provisions of Paragraphs 2(E) and 2(F).
End of Schedule
EXHIBIT 2.5
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 22, 1999
BY AND AMONG
U.S. CONCRETE, INC.,
BAER ACQUISITION INC.,
BAER CONCRETE, INCORPORATED
AND
THE STOCKHOLDER NAMED HEREIN
Reverse Triangular Merger; Non-Delaware Company; Single Stockholder; Company
Financial Statements
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of March 22, 1999 by and among U.S. Concrete, Inc., a Delaware corporation
("USC"), Baer Acquisition Inc., a Delaware corporation and a wholly owned
subsidiary of USC ("USC Sub"), Baer Concrete, Incorporated, a New Jersey
corporation (the "Company"), and the person listed on the signature page hereof
under the caption "Stockholder" (the "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination pursuant to which:
(a) USC Sub will merge into the Company on the terms and subject to
the conditions set forth herein (that merger being the "Merger");
(b) USC will acquire the stock of all or some of the entities listed
in the accompanying Addendum 1 (each, other than the Company, an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") pursuant to agreements that are (i) similar to this Agreement
and (ii) entered into among those entities and their equity owners, USC
and subsidiaries of USC (collectively, the "Other Agreements"); and
(c) USC will effect a public offering of shares of its common stock
and issue and sell those shares.
The respective boards of directors of USC, USC Sub and the Company
have approved and adopted this Agreement to effect a transaction subject to
Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings this Agreement contains, the
parties hereto hereby agree as follows:
Paragraph 1 CERTAIN DEFINED TERMS. The following terms this
Agreement uses have the meanings this Paragraph 1 specifies. Capitalized terms
this Agreement uses, but this Paragraph 1 does not define, have the meanings the
preamble to this Agreement, the Preliminary Statement above or Article IX of the
Uniform Provisions, as the case may be, specifies.
"Acquired Business" means the Company.
"Acquisition" means the Merger.
"Acquisition Consideration" has the meaning Paragraph 2 specifies.
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"Additional Cash Consideration" means the product of (i) the
quotient obtained from dividing (A) the sum of the amount of cash
Paragraph B of Schedule 2(D) sets forth in dollars and the 1998 Restricted
Payment Amount by (B) $8.50 multiplied by (ii) the amount, if any, by
which (A) the IPO Price exceeds (B) $8.50.
"Applied Consideration" means the sum of the fair market values on
the IPO Closing Date of the assets Schedule 6.08 lists. In the case of the
loans payable that Schedule 6.08 lists, their fair market value will equal
their unpaid principal amounts and accrued and unpaid interest on the IPO
Closing Date. In the case of the life insurance policies Schedule 6.08
lists, their fair market value will be their cash surrender value on the
IPO Closing Date as determined by the Company and agreed to by USC. In the
case of the remaining assets Schedule 6.08 lists, their fair market value
will be as determined by the Company and agreed to by USC.
"Ceiling Amount" means the sum of (i) $4,800,000, (ii) the
Additional Cash Consideration, if any, (iii) the Positive Net Adjustment,
if any, and (iv) the Negative Net Adjustment, if any; provided, however,
that, for purposes of Sections 6.06(b) and 7.06(b), the Ceiling Amount is
$3,600,000.
"Closing" has the meaning Paragraph 3 specifies.
"Closing Date" means the IPO Pricing Date.
"Company Capital Stock" means the Common Stock, no par value per
share, of the Company.
"Company Financial Statements" means (i) the audited balance sheets
of the Company as of December 31, 1998 and the related audited statements
of operations, cash flows and shareholders' equity for the year ended
December 31, 1998, together with the related audit report of the
Independent Accountants.
"Counsel for USC and USC Sub" means Baker & Botts, L.L.P.
"Counsel for the Company and the Stockholder" means Stephen R.
Urbinato.
"Current Balance Sheet" means the audited balance sheet of the
Company as of December 31, 1998.
"Current Balance Sheet Date" means December 31, 1998.
"Current Balance Sheet Date Working Capital" means $(1,397,000).
"Effective Date" means the IPO Closing Date.
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"Executive Employment Agreement" means the Employment Agreement
entered into effective as of the IPO Closing Date between the Company and
Michael D. Mitschele.
"Initial Financial Statements" means the Company Financial
Statements.
"Minimum Cash Balance" means $0.
"NJBCA" means the New Jersey Business Corporation Act.
"Pro Rata Share" of the Stockholder means 100%.
"Responsible Officer" means Michael D. Mitschele.
"Surviving Corporation" means the Company, which the Certificate of
Merger will designate as the surviving corporation of the Merger.
"Termination Date" means May 31, 1999; provided, however, that if
(i) USC has filed the Registration Statement with the SEC prior to that
date and (ii) the Stockholder would not be entitled to terminate this
Agreement on that date otherwise than pursuant to Section 11.01(a)(ii),
"Termination Date" means September 30, 1999.
"Uniform Provisions" has the meaning Paragraph 4 specifies.
"USC Award Agreements" means the award agreements, each in the form
of Exhibit 1-B, pursuant to which USC, on the Closing Date, will grant to
certain key employees of the Company Michael D. Mitschele has designated
by written notice to USC and USC has approved by written notice to the
Responsible Officer (which approval USC will not unreasonably withhold)
prior to the Closing Date, pursuant to the U.S. Concrete, Inc. 1999
Employee Incentive Plan, or other similar stock option plan, options to
purchase an aggregate not to exceed 22,605 shares of USC Common Stock at a
per share exercise price equal to the IPO Price.
"USC Sub Common Stock" means the Common Stock, par value $1.00 per
share, of USC Sub.
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"1998 Restricted Payment Amount" means $0.
Paragraph 2 (A) CERTIFICATE OF MERGER. Subject to the terms and
conditions hereof, the Company will cause the Certificate of Merger to be duly
executed and delivered on or promptly after the Closing Date and filed with the
Secretary of State of the State of New Jersey and the Secretary of State of the
State of Delaware.
(B) THE EFFECTIVE TIME. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., Houston, Texas time, on the Effective Date.
(C) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective Time,
(1) USC Sub will be merged with and into the Company in accordance with the
provisions of the NJBCA and the DGCL, (2) USC Sub will cease to exist as a
separate legal entity, (3) the certificate of incorporation of the Company will
be amended to change the Company's authorized shares of capital stock to 1,000
shares, par value $1.00 per share, of Common Stock, (4) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
NJBCA and the DGCL, (a) possess all the properties and rights, and be subject to
all the restrictions and duties, of the Company and USC Sub and (b) be governed
by the laws of the State of New Jersey, (5) the Charter Documents of the Company
then in effect (after giving effect to the amendment to the Company's
certificate of incorporation specified in clause (3) of this sentence) will
become and thereafter remain (until changed in accordance with (a) applicable
law (in the case of the certificate of incorporation) or (b) their terms (in the
case of the bylaws)) the Charter Documents of the Surviving Corporation, (6) the
initial board of directors of the Surviving Corporation will be the persons
Schedule 2(C) names as such, and those persons will hold the office of director
of the Surviving Corporation, subject to the provisions of the applicable laws
of the State of New Jersey and the Charter Documents of the Surviving
Corporation, and (7) the initial officers of the Surviving Corporation will be
as Schedule 2(C) sets forth, and each of those persons will serve in each office
Schedule 2(C) specifies for that person, subject to the provisions of the
Charter Documents of the Surviving Corporation, until that person's successor is
duly elected to, and, if necessary, qualified for, that office.
(D) EFFECT OF THE MERGER ON CAPITAL STOCK. As of the Effective Time,
as a result of the Merger and without any action on the part of any holder
thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) convert into the right to
receive, subject to the provisions of Paragraph 2(E), without interest, on
surrender of the certificates evidencing those shares, the amount of cash
and the number of whole and fractional shares of USC Common Stock Schedule
2(D) sets forth and, if any, the Additional Cash Consideration (the
"Acquisition Consideration"), (b) cease to be outstanding and to exist and
(c) be canceled and retired;
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<PAGE>
(2) each share of Company Capital Stock held in the treasury of the
Company or any Company Subsidiary will (a) cease to be outstanding and to
exist and (b) be canceled and retired; and
(3) each share of USC Sub Common Stock issued and outstanding
immediately prior to the Effective Time will convert into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation and
the shares of Common Stock of the Surviving Corporation issued on that
conversion will constitute all the issued and outstanding shares of
Capital Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without interest,
the Acquisition Consideration and the additional cash, if any, owing with
respect to those shares as provided in Paragraph 2(F).
(E) DELIVERY, EXCHANGE AND PAYMENT. (1) At or after the Effective
Time: (a) the Stockholder, as the holder of certificates representing shares of
Company Capital Stock, will, on surrender of those certificates to USC (or any
agent that USC may appoint for purposes of this Paragraph 2(E)), receive,
subject to the provisions of this Paragraph 2(E) and Paragraph 2(F), the
Acquisition Consideration; and (b) until any certificate representing Company
Capital Stock has been surrendered and replaced pursuant to this Paragraph 2(E),
that certificate will, for all purposes, be deemed to evidence ownership of the
number of whole shares of USC Common Stock included in the Acquisition
Consideration payable in respect of that certificate pursuant to Paragraph 2(D);
provided, however, that the Stockholder hereby directs USC to withhold the
Applied Consideration until such time as the Stockholder directs USC in writing
to deliver the Applied Consideration to the Company as payment of the purchase
price the Stockholder then owes pursuant to Section 6.08. All shares of USC
Common Stock issuable in the Merger will be deemed for all purposes to have been
issued by USC at the Effective Time.
(2) The Stockholder will deliver to USC (or any agent that USC may
appoint for purposes of this Paragraph 2(E)) on or before the IPO Closing Date
the certificates representing all the Company Capital Stock owned by the
Stockholder, duly endorsed in blank, or accompanied by stock powers in blank
duly executed, by that Person, and with all necessary transfer tax and other
revenue stamps, acquired at that Person's expense, affixed and canceled. The
Stockholder will cure any deficiencies in the endorsement of the certificates or
other documents of conveyance respecting, or in the stock powers accompanying,
the certificates representing Company Capital Stock that Person delivers.
(3) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to USC Common Stock and payable to
the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company Capital
Stock for which whole shares of USC Common Stock have been issued
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<PAGE>
in the Merger until those certificates are surrendered as provided herein, but
(a) on that surrender USC will cause to be paid, to the Person in whose name the
certificates representing those whole shares of USC Common Stock will then be
issued, the amount of dividends or other distributions previously paid with
respect to those whole shares of USC Common Stock with a record date, or which
have accrued, subsequent to the Effective Time, but prior to that surrender, and
the amount of any cash payable to that Person for and in lieu of fractional
shares pursuant to Paragraph 2(F) and (b) at the appropriate payment date or as
soon as practicable thereafter, USC will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which have
been accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to those whole
shares of USC Common Stock, subject in all cases to any applicable escheat laws.
No interest will be payable with respect to the payment of those dividends or
other distributions or cash for and in lieu of fractional shares on surrender of
outstanding certificates.
(F) Notwithstanding any other provision herein, USC will not issue
any fractional shares of USC Common Stock, and if the Stockholder would be
entitled hereunder to receive a fractional share of USC Common Stock but for
this Paragraph 2(F), the Stockholder will be entitled hereunder to receive a
cash payment for and in lieu thereof in the amount (rounded upward to the
nearest whole cent) equal to the Stockholder's fractional interest in a share of
USC Common Stock multiplied by the IPO Price.
Paragraph 3 THE CLOSING. On or before the Closing Date, the parties
hereto will take all actions necessary to (A) effect the Acquisition (including,
as permitted by the NJBCA and the DGCL, (i) the execution of a Certificate of
Merger (a) meeting the requirements of the NJBCA and the DGCL and (b) providing
that the Merger will become effective on the Effective Date and (ii) the
transmitting for filing of that Certificate of Merger with the Secretary of
State of the State of New Jersey and the Secretary of State of the State of
Delaware), (B) verify the existence and ownership of the certificates evidencing
the Company Capital Stock to be exchanged for the Acquisition Consideration
pursuant to Paragraph 2(E) and (C) satisfy the document delivery requirements on
which the obligations of the parties to effect the Acquisition and the other
transactions contemplated hereby are conditioned by the provisions of Article V
(all those actions collectively being the "Closing"). The Closing will take
place at the offices of Baker & Botts, L.L.P., 30th Floor, 910 Louisiana,
Houston, Texas at 10:00 a.m., Houston time, on the Closing Date, or at such
later time on the Closing Date as USC specifies by written notice to the
Responsible Officer. The actions taken at the Closing will not include the
delivery of the Company Capital Stock to USC or the payment of the Acquisition
Consideration to the Stockholder. Instead, on the IPO Closing Date, the Company
Capital Stock will be surrendered in exchange for the Acquisition Consideration
(with the cash portion of the Acquisition Consideration being paid by wire
transfer in immediately available funds pursuant to instructions the Stockholder
delivers to USC prior to Closing or, in the absence of those instructions, a USC
check), and all transactions contemplated by this Agreement to be closed or
completed on or before the IPO Closing Date will be closed and completed, as the
case may be.
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<PAGE>
Paragraph 4 INCORPORATION OF UNIFORM PROVISIONS. (A) The U.S.
Concrete, Inc. Uniform Provisions for the Acquisition of Founding Companies
attached hereto as Annex 1 (the "Uniform Provisions") hereby are incorporated in
this Agreement by this reference and constitute a part of this Agreement with
the same force and effect as if set forth at length herein.
(B) Notwithstanding the provisions of Section 10.07, Article VIII
and the rights and obligations thereunder of the parties thereto will be
governed by and construed in accordance with the substantive laws of the State
of New Jersey without regard to the conflicts of law provisions thereof.
(C) The Uniform Provisions are hereby amended by adding a Section
10.16 which reads in its entirety as follows:
Section 10.16 REMEDIATION AGREEMENT. To the extent required in order
to achieve compliance under the New Jersey Industrial Site Recovery Act
(N.J.S.A. 13:1K-6 et seq.) prior to the IPO Closing Date and to the extent
permitted by the New Jersey Department of Environmental Protection, (i)
the Stockholder will use his best efforts to enter into a pre-closing
remediation agreement with the New Jersey Department of Environmental
Protection in order to permit the closing of the transactions contemplated
hereby without the need to complete any required site remediation work
prior to the IPO Closing Date or (ii) in the event that the Stockholder is
unable to enter into such a pre-closing remediation agreement, the
Stockholder will cause the Company to enter into such a pre-closing
remediation agreement on the request of USC, in which event Stockholder
will indemnify USC or the Company, as applicable, for the cost of any
remediation which is required to be performed pursuant to such pre-closing
remediation agreement.
(D) The Uniform Provisions are hereby amended by changing the
definition of "Positive Net Adjustment", "Current Balance Sheet Date Adjusted
Working Capital" and "Final Balance Sheet" in Section 6.07 to read as follows:
"Positive Net Adjustment" means $0.
"Current Balance Sheet Date Adjusted Working Capital" means "Current
Balance Sheet Date Working Capital"
"Final Balance Sheet" means a balance sheet of the Acquired Business
as of the later of (i) May 31, 1999 and (ii) the effective date USC uses
to record the Acquisition in accordance with GAAP on the same basis on
which the Current Balance Sheet was prepared.
(E) The Uniform Provisions are hereby amended by adding a Section
10.17 which reads in its entirety as follows:
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<PAGE>
Section 10.17 COVENANTS OF USC PRIOR TO MAY 31, 1999. If the IPO
Closing Date occurs before May 31, 1999, USC covenants and agrees that it
will not take any action between the IPO Closing Date and May 31, 1999,
which is outside the ordinary course of business and which adversely
affects Final Working Capital.
(F) Article VI is hereby amended by adding at the end thereof the
following:
Section 6.08 PURCHASE OF CERTAIN ASSETS. On the IPO Closing Date and
following the Effective Time, the Stockholder will purchase from the
Company for cash in immediately available funds the assets Schedule 6.08
lists at an aggregate purchase price for all those assets equal to the
Applied Consideration, whereupon the Company will deliver and otherwise
transfer title to those assets to the Stockholder.
Paragraph 5 CERTAIN CONDITIONS TO CLOSING AND CONSUMMATION. (A) The
obligations of the Stockholder with respect to the actions to be taken on the
IPO Closing Date are subject to the satisfaction of the following condition in
addition to those set forth or referred to in Section 5.02(b): (i) the Executive
Employment Agreement then will be in full force and effect and (ii) USC shall
have tendered the USC Award Agreements to the respective recipients thereof,
duly signed on its behalf by an authorized officer of USC.
(B) The obligations of USC and USC Sub with respect to the actions
to be taken on the IPO Closing Date are subject to the satisfaction of the
following conditions in addition to those set forth or referred to in Section
5.03(b): (i) the Executive Employment Agreement then will be in full force and
effect and (ii) Stockholder shall have performed his obligations pursuant to
Section 10.16.
Paragraph 6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
Paragraph 7 NOTICES. For purposes of Section 10.06, notices will be
initially addressed to the Stockholder and the Company, as follows:
(A) if to the Stockholder, addressed to him at:
Mr. Michael D. Mitschele
89 Eagle Rock Avenue
P.O. Box 683
Roseland, New Jersey 07068
; and
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<PAGE>
(B) if to the Company, addressed to it at:
Baer Concrete, Incorporated
117 Harrison Avenue
P.O. Box 147
Roseland, New Jersey 07068
Fax No.: (973) 226-8140
Attn: Michael D. Mitschele
with copies (which will not constitute notice for purposes of this
Agreement) to:
Stephen R. Urbinato, Esq.
200 Executive Drive, Suite 100
West Orange, New Jersey 07052
Fax No.: (973) 731-0163
Paragraph 8 ABANDONMENT OF MERGER. If this Agreement is terminated
pursuant to Section 11.01, the Merger will be deemed for all purposes to have
been abandoned and of no force or effect and, if the Certificate of Merger has
been filed with the Secretary of State of the Company's Organization State prior
to that termination, each of the Company and USC Sub is authorized to execute
and file with the Secretary of State of the Company's Organization State a
certificate of that termination pursuant to Section 14A:10-9 of the NJBCA.
[Signatures on following page]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
U.S. CONCRETE, INC.
By:_______________________________________
Eugene P. Martineau
President and Chief Executive Officer
BAER ACQUISITION INC.
By:_______________________________________
Eugene P Martineau
President
BAER CONCRETE, INCORPORATED
By:_______________________________________
Michael D. Mitschele
President
Stockholder:
____________________________________________
Michael D. Mitschele
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<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Baer Concrete, Incorporated
are parties
A. Capitalized terms this Addendum uses, but does not define, have the
meanings the captioned Agreement specifies.
B. The Founding Companies are:
Baer Concrete, Incorporated
Bay Cities Building Materials Co., Inc.
Central Concrete Supply Co., Inc.
Opportunity Concrete Corporation
R. G. Evans/Associates d/b/a Santa Rosa Cast Products Co.
Walker's Concrete, Inc.
<PAGE>
SCHEDULE 2(C)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Baer Concrete, Incorporated
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows: Eugene P. Martineau and Michael W. Harlan.
C. The officers of the Surviving Corporation immediately after the
Effective Time are as follows:
President.................................. Michael D. Mitschele
Senior Vice President...................... Eugene P. Martineau
Vice President, Treasurer and Secretary.... Michael W. Harlan
End of Schedule
<PAGE>
SCHEDULE 2(D)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
Baer Concrete, Incorporated
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. Subject to increase by the amount of the Positive Net Adjustment,
if any, and to decrease by the amount of the Negative Net Adjustment, if any,
the aggregate Acquisition Consideration will be comprised of (1) $1,200,000 in
cash, (2) 423,529 shares of USC Common Stock, (3) the Additional Cash
Consideration and (4) the Applied Consideration.
C. The Stockholder will be entitled to receive his Pro Rata Share of
the Acquisition Consideration pursuant to Paragraph 2(D), subject to the
provisions of Paragraphs 2(E) and 2(F).
End of Schedule
EXHIBIT 2.6
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 22, 1999
BY AND AMONG
U.S. CONCRETE, INC.,
SANTA ROSA ACQUISITION INC.,
R. G. EVANS/ASSOCIATES D/B/A
SANTA ROSA CAST PRODUCTS CO.
AND
THE STOCKHOLDER NAMED HEREIN
Reverse Triangular Merger; Non-Delaware Company; Single Stockholder; Company
Financial Statements
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of March 22, 1999 by and among U.S. Concrete, Inc., a Delaware corporation
("USC"), Santa Rosa Acquisition Inc., a Delaware corporation and a wholly owned
subsidiary of USC ("USC Sub"), R.G. Evans/Associates d/b/a Santa Rosa Cast
Products Company, a California corporation (the "Company"), and Robert G. Evans
and Delores J. Evans, trustees of the Evans Family Revocable Living Trust dated
3/9/94 (jointly, the "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination pursuant to which:
(a) USC Sub will merge into the Company on the terms and subject to
the conditions set forth herein (that merger being the "Merger");
(b) USC will acquire the stock of all or some of the entities listed
in the accompanying Addendum 1 (each, other than the Company, an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") pursuant to agreements that are (i) similar to this Agreement
and (ii) entered into among those entities and their equity owners, USC
and subsidiaries of USC (collectively, the "Other Agreements"); and
(c) USC will effect a public offering of shares of its common stock
and issue and sell those shares.
The respective boards of directors of USC, USC Sub and the Company
have approved and adopted this Agreement to effect a transaction subject to
Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings this Agreement contains, the
parties hereto hereby agree as follows:
Paragraph 1 CERTAIN DEFINED TERMS. The following terms this
Agreement uses have the meanings this Paragraph 1 specifies. Capitalized terms
this Agreement uses, but this Paragraph 1 does not define, have the meanings the
preamble to this Agreement, the Preliminary Statement above or Article IX of the
Uniform Provisions, as the case may be, specifies.
"Acquired Business" means the Company.
"Acquisition" means the Merger.
"Acquisition Consideration" has the meaning Paragraph 2 specifies.
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<PAGE>
"Additional Cash Consideration" means the product of (i) the
quotient obtained from dividing (A) the sum of (i) the amount of cash
Paragraph B of Schedule 2(D) sets forth in dollars and (ii) the 1998
Permitted Restricted Payment by (B) $8.50 multiplied by (ii) the amount,
if any, by which (A) the IPO Price exceeds (B) $8.50.
"Ceiling Amount" means the sum of (i) $5,128,721, (ii) the
Additional Cash Consideration, if any, (iii) the Positive Net Adjustment,
if any, and (iv) the Negative Net Adjustment, if any; provided, however,
that, for purposes of Sections 6.06(b) and 7.06(b), the Ceiling Amount is
$2,564,360.
"CGCL" means the General Corporation Law of the State of California.
"Closing" has the meaning Paragraph 3 specifies.
"Closing Date" means the IPO Pricing Date.
"Company Capital Stock" means the Common Stock, no par value, of the
Company.
"Company Financial Statements" means the balance sheet of the
Company as of December 31, 1998 and the related statements of operations,
cash flows and shareholders' equity for the year ended December 31, 1998
which the Company has prepared in consultation with the Independent
Accountants.
"Consulting Agreement" means the Consulting Agreement entered into
as of the Closing Date between the Company and Robert G. Evans.
"Counsel for the Company and the Stockholder" means Ferrari, Olsen,
Ottoboni & Bebb, LLP.
"Counsel for USC and USC Sub" means Baker & Botts, L.L.P.
"Current Balance Sheet" means the balance sheet of the Company as of
December 31, 1998 which the Company Financial Statements include.
"Current Balance Sheet Date" means December 31, 1998.
"Current Balance Sheet Date Working Capital" means $593,000.
"Effective Date" means the IPO Closing Date.
"Employment Agreement" means the employment Agreement entered into
effective as of the IPO Closing Date between the Company and Robert
Humphrey.
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<PAGE>
"Initial Financial Statements" means the Company Financial
Statements.
"Minimum Cash Balance" means $0.
"Pro Rata Share" of the Stockholder means 100%.
"Responsible Officer" means Robert G. Evans.
"Surviving Corporation" means the Company, which the Certificate of
Merger will designate as the surviving corporation of the Merger.
"Termination Date" means May 31, 1999; provided, however, that if
(i) USC has filed the Registration Statement with the SEC prior to that
date and (ii) the Stockholder would not be entitled to terminate this
Agreement on that date otherwise than pursuant to Section 11.01(a)(ii),
"Termination Date" means September 30, 1999.
"Uniform Provisions" has the meaning Paragraph 4 specifies.
"USC Award Agreements" means the award agreements, each in the form
of Exhibit 1-A, pursuant to which USC, on the Closing Date, will grant to
certain key employees of the Company Robert G. Evans has designated by
written notice to USC and USC has approved by written notice to the
Responsible Officer (which approval USC will not unreasonably withhold)
prior to the Closing Date, pursuant to the U.S. Concrete, Inc. 1999
Employee Incentive Plan, or other similar stock option plan, options to
purchase an aggregate not to exceed 24,153 shares of USC Common Stock at a
per share exercise price equal to the IPO Price.
"USC Sub Common Stock" means the Common Stock, par value $1.00 per
share, of USC Sub.
"1998 Restricted Payment Amount" means $703,000.
Paragraph 2 (A) CERTIFICATE OF MERGER. Subject to the terms and
conditions hereof, the Company will cause the Certificate of Merger to be duly
executed and delivered on or promptly after the Closing Date and filed with the
Secretary of State of the State of California and the Secretary of State of the
State of Delaware.
(B) THE EFFECTIVE TIME. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., Houston, Texas time, on the Effective Date.
(C) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective Time,
(1) USC Sub will be merged with and into the Company in accordance with the
provisions of the CGCL and the
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<PAGE>
DGCL, (2) USC Sub will cease to exist as a separate legal entity, (3) the
articles of incorporation of the Company will be amended to change the Company's
authorized shares of capital stock to 1,000 shares, par value $1.00 per share,
of Common Stock, (4) the Company will be the Surviving Corporation and, as such,
will, all with the effect provided by the CGCL and the DGCL, (a) possess all the
properties and rights, and be subject to all the restrictions and duties, of the
Company and USC Sub and (b) be governed by the laws of the State of California,
(5) the Charter Documents of the Company then in effect (after giving effect to
the amendment to the Company's articles of incorporation specified in clause (3)
of this sentence) will become and thereafter remain (until changed in accordance
with (a) applicable law (in the case of the articles of incorporation) or (b)
their terms (in the case of the bylaws)) the Charter Documents of the Surviving
Corporation, (6) the initial board of directors of the Surviving Corporation
will be the persons Schedule 2(C) names as such, and those persons will hold the
office of director of the Surviving Corporation, subject to the provisions of
the applicable laws of the State of California and the Charter Documents of the
Surviving Corporation, and (7) the initial officers of the Surviving Corporation
will be as Schedule 2(C) sets forth, and each of those persons will serve in
each office Schedule 2(C) specifies for that person, subject to the provisions
of the Charter Documents of the Surviving Corporation, until that person's
successor is duly elected to, and, if necessary, qualified for, that office.
(D) EFFECT OF THE MERGER ON CAPITAL STOCK. As of the Effective Time,
as a result of the Merger and without any action on the part of any holder
thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) convert into the right to
receive, subject to the provisions of Paragraph 2(E), without interest, on
surrender of the certificates evidencing those shares, the amount of cash
and the number of whole and fractional shares of USC Common Stock Schedule
2(D) sets forth and, if any, the Additional Cash Consideration (the
"Acquisition Consideration"), (b) cease to be outstanding and to exist and
(c) be canceled and retired;
(2) each share of Company Capital Stock held in the treasury of the
Company or any Company Subsidiary will (a) cease to be outstanding and to
exist and (b) be canceled and retired; and
(3) each share of USC Sub Common Stock issued and outstanding
immediately prior to the Effective Time will convert into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation and
the shares of Common Stock of the Surviving Corporation issued on that
conversion will constitute all the issued and outstanding shares of
Capital Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without interest,
the Acquisition Consideration and the additional cash, if any, owing with
respect to those shares as provided in Paragraph 2(F).
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<PAGE>
(E) DELIVERY, EXCHANGE AND PAYMENT. (1) At or after the Effective
Time: (a) the Stockholder, as the holder of certificates representing shares of
Company Capital Stock, will, on surrender of those certificates to USC (or any
agent that USC may appoint for purposes of this Paragraph 2(E)), receive,
subject to the provisions of this Paragraph 2(E) and Paragraph 2(F), the
Acquisition Consideration; and (b) until any certificate representing Company
Capital Stock has been surrendered and replaced pursuant to this Paragraph 2(E),
that certificate will, for all purposes, be deemed to evidence ownership of the
number of whole shares of USC Common Stock included in the Acquisition
Consideration payable in respect of that certificate pursuant to Paragraph 2(D).
All shares of USC Common Stock issuable in the Merger will be deemed for all
purposes to have been issued by USC at the Effective Time.
(2) The Stockholder will deliver to USC (or any agent that USC may
appoint for purposes of this Paragraph 2(E)) on or before the IPO Closing Date
the certificates representing all the Company Capital Stock owned by the
Stockholder, duly endorsed in blank, or accompanied by stock powers in blank
duly executed, by that Person, and with all necessary transfer tax and other
revenue stamps, acquired at that Person's expense, affixed and canceled. The
Stockholder will cure any deficiencies in the endorsement of the certificates or
other documents of conveyance respecting, or in the stock powers accompanying,
the certificates representing Company Capital Stock that Person delivers.
(3) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to USC Common Stock and payable to
the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company Capital
Stock for which whole shares of USC Common Stock have been issued in the Merger
until those certificates are surrendered as provided herein, but (a) on that
surrender USC will cause to be paid, to the Person in whose name the
certificates representing those whole shares of USC Common Stock will then be
issued, the amount of dividends or other distributions previously paid with
respect to those whole shares of USC Common Stock with a record date, or which
have accrued, subsequent to the Effective Time, but prior to that surrender, and
the amount of any cash payable to that Person for and in lieu of fractional
shares pursuant to Paragraph 2(F) and (b) at the appropriate payment date or as
soon as practicable thereafter, USC will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which have
been accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to those whole
shares of USC Common Stock, subject in all cases to any applicable escheat laws.
No interest will be payable with respect to the payment of those dividends or
other distributions or cash for and in lieu of fractional shares on surrender of
outstanding certificates.
(F) Notwithstanding any other provision herein, USC will not issue
any fractional shares of USC Common Stock, and if the Stockholder would be
entitled hereunder to receive a fractional share of USC Common Stock but for
this Paragraph 2(F), the Stockholder will be entitled hereunder to receive a
cash payment for and in lieu thereof in the amount (rounded upward to the
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<PAGE>
nearest whole cent) equal to the Stockholder's fractional interest in a share of
USC Common Stock multiplied by the IPO Price.
Paragraph 3 THE CLOSING. On or before the Closing Date, the parties
hereto will take all actions necessary to (A) effect the Acquisition (including,
as permitted by the CGCL and the DGCL, (i) the execution of a Certificate of
Merger (a) meeting the requirements of the CGCL and the DGCL and (b) providing
that the Merger will become effective on the Effective Date and (ii) the
transmitting for filing of that Certificate of Merger with the Secretary of
State of the State of California and the Secretary of State of the State of
Delaware), (B) verify the existence and ownership of the certificates evidencing
the Company Capital Stock to be exchanged for the Acquisition Consideration
pursuant to Paragraph 2(E) and (C) satisfy the document delivery requirements on
which the obligations of the parties to effect the Acquisition and the other
transactions contemplated hereby are conditioned by the provisions of Article V
(all those actions collectively being the "Closing"). The Closing will take
place at the offices of Baker & Botts, L.L.P., 30th Floor, 910 Louisiana,
Houston, Texas at 10:00 a.m., Houston time, on the Closing Date, or at such
later time on the Closing Date as USC specifies by written notice to the
Responsible Officer. The actions taken at the Closing will not include the
delivery of the Company Capital Stock to USC or the payment of the Acquisition
Consideration to the Stockholder. Instead, on the IPO Closing Date, the Company
Capital Stock will be surrendered in exchange for the Acquisition Consideration
(with the cash portion of the Acquisition Consideration being paid by wire
transfer pursuant to instructions the Stockholder delivers to USC prior to
Closing or, in the absence of those instructions, a USC check), and all
transactions contemplated by this Agreement to be closed or completed on or
before the IPO Closing Date will be closed and completed, as the case may be.
Paragraph 4 INCORPORATION OF UNIFORM PROVISIONS. (A) The U.S.
Concrete, Inc. Uniform Provisions for the Acquisition of Founding Companies
attached hereto as Annex 1 (the "Uniform Provisions") hereby are incorporated in
this Agreement by this reference and constitute a part of this Agreement with
the same force and effect as if set forth at length herein.
(B) The Uniform Provisions are hereby amended by adding a Section
1.08 which reads in its entirety as follows:
SECTION 1.08 TRUSTS.
(a) Schedule 1.08 sets forth the legal name of each
Stockholder that is a trustee (the "Trustees"), the name of the
trust over which that Trustee serves (each a "Trust"), the state or
other jurisdiction which governs that Trustee's duties with respect
to that Trust, and the name of each beneficiary of that Trust (the
"Beneficiaries").
(b) There has not been any challenge to (i) the authority,
appointment or capacity of any Trustee to serve as such over the
applicable Trust or (ii) the validity of any Trust.
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(c) Full and complete copies of all documents under which each
Trust was created and all documents otherwise pertaining to each
Trust or the duties and obligations of each Trustee serving over
each Trust and all amendments, supplements or modifications thereto
have been provided to USC.
(d) The Trustees set forth opposite the name of each Trust on
Schedule 1.08 are the sole Trustees of that Trust and each Trustee
listed is a duly acting and qualified trustee of that Trust. Each of
the Trustees has all requisite power and authority to execute and
deliver each Transaction Document, to consummate the transactions
contemplated thereby and to perform all the terms and conditions
thereof to be performed by that Trustee.
(e) No notice is required to be given to and no consent or
joinder is required to be acquired from any Beneficiary in
connection with the Transaction Documents or any of the transactions
contemplated thereby and no objection has been received from any
Beneficiary relating to the Transaction Documents or any of the
transactions contemplated thereby.
(C) Section 4.03 is hereby amended by adding at the end thereof the
following:
; provided, however, that the Company may make Restricted Payments to its
Stockholders as dividends consisting of: (i) cash or Permitted Promissory
Notes (valued at the principal amount thereof) in an aggregate amount not
to exceed the amount by which (A) the 1998 Restricted Payment Amount
exceeds (B) the sum of all Restricted Payments the Company has made from
and after January 1, 1999 to the date of this Agreement; and (ii)
Permitted Promissory Notes in an aggregate principal amount not to exceed
the 1999 Restricted Payment Amount. As used herein, "Permitted Promissory
Note" means an unsecured promissory note of the Company which bears
interest from the date of its issue until paid at the rate of 6% per annum
and will become due and payable no earlier than the Adjustment
Determination Date.
(D) Section 6.02 is hereby amended by adding a second paragraph
which reads in its entirety as follows:
The Stockholder will have the right to prepare the initial draft of
the Company's income tax Returns for the period from January 1, 1999
through the Closing Date, provided that (i) they deliver such draft
Returns to USC at least 45 days prior to their due dates and (ii) they
prepare such draft Returns in accordance with the Company's past practices
and consistent with applicable Governmental Requirements. USC will have
the right to review and revise such draft Returns before filing, provided
that USC (i) will consult in good faith with the Responsible Officer
regarding any such revision before it makes such filing and (ii) will not
make any such revision without the consent of the Responsible Officer
(which
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<PAGE>
will not be unreasonably withheld or delayed) if such revision would be
inconsistent with the Company's past practices, to the extent those
practices were consistent with applicable Governmental Requirements. USC
will not file any amendments to any income tax Return covering any period
ending on or prior to the Effective Date without the consent of the
Responsible Officer (which will not be unreasonably withheld or delayed),
unless USC determines that such amendment is required by applicable
Governmental Requirements.
(E) Section 6.07 is hereby amended by deleting the definition of the
"Final Balance Sheet" contained therein and replacing it with the following:
"Final Balance sheet" means a balance sheet of the Acquired
Business as of the later of (i) the effective date USC uses to
record the Acquisition or (ii) May 31, 1999, in each case, in
accordance with GAAP on the same basis on which the Current Balance
Sheet was prepared.
(F) Section 6.07 is hereby amended by deleting the definition of
"Positive Net Adjustment" contained therein and replacing it with the following:
"Positive Net Adjustment" means $0.
(G) Section 6.07 is hereby amended by deleting the definition of
current "Balance Sheet Date Adjusted Working Capital" contained therein and
replacing it with the following:
"Current Balance Sheet Date Adjusted Working Capital"
means "Current Balance Sheet Date Working Capital."
(H) Section 10.02 is hereby amended by adding the following to the
end of that Section: "USC and USC Sub acknowledge that Upton Financial Group,
Inc., its agents and employees (collectively, "Upton") provided advice
exclusively to the Stockholders in connection with the Acquisition. Each of the
parties to this Agreement acknowledge that Upton is acting as an intermediary
only, and Upton has not provided legal or accounting advice to any party to this
Agreement. USC and USC Sub acknowledge that they are not entering into this
Agreement based on any representation, warranty or guarantee of Upton."
(I) Notwithstanding the provisions of Section 10.07, Article VIII
and the rights and obligations thereunder of the parties thereto will be
governed by and construed in accordance with the substantive laws of the State
of California without regard to the conflicts of law provisions thereof.
Paragraph 5 CERTAIN CONDITIONS TO CLOSING AND CONSUMMATION. (A) The
obligations of the Stockholder with respect to the actions to be taken on the
IPO Closing Date are subject to the satisfaction of the following condition in
addition to those set forth or referred to in Section 5.02(b):
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<PAGE>
(i) the Consulting Agreement then will be in full force and effect and (ii) USC
shall have tendered the USC Award Agreements to the respective recipients
thereof, duly signed on its behalf by an authorized officer of USC.
(B) The obligations of USC and USC Sub with respect to the actions
to be taken on the IPO Closing Date are subject to the satisfaction of the
following condition in addition to those set forth or referred to in Section
5.03(b): the Consulting Agreement then will be in full force and effect.
(C) For purposes of Section 6.07, the Cash Adjustment will be zero.
Paragraph 6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
Paragraph 7 NOTICES. For purposes of Section 10.06, notices will be
initially addressed to the Stockholder and the Company, as follows:
(A) if to the Stockholder, addressed as follows:
Mr. Robert G. Evans and Mrs. Delores J. Evans
1801 Vermillion Way
Santa Rosa, California 95403
; and
(B) if to the Company, addressed to it at:
R. G. Evans/Associates
d/b/a Santa Rosa Cast Products Co.
471 W. College Avenue
Santa Rosa, California 95401
Fax No.: (707) 525-6406
Attn: Robert G. Evans
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<PAGE>
with copies (which will not constitute notice for purposes of this
Agreement) to:
Ferrari, Olsen, Ottoboni & Bebb, LLP
333 West Santa Clara Street, Suite 700
San Jose, California 95113
Fax No.: (408) 280-0151
Attn: Peter D. Feinberg
Richard S. Bebb
Paragraph 8 ABANDONMENT OF MERGER. If this Agreement is terminated
pursuant to Section 11.01, the Merger will be deemed for all purposes to have
been abandoned and of no force or effect and, if the Certificate of Merger has
been filed with the Secretary of State of the Company's Organization State prior
to that termination, each of the Company and USC Sub is authorized to execute
and file with the Secretary of State of the Company's Organization State a
certificate of that termination pursuant to Section 110 of the CGCL.
[Signatures on following page]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
U.S. CONCRETE, INC.
By:________________________________________
Eugene P. Martineau
President and Chief Executive Officer
SANTA ROSA ACQUISITION INC.
By:_______________________________________
Eugene P Martineau
President
R. G. EVANS/ASSOCIATES D/B/A SANTA ROSA
CAST PRODUCTS CO.
By:________________________________________
Robert G. Evans
President
Stockholder:
____________________________________________
Robert G. Evans, co-trustee of the Evans
Family Revocable Living Trust dated 3/9/94
____________________________________________
Delores J. Evans, co-trustee of the Evans
Family Revocable Living Trust dated 3/9/94
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<PAGE>
Each of the undersigned hereby joins in the execution of this
Agreement individually to be bound as if the undersigned was a Stockholder
individually for the purposes of Article VIII.
____________________________________________
Robert G. Evans
____________________________________________
Delores J. Evans
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<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
R. G. Evans/Associates
are parties
A. Capitalized terms this Addendum uses, but does not define, have the
meanings the captioned Agreement specifies.
B. The Founding Companies are:
Baer Concrete, Incorporated
Bay Cities Building Materials Co., Inc.
Central Concrete Supply Co., Inc.
Opportunity Concrete Corporation
R.G. Evans/Associates d/b/a Santa Rosa Cast Products Co.
Walker's Concrete, Inc.
<PAGE>
SCHEDULE 2(C)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
R.G. Evans/Associates
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows: Eugene P. Martineau and Michael W. Harlan.
C. The officers of the Surviving Corporation immediately after the
Effective Time are as follows:
President ................................. Robert G. Evans
Senior Vice President...................... Eugene P. Martineau
Vice President, Treasurer and Secretary.... Michael W. Harlan
End of Schedule
<PAGE>
SCHEDULE 2(D)
to the
Agreement and Plan of Reorganization
to which
U.S. Concrete, Inc.
and
R.G. Evans/Associates
are parties
A. Capitalized terms this Schedule uses, but does not define, have
the meanings the captioned Agreement specifies.
B. Subject to increase by the amount of the Positive Net Adjustment,
if any, and to decrease by the amount of the Negative Net Adjustment, if any,
the aggregate Acquisition Consideration will be comprised of (1) $1,861,361 in
cash, (2) 301,689 shares of USC Common Stock and (3) the Additional Cash
Consideration.
C. The Stockholder will be entitled to receive his Pro Rata Share of
the Acquisition Consideration pursuant to Paragraph 2(D), subject to the
provisions of Paragraphs 2(E) and 2(F).
End of Schedule
EXHIBIT 2.7
ANNEX 1
U.S. CONCRETE, INC.
UNIFORM PROVISIONS
FOR
THE ACQUISITION OF FOUNDING COMPANIES
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER...............1
Section 1.01 Ownership and Status of Company Capital Stock....................1
Section 1.02 Power of the Stockholder; Approval of the Acquisition............1
Section 1.03 No Conflicts or Litigation.......................................2
Section 1.04 No Brokers.......................................................2
Section 1.05 Preemptive and Other Rights; Waiver; No Commitments..............2
Section 1.06 Control of Related Businesses....................................2
Section 1.07 Accredited Investor Status; Sophistication; Review of Private
Placement Memorandum............................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS....................................................3
Section 2.01 Organization.....................................................3
Section 2.02 Qualification....................................................4
Section 2.03 Authorization; Enforceability; Absence of Conflicts;
Required Consents...............................................4
Section 2.04 Charter Documents and Records; No Violation......................5
Section 2.05 No Defaults......................................................5
Section 2.06 Company Subsidiaries.............................................5
Section 2.07 Controlling Affiliates...........................................6
Section 2.08 Capital Stock of the Company and the Company Subsidiaries........6
Section 2.09 Transactions in Capital Stock....................................6
Section 2.10 No Bonus Shares..................................................6
Section 2.11 Predecessor Status; etc..........................................6
Section 2.12 Related Party Agreements.........................................6
Section 2.13 Litigation.......................................................7
Section 2.14 Financial Statements; Disclosure.................................7
Section 2.15 Compliance With Laws.............................................8
Section 2.16 Certain Environmental Matters....................................9
Section 2.17 Liabilities and Obligations......................................9
Section 2.18 Receivables.....................................................10
Section 2.19 Real Properties.................................................10
Section 2.20 Other Tangible Assets...........................................11
Section 2.21 Proprietary Rights..............................................11
Section 2.22 Relations With Governments, etc.................................11
Section 2.23 Commitments.....................................................12
Section 2.24 Capital Expenditures............................................13
Section 2.25 Inventories.....................................................13
Section 2.26 Insurance.......................................................13
Section 2.27 Employee Matters................................................14
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Section 2.28 Compliance With ERISA...........................................17
Section 2.29 Taxes...........................................................19
Section 2.30 Government Contracts............................................20
Section 2.31 Absence of Changes..............................................20
Section 2.32 Bank Relations; Powers of Attorney..............................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF USC...........................23
Section 3.01 Organization; Power.............................................23
Section 3.02 Authorization; Enforceability; Absence of Conflicts;
Required Consents..............................................23
Section 3.03 Charter Documents...............................................24
Section 3.04 Capital Stock of USC and USC Sub................................24
Section 3.05 Subsidiaries....................................................25
Section 3.06 Compliance With Laws; No Litigation.............................25
Section 3.07 Conduct of Operations to Date; Absence of Undisclosed
Liabilities....................................................25
Section 3.08 Capitalization of USC...........................................25
Section 3.09 No Brokers......................................................25
Section 3.10 Private Placement Memorandum....................................26
ARTICLE IV COVENANTS EXTENDING TO THE EFFECTIVE TIME.......................26
Section 4.01 Access and Cooperation; Due Diligence...........................26
Section 4.02 Conduct of Business Pending the Effective Time..................27
Section 4.03 Prohibited Activities...........................................28
Section 4.04 No Shop.........................................................29
Section 4.05 Notice to Bargaining Agents.....................................30
Section 4.06 Notification of Certain Matters.................................30
Section 4.07 Supplemental Information........................................30
Section 4.08 Cooperation in Connection With the IPO..........................31
Section 4.09 Additional Financial Statements.................................31
Section 4.10 Termination of Plans............................................32
Section 4.11 Disposition of Unwanted Assets..................................32
Section 4.12 HSR Act Matters.................................................32
ARTICLE V THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION..........32
Section 5.01 Conditions to the Obligations of Each Party.....................32
Section 5.02 Conditions to the Obligations of the Company and the
Stockholders.......34
Section 5.03 Conditions to the Obligations of USC and USC Sub................35
ARTICLE VI COVENANTS FOLLOWING THE EFFECTIVE TIME..........................36
Section 6.01 Disclosure......................................................36
Section 6.02 Preparation and Filing of Tax Returns...........................37
Section 6.03 Directors.......................................................37
Section 6.04 Removal of Guaranties...........................................37
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Section 6.05 Survival of Representations and Warranties...............37
Section 6.06 Limitations on Damage Claims.............................38
Section 6.07 Working Capital Adjustment...............................39
ARTICLE VII INDEMNIFICATION..........................................41
Section 7.01 In Respect of Representations and Warranties.............41
Section 7.02 Indemnification of USC Indemnified Parties...............41
Section 7.03 Indemnification of Stockholder Indemnified Parties.......42
Section 7.04 Conditions of Indemnification............................42
Section 7.05 Remedies Not Exclusive...................................45
Section 7.06 Limitations on Indemnification...........................45
ARTICLE VIII LIMITATIONS ON COMPETITION...............................46
Section 8.01 Prohibited Activities....................................46
Section 8.02 Damages..................................................47
Section 8.03 Reasonable Restraint.....................................47
Section 8.04 Severability; Reformation................................47
Section 8.05 Independent Covenant.....................................48
Section 8.06 Materiality..............................................48
ARTICLE IX ADDITIONAL DEFINITIONS AND DEFINITIONAL PROVISIONS.......48
Section 9.01 Defined Terms............................................48
Section 9.02 Other Defined Terms......................................63
Section 9.03 Other Definitional Provisions............................63
Section 9.04 Captions.................................................63
ARTICLE X GENERAL PROVISIONS.......................................64
Section 10.01 Treatment of Confidential Information...................64
Section 10.02 Brokers and Agents......................................65
Section 10.03 Assignment; No Third Party Beneficiaries................65
Section 10.04 Entire Agreement; Amendment; Waivers....................65
Section 10.05 Expenses................................................66
Section 10.06 Notices.................................................66
Section 10.07 Governing Law...........................................67
Section 10.08 Exercise of Rights and Remedies.........................67
Section 10.09 Time....................................................67
Section 10.10 Reformation and Severability............................67
Section 10.11 Remedies Cumulative.....................................67
Section 10.12 Release.................................................67
Section 10.13 Respecting the IPO......................................68
Section 10.14 Restrictions on Transfer of USC Common Stock............69
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ARTICLE XI TERMINATION.............................................70
Section 11.01 Termination of This Agreement...........................70
Section 11.02 Liabilities in the Event of Termination.................71
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<PAGE>
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each of the Stockholders represents and warrants to USC that, as
applied solely to himself, all the following representations and warranties in
this Article I are as of the date of this Agreement, and will be, as amended or
supplemented pursuant to Section 4.07, on the Closing Date and immediately prior
to the Effective Time, true and correct:
Section 1.01 OWNERSHIP AND STATUS OF COMPANY CAPITAL STOCK. The
Stockholder is the record and beneficial owner (or, if the Stockholder is a
trust or the estate of a deceased natural person, the legal owner) of the number
of shares of Company Capital Stock Schedule 1.01 sets forth opposite the
Stockholder's name, by each class, and by each series in each class, thereof,
free and clear of all Liens, except for the Liens that Schedule sets forth, all
of which will be released on or before the Closing Date.
