AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 1999.
REGISTRATION NO. 333-74855
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
U.S. 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) 350-6040
(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 this registration statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
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. [ ]
------------------------
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 MAY 5, 1999
3,800,000 SHARES
[LOGO--U.S. CONCRETE, INC.--LOGO]
COMMON STOCK
------------------------
U.S. Concrete, Inc. is selling all the 3,800,000 shares of common stock
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. Our common stock will be quoted on the Nasdaq National Market under
the symbol "RMIX."
We have been recently formed to acquire operating businesses in the
ready-mixed concrete industry and intend 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................ $ $
Underwriting Discount................ $ $
Proceeds, before expenses, to U.S.
Concrete, Inc. ...................... $ $
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>
[US CONCRETE LOGO]
We intend to become the leading value-added provider of ready-mixed
concrete and related products and services to the construction
industry in major markets in the United States.
[GRAPHIC OF CONSTRUCTION SITE OMITTED] [GRAPHIC OF MIXER TRUCK OMITTED]
[GRAPHIC OF WET BATCH PLANT OMITTED]
[GRAPHIC OF COMPLETED PROJECT OMITTED] [GRAPHIC OF COMPLETED PROJECT OMITTED]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................... 4
Risk Factors......................... 9
The Company.......................... 16
Use of Proceeds...................... 19
Dividend Policy...................... 19
Pro Forma Capitalization............. 20
Dilution............................. 21
Selected Financial Information....... 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 25
Business............................. 39
Management........................... 50
Certain Transactions................. 57
Security Ownership of Certain
Beneficial Owners and Management..... 60
Shares Eligible for Future Sale...... 61
Description of Capital Stock......... 62
Underwriting......................... 67
Legal Matters........................ 69
Experts.............................. 69
Where You Can Find More
Information.......................... 70
Index to Financial Statements........ F-1
</TABLE>
------------------------
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.
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION THIS PROSPECTUS CONTAINS, AND
THE REMAINDER OF THIS PROSPECTUS QUALIFIES THIS SUMMARY IN ITS ENTIRETY.
OUR 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. When this offering closes, we will purchase six businesses
and begin our operations as a provider of ready-mixed concrete and related
products and services. These businesses operate 26 concrete plants in the San
Francisco Bay area, the Sacramento metropolitan area, Washington, D.C. and
northern New Jersey. Their plants produced over 2.5 million cubic yards of
concrete in 1998 for more than 2,500 different customers. Their pro forma
combined sales totaled $194.1 million in 1998, an increase of 17.4% from their
pro forma combined sales in 1997. We believe our initial size will place us
among the leading independent ready-mixed concrete companies in the United
States on the basis of annual sales.
Of our 1998 pro forma combined sales, we estimate that approximately 44%
were to commercial and industrial construction contractors, 33% were to
residential construction contractors, 18% were to street and highway
construction and paving contractors and 5% were to other public works and
infrastructure contractors. In 1998, repeat customers accounted for an estimated
85% of our pro forma combined sales.
THE READY-MIXED CONCRETE INDUSTRY
According to the National Ready-Mixed Concrete Association, the annual
market for ready-mixed concrete in the United States currently exceeds $21.3
billion and has been growing at an annual rate of approximately 10% since 1996.
The primary factor driving this market is the favorable trend in the overall
economy of the United States. In addition, we believe three other factors are
contributing to the expansion of this market:
o the increased level of industry-wide promotional and marketing
activities;
o the development of new and innovative uses for ready-mixed concrete;
and
o the 1998 enactment of the Federal Transportation Equity Act for the
21st Century.
On the basis of information the National Ready-Mixed Concrete Association has
provided us, we estimate that, in addition to vertically integrated
manufacturers of cement and ready-mixed concrete, more than 3,500 independent
producers currently operate a total of approximately 5,300 ready-mixed concrete
plants in the United States. See "Business -- Industry Overview."
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 the building of new plants entails make acquisitions an important
element of our growth strategy. In addition to acquiring businesses in our
existing and new markets, we plan to implement a national operating strategy
aimed at increasing revenue growth and market share, achieving cost efficiencies
and enhancing profitability. We believe numerous potential acquisition
candidates exist in the highly fragmented ready-mixed concrete industry in both
the markets we initially will serve and other large metropolitan, high-growth
markets. We believe that a significant consolidation opportunity exists for a
company that can consistently offer high-quality, value-added services to users
of large volumes of ready-mixed concrete.
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)
350-6040. We are a Delaware corporation.
4
<PAGE>
THIS OFFERING
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<S> <C>
Common stock we are offering......... 3,800,000 shares
Common stock that will be outstanding
immediately after this offering.... 15,638,543 shares
Use of proceeds...................... When this offering closes, we will use $23.3 million of our net
proceeds to pay the cash portion of the purchase prices for six
businesses which then will be due and apply the balance to repay a
portion of the indebtedness of those businesses. See "Use of
Proceeds."
Nasdaq National Market
trading symbol..................... RMIX
</TABLE>
5
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following summary unaudited financial information represents historical
information we have adjusted to give effect to:
o our acquisition of six businesses;
o this offering and our use of its estimated net proceeds; and
o borrowings we will make to refinance indebtedness of the six
businesses.
The pro forma balance sheet information assumes these transactions occurred
on March 31, 1999, while the other pro forma information assumes these events
occurred on January 1 in each period presented. This information reflects that
we will account for our acquisition of six businesses under the purchase method
of accounting and presents Central Concrete Supply Co., Inc., one of these
businesses, as the acquirer of the other five businesses and U.S. Concrete. This
information is not necessarily indicative of the consolidated results we would
have obtained had these transactions actually occurred when assumed or of our
future consolidated results. We have based this information on preliminary
estimates, available information and assumptions we deem appropriate.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
YEAR ENDED --------------------------
DECEMBER 31, 1998 1998 1999
----------------- ------------ ------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE INFORMATION)
STATEMENT OF OPERATIONS INFORMATION:
Sales............................ $ 194,076 $ 33,181 $ 38,461
Cost of goods sold............... 158,913 28,277 31,986
----------------- ------------ ------------
Gross profit..................... 35,163 4,904 6,475
Selling, general and
administrative expenses(1)..... 13,321 2,154 3,318
Stock compensation charge(2)..... 2,678 -- 765
Depreciation and
amortization(3)................ 4,995 1,261 1,320
----------------- ------------ ------------
Income from operations........... 14,169 1,489 1,072
Other income (expense), net(4)... 73 (73) 290
----------------- ------------ ------------
Income before provision for
income taxes................... 14,242 1,416 1,362
Provision for income taxes(5).... 6,337 710 687
----------------- ------------ ------------
Net income....................... $ 7,905 $ 706 $ 675
================= ============ ============
Net income per share............. $ 0.51 $ 0.05 $ 0.04
================= ============ ============
Shares used in computing net
income per share(6)............ 15,638,543 15,638,543 15,638,543
================= ============ ============
OTHER INFORMATION:
Net income excluding stock
compensation charge............ $ 9,491 $ 706 $ 1,128
================= ============ ============
Net income per share excluding
stock compensation charge...... $ 0.61 $ 0.05 $ 0.07
EBITDA(7)........................ $ 19,164 $ 2,750 $ 2,392
================= ============ ============
EBITDA excluding stock
compensation charge(7)......... $ 21,842 $ 2,750 $ 3,157
================= ============ ============
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------------
COMBINED(8) AS ADJUSTED(9)
------------ ---------------
<S> <C> <C>
(IN THOUSANDS)
BALANCE SHEET INFORMATION:
Working capital (deficit)(10)... $(18,524) $ 4,788
Total assets.................... 125,227 123,999
Total debt, including current
maturities (10)................. 39,761 12,722
Stockholders' equity............ 60,647 86,458
</TABLE>
6
<PAGE>
- ------------
(1) Reflects the following:
o reductions in compensation and benefits to which owners of the
six businesses we are acquiring have agreed and which totaled
$3.5 million in 1998, $0.9 million for the three-month period
ended March 31, 1998 and $0.7 million for the three-month period
ended March 31, 1999; and
o a charge for recurring salary changes of our management which
totaled $0.3 million in 1998 and $0.1 million in each of the
three-month periods ended March 31.
(2) Reflects a noncash, nonrecurring compensation charge resulting from the
issuance of 350,000 shares of common stock to management in 1998 and
100,000 shares of common stock to nonemployee directors in the three-month
period ended March 31, 1999. The charge was calculated using an estimated
fair value of $7.65 per share, which reflects a 10% discount from the
assumed initial public offering price of $8.50 per share because of
restrictions on the sale and transferability of the shares issued.
(3) Reflects our write-off at the rate of $1.3 million per year over 40 years
of purchased goodwill and $0.7 million per in year in additional
depreciation expense to reflect the fair value of equipment of the six
businesses we are acquiring.
(4) Reflects interest expense of $0.8 million for 1998 and $0.2 million for
each of the three-month periods ended March 31, on borrowings of $12.7
million necessary to fund the acquisitions of the six businesses. This is
net of savings of $1.2 million in 1998 and $0.2 million in each of the
three-month periods ended March 31, on $14.7 million of historical debt to
be repaid. It also reflects the elimination of historical interest income
of $0.4 million in 1998 and $0.1 million in each of the three-month periods
ended March 31.
(5) Reflects application of a 40.8% combined tax rate to all pretax income
before nondeductible goodwill and other permanent items.
(6) Consists of:
o 8,985,288 shares we will issue to the owners of the six
businesses;
o 2,853,255 shares our current stockholders and executive officers
own; and
o 3,800,000 shares we will sell in this offering.
This share number:
o gives effect to a split of the common stock and a
recapitalization in March 1999 and the automatic conversion of
our outstanding class A common stock into common stock which will
occur prior to the closing of this offering; and
o assumes the underwriters do not exercise their over-allotment
option.
(7) "EBITDA" means income from operations plus noncash depreciation and
amortization and is a supplemental financial measurement we use to evaluate
our business. We are not presenting our pro forma combined 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 the cash we must use
to service our debt or pay our income taxes and thus does not reflect the
funds actually available for capital expenditures, acquisitions or other
discretionary uses. In addition, our presentation of EBITDA may not be
comparable to similarly titled measures other companies report.
(8) Does not reflect the closing of this offering or our use of its proceeds.
(9) Reflects the closing of this offering and our use of its proceeds.
(10) The pro forma combined amount includes the $23.3 million cash portion of
the purchase prices we will pay when this offering closes.
7
<PAGE>
SUMMARY FINANCIAL INFORMATION FOR THE BUSINESSES WE WILL ACQUIRE
The following table presents summary historical financial information for
each business we initially will acquire for its three most recently completed
fiscal years. Fiscal 1996 for Baer Concrete, Incorporated is its fiscal year
ended March 31, 1997, while each other fiscal year presented is a calendar year.
The information for Opportunity Concrete Corporation for fiscal 1996, Baer for
fiscal 1996 and 1997 and Santa Rosa Cast Products Co. 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 businesses have agreed or any of the other pro forma
adjustments reflected in the Unaudited Pro Forma Combined Financial Statements
this prospectus contains. You should read this information along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes this prospectus
contains.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR MARCH 31
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
(UNAUDITED)
CENTRAL CONCRETE SUPPLY CO., INC.
Sales........................... $ 39,204 $ 53,631 $ 66,499 $ 9,918 $ 12,956
Gross profit.................... 5,802 9,837 12,525 1,381 2,331
Income from operations.......... 955 4,242 6,883 593 716
WALKER'S CONCRETE, INC.
Sales........................... $ 31,008 $ 37,990 $ 41,615 $ 5,842 $ 8,244
Gross profit.................... 4,553 6,192 7,087 572 1,300
Income (loss) from operations... 1,631 2,411 3,169 (420) 230
BAY CITIES BUILDING MATERIALS CO.,
INC.
Sales........................... $ 30,496 $ 45,312 $ 53,600 $ 10,908 $ 12,548
Gross profit.................... 3,209 5,020 6,834 1,468 1,993
Income from operations.......... 661 1,784 2,367 650 1,337
OPPORTUNITY CONCRETE CORPORATION
Sales........................... $ 19,737 $ 15,550 $ 16,180 $ 4,266 $ 2,164
Gross profit.................... 4,197 4,852 4,884 1,261 545
Income (loss) from operations... 2,654 2,240 2,287 614 (89)
BAER CONCRETE, INCORPORATED
Sales........................... $ 4,811 $ 9,712 $ 11,973 $ 2,084 $ 2,024
Gross profit.................... 400 965 2,063 183 154
Income (loss) from operations... (585) 261 456 (207) (243)
SANTA ROSA CAST PRODUCTS CO.
Sales........................... $ 3,032 $ 3,176 $ 4,209 $ 163 $ 525
Gross profit.................... 1,116 1,312 1,770 39 152
Income (loss) from operations... 186 292 728 (9) (35)
</TABLE>
8
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, AS WELL AS THE OTHER
INFORMATION THIS PROSPECTUS CONTAINS.