Section 1.02 POWER OF THE STOCKHOLDER; APPROVAL OF THE
ACQUISITION. (a) The Stockholder has the full power, legal capacity and
authority to execute and deliver this Agreement and each other Transaction
Document to which the Stockholder is a party and to perform the Stockholder's
obligations in this Agreement and in all other Transaction Documents to which
the Stockholder is a party. This Agreement constitutes, and each such other
Transaction Document, when executed in the Stockholder's individual capacity and
delivered by the Stockholder, will constitute, the legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except as that enforceability may be (i) limited by any
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally or any applicable law that limits rights to indemnification and (ii)
subject to general principles of equity (regardless of whether that
enforceability is considered in a proceeding in equity or at law). If the
Stockholder is an Entity, the Stockholder has obtained, in accordance with all
applicable Governmental Requirements and its Charter Documents, all approvals
and the taking of all actions necessary for the authorization, execution,
delivery and performance by the Stockholder of this Agreement and the other
Transaction Documents to which the Stockholder is a party. If the Stockholder is
acting otherwise than in his individual capacity (whether as an executor or a
guardian or in any other fiduciary or representative capacity), all actions on
the part of the Stockholder and all other Persons (including any court)
necessary for the authorization, execution, delivery and performance by the
Stockholder of this Agreement and the other Transaction Documents to which the
Stockholder is a party have been duly taken.
(b) The Stockholder, acting in each capacity in which he is
entitled, by reason of the Company's Charter Documents or the Governmental
Requirements of the Company's Organization State or for any other reason, to
vote to approve or disapprove the consummation of the Acquisition, has voted all
the shares of Company Capital Stock owned by him and entitled to a vote or votes
on that matter, in any one or more of the manners prescribed or permitted by the
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<PAGE>
Company's Charter Documents or the Governmental Requirements of the Company's
Organization State, whichever are controlling, to approve this Agreement and the
consummation of the Acquisition and the other transactions contemplated hereby.
Section 1.03 NO CONFLICTS OR LITIGATION. The Stockholder's
execution, delivery and performance in accordance with their respective terms of
this Agreement and the other Transaction Documents to which the Stockholder is a
party do not and will not (i) violate or conflict with any Governmental
Requirement, (ii) breach or constitute a default under any agreement or
instrument to which the Stockholder is a party or by which the Stockholder or
any shares of Company Capital Stock the Stockholder owns is bound, (iii) result
in the creation or imposition of, or afford any Person the right to obtain, any
Lien upon any shares of Company Capital Stock the Stockholder owns (or upon any
revenues, income or profits of the Stockholder therefrom) or (iv) if the
Stockholder is an Entity, violate the Stockholder's Charter Documents. No
Litigation is pending or, to the knowledge of the Stockholder, threatened to
which the Stockholder is or may become a party which (i) questions or involves
the validity or enforceability of any of the Stockholder's obligations under any
Transaction Document or (ii) seeks (or reasonably may be expected to seek) (A)
to prevent or delay the consummation by the Stockholder of the transactions this
Agreement contemplates the Stockholder will consummate or (B) damages in
connection with any such consummation.
Section 1.04 NO BROKERS. Except as Schedule 1.04 sets forth, the
Stockholder has not, directly or indirectly, in connection with this Agreement
or the transactions contemplated hereby (i) employed any broker, finder or agent
or (ii) agreed to pay or incurred any obligation to pay any broker's or finder's
fee, any sales commission or any similar form of compensation.
Section 1.05 PREEMPTIVE AND OTHER RIGHTS; WAIVER; NO COMMITMENTS.
Except for the right of the Stockholder to receive shares of USC Common Stock as
a result of the Acquisition, the Stockholder either (i) does not own or
otherwise have any statutory or contractual preemptive or other right of any
kind (including any right of first offer or refusal) to acquire any shares of
Company Capital Stock or USC Common Stock or (ii) hereby irrevocably waives each
right of that type the Stockholder does own or otherwise has. The Stockholder
does not have any binding commitment to sell, exchange or otherwise dispose of
the USC Common Stock the Stockholder will receive as part of the Acquisition
Consideration, and the representation and warranty in this sentence is for the
benefit of each other Stockholder and each owner of each Other Founding Company.
Section 1.06 CONTROL OF RELATED BUSINESSES. Except as Schedule
1.06 sets forth, the Stockholder is not, alone or with one or more other
Persons, the controlling Affiliate of any Entity, business or trade (other than
the Acquired Business or any Entity the Acquired Business includes, if the
Stockholder is an Affiliate of any thereof) that (i) is engaged in any line of
business which is the same as or similar to any line of business in which the
Acquired Business or any Entity the Acquired Business includes is engaged or
(ii) is, or has within the three-year period ending on the date of this
Agreement, engaged in any transaction with any Entity the Acquired Business
includes, except for transactions in the ordinary course of business of that
Entity.
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<PAGE>
Section 1.07 ACCREDITED INVESTOR STATUS; SOPHISTICATION; REVIEW
OF PRIVATE PLACEMENT MEMORANDUM. The Stockholder (i) will be acquiring the
shares of USC Common Stock to be issued to him pursuant to Paragraph 2 solely
for his account, for investment purposes only and with no current intention or
plan to distribute, sell or otherwise dispose of any of those shares in
connection with any distribution and (ii) is not a party to any agreement or
other arrangement for the disposition of any shares of USC Common Stock other
than this Agreement and the Registration Rights Agreement. Schedule 1.07
correctly states (i) whether he is, or is not, an "accredited investor" as
defined in Securities Act Rule 501(a) and, if he is not such an investor, (ii)
the name and address of his "purchaser representative" (as defined in Securities
Act Rule 501(h)). The Stockholder (i) is able to bear the economic risk of an
investment in the USC Common Stock acquired pursuant to this Agreement, (ii) can
afford to sustain a total loss of that investment, (iii) has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the proposed investment in the USC Common Stock, (iv)
his purchaser representative, if any, has received and reviewed a copy of the
Private Placement Memorandum and had an adequate opportunity to ask questions
and receive answers from the officers of USC concerning any and all matters
relating to the transactions contemplated hereby and thereby, including the
background and experience of the current and proposed officers and directors of
USC, the plans for the business and operations of USC, the business, operations
and financial condition of the Other Founding Companies and any plans of USC for
additional acquisitions, and (v) or his purchaser representative, if any, has
asked all questions of the nature described in preceding clause (iv) and all
those questions have been answered to his satisfaction and the satisfaction of
his purchaser representative, if any.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent
and warrant to, and agree with, USC that all the following representations and
warranties in this Article II are as of the date of this Agreement, and will be,
as amended or supplemented pursuant to Section 4.07, on the Closing Date and
immediately prior to the Effective Time, true and correct:
Section 2.01 ORGANIZATION. Schedule 2.01 sets forth the
Organization State of each of the Company and the Company Subsidiaries. Each of
the Company and the Company Subsidiaries (i) is a corporation duly organized,
validly existing and in good standing under the laws of its Organization State,
(ii) has all requisite corporate power and authority under those laws and its
Charter Documents to own or lease and to operate its properties and to carry on
its business as now conducted and (iii) is duly qualified and in good standing
as a foreign corporation in all jurisdictions in which it owns or leases
property or in which the carrying on of its business as now conducted so
requires, except where the failure to be so qualified, singly or in the
aggregate, would not have a Material Adverse Effect.
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<PAGE>
Section 2.02 QUALIFICATION. Schedule 2.02 lists all the
jurisdictions in which each of the Company and the Company Subsidiaries is
authorized or qualified to own or lease and to operate its properties or to
carry on its business as now conducted, and neither the Company nor any Company
Subsidiary owns, leases or operates any properties, or carries on any business,
that is Material to the Acquired Business in any jurisdiction that Schedule does
not list.
Section 2.03 AUTHORIZATION; ENFORCEABILITY; ABSENCE OF CONFLICTS;
REQUIRED CONSENTS. (a) The execution, delivery and performance by the Company of
this Agreement and each other Transaction Document to which it is a party, and
the effectuation of the Acquisition and the other transactions contemplated
hereby and thereby, are within its corporate or other power under its Charter
Documents and the applicable Governmental Requirements of its Organization State
and have been duly authorized by all proceedings, including actions permitted to
be taken in lieu of proceedings, required under its Charter Documents and those
Governmental Requirements.
(b) This Agreement has been, and each of the other Transaction
Documents to which the Company is a party, when executed and delivered by the
parties thereto will have been, duly executed and delivered by the Company and
is, or when so executed and delivered will be, the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as that enforceability may be (i) limited by any applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally or any
applicable law that limits rights to indemnification and (ii) subject to general
principles of equity (regardless of whether that enforceability is considered in
a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by the Company of the Transaction Documents to which it
is a party have not and will not (i) violate, breach or constitute a default
under (A) the Charter Documents of any of the Company and the Company
Subsidiaries, (B) any Governmental Requirement applicable to any of the Company
and the Company Subsidiaries or (C) any Material Agreement of the Company
(except as Schedule 2.03 sets forth), (ii) result in the acceleration or
mandatory prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of any of the Company and the Company Subsidiaries or afford any
holder of any of that Indebtedness, or any beneficiary of any of those
Guaranties, the right to require any of the Company and the Company Subsidiaries
to redeem, purchase or otherwise acquire, reacquire or repay any of that
Indebtedness, or to perform any of those Guaranties (except as Schedule 2.03
sets forth), (iii) cause or result in the imposition of, or afford any Person
the right to obtain, any Lien upon any property or assets of any of the Company
and the Company Subsidiaries (or upon any revenues, income or profits of any of
the Company and the Company Subsidiaries therefrom) or (iv) except as Schedule
2.03 sets forth, result in the revocation, cancellation, suspension or material
modification, in any single case or in the aggregate, of any Governmental
Approval possessed by any of the Company and the Company Subsidiaries at the
date hereof and necessary for the ownership or lease or the operation of its
properties or the carrying on of its business as now conducted, including any
necessary Governmental Approval under each applicable Environmental Law and
Industry Law.
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(d) Except for (i) the filing of the Certificates of Merger, if
any, with the applicable Governmental Authorities , (ii) filings of the
Registration Statement under the Securities Act and the SEC order declaring the
Registration Statement effective under the Securities Act and (iii) as may be
required by the HSR Act or the applicable state securities or blue sky laws, no
Governmental Approvals are required to be obtained, and no reports or notices to
or filings with any Governmental Authority are required to be made, by any of
the Company and the Company Subsidiaries for the execution, delivery or
performance by the Company of the Transaction Documents to which it is a party,
the enforcement against the Company of its obligations thereunder or the
effectuation of the Acquisition and the other transactions contemplated thereby.
Section 2.04 CHARTER DOCUMENTS AND RECORDS; NO VIOLATION. Except
as Schedule 2.04 sets forth, the Company has caused true, complete and correct
copies of the Charter Documents, each as in effect on the date hereof, and the
minute books and similar corporate or other Entity records of each of the
Company and the Company Subsidiaries to be delivered to USC. No breach or
violation of any Charter Document of any of the Company and the Company
Subsidiaries has occurred and is continuing.
Section 2.05 NO DEFAULTS. Except as Schedule 2.05 sets forth, no
condition or state of facts exists, or, with the giving of notice or the lapse
of time or both, would exist, which (i) entitles any holder of any outstanding
Indebtedness, or any Guaranty not constituting Indebtedness, of any of the
Company and the Company Subsidiaries, or a representative of that holder, to
accelerate the maturity, or require a mandatory prepayment, of that Indebtedness
or Guaranty, or affords that holder or its representative, or any beneficiary of
that Guaranty, the right to require any of the Company and the Company
Subsidiaries to redeem, purchase or otherwise acquire, reacquire or repay any of
that Indebtedness, or to perform that Guaranty in whole or in part, (ii)
entitles any Person to obtain any Lien (other than a Permitted Lien) on any
properties or assets constituting any part of the Acquired Business (or upon any
revenues, income or profits of any of the Company and the Company Subsidiaries
therefrom) or (iii) constitutes a violation or breach of, or a default under,
any Material Agreement of the Company (including this Agreement) by any of the
Company and the Company Subsidiaries.
Section 2.06 COMPANY SUBSIDIARIES. Schedule 2.01 either (i) sets
forth the form of organization, legal name, each assumed name and Organization
State of each Company Subsidiary or (ii) correctly states no Entity is a Company
Subsidiary. Except as Schedule 2.06 sets forth, each Company Subsidiary is a
Wholly Owned Subsidiary. In the case of any Company Subsidiary that is not a
Wholly Owned Subsidiary, Schedule 2.06 sets forth, by each class and each series
within each class, (i) the number of outstanding shares (or other percentage
ownership interests) of Capital Stock of the Company Subsidiary, (ii) the
Company's aggregate direct and indirect ownership of those shares (or interests)
and (iii) the name and address of record and percentage ownership of those
shares (or interests) of each holder of record thereof other than the Company or
a Company Subsidiary. No Lien exists upon any outstanding share (or other
percentage ownership interests) of Capital Stock of any Company Subsidiary which
the Company directly or indirectly owns other than (i) the Liens, if any,
Schedule 2.06 describes, all of which will be released at or before the
Effective
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Time, and (ii) Permitted Liens. Except as Schedule 2.06 sets forth, the Company
does not own, of record or beneficially, directly or indirectly through any
Person, and does not control, directly or indirectly through any Person or
otherwise, any Capital Stock or Derivative Securities of any Entity other than a
Company Subsidiary.
Section 2.07 CONTROLLING AFFILIATES. Schedule 2.07 sets forth the
name of each Person who at the time the Acquisition was submitted for vote or
consent to the Stockholders, is, was or will be an Affiliate of the Company by
reason of that Person's control of the Company.
Section 2.08 CAPITAL STOCK OF THE COMPANY AND THE COMPANY
SUBSIDIARIES. Schedule 2.08 sets forth, by each class and by each series within
each class, the total number of shares of authorized Company Capital Stock and
the total number of such shares that have been issued and are now outstanding.
Except as Schedule 2.08 sets forth: (i) no shares of Company Capital Stock are
held by the Company or any Company Subsidiary as treasury shares; and (ii) no
outstanding options, warrants or rights to acquire Capital Stock of the Company
or any Company Subsidiary exist. All the issued and outstanding shares of
Capital Stock of each of the Company and the Company Subsidiaries (i) have been
duly authorized and validly issued in accordance with the applicable
Governmental Requirements of their issuer's Organization State and Charter
Documents and (ii) are fully paid and nonassessable. Neither the Company nor any
Company Subsidiary has issued or sold any shares of its outstanding Capital
Stock in breach or violation of (i) any applicable statutory or contractual
preemptive rights, or any other rights of any kind (including any rights of
first offer or refusal), of any Person or (ii) the terms of any of its
Derivative Securities which then were outstanding. No Person has, otherwise than
solely by reason of that Person's right, if any, to vote shares of the Capital
Stock of the Company or any Company Subsidiary it holds (to the extent those
shares afford the holder thereof any voting rights) any right to vote on any
matter with the holders of Capital Stock of the Company or any Company
Subsidiary.
Section 2.09 TRANSACTIONS IN CAPITAL STOCK. Except as Schedule
2.09 sets forth: (i) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire or reacquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof; and (ii) no transaction has been effected, and no action in
contemplation of the transactions described in this Agreement has been taken,
respecting the equity ownership of either the Company or any Company Subsidiary.
Section 2.10 NO BONUS SHARES. Except as Schedule 2.10 sets forth,
no outstanding share of Capital Stock of the Company was issued for less than
the fair market value thereof at the time of issuance or was issued in exchange
for any consideration other than cash.
Section 2.11 PREDECESSOR STATUS; ETC. Except as Schedule 2.11
sets forth, the Company has not been a Subsidiary or division of another Entity
during the past five years.
Section 2.12 RELATED PARTY AGREEMENTS. Schedule 2.12 sets forth
all Related Party Agreements in effect on the date hereof. Except for those
Related Party Agreements that Schedule
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specifically refers to as "Retained Related Party Agreements" (the "Retained
Related Party Agreements"), each Related Party Agreement in effect on the date
hereof will have been terminated, and all Indebtedness of each Related Person
and its Affiliates owed to any of the Company and the Company Subsidiaries will
have been paid in full, prior to the Effective Time, and no Related Party
Agreement then will exist. The terms and conditions of each of the Retained
Related Party Agreements are no less favorable to the Company than the Company
reasonably could have expected to obtain in an arm's-length transaction with a
Person other than an Affiliate of the Company, the rentals provided for in the
Retained Related Party Agreements constituting leases of property to the
Acquired Business (other than the leases, if any, that this Agreement defines as
a Facilities Lease Agreement, as to which no representation is made pursuant to
this Section 2.12) do not and will not exceed fair market rentals of the
properties being rented or leased under those Retained Related Party Agreements
and the payments provided to be made by the Company or any Company Subsidiary in
the Retained Related Party Agreements do not exceed the fair market value of the
goods or other property provided to or the services performed for the Acquired
Business.
Section 2.13 LITIGATION. Except as Schedule 2.13 sets forth, no
Litigation is pending or, to the knowledge of the Company or any Stockholder,
threatened to which the Company or any Company Subsidiary is or may become a
party.
Section 2.14 FINANCIAL STATEMENTS; DISCLOSURE. (a) FINANCIAL
STATEMENTS. (i) The Financial Statements (including in each case the related
schedules and notes) delivered to USC present fairly, in all material respects,
the financial position of the Acquired Business at the respective dates of the
balance sheets included therein and the results of operations, cash flows and
stockholders' or other owners' equity of the Acquired Business for the
respective periods set forth therein and have been prepared in accordance with
GAAP, except, with respect to any financial statements of the Acquired Business
delivered to USC pursuant to the provisions of Section 4.09, for the provision
of applicable footnotes and adjustments customarily made at year end. As of the
date of any balance sheet included in those Financial Statements, neither the
Company nor any Company Subsidiary then had any outstanding Indebtedness to any
Person or any liabilities of any kind (including contingent obligations, tax
assessments or unusual forward or long-term commitments), or any unrealized or
anticipated loss, which in the aggregate then were Material to the Acquired
Business and required to be reflected in those Financial Statements or in the
notes related thereto in accordance with GAAP which were not so reflected.
(ii) Since the Current Balance Sheet Date, no change has occurred
in the business, operations, properties or assets, liabilities, condition
(financial or other) or results of operations of the Acquired Business that
could reasonably be expected, either alone or together with all other such
changes, to have a Material Adverse Effect.
(b) DISCLOSURE. (i) As of the date hereof, all Information that
has been made available to USC by or on behalf of the Company prior to the date
of this Agreement in connection with the transactions contemplated hereby (other
than financial budgets and projections) is, taken together, true and correct in
all material respects and does not contain any untrue statement of a
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material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which those statements were made.
(ii) All Information that is furnished to USC after the date
hereof from time to time prior to the Effective Time by or on behalf of the
Company in connection with or pursuant to this Agreement, any other Transaction
Document or the transactions contemplated hereby or thereby (other than
financial budgets and projections) will be, when made available and taken
together, true and correct in all material respects and will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not materially misleading in
light of the circumstances under which those statements are made.
(iii) Schedule 2.14 sets forth a complete list of all financial
budgets and projections respecting the Acquired Business that, as of the date of
this Agreement, the Company, or any of its Representatives have made available
to USC in connection with this Agreement or the transactions contemplated
hereby. All those financial budgets and projections and any other financial
budgets or projections respecting the Acquired Business that the Company or any
of its Representatives hereafter provide to USC in writing prior to the
Effective Time pursuant to or in connection with this Agreement, any other
Transaction Document or the transactions contemplated hereby or thereby have
been and will be prepared and furnished to USC in good faith and were and will
be based on facts and assumptions that are believed by the management of the
Company to be reasonable in light of the then current and foreseeable business
conditions of the Company and the Company Subsidiaries and represented and will
represent that management's good faith estimate of the consolidated projected
financial performance of the Company and the Company Subsidiaries based on the
information available to the Responsible Officer at the time so furnished.
Section 2.15 COMPLIANCE WITH LAWS. (a) Except as Schedule 2.15
sets forth: (i) each of the Company and the Company Subsidiaries possesses, or,
if required by the applicable Environmental Laws and Industry Laws (including
those relating to hazardous air pollutants or Solid Wastes, Hazardous Wastes or
Hazardous Substances), one or more of its employees as required by those
Environmental Laws and Industry Laws possesses, all necessary certifications and
licenses and similar Governmental Approvals required for the conduct of its
business; and (ii) each of the Company and the Company Subsidiaries and such one
or more of its employees are in compliance in all material respects with the
terms and conditions of all Governmental Approvals necessary for the ownership
or lease and the operation of its properties (including all the facilities and
sites it owns or holds under any lease) and the carrying on of its business as
now conducted. The Company has provided USC with a complete written list of all
the Governmental Approvals so possessed. All the Governmental Approvals so
listed are valid and in full force and effect, and, except as Schedule 2.15 sets
forth, neither the Company nor any Company Subsidiary has received, nor to the
knowledge of any Stockholder has any employee of either received, any notice
from any Governmental Authority of its intention to cancel, terminate or not
renew any of those Governmental Approvals.
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(b) Except as Schedule 2.15 sets forth, each of the Company and
the Company Subsidiaries: (i) has been and continues to be in compliance in all
material respects with all Governmental Requirements applicable to it or any of
its presently or previously owned or operated properties (including all the
facilities and sites now or previously owned or held by it under any lease),
businesses or operations, including all applicable Governmental Requirements
under ERISA, Environmental Laws and Industry Laws; and (ii)(A) neither the
Company nor any Company Subsidiary has received, nor to the knowledge of the
Company has any employee of either received, any notice from any Governmental
Authority which asserts, or raises the possibility of assertion of, any
noncompliance with any of those Governmental Requirements and, to the knowledge
of each of the Company, the Company Subsidiaries and the Stockholders, (B) no
condition or state of facts exists which would provide a valid basis for any
such assertion.
Section 2.16 CERTAIN ENVIRONMENTAL MATTERS. Except as Schedule
2.16 sets forth: (i) the Company and each Company Subsidiary have complied, and
remain in compliance, with the provisions of all Environmental Laws applicable
to any of them or any of their respective presently owned or operated
facilities, sites or other properties, businesses and operations and which
relate to the reporting by the Company and each Company Subsidiary of all sites
presently owned or operated by any of them where Solid Wastes, Hazardous Wastes
or Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (ii) no release (as defined in those Environmental Laws) at, from, in
or on any site owned or operated by the Company or any Company Subsidiary has
occurred which, if all relevant facts were known to the relevant Governmental
Authorities, reasonably could be expected to require remediation to avoid deed
record notices, restrictions, liabilities or other consequences that would not
be applicable if that release had not occurred; (iii) neither the Company nor
any Company Subsidiary (or any agent or contractor of either) has transported or
arranged for the transportation of any Solid Wastes, Hazardous Wastes or
Hazardous Substances to, or disposed or arranged for the disposition of any
Solid Wastes, Hazardous Wastes or Hazardous Substances at, any off-site location
that could lead to any claim against the Company, any Company Subsidiary, the
Acquired Business, any Other Founding Company or any of its Subsidiaries, USC or
any Subsidiary of USC, as a potentially responsible party or otherwise, for any
clean-up costs, remedial work, damage to natural resources, personal injury or
property damage, including any claim under CERCLA; and (iv) no storage tanks
exist on or under any of the properties owned or operated by the Company or any
Company Subsidiary from which any Solid Wastes, Hazardous Wastes or Hazardous
Substances have been released into the surrounding environment. The Company has
provided USC with copies (or, if not available, accurate written summaries) of
all environmental investigations, studies, audits, reviews and other analyses
conducted by or on behalf, or which otherwise are in the possession, of the
Company or any Company Subsidiary respecting any facility, site or other
property the Company or any Company Subsidiary presently owns or operates.
Section 2.17 LIABILITIES AND OBLIGATIONS. Schedule 2.17 lists or
describes all present liabilities, of every kind, character and description and
whether accrued, absolute, fixed, contingent or otherwise, of each of the
Company and the Company Subsidiaries which (i) exceed or reasonably could be
expected to exceed $10,000 and (ii) (A) had been incurred prior to the Current
Balance
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Sheet Date, but are not reflected on the Current Balance Sheet, or (B) were
incurred after the Current Balance Sheet Date otherwise than in the ordinary
course of business, and consistent with the past practice, of that Entity. That
Schedule also lists and describes, for each of the Company and the Company
Subsidiaries: (i) each of its outstanding secured and unsecured Guaranties not
constituting its Indebtedness and, for each of those Guaranties, whether any
Stockholder or Related Person or Affiliate of any Stockholder is a Person whose
obligation is covered by that Guaranty, and (ii ) for each of the items listed
under clause (i) of this sentence, (A) if that item is secured by any property
or asset of the Company or any Company Subsidiary, the nature of that security,
and (B) if that item is covered in whole or in part by a Guaranty of any
Stockholder or any Related Person or Affiliate of any Stockholder, the name of
the guarantor.
Section 2.18 RECEIVABLES. Except as Schedule 2.18 sets forth, all
the accounts and notes or other advances receivable of the Company and the
Company Subsidiaries reflected on the Current Balance Sheet were collected, or
are valid and enforceable claims arising in the ordinary course of business and,
in the good faith belief of the Company's management, collectible, in the
aggregate respective amounts so reflected, net of the reserves, if any,
reflected in the Current Balance Sheet.
Section 2.19 REAL PROPERTIES. (a) Schedule 2.19 lists and
correctly describes in all material respects: (i) all real properties owned by
any of the Company and the Company Subsidiaries and, for each of those
properties, the address thereof, the type and approximate square footage of each
structure located thereon and the use thereof in the business of the Company and
the Company Subsidiaries; (ii) all real properties of which any of the Company
and the Company Subsidiaries is the lessee and, for each of those properties,
the address thereof, the type and approximate square footage of each structure
located thereon the Company or a Company Subsidiary is leasing and the
expiration date of its lease and the use thereof in the business of the Company
and the Company Subsidiaries; and (iii) in the case of each real property listed
as being owned, whether it was previously owned, and in the case of each real
property listed as being leased, whether it is presently owned, by any
Stockholder or any of his Related Persons or Affiliates (other than the Company
and the Company Subsidiaries, any other Entity included in the Acquired
Business, if the Stockholder is an Affiliate of the Company or any other Entity
included in the Acquired Business).
(b) The Company has provided USC with true, complete and correct
copies of all title reports and insurance policies the Company or its
Stockholders possess relating to any of the real properties Schedule 2.19 lists
as being owned or leased. Except as that Schedule sets forth, and except for
Permitted Liens, the Company or a Company Subsidiary owns in fee, and has good,
valid and marketable title to, free and clear of all Liens, each property that
Schedule lists as being owned.
(c) The Company has provided USC with true, correct and complete
copies of all leases under which the Company or a Company Subsidiary is leasing
each of the properties Schedule 2.19 lists as being leased and, except as that
Schedule sets forth, (i) each of those leases is, to the knowledge of the
Company, valid and binding on the lessor party thereto and (ii) the lessee
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party thereto has not sublet any of the leased space to any Person other than
the Company, a Company Subsidiary or any other Entity included in the Acquired
Business.
(d) The fixed assets of each of the Company and the Company
Subsidiaries are affixed only to one or more of the real properties Schedule
2.19 lists and, except as that Schedule sets forth, are maintained in accordance
with ordinary industry practices and adequate for the purposes for which they
presently are being used or held for use, ordinary wear and tear excepted.
Section 2.20 OTHER TANGIBLE ASSETS. (a) Schedule 2.20 discloses
all leases, including capital leases, that are Material to the Company under
which the Company or a Company Subsidiary is leasing its property, plant and
equipment and other tangible assets other than real properties. Except as that
Schedule sets forth, (i) each of those leases is, to the knowledge of the
Company, valid and binding on the lessor party thereto and (ii) the lessee party
thereto has not sublet any of the leased property to any Person other than the
Company, a Company Subsidiary or any other Entity included in the Acquired
Business.
(b) Except as Schedule 2.20 sets forth, all the property, plant
and equipment of the Company and the Company Subsidiaries are in satisfactory
condition and in a commercially satisfactory state of repair given the use to
which they are put, ordinary wear and tear excepted, and adequate for the
purposes for which they presently are being used or held for use.
(c) In each case, free and clear of all Liens except for
Permitted Liens and as Schedule 2.20 sets forth, the Acquired Business has good
and valid title to, or holds under a lease valid and binding on the lessor party
thereto, all its tangible personal properties and assets that individually or in
the aggregate are Material to the Acquired Business.
Section 2.21 PROPRIETARY RIGHTS. Except as Schedule 2.21 sets
forth, each of the Company and the Company Subsidiaries owns, free and clear of
all Liens other than Permitted Liens, or has the legal right to use, all
Proprietary Rights that are necessary to the conduct of its business as now
conducted, in each case free of any claims or infringements known to the Company
or any Stockholder. Schedule 2.21 (i) lists those Proprietary Rights and (ii)
indicates those owned by the Company or any Company Subsidiary and, for those
not listed as so owned, the agreement or other arrangement pursuant to which
they are possessed. Except as that Schedule sets forth, (i) no consent of any
Person will be required for the use of any of these Proprietary Rights by USC or
any Subsidiary of USC following the Effective Time and (ii) no governmental
registration of any of these Proprietary Rights has lapsed or expired or been
canceled, abandoned, opposed or the subject of any reexamination request.
Section 2.22 RELATIONS WITH GOVERNMENTS, ETC. Neither the Company
nor any Company Subsidiary has made, offered or agreed to offer anything of
value to any governmental official, political party or candidate for government
office which would cause the Company or any Company Subsidiary to be in
violation of the Foreign Corrupt Practices Act of 1977 or any Governmental
Requirement to a similar effect.
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Section 2.23 COMMITMENTS. (a) Schedule 2.23 sets forth a complete
list of each of the following (each a "Company Commitment") to which any of the
Company and the Company Subsidiaries is a party or by which any of its
properties is bound and which presently remains executory in whole or in any
part:
(i) each partnership, joint venture or cost sharing agreement;
(ii) each guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iii) each instrument, agreement or other obligation evidencing
or relating to Indebtedness of any of the Company and the Company
Subsidiaries involving more than $10,000;
(iv) each contract to purchase or sell real property;
(v) each agreement with sales or commission agents, public
relations or advertising agencies, accountants or attorneys (other than
in connection with this Agreement and the transactions contemplated
hereby) involving total payments within any 12-month period in excess of
$10,000 and which is not terminable without penalty and on no more than
30 days' prior notice;
(vi) each agreement for the acquisition or provision of services,
supplies, equipment, inventory, fixtures or other property involving
more than $25,000 in the aggregate;
(vii) each Related Party Agreement involving total payments
within any 12-month period in excess of $10,000 and which is not
terminable without penalty on no more than 30 days' prior notice;
(viii) each contract containing any noncompetition agreement,
covenant or undertaking;
(ix) each agreement providing for the purchase from a supplier of
all or substantially all the requirements of the Company or any Company
Subsidiary of a particular product or service; or
(x) each other agreement or commitment not made in the ordinary
course of business which is Material to the Acquired Business.
True, correct and complete copies of all written Company Commitments, and true,
correct and complete written descriptions of all oral Company Commitments, have
heretofore been delivered to USC Except as Schedule 2.23 sets forth: (i) there
are no existing or asserted defaults, events of
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default or events, occurrences, acts or omissions that, with the giving of
notice or lapse of time or both, would constitute defaults or events of default
under any Company Commitment Material to the Acquired Business by any of the
Company and the Company Subsidiaries or, to the knowledge of the Company, any
other party thereto; and (ii) no penalties have been incurred, nor are
amendments pending, with respect to the Company Commitments Material to the
Acquired Business. The Company Commitments are in full force and effect and are
valid and enforceable obligations of the Company or the Company Subsidiaries
parties thereto and, to the knowledge of the Company, the other parties thereto
in accordance with their respective terms, except as that enforceability may be
(i) limited by any applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and
(ii) subject to general principles of equity (regardless of whether that
enforceability is considered in a proceeding in equity or at law), and no
defenses, off-sets or counterclaims have been asserted or, to the knowledge of
the Company, may be made by any party thereto (other than by the Company or a
Company Subsidiary), nor has the Company or a Company Subsidiary, as the case
may be, waived any rights thereunder, except as Schedule 2.23 sets forth.
(b) Except as Schedule 2.23 sets forth or as contemplated hereby
or by any other Transaction Document to which the Company or any Company
Subsidiary or Stockholder is a party, neither the Company nor any Company
Subsidiary or Stockholder has knowledge of any plan or intention of any other
party to any Company Commitment that is Material to the Acquired Business to
exercise any right to cancel or terminate that Company Commitment, and neither
the Company nor that Company Subsidiary or any Stockholder has knowledge of any
condition or state of facts which would justify the exercise of such a right.
Section 2.24 CAPITAL EXPENDITURES. Schedule 2.24 sets forth the
total amount of capital expenditures currently budgeted to be incurred by the
Acquired Business in excess of $25,000 in the aggregate during the balance of
the Company's current fiscal year.
Section 2.25 INVENTORIES. Except as Schedule 2.25 sets forth: (i)
all inventories, net of reserves determined in accordance with GAAP, of the
Acquired Business which are classified as such on the Current Balance Sheet are,
to the knowledge of the Company, merchantable and salable or usable in the
ordinary course of business of the Acquired Business; and (ii) the Acquired
Business does not depend on any single vendor for its inventories the loss of
which could have a Material Adverse Effect or during the past five years has
sustained a difficulty Material to the Acquired Business in obtaining its
inventories.
Section 2.26 INSURANCE. Except as Schedule 2.26 sets forth: (i)
the Company has provided USC with: (A) a list as of the Current Balance Sheet
Date of all insurance policies then carried by each of the Company and the
Company Subsidiaries; (B) a list of all insurance loss runs and worker's
compensation claims received for the most recently ended three policy years; and
(C) true, complete and correct copies of all insurance policies carried by each
of the Company and the Company Subsidiaries which are in effect, all of which
(1) have been issued by insurers of recognized responsibility and (2) currently
are, and will remain without interruption through the
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Closing Date, in full force and effect; (ii) no insurance carried by the Company
or any Company Subsidiary has been canceled by the insurer during the past five
years, and neither the Company nor any Company Subsidiary has ever been denied
coverage; and (iii) neither the Company nor any Company Subsidiary or
Stockholder has received any notice or other communication from any issuer of
any such insurance policy of any material increase in any deductibles, retained
amounts or the premiums payable thereunder, and, to the knowledge of the Company
or any Stockholder, no such increase in deductibles, retainages or premiums is
threatened.
Section 2.27 EMPLOYEE MATTERS. (a) CASH COMPENSATION. The Company
has provided USC with a complete written list of the names, titles and rates of
annual Cash Compensation, at the Current Balance Sheet Date (and the portions
thereof attributable to salary or the equivalent, fixed bonuses, discretionary
bonuses and other Cash Compensation, respectively) of the key employees
(including all employees who are officers or directors), nonemployee officers,
nonemployee directors and key consultants and independent contractors of each of
the Company and the Company Subsidiaries.
(b) EMPLOYMENT AGREEMENTS. Schedule 2.27 lists all Employment
Agreements remaining executory in whole or in part on the date hereof, and the
Company has provided USC with true, complete and correct copies of all those
Employment Agreements. Neither the Company nor any Company Subsidiary is a party
to any oral Employment Agreement, other than with respect to employment at-will
arrangements that are terminable by either party thereto without liability on
the part of either party thereto (except for earned but unpaid salaries or
wages).
(c) OTHER COMPENSATION PLANS. Schedule 2.27 lists all Other
Compensation Plans either remaining executory at the date hereof or to become
effective after the date hereof. The Company has provided USC with a true,
correct and complete copy of each of those Other Compensation Plans that is in
writing and an accurate written description of each of those Other Compensation
Plans that is not written. Except as Schedule 2.27 sets forth, each of the Other
Compensation Plans, including each that is a Welfare Plan, may be unilaterally
amended or terminated by the Company or any Company Subsidiary without liability
to any of them, except as to benefits accrued thereunder prior to that amendment
or termination.
(d) ERISA BENEFIT PLANS. Schedule 2.27 (i) lists (A) each ERISA
Pension Benefit Plan (1) the funding requirements of which (under Section 301 of
ERISA or Section 412 of the Code) are, or at any time during the six-year period
ending on the date hereof were, in whole or in part, the responsibility of the
Company or any Company Subsidiary or (2) respecting which the Company or any
Company Subsidiary is, or at any time during that period was, a "contributing
sponsor" or an "employer" as defined in Sections 4001(a)(13) and 3(5),
respectively, of ERISA (each plan described in this clause (A) being a "Company
ERISA Pension Plan"), (B) each other ERISA Pension Benefit Plan respecting which
an ERISA Affiliate is, or at any time during that period was, such a
"contributing sponsor" or "employer" (each plan described in this clause (B)
being an "ERISA Affiliate Pension Plan") and (C) each other ERISA Employee
Benefit Plan that is being, or at any time during that period was, sponsored,
maintained or contributed to by the Company or
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any Company Subsidiary (each plan described in this clause (C) and each Company
ERISA Pension Plan being a "Company ERISA Benefit Plan"), (ii) states the
termination date of each Company ERISA Benefit Plan and ERISA Affiliate Pension
Plan that has been terminated and (iii) identifies for each ERISA Affiliate
Pension Plan the relevant ERISA Affiliates. The Company has provided USC with
true, complete and correct copies of (i) each Company ERISA Benefit Plan and
ERISA Affiliate Pension Plan, (ii) each trust agreement related thereto (if any)
and (iii) all amendments to those plans and trust agreements. Except as Schedule
2.27 sets forth, (i) neither the Company nor any Company Subsidiary is, or at
any time during the six-year period ended on the date hereof was, a member of
any ERISA Group that currently includes, or included when the Company or a
Company Subsidiary was a member, among its members any Person other than the
Company and the Company Subsidiaries and (ii) no Person is an ERISA Affiliate of
the Company or any Company Subsidiary (other than the Company or any Company
Subsidiary in the case of any other Company Subsidiary or any Company Subsidiary
in the case of the Company, if the Company and the Company Subsidiaries comprise
an ERISA Group).
(e) EMPLOYEE POLICIES AND PROCEDURES. Schedule 2.27 lists all
Employee Policies and Procedures. The Company has provided USC with a copy of
all written Employee Policies and Procedures and a written description of all
unwritten Employee Policies and Procedures that in the aggregate are Material to
the Company.
(f) UNWRITTEN AMENDMENTS. Except as Schedule 2.27 sets forth, no
unwritten amendments have been made, whether by oral communication, pattern of
conduct or otherwise, with respect to any of the Employment Agreements, Other
Compensation Plans or Employee Policies and Procedures which in the aggregate
are Material to the Company.
(g) LABOR COMPLIANCE. Except as Schedule 2.27 sets forth, each of
the Company and the Company Subsidiaries has been and is in compliance in all
material respects with all applicable Governmental Requirements respecting
employment and employment practices, terms and conditions of employment, wages
and hours and workplace health and safety in concrete mixing facilities and
other work areas, and neither the Company nor any Company Subsidiary is liable
for any arrears of wages or penalties for failure to comply with any of the
foregoing. Neither the Company nor any Company Subsidiary has engaged in any
unfair labor practice or discriminated on the basis of race, color, religion,
sex, national origin, age, disability or handicap in its employment conditions
or practices. Except as Schedule 2.27 sets forth, there are no (i) unfair labor
practice charges or complaints or racial, color, religious, sex, national
origin, age, disability or handicap discrimination charges or complaints pending
or, to the knowledge of the Company, threatened against the Company or any of
the Company Subsidiaries before any Governmental Authority (nor, to the
knowledge of the Company, does any valid basis therefor exist) or (ii) existing
or, to the knowledge of the Company, threatened labor strikes, disputes,
grievances or controversies affecting the Company or any of the Company
Subsidiaries (nor, to the knowledge of the Company, does any valid basis
therefor exist). Each of the Company and the Company Subsidiaries has complied,
and remains in compliance in all material respects with, all federal and state
Governmental
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Requirements mandating the provision of programs offering hazard recognition
training to its employees and employees of its customers.
(h) UNIONS. Except as Schedule 2.27 sets forth, (i) neither the
Company nor any Company Subsidiary or ERISA Affiliate has ever been a party to
any agreement with any union, labor organization or collective bargaining unit,
(ii) no employees of the Company and the Company Subsidiaries are represented by
any union, labor organization or collective bargaining unit and (iii) to the
knowledge of the Company, none of the employees of the Company and the Company
Subsidiaries has threatened to organize or join a union, labor organization or
collective bargaining unit with respect to their employment by the Company or
any Company Subsidiary.
(i) ALIENS. Except as Schedule 2.27 sets forth, all employees of
each of the Company and the Company Subsidiaries are, to the knowledge of the
Company (including any constructive knowledge the IRCA may deem the Company to
have), (i) citizens of the United States or (ii) not citizens of the United
States, but, in accordance with the IRCA and other applicable federal
Governmental Requirements, are either (A) immigrants authorized to work in the
United States or (B) nonimmigrants authorized to work in the United States for
the Company or a Company Subsidiary in their specific jobs. Except as Schedule
2.27 sets forth: neither the Company nor any Company Subsidiary has since
November 6, 1986 (i) hired (or by reason of any contract, subcontract or
exchange is considered for purposes of the IRCA to have hired) an alien in the
United States to perform labor or services with knowledge (as determined in
accordance with the IRCA) that the alien is an unauthorized alien with respect
to performing that labor or those services, (ii) continued the employment of any
employee hired after November 6, 1986 with knowledge (as determined in
accordance with the IRCA) that the employee is or has become an unauthorized
alien with respect to that employment or (iii) directly or indirectly in
violation of the IRCA required any individual it has hired to post a bond or
security or provide any other financial assurance to it against any potential
liability under the IRCA as a result of that hire. The Company has provided USC
with a true, complete list of all current alien employees of the Company who (i)
are authorized to work in the United States as immigrants or (ii) hold H-1B,
H-2B or other nonimmigrant visas. The Company has provided USC with respect to
each current employee of the Company or any Company Subsidiary who has an H-1B
or H-2B visa, true, complete copies of the Department of Labor File and Public
Access File the Company or a Company Subsidiary has maintained with respect to
that employee. The Company also has provided USC with true, complete copies of
all Forms I-9 the Company and the Company Subsidiaries possess with respect to
their (i) current employees, (ii) former employees whose employment was
terminated within 12 months of the date hereof and who were employed for more
than 36 months and (iii) former employees whose employment was terminated within
36 months of the date hereof and who were employed for less than 36 months. The
Company also has provided USC with a list of all people employed by the Company
or Company Subsidiaries within the last 36 months and their hire dates and
termination dates (if any). Except as Schedule 2.27 sets forth, each of the
Company and the Company Subsidiaries has obtained, completed and maintained Form
I-9s in accordance with, and has otherwise complied with the record-keeping
requirements of, the IRCA.
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(j) CHANGE OF CONTROL BENEFITS. Except as Schedule 2.27 sets
forth, neither the Company nor any of the Company Subsidiaries is a party to any
agreement, or has established any plan, policy, practice or program, requiring
it to make a payment or provide any other form of compensation or benefit or
vesting rights to any person performing services for the Company or any of the
Company Subsidiaries which would not be payable or provided in the absence of
this Agreement or the consummation of the transactions this Agreement
contemplates, including any parachute payment under Section 280G of the Code.
(k) RETIREES. Except as Schedule 2.27 sets forth, neither the
Company nor any of the Company Subsidiaries has any obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired except
as the continuation of coverage provisions of Section 4980B of the Code and the
applicable parallel provisions of ERISA may require.
Section 2.28 COMPLIANCE WITH ERISA. (a) COMPLIANCE. Each of the
Company ERISA Benefit Plans and Other Compensation Plans (each, a "Plan") (i) is
in substantial compliance with all applicable provisions of ERISA, as well as
with all other applicable Governmental Requirements, and (ii) has been
administered, operated and managed in accordance with its governing documents.
(b) QUALIFICATION. All Plans that are intended to qualify under
Section 401(a) of the Code (the "Qualified Plans") are so qualified and have
been determined by the IRS to be so qualified (or application for determination
letters have been timely submitted to the IRS). The Company has provided USC
with true, complete and correct copies of the current plan determination
letters, most recent actuarial valuation reports, if any, most recent Form 5500,
or, as applicable, Form 5500-C/R, filed with respect to each such Qualified Plan
and most recent trustee or custodian report. To the extent that any Qualified
Plans have not been amended to comply with applicable Governmental Requirements,
the remedial amendment period permitting retroactive amendment of these
Qualified Plans has not expired and will not expire within 120 days after the
Effective Time. All reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including annual reports, summary annual reports, actuarial reports, PBGC-1
Forms, audits or Returns) have been timely filed or distributed, except for any
failures to timely file or distribute such reports and other documents as would
not, singly or in the aggregate, result in a material liability for any Tax.
(c) NO PROHIBITED TRANSACTIONS. None of the Stockholders, any
Plan or the Company or any Company Subsidiary has engaged in any Prohibited
Transaction. No Plan has incurred an accumulated funding deficiency, as defined
in Section 412(a) of the Code and Section 302(a) of ERISA, and no circumstances
exist as a result of which the Company or any Company Subsidiary could have any
direct or indirect material liability whatsoever (including being subject to any
statutory Lien to secure payment of any such liability), to the PBGC under Title
IV of ERISA or to the IRS for any excise tax or penalty with respect to any Plan
now or hereafter maintained or contributed to by the Company or any of its ERISA
Affiliates. Further:
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(i) there have been no terminations, partial terminations or
discontinuances of contributions to any Qualified Plan without a
determination by the IRS that such action does not adversely affect the
tax-qualified status of that plan;
(ii) no Termination Event has occurred;
(iii) no Reportable Event has occurred with respect to any Plan
which was not properly reported;
(iv) the valuation of assets of any Qualified Plan, as of the
Effective Time, will equal or exceed the actuarial present value of all
"benefit liabilities" (within the meaning of Section 4001(a)(16) of
ERISA) under that plan in accordance with the assumptions the
regulations of the PBGC governing the funding of terminated defined
benefit plans contain;
(v) with respect to Plans qualifying as "group health plans"
under Section 4980B of the Code or Section 607(l) or 609 of ERISA
(relating to the benefit continuation rights imposed by "COBRA" or
qualified medical child support orders), the Company, each Company
Subsidiary and each Stockholder have complied (and at the Effective Time
will have complied) in all material respects with all reporting,
disclosure, notice, election and other benefit continuation and coverage
requirements imposed thereunder as and when applicable to those plans,
and neither the Company nor any Company Subsidiary has incurred (or will
incur) any direct or indirect liability or is (or will be) subject to
any loss, assessment, excise tax penalty, loss of federal income tax
deduction or other sanction, arising on account of or in respect of any
direct or indirect failure by the Company, any Company Subsidiary or any
Stockholder, at any time prior to the Effective Time, to comply with any
such federal or state benefit continuation or coverage requirement,
which is capable of being assessed or asserted before or after the
Effective Time directly or indirectly against the Company, any Company
Subsidiary, any Stockholder, USC or any Subsidiary of USC with respect
to any of those group health plans;
(vi) the Financial Statements as of the Current Balance Sheet
Date reflect the approximate total pension, medical and other benefit
liability for all Plans, and no material funding changes or
irregularities are reflected therein which would cause those Financial
Statements to be not representative of prior periods; and
(vii) neither the Company nor any Company Subsidiary has incurred
liability under Section 4062 of ERISA.
(d) MULTIEMPLOYER PLANS. Except as Schedule 2.28 sets forth,
neither the Company nor any Company Subsidiary, and no ERISA Affiliate of any of
them, is, or at any time during the six-year period ended on the date hereof
was, obligated to contribute to a Multiemployer Plan. Neither the Company nor
any Company Subsidiary, and no ERISA Affiliate of any of them, has made a
complete or partial withdrawal from a Multiemployer Plan so as to incur
withdrawal
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liability as defined in Section 4201 of ERISA. Schedule 2.28 states for each
Multiemployer Plan it lists or should list the Company's best estimate of the
amount of withdrawal liability that would be incurred if the Company and each of
the its ERISA Affiliates were to make a complete withdrawal from that
Multiemployer Plan as of the Closing Date. Except as that Schedule sets forth,
the aggregate amount of that withdrawal liability if the Company and each of its
ERISA Affiliates were to make a complete withdrawal from each such Multiemployer
Plan would not exceed $25,000.
(e) CLAIMS AND LITIGATION. Except as Schedule 2.28 sets forth, no
Litigation or claims (other than routine claims for benefits) are pending or, to
the knowledge of the Company, threatened against, or with respect to, any of the
Plans or with respect to any fiduciary, administrator, party-in-interest or
sponsor thereof (in their capacities as such).
(f) EXCISE TAXES, DAMAGES AND PENALTIES. No act, omission or
transaction has occurred which would result in the imposition on the Company or
any Company Subsidiary with respect to any Plan of (i) a material breach of
fiduciary duty liability damages under Section 409 of ERISA, (ii) a material
civil penalty assessed pursuant to subsection (c), (i) or (l) of Section 502 of
ERISA or (iii) any material excise tax under applicable provisions of the Code.
(g) WELFARE TRUSTS. Any trust funding a Plan, which is intended
to be exempt from federal income taxation pursuant to Section 501(c)(9) of the
Code, satisfies the requirements of that Section and has received a favorable
determination letter from the IRS regarding that exempt status and has not,
since receipt of the most recent favorable determination letter, been amended or
operated in a way that would adversely affect that exempt status.
Section 2.29 TAXES. (a) Each of the following representations and
warranties in this Section 2.29 is qualified to the extent Schedule 2.29 sets
forth.
(b) All Returns required to be filed with respect to any Tax for
which any of the Company and the Company Subsidiaries is liable have been duly
and timely filed with the appropriate Taxing Authority, each such Return is
true, correct and complete in all respects Material to the Acquired Business
(and, in the case of a Return filed by a Company Subsidiary, the Company
Subsidiary), each Tax shown to be payable on each such Return has been paid,
each Tax payable by the Company or a Company Subsidiary by assessment has been
timely paid in the amount assessed and adequate reserves have been established
on the consolidated books of the Acquired Business for all Taxes for which any
of the Company and the Company Subsidiaries is liable, but the payment of which
is not yet due. Neither the Company nor any Company Subsidiary is, or ever has
been, liable for any Tax payable by reason of the income or property of a Person
other than the Company or a Company Subsidiary. Each of the Company and the
Company Subsidiaries has timely filed true, correct and complete declarations of
estimated Tax in each jurisdiction in which any such declaration is required to
be filed by it. No Liens for Taxes exist upon the assets of the Company or any
Company Subsidiary except Liens for Taxes which are not yet due. Neither the
Company nor any Company Subsidiary is, or ever has been, subject to Tax in any
jurisdiction outside of the United
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States. No Litigation with respect to any Tax for which the Company or any
Company Subsidiary is asserted to be liable is pending or, to the knowledge of
the Company or any Stockholder, threatened and no basis which the Company or any
Stockholder believes to be valid exists on which any claim for any such Tax can
be asserted against the Company or any Company Subsidiary. No requests for
rulings or determinations in respect of any Taxes are pending between the
Company or any Company Subsidiary and any Taxing Authority. No extension of any
period during which any Tax may be assessed or collected and for which the
Company or any Company Subsidiary is or may be liable has been granted to any
Taxing Authority. Neither the Company nor any Company Subsidiary is or has been
a party to any tax allocation or sharing agreement. All amounts required to be
withheld by any of the Company and the Company Subsidiaries and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper Taxing Authority. The Company and each Company Subsidiary have made
all deposits required by law to be made with respect to employees' withholding
and other employment taxes.
(c) None of the Company, any Company Subsidiary or any
Stockholder is a "foreign person," as Section 1445(f)(3) of the Code refers to
that term.
(d) The Company has not filed a consent pursuant to Section
341(f) of the Code or any comparable provision of any other tax statute and has
not agreed to the application of Section 341(f)(2) of the Code or any comparable
provision of any other tax statute to any disposition of an asset. The Company
has not made, is not obligated to make and is not a party to any agreement that
could require it to make any payment that is not deductible under Section 280G
of the Code. No asset of the Acquired Business is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation or
amortization in respect of that asset below the allowance generally available to
an asset of its type. No accounting method changes of the Acquired Business
exist or are proposed or threatened which could give rise to an adjustment under
Section 481 of the Code. If the Company or any predecessor corporation at any
time has filed an election to be an S corporation, within the meaning of Section
1361(a)(1) of the Code or any predecessor provision or comparable provisions of
state laws, the Company and any such predecessor corporation have at all times
met all requirements for that election, and that election has at all times been
and is presently valid and in full force and effect.
Section 2.30 GOVERNMENT CONTRACTS. Except as Schedule 2.30 sets
forth, neither the Company nor any Company Subsidiary is a party to any
governmental contract subject to price redetermination or renegotiation.
Section 2.31 ABSENCE OF CHANGES. Since the Current Balance Sheet
Date, except as Schedule 2.31 sets forth, none of the following has occurred
with respect to the Company or any Company Subsidiary:
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(i) any circumstance, condition, event or state of facts (either
singly or in the aggregate), other than conditions generally affecting
the Industry, which has caused, is causing or will cause a Material
Adverse Effect;
(ii) any change in its authorized Capital Stock or in any of its
outstanding Capital Stock or Derivative Securities;
(iii) any Restricted Payment, except any declaration or payment
of dividends by any Company Subsidiary solely to the Company and any
Restricted Payment that Section 4.03 permits;
(iv) any increase in, or any commitment or promise to increase,
the rates of Cash Compensation as of the date hereof, or the amounts or
other benefits paid or payable under any Company ERISA Pension Plan or
Other Compensation Plan, except for ordinary and customary bonuses and
salary increases for employees (other than the Stockholders or their
Immediate Family Members) at the times and in the amounts consistent
with its past practice;
(v) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, that will have a
Material Adverse Effect following the Effective Time;
(vi) any distribution, sale or transfer of, or any Company
Commitment to distribute, sell or transfer, any of its assets or
properties of any kind which singly is or in the aggregate are Material
to the Acquired Business, other than distributions, sales or transfers
in the ordinary course of its business and consistent with its past
practices to Persons other than the Stockholders and their Immediate
Family Members and Affiliates;
(vii) any cancellation, or agreement to cancel, any Indebtedness,
obligation or other liability owing to it, including any Indebtedness,
obligation or other liability of any Stockholder or any Related Person
or Affiliate thereof, provided that it may negotiate and adjust bills in
the course of good faith disputes with customers in a manner consistent
with past practice, if all those adjustments are included in the
Supplemental Information provided USC pursuant to Section 4.07;
(viii) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of its
assets, property or rights or requiring consent of any Person to the
transfer and assignment of any such assets, property or rights;
(ix) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of its business consistent with its past
practices;
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(x) any waiver of any of its rights or claims that singly is or
in the aggregate are Material to the Acquired Business;
(xi) any transaction by it outside the ordinary course of its
business or not consistent with its past practices;
(xii) any incurrence by it of any Indebtedness (other than
Indebtedness, if any, that Section 4.03 permits to be paid as Restricted
Payments) or any Guaranty not constituting its Indebtedness, or any
Company Commitment to incur any Indebtedness or any such Guaranty;
(xiii) any investment in the Capital Stock, Derivative Securities
or Indebtedness of any Person other than a Permitted Investment;
(xiv) except in accordance with the consolidated capital
expenditure budget of the Acquired Business for the Company's current
fiscal year, any capital expenditure or series of related capital
expenditures by the Acquired Business in excess of $25,000, or
commitments by the Acquired Business to make capital expenditures
totaling in excess of $25,000;
(xv) any prepayment of any Indebtedness, obligation or other
liability owing by it to any Person which this Agreement contemplates
the Stockholders, or any one or more of them, will assume prior to the
Effective Time;
(xvi) any change in the terms of payment by its customers for any
services it performs or products it sells the effect of which is to
enable the Acquired Business to recognize revenues in its statement of
operations for any period ending on or before the date of the Final
Balance Sheet which, but for that change, the Acquired Business would
not so recognize before a period beginning after the date of the Final
Balance Sheet; or
(xvii) any cancellation or termination of a Material Agreement of
the Acquired Business.
Section 2.32 BANK RELATIONS; POWERS OF ATTORNEY. Schedule 2.32
sets forth:
(i) the name of each financial institution in which any Entity
the Acquired Business includes has borrowing or investment arrangements,
deposit or checking accounts or safe deposit boxes;
(ii) the types of those arrangements and accounts, including, as
applicable, names in which accounts or boxes are held, the account or
box numbers and the name of each Person authorized to draw thereon or
have access thereto; and
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(iii) the name of each Person holding a general or special power
of attorney from any Entity the Acquired Business includes and a
description of the terms of each such power.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF USC
USC represents and warrants to, and agrees with, the Company and
each Stockholder that all the following representations and warranties in this
Article III are as of the date of this Agreement, and will be on the Closing
Date and immediately prior to the Effective Time, true and correct:
Section 3.01 ORGANIZATION; POWER. Each of USC and USC Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and each of USC and USC Sub has all requisite
corporate power and authority under the laws of the State of Delaware and its
Charter Documents to own or lease and to operate its properties presently and
following the Effective Time and to carry on its business as now conducted and
as proposed to be conducted following the Effective Time.
Section 3.02 AUTHORIZATION; ENFORCEABILITY; ABSENCE OF CONFLICTS;
REQUIRED CONSENTS. (a) The execution, delivery and performance by each of USC
and USC Sub of this Agreement and each other Transaction Document to which it is
a party, and the effectuation of the Acquisition and the other transactions
contemplated hereby and thereby, are within its corporate power under its
Charter Documents and the applicable Governmental Requirements of the State of
Delaware and have been duly authorized by all proceedings, including actions
permitted to be taken in lieu of proceedings, required under its Charter
Documents and the applicable Governmental Requirements of the State of Delaware.
(b) This Agreement has been, and each of the other Transaction
Documents to which either of USC or USC Sub is a party, when executed and
delivered by the parties thereto, will have been, duly executed and delivered by
it and is, or when so executed and delivered will be, its legal, valid and
binding obligation, enforceable against it in accordance with its terms, except
as that enforceability may be (i) limited by any applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally or any applicable law
that limits rights to indemnification and (ii) subject to general principles of
equity (regardless of whether that enforceability is considered in a proceeding
in equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by each of USC and USC Sub of the Transaction Documents
to which it is a party have not and will not (i) violate, breach or constitute a
default under (A) the Charter Documents of USC or USC Sub, (B) any Governmental
Requirement applicable to USC or USC Sub or (C) any Material Agreement of USC or
USC Sub, (ii) result in the acceleration or mandatory prepayment of any
Indebtedness, or any Guaranty not constituting Indebtedness, of USC or USC Sub
or afford any
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holder of any of that Indebtedness, or any beneficiary of any of those
Guaranties, the right to require USC or USC Sub to redeem, purchase or otherwise
acquire, reacquire or repay any of that Indebtedness, or to perform any of those
Guaranties, (iii) cause or result in the imposition of, or afford any Person the
right to obtain, any Lien upon any property or assets of USC or USC Sub (or upon
any revenues, income or profits of either USC or USC Sub therefrom), other than
(A) Liens that may secure Indebtedness of USC to its commercial lenders and (B)
negative pledge covenants of USC respecting its assets, or (iv) result in the
revocation, cancellation, suspension or material modification, in any single
case or in the aggregate, of any Governmental Approval possessed by USC or USC
Sub at the date hereof and necessary for the ownership or lease and the
operation of its properties or the carrying on of its business as now conducted,
including any necessary Governmental Approval under each applicable
Environmental Law and Industry Law.
(d) Except for (i) the filing of the Certificates of Merger, if
any, with the applicable Governmental Authorities , (ii) filings of the
Registration Statement under the Securities Act and the SEC order declaring the
Registration Statement effective under the Securities Act and (iii) as may be
required by the HSR Act or the applicable state securities or blue sky laws, no
Governmental Approvals are required to be obtained, and no reports or notices to
or filings with any Governmental Authority are required to be made, by USC or
USC Sub for the execution, delivery or performance by USC or USC Sub of the
Transaction Documents to which it is a party, the enforcement against USC or USC
Sub, as the case may be, of its obligations thereunder or the effectuation of
the Acquisition and the other transactions contemplated thereby.
Section 3.03 CHARTER DOCUMENTS. USC has delivered to the Company
true, complete and correct copies of the Charter Documents of USC No breach or
violation of any Charter Document of USC has occurred and is continuing.
Section 3.04 CAPITAL STOCK OF USC AND USC SUB. (a) Immediately
prior to the Effective Time, (i) the authorized Capital Stock of USC will be
comprised of (A) 40,000,000 shares of USC Common Stock, (B) one share of class A
stock, par value $.001 per share, and (C) 5,000,000 shares of preferred stock,
par value $.001 per share, (ii) before giving effect to the Merger and the
merger or other acquisition transactions the Other Agreements contemplate, (A)
the number of shares of USC Common Stock then issued and outstanding will be as
set forth in the Registration Statement when it becomes effective under the
Securities Act, (B) no shares of the USC preferred stock then will be issued or
outstanding and (C) USC will have reserved for issuance pursuant to compensation
plans or the exercise of Derivative Securities the number of shares of USC
Common Stock set forth in the Registration Statement when it becomes effective
under the Securities Act.
(b) The authorized Capital Stock of USC Sub is comprised of 1,000
shares of USC Sub Common Stock, all of which shares are issued, outstanding and
owned, of record and beneficially, by USC free and clear of all Liens, except
for any liens USC may grant in favor of its lenders in connection with its
financing arrangements. No Derivative Securities of USC Sub exist.
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(c) All shares of USC Common Stock and USC Sub Common Stock
outstanding immediately prior to the Effective Time, and all shares of USC
Common Stock to be issued pursuant to Paragraph 2, when issued, (i) will have
been duly authorized and validly issued in accordance with the general
corporation laws of the State of Delaware and the issuer's Charter Documents and
(ii) will be fully paid and nonassessable. None of the shares of USC Common
Stock to be issued pursuant to Paragraph 2 will, when issued, have been issued
in breach or violation of (i) any applicable statutory or contractual preemptive
rights, or any other rights of any kind (including any rights of first offer or
refusal), of any Person or (ii) the terms of any of its Derivative Securities
then outstanding.
Section 3.05 SUBSIDIARIES. Immediately prior to the Closing Date,
(i) USC will have no Subsidiaries other than those Exhibit 21 to the
Registration Statement lists, (ii) USC Sub will have no Subsidiaries and (iii)
neither USC nor USC Sub will own, of record or beneficially, directly or
indirectly through any Person or otherwise (except pursuant hereto or to the
Other Agreements), any Capital Stock or Derivative Securities of any Entity not
described in this Section 3.05 as a Subsidiary of USC (in the case of USC) or
any Entity (in the case of USC Sub).
Section 3.06 COMPLIANCE WITH LAWS; NO LITIGATION. Each of USC and
USC Sub is in compliance with all Governmental Requirements applicable to it,
and no Litigation is pending or, to the knowledge of USC, threatened to which
USC or USC Sub is or may become a party which (i) questions or involves the
validity or enforceability of any obligation of USC or USC Sub under any
Transaction Document, (ii) seeks (or reasonably may be expected to seek) (A) to
prevent or delay consummation by USC or USC Sub of the transactions contemplated
by this Agreement to be consummated by USC or USC Sub, as the case may be, or
(B) damages from USC or USC Sub in connection with any such consummation.
Section 3.07 CONDUCT OF OPERATIONS TO DATE; ABSENCE OF
UNDISCLOSED LIABILITIES. Except for its activities in connection with the
proposed acquisitions of the Founding Companies and other acquisition candidates
and the IPO, USC has conducted no significant operations during the period from
its inception to the date of this Agreement, and, except for expenses it has
incurred in connection with those activities, as of the date of this Agreement
USC has no material liabilities that the Private Placement Memorandum does not
disclose.
Section 3.08 CAPITALIZATION OF USC. The authorized and
outstanding Capital Stock of USC as of the date of this Agreement is as set
forth in the Private Placement Memorandum. Except as the Private Placement
Memorandum discloses, there will be no outstanding Capital Stock of USC, and no
options, warrants or other rights to acquire Capital Stock of USC, outstanding
as of the IPO Closing Date.
Section 3.09 NO BROKERS. Except as the Private Placement
Memorandum sets forth, USC has not, directly or indirectly, in connection with
this Agreement or the transactions contemplated hereby (i) employed any broker,
finder or agent or (ii) agreed to pay or incurred any
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obligation to pay any broker's or finder's fee, any sales commission or any
similar form of compensation.
Section 3.10 PRIVATE PLACEMENT MEMORANDUM. At the date hereof the
Private Placement Memorandum (other than the historical financial statements and
the notes thereto of the Company and the historical information it contains
respecting the Acquired Business and the Stockholders, to which this Section
3.10 does not apply) does not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements it does
contain not materially misleading in the light of the circumstances under which
those statements were made.
ARTICLE IV
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Section 4.01 ACCESS AND COOPERATION; DUE DILIGENCE. (a) From the
date hereof and until the Effective Time, the Company will (i) afford to the
Representatives of USC and each Other Founding Company reasonable access, during
normal business hours and with reasonable prior notice, to all the key
employees, sites, properties, books and records of each of the Company and the
Company Subsidiaries, provided that such access does not unreasonably interfere
with the Company's business and operations, (ii) provide USC with such
additional financial and operating data and other information relating to the
business and properties of each of the Company and the Company Subsidiaries as
USC or any Other Founding Company may from time to time reasonably request and
(iii) cooperate with USC and each Other Founding Company and their respective
Representatives in the preparation of any documents or other material that may
be required in connection with any Transaction Documents or any Other
Transaction Documents. Each Stockholder and the Company will treat, and will
cause the Company's Representatives to treat, all Confidential Information
obtained by them in connection with the negotiation and performance of this
Agreement or the due diligence investigations conducted with respect to each
Other Founding Company as confidential in accordance with the provisions of
Section 10.01. USC will cause each Other Founding Company to enter into a
provision substantially identical to this Section 4.01 in order to require each
Other Founding Company and its owners and Representatives to keep confidential
any Confidential Information respecting any of the Company and the Company
Subsidiaries that Other Founding Company or any of its Representatives obtains.
Prior to the Effective Time, USC and the Other Founding Companies may provide
Confidential Information respecting the Company and the Company Subsidiaries to
(i) the Other Founding Companies and prospective Other Founding Companies and
their respective Representatives, (ii) USC's actual and prospective financing
sources and their respective Representatives, (iii) the Underwriter and its
Representatives, (iv) prospective investors in the IPO, (v) USC's prospective
insurance brokers and software or other information technology vendors and (vi)
USC's Representatives, but otherwise will keep that Confidential Information
confidential in accordance with the provisions of Section 10.01.
(b) Each of the Company and the Stockholders will use its
commercially reasonable best efforts to secure, as soon as practicable after the
date hereof, all approvals or
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consents of third Persons as may be necessary to enable them to consummate the
transactions contemplated hereby. USC will use its best efforts to secure, as
soon as practicable after the date hereof, all approvals or consents of third
Persons as may be necessary to enable USC and USC Sub to consummate the
transactions contemplated hereby.
(c) From the date hereof and until the Effective Time, USC will
(i) afford to the Representatives of the Company and the Stockholders access to
all sites, properties, books and records of USC and USC Sub, (ii) provide the
Company with such additional financial and operating data and other information
relating to the business and properties of USC and USC Sub as the Company or any
Stockholder may from time to time reasonably request and (iii) cooperate with
the Company and the Stockholders and their respective Representatives in the
preparation of any documents or other material which may be required in
connection with any Transaction Documents.
(d) If this Agreement is terminated pursuant to Section 11.01,
USC promptly will (i) return all written Confidential Information of the Company
it and USC Sub then possess to the Company and (ii) use commercially reasonable
efforts to facilitate the return to the Company of all Confidential Information
of the Company that USC or any of its Representatives has provided to any Other
Founding Company.
Section 4.02 CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME. From
the date hereof and until the Effective Time, the Company will, and will cause
each Company Subsidiary to, except as and only to the extent set forth in
Schedule 4.02:
(i) carry on its businesses in substantially the same manner as
it has heretofore and not introduce any new methods of management,
operation or accounting that in the aggregate are Material to the
Acquired Business;
(ii) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all its obligations under agreements relating to or
affecting its assets, properties and other rights;
(iv) keep in full force and effect without interruption all its
present insurance policies or other comparable insurance coverage;
(v) use reasonable commercial efforts to (A) maintain and
preserve its business organization intact, (B) retain its present
employees and (C) maintain its relationships with suppliers, customers
and others having business relations with it;
(vi) comply with all applicable Governmental Requirements that in
the aggregate are Material to the Acquired Business; and
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(vii) except as this Agreement requires or expressly permits,
maintain the instruments and agreements governing its outstanding
Indebtedness and leases on their present terms and not enter into new or
amended Indebtedness or lease instruments or agreements involving
amounts over $10,000 in any single case or $100,000 in the aggregate,
without the prior written consent of USC (which consent will not be
unreasonably withheld).
Section 4.03 PROHIBITED ACTIVITIES. From the date hereof and
until the Effective Time, without the prior written consent of USC or unless as
this Agreement requires or expressly permits, the Company will not, and will not
permit any Company Subsidiary to, except as and only to the extent Schedule 4.03
sets forth:
(i) make any change in its Charter Documents;
(ii) issue any of its Capital Stock or issue or otherwise create
any of its Derivative Securities;
(iii) make any Restricted Payment;
(iv) make any investments (other than Permitted Investments) in
the Capital Stock, Derivative Securities or Indebtedness of any Person;
(v) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures in a single
transaction or a series of related transactions involving an aggregate
amount of more than $10,000 otherwise than in the ordinary course of its
business and consistent with its past practice;
(vi) increase or commit or promise to increase the Cash
Compensation payable or to become payable to any officer, director,
stockholder, employee or agent, consultant or independent contractor of
any of the Company and the Company Subsidiaries or make any
discretionary bonus or management fee payment to any such Person, except
bonuses or salary increases to employees (other than the Stockholders or
their Immediate Family Members) at the times and in the amounts
consistent with its past practice;
(vii) create, assume or permit to be created or imposed any Liens
(other than Permitted Liens) upon any of its assets or properties,
whether now owned or hereafter acquired, except for purchase money Liens
incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of $10,000 and necessary or desirable for
the conduct of the business of any of the Company and the Company
Subsidiaries;
(viii) (A) adopt, establish, amend or terminate any ERISA
Employee Benefit Plan, or any Other Compensation Plan or Employee
Policies and Procedures or (B) take any discretionary action, or omit to
take any contractually required action, if that action or
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omission could either (1) deplete the assets of any ERISA Employee
Benefit Plan or any Other Compensation Plan or (2) increase the
liabilities or obligations under any such plan;
(ix) sell, assign, lease or otherwise transfer or dispose of any
of its owned or leased property or equipment otherwise than in the
ordinary course of its business and consistent with its past practice;
(x) negotiate for the acquisition of any business or the start-up
of any new business;
(xi) merge, consolidate or effect a share exchange with, or agree
to merge, consolidate or effect a share exchange with, any other Entity;
(xii) waive any of its rights or claims that in the aggregate are
Material to the Acquired Business, provided that it may negotiate and
adjust bills in the course of good faith disputes with customers in a
manner consistent with past practice, but such adjustments will not be
deemed to be included in Schedule 4.03 unless the Supplemental
Information lists them;
(xiii) commit breaches that in the aggregate are Material to the
Acquired Business or amend or terminate any Material Agreement of the
Acquired Business or any of its Governmental Approvals; or
(xiv) enter into any other transaction (i) outside the ordinary
course of its business and consistent with its past practice or (ii)
prohibited hereby.
Section 4.04 NO SHOP. Each of the Company and the Stockholders
agrees that, from the date hereof and until the first to occur of the Effective
Time or the termination of this Agreement in accordance with Article XI, neither
the Company nor any Stockholder, nor any of their respective officers and
directors will, and the Company and each Stockholder will direct and use their
reasonable best efforts to cause each of their respective Representatives not
to, initiate, solicit, encourage or respond to, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including
any proposal or offer to the Stockholders) with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of, the
Company (any such proposal or offer being an "Acquisition Proposal") or engage
in any activities, discussions or negotiations concerning, or provide any
Confidential Information respecting, the Acquired Business, any Other Founding
Company or USC to, or have any discussions with, any Person relating to an
Acquisition Proposal or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. The Company and each Stockholder will: (i)
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and each will take the steps necessary to inform the
Persons referred to in the first sentence of this Section 4.04 of the
obligations undertaken in this Section 4.04; and (ii) notify USC
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immediately if any such inquiries or proposals are received by, any such
information is requested from or any such discussions or negotiations are sought
to be initiated or continued with the Company or any Stockholder.
Section 4.05 NOTICE TO BARGAINING AGENTS. Prior to the Closing
Date, the Company will (i) satisfy any requirement for notice of the
transactions contemplated by this Agreement under applicable collective
bargaining agreements and (ii) provide USC with proof that any required notice
has been sent.
Section 4.06 NOTIFICATION OF CERTAIN MATTERS. The Stockholders
and the Company will give prompt notice to USC of (i) the existence or
occurrence of each condition or state of facts of which any of them become aware
that will or reasonably could be expected to cause any representation or
warranty of the Company or any Stockholder contained herein to be untrue or
incorrect in any material respect at or prior to the Closing or on the IPO
Closing Date and (ii) any material failure of any Stockholder or the Company to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by that Person hereunder. USC will give prompt notice to the
Company of (i) the existence or occurrence of each condition or state of facts
of which USC becomes aware that will or reasonably could be expected to cause
any representation or warranty of USC or USC Sub contained herein to be untrue
or inaccurate at or prior to the Closing or on the IPO Closing Date and (ii) any
material failure of USC or USC Sub to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 4.06 will not be deemed to (i)
modify the representations or warranties herein of the party delivering that
notice, or any other party, which modification may be made only pursuant to
Section 4.07, (ii) modify the conditions set forth or referred to in Article V
or (iii) limit or otherwise affect the remedies available hereunder to the party
receiving that notice.
Section 4.07 SUPPLEMENTAL INFORMATION. Each of the Company and
the Stockholders agrees that, with respect to the representations and warranties
of that party contained in this Agreement, that party will have the continuing
obligation (except to the extent Section 4.03 or 4.06 otherwise provides) until
the Closing to provide USC promptly with such additional supplemental
Information (collectively, the "Supplemental Information"), in the form of (i)
amendments to then existing Schedules or (ii) additional Schedules, as would be
necessary, in the light of the circumstances, conditions, events and states of
facts then known to the Company or any Stockholder, to make each of those
representations and warranties true and correct as of the Closing and on the IPO
Closing Date. For purposes only of determining whether the conditions to the
obligations of USC and USC Sub which are specified in Section 5.03 have been
satisfied, the Schedules as of the Closing Date will be deemed to be the
Schedules as of the date hereof as amended or supplemented by the Supplemental
Information provided to USC prior to the Closing pursuant to this Section 4.07;
provided, however, that if the Supplemental Information so provided discloses
the existence of circumstances, conditions, events or states of facts which, in
any combination thereof, (i) have had a Material Adverse Effect that was not
reflected in the determination of the Ceiling Amount or, in the sole judgment of
USC (which will be conclusive for
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purposes of this Section 4.07 and Article XI, but not for any purpose of Section
6.05 or Article VII), (ii) are having or will have a Material Adverse Effect,
USC will be entitled to terminate this Agreement pursuant to Section 11.01(iv);
and provided, further, that if USC is entitled to terminate this Agreement
pursuant to Section 11.01(iv), but elects not to do so, it will be entitled to
treat as USC Indemnified Losses or USC Unindemnified Losses (which treatment
will not prejudice the right of any Stockholder under Section 6.05 or Article
VII, as applicable, to contest Damage Claims made by USC in respect of those USC
Indemnified Losses or USC Unindemnified Losses), as applicable, all Damages to
the Acquired Business which are attributable to the circumstances, conditions,
events and states of facts first disclosed herein after the date hereof in the
Supplemental Information. USC will provide the Company with copies of the
Registration Statement, including all pre-effective amendments thereto, promptly
after the filing thereof with the SEC under the Securities Act.
Section 4.08 COOPERATION IN CONNECTION WITH THE IPO. The Company
and the Stockholders will (i) provide USC, the Underwriter and their respective
Representatives with all the Information concerning the Company or any of the
Stockholders which is reasonably requested by USC, the Underwriter or their
respective Representatives from time to time in connection with effecting the
IPO and (ii) cooperate with USC and the Underwriter and their respective
Representatives in the preparation and amendment of the Registration Statement
(including the Financial Statements) and in responding to the comments of the
SEC staff, if any, with respect thereto. The Company and each Stockholder agree
promptly to (i) advise USC and their legal counsel if, at any time during the
period in which a prospectus relating to the IPO is required to be delivered
under the Securities Act, any information contained in the then current
Registration Statement prospectus concerning the Company or the Stockholders
becomes incorrect or incomplete in any material respect and (ii) provide USC and
their legal counsel with the information needed to correct or complete that
information. Prior to the time the Registration Statement or any post-effective
amendment thereto becomes effective under the Securities Act, USC will provide
an opportunity to review and comment with respect to that document to one
counsel selected by a majority in number of the Founding Companies and
reasonably satisfactory to USC.
Section 4.09 ADDITIONAL FINANCIAL STATEMENTS. The Company will
furnish to USC:
(i) as soon as available and in any event within 30 days after
the end of each of the Company's fiscal quarters which ends prior to the
IPO Pricing Date, an unaudited balance sheet of the Acquired Business as
of the end of that fiscal quarter and the related statements of income
or operations, cash flows and stockholders' or other owners' equity for
that fiscal quarter and for the period of the Acquired Business' fiscal
year ended with that quarter, in each case (A) setting forth in
comparative form the figures for the corresponding portion of the
Acquired Business' previous fiscal year and (B) prepared on the same
combined, consolidated or other basis on which the Initial Financial
Statements were prepared in accordance with GAAP applied on basis
consistent (1) throughout the periods indicated (excepting footnotes)
and (2) with the basis on which the Initial Financial Statements
including the Current Balance Sheet were prepared; and
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(ii) if requested by USC in connection with any amendment of the
Registration Statement and promptly following any such request, such
summary combined, consolidated or other operating or other financial
information of the Acquired Business as of the end of either the first
or second fiscal month in any of the Acquired Business' fiscal quarters
as USC may request.
Section 4.10 TERMINATION OF PLANS. If requested by USC, the
Company will, or will cause the applicable Company Subsidiary to, if permitted
by all applicable Governmental Requirements to do so, terminate each Plan
Schedule 2.27 identifies as a "Plan To Be Terminated" prior to the Effective
Time.
Section 4.11 DISPOSITION OF UNWANTED ASSETS. At or prior to the
Closing, the Company will make all arrangements and take all such actions as are
necessary and satisfactory to USC to dispose, prior to the Effective Time, of
those assets of it or of one or more of the Company Subsidiaries which Schedule
4.11 lists as unwanted assets.
Section 4.12 HSR ACT MATTERS. If USC determines that filings
pursuant to and under the HSR Act are necessary or appropriate in connection
with the effectuation of the Acquisition or the consummation of the acquisitions
contemplated by the Other Agreements, and advises the Company in writing of that
determination, the Company promptly will compile and file (or will cause its
"ultimate parent entity" (as determined for purposes of the HSR Act) to file)
under the HSR Act such information respecting it as the HSR Act requires of an
Entity to be acquired, and the expiration or termination of the applicable
waiting period and any extension thereof under the HSR Act will be deemed a
condition precedent Section 5.01(b) sets forth. USC will assist the Company in
its preparation of that information, if any.
ARTICLE V
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 5.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. (a) The
obligation of each party hereto to take the actions contemplated to be taken by
that party at the Closing is subject to the satisfaction on or before the
Closing Date, or written waiver pursuant to Section 10.04, of each of the
following conditions:
(i) NO LITIGATION. No Litigation shall be pending on the Closing
Date to restrain, prohibit or otherwise interfere with, or to obtain
material damages or other relief from USC, any Subsidiary of USC, the
Company or any Company Subsidiary in connection with, the consummation
of the Acquisition or the IPO;
(ii) GOVERNMENTAL APPROVALS. All Governmental Approvals (other
than the acceptance for filing of the Certificates of Merger) required
to be obtained by any of the
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Company, USC and USC Sub in connection with the consummation of the
Acquisition and the IPO shall have been obtained; and
(iii) THE REGISTRATION STATEMENT. (A) The Registration Statement,
as amended to cover the offering, issuance and sale by USC of such
number of shares of USC Common Stock at the IPO Price (which need not be
set forth in the Registration Statement when it becomes effective under
the Securities Act) as shall yield aggregate cash proceeds to USC from
that sale (net of the Underwriter's discount or commissions) in at least
the amount (the "Minimum Cash Amount") that is sufficient, when added to
the funds, if any, available from other sources (if any, and as set
forth in the Registration Statement when it becomes effective under the
Securities Act) (the "Other Financing Sources") to enable USC to pay or
otherwise deliver on the IPO Closing Date (1) the total cash portion of
the Acquisition Consideration then to be delivered pursuant to Paragraph
2, (2) the total cash portion of the acquisition consideration then to
be delivered pursuant to the Other Agreements as a result of the
consummation of the acquisition transactions contemplated thereby and
(3) the total amount of Indebtedness of the Founding Companies and USC
which the Registration Statement discloses at the time it becomes
effective under the Securities Act will be repaid with proceeds received
by USC from the IPO and the Other Financing Sources, shall have been
declared effective under the Securities Act by the SEC; (B) no stop
order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC, and the SEC shall not have initiated or
threatened to initiate Litigation for that purpose; and (C) the
Underwriter shall have agreed in writing (the "Underwriting Agreement,"
which term includes the related pricing agreement, if any) to purchase
from USC on a firm commitment basis for resale to the public initially
at the IPO Price, subject to the conditions set forth in the
Underwriting Agreement, such number of shares of USC Common Stock
covered by the Registration Statement as, when multiplied by the price
per share of USC Common Stock to be paid by the Underwriter to USC
pursuant to the Underwriting Agreement, equals at least the Minimum Cash
Amount.
(b) The obligation of each party hereto with respect to the
actions to be taken on the IPO Closing Date is subject to the satisfaction on
that date of each of the following conditions:
(i) NO LITIGATION. No Litigation shall be pending on the IPO
Closing Date to restrain, prohibit or otherwise interfere with, or to
obtain material damages or other relief from USC or any Subsidiary of
USC in connection with, the consummation of the Acquisition or the IPO;
(ii) GOVERNMENTAL APPROVALS. All Governmental Approvals required
to be obtained by the Company, USC and USC Sub in connection with the
consummation of the Acquisition and the IPO shall have been obtained;
and
(iii) CLOSING OF THE IPO. USC shall have issued and sold shares
of USC Common Stock to the Underwriter in accordance with the
Underwriting Agreement for initial resale
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at the IPO Price and received payment therefor in an amount at least
equal to the amount by which (A) the Minimum Cash Amount exceeds (B) the
aggregate amount of funds actually received on the IPO Closing Date, if
any, from any one or more of the Other Financing Sources.
Section 5.02 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS. (a) The obligations of the Company and each Stockholder with
respect to actions to be taken by them at or before the Closing are subject to
the satisfaction on or before the Closing Date, or the written waiver by the
Company on behalf of itself and each Stockholder pursuant to Section 10.04, of
(i) all the conditions Paragraph 5 and Section 5.01(a) set forth and (ii) all
the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. All the representations and
warranties of USC in this Agreement shall be true and correct as of the
Closing as though made at that time;
(B) PERFORMANCE OF COVENANTS. USC and USC Sub shall have complied
with all their respective covenants in Article IV;
(C) DELIVERY OF DOCUMENTS. USC shall have delivered to the
Company, with copies for each Stockholder:
(1) a USC officer's certificate respecting the
representations and warranties of USC in this Agreement and
compliance with the covenants of USC and USC Sub in Article IV
and in the form thereof attached as an exhibit to the Closing
Memorandum;
(2) an opinion dated the Closing Date and addressed to the
Company and the Stockholders from Counsel for USC and USC Sub
substantially in the form thereof attached as an exhibit to the
Closing Memorandum;
(3) a certificate of the secretary or any assistant
secretary of USC in the form thereof (without attachments
thereto) attached as an exhibit to the Closing Memorandum and
respecting, and to which is attached: (a) the Charter Documents
of each of USC and USC Sub (certified by the Secretary of State
of the State of Delaware in the case of its certificate of
incorporation included therein); (b) the resolutions of the
boards of directors of USC and USC Sub respecting the Transaction
Documents and the transactions contemplated thereby; (c) a
certificate respecting the incumbency and true signatures of the
USC and USC Sub officers who execute the Transaction Documents on
behalf of USC and USC Sub, respectively; and (d) a specimen
certificate evidencing shares of USC Common Stock;
(4) the Registration Rights Agreement duly executed and
delivered by USC; and
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(5) for USC, a certificate, dated as of a Current Date,
duly issued by the appropriate Governmental Authorities in the
State of Delaware showing it to be in existence or good standing
and authorized to do business in that State; and
(D) INCENTIVE PLAN. The Incentive Plan the Private Placement
Memorandum describes shall be in full force and effect.
(b) The obligations of the Company and each Stockholder with
respect to the actions to be taken on the IPO Closing Date are subject to the
satisfaction on that date of (i) all the conditions Section 5.01(b) sets forth,
(ii) the condition that all the representations and warranties of USC in this
Agreement shall be true and correct as of the IPO Closing Date as though made on
that date, (iii) the condition that USC and USC Sub shall have complied with all
their respective covenants in Article IV, (iv) the condition Section
5.02(a)(ii)(D) sets forth, (v) the condition that USC shall have delivered to
the Company and each Stockholder a copy of (A) an opinion from Counsel for USC
and USC Sub dated the IPO Closing Date and addressed to USC and providing the
Stockholders may rely thereon, respecting Section 351 of the Code and
substantially in the form thereof attached as an exhibit to the Closing
Memorandum, and (B) a certificate of USC in substantially the form thereof
attached to the form of opinion to which subclause (A) of this clause (v) refers
and (vi) all the conditions Paragraph 5 sets forth, if any.
Section 5.03 CONDITIONS TO THE OBLIGATIONS OF USC AND USC SUB.
(a) The obligations of USC and USC Sub with respect to actions to be taken by
them at or before the Closing are subject to the satisfaction on or before the
Closing Date, or the written waiver by USC pursuant to Section 10.04, of (i) all
the conditions Paragraph 5 and Section 5.01(a) set forth and (ii) all the
following conditions:
(A) REPRESENTATIONS AND WARRANTIES. All the representations and
warranties of the Stockholders and the Company in this Agreement shall
be true and correct as of the Closing as though made at that time;
(B) PERFORMANCE OF COVENANTS. The Company and the Stockholders
shall have complied with all their respective covenants in Article IV;
(C) DELIVERY OF DOCUMENTS. The Stockholders and the Company shall
have delivered to USC:
(1) a Company officer's certificate, signed by a
Responsible Officer, respecting the representations and
warranties of the Stockholders and the Company in this Agreement
and compliance with the covenants of the Stockholders and the
Company in Article IV and in the form thereof attached as an
exhibit to the Closing Memorandum;
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(2) an opinion dated the Closing Date and addressed to USC
from Counsel for the Company and the Stockholders substantially
in the form thereof attached as an exhibit to the Closing
Memorandum;
(3) a certificate of the secretary or any assistant
secretary of the Company in the form thereof (without attachments
thereto) attached as an exhibit to the Closing Memorandum and
respecting, and to which is attached, (a) the Charter Documents
of the Company; (b) the resolutions of the board of directors of
the Company respecting the Transaction Documents and the
transactions contemplated thereby; and (c) a certificate
respecting the incumbency and true signatures of the Responsible
Officers who execute the Transaction Documents on behalf of the
Company;
(4) from each Stockholder, a certificate to the effect
that no withholding is required under Section 1445 of the Code
and in the form thereof attached as an exhibit to the Closing
Memorandum, with the blanks appropriately filled, duly executed
and delivered by that Stockholder;
(5) From each officer and director of the Company and each
Company Subsidiary, if any, a notice of resignation in the form
thereof attached as an exhibit to the Closing Memorandum; and
(6) for each of the Company and the Company Subsidiaries,
a certificate, dated as of a Current Date, duly issued by the
appropriate Governmental Authorities in its Organization State
and, in each other jurisdiction Schedule 2.02 lists for it,
showing it to be in good standing and authorized to do business
in its Organization State and those other jurisdictions and that
all state franchise and/or income tax returns and taxes due by it
in its Organization State and those other jurisdictions for all
periods prior to the Closing have been filed and paid.
(b) The obligations of USC and USC Sub with respect to the
actions to be taken on the IPO Closing Date are subject to the satisfaction on
that date of (i) all the conditions Section 5.01(b) sets forth, (ii) the
condition that all the representations and warranties of the Stockholders and
the Company in this Agreement shall be true and correct as of the IPO Closing
Date as though made on that date, (iii) the condition that the Company and the
Stockholders shall have complied with all their respective covenants in Article
IV and (iv) the conditions Paragraph 5 sets forth, if any.
ARTICLE VI
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 6.01 DISCLOSURE. If, subsequent to the IPO Pricing Date
and prior to the 25th day after the date of the Final Prospectus, any
Stockholder becomes aware of any fact or
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circumstance which would change (or, if after the Effective Time, would have
changed) in any material respect a representation or warranty of the Company or
any Stockholder in this Agreement or would affect any document delivered
pursuant hereto in any material respect, that Stockholder will promptly give
notice of that fact or circumstance to USC.
Section 6.02 PREPARATION AND FILING OF TAX RETURNS. After the
Effective Time, each party hereto will, and will cause its Affiliates to,
provide to each of the other parties hereto such cooperation and information as
any of them reasonably may request in filing any Return, amended Return or claim
for refund, determining a liability for Taxes or a right to refund of Taxes or
in conducting any audit or other proceeding in respect of Taxes. Subject to the
last sentence of this Section 6.02, this cooperation will be at the expense of
the requesting party. This cooperation and information shall include providing
copies of all relevant portions of the relevant Returns, together with such
accompanying schedules and work papers, documents relating to rulings or other
determinations by Taxing Authorities and records concerning the ownership and
Tax bases of property as are relevant which a party possesses. Each party will
make its employees, if any, reasonably available on a mutually convenient basis
at its cost to provide an explanation of any documents or information so
provided. Subject to the preceding sentence, each party required to file Returns
pursuant to this Agreement will bear all costs attributable to the preparation
and filing of those Returns. USC will not, directly or indirectly, take any
action after the Effective Time that would disqualify the Merger as an exchange
under Section 351 of the Code.
Section 6.03 DIRECTORS. Effective on the IPO Closing Date, USC
will cause such corporate proceedings as on its part will be necessary to cause
each of the persons who are named in the Private Placement Memorandum as persons
who will become members of the board of directors of USC following the Effective
Time (other than any such person who, after the date of the Private Placement
Memorandum, declines to become a member of that board) to be initially appointed
to that board when the Private Placement Memorandum so provides.
Section 6.04 REMOVAL OF GUARANTIES. USC will use its reasonable
efforts to ensure that, within 90 days after the Effective Time, either (i) the
Stockholder Guaranties, if any, Schedule 6.04 lists are terminated or (ii) the
Indebtedness to which those Guaranties relate is retired; provided, however,
that if USC is unable to effect the termination of any of those Guaranties or
the retirement of any of that Indebtedness, USC will indemnify and hold harmless
each Stockholder from and against any liabilities, claims, demands, judgments,
losses, costs, damages or expenses whatsoever (including reasonable attorneys'
fees) that Stockholder may sustain, suffer or incur and result from or arise out
of or relate to that Guaranty or that Indebtedness, as the case may be.
Section 6.05 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. (a)
Notwithstanding any investigation at any time made by or on behalf of any party
hereto, the representations and warranties set forth in Articles I, II and III
and in any certificate delivered in connection herewith with respect to any of
those representations and warranties will survive the closing and the Effective
Time until the day that is two years from the Effective Time, whereupon they
will terminate and expire, except as follows: (i) the representations and
warranties of the Stockholders which relate expressly or by
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necessary implication to Taxes, ERISA or the Governmental Requirements referred
to in clause (iii) of Section 7.02(a) will survive until the expiration of the
applicable statutes of limitations (including all periods of extension and
tolling); (ii) the representations and warranties of the Stockholders which
relate expressly or by necessary implication to the environment or Environmental
Laws will survive for a period of four years from the Effective Time; and (iii)
the representations and warranties of the Company will terminate and expire at
the Effective Time.
(b) After a representation and warranty has expired, as Section
6.05(a) provides, no Damage Claim constituting a USC Indemnified Loss will or
may be made or prosecuted through Litigation or otherwise by any Person who
would have been entitled to Damages on the basis of that representation and
warranty prior to its termination and expiration, provided that: (i) the amount
of that claim, if against any Stockholder, will be taken into account in
determining whether the aggregate amount of all claims against that Stockholder
has exceeded that Stockholder's Pro Rata Share of the Threshold Amount for
purposes of Section 6.06; and (ii) in the case of each representation and
warranty that will terminate and expire as this Section 6.05 provides, no Damage
Claim presented in writing for Damages to the Person or Persons from which or
whom those damages are sought on the basis of that representation and warranty
prior to its termination and expiration will be affected in any way by that
termination and expiration.
Section 6.06 LIMITATIONS ON DAMAGE CLAIMS. (a) If USC should have
any Damage Claim hereunder following the Effective Time against any Stockholder
which does not involve a USC Indemnified Loss (each such Damage Claim not
involving a USC Indemnified Loss being an "USC Unindemnified Loss"), that
Stockholder will not be liable to USC on account of that USC Unindemnified Loss
unless the liability of that Stockholder in respect of that USC Unindemnified
Loss, when aggregated with the liability of all Stockholders in respect of the
sum of (i) all USC Unindemnified Losses and (ii) all USC Indemnified Losses
under Section 7.02(a), exceeds, and only to the extent the aggregate amount of
all those USC Unindemnified Losses and USC Indemnified Losses does exceed, the
Threshold Amount. In no event will (i) the aggregate joint and several liability
of the Stockholders under this Agreement, including Section 7.02(a), exceed the
Ceiling Amount or (ii) the aggregate liability of each Stockholder under this
Agreement, including Sections 7.02(a) and 7.02(b), exceed that Stockholder's Pro
Rata Share of the Ceiling Amount. For purposes of determining the amount of USC
Unindemnified Losses and USC Indemnified Losses, no effect will be given to any
resulting Tax benefit to USC or any other USC Indemnified Party.
(b) If any Stockholder should have any Damage Claim hereunder
following the Effective Time against USC which does not involve a Stockholder
Indemnified Loss (each such Damage Claim not involving a Stockholder Indemnified
Loss being a "Stockholder Unindemnified Loss"), USC will not be liable to that
Stockholder on account of that Stockholder Unindemnified Loss unless the
liability of USC on account of that Stockholder Unindemnified Loss, when
aggregated with the liability of USC in respect of the sum of (i) all
Stockholder Unindemnified Losses for which it has become liable and (ii) all
Stockholder Indemnified Losses for which it has become liable, exceeds, and only
to the extent the aggregate amount of all those Stockholder Unindemnified Losses
and Stockholder Indemnified Losses does exceed, the Threshold Amount.
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In no event will USC be liable under this Agreement, including Section 7.03, for
any amount in excess of the Ceiling Amount. For purposes of determining the
amount of Stockholder Unindemnified Losses and Stockholder Indemnified Losses,
no effect will be given to any resulting Tax benefit to any Stockholder
Indemnified Party.
(c) Neither any USC Unindemnified Loss nor any Stockholder
Unindemnified Loss will include any consequential, exemplary, punitive or treble
damage (including any loss of earnings or profits), and USC hereby releases each
Stockholder, and each Stockholder hereby releases USC, in each case to the
fullest extent applicable law permits, from liability for any such excluded
Damage.
Section 6.07 WORKING CAPITAL ADJUSTMENT. (a) This Section 6.07
uses the following terms with the meanings it assigns to them below:
"Adjustment Determination Date" means the date that is 30 days
following delivery by USC of the Post-closing Statement to the
Stockholders, unless the Independent Accountants determine any Computed
Amount pursuant to Section 6.07(b), in which event the Adjustment
Determination Date is the date the Independent Accountants deliver each
determination in writing to USC.