WE MAY NOT BE ABLE TO REALIZE OUR BUSINESS STRATEGY OF GROWING RAPIDLY THROUGH
ACQUISITIONS
We may not be able to grow as rapidly as we expect through acquiring
additional businesses after this offering closes for various reasons, including
the following:
o This offering will not provide us with any cash for use beyond making
our initial acquisitions, and we expect we will use the cash our
operations generate primarily for reinvestment in our business.
Consequently, the extent to which we are able to use cash to pay for
additional acquisitions will be subject to the limitations our credit
facility will impose on our ability to incur additional debt and
perceptions of our creditworthiness. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Combined."
o We may not be able to use our common stock as an acquisition currency.
o We may not be able to identify sufficient suitable acquisition
candidates available for sale at reasonable prices and on other
reasonable terms.
o The businesses we do acquire may fail to meet our earnings
expectations for any number of reasons, including:
o the loss of their customers or key personnel;
o adverse developments in the markets in which they operate; or
o financial losses owing to contingent and latent risks, including
environmental risks, associated with their past operations or to
other unanticipated problems.
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 for a number of reasons,
including the following:
o We may fail to integrate the businesses we acquire into a
cohesive, efficient enterprise with company-wide information and
management systems and effective cost and other control
mechanisms.
o We will have to rely on existing accounting, information and
administrative systems of acquired businesses, which may be
inadequate, until centralized systems can be implemented.
o Our resources, including management resources, are limited and
may be strained if we engage in a significant number of
acquisitions; acquisitions may divert management attention from
implementing cost savings and revenue enhancing programs; our
senior management has only recently been assembled and only two
members of our senior management team have experience in our
industry.
o We may not be able to acquire a sufficient number of businesses
in a given market to realize significant cost savings and
customer cross-selling opportunities in that market; or, even if
we acquire a sufficient number of businesses in a market, we may
fail to realize those savings and selling opportunities.
o We may not be able to effectively implement various plans
intended to improve our performance, including our plans to:
o improve the dispatch system for our mixer trucks;
o develop a professional sales force; and
o expand our expertise in the design and variation of concrete
mixes.
9
<PAGE>
OUR SUCCESS WILL DEPEND ON OUR RETAINING PERSONNEL OR HIRING QUALIFIED
REPLACEMENTS
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 March 31, 1999 includes
goodwill representing approximately 41.6% of assets and 59.7% 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 write off this and all other intangible assets over the
period benefited. This write-off 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. The FASB expects to announce in May 1999 whether it will preserve
the current 40-year write-off period for goodwill or cut that period to as
little as 10 years for most merging companies. Another possibility is an
immediate, one-time writeoff of goodwill. We do not anticipate that any increase
in our amortization rate will have any impact on our ability to borrow under our
credit facility.
10
<PAGE>
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 and
causes sales generally to be materially higher in the second and
third calendar quarters than 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 -- Combined." 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 LOSE BUSINESS TO COMPETITORS WHO UNDERBID US AND OTHERWISE BE UNABLE TO
COMPETE FAVORABLY IN OUR HIGHLY COMPETITIVE INDUSTRY
We may lose business to competitors who underbid us and otherwise 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 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 RESULT IN
INCREASES IN OUR OPERATING COSTS AND CAPITAL EXPENDITURES AND DECREASES IN OUR
EARNINGS
A wide range of federal, state and local laws, ordinances and regulations
(collectively, "laws") will apply to our operations, including the following
matters:
o land usage;
o street and highway usage;
o noise levels; and
o 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
11
<PAGE>
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 RESULT IN INCREASES IN OUR OPERATING COSTS, DISRUPTIONS IN OUR
BUSINESS AND DECREASES IN OUR EARNINGS
At May 1, 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 AND INCREASES IN OUR OPERATING COSTS
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 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
12
<PAGE>
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, these programs may misinterpret "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."
FORMER OWNERS OF THE BUSINESSES WE INITIALLY WILL ACQUIRE 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 AND AN ACTIVE
TRADING MARKET FOR OUR COMMON STOCK MAY NOT DEVELOP OR, IF IT DEVELOPS, CONTINUE
TO EXIST
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. Our common stock has been approved for quotation on the
Nasdaq National Market, subject to official notice of issuance, 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:
o will pay a price per share that substantially exceeds the value
on a per share basis of our assets after we subtract from those
assets our intangible assets and our liabilities;
o will contribute a majority of the funds we will need to complete
our initial acquisitions and refinance indebtedness, but will own
only 24% of the outstanding shares of our common stock; and
o may experience further dilution in the net tangible value of
their common stock as a result of future issuances of common
stock.
See "Dilution."
WE MAY ISSUE PREFERRED STOCK WHOSE TERMS COULD ADVERSELY AFFECT THE GOVERNANCE
RIGHTS OR VALUE OF OUR COMMON STOCK
Our certificate of incorporation 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 governance
rights or value of our common stock. See "Description of Capital
Stock -- Stockholders Rights Plan."
14
<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 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 to issue and set the terms of 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 U.S. Concrete 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."
WE ENCOURAGE YOU NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING INFORMATION
This prospectus contains statements of our expectations, objectives and
plans and other forward-looking statements that involve a number of risks,
uncertainties and assumptions, about matters such as:
o our acquisition and national operating 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; and
o our ability to control costs and maintain quality.
Actual results could differ materially from those the forward-looking statements
project.
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.
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<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. We will acquire six operating
businesses when this offering closes. They operate in the San Francisco Bay
area, the Sacramento metropolitan area, Washington, D.C. and northern New Jersey
and have been in business an average of 43.5 years. In 1998, they generated
sales of $194.1 million, income from operations of $14.2 million and net income
of $7.9 million on a pro forma combined basis.
OUR INITIAL BUSINESSES
CENTRAL. Central Concrete Supply Co., Inc. 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:
o a new facility for Cisco Systems;
o a new facility for Adobe Systems;
o a new facility for Silicon Graphics; and
o the new Interstate Highway 24/680 interchange.
Its sales totaled approximately $66.5 million in 1998 and $13.0 million in the
first quarter of 1999.
WALKER'S. Walker's Concrete, Inc. 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:
o a new complex for Sun Microsystems;
o a highway interchange in Oakland;
o two single-family home developments in San Jose; and
o four new multifamily apartment complexes in San Jose and Oakland.
Its sales totaled approximately $41.6 million in 1998 and $8.2 million in the
first quarter of 1999.
BAY CITIES. Bay Cities Building Materials Co., Inc. 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:
o various renovation and expansion projects at the San Francisco
Airport;
o addition and extension projects at the Moscone Center in San
Francisco;
o various sewer improvement projects for the City of San Francisco;
o a terminal project at the Sacramento International Airport; and
o a large parking garage and the Natomas Marketplace in Sacramento.
Its sales totaled approximately $53.6 million in 1998 and $12.6 million in the
first quarter of 1999.
OPPORTUNITY. Opportunity Concrete Corporation 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:
o the Federal Triangle;
o reconstruction of the 14th Street Bridge;
o Market Square;
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<PAGE>
o the MCI Arena;
o the Hyattsville Justice Center;
o Ronald Reagan Airport; and
o assorted Metro lines and stations.
Its sales totaled approximately $16.2 million in 1998 and $2.2 million in the
first quarter of 1999.
BAER. Baer Concrete, Incorporated 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:
o Yogi Berra Stadium and Floyd Hall Arena at Montclair State
University;
o the Bergen County Jail;
o a new Academic Support Building at Seton Hall University; and
o the New Jersey Shakespeare Theatre at Drew University.
Its sales totaled approximately $12.0 million in 1998 and $2.0 million in the
first quarter of 1999.
SANTA ROSA. Santa Rosa Cast Products Co. 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 the following:
o public works departments;
o cities;
o water districts;
o general contractors; and
o plumbing, underground and other specialty contractors.
Its sales totaled approximately $4.2 million in 1998 and $0.5 million in the
first quarter of 1999. Santa Rosa's legal name is "R.G. Evans/Associates."
SUMMARY OF TERMS OF THE ACQUISITIONS
The aggregate consideration we will pay to acquire the six businesses,
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 these businesses. That
indebtedness totaled approximately $14.7 million as of March 31, 1999 on a
combined historical basis. We will repay approximately $3.7 million of that
indebtedness with net proceeds from this offering and refinance the balance with
our initial borrowings under our credit facility. For information relating to
the consideration we will pay for each business, see "Certain Transactions --
Organizational Transactions"
Changes in the working capital of the businesses 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 businesses 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 business, 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 businesses is approximately $8.0 million. We
intend to effect the adjustments approximately 90 days after this offering
closes.
Three of the businesses 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
17
<PAGE>
retained earnings on which those owners have paid or will pay income taxes,
including 1999 earnings. At March 31, 1999 these distributions would have
totaled approximately $10.7 million.
We negotiated the purchase price we will pay for each business through
arm's-length negotiations between one or more owners or representatives of that
business and us. We used the same general valuation methodology to determine the
purchase price we were willing to pay for each business.
The closing of each acquisition is subject to customary conditions,
including, among others:
o the continuing accuracy of the representations and warranties made by
the applicable business, its stockholders and us;
o the performance of each of their respective covenants in their
acquisition agreement; and
o 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 business prior to the
closing date.
The acquisition agreement relating to a business may be terminated under
certain circumstances prior to closing, including: (1) by the mutual consent of
the owner or owners of that business and us; or (2) if a material breach or
default under the agreement by one party occurs and is not waived.
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<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, will be approximately $27.0 million if the initial public
offering price is $8.50 per share, which is the midpoint of the estimated
initial public offering price range, and the underwriters do not exercise their
over-allotment option. At the same initial public offering price, these net
proceeds will increase to approximately $31.5 million if the underwriters
exercise their over-allotment option in full. 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. That indebtedness totaled approximately $14.7 million at
March 31, 1999 on a historical combined basis. See "Certain
Transactions -- Organizational Transactions."
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 will
have in place when this offering closes. On the basis of our 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 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 $8.0 million. We expect to pay any increase approximately 90 days
after this offering closes with cash on hand or a borrowing under our credit
facility. See "Certain Transactions -- Organizational Transactions."
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:
o our financial condition and performance;
o our cash needs and expansion plans;
o income tax consequences; and
o 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>
PRO FORMA CAPITALIZATION
The following table sets forth our short-term debt and current maturities
of long-term obligations and capitalization as of March 31, 1999: (1) on a pro
forma combined basis after giving effect to our initial acquisitions and our net
incurrence of indebtedness since March 31, 1999; and (2) on that pro forma
basis, as adjusted to give effect to this offering and our use of its net
proceeds. See "Use of Proceeds" and the Unaudited Pro Forma Combined Financial
Statements and the related notes this prospectus contains.
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------------
PRO FORMA
COMBINED(1) AS ADJUSTED
------------ ------------
<S> <C> <C>
(IN THOUSANDS)
Payable to business owners(2)........ $ 23,312 $ --
============ ============
New credit facility.................. 16,449 12,722
Stockholders' equity:
Preferred stock: $.001 par
value, 10,000,000 shares,
authorized; no shares issued
and outstanding............... - --
Common stock: $.001 par value,
60,000,000 shares authorized;
11,838,543 shares issued and
outstanding, pro forma; and
15,638,543 shares issued and
outstanding, as adjusted(3)... 118 156
Additional paid-in capital........... 63,589 89,362
Retained deficit..................... (3,060) (3,060)
------------ ------------
Total stockholders' equity...... 60,647 86,458
------------ ------------
Total capitalization....... $ 77,096 $ 99,180
============ ============
</TABLE>
- ------------
(1) Combines the respective accounts of U.S. Concrete and the six businesses it
initially will acquire as reflected in the Unaudited Pro Forma Combined
Balance Sheet as of March 31, 1999.
(2) The pro forma combined amount represents the $23.3 million cash portion of
the purchase prices we will pay when this offering closes and does not
include any additional cash consideration post-closing adjustment
provisions in our acquisition agreements may require us to pay. The maximum
amount we will pay if cash balances and working capital meet or exceed
specified levels is $8.0 million, and the net amount we would have paid as
of March 31, 1999 was $3.5 million.
(3) The 15,638,543 shares that will be outstanding when this offering closes
consist of:
o the 3,800,000 shares we will sell in this offering if the
underwriters do not exercise their over-allotment option to
purchase up to an additional 570,000 shares;
o the 8,985,288 shares we will issue as part of the purchase prices
for our initial acquisitions;
o the 450,000 shares our management and non-employee directors own;
o the 801,000 shares American Ready-Mix, L.L.C. owns; and
o the 1,602,255 shares Main Street Merchant Partners II, L.P. owns.
That share number does not include:
o the 1,150,000 shares subject to options we expect to grant to our
management and key employees when this offering closes; or
o the 200,000 shares subject to the warrants we will issue to the
representatives of the underwriters for this offering for the
services they perform 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 value as of March 31, 1999 was
approximately $9.0 million or approximately $0.76 per share, after giving effect
to our initial acquisitions and our net incurrence of indebtedness since March
31, 1999. This value per share represents the amount by which our pro forma
combined total liabilities exceed our pro forma combined tangible assets as of
March 31, 1999, divided by the number of shares of common stock which will be
outstanding after giving effect to our initial acquisitions. If the initial
public offering price in this offering is $8.50 per share, which is the midpoint
of the estimated initial public offering price range, our pro forma combined net
tangible book value as of March 31, 1999 would have been approximately $34.9
million, or approximately $2.23 per share of common stock, after giving effect
to the closing of this offering, the estimated underwriting discount and our
estimated offering expenses. This represents an immediate increase in pro forma
net tangible book value of approximately $1.47 per share to existing
stockholders and an immediate dilution of approximately $6.27 per share to new
investors purchasing shares in this offering. The following table illustrates
this pro forma dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price
per share............................ $ 8.50
Pro forma net tangible book
value per share before this
offering....................... $ 0.76
Increase in pro forma net
tangible book value per share
attributable to new
investors...................... 1.47
---------
Pro forma net tangible book value per
share after this offering............ 2.23
---------
Dilution per share to new
investors............................ $ 6.27
=========
</TABLE>
The table below 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 from this offering as of March 31, 1999:
o the number of shares of common stock we have sold;
o the total consideration and average price per share existing
stockholders, including persons who will acquire common stock in
the acquisitions, have paid us; and
o the total consideration and average price per share new investors
purchasing shares in this offering will pay us.
In this table, the total consideration we attribute to 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 contains.
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 11,838,543 75.7% $ 9,037,000 21.9% $ 0.76
New investors........................ 3,800,000 24.3% 32,300,000 78.1% $ 8.50
---------- ------- ----------- -------
Total........................... 15,638,543 100.0% $41,337,000 100.0%
========== ======= =========== =======
</TABLE>
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<PAGE>
SELECTED FINANCIAL INFORMATION
For financial statement presentation purposes, Central Concrete Supply Co.,
Inc., one of the six businesses we initially will acquire, is presented as the
acquirer of the other five businesses and U.S. Concrete. The following
historical financial information for Central as of December 31, 1997 and 1998,
and for the years ended December 31, 1996, 1997 and 1998, derives from the
audited financial statements of Central this prospectus contains. The remaining
historical financial information for Central derives 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 related notes and the
historical financial statements and related notes this prospectus contains.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED APRIL 30 YEAR ENDED DECEMBER 31 ENDED MARCH 31
-------------------- ------------------------------- --------------------
1995 1996 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS INFORMATION FOR
THE ACCOUNTING ACQUIRER:
Sales.............................. $ 25,570 $ 37,781 $ 39,204 $ 53,631 $ 66,499 $ 9,918 $ 12,956
Cost of goods sold................. 23,170 32,040 33,402 43,794 53,974 8,537 10,625
--------- --------- --------- --------- --------- --------- ---------
Gross profit....................... 2,400 5,741 5,802 9,837 12,525 1,381 2,331
Selling, general and administrative
expenses......................... 1,700 2,955 3,644 4,265 4,712 600 1,323
Depreciation....................... 474 586 1,203 1,330 930 188 292
--------- --------- --------- --------- --------- --------- ---------
Income from operations............. 226 2,200 955 4,242 6,883 593 716
Other income (expense), net........ 371 (73) (188) (200) (129) 96 227
--------- --------- --------- --------- --------- --------- ---------
Income before provision for income
taxes............................ 597 2,127 767 4,042 6,754 689 943
Provision (benefit) for income
taxes............................ 101 937 303 (457) 100 6 17
--------- --------- --------- --------- --------- --------- ---------
Net income......................... $ 496 $ 1,190 $ 464 $ 4,499 $ 6,654 $ 683 $ 926
========= ========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET INFORMATION FOR THE
ACCOUNTING ACQUIRER:
APRIL 30 DECEMBER 31
-------------------- ------------------------------- MARCH 31,
1995 1996 1996 1997 1998 1999
--------- --------- --------- --------- --------- -----------
(IN THOUSANDS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Working capital (deficit).......... $ (10) $ 1,074 $ 1,363 $ 4,899 $ 7,431 $ 7,685
Total assets....................... 7,789 9,683 13,603 19,837 26,640 26,389
Long-term debt, including current
maturities....................... 1,465 2,091 1,730 2,660 3,530 5,112
Total stockholders' equity......... 1,967 3,158 7,599 10,731 15,154 14,439
</TABLE>
22
<PAGE>
The following pro forma combined information assumes that we completed the
following transactions (1) on January 1, 1998, in the case of the statement of
operations information, (2) on January 1, 1999, in the case of the EBITDA
information, and (3) on March 31, 1999, in the case of the balance sheet
information:
o our issuance and sale in this offering of 3,800,000 shares of
common stock at an assumed initial public offering price of $8.50
per share, which is the midpoint of the estimated initial public
offering price range;
o our use of our net proceeds from this offering, which we estimate
will be approximately $27.0 million;
o our acquisition of the six businesses and our payment of the
purchase prices for those businesses; and
o our refinancing with borrowings under our new credit facility of
the indebtedness we will assume as a result of the acquisitions.
This information is not necessarily indicative of the consolidated results we
would have obtained had these transactions actually occurred when assumed or of
our future consolidated results. We have prepared this information on the basis
of preliminary estimates, available information and assumptions we deem
appropriate. You should read it together with the historical financial
statements and related notes this prospectus contains.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
YEAR ENDED ------------------------------
DECEMBER 31, 1998 1998 1999
----------------------- -------------- --------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
PRO FORMA STATEMENT OF OPERATIONS
INFORMATION:
Sales.............................. $ 194,076 $ 33,181 $ 38,461
Cost of goods sold................. 158,913 28,277 31,986
----------------------- -------------- --------------
Gross profit....................... 35,163 4,904 6,475
Selling, general and administrative
expenses(1)...................... 13,321 2,154 3,318
Stock compensation charge(2)....... 2,678 -- 765
Depreciation and goodwill
amortization(3).................. 4,995 1,261 1,320
----------------------- -------------- --------------
Income from operations............. 14,169 1,489 1,072
Other income (expense), net(4)..... 73 (73) 290
----------------------- -------------- --------------
Income before provision for income
taxes............................ 14,242 1,416 1,362
Provision for income taxes(5)...... 6,337 710 687
----------------------- -------------- --------------
Net income......................... $ 7,905 $ 706 $ 675
======================= ============== ==============
Net income per share............... $ 0.51 $ 0.05 $ 0.04
======================= ============== ==============
Shares used in computing net income
per share(6)..................... 15,638,543 15,638,543 15,638,543
======================= ============== ==============
OTHER PRO FORMA INFORMATION:
Net income excluding stock
compensation charge.............. $ 9,491 $ 706 $ 1,128
Net income per share excluding
stock compensation charge........ $ 0.61 $ 0.05 $ 0.07
EBITDA(7).......................... $ 19,164 $ 2,750 $ 2,392
======================= ============== ==============
EBITDA excluding stock compensation
charge(7) ....................... $ 21,842 $ 2,750 $ 3,157
======================= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1999
--------------------------
AS
COMBINED(8) ADJUSTED(9)
----------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
PRO FORMA BALANCE SHEET INFORMATION:
Working capital (deficit)(10)...... $ (18,524) $ 4,788
Total assets....................... 125,227 123,999
Total long-term debt, including
current maturities(10)........... 39,761 12,722
Stockholders' equity............... 60,647 86,458
</TABLE>
23
<PAGE>
- ------------
(1) Reflects the following:
o reductions in compensation and benefits to which owners of the
six businesses we are acquiring have agreed and which totaled
$3.5 million in 1998, $0.9 million for the three-month period
ended March 31, 1998 and $0.7 million for the three-month period
ended March 31, 1999; and
o a charge for recurring salary changes of our management which
totaled $0.3 million in 1998 and $0.1 million in each of the
three-month periods ended March 31.
(2) Reflects a noncash, nonrecurring compensation charge resulting from the
issuance of 350,000 shares of common stock to management in 1998 and
100,000 shares of common stock to nonemployee directors in the three-month
period ended March 31, 1999. The charge was calculated using an estimated
fair value of $7.65 per share, which reflects a 10% discount from the
assumed initial public offering price of $8.50 per share due to
restrictions on the sale and transferability of the shares issued.
(3) Reflects our write-off at the rate of $1.3 million per year over 40 years
of purchased goodwill and $0.7 million per year in additional depreciation
expense to reflect the fair value of equipment of the six businesses we are
acquiring.
(4) Reflects interest expense of $0.8 million for 1998 and $0.2 million for
each of the three-month periods ended March 31, on borrowings of $12.7
million necessary to fund the acquisitions of the six businesses. This is
net of savings of $1.2 million in 1998 and $0.2 million in each of the
three-month periods ended March 31, on $14.7 million of historical debt to
be repaid. It also reflects the elimination of historical interest income
of $0.4 million in 1998 and $0.1 million in each of the three-month periods
ended March 31.
(5) Reflects application of a 40.8% combined tax rate to all pretax income
before nondeductible goodwill and other permanent items.
(6) Consists of:
o 8,985,288 shares we will issue to the owners of the six
businesses;
o 2,853,255 shares our current stockholders and executive officers
own; and
o 3,800,000 shares we will sell in this offering.
This share number:
o gives effect to a split of the common stock and a
recapitalization in March 1999 and the automatic conversion of
our outstanding class A common stock into common stock which will
occur prior to the closing of this offering; and
o assumes the underwriters do not exercise their over-allotment
option.
(7) "EBITDA" means income from operations plus noncash depreciation and
amortization and is a supplemental financial measurement we use to evaluate
our business. We are not presenting our pro forma combined 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 the cash we must use
to service our debt or pay our income taxes and thus does not reflect the
funds actually available for capital expenditures, acquisitions or other
discretionary uses. In addition, our presentation of EBITDA may not be
comparable to similarly titled measures other companies report.
(8) Does not reflect the closing of this offering or our use of its proceeds.
(9) Reflects the closing of this offering and our use of its proceeds.
(10) The pro forma combined amount includes the $23.3 million cash portion of
the purchase prices we will pay when this offering closes.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION TOGETHER WITH THE FINANCIAL
STATEMENTS AND RELATED NOTES THIS PROSPECTUS CONTAINS.
OVERVIEW
We expect to derive substantially all our revenues from the sale 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 statements of operations include pro forma
adjustments to our selling, general and administrative expenses to reflect the
reductions in salaries, bonuses and benefits to which owners of the businesses
we initially will acquire have agreed will take effect when we acquire them.
These reductions totaled approximately $3.5 million in 1998, $0.9 million in the
first quarter of 1998 and $0.7 million in the first quarter of 1999. Our pro
forma combined statements of operations also reflect the substantial increase in
income tax expense which will result from the conversion of three of those
businesses from S corporations into C corporations. That pro forma increase was
approximately $2.2 million in 1998.
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:
o obtain greater discounts from suppliers;
o borrow at lower interest rates;
o consolidate insurance programs; and
o generate savings in other general and administrative areas.
We cannot currently quantify these savings and expect that various incremental
costs partially offset them. These incremental costs include those associated
with:
o our corporate management;
o our being a public company; and
o our systems integration, upgrading and replacement.
Our pro forma combined statements of operations reflect neither the cost savings
nor the incremental costs we expect, but cannot quantify.
The pro forma combined financial information this prospectus contains
covers periods during which the businesses we initially will acquire had
different tax structures and operated independently of each other
25
<PAGE>
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, such as wages, rent,
depreciation and other selling, general and administrative expenses, throughout
the year, 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:
o the availability of funds for public or infrastructure
construction;
o commercial and residential vacancy levels;
o changes in interest rates;
o the availability of short- and long-term financing;
o inflation;
o consumer spending habits; and
o 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 writing off 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.
26
<PAGE>
RESULTS OF OPERATIONS -- PRO FORMA COMBINED
The following table sets forth for us on a pro forma combined basis
selected statement of operations information and that information as a
percentage of sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
------------------------------------------
1998 1999
-------------------- --------------------
<S> <C> <C> <C> <C>
(UNAUDITED AND DOLLARS IN THOUSANDS)
Sales................................ $ 33,181 100.0% $ 38,461 100.0%
Cost of goods sold................... 28,277 85.2% 31,986 83.2%
--------- --------- --------- ---------
Gross profit.................... 4,904 14.8% 6,475 16.8%
Selling, general and administrative
expenses........................... 2,154 6.5% 3,318 8.6%
Stock compensation charge............ -- -- 765 2.0%
Depreciation and amortization........ 1,261 3.8% 1,320 3.4%
--------- --------- --------- ---------
Income from operations............... $ 1,489 4.5% $ 1,072 2.8%
========= ========= ========= =========
</TABLE>
SALES. Sales increased $5.3 million, or 16.0%, from $33.2 million in 1998
to $38.5 million in 1999, primarily as a result of improved weather conditions
and higher average sales prices resulting from strong demand in most of our
markets.