"Current Balance Sheet Date Adjusted Working Capital" means the
amount by which (i) the Current Balance Sheet Date Working Capital
exceeds (ii) the sum of (A) the Current Balance Sheet Excess Cash and
(B) the 1998 Restricted Payment Amount.
"Current Balance Sheet Excess Cash" means, as determined from the
Current Balance Sheet, the amount by which (i) the total amount that is
included and classified as current assets comprised of unrestricted cash
and cash equivalents on that balance sheet exceeds (ii) the Minimum Cash
Balance.
"Computed Amount" means any of the following: (i) the Cash
Balance; (ii) the Final Cash Balance; (iii) the Final Working Capital;
(iv) the 1999 Permitted Restricted Payment Amount; (v) the Negative Net
Adjustment; and (vi) the Positive Net Adjustment.
"Final Balance Sheet" means a balance sheet of the Acquired
Business as of the effective date USC uses to record the Acquisition in
accordance with GAAP and which is prepared in accordance with GAAP on
the same basis on which the Current Balance Sheet was prepared.
"Final Cash Balance" means, as determined from the Final Balance
Sheet, the total amount that is included and classified as current
assets comprised of unrestricted cash and cash equivalents on that
balance sheet.
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"Final Excess Cash" means the lesser of (i) the Current Balance
Sheet Excess Cash or (ii) the amount, if any, by which the Final Cash
Balance exceeds the Minimum Cash Balance.
"Final Working Capital" means, as determined from the Final
Balance Sheet, the amount by which (i) the sum, without duplication of
amounts, of all amounts that are included and classified as current
assets on that balance sheet exceeds, or is exceeded by, (ii) the sum,
without duplication of amounts, of all amounts that are included and
classified as liabilities or as mandatorily redeemable Capital Stock on
that balance sheet; provided, that if the Independent Accountants make
the determination of any Computed Amount pursuant to Section 6.07(b),
the amount equal to 50% of their fees and expenses which are
attributable to their audit of the Final Balance Sheet and their making
of that determination will be deemed a liability of the Acquired
Business for the purpose of determining its Final Working Capital; and
provided, further, that if at any time those current assets are exceeded
by those liabilities and that Capital Stock, Final Working Capital will
be expressed as a negative amount
"Negative Net Adjustment" means: (i) if the Current Balance Sheet
Date Adjusted Working Capital is a positive amount, the amount, if any,
by which the Current Balance Sheet Date Adjusted Working Capital exceeds
the Final Working Capital; and (ii) if the Current Balance Sheet Date
Adjusted Working Capital is a negative amount, the amount, if any, by
which the Final Working Capital is more negative than the Current
Balance Sheet Date Adjusted Working Capital.
"1999 Restricted Payment Amount" means, if the Company is subject
to Subchapter S of the Code, the amount equal to the amount the Company
records as income for the period beginning on January 1, 1999 and ending
on the day preceding the IPO Closing Date in its accumulated adjustments
account in accordance with the applicable provisions of the Code.
"Positive Net Adjustment" means, if the Current Balance Sheet
Date Adjusted Working Capital is (i) a positive amount and the Final
Working Capital is the same as or greater than that positive amount or
(ii) a negative amount and the Final Working Capital is the same as or
less negative than that negative amount, the lesser of the Current
Balance Sheet Excess Cash or the Final Excess Cash.
(b) As soon as practicable and in any event within 75 days after
the Effective Date, USC will cause to be prepared in writing and delivered to
the Stockholders (i) the Final Balance Sheet and (ii) a statement (the
"Post-closing Statement") setting forth each Computed Amount. The Final Balance
Sheet and the Post-closing Statement will be final and binding on USC and the
Stockholders unless, within 30 days following the delivery of the Post-closing
Statement, any Stockholder notifies USC in writing that that Stockholder does
not accept as correct one or more of the Computed Amounts the Post-closing
Statement sets forth. If any Stockholder timely delivers
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that notice respecting the Post-closing Statement, the Independent Accountants
will audit the Final Balance Sheet and determine each Computed Amount from that
audited balance sheet within 30 days after the delivery to USC of that notice,
and these determinations will be final and binding on USC and each Stockholder.
If a Negative Net Adjustment is determined with finality pursuant to this
Section 6.07(b), each Stockholder will, no later than 10 Houston, Texas business
days after USC makes a written request therefor, pay in cash that Stockholder's
Pro Rata Share of that Negative Net Adjustment, and if a Positive Net Adjustment
is determined with finality pursuant to this Section 6.07(b), USC will, no later
than 10 Houston, Texas business days after that determination, pay in cash to
each Stockholder that Stockholder's Pro Rata Share of that Positive Net
Adjustment, together, in the case of any amount payable by the Stockholders or
USC pursuant to this Section 6.07(b), with interest on that sum at 8% per annum
from (and including) the Effective Date to (but excluding) the Adjustment
Determination Date.
ARTICLE VII
INDEMNIFICATION
Section 7.01 IN RESPECT OF REPRESENTATIONS AND WARRANTIES. After
a representation and warranty has terminated and expired as Section 6.05
provides, no indemnification will or may be sought pursuant to this Article VII
on the basis of that representation and warranty by any Person who would have
been entitled pursuant to this Article VII to indemnification on the basis of
that representation and warranty prior to its termination and expiration,
provided that, in the case of each representation and warranty that will
terminate and expire as Section 6.05 provides, no claim presented in writing for
indemnification pursuant to this Article VII on the basis of that representation
and warranty prior to its termination and expiration will be affected in any way
by that termination and expiration.
Section 7.02 INDEMNIFICATION OF USC INDEMNIFIED PARTIES. (a)
Subject to the applicable provisions of Sections 7.01 and 7.06, the Stockholders
covenant and agree that they, jointly and severally, will indemnify each USC
Indemnified Party against, and hold each USC Indemnified Party harmless from and
in respect of, all Third Party Claims that arise from, are based on or relate or
otherwise are attributable to (i) any breach of the representations and
warranties of the Stockholders or the Company set forth herein (other than in
Article I) or in certificates delivered in connection herewith (other than in
respect of certificates relating only to the representations and warranties in
Article I), (ii) any nonfulfillment of any covenant or agreement on the part of
the Stockholders or the Company under this Agreement or (iii) any liability
under the Securities Act, the Exchange Act or other applicable Governmental
Requirement which arises out of or is based on (A) any untrue statement or
alleged untrue statement of a material fact relating to the Company and the
Company Subsidiaries, or any of them, which is both (1) provided to USC or its
counsel by the Company or the Stockholders in writing and (2) contained in any
preliminary prospectus relating to the IPO, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or (B) any omission or alleged omission to state therein a material
fact relating to the Company and the Company Subsidiaries, or any of them,
required to be stated therein
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or necessary to make the statements therein not misleading, and not provided to
USC or its counsel by the Company or the Stockholders in writing (each such
Third Party Claim and each Third Party Claim Section 7.02(b) describes being an
"USC Indemnified Loss").
(b) Each Stockholder, severally and not jointly with any other
Person, covenants and agrees that he will indemnify each USC Indemnified Party
against, and hold each USC Indemnified Party harmless from and in respect of,
all Third Party Claims that arise from, are based on or relate or otherwise are
attributable to (i) any breach of the representations and warranties of that
Stockholder solely as to that Stockholder set forth in Article I or in
certificates delivered by that Stockholder and relating to those representations
and warranties, (ii) any nonfulfillment of any several, and not joint and
several, agreement on the part of that Stockholder under this Agreement or (iii)
any liability under the Securities Act, the Exchange Act or other applicable
Governmental Requirement which arises out of or is based on (A) any untrue
statement or alleged untrue statement of a material fact relating solely to that
Stockholder which is both (1) provided to USC or its counsel by that Stockholder
in writing and (2) contained in any preliminary prospectus relating to the IPO,
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or (B) any omission or alleged omission
to state therein a material fact relating solely to that Stockholder required to
be stated therein or necessary to make the statements therein not misleading,
and not provided to USC or its counsel by that Stockholder in writing.
Section 7.03 INDEMNIFICATION OF STOCKHOLDER INDEMNIFIED PARTIES.
USC covenants and agrees that it will indemnify each Stockholder Indemnified
Party against, and hold each Stockholder Indemnified Party harmless from and in
respect of, all Third Party Claims that arise from, are based on or relate or
otherwise are attributable to (i) any breach by USC of its representations and
warranties set forth herein or in its certificates delivered to the Company or
the Stockholders in connection herewith, (ii) any nonfulfillment of any covenant
or agreement on the part of USC or USC Sub under this Agreement or (iii) any
liability under the Securities Act, the Exchange Act or other applicable
Governmental Requirement which arises out of or is based on (A) any untrue
statement or alleged untrue statement of a material fact relating to USC or any
Subsidiary of USC contained in any preliminary prospectus relating to the IPO,
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or (B) any omission or alleged omission
to state therein a material fact relating to USC or any Subsidiary of USC
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made (each
such Third Party Claim being a "Stockholder Indemnified Loss").
Section 7.04 CONDITIONS OF INDEMNIFICATION. (a) All claims for
indemnification under this Agreement shall be asserted and resolved as this
Section 7.04 provides.
(b) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any Third Party Claim
asserted against the Indemnified Party which could give rise to a right of
indemnification under this Agreement and (ii) transmit to the Indemnifying Party
a written
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notice (a "Claim Notice") describing in reasonable detail the nature of the
Third Party Claim, a copy of all papers served with respect to that claim (if
any), an estimate of the amount of damages attributable to that claim to the
extent feasible (which estimate will not be conclusive of the final amount of
that claim) and the basis for the Indemnified Party's request for
indemnification under this Agreement. Except as Section 7.01 sets forth, the
failure to promptly deliver a Claim Notice will not relieve the Indemnifying
Party of its obligations to the Indemnified Party with respect to the related
Third Party Claim except to the extent that the resulting delay is materially
prejudicial to the defense of that claim. Within 30 days after receipt of any
Claim Notice (the "Election Period"), the Indemnifying Party must notify the
Indemnified Party (i) whether the Indemnifying Party disputes its potential
liability to the Indemnified Party under this Article VII with respect to that
Third Party Claim and (ii) if the Indemnifying Party does not dispute its
potential liability to the Indemnified Party with respect to that Third Party
Claim, whether the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against that Third Party
Claim.
(c) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party will have the right to defend, at
its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings the Indemnifying Party must prosecute diligently
to a final conclusion or settle at its discretion in accordance with this
Section 7.04(c), and the Indemnified Party will furnish the Indemnifying Party
with all information in its possession with respect to that Third Party Claim
and otherwise cooperate with the Indemnifying Party in the defense of that Third
Party Claim; provided, however, that the Indemnifying Party will not enter into
any settlement with respect to any Third Party Claim that purports to limit the
activities of, or otherwise restrict in any way, any Indemnified Party or any
Affiliate of any Indemnified Party without the prior consent of that Indemnified
Party (which consent may be withheld in the reasonable discretion of that
Indemnified Party). The Indemnified Party is hereby authorized, at the sole cost
and expense of the Indemnifying Party, to file, during the Election Period, any
motion, answer or other pleadings that the Indemnified Party deems necessary or
appropriate to protect its interests or those of the Indemnifying Party. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim the Indemnifying Party controls pursuant to this
Section 7.04(c) and will bear its own costs and expenses with respect to that
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at the expense of the Indemnifying Party, and,
on its written notification of that employment, the Indemnifying Party will not
have the right to assume or continue the defense of that action on behalf of the
Indemnified Party.
(d) If the Indemnifying Party (i) within the Election Period (A)
disputes its potential liability to the Indemnified Party under this Article
VII, (B) elects not to defend the
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Indemnified Party pursuant to Section 7.04(c) or (C) fails to notify the
Indemnified Party that the Indemnifying Party elects to defend the Indemnified
Party pursuant to Section 7.04(c) or (ii) elects to defend the Indemnified Party
pursuant to Section 7.04(c), but fails diligently and promptly to prosecute or
settle the Third Party Claim, then the Indemnified Party will have the right to
defend, at the sole cost and expense of the Indemnifying Party (if the
Indemnified Party is entitled to indemnification hereunder), the Third Party
Claim by all appropriate proceedings, which proceedings the Indemnified Party
must promptly and vigorously prosecute to a final conclusion or settlement,
provided that the Indemnified Party will not enter into any such settlement
without the prior consent of the Indemnifying Party (which consent may not be
unreasonably withheld) (provided that the Indemnifying Party shall be deemed to
have consented to that settlement if the Indemnifying Party has not objected
within five Houston, Texas business days after the Indemnified Party has
provided the Indemnifying Party with a written notice setting forth the proposed
terms of the settlement in reasonable detail). The Indemnified Party will have
full control of such defense and proceedings. Notwithstanding the foregoing, if
the Indemnifying Party has delivered a written notice to the Indemnified Party
to the effect that the Indemnifying Party disputes its potential liability to
the Indemnified Party under this Article VII and if that dispute is resolved in
favor of the Indemnifying Party, the Indemnifying Party will not be required to
bear the costs and expenses of the Indemnified Party's defense pursuant to this
Section 7.04 or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party will reimburse the
Indemnifying Party in full for all reasonable costs and expenses of that
litigation. The Indemnifying Party may participate in, but not control, any
defense or settlement the Indemnified Party controls pursuant to this Section
7.04(d), and the Indemnifying Party will bear its own costs and expenses with
respect to that participation.
(e) Payments of all amounts owing by an Indemnifying Party
pursuant to this Article VII relating to a Third Party Claim will be made within
30 days after the latest of (i) the settlement of that Third Party Claim, (ii)
the expiration of the period for appeal of a final adjudication of that Third
Party Claim or (iii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement in respect of that Third Party Claim.
(f) If any Stockholder has any indemnification obligation to USC
that becomes payable under Section 7.04(e) during the Restricted Period, that
Stockholder may, with the written consent of USC (which shall not be
unreasonably withheld) and within the payment period Section 7.04(e) prescribes,
satisfy that obligation by transferring to USC such number of shares of USC
Common Stock owned by that Stockholder as have an aggregate fair market value
that most nearly approximates, but does not exceed, the amount of that
obligation, provided that each of the following conditions is satisfied:
(i) USC shall receive good, valid and marketable title to all the
shares so transferred free of all Liens;
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(ii) that Stockholder shall have made such representations and
warranties as to the title to the shares so transferred and the absence
of Liens thereon as USC shall have reasonably requested;
(iii) the certificate or certificates representing USC Common
Stock delivered by that Stockholder in satisfaction of his obligation
shall be duly endorsed in blank, or shall be accompanied by stock powers
in blank duly executed, by that Stockholder and shall have all necessary
transfer tax and other revenue stamps, acquired at that Stockholder's
expense, affixed and cancelled; and
(iv) the other terms and conditions of that transfer, including
any accounting, legal or tax consequences, shall be reasonably
satisfactory to USC.
For purposes of this Section 7.04(f), the fair market value of a share of USC
Common Stock will be the IPO Price (as adjusted, as appropriate, to give effect
to each of the following effected after the IPO Closing Date: any subdivision or
combination of outstanding shares of USC Common Stock, declaration by USC of a
dividend payable in shares of USC Common Stock or capital reorganization or
reclassification or other transaction involving an increase or reduction in the
number of outstanding shares of USC Common Stock).
Section 7.05 REMEDIES NOT EXCLUSIVE. The remedies this Agreement
provides will not be exclusive of any other rights or remedies available to one
party against any other party, either at law or in equity.
Section 7.06 LIMITATIONS ON INDEMNIFICATION. (a) Notwithstanding
the provisions of Section 7.02(a), no Stockholder will be required to indemnify
or hold harmless any of the USC Indemnified Parties on account of any USC
Indemnified Loss under Section 7.02(a) unless the liability of the Company and
the Stockholders in respect of that USC Indemnified Loss, when aggregated with
the liability of all Stockholders in respect of the sum of (i) all USC
Unindemnified Losses and (ii) all USC Indemnified Losses under Section 7.02(a),
exceeds, and only to the extent the aggregate amount of all those USC
Unindemnified Losses and USC Indemnified Losses does exceed, the Threshold
Amount. In no event will (i) the aggregate joint and several liability of the
Stockholders under this Agreement, including Section 7.02(a), exceed the Ceiling
Amount or (ii) the aggregate liability of each Stockholder under this Agreement,
including Sections 7.02(a) and 7.02(b), at any time exceed the amount by which
(A) that Stockholder's Pro Rata Share of the Ceiling Amount exceeds (B) that
Stockholder's Accrued Tax Liability at that time. "Accrued Tax Liability" means,
with respect to any Stockholder at any time, the total federal income tax
liability of that Stockholder which is attributable to the capital gain income
that Stockholder previously has recognized, or will recognize in the taxable
period including that time, in respect of the Acquisition Consideration that
Stockholder has received pursuant to Paragraph 2 and Section 6.07; provided,
that the capital gain attributable to any taxable disposition of any share of
USC Common Stock which that Acquisition Consideration includes will be
determined for purposes of this definition as if that Stockholder had sold that
share at the IPO Price (as adjusted, as appropriate, to give effect to each
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of the following effected after the IPO Closing Date: any subdivision or
combination of outstanding shares of USC Common Stock, declaration by USC of a
dividend payable in shares of USC Common Stock or capital reorganization or
reclassification of outstanding shares of USC Common Stock). For purposes of
determining the amount any USC Indemnified Loss, the gross amount thereof will
be reduced by (i) any correlative Tax benefit the applicable USC Indemnified
Party actually realizes in the Tax year in which that determination is made, as
reflected in any Return that USC Indemnified Party files with respect to that
year, and (ii) any correlative insurance proceeds the applicable USC Indemnified
Party actually receives, net of any insurance premium (or increase in premium)
that becomes due as a result of the claim that results in the payment of those
proceeds.
(b) Notwithstanding the provisions of Section 7.03, USC will not
be required to indemnify or hold harmless any of the Stockholder Indemnified
Parties on account of any Stockholder Indemnified Loss unless the liability of
USC in respect of that Stockholder Indemnified Loss, when aggregated with the
liability of USC in respect of the sum of (i) all Stockholder Unindemnified
Losses and (ii) all Stockholder Indemnified Losses, exceeds, and only to the
extent the aggregate amount of all those Stockholder Unindemnified Losses and
Stockholder Indemnified Losses does exceed, the Threshold Amount. In no event
will USC be liable under this Agreement, including Section 7.03, for any amount
in excess of the Ceiling Amount. For purposes of determining the amount any
Stockholder Indemnified Loss, the gross amount thereof will be reduced by (i)
any correlative Tax benefit the applicable Stockholder Indemnified Party
actually realizes in the Tax year in which that determination is made, as
reflected in any Return that Stockholder Indemnified Party files with respect to
that year, and (ii) any correlative insurance proceeds the applicable
Stockholder Indemnified Party actually receives, net of any insurance premium
(or increase in premium) that becomes due as a result of the claim that results
in the payment of those proceeds.
ARTICLE VIII
LIMITATIONS ON COMPETITION
Section 8.01 PROHIBITED ACTIVITIES. Each Stockholder agrees,
severally and not jointly with any other Person, that he will not, during the
period beginning on the date hereof and ending on the fifth anniversary of the
IPO Closing Date, directly or indirectly, for any reason, for his own account or
on behalf of or together with any other Person:
(i) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as
an employee, independent contractor, consultant or advisor, or as a
sales representative, dealer or distributor of any kind, in any business
selling any products or providing any services in competition with the
Acquired Business, USC or any Subsidiary of USC (all these entities
collectively being "USC" for purposes of this Article VIII) within any
Territory surrounding any plant or other operating facility in which the
Acquired Business was engaged in business on the date hereof or
immediately prior to the Effective Date (for purposes of this Article
VIII, the "Territory"
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surrounding any plant or other operating facility will be: (A) the city,
town or village in which that plant or facility is located, (B) the
county or parish in which that plant or facility is located, (C) the
counties or parishes contiguous to the county or parish in which that
plant or facility is located, (D) the area located within 50 miles of
that plant or facility, (E) the area located within 100 miles of that
plant or facility and (F) the area in which that plant or facility
regularly provides products or services at the locations of its
customers);
(ii) call on or otherwise solicit any natural person who is at
that time employed by USC in any managerial capacity with the purpose or
intent of attracting that person from the employ of USC;
(iii) call on, solicit or perform services for, either directly
or indirectly, any Person that at that time is, or at any time within
two years prior to that time was, a customer of USC within any
Territory, (A) for the purpose of soliciting or selling any product or
service in competition with USC within that Territory and (B) with the
knowledge of that customer relationship; or
(iv) call on or otherwise solicit any USC Acquisition Candidate,
with the knowledge of that Entity's status as a USC Acquisition
Candidate, for the purpose of acquiring that Entity or arranging the
acquisition of that Entity by any Person other than USC.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 5% of the outstanding capital stock of a competing Entity if
that class of capital stock is listed on a national stock exchange or included
in the Nasdaq National Market.
Section 8.02 DAMAGES. Because of (i) the difficulty of measuring
economic losses to USC as a result of any breach by a Stockholder of his
covenants in Section 8.01 and (ii) the immediate and irreparable damage that
could be caused to USC for which it would have no other adequate remedy, each
Stockholder agrees that USC may enforce the provisions of Section 8.01 by
injunctions and restraining orders against that Stockholder if he breaches any
of those provisions.
Section 8.03 REASONABLE RESTRAINT. The parties hereto each agree
that Sections 8.01 and 8.02 impose a reasonable restraint on the Stockholders in
light of the activities and business of USC on the date hereof, the current
business plans of USC and the investment by each Stockholder in USC as a result
of the Acquisition.
Section 8.04 SEVERABILITY; REFORMATION. The covenants in this
Article VIII are severable and separate, and the unenforceability of any
specific covenant in this Article VIII is not intended by any party hereto to,
and will not, affect the provisions of any other covenant in this Article VIII.
If any court of competent jurisdiction determines that the scope, time or
territorial restrictions Section 8.01 sets forth are unreasonable as applied to
any Stockholder, the parties hereto, including that Stockholder, acknowledge
their mutual intention and agreement that those restrictions
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be enforced to the fullest extent the court deems reasonable, and thereby will
be reformed to that extent as applied to that Stockholder and any other
Stockholder similarly situated.
Section 8.05 INDEPENDENT COVENANT. All the covenants in this
Article VIII are intended by each party hereto to, and will, be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of any Stockholder against USC,
whether predicated on this Agreement or otherwise, will not constitute a defense
to the enforcement by USC of any covenant in this Article VIII. It is
specifically agreed that the time period Section 8.01 specifies will be computed
in the case of each Stockholder by excluding from that computation any time
during which that Stockholder is in violation of any provision of Section 8.01.
The covenants this Article VIII contains will not be affected by any breach of
any other provision hereof by any party hereto.
Section 8.06 MATERIALITY. The Company and each Stockholder,
severally and not jointly with any other Person, hereby agree that this Article
VIII is a material and substantial part of the transactions this Agreement
contemplates.
ARTICLE IX
ADDITIONAL DEFINITIONS AND DEFINITIONAL PROVISIONS
Section 9.01 DEFINED TERMS. The following terms this Agreement
uses have the meanings this Section 9.01 assigns to them.
"AA Account Balance" means as of any date, if the Company is
subject to the pass-through tax provisions of subchapter S of the Code
for any period ending on or immediately prior to that date, the amount
then recorded in the accumulated adjustments account of the Company in
accordance with the applicable provisions of the Code.
"Acquired Business" has the meaning Paragraph 1 specifies.
"Acquisition" has the meaning Paragraph 1 specifies.
"Acquisition Consideration" has the meaning Paragraph 2
specifies.
"Acquisition Proposal" has the meaning Section 4.04 specifies.
"Adjustment Determination Date" has the meaning Section 6.07
specifies.
"Affiliate" means, as to any specified Person, any other Person
that, directly or indirectly through one or more intermediaries or
otherwise, controls, is controlled by or is under common control with
the specified Person. As used in this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the
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management or policies of a Person (whether through ownership of Capital
Stock of that Person, by contract or otherwise).
"Agreement" means this Agreement, including all attached
Schedules, Annexes, Addenda and Exhibits, as each of the same may be
amended, modified or supplemented from time to time pursuant to the
provisions hereof or thereof.
"Capital Stock" means, with respect to: (i) any corporation, any
share, or any depositary receipt or other certificate representing any
share, of an equity ownership interest in that corporation; and (ii) any
other Entity, any share, membership or other percentage interest, unit
of participation or other equivalent (however designated) of an equity
interest in that Entity.
"Cash Compensation" means, as applied to any employee,
nonemployee director or officer of, or any natural person who performs
consulting or other independent contractor services for, the Company or
any Company Subsidiary, the wages, salaries, bonuses (discretionary and
formula), fees and other cash compensation paid or payable by the
Company and each Company Subsidiary to that employee or other natural
person.
"Ceiling Amount" has the meaning Paragraph 1 specifies.
"Certificate of Merger" means, if USC effects the Acquisition by
means of a Merger, (i) the articles or certificate of merger respecting
that Merger which contains the information required by the laws of
Surviving Corporation's Organization State to effect that Merger and, if
the Organization State of any Entity merged into the Surviving
Corporation in that Merger is not the Organization State of the
Surviving Corporation, (ii) the articles or certificate of merger
respecting that Merger which contains the information required by the
laws of that merged Entity's Organization State to effect that Merger.
"CERCLA" means the Comprehensive Environmental Response,
Conservation, and Liability Act of 1980.
"Charter Documents" means, with respect to any Entity at any
time, in each case as amended, modified and supplemented at that time,
(i) the articles or certificate of formation, incorporation or
organization (or the equivalent organizational documents) of that
Entity, (ii) the bylaws or limited liability company agreement or
regulations (or the equivalent governing documents) of that Entity and
(iii) each document setting forth the designation, amount and relative
rights, limitations and preferences of any class or series of that
Entity's Capital Stock or of any rights in respect of that Entity's
Capital Stock.
"Claim Notice" has the meaning Section 7.04 specifies.
"Closing" has the meaning Paragraph 3 specifies.
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"Closing Date" has the meaning Paragraph 1 specifies.
"Closing Memorandum" means the closing memorandum attached as an
Exhibit to this Agreement.
"Code" means the Internal Revenue Code of 1986.
"Company" has the meaning Paragraph 1 specifies.
"Company Capital Stock" has the meaning Paragraph 1 specifies.
"Combined Companies" has the meaning Paragraph 1 specifies.
"Company Commitment" has the meaning Section 2.23 specifies.
"Company ERISA Benefit Plan" has the meaning Section 2.27
specifies.
"Company ERISA Pension Plan" has the meaning Section 2.27
specifies.
"Company Subsidiary" means at any time any Entity that is a
Subsidiary of the Company at that time.
"Confidential Information" means, with respect to any Person, all
trade secrets and other confidential, nonpublic and/or proprietary
information of that Person, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales
programs, capital expenditure projects, cost summaries, pricing
formulae, contract analyses, financial information, projections,
confidential filings with any Governmental Authority and all other
confidential, nonpublic concepts, methods of doing business, ideas,
materials or information prepared or performed for, by or on behalf of
that Person.
"Current Balance Sheet" has the meaning Paragraph 1 specifies.
"Current Balance Sheet Date" has the meaning Paragraph 1
specifies.
"Current Balance Sheet Date Working Capital" has the meaning
Paragraph 1 specifies.
"Current Date" means any day during the 20-day period ending on
the Closing Date.
"Damage" to any specified Person means, except as Section 6.06(c)
otherwise provides, any cost, damage (including any consequential,
exemplary, punitive or treble damage) or expense (including reasonable
fees and actual disbursements by attorneys,
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consultants, experts or other Representatives and Litigation costs) to,
any fine of or penalty on or any liability (including loss of earnings
or profits) of any other nature of that Person.
"Damage Claim" means, as asserted (i) against any specified
Person, any claim, demand or Litigation made or pending against the
specified Person for Damages to any other Person, or (ii) by the
specified Person, any claim or demand of the specified Person against
any other Person for Damages to the specified Person.
"DGCL" means the General Corporation Law of the State of
Delaware.
"Derivative Securities" of a specified Entity means any Capital
Stock, debt security or other Indebtedness of the specified Entity or
any other Person which is convertible into or exchangeable for, or any
option, warrant or other right to acquire, (i) any unissued Capital
Stock of the specified Entity or (ii) any Capital Stock of the specified
Entity which has been issued and is being held by the Entity directly or
indirectly as treasury Capital Stock.
"Effective Time" has the meaning Paragraph 2 specifies.
"Election Period" has the meaning Section 7.04 specifies.
"Employee Policies and Procedures" means at any time all employee
manuals and all material policies, procedures and work-related rules
that apply at that time to any employee, nonemployee director or officer
of, or any other natural person performing consulting or other
independent contractor services for, the Company or any Company
Subsidiary.
"Employment Agreement" means at any time any (i) agreement to
which the Company or any Company Subsidiary is a party which then
relates to the direct or indirect employment or engagement, or arises
from the past employment or engagement, of any natural person by the
Company or any Company Subsidiary, whether as an employee, a nonemployee
officer or director, a consultant or other independent contractor, a
sales representative or a distributor of any kind, including any
employee leasing or service agreement and any noncompetition agreement,
and (ii) agreement between the Company or any Company Subsidiary and any
Person which arises from the sale of a business by that Person to the
Company or any Company Subsidiary and limits that Person's competition
with the Company or any Company Subsidiary.
"Entity" means any sole proprietorship, corporation, partnership
of any kind having a separate legal status, limited liability company,
business trust, unincorporated organization or association, mutual
company, joint stock company or joint venture.
"Environmental Laws" means any and all Governmental Requirements
relating to the environment or public or worker health or safety,
including ambient air, surface water
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(including water management and runoff), land surface or subsurface
strata, or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or wastes (including Solid Wastes, Hazardous Wastes or
Hazardous Substances) or noxious noise or odor into the environment, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, recycling, removal, transport or handling
of pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or wastes (including petroleum, petroleum distillates,
asbestos or asbestos-containing material, volatile organic compounds,
pesticides and polychlorinated biphenyls).
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA Affiliate" means, with respect to any specified Person at
any time, any other Person, including an Affiliate of the specified
Person, that is, or at any time within six years of that time was, a
member of any ERISA Group of which the specified Person is or was a
member at the same time.
"ERISA Affiliate Pension Plan" has the meaning Section 2.27
specifies.
"ERISA Employee Benefit Plan" means any "employee benefit plan"
as defined in Section 3(3) of ERISA and includes any ERISA Pension
Benefit Plan.
"ERISA Group" means any "group of organizations" within the
meaning of Section 414(b), (c), (m) or (o) of the Code or any
"controlled group" as defined in Section 4001(a)(14) of ERISA.
"ERISA Pension Benefit Plan" means any "employee pension benefit
plan," as defined in Section 3(2) of ERISA, including any plan that is
covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code (excluding any Multiemployer Plan).
"Exchange Act" means the Securities Exchange Act of 1934.
"Final Balance Sheet" has the meaning Section 6.07 specifies.
"Final Prospectus" means the prospectus USC first furnishes to
the Underwriter after the Registration Statement becomes effective under
the Securities Act (whether or not Securities Act Rule 424(b) requires
USC to file that prospectus with the SEC).
"Final Working Capital" has the meaning Section 6.07 specifies.
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"Financial Statements" means the Initial Financial Statements and
the other financial statements of the Acquired Business, if any,
delivered to USC pursuant to Section 4.09 prior to the Effective Time.
"Founding Company" has the meaning the Preliminary Statement
specifies.
"GAAP" means, as applied to any of the Financial Statements,
generally accepted accounting principles and practices in the United
States as in effect from time to time which (i) have been concurred in
by the Independent Accountants and (ii) have been or are applied on a
basis consistent (except for changes concurred in by the Independent
Accountants) with the most recent audited Financial Statements delivered
to USC prior to the Effective Time.
"Governmental Approval" means at any time any authorization,
consent, approval, permit, franchise, certificate, license, implementing
order or exemption of, or registration or filing with, any Governmental
Authority, including any certification or licensing of a natural person
to engage in a profession or trade or a specific regulated activity, at
that time.
"Governmental Authority" means (i) any national, state, county,
municipal or other government, domestic or foreign, or any agency,
board, bureau, commission, court, department or other instrumentality of
any such government, or (ii) any Person having the authority under any
applicable Governmental Requirement to assess and collect Taxes for its
own account.
"Governmental Requirement" means at any time (i) any law,
statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, writ, edict, award, authorization or other requirement of
any Governmental Authority in effect at that time or (ii) any obligation
included in any certificate, certification, franchise, permit or license
issued by any Governmental Authority or resulting from binding
arbitration, including any requirement under common law, at that time.
"Guaranty" means, for any specified Person, without duplication,
any liability, contingent or otherwise, of that Person guaranteeing or
otherwise becoming liable for any obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and
including any liability of the specified Person, direct or indirect, (i)
to purchase or pay (or advance or supply funds for the purchase or
payment of) that obligation or to purchase (or to advance or supply
funds for the purchase of) any security for the payment of that
obligation, (ii) to purchase property, securities or services for the
purpose of assuring the owner of that obligation of its payment or (iii)
to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the
primary obligor to pay that obligation; provided, that the term
"Guaranty" does not include endorsements for collection or deposit in
the ordinary course of the endorser's business.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976.
"Immediate Family Member" of a Stockholder means at any time: (i)
if that Stockholder is a natural person, any child or grandchild (by
blood or legal adoption) or spouse of that Stockholder at that time, or
any child of that spouse; and (ii) if that Stockholder is an Entity
whose ultimate beneficial owner is a natural person, or a natural person
and his spouse, any child or grandchild (by blood or legal adoption) or
spouse at that time (if not then an ultimate beneficial owner of that
Entity), or any child of that spouse, of the ultimate beneficial owner
or owners.
"Indebtedness" of any Person means, without duplication, (i) any
liability of that Person (A) for borrowed money or arising out of any
extension of credit to or for the account of that Person (including
reimbursement or payment obligations with respect to surety bonds,
letters of credit, bankers' acceptances and similar instruments), for
the deferred purchase price of property or services or arising under
conditional sale or other title retention agreements, other than trade
payables arising in the ordinary course of business, (B) evidenced by
notes, bonds, debentures or similar instruments, (C) in respect of
leases (or other agreements conveying the right to use) property which
GAAP as in effect on the date of this Agreement requires to be
classified and accounted for as capital leases or (D) in respect of
interest rate swap, cap or collar agreements or similar arrangements
providing for the mitigation of that Person's interest rate risks either
generally or under specific contingencies between that Person and any
other Person, (ii) any liability secured by any Lien upon any property
or assets of that Person (or upon any revenues, income or profits of
that Person therefrom), whether or not that Person has assumed that
liability or otherwise become liable for the payment thereof, (iii) any
liability of others of the type described in the preceding clause (i) or
(ii) in respect of which that Person has incurred, assumed or acquired a
liability by means of a Guaranty.
"Indemnified Party" has the meaning Section 7.04 specifies.
"Indemnifying Party" has the meaning Section 7.04 specifies.
"Indemnity Notice" has the meaning Section 7.04 specifies.
"Independent Accountants" means Arthur Andersen LLP.
"Industry" means the industry involving the production and sale
of ready-mixed concrete (including truck-mixed concrete) and other
cement mixtures and pre-cast concrete products and any logical extension
of or business activity reasonably related to any of the foregoing.
"Industry Laws" means any and all Governmental Requirements
relating to the licensing or other regulation of the Industry,
including: the Clean Air Act, 42 USC ss.ss.
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401-7671q; the Clean Water Act, 33 USC ss.ss. 1251- 1387; regulations of
the Environmental Protection Agency, 40 C.F.R. ss.ss. 82.150-82.166; and
state statutes governing licensure of facilities that operate in the
Industry.
"Information" means written information, including (i) data,
certificates, reports and statements (excluding Financial Statements)
and (ii) summaries of unwritten agreements, arrangements, contracts,
plans, policies, programs or practices or of unwritten amendments or
modifications of, supplements to or waivers under any of the foregoing
documents.
"IPO" means the first time a registration statement USC has filed
under the Securities Act and respecting a primary underwritten offering
by USC to the public of shares of USC Common Stock becomes effective
under the Securities Act and USC issues and sells any of the shares
registered by that registration statement to the Underwriter.
"IPO Closing Date" means the date on which USC first receives
payment for the shares of USC Common Stock it sells to the Underwriter
in the IPO.
"IPO Price" means the price per share of USC Common Stock which
the cover page of the Final Prospectus sets forth as the "price to
public."
"IPO Pricing Date" means the date, if any, on which USC and the
Underwriter agree in the Underwriting Agreement to the price per share
of USC Common Stock at which the Underwriter, subject to the terms and
conditions of the Underwriting Agreement, will purchase newly issued
shares of USC Common Stock from USC on the IPO Closing Date.
"IRCA" means the Immigration Reform and Control Act of 1986.
"IRS" means the Internal Revenue Service.
"Lien" means, with respect to any property or asset of any Person
(or any revenues, income or profits of that Person therefrom) (in each
case whether the same is consensual or nonconsensual or arises by
contract, operation of law, legal process or otherwise), (i) any
mortgage, lien, security interest, pledge, attachment, levy or other
charge or encumbrance of any kind thereupon or in respect thereof or
(ii) any other arrangement under which the same is transferred,
sequestered or otherwise identified with the intention of subjecting the
same to, or making the same available for, the payment or performance of
any liability in priority to the payment of the ordinary, unsecured
creditors of that Person, including any "adverse claim" (as Section
8-302(b) of each applicable Uniform Commercial Code defines that term)
in the case of any Capital Stock. For purposes of this Agreement, a
Person will be deemed to own subject to a Lien any asset that it has
acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement relating to that asset.
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"Litigation" means any action, case, proceeding, claim,
grievance, suit or investigation or other proceeding conducted by or
pending before any Governmental Authority or any arbitration proceeding.
"Material" means, as applied to any Entity or the Acquired
Business, material to the business, operations, property or assets,
liabilities, financial condition or results of operations of that Entity
and its Subsidiaries considered as a whole or the Acquired Business, as
the case may be.
"Material Adverse Effect" means, with respect to the consequences
of any fact or circumstance (including the occurrence or non-occurrence
of any event) to the Acquired Business, that such fact or circumstance
has caused, is causing or will cause, directly, indirectly or
consequentially, singly or in the aggregate with other facts and
circumstances, any Damages in excess of the Threshold Amount; provided
that the foregoing shall not include the consequences of any fact or
circumstance attributable to (i) factors affecting the Industry
generally, (ii) general national, regional or local economic or
financial conditions or (iii) changes in governmental or legislative
laws, rules or regulation.
"Material Agreement" of any Entity means any contract or
agreement (i) to which that Entity or any of its Subsidiaries is a
party, or by which that Entity or any of its Subsidiaries is bound or to
which any property or assets of that Entity or any of its Subsidiaries
is subject and (ii) which is Material to that Entity.
"Merger" has the meaning the Preliminary Statement specifies.
"Minimum Cash Amount" has the meaning Section 5.01 specifies .
"Minimum Cash Balance" has the meaning Paragraph 1 specifies.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, Section 414 of the Code or Section 3(37) of
ERISA.
"Negative Net Adjustment" has the meaning Section 6.07 specifies.
"Organization State" means, as applied to (i) any corporation,
its state or other jurisdiction of incorporation, (ii) any limited
liability company or limited partnership, the state or other
jurisdiction under whose laws it is formed, organized and existing in
that legal form, and (iii) any other Entity, the state or other
jurisdiction whose laws govern that Entity's internal affairs.
"Other Agreements" has the meaning the Preliminary Statement
specifies.
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"Other Compensation Plan" means any compensation arrangement,
plan, policy, practice or program established, maintained or sponsored
by the Company or any Company Subsidiary, or to which the Company or any
Company Subsidiary contributes, on behalf of any of its employees,
nonemployee directors or officers or other natural persons performing
consulting or other independent contractor services for the Company or
any Company Subsidiary, (i) including all such arrangements, plans,
policies, practices or programs providing for severance pay, deferred
compensation, incentive, bonus or performance awards or the actual or
phantom ownership of any Capital Stock or Derivative Securities of the
Company or any Company Subsidiary, but (ii) excluding all Company ERISA
Pension Plans and Employment Agreements.
"Other Financing Sources" has the meaning Section 5.01 specifies.
"Other Founding Company" has the meaning the Preliminary
Statement specifies.
"Other Transaction Documents" means the Other Agreements and the
other written agreements, documents, instruments and certificates at any
time executed pursuant to or in connection with the Other Agreements
(other than the Transaction Documents and the Underwriting Agreement),
all as amended, modified or supplemented from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Investments" means: (i) at the time of purchase or
other acquisition by the Company or any Company Subsidiary, (A)
obligations issued or guaranteed by the United States of America with a
remaining maturity not exceeding one year, (B) commercial paper with
maturities of not more than 270 days and a published rating of not less
than A-1 by S&P or P-1 by Moody's and (C) certificates of deposit and
bankers' acceptances having maturities of not more than one year of any
commercial bank or trust company if (1) that bank or trust company has a
combined capital and surplus of at least $500,000,000 and (2) its
unsecured long-term debt obligations, or those of a holding company of
which it is a subsidiary, are rated not less than A- by S&P or A3 by
Moody's; and (ii) other extensions of credit made by the Company or any
Company Subsidiary to its retail customers in the ordinary course of its
business and consistent with its past practices.
"Permitted Liens" means, as applied to the property or assets of
any Person (or any revenues, income or profits of that Person
therefrom): (i) Liens for Taxes if the same are not at the time due and
delinquent; (ii) Liens of carriers, warehousemen, mechanics, laborers
and materialmen for sums not yet due; (iii) Liens incurred in the
ordinary course of that Person's business in connection with worker's
compensation, unemployment insurance and other social security
legislation (other than pursuant to ERISA or Section 412(n) of the
Code); (iv) Liens incurred in the ordinary course of that Person's
business in connection with deposit accounts or to secure the
performance of bids, tenders, trade contracts, statutory obligations,
surety and appeal bonds, performance and return-of-money bonds and other
obligations of
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like nature; (v) easements, rights-of-way, reservations, restrictions
and other similar encumbrances incurred in the ordinary course of that
Person's business or existing on property and not materially interfering
with the ordinary conduct of that Person's business or the use of that
property; (vi) defects or irregularities in that Person's title to its
real properties which do not materially (A) diminish the value of the
surface estate or (B) interfere with the ordinary conduct of that
Person's business or the use of any of such properties; (vii) any
interest or title of a lessor of assets that Person is leasing pursuant
to any capital lease Schedule 2.18 lists or any lease that, pursuant to
GAAP, would be accounted for as an operating lease; and (viii) Liens
securing purchase money Indebtedness Schedule 2.17 or 2.18 lists, so
long as those Liens do not attach to any property or assets other than
the properties or assets purchased with the proceeds of that
Indebtedness.
"Person" means any natural person, Entity, estate, trust, union
or employee organization or Governmental Authority or, for the purpose
of the definition of "ERISA Affiliate," any trade or business.
"Plan" has the meaning Section 2.28 specifies.
"Pre-Acquisition Claims" has the meaning Section 10.12 specifies.
"Positive Net Adjustment" has the meaning Section 6.07 specifies.
"Pre-Acquisition Matters" has the meaning Section 10.12
specifies.
"Private Placement Memorandum" means the Private Placement
Memorandum of USC dated March 20, 1999 and relating to the offer of USC
Common Stock in connection with the Acquisition.
"Prohibited Transaction" means any transaction either Section
4975 of the Code or Section 406 of ERISA prohibits and neither Section
4975 of the Code nor Section 408 of ERISA exempts.
"Proprietary Rights" means (i) patents, applications for patents
and patent rights, (ii) in each case, whether registered, unregistered
or under pending registration, trademark rights, trade names, trade name
rights, corporate names, business names, trade styles or dress, service
marks and logos and other trade designations and copyrights and, in the
case of the Company or any Company Subsidiary, (iii) all agreements
relating to the technology, know-how or processes used in any business
of the Company or any Company Subsidiary.
"Pro Rata Share" has the meaning Paragraph 1 specifies.
"Qualified Plans" has the meaning Section 2.28 specifies.
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"RCRA" means the Resource Conservation and Recovery Act of 1976.
"Registration Rights Agreement" means the registration rights
agreement to be executed and delivered at the Closing by USC and the
Stockholders electing to be parties thereto in the form thereof attached
as Exhibit 9.01, with the blanks appropriately filled.
"Registration Statement" means the registration statement,
including (i) each preliminary prospectus it contains prior to the date
on which it becomes effective under the Securities Act (including any
prospectus USC files with the SEC pursuant to Securities Act Rule
424(b)), (ii) the Final Prospectus and (iii) any amendments thereof and
all supplements and exhibits thereto, USC files with the SEC to register
shares of USC Common Stock under the Securities Act for public offering
and sale in the IPO.
"Related Party Agreement" means any contract or other agreement,
written or oral, (i) to which the Company or any Company Subsidiary is a
party or is bound or by which any property of the Company or any Company
Subsidiary is bound or may be subject and (ii) (A) to which any
Stockholder or any of that Stockholder's Related Persons or Affiliates
(other than any other Entity included in the Acquired Business) also is
a party, (B) of which any Stockholder or any of that Stockholder's
Related Persons or Affiliates (other than any other Entity included in
the Acquired Business) is a beneficiary or (C) as to which any
transaction contemplated thereby properly would be characterized
(without regard to the amount involved) as a related party transaction
for purposes of applying the disclosure requirements of GAAP or the SEC
applicable to the financial statements of the Acquired Business which
the Registration Statement includes.
"Related Person" of a Stockholder means: (i) if that Stockholder
is a natural person, (A) any Immediate Family Member of that
Stockholder, (B) any Estate of that Stockholder or any Immediate Family
Member of that Stockholder, (C) the trustee of any inter vivos or
testamentary trust of which all the beneficiaries are Related Persons of
that Stockholder and (D) any Entity the entire equity interest in which
is owned by any one or more of that Stockholder and Related Persons of
that Stockholder; and (ii) if that Stockholder is an Entity, Estate or
trust, (A) any Person who owns an equity interest in that Stockholder on
the date hereof, (B) any Person who would be a Related Person under
clause (i) of this definition of a natural person who is an ultimate
beneficial owner of that Stockholder or (C) any other Entity the entire
equity interest in which is owned by any one or more of that Stockholder
and Related Persons of that Stockholder. In this definition, "Estate"
means, as to any natural person who has died or been adjudicated
mentally incompetent by a court of competent jurisdiction, (i) that
person's estate or (ii) the administrator, conservator, executor,
guardian or representative of that estate.
"Reportable Event" means, with respect to any Company ERISA
Pension Plan, (i) the occurrence of any of the events set forth in
Section 4043(b) or (c) (other than a Reportable Event as to which the
provision of 30 days' notice to the PBGC is waived under
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applicable regulations), 4062(e) or 4063(a) of ERISA with respect to
that plan, (ii) any event requiring the Company or any ERISA Affiliate
to provide security to that plan under Section 401(a)(29) of the Code or
(iii) any failure to make a payment Section 412(m) of the Code requires
with respect to that plan.
"Representatives" means, with respect to any Person, the
directors, officers, employees, Affiliates, accountants (including
independent certified public accountants), advisors, attorneys,
consultants or other agents of that Person, or any other representatives
of that Person or of any of those directors, officers, employees,
Affiliates, accountants (including independent certified public
accountants), advisors, attorneys, consultants or other agents.
"Restricted Payment" means, with respect to any Entity at any
time, any of the following that Entity effects: (i) any declaration or
payment of any dividend or other distribution, direct or indirect, on
account of any Capital Stock of that Entity or any Affiliate of that
Entity; (ii) any direct or indirect redemption, retirement, purchase or
other acquisition for value of, or any direct or indirect purchase,
payment or sinking fund or similar deposit for the redemption,
retirement, purchase or other acquisition for value of, or to obtain the
surrender of, any then outstanding Capital Stock of that Entity or any
Affiliate of that Entity or any then outstanding warrants, options or
other rights to acquire or subscribe for or purchase unissued or
treasury Capital Stock of that Entity or any Affiliate of that Entity;
or (iii) any payment or distribution of, or any commitment to pay or
distribute, any cash or other property if, for purposes of the Code,
that payment or distribution would (or reasonably could be expected to)
constitute a constructive dividend to any Stockholder.
"Restricted Period" has the meaning Section 10.14 specifies.