GROSS PROFIT. Gross profit increased $1.6 million, or 32.6%, from $4.9
million in 1998 to $6.5 million in 1999. Gross margins increased from 14.8% in
1998 to 16.8% in 1999 primarily due to higher average sales prices and the
strong marginal contribution from those increased prices due to the fixed cost
nature of our business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.1 million, or 50.0%, from $2.2 million in
1998 to $3.3 million in 1999 primarily due to additions to the administrative
infrastructure of several of the businesses we initially will acquire and higher
average compensation levels. As a percentage of sales, selling, general and
administrative expenses increased from 6.5% in 1998 to 8.6% in 1999.
SELECTED OPERATING INFORMATION -- COMBINED
The following table sets forth selected combined statement of operations
information of the six businesses we initially will acquire on an 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 businesses and does not represent a presentation of
that historical information in accordance with generally accepted accounting
principles. These businesses were not under common control or management during
the periods 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>
(UNAUDITED AND DOLLARS 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 $28.7 million, or 17.4%, in 1998 and $37.1
million, or 28.9%, in 1997, 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 raw material costs and increased demand.
GROSS PROFIT. Combined gross profit increased $7.9 million, or 28.8%, in
1998 and $8.0 million, or 41.6%, in 1997. The combined gross profit margin
increased from 15.0% in 1996 to 16.5% in 1997 and to
27
<PAGE>
18.1% in 1998. The increases in gross profit for both years 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.
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. We will use
$23.3 million of our net proceeds from this offering to pay the cash portion of
the purchase prices for our initial acquisitions which will be due when this
offering closes and apply the balance of approximately $3.7 million to repay a
portion of the indebtedness we will assume as a result of those acquisitions.
That indebtedness totaled approximately $14.7 million as of March 31, 1999 on a
historical combined basis.
We will enter into a senior secured credit facility effective when this
offering closes. Chase Securities Inc. has agreed to structure, arrange and
syndicate the facility pursuant to the terms and conditions of a commitment
letter. According to those terms, the facility will be a three-year revolving
credit facility of up to $75.0 million, with a $5.0 million sublimit for letters
of credit issued on our behalf, we may use for the following purposes:
o finance acquisitions;
o refinance existing indebtedness; and
o for general corporate purposes.
Our subsidiaries will guarantee the repayment of all amounts due under the
facility, and we will secure the facility with the capital stock and assets of
our subsidiaries. We expect the facility will:
o require the consent of the lenders for acquisitions;
o prohibit the payment of cash dividends by us;
o restrict our ability to incur additional indebtedness; and
o require us to comply with stringent financial covenants.
The failure to comply with these covenants and restrictions would
constitute an event of default under the facility. At March 31, 1999, after
giving pro forma effect to this offering and our use of its proceeds, the
completion of our initial acquisitions, our initial net borrowings under the
facility and the other transactions to which the pro forma combined financial
statements in this prospectus also give pro forma effect, our unused borrowing
capacity would have been $37.3 million. Our borrowing capacity under the
facility will vary from time to time depending on our satisfaction of several
financial tests.
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 $4.8
million at March 31, 1999. 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, excluding
acquisitions, 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 March 31, 1999, these distributions
would have totaled approximately $10.7 million.
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. As of
March 31, 1999, the net adjustments would have required us to pay a total of
$3.5
28
<PAGE>
million as additional cash consideration on a pro forma basis. The maximum
amount we will pay if cash balances and working capital meet or exceed specified
levels is approximately $8.0 million. 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-digits rather than four to represent years in performing computations and
decision-making functions. These programs, hardware items and systems may fail
beginning on January 1, 2000 because they misinterpret "00" as the year 1900
rather than 2000. These failures 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.
Our year 2000 assessment consists of the following phases:
o identifying all items that may be affected by the year 2000;
o investigating those items for year 2000 compliance;
o assessing the potential impact of year 2000 noncompliance;
o designing solutions for noncompliant items;
o repairing and replacing any noncompliant items and testing those
improvements; and
o contingency planning.
Each company we are acquiring has assigned one or more individuals in its
organization year 2000 responsibility. We have also assigned an individual
overall year 2000 responsibility to track and coordinate the efforts of the
individual companies. Although we are following the general steps we outlined
above, we do not consider preparation and maintenance of formal inventories and
risk rankings, detailed test plans and documentation of results necessary
because the number of information technology systems each company uses is
relatively small.
Each company we are acquiring has completed identification of its mission-
critical information technology hardware and software, including business
applications, operations software, service providers and product suppliers that
may be affected by the year 2000. We are in the process of identifying the
potential impact of embedded technologies on the companies.
We are also contacting third-parties, including third-party vendors, to
obtain representations and assurances that their hardware, embedded technology
systems and software we use or which will impact us are, or will be modified on
a timely basis to be, year 2000 compliant. We are in the beginning stages of
assessing the progress of third parties in resolving their year 2000 issues.
29
<PAGE>
Most of the companies we initially will acquire are in the solution design
phase of their efforts to determine whether noncompliant information hardware
and software systems can be repaired or replaced. We have not performed an
analysis of the expected completion date of these efforts, but we expect
completion well before January 1, 2000.
We have decided not to develop formal budgets or perform an analysis of the
costs associated with this effort. We based this decision on the low number of
systems that comprise our technical environment and the fact that our year 2000
efforts are being addressed during the normal course of business. We have not
deferred other information technology projects because of our year 2000 efforts.
We have not yet begun a formal analysis of various failure scenarios or
their potential impact or possible contingency plans. 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 you have no guarantee that we will achieve total compliance. Factors that
give rise to this uncertainty include our possible failure to identify all
susceptible systems, noncompliance by third parties whose systems and operations
impact us and a possible loss of technical resources to perform the work. 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 other difficulties. Depending on the
length of any noncompliance or 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 and that information as a percentage of sales for the periods
indicated (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------------------------------------- --------------------
1996 1997 1998 1998
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Sales................................ $ 39,204 100.0% $ 53,631 100.0% $ 66,499 100.0% $ 9,918 100%
Cost of goods sold................... 33,402 85.2% 43,794 81.7% 53,974 81.2% 8,537 86.1%
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit..................... 5,802 14.8% 9,837 18.3% 12,525 18.8% 1,381 13.9%
Selling, general and administrative
expenses........................... 3,644 9.3% 4,265 7.9% 4,712 7.1% 600 6.0%
Depreciation......................... 1,203 3.1% 1,330 2.5% 930 1.4% 188 1.9%
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations............... $ 955 2.4% $ 4,242 7.9% $ 6,883 10.3% 593 6.0%
========= ========= ========= ========= ========= ========= ========= =========
<CAPTION>
1999
--------------------
<S> <C> <C>
Sales................................ $ 12,956 100%
Cost of goods sold................... 10,625 82.0%
--------- ---------
Gross profit..................... 2,331 18.0%
Selling, general and administrative
expenses........................... 1,323 10.2%
Depreciation......................... 292 2.3%
--------- ---------
Income from operations............... 716 5.5%
========= =========
</TABLE>
30
<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 (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------------------------------------- --------------------
1996 1997 1998 1998
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Sales
Ready-Mixed...................... $ 33,112 $ 46,077 $ 57,339 $ 8,639
Westside......................... 6,135 8,255 9,162 1,367
Other*........................... (43) (701) (2) (88)
--------- --------- --------- ---------
Total sales.................. 39,204 53,631 66,499 9,918
========= ========= ========= =========
Cost of goods sold
Ready-Mixed...................... 26,923 81.3% 36,301 78.8% 46,465 81.0% 7,116 82.4%
Westside......................... 5,064 82.5% 6,261 75.8% 7,049 76.9% 1,201 87.9%
Other*........................... 1,415 N/A 1,232 N/A 460 N/A 220 N/A
--------- --------- --------- --------- --------- --------- --------- ---------
Total cost of goods sold..... 33,402 85.2% 43,794 81.7% 53,974 81.2% 8,537 86.1%
========= ========= ========= ========= ========= ========= ========= =========
Gross profit
Ready-Mixed...................... 6,189 18.7% 9,776 21.2% 10,874 19.0% 1,523 17.6%
Westside......................... 1,071 17.5% 1,994 24.2% 2,113 23.1% 166 12.1%
Other*........................... (1,458) N/A (1,933) N/A (462) N/A (308) N/A
--------- --------- --------- --------- --------- --------- --------- ---------
Total gross profit........... $ 5,802 14.8% $ 9,837 18.3% $ 12,525 18.8% $ 1,381 13.9%
========= ========= ========= ========= ========= ========= ========= =========
<CAPTION>
1999
--------------------
<S> <C> <C>
Sales
Ready-Mixed...................... $ 11,259
Westside......................... 1,697
Other*........................... --
---------
Total sales.................. 12,956
=========
Cost of goods sold
Ready-Mixed...................... 9,245 82.1%
Westside......................... 1,210 71.3%
Other*........................... 170 N/A
--------- ---------
Total cost of goods sold..... 10.625 82.0%
========= =========
Gross profit
Ready-Mixed...................... 2,014 17.9%
Westside......................... 487 28.7%
Other*........................... (170) N/A
--------- ---------
Total gross profit........... $ 2,331 18.0%
========= =========
</TABLE>
- ------------
* Consists of unallocated administrative items.
FIRST QUARTER 1999 COMPARED TO FIRST QUARTER 1998
SALES.Sales increased $3.1 million, or 30.6%, from $9.9 million in the
first quarter of 1998 to $13.0 million in the first quarter of 1999, primarily
as a result of improved weather conditions and increased demand for commercial
building construction. Additionally, Central increased sales efforts for its
high-end products in 1999. Sales for the Ready-Mixed segment increased $2.6
million, or 30.3%, from $8.6 million in the first quarter of 1998 to $11.3
million in the first quarter of 1999. Sales for the Westside segment increased
$0.3 million, or 24.1%, from $1.4 million in the first quarter of 1998 to $1.7
million in the first quarter of 1999, primarily as a result of increased
marketing efforts.
GROSS PROFIT. Gross profit increased $0.9 million, or 68.8%, from $1.4
million in the first quarter of 1998 to $2.3 million in the first quarter of
1999. Gross margins increased from 13.9% in the first quarter of 1998 to 18.0%
in the first quarter of 1999. Gross profit for the Ready-Mixed segment increased
$0.5 million, or 32.2%, from $1.5 million in the first quarter of 1998 to $2.0
million in the first quarter of 1999. Gross margins for the Ready-Mixed segment
increased from 17.6% in the first quarter of 1998 to 17.9% in the first quarter
of 1999. Gross profit of the Westside segment increased $0.3 million, or 193.4%,
from $0.2 million in the first quarter of 1998 to $0.5 million in the first
quarter of 1999. Gross margins for the Westside segment increased from 12.1% in
the first quarter of 1998 to 28.7% in the first quarter of 1999, as a result of
increased marketing efforts and improved inventory management.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.Selling, general and
administrative expenses increased $0.7 million, or 120.3%, from $0.6 million in
the first quarter of 1998 to $1.3 million in the first quarter of 1999,
primarily because of out-of-pocket costs incurred in connection with our
acquisition of Central and higher average compensation levels. As a percentage
of sales, selling, general and administrative expenses increased from 6.0% in
the first quarter of 1998 to 10.2% in the first quarter of 1999.
1998 COMPARED TO 1997
SALES. Sales increased $12.9 million, or 24.1%, from $53.6 million in 1997
to $66.5 million in 1998, primarily as a result of the strong construction
activity in the Silicon Valley region. Both increases in the size of Central's
customer base and in repeat sales to existing customers contributed to Central's
increase in
31
<PAGE>
sales. Sales for Central's Ready-Mixed segment increased $11.2 million, or
24.4%, from $46.1 million in 1997 to $57.3 million in 1998, primarily as a
result of strong demand for commercial building construction. Sales for
Central's Westside segment increased $0.9 million, or 11.0%, from $8.3 million
in 1997 to $9.2 million in 1998, primarily as a result of increased sales
efforts and expanded product lines for both building materials and equipment.
GROSS PROFIT. Gross profit increased $2.7 million, or 27.3%, from $9.8
million in 1997 to $12.5 million in 1998. Gross margins increased from 18.3% in
1997 to 18.8% in 1998 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 in 1997 to $10.9 million in 1998. Gross
margins decreased from 21.2% in 1997 to 19.0% in 1998 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 6.0%, from $2.0 million in 1997 to
$2.1 million in 1998. Gross margins decreased from 24.2% in 1997 to 23.1% in
1998 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 in
1997 to $4.7 million in 1998 as a result of the addition of administrative
infrastructure necessary to support Central's growth. As a percentage of sales,
selling, general and administrative expenses decreased from 7.9% in 1997 to 7.1%
in 1998.