"Returns" of a Person means the returns, reports or statements
(including any information returns) any Governmental Requirement
requires that Person to file for purposes of any Tax.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Solid Wastes, Hazardous Wastes or Hazardous Substances" have the
meanings ascribed to those terms in CERCLA, RCRA or any other
Environmental Law applicable to the business or operations of the
Company or any Company Subsidiary which imparts a broader meaning to any
of those terms than does CERCLA or RCRA.
"S&P" means Standard and Poor's Rating Services.
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"Stockholder Indemnified Party" means (i) each Stockholder and
each of that Stockholder's Affiliates (other than the Company, any of
the other Combined Companies, if any, or any Subsidiary of any of the
Combined Companies, if any, or, following the Effective Time, the
Surviving Corporation or USC or any of its Subsidiaries, if the
Stockholder is an Affiliate of USC), agents and counsel and (ii) prior
to the Effective Time, the Company and each of its officers, directors,
employees, agents and counsel who are not Stockholder Indemnified
Parties within the meaning of clause (i) of this definition.
"Stockholder Indemnified Loss" has the meaning Section 7.03
specifies.
"Stockholder Unindemnified Loss" has the meaning Section 6.06
specifies.
"Subsidiary" of any specified Person at any time, means any
Entity a majority of the Capital Stock of which is at that time owned or
controlled, directly or indirectly, by the specified Person.
"Supplemental Information" has the meaning Section 4.07
specifies.
"Tax" or "Taxes" means all net or gross income, gross receipts,
net proceeds, sales, use, ad valorem, value added, franchise, bank
shares, withholding, payroll, employment, excise, property, deed, stamp,
alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges or
assessments of any nature whatever imposed by any Governmental
Requirement, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any Governmental Authority having or
purporting to exercise jurisdiction with respect to any Tax.
"Termination Date" has the meaning Paragraph 1 specifies.
"Termination Event" means, with respect to any Company ERISA
Pension Plan, (i) any Reportable Event with respect to that plan which
is likely to result in the termination of that plan, (ii) the
termination of, or the filing of a notice of intent to terminate, that
plan or the treatment of any amendment to that plan as a termination
under Section 4041(c) of ERISA or (iii) the institution of proceedings
to terminate, or the appointment of a trustee to administer, that plan
under Section 4042 of ERISA.
"Third Party Claim" means any claim asserted by any Person that
or who is not a party to this Agreement against any Indemnified Party.
"Threshold Amount" means 1% of the Ceiling Amount.
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"Transaction Document" means this Agreement, the Certificates of
Merger, the Registration Rights Agreement and the other written
agreements, documents, instruments and certificates executed pursuant to
or in connection with this Agreement (other than the Other Transaction
Documents and the Underwriting Agreement), including those Article V
specifies are to be delivered at or before the Closing, all as amended,
modified or supplemented from time to time.
"Transfer Taxes" has the meaning Section 10.05 specifies.
"Underwriter" means collectively (i) the investment banking firms
that prospectively may enter into the Underwriting Agreement and (ii)
from and after the IPO Pricing Date, the investment banking firms
parties to the Underwriting Agreement.
"Underwriting Agreement" has the meaning Section 5.01(a)(iii)
specifies.
"USC Acquisition Candidate" means any Entity (i) which the
Acquired Business or any Entity the Acquired Business includes or USC
has called on in connection with the possible acquisition by any of them
of that Entity or (ii) of which any of them has made an acquisition
analysis, in any case where such Entity is engaged in any aspect of the
Industry.
"USC Common Stock" means the common stock, par value $.001 per
share, of USC.
"USC Indemnified Loss" has the meaning Section 7.02 specifies.
"USC Indemnified Party" means USC and its Affiliates and each of
their respective officers, directors, employees, agents and counsel;
provided, however, that no Person who indemnifies USC Indemnified
Parties in this Agreement in his capacity as a Stockholder will be a USC
Indemnified Party for purposes of this Agreement, notwithstanding that
the Person is a USC Indemnified Party for purposes of one or more of the
Other Agreements.
"USC Sub Common Stock" has the meaning Paragraph 1 specifies.
"USC Unindemnified Loss" has the meaning Section 6.06 specifies.
"Welfare Plan" means an "employee welfare benefit plan" as
defined in Section 3(1) of ERISA.
"Wholly Owned Subsidiary" means any corporation or other Entity
all of whose outstanding Capital Stock on a fully diluted basis the
Company owns and controls, directly or indirectly through another Wholly
Owned Subsidiary.
"Working Capital Adjustment" has the meaning Section 6.07
specifies.
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Section 9.02 OTHER DEFINED TERMs. Words and terms these Uniform
Provisions use which are defined elsewhere in this Agreement are used herein as
therein defined.
Section 9.03 OTHER DEFINITIONAL PROVISIONS. (a) Except as this
Agreement otherwise specifies, all references herein to any Governmental
Requirement defined or referred to herein, including the Code, CERCLA, ERISA,
the Exchange Act, RCRA and the Securities Act, are references to that
Governmental Requirement or any successor Governmental Requirement, as the same
may have been amended or supplemented from time to time, and any rules or
regulations promulgated thereunder.
(b) This Agreement uses the words "herein," "hereof" and
"hereunder" and words of similar import to refer to this Agreement as a whole
and not to any provision of this Agreement, and the words "Article,"
"Paragraph," "Section," "Preliminary Statement," "Annex," "Addendum," "Schedule"
and "Exhibit" refer to Articles, Paragraphs and Sections of, the Preliminary
Statement in, and Annexes, Addenda, Schedules and Exhibits to, this Agreement
unless it otherwise specifies.
(c) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes the
other gender and the neuter.
(d) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding such word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
(e) The phrase "to the knowledge of the Company" or phrases with
similar wording, when used in this Agreement to qualify any representation or
warranty Article II contains, means the collective knowledge, after reasonable
investigation, of each Stockholder and each other Person who holds a management
position with the Company as of the date hereof; provided, however, that if any
Governmental Requirement referred to in any such representation or warranty
specifies a different meaning for that phrase, the meaning that Governmental
Requirement specifies will apply for purposes of that representation and
warranty.
Section 9.04 CAPTIONS. This Agreement includes captions to
Articles, Paragraphs, Sections and subsections of, and Annexes, Addenda,
Schedules and Exhibits to, this Agreement or any other Transaction Document for
convenience of reference only, and these captions do not constitute a part of
this Agreement or any other Transaction Document for any other purpose or in any
way affect the meaning or construction of any provision of this Agreement or any
other Transaction Document.
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ARTICLE X
GENERAL PROVISIONS
Section 10.01 TREATMENT OF CONFIDENTIAL INFORMATION. (a) Each of
the Company and the Stockholders, severally and not jointly with any other
Person, acknowledges that it has or may have had in the past, currently has and
in the future may have access to Confidential Information of the Company and the
Company Subsidiaries, the Other Founding Companies and their Subsidiaries and
USC and its Subsidiaries. Each of the Company and the Stockholders, severally
and not jointly with any other Person, agrees that it will keep confidential all
that Confidential Information furnished to it and, except with the specific
prior written consent of USC, will not disclose that Confidential Information to
any Person except (i) Representatives of USC and (ii) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 10.01; provided, however, that, for
purpose of this Section 10.01(a), Confidential Information does not include such
information as (i) becomes known to the public generally through no fault of any
Stockholder, (ii) is required to be disclosed by law or the order of any
Governmental Authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), each Stockholder will give prior
written notice thereof to USC and provide USC with the opportunity to contest
that disclosure, or (iii) the disclosing party reasonably believes is required
to be disclosed in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 10.01 with respect to any
Confidential Information, USC will be entitled to an injunction restraining that
Stockholder from disclosing, in whole or in part, that Confidential Information.
Nothing herein shall be construed as prohibiting USC from pursuing any other
available remedy for such breach or threatened breach, including the recovery of
damages.
(b) Because of (i) the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 10.01(a) and (ii)
the immediate and irreparable damage that would be caused to USC for which it
would have no other adequate remedy, each of the Company and the Stockholders
agrees that USC may enforce the provisions of Section 10.01(a) by injunctions
and restraining orders against each of them who breaches any of those
provisions.
(c) USC acknowledges that it has or may have had in the past,
currently has and in the future may have access to Confidential Information of
the Company and the Company Subsidiaries. USC agrees that, until the Effective
Time, it will keep confidential all that Confidential Information furnished to
it and, except with the specific prior written consent of the Company, will not
disclose that Confidential Information to any Person prior to the Effective Time
except as Section 4.01(a) contemplates; provided, however, that, for purposes of
this Section 10.01(c), Confidential Information does not include such
information as (i) becomes known to the public generally through no fault of
USC, (ii) is required to be disclosed by law or the order of any Governmental
Authority under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), USC will, if possible, give prior written notice
thereof to the Company and provide the Company with the opportunity to contest
that disclosure, or (iii) USC reasonably
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believes is required to be disclosed in connection with the defense of a lawsuit
against it. In the event of a breach or threatened breach by USC of the
provisions of this Section 10.01 with respect to any Confidential Information,
the Company will be entitled to an injunction restraining USC from disclosing,
in whole or in part, that Confidential Information. Nothing herein shall be
construed as prohibiting the Company from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
(d) Because of (i) the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 10.01(c) and (ii)
the immediate and irreparable damage that would be caused to the Company for
which it would have no other adequate remedy, USC agrees that the Company may
enforce the provisions of Section 10.01(c) by injunctions and restraining orders
against it.
(e) The obligations of the parties under this Section 10.01 will
survive the termination of this Agreement.
Section 10.02 BROKERS AND AGENTS. Except as Schedule 1.04 sets
forth, the Stockholders jointly and severally represent and warrant to USC that
the Company has not directly or indirectly employed or become obligated to pay
any broker or similar agent in connection with the transactions contemplated
hereby and agree, without regard to the Threshold Amount limitations Article VII
sets forth, to indemnify USC against all Damage Claims arising out of claims for
any and all fees and commissions of brokers or similar agents employed or
promised payment by the Company.
Section 10.03 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and the rights of the parties hereunder may not be assigned (except by
operation of law) and will be binding on and inure to the benefit of the parties
hereto, the successors of USC and the heirs and legal representatives of the
Stockholders (and, in the case of any trust, the successor trustees of that
trust). Neither this Agreement nor any other Transaction Document is intended,
or shall be construed, deemed or interpreted, to confer on any Person not a
party hereto or thereto any rights or remedies hereunder or thereunder, except
as the final sentence of Section 1.05, Article VII and Section 10.12 provide or
as otherwise provided expressly herein or therein.
Section 10.04 ENTIRE AGREEMENT; AMENDMENT; WAIVERS. This
Agreement and the documents delivered pursuant hereto constitute the entire
agreement and understanding among the Stockholders, the Company, USC Sub and USC
and supersede all prior agreements and understandings, both written and oral,
relating to the subject matter of this Agreement. This Agreement may be amended,
modified or supplemented, and any right hereunder may be waived, if, but only
if, that amendment, modification, supplement or waiver is in writing and signed
by the Stockholders entitled to receive at least 80% of the total Acquisition
Consideration, the Company and USC; provided, however, that no such amendment,
modification, supplement or waiver will be effective unless it is signed by each
Stockholder affected thereby to the extent that it (i) changes the several
nature of that Stockholder's representations and warranties (to the extent they
are not already
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joint and several as Article II and Section 10.02 provide), (ii) reduces the
amount, or changes the components, of the Acquisition Consideration that
Stockholder is entitled to receive pursuant to Paragraph 2 or (iii) amends or
waives this sentence. The waiver of any of the terms and conditions hereof shall
not be construed or interpreted as, or deemed to be, a waiver of any other term
or condition hereof.
Section 10.05 EXPENSES. Whether or not the transactions
contemplated hereby are consummated, (i) USC will pay the fees, expenses and
disbursements of USC and its Subsidiaries and their Representatives in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by USC and USC Sub under this Agreement, and
(ii) the Stockholders will pay, from personal funds, and not from funds of the
Company or any Company Subsidiary, all sales, use, transfer and other similar
taxes (collectively, "Transfer Taxes") and fees incurred in connection with the
transactions contemplated hereby, including the fees, expenses and disbursements
counsel for the Company and the Stockholders incur in connection with the
subject matter of this Agreement; provided, however, that the Stockholders may
cause the Company to pay the reasonable and customary fees, expenses and
disbursements of counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement on or before the IPO
Closing Date to the extent those fees, expenses and disbursements have been paid
on or prior to the IPO Closing Date or are recorded as liabilities on the Final
Balance Sheet. The Stockholders will file all necessary documentation and
Returns with respect to all Transfer Taxes. In addition, each Stockholder
acknowledges that he, and not the Company or USC or the Surviving Corporation,
will pay all Taxes due on receipt of the consideration payable to that
Stockholder pursuant to the transactions this Agreement contemplates.
Section 10.06 NOTICES. All notices required or permitted
hereunder must be in writing and will be deemed to be delivered and received (i)
if personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the party to whom notice is sent or (ii) if
delivered by mail (whether actually received or not), at the close of business
on the third Houston, Texas business day next following the day when placed in
the mail, postage prepaid, certified or registered, addressed to the appropriate
party or parties, at the address of such party or parties set forth below (or at
such other address as such party may designate by written notice to all other
parties in accordance herewith):
(i) if to USC or USC Sub, addressed to it at:
U.S. Concrete, Inc.
1360 Post Oak Boulevard, Suite 800
Houston, Texas 77056
Attn.: Chief Executive Officer
Facsimile: 713-350-6001
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with copies (which will not constitute notice for purposes of this
Agreement) to:
Baker & Botts, L.L.P.
One Shell Plaza
Houston, Texas 77002-4995
Attn: Ted W. Paris, Esq.
Facsimile: 713-229-1522
(ii) if to the Company or any of the Stockholders, addressed to
that Person as Paragraph 7 sets forth.
SECTION 10.07 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
Section 10.08 EXERCISE OF RIGHTS AND REMEDIES. Except as
otherwise provided herein, no delay or omission in the exercise of any right,
power or remedy accruing to any party hereto as a result of any breach or
default hereunder by any other party hereto will impair any such right, power or
remedy, nor will it be construed, deemed or interpreted as a waiver of or
acquiescence in any such breach or default, or of any similar breach or default
occurring later; nor will any waiver of any single breach or default be
construed, deemed or interpreted as a waiver of any other breach or default
hereunder occurring before or after that waiver.
Section 10.09 TIME. Time is of the essence in the performance of
this Agreement in all respects.
Section 10.10 REFORMATION AND SEVERABILITY. If any provision of
this Agreement is invalid, illegal or unenforceable, that provision will, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties hereto as
expressed herein, and if such a modification is not possible, that provision
will be severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement will not in any
way be affected or impaired thereby.
Section 10.11 REMEDIES CUMULATIVE. No right, remedy or election
any term of this Agreement gives will be deemed exclusive, but each will be
cumulative with all other rights, remedies and elections available at law or in
equity.
Section 10.12 RELEASE. Notwithstanding any other provision of
this Agreement and subject to the limitations the last sentence of this Section
10.12 sets forth, each Stockholder hereby unconditionally and irrevocably
releases and forever discharges, effective as of and forever after the Effective
Time, to the fullest extent permitted by applicable law, all past, present and
future USC Indemnified Parties (including, after the Effective Time, each of the
Company and the Company
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Subsidiaries which is a Subsidiary of USC immediately after the Effective Time)
(collectively, the "Released Parties") from any and all debts, liabilities,
obligations, claims, demands, actions or causes of action, suits, judgments or
controversies of any kind whatsoever (collectively, "Pre-Acquisition Claims")
against the Company and the Company Subsidiaries, if any, or any of them that
arises out of or is based on any agreement or understanding or act or failure to
act (INCLUDING ANY ACT OR FAILURE TO ACT THAT CONSTITUTES ORDINARY OR GROSS
NEGLIGENCE OR RECKLESS OR WILLFUL, WANTON MISCONDUCT), misrepresentation,
omission, transaction, fact, event or other matter occurring prior to the
Effective Time (whether based on any Governmental Requirement or right of
action, at law or in equity or otherwise, foreseen or unforeseen, matured or
unmatured, known or unknown, accrued or not accrued) (collectively,
"Pre-Acquisition Matters"), including without limitation: (i) claims by the
Stockholder with respect to repayment of loans or indebtedness (except for
promissory notes taken by the Stockholder with respect to the payment of the
1998 Restricted Payment Amount or the 1999 Restricted Payment Amount); (ii) any
rights, titles and interests in, to or under any agreements, arrangements or
understandings to which the Stockholder is a party; and (iii) claims by the
Stockholder with respect to dividends, violation of preemptive rights, or
payment of salaries or other compensation or in any way arising out of or in
connection with the Stockholder's employment with the Company or any Company
Subsidiary, the cessation of that employment, the Stockholder's status as an
officer, director or stockholder of the Company or otherwise (but excluding any
and all claims in respect of (A) accrued and unpaid amounts owing to the
Stockholder pursuant to each Employment Agreement Schedule 2.27 lists to which
the Stockholder is a party, (B) accrued and unpaid Cash Compensation owing to
the Stockholder at the rates or in the amounts, as the case may be, set forth in
the list Section 2.27 describes, (C) benefits accrued under each Company ERISA
Benefit Plan or Other Compensation Plan, the existence of which Schedule 2.27
discloses and (D) amounts or other obligations owing to the Stockholder,
directly or indirectly, pursuant to each Related Party Agreement, if any, which
Schedule 2.12 discloses and to which the Stockholder, directly or indirectly, is
a party). The Stockholder further agrees not to file or bring any Litigation
before any Governmental Authority on the basis of or respecting any
Pre-Acquisition Claim concerning any Pre-Acquisition Matter against any Released
Party. Each Stockholder (i) acknowledges that he or she fully comprehends and
understands all the terms of this Section 10.12 and their legal effects and (ii)
expressly represents and warrants that (A) he or she is competent to effect the
release made in this Section 10.12 knowingly and voluntarily and without
reliance on any statement or representation of any Released Party or its
Representatives and (B) he or she had the opportunity to consult with an
attorney of his or her choice regarding this Section 10.12. This Section 10.12
will not affect the rights of the Stockholders under this Agreement or any other
Transaction Document.
Section 10.13 RESPECTING THE IPO. Each of the Company and the
Stockholders acknowledges and agrees that: (i) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (ii) neither USC or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (A) the Registration Statement to become
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effective (provided, however, that USC will use its reasonable best efforts to
cause the Registration Statement to become effective prior to the Termination
Date) or (B) the IPO to occur at a particular price or within a particular range
of prices or to occur at all; and (iii) the decision of Stockholders to enter
into this Agreement, or to vote in favor of or consent to the Merger, has been
or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
USC or the IPO. The Underwriter will have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement. Each Stockholder further agrees to execute and deliver
to the investment banking firm acting as the lead managing underwriter for the
IPO (if requested by that firm) a customary lockup agreement pursuant to which
that Stockholder will agree not to sell, transfer or otherwise dispose of any
shares of USC Common Stock during a period of time, not to exceed 180 days,
following the date of the Final Prospectus.
Section 10.14 RESTRICTIONS ON TRANSFER OF USC COMMON STOCK. (a)
During the one-year period ending on the first anniversary of the Closing Date
(the "Restricted Period"), no Stockholder voluntarily will: (i) sell, assign,
exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose
of (A) any shares of USC Common Stock received by any Stockholder in the Merger
or (B) any interest in (including any option to buy or sell) any of those shares
of USC Common Stock, in whole or in part, and USC will have no obligation to,
and will not, treat any such attempted transfer as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares of USC
Common Stock or any interest therein, the intent or effect of which is to reduce
the risk of owning the shares of USC Common Stock acquired pursuant to Paragraph
2 (including, for example engaging in put, call, short-sale, straddle or similar
market transactions); provided, however, that this Section 10.14 will not
restrict any transfer of USC Common Stock acquired by a Stockholder pursuant to
Paragraph 2 to any of that Stockholder's Related Persons who agree in writing to
be bound by the provisions of Section 10.01 and this Section 10.14. The
certificates evidencing the USC Common Stock delivered to each Stockholder
pursuant to Paragraph 2 will bear a legend substantially in the form set forth
below and containing such other information as USC may deem necessary or
appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES
THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER WILL NOT
BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR
OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE ONE-YEAR PERIOD
ENDING ON ____________, 2000 [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE]. ON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE EXPIRATION OF
THE PERIODS SPECIFIED ABOVE.
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(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of USC Common Stock to be delivered to
that Stockholder pursuant to Paragraph 2 (A) have not been and, except pursuant
to the Registration Rights Agreement, if applicable, will not be registered
under the Securities Act and therefore may not be resold by that Stockholder
without compliance with the Securities Act and (B) will, as a result of the
restrictions on their transferability which this Agreement imposes during the
Restricted Period, have a value materially less on the IPO Closing Date than
would be the value of freely tradable shares of USC Common Stock and (ii)
covenants that none of the shares of USC Common Stock issued to that Stockholder
pursuant to Paragraph 2 will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all the
applicable provisions of the Securities Act and the rules and regulations of the
SEC and applicable state securities laws and regulations. All certificates
evidencing shares of USC Common Stock issued pursuant to Paragraph 2 will bear
the following legend in addition to the legend Section 10.14(a) prescribes:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF
THE HOLDER HEREOF COMPLIES WITH THAT LAW AND OTHER APPLICABLE SECURITIES
LAWS.
In addition, certificates evidencing shares of USC Common Stock issued pursuant
to Paragraph 2 to each Stockholder will bear any legend required by the
securities or blue sky laws of the state in which that Stockholder resides.
Section 10.15 SUBDIVISIONS AND RECOMBINATIONS OF USC COMMON
STOCK. Upon the occurrence of an event prior to the IPO Closing Date by which
(i) the USC Common Stock is subdivided into a greater number of shares or (ii)
combined into a smaller number of shares prior to the IPO Closing Date, the
number of shares set forth in Schedule 2(D) shall be adjusted by either (a)
increasing the number of shares set forth on Schedule 2(D) in proportion to the
subdivision of the shares or (b) decreasing the number of shares set forth on
Schedule 2(D) in proportion to any combination of such shares.
ARTICLE XI
TERMINATION
Section 11.01 TERMINATION OF THIS AGREEMENT. (a) This Agreement
may be terminated at any time prior to the Closing solely:
(i) by the mutual written consent of USC and the Company;
(ii) by the Stockholders or the Company, on the one hand, or by
USC, on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated
by the Termination Date, unless the failure of such transactions to be
consummated results from the willful failure of the party (or in the
case
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of the Stockholders and the Company, any of them) seeking to terminate
this Agreement to perform or adhere to any agreement required hereby to
be performed or adhered to by it prior to or at the Closing or
thereafter on the IPO Closing Date;
(iii) by the Stockholders or the Company, on the one hand, or by
USC, on the other hand, if a material breach or default is made by the
other party (or in the case of the Stockholders and the Company, any of
them) in the observance or in the due and timely performance of any of
the covenants, agreements or conditions contained herein;
(iv) by USC if Section 4.07 entitles it to do so; or
(v) by the Stockholders or the Company if any Other Agreement
with an Other Founding Company whose revenues for the year ended
December 31, 1998 exceeded 20% of the pro forma combined revenues of all
the Founding Companies for the year ended December 31, 1998, in each
case as the Private Placement Memorandum reflects, has been terminated
pursuant to its terms.
(b) This Agreement may be terminated after the Closing solely:
(i) by USC or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO (in the event of any such termination, USC will
provide the Company and the Stockholders with prompt notice thereof); or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 New York City business
days after the Closing Date.
Section 11.02 LIABILITIES IN THE EVENT OF TERMINATION. If this
Agreement is terminated pursuant to Section 11.01, there shall be no liability
or obligation on the part of any party hereto except (i) as Section 10.05
provides and (ii) to the extent that such liability is based on the breach by
that party of any of its representations, warranties or covenants set forth in
this Agreement.
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
the Effective Date (as defined herein) by and between U.S. Concrete, Inc., a
Delaware corporation (the "Company"), and William T. Albanese (the "Employee").
PRELIMINARY STATEMENT
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company without distraction or
concern over minimum compensation, benefits or tenure, to develop and implement
the Company's initial development plan and thereafter to assist in the
management of the Company's future growth and development and the maximization
of the returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
Section 1. CERTAIN DEFINED TERMS. (a) The following terms this
Agreement uses have the respective meanings this Section 1(a) assigns to them:
"Acquired Business" means Central Concrete Supply Co., Inc.
"Active Status" means the Employee's Employment status from the
Effective Date to and including the first to occur of (i) the Part-time
Employment Effective Date or (ii) the Termination Date.
"Annual Cash Compensation" of the Employee for any Compensation Year
means the salary the Employee earns during that Compensation Year,
including all amounts of salary the Employee earns during that
Compensation Year and elects to (i) defer, whether pursuant to a
Compensation Plan intended to qualify as a plan under Code Section 401(k)
or otherwise, and (ii) forego pursuant to a Compensation Plan under which
the Employee may receive Common Stock or any other form of noncash
compensation in lieu of that salary. For purposes of this definition, any
form of noncash compensation will be valued at its fair market value at
the time that compensation is awarded, earned or paid, as the case may be.
"Average Annual Cash Compensation" of the Employee means, as of the
Part-time Employment Effective Date, the average of (i) the Annual Cash
Compensation the Employee has earned in each of the two Compensation Years
next preceding that date or, if less than
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two Compensation Years have occurred prior to that date and since the
Effective Date, (ii) the Annual Cash Compensation in each whole
Compensation Year, if any, and, restated on an annualized basis, the
Annual Cash Compensation in each partial Compensation Year (up to a
maximum of two partial Compensation Years) next preceding the Part-time
Employment Effective Date.
"Base Salary" means: (i) prior to the Part-time Employment Effective
Date, the guaranteed minimum annual salary payable by the Company to the
Employee pursuant to Section 4(a); and (ii) on and after the Part-time
Employment Effective Date, the guaranteed minimum annual salary payable by
the Company to the Employee pursuant to Section 5(e).
"Board" means the entire Board of Directors of the Company.
"Business Reason" for the Company's termination of the Employee's
Employment means any lawful reason other than Cause.
"Cause" for the Company's termination of the Employee's Employment
means: (i) the Employee's conviction of a felony crime (or the Employee's
entering of a plea of NOLO CONTENDERE to any charge against him of a
felony crime) of any kind; or (ii) the Employee's continuing failure to
substantially perform his duties and responsibilities hereunder (except by
reason of the Employee's incapacity attributable to physical or mental
illness or injury) for a period of 20 days after the Required Board
Majority has delivered to the Employee a written demand for substantial
performance hereunder which specifically identifies the bases for the
Required Board Majority's determination that the Employee has not
substantially performed his duties and responsibilities hereunder (that
period being the "Grace Period"); provided, that for purposes of this
clause (ii), the Company will not have Cause to terminate the Employee's
Employment unless (A) at a meeting of the Board called and held following
the Grace Period in the city in which the Company's principal executive
offices are located of which the Employee was given not less than 10 days'
prior written notice and at which the Employee was afforded the
opportunity to be represented by counsel, appear and be heard, the
Required Board Majority adopts a written resolution which (1) sets forth
the Required Board Majority's determination that the failure of the
Employee to substantially perform his duties and responsibilities
hereunder has (except by reason of his incapacity attributable to physical
or mental illness or injury) continued past the Grace Period and (2)
specifically identifies the bases for that determination and (B) the
Company, at the written direction of the Required Board Majority, delivers
to the Employee a Notice of Termination for Cause to which a copy of that
resolution, certified as being true and correct by the secretary or any
assistant secretary of the Company, is attached. Cause of the type
referred to in clause (i) of the preceding sentence is a "Type I Cause,"
while Cause of the type referred to in clause (ii) of the preceding
sentence is a "Type II Cause."
"Code" means the Internal Revenue Code of 1986.
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"Common Stock" means the common stock of the Company.
"Company" means (i) U.S. Concrete, Inc., a Delaware corporation, and
(ii) any Person that assumes the obligations of "the Company" hereunder,
by operation of law, pursuant to Section 9(c)(iii) or otherwise.
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program the Company or any subsidiary of the Company
establishes, maintains or sponsors, or to which the Company or any
subsidiary of the Company contributes, on behalf of two or more Executive
Officers (including, for this purpose, any member of the family of any
Executive Officer), (i) including (A) any "employee pension benefit plan"
(as defined in ERISA Section 3(2)) or other "employee benefit plan" (as
defined in ERISA Section 3(3)), (B) any other retirement or savings plan,
including any supplemental benefit arrangement relating to any plan
intended to be qualified under Code Section 401(a) or whose benefits the
Code or ERISA limits, (C) any "employee welfare plan" (as defined in ERISA
Section 3(1)), (D) any arrangement, plan, policy, practice or program
providing for severance pay, deferred compensation or insurance benefit
and (E) any Incentive Plan, but (ii) excluding any compensation
arrangement, plan, policy, practice or program to the extent it provides
for annual base salary.
"Compensation Committee" means the committee of the Board to which
the Board has delegated duties respecting the compensation of Executive
Officers and the administration of Incentive Plans, if any, intended to
qualify for the Rule 16b-3 exemption under the Securities Exchange Act of
1934.
"Compensation Year" means a calendar year.
"Confidential Information" means, with respect to the Company or any
subsidiary of the Company, all trade secrets and other confidential,
nonpublic and/or proprietary information of that Person, including
information derived from reports, investigations, research, work in
progress, codes, marketing and sales programs, customer lists, records of
customer service requirements, capital expenditure projects, cost
summaries, pricing formulae, contract analyses, financial information,
projections, present and future business plans, confidential filings with
any governmental authority and all other confidential, nonpublic concepts,
methods of doing business, ideas, materials or information prepared or
performed for, by or on behalf of that Person.
"CPI" means for any period the Consumer Price Index for All Urban
Consumers, All Items, 1982-84 = 100, U.S. City Average, as published by
the United States Department of Labor, Bureau of Labor Statistics (or its
successor) for that period.
"Disability" of the Employee means the Employee has been determined
(which determination will be final and binding on all Persons, absent
manifest error), as a result of
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a physical or mental illness or personal injury he has incurred (including
illness or injury resulting from any substance abuse), by a Qualified
Physician (who may be the doctor treating or otherwise acting as the
Employee's doctor in connection with the illness or injury in question)
selected by the Employee, or by the Company at its expense, to be unable
to perform, at the time of that determination and, in all reasonable
medical likelihood, indefinitely thereafter, the normal duties then most
recently assigned, under and in accordance with the terms hereof, to the
Employee while on Active Status; provided that the determination whether
the Employee has incurred a Disability will be made by a majority of three
Qualified Physicians, (i) one of whom the Employee selects, (ii) one of
whom the Company selects and (iii) the remaining one of whom the Qualified
Physicians the Employee and the Company have selected pursuant to clauses
(i) and (ii) of this proviso select and the fees and expenses of whom the
Employee and the Company will share and pay in equal amounts, if: (A) the
Employee has selected a Qualified Physician and the Company has selected
another Qualified Physician, in each case to determine whether the
Employee has incurred a Disability, and (B) those Qualified Physicians
disagree as to whether the Employee has incurred a Disability. For
purposes of this definition, if the Employee is unable by reason of
illness or injury to give an informed consent to the performance of the
treatment of that illness or injury, a Qualified Physician selected by any
Person who is authorized by applicable law to give that consent will be
deemed to have been selected by the Employee. Notwithstanding the
foregoing, if the Company maintains a disability insurance policy that
provides coverage for its Executive Officers generally, the term
"Disability," as used in this Agreement, shall mean the events and/or
circumstances under which the Employee will be entitled to receive
disability benefits under that insurance policy.
"Effective Date" has the meaning Section 9(l) specifies.
"Employment" means the salaried employment of the Employee by the
Company or a subsidiary of the Company hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Executive Officer" means any of the chairman of the board, the
chief executive officer, the chief operating officer, the chief financial
officer, the president or any executive, regional or other group or senior
vice president of the Company.
"Good Reason" for the Employee's termination of his Employment
means: (i) any violation hereof in any material respect by the Company;
(ii) either (A) a failure of the Company to continue in effect any
Compensation Plan in which the Employee was participating or (B) the
taking of any action by the Company which would adversely affect the
Employee's participation in or materially reduce the Employee's benefits
under any such Compensation Plan, unless (1) in the case of either
subclause (A) or (B) of this clause, there is substituted a comparable
Compensation Plan that is at least economically equivalent, in terms of
the benefit offered to the Employee, to the Compensation Plan being ended
or in
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which the Employee's participation is being adversely affected or the
Employee's benefits are being materially reduced or (2) in the case of
that subclause (A), the failure, or in the case of that subclause (B), the
taking of action, adversely affects Executive Officers generally; or (iii)
the assignment to the Employee without the Employee's written consent of
duties inconsistent in any material respect with the Employee's then
current positions, authority, duties or responsibilities or any other
action by the Company which results in a material diminution in those
positions, authority, duties or responsibilities; provided, however, that
if the Company combines the operations of the Acquired Business with the
operations of one or more subsidiaries of the Company (whether through the
creation of an unincorporated or other division, by merger or
consolidation or otherwise), no resulting change in the status, offices,
titles or reporting requirements of the Employee will constitute "Good
Reason."
"Incentive Plan" means any compensation arrangement, plan, policy,
practice or program the Company or any subsidiary of the Company
establishes, maintains or sponsors, or to which the Company or any
subsidiary of the Company contributes, on behalf of at least two Executive
Officers and which provides for incentive, bonus or other
performance-based awards of cash, securities or the phantom equivalent of
securities, including any stock option, stock appreciation right and
restricted stock plan, but excluding any plan intended to qualify as a
plan under any one or more of Code Sections 401(a), 401(k) or 423.
"IPO" means the first time a registration statement the Company has
filed under the Securities Act of 1933, as amended (the "Securities Act")
and respecting a primary underwritten offering by the Company to the
public of shares of Common Stock becomes effective under the Securities
Act and the Company issues and sells any of the shares registered by that
registration statement to the Underwriter.
"IPO Closing Date" means the date on which the Company first
receives payment for the shares of Common Stock it sells to the
Underwriter in the IPO.
"Nonterminating Party" means the Employee or the Company, as the
case may be, to which the Terminating Party delivers a Notice of
Termination.
"Notice of Termination" to or from the Employee means a written
notice that: (i) states that it is a "Notice of Termination" hereunder,
(ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances the Terminating Party claims to provide a basis for
termination of the Employee's Employment, and if the Termination Date is
other than the date of receipt of the notice, (iii) sets forth that
Termination Date.
"Part-time Employment Effective Date" means, (i) if the Company
elects pursuant to any applicable provision hereof to terminate the
Employee's Employment other than for Cause or (ii) if the Employee elects
pursuant to the applicable provision hereof to terminate his Employment
for Good Reason or by reason of his Disability, the date the
Nonterminating Party receives the Terminating Party's Notice of
Termination.
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"Part-time Employment Period" means the period of time which begins
on the Part- time Employment Effective Date and ends on the first to occur
of (i) the third anniversary of the Effective Date or, if later, the first
anniversary of the Part-time Employment Effective Date, (ii) the
termination by the Company of the Employee's Employment for Type I Cause
or (iii) the death of the Employee.
"Person" means any natural person, sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association,
mutual company, joint stock company, joint venture, estate, trust, union
or employee organization or governmental authority.
"Qualified Physician" means, in the case of any determination
whether the Employee has sustained a Disability, a physician (i) holding
an M.D. degree from a medical school located in the United States, (ii)
specializing and board-certified in the treatment of the injury or illness
that has or may have caused that Disability and (iii) having admission
privileges to one or more hospitals located in the state in which the
Company then has its principal executive offices or in the state in which
the Employee then is domiciled.
"Required Board Majority" means at any time a majority of the
members of the Board at that time.
"Retirement" means termination of the Employee's Employment by
reason of the Employee's giving a Notice of Termination on or following
the date he has attained age 65.
"Terminating Party" means the Employee or the Company, as the case
may be, who or which terminates the Employee's Employment by means of a
Notice of Termination.
"Termination Date" means: (i) if the Employee's Employment
terminates by reason of the Employee's death, the date of that death; (ii)
if the Employee's Employment terminates by reason of the Employee's giving
a Notice of Termination Without Good Reason or by reason of Retirement,
the elapse of the 30th day after the Company receives that notice; (iii)
if the Company terminates the Employee's Employment (A) at any time for
Type I Cause or (B) at any time prior to the Part-time Employment
Effective Date for Type II Cause, the date the Employee receives the
Company's Notice of Termination for Cause; and (iv) if the Employee's
Employment terminates for any other reason, at the expiration of the
Part-time Employment Period.
"Type I Cause" means Cause of the type to which clause (i) of the
first sentence of the definition of Cause herein refers.
"Type II Cause" means Cause of the type to which clause (ii) of the
first sentence of the definition of Cause herein refers.
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"Underwriter" means collectively (i) the investment banking firms
that prospectively may enter into the underwriting agreement and (ii) from
and after the IPO pricing date, the investment banking firms parties to
the underwriting agreement.
"Without Good Reason" for the Employee's termination of his
Employment means that, at the time the Company receives the Employee's
Notice of Termination, the Employee was not entitled to terminate his
Employment (i) for a Good Reason or (ii) by reason of his Disability or
Retirement.
(b) OTHER DEFINITIONAL PROVISIONS. (i) Except as this Agreement
otherwise may specify, all references herein to any statute, including the Code
and ERISA, are references to that statute or any successor statute, as the same
may have been or be amended or supplemented from time to time, and any rules or
regulations promulgated thereunder, and all references herein to any rule or
regulation are references to that rule or regulation, or any successor rule or
regulation, as the same may be amended or supplemented from time to time.
(ii) This Agreement uses the words "herein," "hereof" and
"hereunder" and words of similar import to refer to this Agreement as a whole
and not to any provision of this Agreement, and the word "Section" refers to a
Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number includes
the plural and vice versa, and a reference to one gender includes the other
gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding that word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
Section 2. EMPLOYMENT. (a) On the terms and subject to the
conditions hereinafter set forth, and beginning as of the Effective Date and
continuing until the first to occur of the Part-time Employment Effective Date
or the Termination Date, (i) the Company will employ the Employee as President -
Bay Area, (ii) the Employee will serve in the Company's employ in that position
and (iii) the Employee will perform such duties, and have such powers,
authority, functions, duties and responsibilities for the Company and entities
affiliated with the Company as are commensurate and consistent with his
employment in the position or positions to which clause (i) of this sentence
refers. The Employee also will have such additional powers, authority,
functions, duties and responsibilities as the chief executive officer of the
Company or his delegate may assign to him from time to time; provided that,
without the Employee's written consent, those additional powers, authority,
functions, duties and responsibilities must not be inconsistent or interfere
with, or detract from, those herein vested in, or otherwise then being performed
for the Company by, the Employee.
(b) The Employee will not, at any time during his Employment, engage
in any other activities unless those activities do not interfere materially with
the Employee's duties and
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responsibilities to the Company at that time, except that the Employee will be
entitled, subject to the provisions of Section 7, (i) to continue with such
activities as the Employee has carried on prior to the Effective Date, including
making and managing his personal investments and participating in other business
or civic activities and (ii) to serve on corporate or other business, civic or
charitable boards or committees and trade association or similar boards or
committees.
Section 3. TERM OF EMPLOYMENT. Subject to the provisions of Section
5, the term of the Employee's Employment will be for an initial term of three
years, provided that, beginning on the second anniversary of the Effective Date,
the term of the Employee's Employment will be for a continually renewing term of
one year commencing on that anniversary date and renewing each day thereafter
for an additional day without any further action by either the Company or the
Employee until an event has occurred as described in, or one of the parties has
made an appropriate election pursuant to, Section 5. After the Termination Date
has occurred and the Company has paid to the Employee all the applicable amounts
Section 5 provides the Company will pay as a result of the termination of the
Employee's Employment, including all amounts accruing during the Part-time
Employment Period, if any, this Agreement will terminate and have no further
force or effect, except that Sections 8, 9 and 10 will survive that termination
indefinitely and Section 7 will survive for the period of time it specifies.
Section 4. COMPENSATION. (a) BASE SALARY. A Base Salary will be
payable to the Employee by the Company as a guaranteed minimum annual amount
hereunder for each Compensation Year during the period from the Effective Date
to the first to occur of the Part-time Employment Effective Date or the
Termination Date. The Company will pay that Base Salary in the intervals
consistent with its normal payroll schedules, and that Base Salary will be
payable initially at the annual rate of $200,000 and will be increased (but not
decreased or adjusted other than as Section 5 provides) as follows:
(i) on the first and each subsequent anniversary of the Effective
Date, by the amount equal to the product of (A) the annual rate of that
Base Salary as in effect immediately prior to that anniversary multiplied
by (B) the percentage increase (if any) in the CPI for the 12-month period
immediately preceding that anniversary; and
(ii) on the first and each subsequent anniversary of the Effective
Date or at any other time, by such additional amount (if any) the
Compensation Committee in its sole discretion may determine or approve, as
evidenced by the written minutes or records of the Compensation Committee
and its written notices of those determinations or approvals to the
Employee.
Effective as of the Part-time Employment Effective Date, the Base Salary
theretofore in effect will be adjusted as Section 5(e) provides.
(b) OTHER COMPENSATION. The Employee will be entitled to participate
in all Compensation Plans from time to time in effect while he remains on Active
Status, regardless of
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whether the Employee is an Executive Officer. All awards to the Employee under
all Incentive Plans will take into account the Employee's positions with and
duties and responsibilities to the Company and its subsidiaries.
Section 5. TERMINATION OF EMPLOYMENT AND ITS CONSEQUENCES. (A)
TERMINATION BY THE COMPANY. (i) The Company will be entitled, if acting at the
direction of the Required Board Majority, to terminate the Employee's Employment
(A) at any time for Type I Cause or (B) at any time prior to the Part-time
Employment Effective Date for (1) Type II Cause or (2) any Business Reason. The
Company's termination of the Employee's Employment for Cause will be effective
on the date the Company delivers a Notice of Termination for Cause to the
Employee pursuant to this Section 5(a)(i) (together, in the case of a
termination for Type II Cause, with the certified resolution to which clause
(ii) of the definition herein of Cause refers), while the Company's termination
of the Employee's Employment for a Business Reason will be effective on the
later of (A) the third anniversary of the Effective Date and (B) first
anniversary of the date the Company delivers a Notice of Termination for a
Business Reason to the Employee pursuant to this Section 5(a)(i).
(ii) If the Company terminates the Employee's Employment for Cause,
the Company promptly thereafter, and in any event within five business days
thereafter, will pay the Employee his Base Salary to and including the
Termination Date and the amount of all compensation the Employee has previously
deferred (together with any accrued interest or earnings thereon), in each case
to the extent not theretofore paid, and, when that payment is made, the Company
will, notwithstanding Section 3, have no further or other obligations hereunder
to the Employee.
(iii) If the Company terminates the Employee's Employment for a
Business Reason, the respective rights and obligations of the Company and the
Employee during the Part-time Employment Period will be as Section 5(e) sets
forth.
(b) TERMINATION BY THE EMPLOYEE. (i) The Employee will be entitled
to terminate his Employment (A) for a Good Reason at any time within 180 days
after the facts or circumstances constituting that Good Reason first exist and
are known to the Employee, (B) Without Good Reason at any time or (C) by reason
of his Retirement. The Employee's termination of his Employment for Good Reason
will be effective on the later of (A) the third anniversary of the Effective
Date and (B) the first anniversary of the date the Employee delivers a Notice of
Termination for Good Reason to the Company. The Employee's termination of his
Employment Without Good Reason or by reason of his Retirement will be effective
on the 30th day following the Employee's delivery of a Notice of Termination
Without Good Reason or by reason of his Retirement.
(ii) If the Employee terminates his Employment for Good Reason, the
respective rights and obligations of the Company and the Employee during the
Part-time Employment Period will be as Section 5(e) sets forth.
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(iii) If the Employee terminates his Employment Without Good Reason
or by reason of his Retirement, the Company will pay to the Employee, in a cash
lump sum within 10 business days after the Termination Date, the amount equal to
the sum of (A) the portion of the Base Salary to and including the Termination
Date which has not yet been paid, (B) all compensation the Employee has
previously deferred (together with any accrued interest and earnings thereon)
which has not yet been paid and (C) any accrued but unpaid vacation pay.
(c) TERMINATION BY REASON OF DISABILITY. If the Employee incurs any
Disability while on Active Status, either the Employee or the Company may
terminate the Employee's Employment effective on the first anniversary of the
date the Nonterminating Party receives a Notice of Termination from the
Terminating Party pursuant to this Section 5(c). If the Employee's Employment
terminates by reason of the Employee's Disability, the respective rights and
obligations of the Company and the Employee during the Part-time Employment
Period will be as Section 5(e) sets forth.
(d) TERMINATION OF EMPLOYMENT BY DEATH. The Employee's Employment
will terminate automatically at the time of his death. If the Employee's
Employment terminates by reason of the Employee's death, the Company will pay to
the Person the Employee has designated in a written notice delivered to the
Company as his beneficiary entitled to that payment, if any, or to the
Employee's estate, as applicable, in a cash lump sum within 30 days after the
Termination Date, the amount equal to the sum of (i) the portion of the Base
Salary through the end of the month in which the Termination Date occurs which
has not yet been paid, (ii) all compensation the Employee has previously
deferred (together with any accrued interest or earnings thereon) which has not
yet been paid, (iii) any accrued but unpaid vacation pay (if the Employee dies
while on Active Status) and (iv) (A) if the Employee dies while on Active Status
or during the Part-time Employment Period (other than during the last 12 months
of the Part-time Employment Period), an amount equal to the Base Salary being
paid for the Compensation Year in which he dies or (B) if the Employee dies
during the last 12 months of the Part-time Employment Period, the product of (1)
one-twelfth of the Base Salary being paid for the Compensation Year in which the
Employee dies multiplied by (2) the number of whole and partial calendar months
in the period beginning with the first calendar month after the calendar month
in which he dies and ending with the last calendar month in which the
Termination Date would have occurred if the Employee's Employment were to have
continued to the end of the Part-time Employment Period. For purposes of this
Section 5(d), if the anniversary of the Effective Date in the Compensation Year
in which the Employee dies has not occurred on or before the Termination Date,
the Base Salary for that Compensation Year will be calculated on the assumption
that no increase in the amount thereof would be made effective as of that
anniversary pursuant to Section 4(a) or 5(e)(i), as applicable.
(e) EMPLOYEE'S RIGHTS DURING THE PART-TIME EMPLOYMENT PERIOD. (i)
The Company will pay the Employee a Base Salary, in the intervals consistent
with its normal payroll schedules, during the Part-time Employment Period in the
amounts determined from time to time as follows: Effective as of the Part-time
Employment Effective Date, the Base Salary payable by the Company to the
Employee for the Part-time Employment Period will be as follows:
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(A) (1) if the Part-time Employment Effective Date occurs as a
result of the receipt by the Nonterminating Party of a Notice of
Termination for a Business Reason or a Notice of Termination for Good
Reason, the amount equal to the Average Annual Cash Compensation of the
Employee determined as of the Part-time Employment Effective Date; and (2)
if the Part-time Employment Effective Date occurs as a result of the
receipt by the Nonterminating Party of a Notice of Termination for
Disability, the amount equal to the amount by which (a) the Average Annual
Cash Compensation of the Employee determined as of the Part-time
Employment Effective Date exceeds (b) the aggregate amount of periodic
payments the Employee receives during the 12 months beginning on that date
under Compensation Plans then in effect and providing for those payments
to the Employee solely as a result or on account of disability; and
(B) on each anniversary of the Effective Date which occurs during
the Part-time Employment Period, if any, the Base Salary payable pursuant
to this Section 5(e) will be increased by the amount equal to the product
of (1) the annual rate of that Base Salary as in effect immediately prior
to that anniversary multiplied by (2) the percentage increase (if any) in
the CPI for the 12-month period immediately preceding that anniversary.
(ii) The Employee will continue to participate in all Compensation
Plans from time to time in effect during the Part-time Employment Period,
provided, however, that: (A) the Employee will not be entitled to receive any
new award or grant under any Incentive Plan, and any such new award or grant
will be at the sole discretion of the Compensation Committee or the Board, as
applicable, with respect to that Incentive Plan; and (B) if (1) the terms of any
such plan preclude the Employee's continued participation therein or (2) his
continued participation in any such plan would or reasonably could be expected
to disqualify that plan under the Code, the Employee will not be entitled to
participate in that plan, but the Company instead will provide the Employee with
the after-tax equivalent of the benefits that would have been provided to the
Employee were he a participant in that plan. For purposes of determining
eligibility (including years of service) for retirement benefits payable under
any Compensation Plan, the Employee will be deemed to have retired at the
Termination Date.
(iii) Subject to the provisions of Section 7, the Employee will not
be (A) prevented from accepting other employment or engaging in (and devoting
substantially all his time to) other business activities or (B) required to
perform any regular duties for the Company (except to provide such services
consistent with the Employee's educational background, experience and prior
positions with the Company as may be acceptable to the Employee) or to seek or
accept additional employment with any other Person. If the Employee, at his
discretion, accepts any such additional employment or engages in any such other
business activity, there will be no offset, reduction or effect on any rights,
benefits or payments to which the Employee is entitled pursuant to this
Agreement. Furthermore, the Employee will have no obligation to account for,
remit, rebate or pay over to the Company any compensation or other amounts he
earns or derives in connection with such additional employment or business
activity. The Employee will, however, make himself generally available for
special projects or to consult with the Company and its employees at such times
and
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at such places as the Company may reasonably request on terms that are
reasonably satisfactory to the Employee and consistent with the Employee's
regular duties and responsibilities in the course of his then new occupation or
other employment, if any.
(f) RETURN OF PROPERTY. On termination of the Employee's Employment,
however brought about, the Employee (or his representatives) will promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Employee (or those representatives).
(g) STOCK OPTIONS. Notwithstanding any other provision of this
Agreement to the contrary: (i) except in the case of a termination of the
Employee's Employment by the Company for Cause or by the Employee Without Good
Reason at any time while on Active Status, all stock options previously granted
to the Employee under Incentive Plans that have not been exercised and are
outstanding as of the time immediately prior to the Termination Date will,
notwithstanding any contrary provision of any applicable Incentive Plan, remain
outstanding (and continue to become exercisable pursuant to their respective
terms) until exercised or the expiration of their term, whichever is earlier;
(ii) in the case of a termination of the Employee's Employment by the Employee
Without Good Reason at any time while on Active Status, all stock options
previously granted to the Employee under Incentive Plans that have not been
exercised and are outstanding and exercisable as of the time immediately prior
to the Termination Date will, notwithstanding any contrary provision of any
applicable Incentive Plan, remain outstanding and continue to be exercisable
until exercised or the date that is 90 days after the Termination Date,
whichever is earlier, whereupon, those options will expire; and (iii) in the
case of a termination of the Employee's Employment by the Company for Cause at
any time while the Employee is on Active Status, all stock options previously
granted to the Employee under Incentive Plans will expire on the Termination
Date. No stock option previously granted to the Employee under any Incentive
Plan will, notwithstanding any contrary provision of that Incentive Plan, expire
or fail to become exercisable or, if exercisable, cease to be exercisable by
reason of either (i) the occurrence of the Employee's Part-time Employment
Effective Date or (ii) the Employee's service during the Part-time Employment
Period being less than full-time.
(h) NO CONSTRUCTIVE TERMINATION. Except in the case of a termination
of the Employee's Employment which results from the Employee's death, no
termination of the Employee's Employment will be effective for any purpose
hereunder unless the Terminating Party delivers a Notice of Termination to the
Nonterminating Party. An offer by the Employee to resign from an office or the
Board or otherwise to step aside will not, whether in writing or oral,
constitute a Notice of Termination by the Employee.
Section 6. OTHER EMPLOYEE RIGHTS (a) PAID VACATION AND Holidays. The
Employee will be entitled to not less than five weeks of annual vacation and all
legal holidays during which times his applicable compensation will be paid in
full.
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(b) BUSINESS EXPENSES. The Employee is authorized to incur, and will
be entitled to receive prompt reimbursement for, all reasonable expenses the
Employee incurs in performing his duties and carrying out his responsibilities
hereunder, including (i) business meals and entertainment and travel expenses
and (ii) mileage reimbursements in accordance with the Company's automobile
expense reimbursement policy as in effect at the time those expenses are
incurred, provided that the Employee complies with the applicable policies,
practices and procedures of the Company relating to the submission of expense
reports, receipts or similar documentation of those expenses. The Company will
either pay directly or promptly reimburse the Employee for those expenses not
more than 30 days after the submission to the Company by the Employee from time
to time of an itemized accounting of those expenses for which direct payment or
reimbursement is sought. Unpaid reimbursements after that 30-day period will
accrue interest in accordance with Section 9(i).
(c) NO FORCED RELOCATION. The Employee will not be required to move
his principal place of residence from the metropolitan San Jose, California area
or to perform regular duties that could reasonably be expected to require either
such move against his wish or his spending amounts of time each week outside the
metropolitan San Jose, California area which are unreasonable in relation to the
duties and responsibilities of the Employee hereunder, and the Company agrees
that, if it requests the Employee to make such a move and the Employee declines
that request, that declination will not constitute any basis for a determination
that Type II Cause exists.
Section 7. COVENANT NOT TO COMPETE. (a) The Employee recognizes that
in each of the highly competitive businesses in which the Company will be
engaged following the Effective Date, personal contact is of primary importance
in securing new customers and in retaining the accounts and goodwill of present
customers and protecting the business of the Company. The Employee, therefore,
agrees that during the term of his Employment and for a period of three years
after the Termination Date, he will not, within 75 miles of each geographic
location in which he has devoted substantial attention at such location to the
material business interests of the Company (the "Relevant Geographic Areas"):
(i) accept employment or render service to any Person that is engaged in a
business directly competitive with the business then engaged in by the Company
or (ii) enter into or take part in or lend his name, counsel or assistance to
any business, either as proprietor, principal, investor, partner, director,
officer, employee, consultant, advisor, agent, independent contractor, or in any
other capacity whatsoever, for any purpose that would be competitive with the
business of the Company (all of the foregoing activities are collectively
referred to as the "Prohibited Activity"). Notwithstanding the foregoing, the
Employee may own and hold as a passive investment up to 5% of the outstanding
shares of any class of capital stock (or other equity interest) in a competing
corporation, limited liability company, limited partnership or other entity if
that class of capital stock (or other equity interest) is listed on a national
stock exchange or included in the Nasdaq National Market.
(b) In addition to all other remedies at law or in equity which the
Company may have for breach of a provision of this Section 7 by the Employee, it
is agreed that in the event of any
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breach or attempted or threatened breach of any such provision, the Company will
be entitled, on application to any court of proper jurisdiction, to a temporary
restraining order or preliminary injunction (without the necessity of (i)
proving irreparable harm, (ii) establishing that monetary damages are inadequate
or (iii) posting any bond with respect thereto) against the Employee prohibiting
such breach or attempted or threatened breach by proving only the existence of
such breach or attempted or threatened breach. If the provisions of this Section
7 should ever be deemed to exceed the time, geographic or occupational
limitations applicable law permits, the Employee and the Company agree that
those provisions will be and are hereby reformed to the maximum time, geographic
or occupational limitations applicable law permits.
(c) The covenants of the Employee in this Section 7 are independent
of and severable from every other provision of this Agreement; and the breach of
any other provision of this Agreement by the Company or the breach by the
Company of any other agreement between the Company and the Employee will not
affect the validity of the provisions of this Section 7 or constitute a defense
of the Employee in any suit or action brought by the Company to enforce any of
the provisions of this Section 7 or seek any relief for the breach thereof by
Employee.
(d) The Employee acknowledges, agrees and stipulates that: (i) the
terms and provisions of this Agreement are reasonable and constitute an
otherwise enforceable agreement to or of which the terms and provisions of this
Section 7 are ancillary or a part; (ii) the consideration provided by the
Company under this Agreement is not illusory; and (iii) the consideration given
by the Company under this Agreement, including the provision by the Company of
Confidential Information to the Employee as Section 8 contemplates, gives rise
to the Company's interest in restraining and prohibiting the Employee from
engaging in the Prohibited Activity within the Relevant Geographic Areas as this
Section 7 provides and the Employee's covenant not to engage in the Prohibited
Activity within the Relevant Geographic Areas pursuant to this Section 7 is
designed to enforce the Employee's consideration (or return promises) including
the Employee's promise in Section 8 to not disclose Confidential Information.
Section 8. CONFIDENTIAL INFORMATION. The Employee acknowledges that
he has had and will continue to have access to various Confidential Information.
The Employee agrees, therefore, that he will not at any time, either while
employed by the Company or afterwards, make any independent use of, or disclose
to any other person (except as authorized by the Company) any Confidential
Information. Confidential Information will not include (a) information that
becomes known to the public generally through no fault of the Employee, (b)
information required to be disclosed by law or legal process or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (b), the Employee will give prior
written notice thereof to the Company and provide the Company with the
opportunity to contest that requirement, or (c) the Employee reasonably believes
that disclosure is required in connection with the defense of a lawsuit against
the Employee. In the event of a breach or threatened breach by the Employee of
the provisions of this Section 8 with respect to any Confidential Information,
the Company will be entitled to a temporary restraining order and a preliminary
and permanent injunction (without the necessity of posting any bond in
connection
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therewith) restraining the Employee from disclosing, in whole or in part, that
Confidential Information. Nothing herein will be construed as prohibiting the
Company from pursuing any other available remedy for that breach or threatened
breach, including the recovery of damages.
Section 9. GENERAL PROVISIONS. (a) SEVERABILITY. If any one or more
of the provisions of this Agreement shall, for any reason, be held or found by
final judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, (i) that invalidity, illegality or
unenforceability will not affect any other provisions of this Agreement and (ii)
this Agreement will be construed as if that invalid, illegal or unenforceable
provision had never been contained herein (except that this clause (ii) will not
prohibit any modification allowed under Section 7(b)).
(b) NONEXCLUSIVITY OF RIGHTS. Nothing herein will prevent or limit
the Employee's continuing or future participation in any Compensation Plan or,
subject to Section 9(k), limit or otherwise affect such rights as the Employee
may have under any other contract or agreement with the Company. Vested benefits
and other amounts to which the Employee is or becomes entitled to receive under
any Compensation Plan on or after the Termination Date will be payable in
accordance with that Compensation Plan, except as expressly modified hereby.
(c) SUCCESSORS. (i) This Agreement is personal to the Employee and,
without the prior written consent of the Company, is not assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement will inure to the benefit and be enforceable by the Employee's legal
representatives (including any duly appointed guardian) acting in their
capacities as such pursuant to applicable law.
(ii) This Agreement will inure to the benefit of and be binding on
the Company and its successors and assigns. If, at any time prior to the
Termination Date, the Employee is not an Executive Officer, the Company will be
entitled to assign all its obligations hereunder to a subsidiary of the Company
and treat the Employee as an employee of that subsidiary for all purposes, but
the Company will remain liable for the full, timely performance of all the
obligations so assigned as if the assignment had not been made.
(iii) The Company will require any successor (direct or indirect and
whether by purchase, merger, consolidation, share exchange or otherwise) to the
business, properties and assets of the Company substantially as an entirety
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Company would have been required to perform it had no
such succession taken place.
(d) AMENDMENTS; WAIVERS. This Agreement may not be amended or
modified except (i) by a written agreement executed and delivered by the parties
hereto or their respective successors or legal representatives acting in their
capacities as such pursuant to applicable law or (ii) pursuant to the provisions
of Section 7(b) or 9(a).
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(e) NOTICES. All notices and other communications required or
permitted under this Agreement must be in writing and will be deemed delivered
and received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom the
notice or communication is sent or (ii) if delivered by mail (whether actually
received or not), at the close of business on the third business day (in the
location where the Company then has its principal executive offices) next
following the day when placed in the mail, postage prepaid, certified or
registered, addressed to the appropriate party or parties at the address of that
party set forth below (or at such other address as that party may designate by
written notice to the other party in accordance herewith):
(A) if to the Employee, addressed as follows:
William T. Albanese
17070 Lon Road
Los Gatos, California 95033
Facsimile: [(408) 294-3162]
(B) if to the Company, addressed as follows:
U.S. Concrete, Inc.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77065
Attn: Corporate Secretary
Facsimile: (713) 350-6001
(f) NO WAIVER. The failure of the Company or the Employee to insist
on strict compliance with any provision of, or to assert any right under, this
Agreement (including the right of the Employee to terminate his Employment for
Good Reason) will not be deemed a waiver of that provision or of any other
provision of or right under this Agreement.
(G) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO
ANY PRINCIPLES OF CONFLICTS OF LAWS.
(h) HEADINGS. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
(i) INTEREST. If any amounts required to be paid or reimbursed to
the Employee hereunder are not so paid or reimbursed at the times provided
herein (including amounts required to be paid by the Company pursuant to
Sections 6 and 10, those amounts will accrue interest compounded daily at the
annual percentage rate equal to the interest rate shown as the Prime Rate in the
Money Rates column in the then most recently published edition of THE WALL
STREET JOURNAL,
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or, if that rate is not then so published on at least a weekly basis, the
interest rate announced by The Chase Manhattan Bank (or its successor), from
time to time, as its Base Rate (or prime lending rate), from the date those
amounts were required to have been paid or reimbursed to the Employee until
those amounts are finally and fully paid or reimbursed; provided, however, that
in no event will the amount of interest contracted for, charged or received
hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
(j) TAX WITHHOLDING. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that applicable laws or regulations require it to withhold.
(k) ENTIRE AGREEMENT. The Company and the Employee agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Employee by the Company, but has no effect on
any Compensation Plan in which the Employee was participating prior to the
Effective Date.
(l) EFFECTIVE DATE. This Agreement will become effective on
IPO Closing Date (the "Effective Date").
Section 10. PAYMENT OF EXPENSES; RESOLUTION OF DISPUTES. (A) PAYMENT
OF EXPENSES. If at any time during the term hereof or afterwards: (i) there
should exist a dispute or conflict between the Employee and the Company or
another Person as to the validity, interpretation or application of any term or
condition hereof, or as to the Employee's entitlement to any benefit intended to
be bestowed hereby, which is not resolved to the satisfaction of the Employee,
(ii) the Employee must (A) defend the validity of this Agreement or (B) contest
any determination by the Company concerning the amounts payable (or
reimbursable) by the Company to the Employee or (iii) the Employee must prepare
responses to an Internal Revenue Service ("IRS") audit of, or otherwise defend,
his personal income tax return for any year the subject of any such audit, or an
adverse determination, administrative proceedings or civil litigation arising
therefrom that is occasioned by or related to an audit by the IRS of the
Company's income tax returns, then the Company hereby unconditionally agrees:
(1) on written demand of the Company by the Employee, to provide sums sufficient
to advance and pay on a current basis (either by paying directly or by
reimbursing the Employee) not less than 30 days after a written request therefor
is submitted by the Employee, the Employee's reasonable out-of-pocket costs and
expenses (including reasonable attorney's fees) the Employee incurs in
connection with any such matter; (2) the Employee will be entitled, on
application to any court of competent jurisdiction, to the entry of a mandatory
injunction without the necessity of posting any bond with respect thereto which
compels the Company to pay or advance such costs and expenses on a current
basis; and (3) the Company's obligations under this Section 10(a) will not be
affected if the Employee is not the prevailing party in the final resolution of
any such matter.
(b) RESOLUTION OF DISPUTES. If a dispute of any type referred to in
Section 10(a) arises between the Company and the Employee and they fail to
resolve that dispute by direct
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negotiation, the Company and the Employee agree that the next step taken to
resolve that dispute, prior to either party initiating any litigation to resolve
that dispute (not including any litigation that may be required to enforce the
Employee's rights to the payment or advancement of expenses and legal fees on a
current basis pursuant to Section 10(a)) will be to submit the dispute to an
agreed Alternative Dispute Resolution ("ADR") process, to which process the
parties will strive diligently in good faith to agree within 10 business days
after either party has given written notice to the other party that it is unable
to concur in the other party's final proposed negotiated resolution of the
dispute. If the Company and the Employee are unable to agree in writing to an
acceptable ADR process within that 10-business day period, then the parties will
submit to a mandatory ADR process by making joint application to the then Chief
United States Federal District Judge in the federal district in which the
Company then has its principal executive offices for the selection of an ADR
process for the parties. The parties will diligently in good faith participate
in the ADR process that judge chooses. If the parties are unable to resolve
their dispute after diligent good faith participation in the ADR process, then
either party will be free to initiate such litigation as that party deems
appropriate under the circumstances. Under no circumstances will the Employee be
obligated to pay for the cost of any ADR process or to pay or reimburse the
Company for any attorneys' fees, costs or other expenses the Company incurs in
connection with any process undertaken by the Employee to resolve disputes under
this Agreement. This Section 10 uses the term "Employee" to include, if the
Employee has died or become incompetent as a matter of applicable law, the
Employee's legal representative acting in his capacity as such under applicable
law.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
U.S. CONCRETE, INC.
By: ___________________________________
Eugene P. Martineau
President and Chief Executive Officer
EMPLOYEE
________________________________________
William T. Albanese
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
the Effective Date (as defined herein) by and between U.S. Concrete, Inc., a
Delaware corporation (the "Company"), and Michael D. Mitschele (the "Employee").
PRELIMINARY STATEMENT
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company without distraction or
concern over minimum compensation, benefits or tenure, to develop and implement
the Company's initial development plan and thereafter to assist in the
management of the Company's future growth and development and the maximization
of the returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
Section 1. CERTAIN DEFINED TERMS. (a) The following terms this
Agreement uses have the respective meanings this Section 1(a) assigns to them:
"Acquired Business" means Baer Concrete, Incorporated.
"Active Status" means the Employee's Employment status from the
Effective Date to and including the first to occur of (i) the Part-time
Employment Effective Date or (ii) the Termination Date.
"Annual Cash Compensation" of the Employee for any Compensation Year
means the salary the Employee earns during that Compensation Year,
including all amounts of salary the Employee earns during that
Compensation Year and elects to (i) defer, whether pursuant to a
Compensation Plan intended to qualify as a plan under Code Section 401(k)
or otherwise, and (ii) forego pursuant to a Compensation Plan under which
the Employee may receive Common Stock or any other form of noncash
compensation in lieu of that salary. For purposes of this definition, any
form of noncash compensation will be valued at its fair market value at
the time that compensation is awarded, earned or paid, as the case may be.
"Average Annual Cash Compensation" of the Employee means, as of the
Part-time Employment Effective Date, the average of (i) the Annual Cash
Compensation the Employee has earned in each of the two Compensation Years
next preceding that date or, if less than
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two Compensation Years have occurred prior to that date and since the
Effective Date, (ii) the Annual Cash Compensation in each whole
Compensation Year, if any, and, restated on an annualized basis, the
Annual Cash Compensation in each partial Compensation Year (up to a
maximum of two partial Compensation Years) next preceding the Part-time
Employment Effective Date.
"Base Salary" means: (i) prior to the Part-time Employment Effective
Date, the guaranteed minimum annual salary payable by the Company to the
Employee pursuant to Section 4(a); and (ii) on and after the Part-time
Employment Effective Date, the guaranteed minimum annual salary payable by
the Company to the Employee pursuant to Section 5(e).
"Board" means the entire Board of Directors of the Company.
"Business Reason" for the Company's termination of the Employee's
Employment means any lawful reason other than Cause.
"Cause" for the Company's termination of the Employee's Employment
means: (i) the Employee's conviction of a felony crime (or the Employee's
entering of a plea of NOLO CONTENDERE to any charge against him of a
felony crime) of any kind; or (ii) the Employee's continuing failure to
substantially perform his duties and responsibilities hereunder (except by
reason of the Employee's incapacity attributable to physical or mental
illness or injury) for a period of 20 days after the Required Board
Majority has delivered to the Employee a written demand for substantial
performance hereunder which specifically identifies the bases for the
Required Board Majority's determination that the Employee has not
substantially performed his duties and responsibilities hereunder (that
period being the "Grace Period"); provided, that for purposes of this
clause (ii), the Company will not have Cause to terminate the Employee's
Employment unless (A) at a meeting of the Board called and held following
the Grace Period in the city in which the Company's principal executive
offices are located of which the Employee was given not less than 10 days'
prior written notice and at which the Employee was afforded the
opportunity to be represented by counsel, appear and be heard, the
Required Board Majority adopts a written resolution which (1) sets forth
the Required Board Majority's determination that the failure of the
Employee to substantially perform his duties and responsibilities
hereunder has (except by reason of his incapacity attributable to physical
or mental illness or injury) continued past the Grace Period and (2)
specifically identifies the bases for that determination and (B) the
Company, at the written direction of the Required Board Majority, delivers
to the Employee a Notice of Termination for Cause to which a copy of that
resolution, certified as being true and correct by the secretary or any
assistant secretary of the Company, is attached. Cause of the type
referred to in clause (i) of the preceding sentence is a "Type I Cause,"
while Cause of the type referred to in clause (ii) of the preceding
sentence is a "Type II Cause."
"Code" means the Internal Revenue Code of 1986.
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"Common Stock" means the common stock of the Company.
"Company" means (i) U.S. Concrete, Inc., a Delaware corporation, and
(ii) any Person that assumes the obligations of "the Company" hereunder,
by operation of law, pursuant to Section 9(c)(iii) or otherwise.
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program the Company or any subsidiary of the Company
establishes, maintains or sponsors, or to which the Company or any
subsidiary of the Company contributes, on behalf of two or more Executive
Officers (including, for this purpose, any member of the family of any
Executive Officer), (i) including (A) any "employee pension benefit plan"
(as defined in ERISA Section 3(2)) or other "employee benefit plan" (as
defined in ERISA Section 3(3)), (B) any other retirement or savings plan,
including any supplemental benefit arrangement relating to any plan
intended to be qualified under Code Section 401(a) or whose benefits the
Code or ERISA limits, (C) any "employee welfare plan" (as defined in ERISA
Section 3(1)), (D) any arrangement, plan, policy, practice or program
providing for severance pay, deferred compensation or insurance benefit
and (E) any Incentive Plan, but (ii) excluding any compensation
arrangement, plan, policy, practice or program to the extent it provides
for annual base salary.
"Compensation Committee" means the committee of the Board to which
the Board has delegated duties respecting the compensation of Executive
Officers and the administration of Incentive Plans, if any, intended to
qualify for the Rule 16b-3 exemption under the Securities Exchange Act of
1934.
"Compensation Year" means a calendar year.
"Confidential Information" means, with respect to the Company or any
subsidiary of the Company, all trade secrets and other confidential,
nonpublic and/or proprietary information of that Person, including
information derived from reports, investigations, research, work in
progress, codes, marketing and sales programs, customer lists, records of
customer service requirements, capital expenditure projects, cost
summaries, pricing formulae, contract analyses, financial information,
projections, present and future business plans, confidential filings with
any governmental authority and all other confidential, nonpublic concepts,
methods of doing business, ideas, materials or information prepared or
performed for, by or on behalf of that Person.
"CPI" means for any period the Consumer Price Index for All Urban
Consumers, All Items, 1982-84 = 100, U.S. City Average, as published by
the United States Department of Labor, Bureau of Labor Statistics (or its
successor) for that period.
"Disability" of the Employee means the Employee has been determined
(which determination will be final and binding on all Persons, absent
manifest error), as a result of
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a physical or mental illness or personal injury he has incurred (including
illness or injury resulting from any substance abuse), by a Qualified
Physician (who may be the doctor treating or otherwise acting as the
Employee's doctor in connection with the illness or injury in question)
selected by the Employee, or by the Company at its expense, to be unable
to perform, at the time of that determination and, in all reasonable
medical likelihood, indefinitely thereafter, the normal duties then most
recently assigned, under and in accordance with the terms hereof, to the
Employee while on Active Status; provided that the determination whether
the Employee has incurred a Disability will be made by a majority of three
Qualified Physicians, (i) one of whom the Employee selects, (ii) one of
whom the Company selects and (iii) the remaining one of whom the Qualified
Physicians the Employee and the Company have selected pursuant to clauses
(i) and (ii) of this proviso select and the fees and expenses of whom the
Employee and the Company will share and pay in equal amounts, if: (A) the
Employee has selected a Qualified Physician and the Company has selected
another Qualified Physician, in each case to determine whether the
Employee has incurred a Disability, and (B) those Qualified Physicians
disagree as to whether the Employee has incurred a Disability. For
purposes of this definition, if the Employee is unable by reason of
illness or injury to give an informed consent to the performance of the
treatment of that illness or injury, a Qualified Physician selected by any
Person who is authorized by applicable law to give that consent will be
deemed to have been selected by the Employee. Notwithstanding the
foregoing, if the Company maintains a disability insurance policy that
provides coverage for its Executive Officers generally, the term
"Disability," as used in this Agreement, shall mean the events and/or
circumstances under which the Employee will be entitled to receive
disability benefits under that insurance policy.
"Effective Date" has the meaning Section 9(l) specifies.
"Employment" means the salaried employment of the Employee by the
Company or a subsidiary of the Company hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Executive Officer" means any of the chairman of the board, the
chief executive officer, the chief operating officer, the chief financial
officer, the president or any executive, regional or other group or senior
vice president of the Company.
"Good Reason" for the Employee's termination of his Employment
means: (i) any violation hereof in any material respect by the Company;
(ii) either (A) a failure of the Company to continue in effect any
Compensation Plan in which the Employee was participating or (B) the
taking of any action by the Company which would adversely affect the
Employee's participation in or materially reduce the Employee's benefits
under any such Compensation Plan, unless (1) in the case of either
subclause (A) or (B) of this clause, there is substituted a comparable
Compensation Plan that is at least economically equivalent, in terms of
the benefit offered to the Employee, to the Compensation Plan being ended
or in
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which the Employee's participation is being adversely affected or the
Employee's benefits are being materially reduced or (2) in the case of
that subclause (A), the failure, or in the case of that subclause (B), the
taking of action, adversely affects Executive Officers generally; or (iii)
the assignment to the Employee without the Employee's written consent of
duties inconsistent in any material respect with the Employee's then
current positions, authority, duties or responsibilities or any other
action by the Company which results in a material diminution in those
positions, authority, duties or responsibilities; provided, however, that
if the Company combines the operations of the Acquired Business with the
operations of one or more subsidiaries of the Company (whether through the
creation of an unincorporated or other division, by merger or
consolidation or otherwise), no resulting change in the status, offices,
titles or reporting requirements of the Employee will constitute "Good
Reason."
"Incentive Plan" means any compensation arrangement, plan, policy,
practice or program the Company or any subsidiary of the Company
establishes, maintains or sponsors, or to which the Company or any
subsidiary of the Company contributes, on behalf of at least two Executive
Officers and which provides for incentive, bonus or other
performance-based awards of cash, securities or the phantom equivalent of
securities, including any stock option, stock appreciation right and
restricted stock plan, but excluding any plan intended to qualify as a
plan under any one or more of Code Sections 401(a), 401(k) or 423.
"IPO" means the first time a registration statement the Company has
filed under the Securities Act of 1933, as amended (the "Securities Act")
and respecting a primary underwritten offering by the Company to the
public of shares of Common Stock becomes effective under the Securities
Act and the Company issues and sells any of the shares registered by that
registration statement to the Underwriter.
"IPO Closing Date" means the date on which the Company first
receives payment for the shares of Common Stock it sells to the
Underwriter in the IPO.
"Nonterminating Party" means the Employee or the Company, as the
case may be, to which the Terminating Party delivers a Notice of
Termination.
"Notice of Termination" to or from the Employee means a written
notice that: (i) states that it is a "Notice of Termination" hereunder,
(ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances the Terminating Party claims to provide a basis for
termination of the Employee's Employment, and if the Termination Date is
other than the date of receipt of the notice, (iii) sets forth that
Termination Date.
"Part-time Employment Effective Date" means, (i) if the Company
elects pursuant to any applicable provision hereof to terminate the
Employee's Employment other than for Cause or (ii) if the Employee elects
pursuant to the applicable provision hereof to terminate his Employment
for Good Reason or by reason of his Disability, the date the
Nonterminating Party receives the Terminating Party's Notice of
Termination.
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"Part-time Employment Period" means the period of time which begins
on the Part-time Employment Effective Date and ends on the first to occur
of (i) the third anniversary of the Effective Date or, if later, the first
anniversary of the Part-time Employment Effective Date, (ii) the
termination by the Company of the Employee's Employment for Type I Cause
or (iii) the death of the Employee.
"Person" means any natural person, sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association,
mutual company, joint stock company, joint venture, estate, trust, union
or employee organization or governmental authority.
"Qualified Physician" means, in the case of any determination
whether the Employee has sustained a Disability, a physician (i) holding
an M.D. degree from a medical school located in the United States, (ii)
specializing and board-certified in the treatment of the injury or illness
that has or may have caused that Disability and (iii) having admission
privileges to one or more hospitals located in the state in which the
Company then has its principal executive offices or in the state in which
the Employee then is domiciled.
"Required Board Majority" means at any time a majority of the
members of the Board at that time.
"Retirement" means termination of the Employee's Employment by
reason of the Employee's giving a Notice of Termination on or following
the date he has attained age 65.
"Terminating Party" means the Employee or the Company, as the case
may be, who or which terminates the Employee's Employment by means of a
Notice of Termination.
"Termination Date" means: (i) if the Employee's Employment
terminates by reason of the Employee's death, the date of that death; (ii)
if the Employee's Employment terminates by reason of the Employee's giving
a Notice of Termination Without Good Reason or by reason of Retirement,
the elapse of the 30th day after the Company receives that notice; (iii)
if the Company terminates the Employee's Employment (A) at any time for
Type I Cause or (B) at any time prior to the Part-time Employment
Effective Date for Type II Cause, the date the Employee receives the
Company's Notice of Termination for Cause; and (iv) if the Employee's
Employment terminates for any other reason, at the expiration of the
Part-time Employment Period.
"Type I Cause" means Cause of the type to which clause (i) of the
first sentence of the definition of Cause herein refers.
"Type II Cause" means Cause of the type to which clause (ii) of the
first sentence of the definition of Cause herein refers.
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"Underwriter" means collectively (i) the investment banking firms
that prospectively may enter into the underwriting agreement and (ii) from
and after the IPO pricing date, the investment banking firms parties to
the underwriting agreement.
"Without Good Reason" for the Employee's termination of his
Employment means that, at the time the Company receives the Employee's
Notice of Termination, the Employee was not entitled to terminate his
Employment (i) for a Good Reason or (ii) by reason of his Disability or
Retirement.
(b) OTHER DEFINITIONAL PROVISIONS. (i) Except as this Agreement
otherwise may specify, all references herein to any statute, including the Code
and ERISA, are references to that statute or any successor statute, as the same
may have been or be amended or supplemented from time to time, and any rules or
regulations promulgated thereunder, and all references herein to any rule or
regulation are references to that rule or regulation, or any successor rule or
regulation, as the same may be amended or supplemented from time to time.
(ii) This Agreement uses the words "herein," "hereof" and
"hereunder" and words of similar import to refer to this Agreement as a whole
and not to any provision of this Agreement, and the word "Section" refers to a
Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number includes
the plural and vice versa, and a reference to one gender includes the other
gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding that word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
Section 2. EMPLOYMENT. (a) On the terms and subject to the
conditions hereinafter set forth, and beginning as of the Effective Date and
continuing until the first to occur of the Part-time Employment Effective Date
or the Termination Date, (i) the Company will employ the Employee as President -
Baer Concrete, Incorporated, (ii) the Employee will serve in the Company's
employ in that position and (iii) the Employee will perform such duties, and
have such powers, authority, functions, duties and responsibilities for the
Company and entities affiliated with the Company as are commensurate and
consistent with his employment in the position or positions to which clause (i)
of this sentence refers. The Employee also will have such additional powers,
authority, functions, duties and responsibilities as the chief executive officer
of the Company or his delegate may assign to him from time to time; provided
that, without the Employee's written consent, those additional powers,
authority, functions, duties and responsibilities must not be inconsistent or
interfere with, or detract from, those herein vested in, or otherwise then being
performed for the Company by, the Employee.
(b) The Employee will not, at any time during his Employment, engage
in any other activities unless those activities do not interfere materially with
the Employee's duties and
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responsibilities to the Company at that time, except that the Employee will be
entitled, subject to the provisions of Section 7, to (i) continue with such
activities as the Employee has carried on prior to the Effective Date, including
making and managing his personal investments and participating in other business
or civic activities, (ii) serve on corporate or other business, civic or
charitable boards or committees and trade association or similar boards or
committees, and (iii) participate in the Odyssey 2000 Bike Ride throughout the
calendar year 2000, provided that Employee shall attend all board meetings
during the year 2000 and make himself available to the Company for a reasonable
period of time, both before and after such board meetings, as is necessary to
attend to any matters to be brought before such board meeting or to attend to
any such matters which are raised at such board meeting and which reasonably
require his attention. The Company shall reimburse Employee for all reasonable
travel expenses of Employee to and from the Company's board meetings, except
that the Company will only pay for that portion of travel expenses incurred in
connection with travel that originates and concludes within the United States,
excluding Alaska and Hawaii.
Section 3. TERM OF EMPLOYMENT. Subject to the provisions of Section
5, the term of the Employee's Employment will be for an initial term of three
years, provided that, beginning on the second anniversary of the Effective Date,
the term of the Employee's Employment will be for a continually renewing term of
one year commencing on that anniversary date and renewing each day thereafter
for an additional day without any further action by either the Company or the
Employee until an event has occurred as described in, or one of the parties has
made an appropriate election pursuant to, Section 5. After the Termination Date
has occurred and the Company has paid to the Employee all the applicable amounts
Section 5 provides the Company will pay as a result of the termination of the
Employee's Employment, including all amounts accruing during the Part-time
Employment Period, if any, this Agreement will terminate and have no further
force or effect, except that Sections 8, 9 and 10 will survive that termination
indefinitely and Section 7 will survive for the period of time it specifies.
Section 4. COMPENSATION. (a) BASE SALARY. A Base Salary will be
payable to the Employee by the Company as a guaranteed minimum annual amount
hereunder for each Compensation Year during the period from the Effective Date
to the first to occur of the Part-time Employment Effective Date or the
Termination Date. The Company will pay that Base Salary in the intervals
consistent with its normal payroll schedules, and that Base Salary will be
payable initially at the annual rate of $125,000 and will be increased (but not
decreased or adjusted other than as Section 5 provides) as follows:
(i) on the first anniversary and each subsequent anniversary of the
Effective Date, by the amount equal to the product of (A) the annual rate
of that Base Salary as in effect immediately prior to that anniversary
multiplied by (B) the percentage increase (if any) in the CPI for the
12-month period immediately preceding that anniversary; and
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(iii) on the first and each subsequent anniversary of the Effective
Date or at any other time, by such additional amount (if any) the
Compensation Committee in its sole discretion may determine or approve, as
evidenced by the written minutes or records of the Compensation Committee
and its written notices of those determinations or approvals to the
Employee.
Effective as of the Part-time Employment Effective Date, the Base Salary
theretofore in effect will be adjusted as Section 5(e) provides.
(b) Notwithstanding any other provision of this Agreement, the Base
Salary for the Compensation Year beginning January 1, 2000 shall be $100,000;
provided that for purposes of determining Base Salary on and after January 1,
2001, it shall be assumed that Base Salary had not been so adjusted pursuant to
this Section 4(b) and that Base Salary had been regularly adjusted in accordance
with Section 4(a)(i) hereof.
(c) OTHER COMPENSATION. The Employee will be entitled to participate
in all Compensation Plans from time to time in effect while he remains on Active
Status, regardless of whether the Employee is an Executive Officer. All awards
to the Employee under all Incentive Plans will take into account the Employee's
positions with and duties and responsibilities to the Company and its
subsidiaries. The Employee will not be entitled to, and shall not receive,
medical, dental or life insurance, in connection with the Employee's Employment.
(d) AUTOMOBILE. On December 31, 1999, the Employee will be entitled
to purchase the Mercedes Benz 450 SL, which is an asset of the Acquired
Business, for its net book value. On January 1, 2001, the Company will provide
the Employee with the use of an automobile, which shall be a Lincoln Continental
or a Cadillac.
Section 5. TERMINATION OF EMPLOYMENT AND ITS CONSEQUENCES. (a)
TERMINATION BY THE COMPANY. (i) The Company will be entitled, if acting at the
direction of the Required Board Majority, to terminate the Employee's Employment
(A) at any time for Type I Cause or (B) at any time prior to the Part-time
Employment Effective Date for (1) Type II Cause or (2) any Business Reason. The
Company's termination of the Employee's Employment for Cause will be effective
on the date the Company delivers a Notice of Termination for Cause to the
Employee pursuant to this Section 5(a)(i) (together, in the case of a
termination for Type II Cause, with the certified resolution to which clause
(ii) of the definition herein of Cause refers), while the Company's termination
of the Employee's Employment for a Business Reason will be effective on the
later of (A) the third anniversary of the Effective Date and (B) first
anniversary of the date the Company delivers a Notice of Termination for a
Business Reason to the Employee pursuant to this Section 5(a)(i).
(ii) If the Company terminates the Employee's Employment for Cause,
the Company promptly thereafter, and in any event within five business days
thereafter, will pay the Employee his Base Salary to and including the
Termination Date and the amount of all
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compensation the Employee has previously deferred (together with any accrued
interest or earnings thereon), in each case to the extent not theretofore paid,
and, when that payment is made, the Company will, notwithstanding Section 3,
have no further or other obligations hereunder to the Employee.
(iii) If the Company terminates the Employee's Employment for a
Business Reason, the respective rights and obligations of the Company and the
Employee during the Part-time Employment Period will be as Section 5(e) sets
forth.
(b) TERMINATION BY THE EMPLOYEE. (i) The Employee will be entitled
to terminate his Employment (A) for a Good Reason at any time within 180 days
after the facts or circumstances constituting that Good Reason first exist and
are known to the Employee, (B) Without Good Reason at any time or (C) by reason
of his Retirement. The Employee's termination of his Employment for Good Reason
will be effective on the later of (A) the third anniversary of the Effective
Date and (B) the first anniversary of the date the Employee delivers a Notice of
Termination for Good Reason to the Company. The Employee's termination of his
Employment Without Good Reason or by reason of his Retirement will be effective
on the 30th day following the Employee's delivery of a Notice of Termination
Without Good Reason or by reason of his Retirement.
(ii) If the Employee terminates his Employment for Good Reason, the
respective rights and obligations of the Company and the Employee during the
Part-time Employment Period will be as Section 5(e) sets forth.
(iii) If the Employee terminates his Employment Without Good Reason
or by reason of his Retirement, the Company will pay to the Employee, in a cash
lump sum within 10 business days after the Termination Date, the amount equal to
the sum of (A) the portion of the Base Salary to and including the Termination
Date which has not yet been paid, (B) all compensation the Employee has
previously deferred (together with any accrued interest and earnings thereon)
which has not yet been paid and (C) any accrued but unpaid vacation pay.
(c) TERMINATION BY REASON OF DISABILITY. If the Employee incurs any
Disability while on Active Status, either the Employee or the Company may
terminate the Employee's Employment effective on the first anniversary of the
date the Nonterminating Party receives a Notice of Termination from the
Terminating Party pursuant to this Section 5(c). If the Employee's Employment
terminates by reason of the Employee's Disability, the respective rights and
obligations of the Company and the Employee during the Part-time Employment
Period will be as Section 5(e) sets forth.
(d) TERMINATION OF EMPLOYMENT BY DEATH. The Employee's Employment
will terminate automatically at the time of his death. If the Employee's
Employment terminates by reason of the Employee's death, the Company will pay to
the Person the Employee has designated in a written notice delivered to the
Company as his beneficiary entitled to that payment, if any, or to the
Employee's estate, as applicable, in a cash lump sum within 30 days after the
Termination
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Date, the amount equal to the sum of (i) the portion of the Base Salary through
the end of the month in which the Termination Date occurs which has not yet been
paid, (ii) all compensation the Employee has previously deferred (together with
any accrued interest or earnings thereon) which has not yet been paid, (iii) any
accrued but unpaid vacation pay (if the Employee dies while on Active Status)
and (iv) (A) if the Employee dies while on Active Status or during the Part-time
Employment Period (other than during the last 12 months of the Part-time
Employment Period), an amount equal to the Base Salary being paid for the
Compensation Year in which he dies or (B) if the Employee dies during the last
12 months of the Part-time Employment Period, the product of (1) one-twelfth of
the Base Salary being paid for the Compensation Year in which the Employee dies
multiplied by (2) the number of whole and partial calendar months in the period
beginning with the first calendar month after the calendar month in which he
dies and ending with the last calendar month in which the Termination Date would
have occurred if the Employee's Employment were to have continued to the end of
the Part-time Employment Period. For purposes of this Section 5(d), if the
anniversary of the Effective Date in the Compensation Year in which the Employee
dies has not occurred on or before the Termination Date, the Base Salary for
that Compensation Year will be calculated on the assumption that no increase in
the amount thereof would be made effective as of that anniversary pursuant to
Section 4(a) or 5(e)(i), as applicable.
(e) EMPLOYEE'S RIGHTS DURING THE PART-TIME EMPLOYMENT PERIOD. (i)
The Company will pay the Employee a Base Salary, in the intervals consistent
with its normal payroll schedules, during the Part-time Employment Period in the
amounts determined from time to time as follows: Effective as of the Part-time
Employment Effective Date, the Base Salary payable by the Company to the
Employee for the Part-time Employment Period will be as follows:
(A) (1) if the Part-time Employment Effective Date occurs as a
result of the receipt by the Nonterminating Party of a Notice of
Termination for a Business Reason or a Notice of Termination for Good
Reason, the amount equal to the Average Annual Cash Compensation of the
Employee determined as of the Part-time Employment Effective Date; and (2)
if the Part-time Employment Effective Date occurs as a result of the
receipt by the Nonterminating Party of a Notice of Termination for
Disability, the amount equal to the amount by which (a) the Average Annual
Cash Compensation of the Employee determined as of the Part-time
Employment Effective Date exceeds (b) the aggregate amount of periodic
payments the Employee receives during the 12 months beginning on that date
under Compensation Plans then in effect and providing for those payments
to the Employee solely as a result or on account of disability; and
(B) on each anniversary of the Effective Date which occurs during
the Part-time Employment Period, if any, the Base Salary payable pursuant
to this Section 5(e) will be increased by the amount equal to the product
of (1) the annual rate of that Base Salary as in effect immediately prior
to that anniversary multiplied by (2) the percentage increase (if any) in
the CPI for the 12-month period immediately preceding that anniversary.
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(ii) The Employee will continue to participate in all Compensation
Plans from time to time in effect during the Part-time Employment Period,
provided, however, that: (A) the Employee will not be entitled to receive any
new award or grant under any Incentive Plan, and any such new award or grant
will be at the sole discretion of the Compensation Committee or the Board, as
applicable, with respect to that Incentive Plan; and (B) if (1) the terms of any
such plan preclude the Employee's continued participation therein or (2) his
continued participation in any such plan would or reasonably could be expected
to disqualify that plan under the Code, the Employee will not be entitled to
participate in that plan, but the Company instead will provide the Employee with
the after-tax equivalent of the benefits that would have been provided to the
Employee were he a participant in that plan. For purposes of determining
eligibility (including years of service) for retirement benefits payable under
any Compensation Plan, the Employee will be deemed to have retired at the
Termination Date.
(iii) Subject to the provisions of Section 7, the Employee will not
be (A) prevented from accepting other employment or engaging in (and devoting
substantially all his time to) other business activities or (B) required to
perform any regular duties for the Company (except to provide such services
consistent with the Employee's educational background, experience and prior
positions with the Company as may be acceptable to the Employee) or to seek or
accept additional employment with any other Person. If the Employee, at his
discretion, accepts any such additional employment or engages in any such other
business activity, there will be no offset, reduction or effect on any rights,
benefits or payments to which the Employee is entitled pursuant to this
Agreement. Furthermore, the Employee will have no obligation to account for,
remit, rebate or pay over to the Company any compensation or other amounts he
earns or derives in connection with such additional employment or business
activity. The Employee will, however, make himself generally available for
special projects or to consult with the Company and its employees at such times
and at such places as the Company may reasonably request on terms that are
reasonably satisfactory to the Employee and consistent with the Employee's
regular duties and responsibilities in the course of his then new occupation or
other employment, if any.
(f) RETURN OF PROPERTY. On termination of the Employee's Employment,
however brought about, the Employee (or his representatives) will promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Employee (or those representatives).
(g) STOCK OPTIONS. Notwithstanding any other provision of this
Agreement to the contrary: (i) except in the case of a termination of the
Employee's Employment by the Company for Cause or by the Employee Without Good
Reason at any time while on Active Status, all stock options previously granted
to the Employee under Incentive Plans that have not been exercised and are
outstanding as of the time immediately prior to the Termination Date will,
notwithstanding any contrary provision of any applicable Incentive Plan, remain
outstanding (and continue to become exercisable pursuant to their respective
terms) until exercised or the expiration of their term, whichever is earlier;
(ii) in the case of a termination of the Employee's Employment by the Employee
Without Good Reason at any time while on Active Status, all stock options
previously
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granted to the Employee under Incentive Plans that have not been exercised and
are outstanding and exercisable as of the time immediately prior to the
Termination Date will, notwithstanding any contrary provision of any applicable
Incentive Plan, remain outstanding and continue to be exercisable until
exercised or the date that is 90 days after the Termination Date, whichever is
earlier, whereupon, those options will expire; and (iii) in the case of a
termination of the Employee's Employment by the Company for Cause at any time
while the Employee is on Active Status, all stock options previously granted to
the Employee under Incentive Plans will expire on the Termination Date. No stock
option previously granted to the Employee under any Incentive Plan will,
notwithstanding any contrary provision of that Incentive Plan, expire or fail to
become exercisable or, if exercisable, cease to be exercisable by reason of
either (i) the occurrence of the Employee's Part-time Employment Effective Date
or (ii) the Employee's service during the Part-time Employment Period being less
than full-time.
(h) NO CONSTRUCTIVE TERMINATION. Except in the case of a termination
of the Employee's Employment which results from the Employee's death, no
termination of the Employee's Employment will be effective for any purpose
hereunder unless the Terminating Party delivers a Notice of Termination to the
Nonterminating Party. An offer by the Employee to resign from an office or the
Board or otherwise to step aside will not, whether in writing or oral,
constitute a Notice of Termination by the Employee.
Section 6. OTHER EMPLOYEE RIGHTS (a) PAID VACATION AND HOLIDAYS. The
Employee will be entitled to not less than five weeks of annual vacation and all
legal holidays during which times his applicable compensation will be paid in
full.
(b) BUSINESS EXPENSES. The Employee is authorized to incur, and will
be entitled to receive prompt reimbursement for, all reasonable expenses the
Employee incurs in performing his duties and carrying out his responsibilities
hereunder, including (i) business meals and entertainment and travel expenses
and (ii) mileage reimbursements in accordance with the Company's automobile
expense reimbursement policy as in effect at the time those expenses are
incurred, provided that the Employee complies with the applicable policies,
practices and procedures of the Company relating to the submission of expense
reports, receipts or similar documentation of those expenses. The Company will
either pay directly or promptly reimburse the Employee for those expenses not
more than 30 days after the submission to the Company by the Employee from time
to time of an itemized accounting of those expenses for which direct payment or
reimbursement is sought. Unpaid reimbursements after that 30-day period will
accrue interest in accordance with Section 9(i).
(c) NO FORCED RELOCATION. The Employee will not be required to move
his principal place of residence from the metropolitan Newark, New Jersey area
or to perform regular duties that could reasonably be expected to require either
such move against his wish or his spending amounts of time each week outside the
metropolitan Newark, New Jersey area which are unreasonable in relation to the
duties and responsibilities of the Employee hereunder, and the
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Company agrees that, if it requests the Employee to make such a move and the
Employee declines that request, that declination will not constitute any basis
for a determination that Type II Cause exists.
Section 7. COVENANT NOT TO COMPETE. (a) The Employee recognizes that
in each of the highly competitive businesses in which the Company will be
engaged following the Effective Date, personal contact is of primary importance
in securing new customers and in retaining the accounts and goodwill of present
customers and protecting the business of the Company. The Employee, therefore,
agrees that during the term of his Employment and for a period of three years
after the Termination Date, he will not, within 75 miles of each geographic
location in which he has devoted substantial attention at such location to the
material business interests of the Company (the "Relevant Geographic Areas"):
(i) accept employment or render service to any Person that is engaged in a
business directly competitive with the business then engaged in by the Company
or (ii) enter into or take part in or lend his name, counsel or assistance to
any business, either as proprietor, principal, investor, partner, director,
officer, employee, consultant, advisor, agent, independent contractor, or in any
other capacity whatsoever, for any purpose that would be competitive with the
business of the Company (all of the foregoing activities are collectively
referred to as the "Prohibited Activity"). Notwithstanding the foregoing, the
Employee may own and hold as a passive investment up to 5% of the outstanding
shares of any class of capital stock (or other equity interest) in a competing
corporation, limited liability company, limited partnership or other entity if
that class of capital stock (or other equity interest) is listed on a national
stock exchange or included in the Nasdaq National Market.