1997 COMPARED TO 1996
SALES. Sales increased $14.4 million, or 36.8%, from $39.2 million in 1996
to $53.6 million in 1997, primarily because of increased construction activity
by high-tech companies in the Silicon Valley region. Both increases in the size
of Central's customer base and in repeat sales to existing customers in the San
Francisco Bay area contributed to Central's increase in sales. Sales of the
Ready-Mixed segment increased $13.0 million, or 39.2%, from $33.1 million in
1996 to $46.1 million in 1997, as a result of strong commercial building demand.
Sales of the Westside segment increased $2.2 million, or 34.6%, from $6.1
million in 1996 to $8.3 million in 1997 as a result of increased sales efforts
and expanded product lines in building materials and equipment sales.
GROSS PROFIT. Gross profit increased $4.0 million, or 69.5%, from $5.8
million in 1996 to $9.8 million in 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% in 1996 to 18.3% in 1997 for the same reason. Gross profit
of the Ready-Mixed segment increased $3.6 million, or 58.0%, from $6.2 million
in 1996 to $9.8 million in 1997. Gross margins of the Ready-Mixed segment
increased from 18.7% in 1996 to 21.2% in 1997. Gross profit of the Westside
segment increased $0.9 million from $1.1 million in 1996 to $2.0 million in
1997. Gross margins of the Westside segment improved from 17.5% in 1996 to 24.2%
in 1997 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 17.0%, from $3.6 million in
1998 to $4.3 million in 1997, primarily because of an increase of $0.3 million
in expenses attributable to the hiring of additional personnel. As a percentage
of sales, selling, general and administrative expenses decreased from 9.3% in
1996 to 7.9% in 1997 because of Central's sales growth in 1997.
LIQUIDITY AND CAPITAL RESOURCES -- CENTRAL
Central's operations generated $1.9 million of net cash for the first
quarter of 1999, a decrease of $0.5 million from 1998, primarily because of a
$0.9 million decrease in payables and a $1.0 million increase in receivables,
partially offset by a $0.2 million increase in net income and $1.2 million of
other favorable changes in working capital accounts. Central used net cash in
investing activities of $0.6 million in the first quarter of 1999, substantially
all of which it spent on property, plant and equipment. In the first quarter of
1999, Central used net cash of $0.1 million in its financing activities, which
reflected distributions to its
32
<PAGE>
stockholders of $1.6 million, partially offset by net borrowings of $1.5
million. At March 31, 1999, Central had working capital of $7.7 million and
total long-term debt of $5.1 million.
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 a $2.2 million
increase in net income and a $2.3 million decrease in receivables. 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.
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 five ready-mixed concrete plants in Oakland, Hayward and
San Jose, California.
The following table sets forth selected statement of operations information
of Walker's and that information as a percentage of sales for the periods
indicated (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------------------------------------- --------------------
1996 1997 1998 1998
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Sales................................ $ 31,008 100.0% $ 37,990 100.0% $ 41,615 100.0% $ 5,842 100.0%
Cost of goods sold................... 26,455 85.3% 31,798 83.7% 34,528 83.0% 5,270 90.2%
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit..................... 4,553 14.7% 6,192 16.3% 7,087 17.0% 572 9.8%
Selling, general and administrative
expenses........................... 2,155 6.9% 2,953 7.8% 3,022 7.3% 707 12.1%
Depreciation......................... 767 2.5% 828 2.2% 896 2.1% 285 4.9%
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations........ $ 1,631 5.3% $ 2,411 6.3% $ 3,169 7.6% $ (420) (7.2)%
========= ========= ========= ========= ========= ========= ========= =========
<CAPTION>
1999
--------------------
<S> <C> <C>
Sales................................ $ 8,244 100.0%
Cost of goods sold................... 6,944 84.2%
--------- ---------
Gross profit..................... 1,300 15.8%
Selling, general and administrative
expenses........................... 850 10.3%
Depreciation......................... 220 2.7%
--------- ---------
Income (loss) from operations........ $ 230 2.8%
========= =========
</TABLE>
FIRST QUARTER 1999 COMPARED TO FIRST QUARTER 1998
SALES. Sales increased $2.4 million, or 41.1%, from $5.8 million in the
first quarter of 1998 to $8.2 million in the first quarter of 1999, primarily
because of sales volume increases resulting from improved weather conditions and
an increase in concrete sales prices. Concrete sales price increases resulted
primarily from significant improvements in the pricing of projects in the
Silicon Valley market.
GROSS PROFIT. Gross profit increased $0.7 million, or 127.3%, from $0.6
million in the first quarter of 1998 to $1.3 million in the first quarter of
1999. Gross margins increased from 9.8% in the first quarter of 1998 to 15.8% in
the first quarter of 1999, as a result of sales volume increases and higher
average sales prices and the strong marginal contribution from these increased
volumes and prices due to the fixed-cost nature of Walker's business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.2 million, or 20.2%, from $0.7 million in
the first quarter of 1998 to $0.9 million in the first quarter of 1999,
primarily due to out-of-pocket costs incurred in connection with our acquisition
of Walker's and higher average compensation levels. As a percentage of sales,
selling, general and administrative expenses decreased from 12.1% in the first
quarter of 1998 to 10.3% in the first quarter of 1999.
33
<PAGE>
1998 COMPARED TO 1997
SALES. Sales increased $3.6 million, or 9.5%, from $38.0 million in 1997
to $41.6 million in 1998, primarily as a result of the strong construction
activity in the Silicon Valley region and increased average sales prices.
GROSS PROFIT. Gross profit increased $0.9 million, or 14.5%, from $6.2
million in 1997 to $7.1 million in 1998 due to higher sales volume and higher
average sales prices more than offsetting increases in cement prices and other
costs. Gross margins increased from 16.3% in 1997 to 17.0% in 1998, primarily
due to higher average sales prices.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained relatively constant at $3.0 million. As a
percentage of sales, selling, general and administrative expenses decreased from
7.8% in 1997 to 7.3% in 1998.
1997 COMPARED TO 1996
SALES. Sales increased $7.0 million, or 22.5%, from $31.0 million in 1996
to $38.0 million in 1997, primarily as a result of increased demand as a result
of the strong construction activity in the Silicon Valley region and increased
average sales prices.
GROSS PROFIT. Gross profit increased $1.6 million, or 36.0%, from $4.6
million in 1996 to $6.2 million in 1997. Gross margins increased from 14.7% in
1996 to 16.3% in 1997 because sales price increases more than offset increases
in cement and other costs and because of the strong marginal contribution from
these increased prices due to the fixed-cost nature of Walker's business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.8 million, or 37.0%, from $2.2 million in
1996 to $3.0 million in 1997, due to increased selling and administrative costs
to support the growth of Walker's business. As a percentage of sales, selling,
general and administrative expenses increased from 6.9% in 1996 to 7.8% in 1997.
LIQUIDITY AND CAPITAL RESOURCES -- WALKER'S
Walker's operations generated $1.3 million of net cash for the first
quarter of 1999, a decrease of $0.6 million from 1998, primarily because of a
$0.7 million increase in receivables and $0.2 million of unfavorable changes in
other working capital accounts, partially offset by a $0.3 million increase in
net income. Walker's used net cash in investing activities of $1.1 million in
the first quarter of 1999, all of which it spent on property, plant and
equipment. In the first quarter of 1999, Walker's generated net cash of $0.2
million in its financing activities, which reflected net borrowings. At March
31, 1999, Walker's had working capital of $0.2 million and long-term debt of
$1.8 million.
Walker's operations generated $2.6 million of net cash in 1998, an increase
of $0.8 million from 1997, principally as a result of a $0.5 million increase in
net income and a $0.2 decrease in receivables. 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.
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 March 31, 1999,
it had $2.8 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 10 ready-mixed concrete plants in the San Francisco Bay
area and Sacramento metropolitan area.
34
<PAGE>
The following table sets forth selected statement of operations information
of Bay Cities and that information as a percentage of sales for the periods
indicated (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------------------------------------- --------------------
1996 1997 1998 1998
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Sales................................ $ 30,496 100.0% $ 45,312 100.0% $ 53,600 100.0% $ 10,908 100.0%
Cost of goods sold................... 27,287 89.5% 40,292 88.9% 46,766 87.3% 9,440 86.5%
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit..................... 3,209 10.5% 5,020 11.1% 6,834 12.7% 1,468 13.5%
Selling, general and administrative
expenses........................... 2,090 6.8% 2,778 6.2% 3,962 7.4% 697 6.4%
Depreciation......................... 458 1.5% 458 1.0% 505 0.9% 121 1.1%
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations............... $ 661 2.2% $ 1,784 3.9% $ 2,367 4.4% $ 650 6.0%
========= ========= ========= ========= ========= ========= ========= =========
<CAPTION>
1999
--------------------
<S> <C> <C>
Sales................................ $ 12,548 100.0%
Cost of goods sold................... 10,555 84.1%
--------- ---------
Gross profit..................... 1,993 15.9%
Selling, general and administrative
expenses........................... 553 4.4%
Depreciation......................... 103 0.8%
--------- ---------
Income from operations............... $ 1,337 10.7%
========= =========
</TABLE>
FIRST QUARTER 1999 COMPARED TO FIRST QUARTER 1998
SALES. Sales increased $1.6 million, or 15.0%, from $10.9 million in the
first quarter of 1998 to $12.5 million in the first quarter of 1999, primarily
because of strong construction activity in the Silicon Valley region and higher
average sales prices.
GROSS PROFIT. Gross profit increased $0.5 million, or 35.8%, from $1.5
million in the first quarter of 1998 to $2.0 million in the first quarter of
1999. Gross margins increased from 13.5% in the first quarter of 1998 to 15.9%
in the first quarter of 1999, primarily because of higher average sales prices
and the strong marginal contribution from these increased prices due to the
fixed-cost nature of Bay Cities' business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $0.1 million, or 20.7%, from $0.7 million in
the first quarter of 1998 to $0.6 million in the first quarter of 1999,
primarily because of a decrease in owners' compensation, partially offset by
out-of-pocket costs incurred in connection with our acquisition of Bay Cities.
As a percentage of sales, selling, general and administrative expenses decreased
from 6.4% in the first quarter of 1998 to 4.4% in the first quarter of 1999.
1998 COMPARED TO 1997
SALES. Sales increased $8.3 million, or 18.3%, from $45.3 million in 1997
to $53.6 million in 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%, from $5.0
million in 1997 to $6.8 million in 1998. Gross margins increased from 11.1% in
1997 to 12.7% in 1998, because sales price increases more than offset increases
in cement and other costs and because of the strong marginal contribution from
the sales price increases due to the fixed-cost nature of Bay Cities' business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.2 million, or 42.6%, from $2.8 million in
1997 to $4.0 million in 1998, due to increased selling and administrative costs
associated with Bay Cities' growth. As a percentage of sales, selling, general
and administrative expenses increased from 6.2% in 1997 to 7.4% in 1998.
1997 COMPARED TO 1996
SALES. Sales increased $14.8 million, or 48.6%, from $30.5 million in 1996
to $45.3 million in 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%, from $3.2
million in 1996 to $5.0 million in 1997. Gross margins increased from 10.5% in
1996 to 11.1% in 1997, because sales price increases more than offset increases
in cement and other costs and because of the strong marginal contribution from
the sales price increases due to the fixed-cost nature of Bay Cities' business.
35
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.7 million, or 32.9%, from $2.1 million in
1996 to $2.8 million in 1997, because of increased selling and administrative
costs associated with Bay Cities' growth. As a percentage of sales, selling,
general and administrative expenses decreased from 6.8% in 1996 to 6.2% in 1997.
LIQUIDITY AND CAPITAL RESOURCES -- BAY CITIES
Bay Cities' operations generated $0.5 million of net cash for the first
quarter of 1999, an increase of $1.0 million from 1998, primarily because of a
$0.4 million increase in net income and $1.9 million increase in payables,
partially offset by a $1.1 million increase in receivables and $0.2 million of
unfavorable changes in other working capital accounts. Bay Cities used net cash
in investing activities of $0.3 million in the first quarter of 1999,
substantially all of which it spent on property, plant and equipment. In the
first quarter of 1999, Bay Cities neither generated nor used net cash in its
financing activities. At March 31, 1999, Bay Cities had working capital of $2.3
million and long-term debt of $2.5 million.
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 a $0.4 million
increase in net income and a $5.3 million decrease in receivables. These
increases were offset by a $2.6 million decrease in accounts payable. 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.
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."
RESULTS OF OPERATIONS -- OPPORTUNITY
Opportunity operates a ready-mixed concrete plant in Washington, D.C.
The following table sets forth selected statement of operations information
of Opportunity and that information as a percentage of sales for the periods
indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 THREE MONTHS ENDED MARCH 31
------------------------------------------ ------------------------------------------
1997 1998 1998 1999
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Sales................................ $ 15,550 100.0% $ $16,180 100.0% $ 4,266 100.0% $ 2,164 100.0%
Cost of goods sold................... 10,698 68.8% 11,296 69.8% 3,005 70.4% 1,619 74.8%
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 4,852 31.2% 4,884 30.2% 1,261 29.6% 545 25.2%
Selling, general and administrative
expenses........................... 2,380 15.3% 2,352 14.5% 586 13.7% 575 26.6%
Depreciation......................... 232 1.5% 245 1.5% 61 1.4% 59 2.7%
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations........ $ 2,240 14.4% $ 2,287 14.1% $ 614 14.5% $ (89) (4.1)%
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
FIRST QUARTER 1999 COMPARED TO FIRST QUARTER 1998
SALES. Sales decreased $2.1 million, or 49.3%, from $4.3 million in the
first quarter of 1998 to $2.2 million in the first quarter of 1999, primarily
because of sales volume decreases resulting from adverse weather conditions in
the 1999 period as compared to the corresponding period in the prior year. The
adverse weather conditions in the first quarter of 1999 resulted in several of
Opportunity's projects being delayed until the second and third quarters of
1999. In addition, Opportunity's projects during 1998
36
<PAGE>
included a strong backlog of underground work, which is typically unaffected by
adverse weather conditions.
GROSS PROFIT. Gross profit decreased $0.7 million, or 56.8%, from $1.3
million in the first quarter of 1998 to $0.5 million in the first quarter of
1999. Gross margins decreased from 29.6% in the first quarter of 1998 to 25.2%
in the first quarter of 1999, primarily because of the decrease in sales and
production.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained constant at $0.6 million in the first quarter
of 1999 compared to the first quarter of 1998.
1998 COMPARED TO 1997
SALES. Sales increased $0.6 million, or 4.1%, from $15.6 million in 1997 to
$16.2 million in 1998, primarily due to increased demand for commercial building
construction and an increase in average selling prices.
GROSS PROFIT. Gross profit remained constant at $4.9 million in 1998
compared to 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained constant at $2.4 million in 1998 compared to
1997.
LIQUIDITY AND CAPITAL RESOURCES -- OPPORTUNITY
Opportunity's operations generated $0.2 million of net cash for the first
quarter of 1999. Cash used in financing activities was $0.4 million, including
repayments of debt of $0.1 million and distributions to stockholders of $0.3
million. At March 31, 1999, Opportunity had working capital of $1.2 million and
long-term debt of $0.9 million.
Opportunity's operations generated $2.4 million of net cash in 1998, an
increase of $0.2 million from 1997, primarily because of a $0.2 million increase
in cash paid on receivables. Opportunity used net cash in investing activities
of $0.5 million in 1998, substantially all of which it spent on property, plant
and equipment. In 1998, Opportunity used net cash of $2.1 million in its
financing activities, which reflected distributions to its stockholders of $2.3
million, partially offset by net borrowings of $0.2 million.
Opportunity 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. Opportunity maintains a $500,000 line of credit with a bank. There was no
outstanding balance under that line of credit at March 31, 1999.
RESULTS OF OPERATIONS -- BAER
Baer operates five ready-mixed concrete plants in northern New Jersey.
The following table sets forth selected statement of operations information
of Baer and that information as a percentage of sales for the periods indicated
(dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
------------------------------------------
1998 1999
-------------------- --------------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Sales................................ $ 2,084 100.0% $ 2,024 100.0%
Cost of goods sold................... 1,901 91.2% 1,870 92.4%
--------- --------- --------- ---------
Gross profit......................... 183 8.8% 154 7.6%
Selling, general and administrative
expenses........................... 286 13.7% 260 12.8%
Depreciation......................... 104 5.0% 137 6.8%
--------- --------- --------- ---------
Loss from operations................. $ (207) (9.9)% $ (243) (12.0)%
========= ========= ========= =========
</TABLE>
37
<PAGE>
FIRST QUARTER 1999 COMPARED TO FIRST QUARTER 1998
SALES. Sales decreased $0.1 million, or 2.9%, from $2.1 million in the
first quarter of 1998 to $2.0 million in the first quarter of 1999, primarily
due to slightly lower sales volumes resulting from unfavorable weather
conditions in 1999.
GROSS PROFIT. Gross profit remained constant at $0.2 million in the first
quarter of 1999 compared to the first quarter of 1998. Gross margins decreased
from 8.8% in the first quarter of 1998 to 7.6% in the first quarter of 1999,
primarily because of lower labor utilization in the first quarter of 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained constant at $0.3 million in 1999 compared to
1998.
LIQUIDITY AND CAPITAL RESOURCES -- BAER
Baer's operations generated $0.1 million of net cash for the first quarter
of 1999. Cash used in investing activities was $0.1 million in 1999, primarily
for the purchases of plant, property and equipment. Cash used in financing
activities was $1.2 million, including repayments of debt and other long-term
obligations of $1.1 million and advances to related parties of $0.1 million. At
March 31, 1999, Baer had a working capital deficit of $0.1 million and long-term
debt and other long-term obligations of $1.5 million.
Baer 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. Baer
maintains a $350,000 line of credit with a bank with no outstanding balance at
March 31, 1999.
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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. We initially will serve all segments of the construction industry in the
San Francisco Bay area, the Sacramento metropolitan area, Washington, D.C. and
northern New Jersey. Our initial 26 concrete plants produced over 2.5 million
cubic yards of concrete in 1998. Our operations will consist principally of
formulating, preparing, delivering and placing ready-mixed concrete at the job
sites of our customers. We will provide services to reduce our customers'
overall construction costs by lowering the installed, or "in-place," cost of
concrete. These services will 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.
On a pro forma combined basis, our sales of $194.1 million in 1998
represented a 17.4% increase from our 1997 sales of $165.4 million, and our 1997
sales represented a 28.9% increase from our fiscal 1996 sales of $128.3 million.
In 1998, we estimate the following segments of the construction industry
accounted for the following approximate percentages of our pro forma combined
sales:
<TABLE>
<S> <C>
Commercial and industrial
construction......................... 44%
Residential construction............. 33%
Street and highway construction and
paving............................... 18%
Other public works and infrastructure
construction......................... 5%
---
Total........................... 100%
===
</TABLE>
We believe our initial size will place us among the leading independent
ready-mixed concrete companies in the United States on the basis of annual
sales.
Given the large size and fragmentation of the ready-mixed concrete
industry, we believe numerous potential acquisition candidates exist both in the
markets we initially will serve and other large metropolitan, 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 users of large volumes 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, 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, an increase of 9.7%, and to $21.3 billion in 1998, an
increase of 10.4%, and are expected to grow to $22.1 billion in 1999. Also
according to this industry association, the following segments of the
construction industry accounted for the following approximate percentages of
total sales of ready-mixed concrete in the United States in 1998:
<TABLE>
<S> <C>
Commercial and industrial
construction......................... 18%
Residential construction............. 22%
Street and highway construction and
paving............................... 32%
Other public works and infrastructure
construction......................... 28%
---
Total........................... 100%
===
</TABLE>
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, with water, various admixtures and cement. 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
39
<PAGE>
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 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.
On the basis of information the National Ready-Mixed Concrete Association
has provided us, we estimate that, in addition to vertically integrated
manufacturers of cement and ready-mixed concrete, more than 3,500 independent
producers currently operate a total of approximately 5,300 plants in the United
States. 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 in our highly fragmented industry
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
On the basis of available industry information, we believe that between
1996 and 1998 ready-mixed concrete sales as a percentage of total construction
expenditures in the United States 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:
o the increased level of industry-wide promotional and marketing
activities;
o the development of new and innovative uses for ready-mixed
concrete; and
o the enactment of the federal legislation commonly called TEA-21.
INDUSTRY-WIDE PROMOTIONAL AND MARKETING ACTIVITIES. We believe 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 our chief executive officer, Eugene
P. Martineau, and has been adopted by the National Ready-Mixed Concrete
Association, 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:
40
<PAGE>
o concrete housing;
o precast modular paving stones;
o prestressed concrete railroad ties to replace wood ties;
o continuous-slab rail-support systems for rapid transit and
heavy-traffic intercity rail lines; and
o 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:
o highway median barriers;
o highway sound barriers;
o paved shoulders to replace less permanent and increasingly
costly asphalt shoulders;
o parking lots providing a long-lasting and aesthetically
pleasing urban environment; and
o colored pavements to mark entrance and exit ramps and lanes
of expressways.
IMPACT OF TEA-21. The Federal Transportation Equity Act for the 21st
Century, commonly called TEA-21, is the largest public works funding bill in the
history of the United States. It became effective in June 1998 and provides a
$218 billion budget for federal highway, transit and 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 accounted
for only 18% of the sales of our initial businesses in 1998, we believe we
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 our operations and
become the leading value-added provider of ready-mixed concrete and related
services in each of our 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 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.
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 in our existing markets and (2)
entering new geographic markets in the United States.
o EXPANDING IN EXISTING MARKETS. We will seek to acquire other
well-established companies operating in our existing markets in order
to expand our market penetration. 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.
41
<PAGE>
We believe our three initial businesses in the San Francisco Bay area
provide a clear example of many of the market inefficiencies that
confront local, competing ready-mixed concrete manufacturers. On the
basis of industry information, we estimate that these businesses
realized a combined 30% share of their market. Among these businesses,
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 acquisition of the businesses in the San Francisco Bay area also
illustrates our acquisition strategy to expand operations in 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 in 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. We 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 we enter, 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 include historically successful operating
results, established customer relationships and superior operational
management personnel, whom we generally will seek to retain.
During the past several months, we have contacted the owners of a
number of ready-mixed concrete companies, several of whom have
expressed interest in selling their businesses to us. We are reviewing
those opportunities. We do not have any binding commitments or letters
of intent relating to any proposed acquisition, other than the binding
acquisition agreements relating to the six businesses we initially
will acquire. We cannot accurately predict the timing, size or success
of our acquisition efforts or our associated potential capital
commitments. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources -- Combined."
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 installed, or 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:
o providing corporate-level marketing and sales expertise;
o establishing company-wide quality control improvements;
o developing and implementing training programs that emphasize
successful marketing, sales and training techniques and the sale
of high-margin concrete mix designs; and
o investing in computer and communications technology at each of
our 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 other functions each
business performed separately prior to its acquisition. In addition,
we believe that, as we increase in size, we should experience reduced
costs as a percentage of net sales compared to those of the individual
businesses we acquire in such areas as:
o materials procurement;
o purchases of mixer trucks and other equipment, spare parts and
tools;
42
<PAGE>
o vehicle and equipment maintenance;
o financing terms;
o employee benefit plans; and
o insurance and other risk management programs.
PRODUCTS AND SERVICES
READY-MIXED CONCRETE. Our ready-mixed concrete products will consist of
proportioned mixes we prepare and deliver 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
we can achieve product differentiation for the mixes we will offer because of
the variety of mixes we are able to produce, our volume production capacity and
our scheduling, delivery and placement reliability. We also believe we can
distinguish ourselves with our value-added service approach that emphasizes
reducing our customers' overall construction costs by lowering the installed, or
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. 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. By carefully
designing proper mixes and using recent advances in mixing technology, we can
assist our customers in reducing the amount of reinforcing steel and labor
required in various applications.
We will provide a variety of services in connection with our sale of
ready-mixed concrete which can help reduce our customers' in-place cost of
concrete. These services will include:
o production of new formulations and alternative product
recommendations that reduce labor and materials costs;
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.
We will produce ready-mixed concrete by combining the desired type of
cement, sand, gravel and crushed stone with water and typically one or more
admixtures. These admixtures, such as chemicals, minerals and fibers, determine
the usefulness of the product for particular applications.
We will use 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.
We frequently will use 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.
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<PAGE>
We also will use fibers, such as steel, glass and synthetic and carbon
filaments, as an additive in various formulations of concrete. Fibers help to
control shrinkage cracking, thus reducing permeability and improving 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. We will produce precast concrete products at our Santa
Rosa, California plant. These products include specialty engineered structures,
custom signage and curb inlets. In some locations, we will also sell
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.
Our pro forma combined sales from the sale of precast concrete products and
other concrete-related building materials and supplies in 1998 totaled
approximately $13.4 million, or approximately 7.0% of our total pro forma
combined sales for 1998.
OPERATIONS
The businesses we initially will acquire have made substantial capital
investments in equipment, systems and personnel at their respective plants to
facilitate continuous multi-customer deliveries of highly perishable products.