(b) In addition to all other remedies at law or in equity which the
Company may have for breach of a provision of this Section 7 by the Employee, it
is agreed that in the event of any breach or attempted or threatened breach of
any such provision, the Company will be entitled, on application to any court of
proper jurisdiction, to a temporary restraining order or preliminary injunction
(without the necessity of (i) proving irreparable harm, (ii) establishing that
monetary damages are inadequate or (iii) posting any bond with respect thereto)
against the Employee prohibiting such breach or attempted or threatened breach
by proving only the existence of such breach or attempted or threatened breach.
If the provisions of this Section 7 should ever be deemed to exceed the time,
geographic or occupational limitations applicable law permits, the Employee and
the Company agree that those provisions will be and are hereby reformed to the
maximum time, geographic or occupational limitations applicable law permits.
(c) The covenants of the Employee in this Section 7 are independent
of and severable from every other provision of this Agreement; and the breach of
any other provision of this Agreement by the Company or the breach by the
Company of any other agreement between the Company and the Employee will not
affect the validity of the provisions of this Section 7 or constitute a defense
of the Employee in any suit or action brought by the Company to enforce any of
the provisions of this Section 7 or seek any relief for the breach thereof by
Employee.
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(d) The Employee acknowledges, agrees and stipulates that: (i) the
terms and provisions of this Agreement are reasonable and constitute an
otherwise enforceable agreement to or of which the terms and provisions of this
Section 7 are ancillary or a part; (ii) the consideration provided by the
Company under this Agreement is not illusory; and (iii) the consideration given
by the Company under this Agreement, including the provision by the Company of
Confidential Information to the Employee as Section 8 contemplates, gives rise
to the Company's interest in restraining and prohibiting the Employee from
engaging in the Prohibited Activity within the Relevant Geographic Areas as this
Section 7 provides and the Employee's covenant not to engage in the Prohibited
Activity within the Relevant Geographic Areas pursuant to this Section 7 is
designed to enforce the Employee's consideration (or return promises) including
the Employee's promise in Section 8 to not disclose Confidential Information.
Section 8. CONFIDENTIAL INFORMATION. The Employee acknowledges that
he has had and will continue to have access to various Confidential Information.
The Employee agrees, therefore, that he will not at any time, either while
employed by the Company or afterwards, make any independent use of, or disclose
to any other person (except as authorized by the Company) any Confidential
Information. Confidential Information will not include (a) information that
becomes known to the public generally through no fault of the Employee, (b)
information required to be disclosed by law or legal process or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (b), the Employee will give prior
written notice thereof to the Company and provide the Company with the
opportunity to contest that requirement, or (c) the Employee reasonably believes
that disclosure is required in connection with the defense of a lawsuit against
the Employee. In the event of a breach or threatened breach by the Employee of
the provisions of this Section 8 with respect to any Confidential Information,
the Company will be entitled to a temporary restraining order and a preliminary
and permanent injunction (without the necessity of posting any bond in
connection therewith) restraining the Employee from disclosing, in whole or in
part, that Confidential Information. Nothing herein will be construed as
prohibiting the Company from pursuing any other available remedy for that breach
or threatened breach, including the recovery of damages.
Section 9. GENERAL PROVISIONS. (a) SEVERABILITY. If any one or more
of the provisions of this Agreement shall, for any reason, be held or found by
final judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, (i) that invalidity, illegality or
unenforceability will not affect any other provisions of this Agreement and (ii)
this Agreement will be construed as if that invalid, illegal or unenforceable
provision had never been contained herein (except that this clause (ii) will not
prohibit any modification allowed under Section 7(b)).
(b) NONEXCLUSIVITY OF RIGHTS. Nothing herein will prevent or limit
the Employee's continuing or future participation in any Compensation Plan or,
subject to Section 9(k), limit or otherwise affect such rights as the Employee
may have under any other contract or agreement with the Company. Vested benefits
and other amounts to which the Employee is or becomes entitled to receive under
any Compensation Plan on or after the Termination Date will be payable in
accordance with that Compensation Plan, except as expressly modified hereby.
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(c) SUCCESSORS. (i) This Agreement is personal to the Employee and,
without the prior written consent of the Company, is not assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement will inure to the benefit and be enforceable by the Employee's legal
representatives (including any duly appointed guardian) acting in their
capacities as such pursuant to applicable law.
(ii) This Agreement will inure to the benefit of and be binding on
the Company and its successors and assigns. If, at any time prior to the
Termination Date, the Employee is not an Executive Officer, the Company will be
entitled to assign all its obligations hereunder to a subsidiary of the Company
and treat the Employee as an employee of that subsidiary for all purposes, but
the Company will remain liable for the full, timely performance of all the
obligations so assigned as if the assignment had not been made.
(iii) The Company will require any successor (direct or indirect and
whether by purchase, merger, consolidation, share exchange or otherwise) to the
business, properties and assets of the Company substantially as an entirety
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Company would have been required to perform it had no
such succession taken place.
(d) AMENDMENTS; WAIVERS. This Agreement may not be amended or
modified except (i) by a written agreement executed and delivered by the parties
hereto or their respective successors or legal representatives acting in their
capacities as such pursuant to applicable law or (ii) pursuant to the provisions
of Section 7(b) or 9(a).
(e) NOTICES. All notices and other communications required or
permitted under this Agreement must be in writing and will be deemed delivered
and received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom the
notice or communication is sent or (ii) if delivered by mail (whether actually
received or not), at the close of business on the third business day (in the
location where the Company then has its principal executive offices) next
following the day when placed in the mail, postage prepaid, certified or
registered, addressed to the appropriate party or parties at the address of that
party set forth below (or at such other address as that party may designate by
written notice to the other party in accordance herewith):
(A) if to the Employee, addressed as follows:
Michael D. Mitschele
89 Eagle Rock Avenue
P.O. Box 683
Roseland, New Jersey 07068
Facsimile: (973) 226-8140
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(B) if to the Company, addressed as follows:
U.S. Concrete, Inc.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77065
Attn: Corporate Secretary
Facsimile: (713) 350-6001
(f) NO WAIVER. The failure of the Company or the Employee to insist
on strict compliance with any provision of, or to assert any right under, this
Agreement (including the right of the Employee to terminate his Employment for
Good Reason) will not be deemed a waiver of that provision or of any other
provision of or right under this Agreement.
(G) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REFERENCE TO
ANY PRINCIPLES OF CONFLICTS OF LAWS.
(h) HEADINGS. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
(i) INTEREST. If any amounts required to be paid or reimbursed to
the Employee hereunder are not so paid or reimbursed at the times provided
herein (including amounts required to be paid by the Company pursuant to
Sections 6 and 10, those amounts will accrue interest compounded daily at the
annual percentage rate equal to the interest rate shown as the Prime Rate in the
Money Rates column in the then most recently published edition of THE WALL
STREET JOURNAL, or, if that rate is not then so published on at least a weekly
basis, the interest rate announced by The Chase Manhattan Bank (or its
successor), from time to time, as its Base Rate (or prime lending rate), from
the date those amounts were required to have been paid or reimbursed to the
Employee until those amounts are finally and fully paid or reimbursed; provided,
however, that in no event will the amount of interest contracted for, charged or
received hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
(j) TAX WITHHOLDING. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that applicable laws or regulations require it to withhold.
(k) ENTIRE AGREEMENT. The Company and the Employee agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Employee by the Company, but has no effect on
any Compensation Plan in which the Employee was participating prior to the
Effective Date.
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(l) EFFECTIVE DATE. This Agreement will become effective on the IPO
Closing Date (the "Effective Date").
Section 10. PAYMENT OF EXPENSES; RESOLUTION OF DISPUTES. (a) PAYMENT
OF EXPENSES. If at any time during the term hereof or afterwards: (i) there
should exist a dispute or conflict between the Employee and the Company or
another Person as to the validity, interpretation or application of any term or
condition hereof, or as to the Employee's entitlement to any benefit intended to
be bestowed hereby, which is not resolved to the satisfaction of the Employee,
(ii) the Employee must (A) defend the validity of this Agreement or (B) contest
any determination by the Company concerning the amounts payable (or
reimbursable) by the Company to the Employee or (iii) the Employee must prepare
responses to an Internal Revenue Service ("IRS") audit of, or otherwise defend,
his personal income tax return for any year the subject of any such audit, or an
adverse determination, administrative proceedings or civil litigation arising
therefrom that is occasioned by or related to an audit by the IRS of the
Company's income tax returns, then the Company hereby unconditionally agrees:
(1) on written demand of the Company by the Employee, to provide sums sufficient
to advance and pay on a current basis (either by paying directly or by
reimbursing the Employee) not less than 30 days after a written request therefor
is submitted by the Employee, the Employee's reasonable out-of-pocket costs and
expenses (including reasonable attorney's fees) the Employee incurs in
connection with any such matter; (2) the Employee will be entitled, on
application to any court of competent jurisdiction, to the entry of a mandatory
injunction without the necessity of posting any bond with respect thereto which
compels the Company to pay or advance such costs and expenses on a current
basis; and (3) the Company's obligations under this Section 10(a) will not be
affected if the Employee is not the prevailing party in the final resolution of
any such matter.
(b) RESOLUTION OF DISPUTES. If a dispute of any type referred to in
Section 10(a) arises between the Company and the Employee and they fail to
resolve that dispute by direct negotiation, the Company and the Employee agree
that the next step taken to resolve that dispute, prior to either party
initiating any litigation to resolve that dispute (not including any litigation
that may be required to enforce the Employee's rights to the payment or
advancement of expenses and legal fees on a current basis pursuant to Section
10(a)) will be to submit the dispute to an agreed Alternative Dispute Resolution
("ADR") process, to which process the parties will strive diligently in good
faith to agree within 10 business days after either party has given written
notice to the other party that it is unable to concur in the other party's final
proposed negotiated resolution of the dispute. If the Company and the Employee
are unable to agree in writing to an acceptable ADR process within that
10-business day period, then the parties will submit to a mandatory ADR process
by making joint application to the then Chief United States Federal District
Judge in the federal district in which the Company then has its principal
executive offices for the selection of an ADR process for the parties. The
parties will diligently in good faith participate in the ADR process that judge
chooses. If the parties are unable to resolve their dispute after diligent good
faith participation in the ADR process, then either party will be free to
initiate such litigation as that party deems appropriate under the
circumstances. Under no circumstances will the Employee be obligated to pay for
the cost of any ADR process or to pay or reimburse the Company for any
attorneys' fees, costs
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or other expenses the Company incurs in connection with any process undertaken
by the Employee to resolve disputes under this Agreement. This Section 10 uses
the term "Employee" to include, if the Employee has died or become incompetent
as a matter of applicable law, the Employee's legal representative acting in his
capacity as such under applicable law.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
U.S. CONCRETE, INC.
By:________________________________________
Eugene P. Martineau
President and Chief Executive Officer
EMPLOYEE
___________________________________________
Michael D. Mitschele
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
the Effective Date (as defined herein) by and between U.S. Concrete, Inc., a
Delaware corporation (the "Company"), and Neil J. Vannucci (the "Employee").
PRELIMINARY STATEMENT
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company without distraction or
concern over minimum compensation, benefits or tenure, to develop and implement
the Company's initial development plan and thereafter to assist in the
management of the Company's future growth and development and the maximization
of the returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
Section 1. CERTAIN DEFINED TERMS. (a) The following terms this
Agreement uses have the respective meanings this Section 1(a) assigns to them:
"Acquired Business" means Bay Cities Building Materials Co., Inc.
"Active Status" means the Employee's Employment status from the
Effective Date to and including the first to occur of (i) the Part-time
Employment Effective Date or (ii) the Termination Date.
"Annual Cash Compensation" of the Employee for any Compensation Year
means the salary the Employee earns during that Compensation Year,
including all amounts of salary the Employee earns during that
Compensation Year and elects to (i) defer, whether pursuant to a
Compensation Plan intended to qualify as a plan under Code Section 401(k)
or otherwise, and (ii) forego pursuant to a Compensation Plan under which
the Employee may receive Common Stock or any other form of noncash
compensation in lieu of that salary. For purposes of this definition, any
form of noncash compensation will be valued at its fair market value at
the time that compensation is awarded, earned or paid, as the case may be.
"Average Annual Cash Compensation" of the Employee means, as of the
Part-time Employment Effective Date, the average of (i) the Annual Cash
Compensation the Employee has earned in each of the two Compensation Years
next preceding that date or, if less than
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two Compensation Years have occurred prior to that date and since the
Effective Date, (ii) the Annual Cash Compensation in each whole
Compensation Year, if any, and, restated on an annualized basis, the
Annual Cash Compensation in each partial Compensation Year (up to a
maximum of two partial Compensation Years) next preceding the Part-time
Employment Effective Date.
"Base Salary" means: (i) prior to the Part-time Employment Effective
Date, the guaranteed minimum annual salary payable by the Company to the
Employee pursuant to Section 4(a); and (ii) on and after the Part-time
Employment Effective Date, the guaranteed minimum annual salary payable by
the Company to the Employee pursuant to Section 5(e).
"Board" means the entire Board of Directors of the Company.
"Business Reason" for the Company's termination of the Employee's
Employment means any lawful reason other than Cause.
"Cause" for the Company's termination of the Employee's Employment
means: (i) the Employee's conviction of a felony crime (or the Employee's
entering of a plea of NOLO CONTENDERE to any charge against him of a
felony crime) of any kind; or (ii) the Employee's continuing failure to
substantially perform his duties and responsibilities hereunder (except by
reason of the Employee's incapacity attributable to physical or mental
illness or injury) for a period of 20 days after the Required Board
Majority has delivered to the Employee a written demand for substantial
performance hereunder which specifically identifies the bases for the
Required Board Majority's determination that the Employee has not
substantially performed his duties and responsibilities hereunder (that
period being the "Grace Period"); provided, that for purposes of this
clause (ii), the Company will not have Cause to terminate the Employee's
Employment unless (A) at a meeting of the Board called and held following
the Grace Period in the city in which the Company's principal executive
offices are located of which the Employee was given not less than 10 days'
prior written notice and at which the Employee was afforded the
opportunity to be represented by counsel, appear and be heard, the
Required Board Majority adopts a written resolution which (1) sets forth
the Required Board Majority's determination that the failure of the
Employee to substantially perform his duties and responsibilities
hereunder has (except by reason of his incapacity attributable to physical
or mental illness or injury) continued past the Grace Period and (2)
specifically identifies the bases for that determination and (B) the
Company, at the written direction of the Required Board Majority, delivers
to the Employee a Notice of Termination for Cause to which a copy of that
resolution, certified as being true and correct by the secretary or any
assistant secretary of the Company, is attached. Cause of the type
referred to in clause (i) of the preceding sentence is a "Type I Cause,"
while Cause of the type referred to in clause (ii) of the preceding
sentence is a "Type II Cause."
"Code" means the Internal Revenue Code of 1986.
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"Common Stock" means the common stock of the Company.
"Company" means (i) U.S. Concrete, Inc., a Delaware corporation, and
(ii) any Person that assumes the obligations of "the Company" hereunder,
by operation of law, pursuant to Section 9(c)(iii) or otherwise.
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program the Company or any subsidiary of the Company
establishes, maintains or sponsors, or to which the Company or any
subsidiary of the Company contributes, on behalf of two or more Executive
Officers (including, for this purpose, any member of the family of any
Executive Officer), (i) including (A) any "employee pension benefit plan"
(as defined in ERISA Section 3(2)) or other "employee benefit plan" (as
defined in ERISA Section 3(3)), (B) any other retirement or savings plan,
including any supplemental benefit arrangement relating to any plan
intended to be qualified under Code Section 401(a) or whose benefits the
Code or ERISA limits, (C) any "employee welfare plan" (as defined in ERISA
Section 3(1)), (D) any arrangement, plan, policy, practice or program
providing for severance pay, deferred compensation or insurance benefit
and (E) any Incentive Plan, but (ii) excluding any compensation
arrangement, plan, policy, practice or program to the extent it provides
for annual base salary.
"Compensation Committee" means the committee of the Board to which
the Board has delegated duties respecting the compensation of Executive
Officers and the administration of Incentive Plans, if any, intended to
qualify for the Rule 16b-3 exemption under the Securities Exchange Act of
1934.
"Compensation Year" means a calendar year.
"Confidential Information" means, with respect to the Company or any
subsidiary of the Company, all trade secrets and other confidential,
nonpublic and/or proprietary information of that Person, including
information derived from reports, investigations, research, work in
progress, codes, marketing and sales programs, customer lists, records of
customer service requirements, capital expenditure projects, cost
summaries, pricing formulae, contract analyses, financial information,
projections, present and future business plans, confidential filings with
any governmental authority and all other confidential, nonpublic concepts,
methods of doing business, ideas, materials or information prepared or
performed for, by or on behalf of that Person.
"CPI" means for any period the Consumer Price Index for All Urban
Consumers, All Items, 1982-84 = 100, U.S. City Average, as published by
the United States Department of Labor, Bureau of Labor Statistics (or its
successor) for that period.
"Disability" of the Employee means the Employee has been determined
(which determination will be final and binding on all Persons, absent
manifest error), as a result of
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a physical or mental illness or personal injury he has incurred (including
illness or injury resulting from any substance abuse), by a Qualified
Physician (who may be the doctor treating or otherwise acting as the
Employee's doctor in connection with the illness or injury in question)
selected by the Employee, or by the Company at its expense, to be unable
to perform, at the time of that determination and, in all reasonable
medical likelihood, indefinitely thereafter, the normal duties then most
recently assigned, under and in accordance with the terms hereof, to the
Employee while on Active Status; provided that the determination whether
the Employee has incurred a Disability will be made by a majority of three
Qualified Physicians, (i) one of whom the Employee selects, (ii) one of
whom the Company selects and (iii) the remaining one of whom the Qualified
Physicians the Employee and the Company have selected pursuant to clauses
(i) and (ii) of this proviso select and the fees and expenses of whom the
Employee and the Company will share and pay in equal amounts, if: (A) the
Employee has selected a Qualified Physician and the Company has selected
another Qualified Physician, in each case to determine whether the
Employee has incurred a Disability, and (B) those Qualified Physicians
disagree as to whether the Employee has incurred a Disability. For
purposes of this definition, if the Employee is unable by reason of
illness or injury to give an informed consent to the performance of the
treatment of that illness or injury, a Qualified Physician selected by any
Person who is authorized by applicable law to give that consent will be
deemed to have been selected by the Employee. Notwithstanding the
foregoing, if the Company maintains a disability insurance policy that
provides coverage for its Executive Officers generally, the term
"Disability," as used in this Agreement, shall mean the events and/or
circumstances under which the Employee will be entitled to receive
disability benefits under that insurance policy.
"Effective Date" has the meaning Section 9(l) specifies.
"Employment" means the salaried employment of the Employee by the
Company or a subsidiary of the Company hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Executive Officer" means any of the chairman of the board, the
chief executive officer, the chief operating officer, the chief financial
officer, the president or any executive, regional or other group or senior
vice president of the Company.
"Good Reason" for the Employee's termination of his Employment
means: (i) any violation hereof in any material respect by the Company;
(ii) either (A) a failure of the Company to continue in effect any
Compensation Plan in which the Employee was participating or (B) the
taking of any action by the Company which would adversely affect the
Employee's participation in or materially reduce the Employee's benefits
under any such Compensation Plan, unless (1) in the case of either
subclause (A) or (B) of this clause, there is substituted a comparable
Compensation Plan that is at least economically equivalent, in terms of
the benefit offered to the Employee, to the Compensation Plan being ended
or in
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which the Employee's participation is being adversely affected or the
Employee's benefits are being materially reduced or (2) in the case of
that subclause (A), the failure, or in the case of that subclause (B), the
taking of action, adversely affects Executive Officers generally; or (iii)
the assignment to the Employee without the Employee's written consent of
duties inconsistent in any material respect with the Employee's then
current positions, authority, duties or responsibilities or any other
action by the Company which results in a material diminution in those
positions, authority, duties or responsibilities; provided, however, that
if the Company combines the operations of the Acquired Business with the
operations of one or more subsidiaries of the Company (whether through the
creation of an unincorporated or other division, by merger or
consolidation or otherwise), no resulting change in the status, offices,
titles or reporting requirements of the Employee will constitute "Good
Reason."
"Incentive Plan" means any compensation arrangement, plan, policy,
practice or program the Company or any subsidiary of the Company
establishes, maintains or sponsors, or to which the Company or any
subsidiary of the Company contributes, on behalf of at least two Executive
Officers and which provides for incentive, bonus or other
performance-based awards of cash, securities or the phantom equivalent of
securities, including any stock option, stock appreciation right and
restricted stock plan, but excluding any plan intended to qualify as a
plan under any one or more of Code Sections 401(a), 401(k) or 423.
"IPO" means the first time a registration statement the Company has
filed under the Securities Act of 1933, as amended (the "Securities Act")
and respecting a primary underwritten offering by the Company to the
public of shares of Common Stock becomes effective under the Securities
Act and the Company issues and sells any of the shares registered by that
registration statement to the Underwriter.
"IPO Closing Date" means the date on which the Company first
receives payment for the shares of Common Stock it sells to the
Underwriter in the IPO.
"Nonterminating Party" means the Employee or the Company, as the
case may be, to which the Terminating Party delivers a Notice of
Termination.
"Notice of Termination" to or from the Employee means a written
notice that: (i) states that it is a "Notice of Termination" hereunder,
(ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances the Terminating Party claims to provide a basis for
termination of the Employee's Employment, and if the Termination Date is
other than the date of receipt of the notice, (iii) sets forth that
Termination Date.
"Part-time Employment Effective Date" means, (i) if the Company
elects pursuant to any applicable provision hereof to terminate the
Employee's Employment other than for Cause or (ii) if the Employee elects
pursuant to the applicable provision hereof to terminate his Employment
for Good Reason or by reason of his Disability, the date the
Nonterminating Party receives the Terminating Party's Notice of
Termination.
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"Part-time Employment Period" means the period of time which begins
on the Part- time Employment Effective Date and ends on the first to occur
of (i) the third anniversary of the Effective Date or, if later, the first
anniversary of the Part-time Employment Effective Date, (ii) the
termination by the Company of the Employee's Employment for Type I Cause
or (iii) the death of the Employee.
"Person" means any natural person, sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association,
mutual company, joint stock company, joint venture, estate, trust, union
or employee organization or governmental authority.
"Qualified Physician" means, in the case of any determination
whether the Employee has sustained a Disability, a physician (i) holding
an M.D. degree from a medical school located in the United States, (ii)
specializing and board-certified in the treatment of the injury or illness
that has or may have caused that Disability and (iii) having admission
privileges to one or more hospitals located in the state in which the
Company then has its principal executive offices or in the state in which
the Employee then is domiciled.
"Required Board Majority" means at any time a majority of the
members of the Board at that time.
"Retirement" means termination of the Employee's Employment by
reason of the Employee's giving a Notice of Termination on or following
the date he has attained age 65.
"Terminating Party" means the Employee or the Company, as the case
may be, who or which terminates the Employee's Employment by means of a
Notice of Termination.
"Termination Date" means: (i) if the Employee's Employment
terminates by reason of the Employee's death, the date of that death; (ii)
if the Employee's Employment terminates by reason of the Employee's giving
a Notice of Termination Without Good Reason or by reason of Retirement,
the elapse of the 30th day after the Company receives that notice; (iii)
if the Company terminates the Employee's Employment (A) at any time for
Type I Cause or (B) at any time prior to the Part-time Employment
Effective Date for Type II Cause, the date the Employee receives the
Company's Notice of Termination for Cause; and (iv) if the Employee's
Employment terminates for any other reason, at the expiration of the
Part-time Employment Period.
"Type I Cause" means Cause of the type to which clause (i) of the
first sentence of the definition of Cause herein refers.
"Type II Cause" means Cause of the type to which clause (ii) of the
first sentence of the definition of Cause herein refers.
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"Underwriter" means collectively (i) the investment banking firms
that prospectively may enter into the underwriting agreement and (ii) from
and after the IPO pricing date, the investment banking firms parties to
the underwriting agreement.
"Without Good Reason" for the Employee's termination of his
Employment means that, at the time the Company receives the Employee's
Notice of Termination, the Employee was not entitled to terminate his
Employment (i) for a Good Reason or (ii) by reason of his Disability or
Retirement.
(b) OTHER DEFINITIONAL PROVISIONS. (i) Except as this Agreement
otherwise may specify, all references herein to any statute, including the Code
and ERISA, are references to that statute or any successor statute, as the same
may have been or be amended or supplemented from time to time, and any rules or
regulations promulgated thereunder, and all references herein to any rule or
regulation are references to that rule or regulation, or any successor rule or
regulation, as the same may be amended or supplemented from time to time.
(ii) This Agreement uses the words "herein," "hereof" and
"hereunder" and words of similar import to refer to this Agreement as a whole
and not to any provision of this Agreement, and the word "Section" refers to a
Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number includes
the plural and vice versa, and a reference to one gender includes the other
gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding that word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
Section 2. EMPLOYMENT. (a) On the terms and subject to the
conditions hereinafter set forth, and beginning as of the Effective Date and
continuing until the first to occur of the Part-time Employment Effective Date
or the Termination Date, (i) the Company will employ the Employee as Executive
Vice President of Business Development - Bay Area, (ii) the Employee will serve
in the Company's employ in that position and (iii) the Employee will perform
such duties, and have such powers, authority, functions, duties and
responsibilities for the Company and entities affiliated with the Company as are
commensurate and consistent with his employment in the position or positions to
which clause (i) of this sentence refers. The Employee also will have such
additional powers, authority, functions, duties and responsibilities as the
chief executive officer of the Company or his delegate may assign to him from
time to time; provided that, without the Employee's written consent, those
additional powers, authority, functions, duties and responsibilities must not be
inconsistent or interfere with, or detract from, those herein vested in, or
otherwise then being performed for the Company by, the Employee.
(b) The Employee will not, at any time during his Employment, engage
in any other activities unless those activities do not interfere materially with
the Employee's duties and
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responsibilities to the Company at that time, except that the Employee will be
entitled, subject to the provisions of Section 7, (i) to continue with such
activities as the Employee has carried on prior to the Effective Date, including
making and managing his personal investments and participating in other business
or civic activities and (ii) to serve on corporate or other business, civic or
charitable boards or committees and trade association or similar boards or
committees.
Section 3. TERM OF EMPLOYMENT. Subject to the provisions of Section
5, the term of the Employee's Employment will be for an initial term of three
years, provided that, beginning on the second anniversary of the Effective Date,
the term of the Employee's Employment will be for a continually renewing term of
one year commencing on that anniversary date and renewing each day thereafter
for an additional day without any further action by either the Company or the
Employee until an event has occurred as described in, or one of the parties has
made an appropriate election pursuant to, Section 5. After the Termination Date
has occurred and the Company has paid to the Employee all the applicable amounts
Section 5 provides the Company will pay as a result of the termination of the
Employee's Employment, including all amounts accruing during the Part-time
Employment Period, if any, this Agreement will terminate and have no further
force or effect, except that Sections 8, 9 and 10 will survive that termination
indefinitely and Section 7 will survive for the period of time it specifies.
Section 4. COMPENSATION. (a) BASE SALARY. A Base Salary will be
payable to the Employee by the Company as a guaranteed minimum annual amount
hereunder for each Compensation Year during the period from the Effective Date
to the first to occur of the Part-time Employment Effective Date or the
Termination Date. The Company will pay that Base Salary in the intervals
consistent with its normal payroll schedules, and that Base Salary will be
payable initially at the annual rate of $200,000 and will be increased (but not
decreased or adjusted other than as Section 5 provides) as follows:
(i) on the first and each subsequent anniversary of the Effective
Date, by the amount equal to the product of (A) the annual rate of that
Base Salary as in effect immediately prior to that anniversary multiplied
by (B) the percentage increase (if any) in the CPI for the 12-month period
immediately preceding that anniversary; and
(ii) on the first and each subsequent anniversary of the Effective
Date or at any other time, by such additional amount (if any) the
Compensation Committee in its sole discretion may determine or approve, as
evidenced by the written minutes or records of the Compensation Committee
and its written notices of those determinations or approvals to the
Employee.
Effective as of the Part-time Employment Effective Date, the Base Salary
theretofore in effect will be adjusted as Section 5(e) provides.
(b) OTHER COMPENSATION. The Employee will be entitled to participate
in all Compensation Plans from time to time in effect while he remains on Active
Status, regardless of
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whether the Employee is an Executive Officer. All awards to the Employee under
all Incentive Plans will take into account the Employee's positions with and
duties and responsibilities to the Company and its subsidiaries.
Section 5. TERMINATION OF EMPLOYMENT AND ITS CONSEQUENCES. (A)
TERMINATION BY THE COMPANY. (i) The Company will be entitled, if acting at the
direction of the Required Board Majority, to terminate the Employee's Employment
(A) at any time for Type I Cause or (B) at any time prior to the Part-time
Employment Effective Date for (1) Type II Cause or (2) any Business Reason. The
Company's termination of the Employee's Employment for Cause will be effective
on the date the Company delivers a Notice of Termination for Cause to the
Employee pursuant to this Section 5(a)(i) (together, in the case of a
termination for Type II Cause, with the certified resolution to which clause
(ii) of the definition herein of Cause refers), while the Company's termination
of the Employee's Employment for a Business Reason will be effective on the
later of (A) the third anniversary of the Effective Date and (B) first
anniversary of the date the Company delivers a Notice of Termination for a
Business Reason to the Employee pursuant to this Section 5(a)(i).
(ii) If the Company terminates the Employee's Employment for Cause,
the Company promptly thereafter, and in any event within five business days
thereafter, will pay the Employee his Base Salary to and including the
Termination Date and the amount of all compensation the Employee has previously
deferred (together with any accrued interest or earnings thereon), in each case
to the extent not theretofore paid, and, when that payment is made, the Company
will, notwithstanding Section 3, have no further or other obligations hereunder
to the Employee.
(iii) If the Company terminates the Employee's Employment for a
Business Reason, the respective rights and obligations of the Company and the
Employee during the Part-time Employment Period will be as Section 5(e) sets
forth.
(b) TERMINATION BY THE EMPLOYEE. (i) The Employee will be entitled
to terminate his Employment (A) for a Good Reason at any time within 180 days
after the facts or circumstances constituting that Good Reason first exist and
are known to the Employee, (B) Without Good Reason at any time or (C) by reason
of his Retirement. The Employee's termination of his Employment for Good Reason
will be effective on the later of (A) the third anniversary of the Effective
Date and (B) the first anniversary of the date the Employee delivers a Notice of
Termination for Good Reason to the Company. The Employee's termination of his
Employment Without Good Reason or by reason of his Retirement will be effective
on the 30th day following the Employee's delivery of a Notice of Termination
Without Good Reason or by reason of his Retirement.
(ii) If the Employee terminates his Employment for Good Reason, the
respective rights and obligations of the Company and the Employee during the
Part-time Employment Period will be as Section 5(e) sets forth.
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(iii) If the Employee terminates his Employment Without Good Reason
or by reason of his Retirement, the Company will pay to the Employee, in a cash
lump sum within 10 business days after the Termination Date, the amount equal to
the sum of (A) the portion of the Base Salary to and including the Termination
Date which has not yet been paid, (B) all compensation the Employee has
previously deferred (together with any accrued interest and earnings thereon)
which has not yet been paid and (C) any accrued but unpaid vacation pay.
(c) TERMINATION BY REASON OF DISABILITY. If the Employee incurs any
Disability while on Active Status, either the Employee or the Company may
terminate the Employee's Employment effective on the first anniversary of the
date the Nonterminating Party receives a Notice of Termination from the
Terminating Party pursuant to this Section 5(c). If the Employee's Employment
terminates by reason of the Employee's Disability, the respective rights and
obligations of the Company and the Employee during the Part-time Employment
Period will be as Section 5(e) sets forth.
(d) TERMINATION OF EMPLOYMENT BY DEATH. The Employee's Employment
will terminate automatically at the time of his death. If the Employee's
Employment terminates by reason of the Employee's death, the Company will pay to
the Person the Employee has designated in a written notice delivered to the
Company as his beneficiary entitled to that payment, if any, or to the
Employee's estate, as applicable, in a cash lump sum within 30 days after the
Termination Date, the amount equal to the sum of (i) the portion of the Base
Salary through the end of the month in which the Termination Date occurs which
has not yet been paid, (ii) all compensation the Employee has previously
deferred (together with any accrued interest or earnings thereon) which has not
yet been paid, (iii) any accrued but unpaid vacation pay (if the Employee dies
while on Active Status) and (iv) (A) if the Employee dies while on Active Status
or during the Part-time Employment Period (other than during the last 12 months
of the Part-time Employment Period), an amount equal to the Base Salary being
paid for the Compensation Year in which he dies or (B) if the Employee dies
during the last 12 months of the Part-time Employment Period, the product of (1)
one-twelfth of the Base Salary being paid for the Compensation Year in which the
Employee dies multiplied by (2) the number of whole and partial calendar months
in the period beginning with the first calendar month after the calendar month
in which he dies and ending with the last calendar month in which the
Termination Date would have occurred if the Employee's Employment were to have
continued to the end of the Part-time Employment Period. For purposes of this
Section 5(d), if the anniversary of the Effective Date in the Compensation Year
in which the Employee dies has not occurred on or before the Termination Date,
the Base Salary for that Compensation Year will be calculated on the assumption
that no increase in the amount thereof would be made effective as of that
anniversary pursuant to Section 4(a) or 5(e)(i), as applicable.
(e) EMPLOYEE'S RIGHTS DURING THE PART-TIME EMPLOYMENT PERIOD. (i)
The Company will pay the Employee a Base Salary, in the intervals consistent
with its normal payroll schedules, during the Part-time Employment Period in the
amounts determined from time to time as follows: Effective as of the Part-time
Employment Effective Date, the Base Salary payable by the Company to the
Employee for the Part-time Employment Period will be as follows:
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(A) (1) if the Part-time Employment Effective Date occurs as a
result of the receipt by the Nonterminating Party of a Notice of
Termination for a Business Reason or a Notice of Termination for Good
Reason, the amount equal to the Average Annual Cash Compensation of the
Employee determined as of the Part-time Employment Effective Date; and (2)
if the Part-time Employment Effective Date occurs as a result of the
receipt by the Nonterminating Party of a Notice of Termination for
Disability, the amount equal to the amount by which (a) the Average Annual
Cash Compensation of the Employee determined as of the Part-time
Employment Effective Date exceeds (b) the aggregate amount of periodic
payments the Employee receives during the 12 months beginning on that date
under Compensation Plans then in effect and providing for those payments
to the Employee solely as a result or on account of disability; and
(B) on each anniversary of the Effective Date which occurs during
the Part-time Employment Period, if any, the Base Salary payable pursuant
to this Section 5(e) will be increased by the amount equal to the product
of (1) the annual rate of that Base Salary as in effect immediately prior
to that anniversary multiplied by (2) the percentage increase (if any) in
the CPI for the 12-month period immediately preceding that anniversary.
(ii) The Employee will continue to participate in all Compensation
Plans from time to time in effect during the Part-time Employment Period,
provided, however, that: (A) the Employee will not be entitled to receive any
new award or grant under any Incentive Plan, and any such new award or grant
will be at the sole discretion of the Compensation Committee or the Board, as
applicable, with respect to that Incentive Plan; and (B) if (1) the terms of any
such plan preclude the Employee's continued participation therein or (2) his
continued participation in any such plan would or reasonably could be expected
to disqualify that plan under the Code, the Employee will not be entitled to
participate in that plan, but the Company instead will provide the Employee with
the after-tax equivalent of the benefits that would have been provided to the
Employee were he a participant in that plan. For purposes of determining
eligibility (including years of service) for retirement benefits payable under
any Compensation Plan, the Employee will be deemed to have retired at the
Termination Date.
(iii) Subject to the provisions of Section 7, the Employee will not
be (A) prevented from accepting other employment or engaging in (and devoting
substantially all his time to) other business activities or (B) required to
perform any regular duties for the Company (except to provide such services
consistent with the Employee's educational background, experience and prior
positions with the Company as may be acceptable to the Employee) or to seek or
accept additional employment with any other Person. If the Employee, at his
discretion, accepts any such additional employment or engages in any such other
business activity, there will be no offset, reduction or effect on any rights,
benefits or payments to which the Employee is entitled pursuant to this
Agreement. Furthermore, the Employee will have no obligation to account for,
remit, rebate or pay over to the Company any compensation or other amounts he
earns or derives in connection with such additional employment or business
activity. The Employee will, however, make himself generally available for
special projects or to consult with the Company and its employees at such times
and
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at such places as the Company may reasonably request on terms that are
reasonably satisfactory to the Employee and consistent with the Employee's
regular duties and responsibilities in the course of his then new occupation or
other employment, if any.
(f) RETURN OF PROPERTY. On termination of the Employee's Employment,
however brought about, the Employee (or his representatives) will promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Employee (or those representatives).
(g) STOCK OPTIONS. Notwithstanding any other provision of this
Agreement to the contrary: (i) except in the case of a termination of the
Employee's Employment by the Company for Cause or by the Employee Without Good
Reason at any time while on Active Status, all stock options previously granted
to the Employee under Incentive Plans that have not been exercised and are
outstanding as of the time immediately prior to the Termination Date will,
notwithstanding any contrary provision of any applicable Incentive Plan, remain
outstanding (and continue to become exercisable pursuant to their respective
terms) until exercised or the expiration of their term, whichever is earlier;
(ii) in the case of a termination of the Employee's Employment by the Employee
Without Good Reason at any time while on Active Status, all stock options
previously granted to the Employee under Incentive Plans that have not been
exercised and are outstanding and exercisable as of the time immediately prior
to the Termination Date will, notwithstanding any contrary provision of any
applicable Incentive Plan, remain outstanding and continue to be exercisable
until exercised or the date that is 90 days after the Termination Date,
whichever is earlier, whereupon, those options will expire; and (iii) in the
case of a termination of the Employee's Employment by the Company for Cause at
any time while the Employee is on Active Status, all stock options previously
granted to the Employee under Incentive Plans will expire on the Termination
Date. No stock option previously granted to the Employee under any Incentive
Plan will, notwithstanding any contrary provision of that Incentive Plan, expire
or fail to become exercisable or, if exercisable, cease to be exercisable by
reason of either (i) the occurrence of the Employee's Part-time Employment
Effective Date or (ii) the Employee's service during the Part-time Employment
Period being less than full-time.
(h) NO CONSTRUCTIVE TERMINATION. Except in the case of a termination
of the Employee's Employment which results from the Employee's death, no
termination of the Employee's Employment will be effective for any purpose
hereunder unless the Terminating Party delivers a Notice of Termination to the
Nonterminating Party. An offer by the Employee to resign from an office or the
Board or otherwise to step aside will not, whether in writing or oral,
constitute a Notice of Termination by the Employee.
Section 6. OTHER EMPLOYEE RIGHTS (a) PAID VACATION AND Holidays. The
Employee will be entitled to not less than five weeks of annual vacation and all
legal holidays during which times his applicable compensation will be paid in
full.
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(b) BUSINESS EXPENSES. The Employee is authorized to incur, and will
be entitled to receive prompt reimbursement for, all reasonable expenses the
Employee incurs in performing his duties and carrying out his responsibilities
hereunder, including (i) business meals and entertainment and travel expenses
and (ii) mileage reimbursements in accordance with the Company's automobile
expense reimbursement policy as in effect at the time those expenses are
incurred, provided that the Employee complies with the applicable policies,
practices and procedures of the Company relating to the submission of expense
reports, receipts or similar documentation of those expenses. The Company will
either pay directly or promptly reimburse the Employee for those expenses not
more than 30 days after the submission to the Company by the Employee from time
to time of an itemized accounting of those expenses for which direct payment or
reimbursement is sought. Unpaid reimbursements after that 30-day period will
accrue interest in accordance with Section 9(i).
(c) NO FORCED RELOCATION. The Employee will not be required to move
his principal place of residence from the metropolitan San Francisco, California
area or to perform regular duties that could reasonably be expected to require
either such move against his wish or his spending amounts of time each week
outside the metropolitan San Francisco, California area which are unreasonable
in relation to the duties and responsibilities of the Employee hereunder, and
the Company agrees that, if it requests the Employee to make such a move and the
Employee declines that request, that declination will not constitute any basis
for a determination that Type II Cause exists.
Section 7. COVENANT NOT TO COMPETE. (a) The Employee recognizes that
in each of the highly competitive businesses in which the Company will be
engaged following the Effective Date, personal contact is of primary importance
in securing new customers and in retaining the accounts and goodwill of present
customers and protecting the business of the Company. The Employee, therefore,
agrees that during the term of his Employment and for a period of three years
after the Termination Date, he will not, within 75 miles of each geographic
location in which he has devoted substantial attention at such location to the
material business interests of the Company (the "Relevant Geographic Areas"):
(i) accept employment or render service to any Person that is engaged in a
business directly competitive with the business then engaged in by the Company
or (ii) enter into or take part in or lend his name, counsel or assistance to
any business, either as proprietor, principal, investor, partner, director,
officer, employee, consultant, advisor, agent, independent contractor, or in any
other capacity whatsoever, for any purpose that would be competitive with the
business of the Company (all of the foregoing activities are collectively
referred to as the "Prohibited Activity"). Notwithstanding the foregoing, the
Employee may own and hold as a passive investment up to 5% of the outstanding
shares of any class of capital stock (or other equity interest) in a competing
corporation, limited liability company, limited partnership or other entity if
that class of capital stock (or other equity interest) is listed on a national
stock exchange or included in the Nasdaq National Market.
(b) In addition to all other remedies at law or in equity which the
Company may have for breach of a provision of this Section 7 by the Employee, it
is agreed that in the event of any
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breach or attempted or threatened breach of any such provision, the Company will
be entitled, on application to any court of proper jurisdiction, to a temporary
restraining order or preliminary injunction (without the necessity of (i)
proving irreparable harm, (ii) establishing that monetary damages are inadequate
or (iii) posting any bond with respect thereto) against the Employee prohibiting
such breach or attempted or threatened breach by proving only the existence of
such breach or attempted or threatened breach. If the provisions of this Section
7 should ever be deemed to exceed the time, geographic or occupational
limitations applicable law permits, the Employee and the Company agree that
those provisions will be and are hereby reformed to the maximum time, geographic
or occupational limitations applicable law permits.
(c) The covenants of the Employee in this Section 7 are independent
of and severable from every other provision of this Agreement; and the breach of
any other provision of this Agreement by the Company or the breach by the
Company of any other agreement between the Company and the Employee will not
affect the validity of the provisions of this Section 7 or constitute a defense
of the Employee in any suit or action brought by the Company to enforce any of
the provisions of this Section 7 or seek any relief for the breach thereof by
Employee.
(d) The Employee acknowledges, agrees and stipulates that: (i) the
terms and provisions of this Agreement are reasonable and constitute an
otherwise enforceable agreement to or of which the terms and provisions of this
Section 7 are ancillary or a part; (ii) the consideration provided by the
Company under this Agreement is not illusory; and (iii) the consideration given
by the Company under this Agreement, including the provision by the Company of
Confidential Information to the Employee as Section 8 contemplates, gives rise
to the Company's interest in restraining and prohibiting the Employee from
engaging in the Prohibited Activity within the Relevant Geographic Areas as this
Section 7 provides and the Employee's covenant not to engage in the Prohibited
Activity within the Relevant Geographic Areas pursuant to this Section 7 is
designed to enforce the Employee's consideration (or return promises) including
the Employee's promise in Section 8 to not disclose Confidential Information.
Section 8. CONFIDENTIAL INFORMATION. The Employee acknowledges that
he has had and will continue to have access to various Confidential Information.
The Employee agrees, therefore, that he will not at any time, either while
employed by the Company or afterwards, make any independent use of, or disclose
to any other person (except as authorized by the Company) any Confidential
Information. Confidential Information will not include (a) information that
becomes known to the public generally through no fault of the Employee, (b)
information required to be disclosed by law or legal process or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (b), the Employee will give prior
written notice thereof to the Company and provide the Company with the
opportunity to contest that requirement, or (c) the Employee reasonably believes
that disclosure is required in connection with the defense of a lawsuit against
the Employee. In the event of a breach or threatened breach by the Employee of
the provisions of this Section 8 with respect to any Confidential Information,
the Company will be entitled to a temporary restraining order and a preliminary
and permanent injunction (without the necessity of posting any bond in
connection
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therewith) restraining the Employee from disclosing, in whole or in part, that
Confidential Information. Nothing herein will be construed as prohibiting the
Company from pursuing any other available remedy for that breach or threatened
breach, including the recovery of damages.
Section 9. GENERAL PROVISIONS. (a) SEVERABILITY. If any one or more
of the provisions of this Agreement shall, for any reason, be held or found by
final judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, (i) that invalidity, illegality or
unenforceability will not affect any other provisions of this Agreement and (ii)
this Agreement will be construed as if that invalid, illegal or unenforceable
provision had never been contained herein (except that this clause (ii) will not
prohibit any modification allowed under Section 7(b)).
(b) NONEXCLUSIVITY OF RIGHTS. Nothing herein will prevent or limit
the Employee's continuing or future participation in any Compensation Plan or,
subject to Section 9(k), limit or otherwise affect such rights as the Employee
may have under any other contract or agreement with the Company. Vested benefits
and other amounts to which the Employee is or becomes entitled to receive under
any Compensation Plan on or after the Termination Date will be payable in
accordance with that Compensation Plan, except as expressly modified hereby.
(c) SUCCESSORS. (i) This Agreement is personal to the Employee and,
without the prior written consent of the Company, is not assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement will inure to the benefit and be enforceable by the Employee's legal
representatives (including any duly appointed guardian) acting in their
capacities as such pursuant to applicable law.
(ii) This Agreement will inure to the benefit of and be binding on
the Company and its successors and assigns. If, at any time prior to the
Termination Date, the Employee is not an Executive Officer, the Company will be
entitled to assign all its obligations hereunder to a subsidiary of the Company
and treat the Employee as an employee of that subsidiary for all purposes, but
the Company will remain liable for the full, timely performance of all the
obligations so assigned as if the assignment had not been made.
(iii) The Company will require any successor (direct or indirect and
whether by purchase, merger, consolidation, share exchange or otherwise) to the
business, properties and assets of the Company substantially as an entirety
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Company would have been required to perform it had no
such succession taken place.
(d) AMENDMENTS; WAIVERS. This Agreement may not be amended or
modified except (i) by a written agreement executed and delivered by the parties
hereto or their respective successors or legal representatives acting in their
capacities as such pursuant to applicable law or (ii) pursuant to the provisions
of Section 7(b) or 9(a).
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(e) NOTICES. All notices and other communications required or
permitted under this Agreement must be in writing and will be deemed delivered
and received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom the
notice or communication is sent or (ii) if delivered by mail (whether actually
received or not), at the close of business on the third business day (in the
location where the Company then has its principal executive offices) next
following the day when placed in the mail, postage prepaid, certified or
registered, addressed to the appropriate party or parties at the address of that
party set forth below (or at such other address as that party may designate by
written notice to the other party in accordance herewith):
(A) if to the Employee, addressed as follows:
Neil J. Vannucci
1981 Eucalyptus Avenue
San Carlos, California 94070
Facsimile: [(650) 871-5745]
(B) if to the Company, addressed as follows:
U.S. Concrete, Inc.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77065
Attn: Corporate Secretary
Facsimile: (713) 350-6001
(f) NO WAIVER. The failure of the Company or the Employee to insist
on strict compliance with any provision of, or to assert any right under, this
Agreement (including the right of the Employee to terminate his Employment for
Good Reason) will not be deemed a waiver of that provision or of any other
provision of or right under this Agreement.
(G) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO
ANY PRINCIPLES OF CONFLICTS OF LAWS.
(h) HEADINGS. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
(i) INTEREST. If any amounts required to be paid or reimbursed to
the Employee hereunder are not so paid or reimbursed at the times provided
herein (including amounts required to be paid by the Company pursuant to
Sections 6 and 10, those amounts will accrue interest compounded daily at the
annual percentage rate equal to the interest rate shown as the Prime Rate in the
Money Rates column in the then most recently published edition of THE WALL
STREET JOURNAL,
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or, if that rate is not then so published on at least a weekly basis, the
interest rate announced by The Chase Manhattan Bank (or its successor), from
time to time, as its Base Rate (or prime lending rate), from the date those
amounts were required to have been paid or reimbursed to the Employee until
those amounts are finally and fully paid or reimbursed; provided, however, that
in no event will the amount of interest contracted for, charged or received
hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
(j) TAX WITHHOLDING. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that applicable laws or regulations require it to withhold.
(k) ENTIRE AGREEMENT. The Company and the Employee agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Employee by the Company, but has no effect on
any Compensation Plan in which the Employee was participating prior to the
Effective Date.
(l) EFFECTIVE DATE. This Agreement will become effective on
IPO Closing Date (the "Effective Date").
Section 10. PAYMENT OF EXPENSES; RESOLUTION OF DISPUTES. (A) PAYMENT
OF EXPENSES. If at any time during the term hereof or afterwards: (i) there
should exist a dispute or conflict between the Employee and the Company or
another Person as to the validity, interpretation or application of any term or
condition hereof, or as to the Employee's entitlement to any benefit intended to
be bestowed hereby, which is not resolved to the satisfaction of the Employee,
(ii) the Employee must (A) defend the validity of this Agreement or (B) contest
any determination by the Company concerning the amounts payable (or
reimbursable) by the Company to the Employee or (iii) the Employee must prepare
responses to an Internal Revenue Service ("IRS") audit of, or otherwise defend,
his personal income tax return for any year the subject of any such audit, or an
adverse determination, administrative proceedings or civil litigation arising
therefrom that is occasioned by or related to an audit by the IRS of the
Company's income tax returns, then the Company hereby unconditionally agrees:
(1) on written demand of the Company by the Employee, to provide sums sufficient
to advance and pay on a current basis (either by paying directly or by
reimbursing the Employee) not less than 30 days after a written request therefor
is submitted by the Employee, the Employee's reasonable out-of-pocket costs and
expenses (including reasonable attorney's fees) the Employee incurs in
connection with any such matter; (2) the Employee will be entitled, on
application to any court of competent jurisdiction, to the entry of a mandatory
injunction without the necessity of posting any bond with respect thereto which
compels the Company to pay or advance such costs and expenses on a current
basis; and (3) the Company's obligations under this Section 10(a) will not be
affected if the Employee is not the prevailing party in the final resolution of
any such matter.
(b) RESOLUTION OF DISPUTES. If a dispute of any type referred to in
Section 10(a) arises between the Company and the Employee and they fail to
resolve that dispute by direct
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negotiation, the Company and the Employee agree that the next step taken to
resolve that dispute, prior to either party initiating any litigation to resolve
that dispute (not including any litigation that may be required to enforce the
Employee's rights to the payment or advancement of expenses and legal fees on a
current basis pursuant to Section 10(a)) will be to submit the dispute to an
agreed Alternative Dispute Resolution ("ADR") process, to which process the
parties will strive diligently in good faith to agree within 10 business days
after either party has given written notice to the other party that it is unable
to concur in the other party's final proposed negotiated resolution of the
dispute. If the Company and the Employee are unable to agree in writing to an
acceptable ADR process within that 10-business day period, then the parties will
submit to a mandatory ADR process by making joint application to the then Chief
United States Federal District Judge in the federal district in which the
Company then has its principal executive offices for the selection of an ADR
process for the parties. The parties will diligently in good faith participate
in the ADR process that judge chooses. If the parties are unable to resolve
their dispute after diligent good faith participation in the ADR process, then
either party will be free to initiate such litigation as that party deems
appropriate under the circumstances. Under no circumstances will the Employee be
obligated to pay for the cost of any ADR process or to pay or reimburse the
Company for any attorneys' fees, costs or other expenses the Company incurs in
connection with any process undertaken by the Employee to resolve disputes under
this Agreement. This Section 10 uses the term "Employee" to include, if the
Employee has died or become incompetent as a matter of applicable law, the
Employee's legal representative acting in his capacity as such under applicable
law.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
U.S. CONCRETE, INC.
By: ____________________________________
Eugene P. Martineau
President and Chief Executive Officer
EMPLOYEE
________________________________________
Neil J. Vannucci
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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
the Effective Date (as defined herein) by and between U.S. Concrete, Inc., a
Delaware corporation (the "Company"), and Robert S. Walker (the "Employee").
PRELIMINARY STATEMENT
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company without distraction or
concern over minimum compensation, benefits or tenure, to develop and implement
the Company's initial development plan and thereafter to assist in the
management of the Company's future growth and development and the maximization
of the returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
provisions contained herein, and for other good and valuable consideration, the
parties hereto agree with each other as follows:
Section 1. CERTAIN DEFINED TERMS. (a) The following terms this
Agreement uses have the respective meanings this Section 1(a) assigns to them:
"Acquired Business" means Walker's Concrete, Inc.
"Active Status" means the Employee's Employment status from the
Effective Date to and including the first to occur of (i) the Part-time
Employment Effective Date or (ii) the Termination Date.
"Annual Cash Compensation" of the Employee for any Compensation Year
means the salary the Employee earns during that Compensation Year,
including all amounts of salary the Employee earns during that
Compensation Year and elects to (i) defer, whether pursuant to a
Compensation Plan intended to qualify as a plan under Code Section 401(k)
or otherwise, and (ii) forego pursuant to a Compensation Plan under which
the Employee may receive Common Stock or any other form of noncash
compensation in lieu of that salary. For purposes of this definition, any
form of noncash compensation will be valued at its fair market value at
the time that compensation is awarded, earned or paid, as the case may be.
"Average Annual Cash Compensation" of the Employee means, as of the
Part-time Employment Effective Date, the average of (i) the Annual Cash
Compensation the Employee has earned in each of the two Compensation Years
next preceding that date or, if less than two Compensation Years have
occurred prior to that date and since the Effective Date, (ii) the Annual
Cash Compensation in each whole Compensation Year, if any, and, restated
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on an annualized basis, the Annual Cash Compensation in each partial
Compensation Year (up to a maximum of two partial Compensation Years) next
preceding the Part-time Employment Effective Date.
"Base Salary" means: (i) prior to the Part-time Employment Effective
Date, the guaranteed minimum annual salary payable by the Company to the
Employee pursuant to Section 4(a); and (ii) on and after the Part-time
Employment Effective Date, the guaranteed minimum annual salary payable by
the Company to the Employee pursuant to Section 5(e).
"Board" means the entire Board of Directors of the Company.
"Business Reason" for the Company's termination of the Employee's
Employment means any lawful reason other than Cause.
"Cause" for the Company's termination of the Employee's Employment
means: (i) the Employee's conviction of a felony crime (or the Employee's
entering of a plea of NOLO CONTENDERE to any charge against him of a
felony crime) of any kind; or (ii) the Employee's continuing failure to
substantially perform his duties and responsibilities hereunder (except by
reason of the Employee's incapacity attributable to physical or mental
illness or injury) for a period of 20 days after the Required Board
Majority has delivered to the Employee a written demand for substantial
performance hereunder which specifically identifies the bases for the
Required Board Majority's determination that the Employee has not
substantially performed his duties and responsibilities hereunder (that
period being the "Grace Period"); provided, that for purposes of this
clause (ii), the Company will not have Cause to terminate the Employee's
Employment unless (A) at a meeting of the Board called and held following
the Grace Period in the city in which the Company's principal executive
offices are located of which the Employee was given not less than 10 days'
prior written notice and at which the Employee was afforded the
opportunity to be represented by counsel, appear and be heard, the
Required Board Majority adopts a written resolution which (1) sets forth
the Required Board Majority's determination that the failure of the
Employee to substantially perform his duties and responsibilities
hereunder has (except by reason of his incapacity attributable to physical
or mental illness or injury) continued past the Grace Period and (2)
specifically identifies the bases for that determination and (B) the
Company, at the written direction of the Required Board Majority, delivers
to the Employee a Notice of Termination for Cause to which a copy of that
resolution, certified as being true and correct by the secretary or any
assistant secretary of the Company, is attached. Cause of the type
referred to in clause (i) of the preceding sentence is a "Type I Cause,"
while Cause of the type referred to in clause (ii) of the preceding
sentence is a "Type II Cause."
"Code" means the Internal Revenue Code of 1986.
"Common Stock" means the common stock of the Company.
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"Company" means (i) U.S. Concrete, Inc., a Delaware corporation, and
(ii) any Person that assumes the obligations of "the Company" hereunder,
by operation of law, pursuant to Section 9(c)(iii) or otherwise.
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program the Company or any subsidiary of the Company
establishes, maintains or sponsors, or to which the Company or any
subsidiary of the Company contributes, on behalf of two or more Executive
Officers (including, for this purpose, any member of the family of any
Executive Officer), (i) including (A) any "employee pension benefit plan"
(as defined in ERISA Section 3(2)) or other "employee benefit plan" (as
defined in ERISA Section 3(3)), (B) any other retirement or savings plan,
including any supplemental benefit arrangement relating to any plan
intended to be qualified under Code Section 401(a) or whose benefits the
Code or ERISA limits, (C) any "employee welfare plan" (as defined in ERISA
Section 3(1)), (D) any arrangement, plan, policy, practice or program
providing for severance pay, deferred compensation or insurance benefit
and (E) any Incentive Plan, but (ii) excluding any compensation
arrangement, plan, policy, practice or program to the extent it provides
for annual base salary.
"Compensation Committee" means the committee of the Board to which
the Board has delegated duties respecting the compensation of Executive
Officers and the administration of Incentive Plans, if any, intended to
qualify for the Rule 16b-3 exemption under the Securities Exchange Act of
1934.
"Compensation Year" means a calendar year.
"Confidential Information" means, with respect to the Company or any
subsidiary of the Company, all trade secrets and other confidential,
nonpublic and/or proprietary information of that Person, including
information derived from reports, investigations, research, work in
progress, codes, marketing and sales programs, customer lists, records of
customer service requirements, capital expenditure projects, cost
summaries, pricing formulae, contract analyses, financial information,
projections, present and future business plans, confidential filings with
any governmental authority and all other confidential, nonpublic concepts,
methods of doing business, ideas, materials or information prepared or
performed for, by or on behalf of that Person.
"CPI" means for any period the Consumer Price Index for All Urban
Consumers, All Items, 1982-84 = 100, U.S. City Average, as published by
the United States Department of Labor, Bureau of Labor Statistics (or its
successor) for that period.
"Disability" of the Employee means the Employee has been determined
(which determination will be final and binding on all Persons, absent
manifest error), as a result of a physical or mental illness or personal
injury he has incurred (including illness or injury resulting from any
substance abuse), by a Qualified Physician (who may be the doctor
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treating or otherwise acting as the Employee's doctor in connection with
the illness or injury in question) selected by the Employee, or by the
Company at its expense, to be unable to perform, at the time of that
determination and, in all reasonable medical likelihood, indefinitely
thereafter, the normal duties then most recently assigned, under and in
accordance with the terms hereof, to the Employee while on Active Status;
provided that the determination whether the Employee has incurred a
Disability will be made by a majority of three Qualified Physicians, (i)
one of whom the Employee selects, (ii) one of whom the Company selects and
(iii) the remaining one of whom the Qualified Physicians the Employee and
the Company have selected pursuant to clauses (i) and (ii) of this proviso
select and the fees and expenses of whom the Employee and the Company will
share and pay in equal amounts, if: (A) the Employee has selected a
Qualified Physician and the Company has selected another Qualified
Physician, in each case to determine whether the Employee has incurred a
Disability, and (B) those Qualified Physicians disagree as to whether the
Employee has incurred a Disability. For purposes of this definition, if
the Employee is unable by reason of illness or injury to give an informed
consent to the performance of the treatment of that illness or injury, a
Qualified Physician selected by any Person who is authorized by applicable
law to give that consent will be deemed to have been selected by the
Employee. Notwithstanding the foregoing, if the Company maintains a
disability insurance policy that provides coverage for its Executive
Officers generally, the term "Disability," as used in this Agreement,
shall mean the events and/or circumstances under which the Employee will
be entitled to receive disability benefits under that insurance policy.
"Effective Date" has the meaning Section 9(l) specifies.
"Employment" means the salaried employment of the Employee by the
Company or
a subsidiary of the Company hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Executive Officer" means any of the chairman of the board, the
chief executive officer, the chief operating officer, the chief financial
officer, the president or any executive, regional or other group or senior
vice president of the Company.
"Good Reason" for the Employee's termination of his Employment
means: (i) any violation hereof in any material respect by the Company;
(ii) either (A) a failure of the Company to continue in effect any
Compensation Plan in which the Employee was participating or (B) the
taking of any action by the Company which would adversely affect the
Employee's participation in or materially reduce the Employee's benefits
under any such Compensation Plan, unless (1) in the case of either
subclause (A) or (B) of this clause, there is substituted a comparable
Compensation Plan that is at least economically equivalent, in terms of
the benefit offered to the Employee, to the Compensation Plan being ended
or in which the Employee's participation is being adversely affected or
the Employee's benefits are being materially reduced or (2) in the case of
that subclause (A), the failure, or in the case
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of that subclause (B), the taking of action, adversely affects Executive
Officers generally; or (iii) the assignment to the Employee without the
Employee's written consent of duties inconsistent in any material respect
with the Employee's then current positions, authority, duties or
responsibilities or any other action by the Company which results in a
material diminution in those positions, authority, duties or
responsibilities; provided, however, that if the Company combines the
operations of the Acquired Business with the operations of one or more
subsidiaries of the Company (whether through the creation of an
unincorporated or other division, by merger or consolidation or
otherwise), no resulting change in the status, offices, titles or
reporting requirements of the Employee will constitute "Good Reason."
"Incentive Plan" means any compensation arrangement, plan, policy,
practice or program the Company or any subsidiary of the Company
establishes, maintains or sponsors, or to which the Company or any
subsidiary of the Company contributes, on behalf of at least two Executive
Officers and which provides for incentive, bonus or other
performance-based awards of cash, securities or the phantom equivalent of
securities, including any stock option, stock appreciation right and
restricted stock plan, but excluding any plan intended to qualify as a
plan under any one or more of Code Sections 401(a), 401(k) or 423.
"IPO" means the first time a registration statement the Company has
filed under the Securities Act of 1933, as amended (the "Securities Act")
and respecting a primary underwritten offering by the Company to the
public of shares of Common Stock becomes effective under the Securities
Act and the Company issues and sells any of the shares registered by that
registration statement to the Underwriter.
"IPO Closing Date" means the date on which the Company first
receives payment for the shares of Common Stock it sells to the
Underwriter in the IPO.
"Nonterminating Party" means the Employee or the Company, as the
case may be, to which the Terminating Party delivers a Notice of
Termination.
"Notice of Termination" to or from the Employee means a written
notice that: (i) states that it is a "Notice of Termination" hereunder,
(ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances the Terminating Party claims to provide a basis for
termination of the Employee's Employment, and if the Termination Date is
other than the date of receipt of the notice, (iii) sets forth that
Termination Date.
"Part-time Employment Effective Date" means, (i) if the Company
elects pursuant to any applicable provision hereof to terminate the
Employee's Employment other than for Cause or (ii) if the Employee elects
pursuant to the applicable provision hereof to terminate his Employment
for Good Reason or by reason of his Disability, the date the
Nonterminating Party receives the Terminating Party's Notice of
Termination.
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"Part-time Employment Period" means the period of time which begins
on the Part-time Employment Effective Date and ends on the first to occur
of (i) the third anniversary of the Effective Date or, if later, the first
anniversary of the Part-time Employment Effective Date, (ii) the
termination by the Company of the Employee's Employment for Type I Cause
or (iii) the death of the Employee.
"Person" means any natural person, sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association,
mutual company, joint stock company, joint venture, estate, trust, union
or employee organization or governmental authority.
"Qualified Physician" means, in the case of any determination
whether the Employee has sustained a Disability, a physician (i) holding
an M.D. degree from a medical school located in the United States, (ii)
specializing and board-certified in the treatment of the injury or illness
that has or may have caused that Disability and (iii) having admission
privileges to one or more hospitals located in the state in which the
Company then has its principal executive offices or in the state in which
the Employee then is domiciled.
"Required Board Majority" means at any time a majority of the
members of the Board at that time.
"Retirement" means termination of the Employee's Employment by
reason of the Employee's giving a Notice of Termination on or following
the date he has attained age 65.
"Terminating Party" means the Employee or the Company, as the case
may be, who or which terminates the Employee's Employment by means of a
Notice of Termination.
"Termination Date" means: (i) if the Employee's Employment
terminates by reason of the Employee's death, the date of that death; (ii)
if the Employee's Employment terminates by reason of the Employee's giving
a Notice of Termination Without Good Reason or by reason of Retirement,
the elapse of the 30th day after the Company receives that notice; (iii)
if the Company terminates the Employee's Employment (A) at any time for
Type I Cause or (B) at any time prior to the Part-time Employment
Effective Date for Type II Cause, the date the Employee receives the
Company's Notice of Termination for Cause; and (iv) if the Employee's
Employment terminates for any other reason, at the expiration of the
Part-time Employment Period.
"Type I Cause" means Cause of the type to which clause (i) of the
first sentence of the definition of Cause herein refers.
"Type II Cause" means Cause of the type to which clause (ii) of the
first sentence of the definition of Cause herein refers.
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"Underwriter" means collectively (i) the investment banking firms
that prospectively may enter into the underwriting agreement and (ii) from
and after the IPO pricing date, the investment banking firms parties to
the underwriting agreement.
"Without Good Reason" for the Employee's termination of his
Employment means that, at the time the Company receives the Employee's
Notice of Termination, the Employee was not entitled to terminate his
Employment (i) for a Good Reason or (ii) by reason of his Disability or
Retirement.
(b) OTHER DEFINITIONAL PROVISIONS. (i) Except as this Agreement
otherwise may specify, all references herein to any statute, including the Code
and ERISA, are references to that statute or any successor statute, as the same
may have been or be amended or supplemented from time to time, and any rules or
regulations promulgated thereunder, and all references herein to any rule or
regulation are references to that rule or regulation, or any successor rule or
regulation, as the same may be amended or supplemented from time to time.
(ii) This Agreement uses the words "herein," "hereof" and
"hereunder" and words of similar import to refer to this Agreement as a whole
and not to any provision of this Agreement, and the word "Section" refers to a
Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number includes
the plural and vice versa, and a reference to one gender includes the other
gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding that word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
Section 2. EMPLOYMENT. (a) On the terms and subject to the
conditions hereinafter set forth, and beginning as of the Effective Date and
continuing until the first to occur of the Part-time Employment Effective Date
or the Termination Date, (i) the Company will employ the Employee as Executive
Vice President of Operations - Bay Area, (ii) the Employee will serve in the
Company's employ in that position and (iii) the Employee will perform such
duties, and have such powers, authority, functions, duties and responsibilities
for the Company and entities affiliated with the Company as are commensurate and
consistent with his employment in the position or positions to which clause (i)
of this sentence refers. The Employee also will have such additional powers,
authority, functions, duties and responsibilities as the chief executive officer
of the Company or his delegate may assign to him from time to time; provided
that, without the Employee's written consent, those additional powers,
authority, functions, duties and responsibilities must not be inconsistent or
interfere with, or detract from, those herein vested in, or otherwise then being
performed for the Company by, the Employee.
(b) The Employee will not, at any time during his Employment, engage
in any other activities unless those activities do not interfere materially with
the Employee's duties and
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responsibilities to the Company at that time, except that the Employee will be
entitled, subject to the provisions of Section 7, (i) to continue with such
activities as the Employee has carried on prior to the Effective Date, including
making and managing his personal investments and participating in other business
or civic activities and (ii) to serve on corporate or other business, civic or
charitable boards or committees and trade association or similar boards or
committees.
Section 3. TERM OF EMPLOYMENT. Subject to the provisions of Section
5, the term of the Employee's Employment will be for an initial term of three
years, provided that, beginning on the second anniversary of the Effective Date,
the term of the Employee's Employment will be for a continually renewing term of
one year commencing on that anniversary date and renewing each day thereafter
for an additional day without any further action by either the Company or the
Employee until an event has occurred as described in, or one of the parties has
made an appropriate election pursuant to, Section 5. After the Termination Date
has occurred and the Company has paid to the Employee all the applicable amounts
Section 5 provides the Company will pay as a result of the termination of the
Employee's Employment, including all amounts accruing during the Part-time
Employment Period, if any, this Agreement will terminate and have no further
force or effect, except that Sections 8, 9 and 10 will survive that termination
indefinitely and Section 7 will survive for the period of time it specifies.
Section 4. COMPENSATION. (a) BASE SALARY. A Base Salary will be
payable to the Employee by the Company as a guaranteed minimum annual amount
hereunder for each Compensation Year during the period from the Effective Date
to the first to occur of the Part-time Employment Effective Date or the
Termination Date. The Company will pay that Base Salary in the intervals
consistent with its normal payroll schedules, and that Base Salary will be
payable initially at the annual rate of $200,000 and will be increased (but not
decreased or adjusted other than as Section 5 provides) as follows:
(i) on the first and each subsequent anniversary of the Effective
Date, by the amount equal to the product of (A) the annual rate of that
Base Salary as in effect immediately prior to that anniversary multiplied
by (B) the percentage increase (if any) in the CPI for the 12-month period
immediately preceding that anniversary; and
(ii) on the first and each subsequent anniversary of the Effective
Date or at any other time, by such additional amount (if any) the
Compensation Committee in its sole discretion may determine or approve, as
evidenced by the written minutes or records of the Compensation Committee
and its written notices of those determinations or approvals to the
Employee.
Effective as of the Part-time Employment Effective Date, the Base Salary
theretofore in effect will be adjusted as Section 5(e) provides.
(b) OTHER COMPENSATION. The Employee will be entitled to
participate in all
Compensation Plans from time to time in effect while he remains on Active
Status, regardless of
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whether the Employee is an Executive Officer. All awards to the Employee under
all Incentive Plans will take into account the Employee's positions with and
duties and responsibilities to the Company and its subsidiaries.
Section 5. TERMINATION OF EMPLOYMENT AND ITS CONSEQUENCES. (a)
TERMINATION BY THE COMPANY. (i) The Company will be entitled, if acting at the
direction of the Required Board Majority, to terminate the Employee's Employment
(A) at any time for Type I Cause or (B) at any time prior to the Part-time
Employment Effective Date for (1) Type II Cause or (2) any Business Reason. The
Company's termination of the Employee's Employment for Cause will be effective
on the date the Company delivers a Notice of Termination for Cause to the
Employee pursuant to this Section 5(a)(i) (together, in the case of a
termination for Type II Cause, with the certified resolution to which clause
(ii) of the definition herein of Cause refers), while the Company's termination
of the Employee's Employment for a Business Reason will be effective on the
later of (A) the third anniversary of the Effective Date and (B) first
anniversary of the date the Company delivers a Notice of Termination for a
Business Reason to the Employee pursuant to this Section 5(a)(i).
(ii) If the Company terminates the Employee's Employment for Cause,
the Company promptly thereafter, and in any event within five business days
thereafter, will pay the Employee his Base Salary to and including the
Termination Date and the amount of all compensation the Employee has previously
deferred (together with any accrued interest or earnings thereon), in each case
to the extent not theretofore paid, and, when that payment is made, the Company
will, notwithstanding Section 3, have no further or other obligations hereunder
to the Employee.
(iii) If the Company terminates the Employee's Employment for a
Business Reason, the respective rights and obligations of the Company and the
Employee during the Part-time Employment Period will be as Section 5(e) sets
forth.
(b) TERMINATION BY THE EMPLOYEE. (i) The Employee will be entitled
to terminate his Employment (A) for a Good Reason at any time within 180 days
after the facts or circumstances constituting that Good Reason first exist and
are known to the Employee, (B) Without Good Reason at any time or (C) by reason
of his Retirement. The Employee's termination of his Employment for Good Reason
will be effective on the later of (A) the third anniversary of the Effective
Date and (B) the first anniversary of the date the Employee delivers a Notice of
Termination for Good Reason to the Company. The Employee's termination of his
Employment Without Good Reason or by reason of his Retirement will be effective
on the 30th day following the Employee's delivery of a Notice of Termination
Without Good Reason or by reason of his Retirement.
(ii) If the Employee terminates his Employment for Good Reason, the
respective rights and obligations of the Company and the Employee during the
Part-time Employment Period will be as Section 5(e) sets forth.
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(iii) If the Employee terminates his Employment Without Good Reason
or by reason of his Retirement, the Company will pay to the Employee, in a cash
lump sum within 10 business days after the Termination Date, the amount equal to
the sum of (A) the portion of the Base Salary to and including the Termination
Date which has not yet been paid, (B) all compensation the Employee has
previously deferred (together with any accrued interest and earnings thereon)
which has not yet been paid and (C) any accrued but unpaid vacation pay.
(c) TERMINATION BY REASON OF DISABILITY. If the Employee incurs any
Disability while on Active Status, either the Employee or the Company may
terminate the Employee's Employment effective on the first anniversary of the
date the Nonterminating Party receives a Notice of Termination from the
Terminating Party pursuant to this Section 5(c). If the Employee's Employment
terminates by reason of the Employee's Disability, the respective rights and
obligations of the Company and the Employee during the Part-time Employment
Period will be as Section 5(e) sets forth.
(d) TERMINATION OF EMPLOYMENT BY DEATH. The Employee's Employment
will terminate automatically at the time of his death. If the Employee's
Employment terminates by reason of the Employee's death, the Company will pay to
the Person the Employee has designated in a written notice delivered to the
Company as his beneficiary entitled to that payment, if any, or to the
Employee's estate, as applicable, in a cash lump sum within 30 days after the
Termination Date, the amount equal to the sum of (i) the portion of the Base
Salary through the end of the month in which the Termination Date occurs which
has not yet been paid, (ii) all compensation the Employee has previously
deferred (together with any accrued interest or earnings thereon) which has not
yet been paid, (iii) any accrued but unpaid vacation pay (if the Employee dies
while on Active Status) and (iv) (A) if the Employee dies while on Active Status
or during the Part-time Employment Period (other than during the last 12 months
of the Part-time Employment Period), an amount equal to the Base Salary being
paid for the Compensation Year in which he dies or (B) if the Employee dies
during the last 12 months of the Part-time Employment Period, the product of (1)
one-twelfth of the Base Salary being paid for the Compensation Year in which the
Employee dies multiplied by (2) the number of whole and partial calendar months
in the period beginning with the first calendar month after the calendar month
in which he dies and ending with the last calendar month in which the
Termination Date would have occurred if the Employee's Employment were to have
continued to the end of the Part-time Employment Period. For purposes of this
Section 5(d), if the anniversary of the Effective Date in the Compensation Year
in which the Employee dies has not occurred on or before the Termination Date,
the Base Salary for that Compensation Year will be calculated on the assumption
that no increase in the amount thereof would be made effective as of that
anniversary pursuant to Section 4(a) or 5(e)(i), as applicable.
(e) EMPLOYEE'S RIGHTS DURING THE PART-TIME EMPLOYMENT PERIOD. (i)
The Company will pay the Employee a Base Salary, in the intervals consistent
with its normal payroll schedules, during the Part-time Employment Period in the
amounts determined from time to time as follows: Effective as of the Part-time
Employment Effective Date, the Base Salary payable by the Company to the
Employee for the Part-time Employment Period will be as follows:
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(A) (1) if the Part-time Employment Effective Date occurs as a
result of the receipt by the Nonterminating Party of a Notice of
Termination for a Business Reason or a Notice of Termination for Good
Reason, the amount equal to the Average Annual Cash Compensation of the
Employee determined as of the Part-time Employment Effective Date; and (2)
if the Part-time Employment Effective Date occurs as a result of the
receipt by the Nonterminating Party of a Notice of Termination for
Disability, the amount equal to the amount by which (a) the Average Annual
Cash Compensation of the Employee determined as of the Part-time
Employment Effective Date exceeds (b) the aggregate amount of periodic
payments the Employee receives during the 12 months beginning on that date
under Compensation Plans then in effect and providing for those payments
to the Employee solely as a result or on account of disability; and
(B) on each anniversary of the Effective Date which occurs during
the Part-time Employment Period, if any, the Base Salary payable pursuant
to this Section 5(e) will be increased by the amount equal to the product
of (1) the annual rate of that Base Salary as in effect immediately prior
to that anniversary multiplied by (2) the percentage increase (if any) in
the CPI for the 12-month period immediately preceding that anniversary.
(ii) The Employee will continue to participate in all Compensation
Plans from time to time in effect during the Part-time Employment Period,
provided, however, that: (A) the Employee will not be entitled to receive any
new award or grant under any Incentive Plan, and any such new award or grant
will be at the sole discretion of the Compensation Committee or the Board, as
applicable, with respect to that Incentive Plan; and (B) if (1) the terms of any
such plan preclude the Employee's continued participation therein or (2) his
continued participation in any such plan would or reasonably could be expected
to disqualify that plan under the Code, the Employee will not be entitled to
participate in that plan, but the Company instead will provide the Employee with
the after-tax equivalent of the benefits that would have been provided to the
Employee were he a participant in that plan. For purposes of determining
eligibility (including years of service) for retirement benefits payable under
any Compensation Plan, the Employee will be deemed to have retired at the
Termination Date.
(iii) Subject to the provisions of Section 7, the Employee will not
be (A) prevented from accepting other employment or engaging in (and devoting
substantially all his time to) other business activities or (B) required to
perform any regular duties for the Company (except to provide such services
consistent with the Employee's educational background, experience and prior
positions with the Company as may be acceptable to the Employee) or to seek or
accept additional employment with any other Person. If the Employee, at his
discretion, accepts any such additional employment or engages in any such other
business activity, there will be no offset, reduction or effect on any rights,
benefits or payments to which the Employee is entitled pursuant to this
Agreement. Furthermore, the Employee will have no obligation to account for,
remit, rebate or pay over to the Company any compensation or other amounts he
earns or derives in connection with such additional employment or business
activity. The Employee will, however, make himself generally available for
special projects or to consult with the Company and its employees at such times
and
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at such places as the Company may reasonably request on terms that are
reasonably satisfactory to the Employee and consistent with the Employee's
regular duties and responsibilities in the course of his then new occupation or
other employment, if any.
(f) RETURN OF PROPERTY. On termination of the Employee's Employment,
however brought about, the Employee (or his representatives) will promptly
deliver and return to the Company all the Company's property that is in the
possession or under the control of the Employee (or those representatives).
(g) STOCK OPTIONS. Notwithstanding any other provision of this
Agreement to the contrary: (i) except in the case of a termination of the
Employee's Employment by the Company for Cause or by the Employee Without Good
Reason at any time while on Active Status, all stock options previously granted
to the Employee under Incentive Plans that have not been exercised and are
outstanding as of the time immediately prior to the Termination Date will,
notwithstanding any contrary provision of any applicable Incentive Plan, remain
outstanding (and continue to become exercisable pursuant to their respective
terms) until exercised or the expiration of their term, whichever is earlier;
(ii) in the case of a termination of the Employee's Employment by the Employee
Without Good Reason at any time while on Active Status, all stock options
previously granted to the Employee under Incentive Plans that have not been
exercised and are outstanding and exercisable as of the time immediately prior
to the Termination Date will, notwithstanding any contrary provision of any
applicable Incentive Plan, remain outstanding and continue to be exercisable
until exercised or the date that is 90 days after the Termination Date,
whichever is earlier, whereupon, those options will expire; and (iii) in the
case of a termination of the Employee's Employment by the Company for Cause at
any time while the Employee is on Active Status, all stock options previously
granted to the Employee under Incentive Plans will expire on the Termination
Date. No stock option previously granted to the Employee under any Incentive
Plan will, notwithstanding any contrary provision of that Incentive Plan, expire
or fail to become exercisable or, if exercisable, cease to be exercisable by
reason of either (i) the occurrence of the Employee's Part-time Employment
Effective Date or (ii) the Employee's service during the Part-time Employment
Period being less than full-time.
(h) NO CONSTRUCTIVE TERMINATION. Except in the case of a termination
of the Employee's Employment which results from the Employee's death, no
termination of the Employee's Employment will be effective for any purpose
hereunder unless the Terminating Party delivers a Notice of Termination to the
Nonterminating Party. An offer by the Employee to resign from an office or the
Board or otherwise to step aside will not, whether in writing or oral,
constitute a Notice of Termination by the Employee.
Section 6. OTHER EMPLOYEE RIGHTS (a) PAID VACATION AND HOLIDAYS. The
Employee will be entitled to not less than five weeks of annual vacation and all
legal holidays during which times his applicable compensation will be paid in
full.
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(b) BUSINESS EXPENSES. The Employee is authorized to incur, and will
be entitled to receive prompt reimbursement for, all reasonable expenses the
Employee incurs in performing his duties and carrying out his responsibilities
hereunder, including (i) business meals and entertainment and travel expenses
and (ii) mileage reimbursements in accordance with the Company's automobile
expense reimbursement policy as in effect at the time those expenses are
incurred, provided that the Employee complies with the applicable policies,
practices and procedures of the Company relating to the submission of expense
reports, receipts or similar documentation of those expenses. The Company will
either pay directly or promptly reimburse the Employee for those expenses not
more than 30 days after the submission to the Company by the Employee from time
to time of an itemized accounting of those expenses for which direct payment or
reimbursement is sought. Unpaid reimbursements after that 30-day period will
accrue interest in accordance with Section 9(i).
(c) NO FORCED RELOCATION. The Employee will not be required to move
his principal place of residence from the metropolitan Oakland, California area
or to perform regular duties that could reasonably be expected to require either
such move against his wish or his spending amounts of time each week outside the
metropolitan Oakland, California area which are unreasonable in relation to the
duties and responsibilities of the Employee hereunder, and the Company agrees
that, if it requests the Employee to make such a move and the Employee declines
that request, that declination will not constitute any basis for a determination
that Type II Cause exists.
Section 7. COVENANT NOT TO COMPETE. (a) The Employee recognizes that
in each of the highly competitive businesses in which the Company will be
engaged following the Effective Date, personal contact is of primary importance
in securing new customers and in retaining the accounts and goodwill of present
customers and protecting the business of the Company. The Employee, therefore,
agrees that during the term of his Employment and for a period of three years
after the Termination Date, he will not, within 75 miles of each geographic
location in which he has devoted substantial attention at such location to the
material business interests of the Company (the "Relevant Geographic Areas"):
(i) accept employment or render service to any Person that is engaged in a
business directly competitive with the business then engaged in by the Company
or (ii) enter into or take part in or lend his name, counsel or assistance to
any business, either as proprietor, principal, investor, partner, director,
officer, employee, consultant, advisor, agent, independent contractor, or in any
other capacity whatsoever, for any purpose that would be competitive with the
business of the Company (all of the foregoing activities are collectively
referred to as the "Prohibited Activity"). Notwithstanding the foregoing, the
Employee may own and hold as a passive investment up to 5% of the outstanding
shares of any class of capital stock (or other equity interest) in a competing
corporation, limited liability company, limited partnership or other entity if
that class of capital stock (or other equity interest) is listed on a national
stock exchange or included in the Nasdaq National Market.
(b) In addition to all other remedies at law or in equity which the
Company may have for breach of a provision of this Section 7 by the Employee, it
is agreed that in the event of any
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breach or attempted or threatened breach of any such provision, the Company will
be entitled, on application to any court of proper jurisdiction, to a temporary
restraining order or preliminary injunction (without the necessity of (i)
proving irreparable harm, (ii) establishing that monetary damages are inadequate
or (iii) posting any bond with respect thereto) against the Employee prohibiting
such breach or attempted or threatened breach by proving only the existence of
such breach or attempted or threatened breach. If the provisions of this Section
7 should ever be deemed to exceed the time, geographic or occupational
limitations applicable law permits, the Employee and the Company agree that
those provisions will be and are hereby reformed to the maximum time, geographic
or occupational limitations applicable law permits.
(c) The covenants of the Employee in this Section 7 are independent
of and severable from every other provision of this Agreement; and the breach of
any other provision of this Agreement by the Company or the breach by the
Company of any other agreement between the Company and the Employee will not
affect the validity of the provisions of this Section 7 or constitute a defense
of the Employee in any suit or action brought by the Company to enforce any of
the provisions of this Section 7 or seek any relief for the breach thereof by
Employee.
(d) The Employee acknowledges, agrees and stipulates that: (i) the
terms and provisions of this Agreement are reasonable and constitute an
otherwise enforceable agreement to or of which the terms and provisions of this
Section 7 are ancillary or a part; (ii) the consideration provided by the
Company under this Agreement is not illusory; and (iii) the consideration given
by the Company under this Agreement, including the provision by the Company of
Confidential Information to the Employee as Section 8 contemplates, gives rise
to the Company's interest in restraining and prohibiting the Employee from
engaging in the Prohibited Activity within the Relevant Geographic Areas as this
Section 7 provides and the Employee's covenant not to engage in the Prohibited
Activity within the Relevant Geographic Areas pursuant to this Section 7 is
designed to enforce the Employee's consideration (or return promises) including
the Employee's promise in Section 8 to not disclose Confidential Information.
Section 8. CONFIDENTIAL INFORMATION. The Employee acknowledges that
he has had and will continue to have access to various Confidential Information.
The Employee agrees, therefore, that he will not at any time, either while
employed by the Company or afterwards, make any independent use of, or disclose
to any other person (except as authorized by the Company) any Confidential
Information. Confidential Information will not include (a) information that
becomes known to the public generally through no fault of the Employee, (b)
information required to be disclosed by law or legal process or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (b), the Employee will give prior
written notice thereof to the Company and provide the Company with the
opportunity to contest that requirement, or (c) the Employee reasonably believes
that disclosure is required in connection with the defense of a lawsuit against
the Employee. In the event of a breach or threatened breach by the Employee of
the provisions of this Section 8 with respect to any Confidential Information,
the Company will be entitled to a temporary restraining order and a preliminary
and permanent injunction (without the necessity of posting any bond in
connection
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therewith) restraining the Employee from disclosing, in whole or in part, that
Confidential Information. Nothing herein will be construed as prohibiting the
Company from pursuing any other available remedy for that breach or threatened
breach, including the recovery of damages.
Section 9. GENERAL PROVISIONS. (a) SEVERABILITY. If any one or more
of the provisions of this Agreement shall, for any reason, be held or found by
final judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, (i) that invalidity, illegality or
unenforceability will not affect any other provisions of this Agreement and (ii)
this Agreement will be construed as if that invalid, illegal or unenforceable
provision had never been contained herein (except that this clause (ii) will not
prohibit any modification allowed under Section 7(b)).
(b) NONEXCLUSIVITY OF RIGHTS. Nothing herein will prevent or limit
the Employee's continuing or future participation in any Compensation Plan or,
subject to Section 9(k), limit or otherwise affect such rights as the Employee
may have under any other contract or agreement with the Company. Vested benefits
and other amounts to which the Employee is or becomes entitled to receive under
any Compensation Plan on or after the Termination Date will be payable in
accordance with that Compensation Plan, except as expressly modified hereby.
(c) SUCCESSORS. (i) This Agreement is personal to the Employee and,
without the prior written consent of the Company, is not assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement will inure to the benefit and be enforceable by the Employee's legal
representatives (including any duly appointed guardian) acting in their
capacities as such pursuant to applicable law.
(ii) This Agreement will inure to the benefit of and be binding on
the Company and its successors and assigns. If, at any time prior to the
Termination Date, the Employee is not an Executive Officer, the Company will be
entitled to assign all its obligations hereunder to a subsidiary of the Company
and treat the Employee as an employee of that subsidiary for all purposes, but
the Company will remain liable for the full, timely performance of all the
obligations so assigned as if the assignment had not been made.
(iii) The Company will require any successor (direct or indirect and
whether by purchase, merger, consolidation, share exchange or otherwise) to the
business, properties and assets of the Company substantially as an entirety
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Company would have been required to perform it had no
such succession taken place.
(d) AMENDMENTS; WAIVERS. This Agreement may not be amended or
modified except (i) by a written agreement executed and delivered by the parties
hereto or their respective successors or legal representatives acting in their
capacities as such pursuant to applicable law or (ii) pursuant to the provisions
of Section 7(b) or 9(a).
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(e) NOTICES. All notices and other communications required or
permitted under this Agreement must be in writing and will be deemed delivered
and received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom the
notice or communication is sent or (ii) if delivered by mail (whether actually
received or not), at the close of business on the third business day (in the
location where the Company then has its principal executive offices) next
following the day when placed in the mail, postage prepaid, certified or
registered, addressed to the appropriate party or parties at the address of that
party set forth below (or at such other address as that party may designate by
written notice to the other party in accordance herewith):
(A) if to the Employee, addressed as follows:
Robert S. Walker
86 Reo Birch Court
Danville, California 94506
Facsimile: [(510) 782-1068]
(B) if to the Company, addressed as follows:
U.S. Concrete, Inc.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77065
Attn: Corporate Secretary
Facsimile: (713) 350-6001
(f) NO WAIVER. The failure of the Company or the Employee to insist
on strict compliance with any provision of, or to assert any right under, this
Agreement (including the right of the Employee to terminate his Employment for
Good Reason) will not be deemed a waiver of that provision or of any other
provision of or right under this Agreement.
(G) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO
ANY PRINCIPLES OF CONFLICTS OF LAWS.
(h) HEADINGS. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
(i) INTEREST. If any amounts required to be paid or reimbursed to
the Employee hereunder are not so paid or reimbursed at the times provided
herein (including amounts required to be paid by the Company pursuant to
Sections 6 and 10, those amounts will accrue interest compounded daily at the
annual percentage rate equal to the interest rate shown as the Prime Rate in the
Money Rates column in the then most recently published edition of THE WALL
STREET JOURNAL,
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or, if that rate is not then so published on at least a weekly basis, the
interest rate announced by The Chase Manhattan Bank (or its successor), from
time to time, as its Base Rate (or prime lending rate), from the date those
amounts were required to have been paid or reimbursed to the Employee until
those amounts are finally and fully paid or reimbursed; provided, however, that
in no event will the amount of interest contracted for, charged or received
hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
(j) TAX WITHHOLDING. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that applicable laws or regulations require it to withhold.
(k) ENTIRE AGREEMENT. The Company and the Employee agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Employee by the Company, but has no effect on
any Compensation Plan in which the Employee was participating prior to the
Effective Date.
(l) EFFECTIVE DATE. This Agreement will become effective on the IPO
Closing Date (the "Effective Date").
Section 10. PAYMENT OF EXPENSES; RESOLUTION OF DISPUTES. (a) PAYMENT
OF EXPENSES. If at any time during the term hereof or afterwards: (i) there
should exist a dispute or conflict between the Employee and the Company or
another Person as to the validity, interpretation or application of any term or
condition hereof, or as to the Employee's entitlement to any benefit intended to
be bestowed hereby, which is not resolved to the satisfaction of the Employee,
(ii) the Employee must (A) defend the validity of this Agreement or (B) contest
any determination by the Company concerning the amounts payable (or
reimbursable) by the Company to the Employee or (iii) the Employee must prepare
responses to an Internal Revenue Service ("IRS") audit of, or otherwise defend,
his personal income tax return for any year the subject of any such audit, or an
adverse determination, administrative proceedings or civil litigation arising
therefrom that is occasioned by or related to an audit by the IRS of the
Company's income tax returns, then the Company hereby unconditionally agrees:
(1) on written demand of the Company by the Employee, to provide sums sufficient
to advance and pay on a current basis (either by paying directly or by
reimbursing the Employee) not less than 30 days after a written request therefor
is submitted by the Employee, the Employee's reasonable out-of-pocket costs and
expenses (including reasonable attorney's fees) the Employee incurs in
connection with any such matter; (2) the Employee will be entitled, on
application to any court of competent jurisdiction, to the entry of a mandatory
injunction without the necessity of posting any bond with respect thereto which
compels the Company to pay or advance such costs and expenses on a current
basis; and (3) the Company's obligations under this Section 10(a) will not be
affected if the Employee is not the prevailing party in the final resolution of
any such matter.
(b) RESOLUTION OF DISPUTES. If a dispute of any type referred to in
Section 10(a) arises between the Company and the Employee and they fail to
resolve that dispute by direct
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negotiation, the Company and the Employee agree that the next step taken to
resolve that dispute, prior to either party initiating any litigation to resolve
that dispute (not including any litigation that may be required to enforce the
Employee's rights to the payment or advancement of expenses and legal fees on a
current basis pursuant to Section 10(a)) will be to submit the dispute to an
agreed Alternative Dispute Resolution ("ADR") process, to which process the
parties will strive diligently in good faith to agree within 10 business days
after either party has given written notice to the other party that it is unable
to concur in the other party's final proposed negotiated resolution of the
dispute. If the Company and the Employee are unable to agree in writing to an
acceptable ADR process within that 10-business day period, then the parties will
submit to a mandatory ADR process by making joint application to the then Chief
United States Federal District Judge in the federal district in which the
Company then has its principal executive offices for the selection of an ADR
process for the parties. The parties will diligently in good faith participate
in the ADR process that judge chooses. If the parties are unable to resolve
their dispute after diligent good faith participation in the ADR process, then
either party will be free to initiate such litigation as that party deems
appropriate under the circumstances. Under no circumstances will the Employee be
obligated to pay for the cost of any ADR process or to pay or reimburse the
Company for any attorneys' fees, costs or other expenses the Company incurs in
connection with any process undertaken by the Employee to resolve disputes under
this Agreement. This Section 10 uses the term "Employee" to include, if the
Employee has died or become incompetent as a matter of applicable law, the
Employee's legal representative acting in his capacity as such under applicable
law.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
U.S. CONCRETE, INC.
By:___________________________________
Eugene P. Martineau
President and Chief Executive Officer
EMPLOYEE
_______________________________________
Robert S. Walker
19
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use or our reports
and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
March 18, 1999
EXHIBIT 23.4
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 428 under the Securities Act of 1933, as amended
(the "Act"), I hereby consent to the use of my name and any references to me as
a person nominated to become a director of U.S. Concrete, Inc., a Delaware
corporation ("USC"), in the Prospectus constituting a part of USC's Registration
Statement on Form S-1 to be filed with the Securities and Exchange Commission
pursuant to the Act.
Dated: March 19, 1998
/s/ WILLIAM T. ALBANESE
William T. Albanese
EXHIBIT 23.5
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 428 under the Securities Act of 1933, as amended
(the "Act"), I hereby consent to the use of my name and any references to me as
a person nominated to become a director of U.S. Concrete, Inc., a Delaware
corporation ("USC"), in the Prospectus constituting a part of USC's Registration
Statement on Form S-1 to be filed with the Securities and Exchange Commission
pursuant to the Act.
Dated: March 19, 1998
/s/ JOHN R. COLSON
John R. Colson
EXHIBIT 23.6
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 428 under the Securities Act of 1933, as amended
(the "Act"), I hereby consent to the use of my name and any references to me as
a person nominated to become a director of U.S. Concrete, Inc., a Delaware
corporation ("USC"), in the Prospectus constituting a part of USC's Registration
Statement on Form S-1 to be filed with the Securities and Exchange Commission
pursuant to the Act.
Dated: March 19, 1998
/s/ PETER T. DAMERIS
Peter T. Dameris
EXHIBIT 23.7
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 428 under the Securities Act of 1933, as amended
(the "Act"), I hereby consent to the use of my name and any references to me as
a person nominated to become a director of U.S. Concrete, Inc., a Delaware
corporation ("USC"), in the Prospectus constituting a part of USC's Registration
Statement on Form S-1 to be filed with the Securities and Exchange Commission
pursuant to the Act.
Dated: March 19, 1998
/s/ MICHAEL D. MITSCHELE
Michael D. Mitschele
EXHIBIT 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 428 under the Securities Act of 1933, as amended
(the "Act"), I hereby consent to the use of my name and any references to me as
a person nominated to become a director of U.S. Concrete, Inc., a Delaware
corporation ("USC"), in the Prospectus constituting a part of USC's Registration
Statement on Form S-1 to be filed with the Securities and Exchange Commission
pursuant to the Act.
Dated: March 19, 1998
/s/ MURRAY S. SIMPSON
Murray S. Simpson
EXHIBIT 23.9
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 428 under the Securities Act of 1933, as amended
(the "Act"), I hereby consent to the use of my name and any references to me as
a person nominated to become a director of U.S. Concrete, Inc., a Delaware
corporation ("USC"), in the Prospectus constituting a part of USC's Registration
Statement on Form S-1 to be filed with the Securities and Exchange Commission
pursuant to the Act.
Dated: March 19, 1998
/s/ NEIL J. VANNUCCI
Neil J. Vannucci
EXHIBIT 23.10
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 428 under the Securities Act of 1933, as amended
(the "Act"), I hereby consent to the use of my name and any references to me as
a person nominated to become a director of U.S. Concrete, Inc., a Delaware
corporation ("USC"), in the Prospectus constituting a part of USC's Registration
Statement on Form S-1 to be filed with the Securities and Exchange Commission
pursuant to the Act.
Dated: March 19, 1998
/s/ ROBERT S. WALKER
Robert S. Walker