In any given market, we may maintain a number of plants whose production we
centrally coordinate to meet customer production requirements. We must be able
to constantly adapt to continually changing delivery schedules.
Our ready-mixed concrete plants will consist of permanent installations and
portable facilities. Several factors govern the choice of plant type, including:
o capital availability;
o production consistency requirements; and
o 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 plant. We believe that a wet batch plant having an hourly capacity of 250
cubic yards currently would cost approximately $1.5 million to build, while a
dry batch plant having the same capacity currently would cost approximately $0.7
million to build. Initially, we will operate 12 wet batch plants and 14 dry
batch plants.
The market primarily will drive our future plant construction decisions.
The relevant market factors include:
o the expected production demand for the plant;
o the expected types of projects the plant will service; and
o the desired location of the plant.
Generally, plants intended primarily to serve high-volume, commercial or public
work's projects will be wet batch plants, while plants intended primarily to
serve low-volume, residential construction projects generally will be dry batch
plants. From time to time, we may also use portable plants, which include both
wet batch and dry batch facilities, to service large, long-term jobs and jobs in
remote locations.
We will produce 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.
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, or approximately 18 tons, and a useful life of 12 years. After
eight years, some components of the mixer trucks require refurbishment. A new
truck of this
44
<PAGE>
size currently costs approximately $125,000. Initially, we will operate a fleet
of approximately 380 mixer trucks.
In our manufacture and delivery of ready-mixed concrete, we will emphasize
quality control, pre-job planning, customer service and coordination of supplies
and delivery. The businesses we initially will acquire often obtain 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, these businesses utilize 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. These businesses perform testing to determine which mix design
is most appropriate to meet the required specifications. The test results enable
them 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.
We will use 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 our testing process. If the job is large enough, we
will obtain quotes from our suppliers as to the cost of raw materials we will
use in preparing the bid. Once we obtain a quotation from our suppliers, the
price of the raw materials for the specified job is informally established.
Several months may elapse from the time a contractor has accepted our bid until
actual delivery of the ready-mixed concrete begins. During this time, we will
maintain 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 we will need to fill the
job order and meet the contractor's delivery requirements. We must confirm that
our 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 operate 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 mixer truck with either dry ingredients
and water in a dry batch plant or the already-mixed concrete in a
wet batch plant; 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 mixer truck as to
whether a particular truck is:
o loading concrete;
o in route to a particular job site;
o on the job site;
o placing concrete;
o being washed; or
o 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 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. Our employees also
will include:
o maintenance personnel who perform routine maintenance work
throughout our plants;
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<PAGE>
o a full-time staff of mechanics who perform substantially all the
maintenance and repair work on our vehicles;
o testing center staff who prepare mixtures for particular job
specifications and maintain quality control;
o various clerical personnel who are responsible for the day-to-day
operations; and
o sales personnel who are responsible for identifying potential
customers and maintaining existing customer relationships.
We will generally operate on a single shift with some overtime operation during
the construction season. On occasion, however, we may have projects that require
deliveries "around the clock."
CEMENT AND RAW MATERIALS
We will obtain most of the materials necessary to manufacture ready-mixed
concrete at each of our facilities on a daily basis. These raw materials include
cement, which is 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 manufacturing a cubic yard of ready-mixed concrete, while the
combined cost of the stone, gravel and sand used is slightly less than the
cement. In each of our markets, we will purchase 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 May 1, 1999, the businesses we initially will acquire collectively
employed approximately 25 full-time sales persons. We intend to increase the
size of that 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 us
from our competitors.
CUSTOMERS
In 1998, the businesses we initially will acquire sold concrete to more
than 2,500 different customers, and no single customer or project accounted for
more than 4% of their combined sales.
These businesses rely heavily on repeat customers. We estimate that repeat
customer sales in 1998 accounted for approximately 85% of their combined sales.
Management and dedicated sales personnel at each of these businesses have been
responsible for developing and maintaining successful long-term relationships
with key customers. We believe that by operating in more geographic markets, we
will be in a better position to market to and service large nationwide and
regional contractors.
TRAINING AND SAFETY
Our future success will depend, in part, on the extent to which we are able
to attract, retain and motivate qualified employees. We believe that our ability
to do so will depend on the quality of our recruiting, training, compensation
and benefits, the opportunities we afford for advancement and our safety record.
Historically, the businesses we will initially acquire 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
46
<PAGE>
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. 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 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 May 1, 1999, the businesses we initially will acquire had approximately
90 salaried employees, including executive officers, management personnel, sales
personnel, technical personnel, administrative staff and clerical personnel, and
approximately 515 hourly personnel generally employed on an as-needed basis,
including 400 truck drivers. The number of employees fluctuates depending on the
number and size of projects ongoing at any particular time, which may be
impacted by variations in weather conditions throughout the year.
At May 1, 1999, approximately 450 of those employees were represented by
labor unions having collective bargaining agreements with five of the businesses
we initially will acquire. Generally, these agreements have multiyear terms and
expire on a staggered basis. Under these agreements, the businesses pay
specified wages to their covered employees, observe designated workplace rules
and make payments to multi-employer pension plans and employee benefit trusts
rather than administering the funds on behalf of their employees.
Bay Cities' collective bargaining agreement with Operating Engineers Local
Union No. 3 for the Sacramento Area expires June 30, 1999 and its collective
bargaining agreement with Chauffeurs, Teamsters and Helpers Local Union No. 150
expires July 1, 1999. These contracts cover approximately 60 employees. We are
negotiating new contracts with these unions and expect the new contracts will be
in place before the existing contracts expire.
None of the businesses we initially will acquire has experienced any
strikes or significant work stoppages in the past 10 years. The managements of
these businesses believe their relationships with their employees and union
representatives are satisfactory.
FACILITIES AND EQUIPMENT
We initially will operate a fleet of approximately 380 owned and leased
mixer trucks and 195 other vehicles. Our own mechanics will service most of the
fleet. We believe these vehicles are generally well-maintained and adequate for
our initial operations. The average age of the mixer trucks is approximately six
years.
When this offering closes, our corporate headquarters will be located in
Houston, Texas. The businesses we initially will acquire collectively maintain
office, maintenance and/or sales operations at a total of six sites located in:
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o the San Francisco Bay area;
o the Sacramento metropolitan area;
o Washington, D.C.; and
o northern New Jersey.
These businesses also operate batch plants at 21 sites scattered throughout
their prime operating regions.
The chart below summarizes the operating facilities we initially will
acquire. We believe that these facilities are sufficient for our immediate
needs. See "Certain Transactions."
<TABLE>
<CAPTION>
OWNED/
LOCATION TYPE OF FACILITY LEASED 1998 VOLUME
- ------------------------------------- ---------------------------- ----------- ------------
<S> <C> <C> <C> <C>
(CUBIC
YARDS)
Byron, 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 Leased 136,235
Bernardsville, NJ.................... Dry Batch Plant Leased 55,892
Lake Hopatcong, 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>
The leases referred to in the table above have terms that expire at various
times ranging from 2000 to 2020.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
A wide range of federal, state and local laws will apply to our operations,
including such matters as:
o land usage;
o street and highway usage;
o noise levels; and
o health, safety and environmental matters.
In many instances, we will be required to have certificates, permits or
licenses in order to conduct our business. 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. These
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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 us to liability for the conduct of
or conditions caused by others, or for acts which complied with all applicable
laws when performed. We are conducting Phase I investigations to assess
environmental conditions on substantially all the real properties we initially
will own or lease and we have 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 our business, financial
condition or results of operations, but you have no assurance material
liabilities will not occur. You also have no assurance our compliance with
amended, new or more stringent laws, stricter interpretations of existing laws
or the future discovery of environmental conditions will not require additional,
material expenditures. OSHA regulations establish requirements our training
programs must meet.
The businesses we initially will acquire have all material permits and
licenses required to conduct their operations and are in substantial compliance
with applicable regulatory requirements relating to their operations. Their
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 our business or financial position as a result of our future
compliance with existing environmental laws controlling the discharge of
materials into the environment.
LEGAL PROCEEDINGS AND INSURANCE
The businesses we initially will acquire 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, they do not have pending any litigation that, separately
or in the aggregate, if adversely determined, we believe would have a material
adverse effect on our business, financial condition or results of operations. We
expect that in the future we will from time to time be a party to litigation or
administrative proceedings which arise in the normal course of our business.
Our operations will 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 we fail or are unable to provide product
in accordance with these requirements and specifications, claims may arise
against us or our reputation could be damaged. Although the businesses we
initially will acquire have not experienced any material claims of this nature
in recent periods, we may experience such claims in the future. In addition, our
employees will 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. We will maintain 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 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.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning our directors,
executive officers and key management employees and the persons who will become
our directors following the closing of this offering:
<TABLE>
<CAPTION>
AGE
AS OF
MAY 1,
NAME 1999 POSITION DIRECTOR CLASS
- -------------------------------------- --------- -------------------------------------- --------------
<S> <C> <C> <C>
Eugene P. Martineau................... 59 Director, Chief Executive Officer and I
President
Michael W. Harlan..................... 38 Director, Senior Vice President, Chief I
Financial Officer and Secretary
Terry Green........................... 51 Vice President--Operational
Integration
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 and Chairman of the II
Board(1)(2)
William T. Albanese................... 55 Director(3) and President of Central III
Michael D. Mitschele.................. 42 Director(3) and President of Baer II
Murray S. Simpson..................... 61 Director(3) III
Neil J. Vannucci...................... 62 Director(3) and President of Bay III
Cities
Robert S. Walker...................... 55 Director(3) and President of Walker's 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 our Chief Executive Officer and President
since September 1998 and as one of our directors 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 the National Ready-Mixed
Concrete Association. He also served as chairman of the 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 our Senior Vice President, Chief Financial
Officer and Secretary since September 1998 and as one of our directors 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
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of Arthur Andersen LLP, where he had been a manager since July 1986. Mr. Harlan
is a certified public accountant.
TERRY GREEN will assume the position of Vice President -- Operational
Integration when this offering closes. Mr. Green has managed the operations of
ready-mixed concrete producers and other transportation related businesses for
over 20 years. Since August 1998, he was Vice President of Maintenance for
Armellini Express Lines, Inc. From January 1989 until June 1998, Mr. Green
served as Director of Maintenance, Equipment and Purchasing for the concrete
products division of Southdown, Inc., a publicly traded, integrated cement and
ready-mixed concrete products division of Southdown, Inc., a publicly traded,
integrated cement and ready-mixed concrete company. Prior thereto, Mr. Green
held various positions with Kraft, Inc. from 1980 until 1989 serving as Private
Fleet Operations Manager from 1988 until 1989.
CHARLES W. SOMMER has served as our Corporate Controller 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 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 one of our directors since August 1998. Mr.
Foster is a Managing Director of Main Street Merchant Partners II, L.P., 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 the NRMCA for
over 20 years and has held several leadership positions with the 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, L.L.C., 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, which is 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
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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, 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 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 term of the Class I directors will expire at the 2000
meeting, the initial term of the Class II directors will expire at the 2001
meeting and the initial term of the Class III directors will expire at the 2002
meeting.
DIRECTOR COMPENSATION
We will initially pay each director who is not one of our employees fees of
$1,000 for each board meeting and $500 for each board committee meeting the
director attends, unless the committee meeting is held on the same day as a
board meeting. We will also periodically grant these nonemployee directors
options to purchase shares of common stock pursuant to our 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 AND OTHER 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 key management employees and their annualized base salaries will
be: Eugene P. Martineau -- $150,000; Michael W. Harlan -- $150,000; Terry Green
- -- $115,000; and Charles Sommer -- $110,000. Effective when this offering
closes, we will grant these executive officers incentive-plan options to
purchase the following numbers of shares of common stock: Mr. Martineau --
225,000; Mr. Harlan -- 175,000; Mr. Green -- 75,000; and Mr. Sommer -- 65,000.
The initial exercise price of these options will be the initial per share price
to the public the front cover page of this prospectus sets forth. See "-- 1999
Incentive Plan."
When this offering closes, we will begin paying the following annual
minimum base salaries to the following director-employees: Mr. Albanese --
$200,000; Mr. Mitschele -- $125,000; Mr. Vannucci -- $200,000; and Mr. Walker --
$200,000.
EMPLOYMENT AGREEMENTS
We will enter into employment agreements with Messrs. Martineau, Harlan,
Green and Sommer which will become effective when this offering closes. Each of
these agreements will:
o provide for an annual minimum base salary;
o entitle the employee to participate in all our compensation plans
in which our executive officers participate; and
o have an initial term of three years.
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 or the employee terminates that employment for
good reason, we generally must pay to the employee monthly for the longer of (1)
the balance of the initial term or (2) 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 during the two years preceding the date the notice of
termination is given. In the case of the
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<PAGE>
agreement with each of Messrs. Martineau and Harlan, "good reason" includes our
failure to nominate the employee for reelection to our board of directors at the
2000 annual meeting of our stockholders. Each of these agreements also will
provide for benefits if the employee dies or becomes disabled. If the employment
of the employee terminates for any reason other than for cause by us or for good
reason by the employee, that termination will not affect the term or
exercisability of any incentive plan options that employee holds. Copies of
these agreements are exhibits to the registration statement of which this
prospectus is a part.
We will enter into similar employment agreements with senior managers of
each of the businesses we initially will acquire, including Messrs. Albanese,
Mitschele, Vannucci and Walker.
1999 INCENTIVE PLAN
The following summarizes the principal provisions of the incentive plan, a
copy of which is an exhibit to the registration statement of which this
prospectus is a part.
GENERAL. The incentive plan, which our board and then-current stockholders
approved in March 1999, 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
our development and financial success by making performance-based awards tied to
our growth and performance.
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 shares of common stock outstanding on the last day of the immediately
preceding calendar quarter. Awarded shares that we do not issue again will
become available for awards.
The following persons are eligible for awards:
o employees holding positions of responsibility with us and whose
performance can have a significant effect on our success and
individuals who have agreed to become our employees within six
months of the date of grant;
o nonemployee directors; and
o nonemployee consultants and other independent contractors who
provide services to us.
The incentive plan generally treats awards to employees and awards to
independent contractors alike, and the following discussion of employee awards
applies, except as noted, equally to awards to independent contractors. For
purposes of Section 16(b) of the Securities Exchange Act of 1934, which could
impose so-called short-swing trading liabilities on our directors and executive
officers in connection with their purchases and sales of common stock within any
six-month period, the incentive plan will qualify for the exemptions from that
section which Exchange Act Rule 16b-3 provides.
The compensation committee of the board of directors will administer the
incentive plan, except as it applies to nonemployee directors. This committee
will consist of at least two nonemployee directors. It has the exclusive power
to:
o administer the incentive plan and take all actions the plan
specifically contemplates or are necessary or appropriate in the
administration of the plan;
o interpret the plan;
o adopt such rules, regulations and guidelines as it deems
necessary, proper or in keeping with the objectives of the plan.
This committee may, in its discretion:
o extend or accelerate the exercisability of, accelerate the
vesting of or eliminate or make less restrictive any restrictions
contained in any employee award;
o waive any restriction or other provision of the incentive plan or
in any employee award;
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<PAGE>
o amend or modify any employee award in any manner that is (1) not
adverse to the holder of that award or (2) consented to by that
holder; or
o delegate some of its duties under the plan to our senior
executive officers.
EMPLOYEE AWARDS. Employee awards may be in the form of:
o options to purchase a specified number of shares of common stock
at a specified price which may be denominated in either or both
of common stock or units denominated in common stock;
o stock appreciation rights, or SARs, 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;
o restricted or unrestricted stock awards consisting of common
stock or units denominated in common stock;
o cash awards; and
o performance awards denominated in cash, common stock, units
denominated in common stock or any other property which are
subject to the attainment of one or more performance goals.
Subject to parameters the incentive plan sets forth, the compensation
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, achievement of specific business
objectives or goals, increases in specified indices or other comparable measures
of performance.
The incentive plan parameters respecting employee awards include the
following:
o an option may be either an incentive stock option that meets, or a
nonqualified stock option that does not meet, the requirements of
Section 422 of the Internal Revenue Code and, unless the
compensation 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 compensation committee must establish the performance goal or
goals for each employee performance award while it is substantially
uncertain whether the goal or goals will be met and 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
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 $1.0
million.
Except for the parameter respecting the initial exercise price of options, these
parameters do not apply to independent-contractor awards.
The exercise price of an option may be paid with cash, or, according to
methods determined by the committee, with common stock or with any other
employee award the exerciser has owned for at least six months.
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. When this offering closes, we will automatically grant each
nonemployee director who is not an owner of a business we initially will acquire
nonqualified stock options to purchase 10,000 shares of common stock. In
addition, on the first business day of the month following the date on which we
hold each annual meeting of our stockholders, we will
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<PAGE>
automatically grant each nonemployee director nonqualified stock options to
purchase 5,000 shares of common stock. The board of directors may increase
subsequent annual director awards to not more than 15,000 shares. The incentive
plan also provides for the grant of prorated option awards to persons who become
nonemployee directors otherwise than at an annual meeting of stockholders.
Each nonqualified stock option granted to a nonemployee director will:
o have a five-year term;
o have a cash exercise price per share equal to the fair market
value of a share of common stock on the date of its grant; and
o become exercisable on the date that is 180 days after the date of
grant.
The initial price to the public in this offering will be the exercise price of
the nonemployee-director options we will grant when this offering closes.
Each year, any nonemployee director may elect to receive a restricted award
of common stock in lieu of the director's fees he or she otherwise would receive
during the next year.
OTHER PROVISIONS. If the compensation committee approves, payments in
respect of employee awards may be deferred by any employee. At the discretion of
the the compensation 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
compensation committee may permit withholding to be satisfied by the transfer to
us of shares of common stock previously owned by the holder of the employee
award for which withholding is required and/or cause us to make a short-term or
demand loan to an employee or independent contractor to permit the payment of
taxes required by law.
The board of directors 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 of directors will make appropriate adjustments to the
following:
o the number of shares of common stock reserved under the incentive
plan;
o the number of shares of common stock covered by outstanding
awards in the form of common stock or units denominated in common
stock;
o the exercise or other price in respect of such awards;
o the appropriate fair market value and other price determinations
for awards in order to reflect such transactions;
o the number of shares of common stock covered by options
automatically granted to nonemployee directors;
o the number of shares of common stock covered by restricted stock
awards automatically granted to nonemployee directors; and
o the stock-based awards limitations.
If we recapitalize or effect a capital reorganization, consolidate or merge
with another entity, adopt any plan of exchange affecting the common stock or
make any distribution to holders of common stock of securities or property,
other than normal cash dividends, if any, the board of directors will make such
adjustments or other provisions as it may deem equitable to give effect to such
transaction, including adjustments to the amounts or other items referred to in
the immediately preceding paragraph other than with respect to the number of
shares of common stock reserved under the incentive plan. In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the board of directors will be authorized in its
sole discretion, to:
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<PAGE>
o 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;
o make provisions, 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
o provide for the acceleration of the vesting and exercisability of
options and their cancellation in exchange for such payment as
the board of directors 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 us from
the grant and exercise of incentive plan awards. It does not address the effect
of any other tax law.
The grant of an option or SAR is not a taxable event. The exercise of a
nonqualifed stock option or an SAR will result in taxable ordinary compensation
income. The exercise of an incentive stock option will not result in taxable
ordinary compensation income, but may subject the exerciser to the alternative
minmum tax. The disposition of stock issued on the exercise of an incentive
stock option will be a taxable event. How long that stock has been held will
determine whether that event will result in capital gain or ordinary
compensation income. If the holder of an option uses common stock he already
owns to pay any part of the execise price of that option, he will not recognize
capital gain as a result of that use.
Cash awarded under the incentive plan will constitute taxable ordinary
compensation income when delivered or made available to the awardee. Common
stock delivered as a stock or performance award also will constitute taxable
ordinary compensation income when delivered. If the stock is both
nontransferable and subject to a substantial risk of forfeiture at the time of
delivery, the awardee may elect to defer recognizing that income until such time
as the stock becomes transferable and is no longer subject to that risk.
When an employee recognizes compensation income as a result of an award, he
will be subject to withholding for federal income tax at that time.
We generally will be entitled to a deduction for federal income tax
purposes which corresponds as to amount and timing to the compensation income
realized by others as a result of incentive-plan awards. The Internal Revenue
Code, however, will limit our deductions to amounts constituting both reasonable
compensation for services rendered or to be rendered and ordinary, necessary
business expenses and will disallow deductions of amounts constituting excess
parachute payments made or deemed made in connection with a change in control of
an employer. In addition, Section 162(m) of the Internal Revenue Code may
preclude us from claiming a federal income tax deduction for total remuneration
we may pay in excess of $1.0 million to our chief executive officer or to any of
our other four most highly compensated officers in any one year. Total
renumeration would include income these officers recognize as a result of awards
under the incentive plan. In the case of performance-based compensation,
exceptions to Section 162(m) currently apply if designated requirements are met.
We intend generally to satisfy these requirements in connection with the grant
and payment of performance-based awards, including options and SARS, and have
included this description of the incentive plan to satisfy one of those
requirements. We may not be able to satisfy these requirements in all cases and
may, in our sole discretion, determine in one or more cases that it is in our
best interests not to satisfy these requirements even if we are 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
ORGANIZATIONAL TRANSACTIONS
We issued and sold 200 shares of common stock in October 1997 to Main
Street Merchant Partners II, L.P. ("Main Street") for $10 per share. Mr.
Foster, the chairman of our board, is a managing director of Main Street. In
December 1998, we issued and sold 20 shares of common stock to Mr. Martineau,
our chief executive officer and one of our directors, for $10 per share. At that
time, we also issued and sold 15 shares of common stock to Mr. Harlan, our chief
financial officer and one of our directors, together with his family trust, 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, Main Street
now owns one share of Class A common stock, Mr. Martineau owns 200,000 shares of
common stock and Mr. Harlan, together with his family trust, owns 150,000 shares
of 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., a company formed by Auburn Capital,
L.L.C. and National Acquisition Services, L.L.C., for nominal consideration. Mr.
Martineau and Murray S. Simpson, who will become one of our directors when this
offering closes, each own an equity interest in American Ready-Mix. Also in
March 1999, we issued 50,000 shares to Charles Sommer, our corporate controller,
and 25,000 shares to each of John R. Colson and Peter T. Dameris, who will
become members of our board, in each case for nominal consideration. As a result
of these issuances, Messrs. Martineau, Harlan and Sommer, Colson and Dameris,
Main Street and American Ready-Mix collectively will own 18.9% of the total
shares outstanding immediately after this offering closes.
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 April 30, 1999, these advances totaled $1.6 million. Our $3.0
million of estimated expenses of this offering include these advances, and we
will repay them, plus interest accrued at the rate of 6% per year, from our
gross proceeds from this offering.
When this offering closes, we then will pay a total of $23.3 million in
cash and issue 8,985,288 shares of common stock to acquire six businesses. We
also then will assume all the indebtedness of the six businesses. That
indebtedness totaled approximately $14.7 million as of March 31, 1999 on a
combined historical basis.
The table below sets forth the consideration we will pay to purchase each
of the six businesses, excluding increases or decreases in cash amounts which
may result from post-closing working-capital adjustments. In the case of each of
Central, Walker's, Bay Cities and Opportunity, we have agreed that if that
business 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 owners of that business 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 -- $1.8
million; Bay Cities -- $2.1 million; and Opportunity -- $0.4 million. The cash
column also excludes approximately $0.6 million the owner of Baer will use
immediately after this offering closes to purchase from Baer for cash at no more
than their respective fair market values life insurance policies, notes owed by
his family members and other assets.
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
----------- ------------
<S> <C> <C>
(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
</TABLE>
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
57
<PAGE>
their retained earnings on which those owners have paid or will pay income
taxes, including 1999 earnings. At March 31, 1999, those balances were as
follows: Central -- $8.0 million; Opportunity -- $2.0 million; and Santa
Rosa -- $0.7 million.
We negotiated the purchase price we will pay for each of the six businesses
through arm's-length negotiations between us and one or more owners or
representatives of that business. We used the same general valuation methodology
to determine the purchase price we were willing to pay for each business. Our
valuation methodology included a combination of discounted cash flow analyses,
comparisons to other recent acquisition transactions in our industry and
comparisons of the resulting valuation multiples to other acquisitions. We did
not rely on any independent appraisal to determine our valuations.
The closing of each acquisition is subject to customary conditions,
including, among others:
o the continuing accuracy of the representations and warranties
made by the applicable business, its stockholders and us;
o the performance of each of their respective covenants their
acquisition agreement contains; and
o 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 business prior to the
closing date.
When this offering closes, some of the businesses we will acquire will have
indebtedness outstanding which their owners have personally guaranteed. We
intend to use borrowings under our credit facility to repay substantially all
that indebtedness.
In the acquisition agreements, all principal owners of each of the
businesses have agreed not to compete with us for a period of five years
commencing on the date this offering closes. We will grant registration rights
to the former owners of the businesses. See "Shares Eligible for Future Sale."
ACQUISITIONS INVOLVING 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 their
businesses, excluding increases or decreases in cash amounts which may result
from post-closing adjustments:
<TABLE>
<CAPTION>
SHARES OF
NAME CASH COMMON STOCK
- ------------------------------------- --------- ------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
William T. Albanese(1)............... $ 1,637 1,313,575
Thomas J. Albanese(1)................ 1,637 1,313,575
Michael D. Mitschele(2).............. 1,200 423,529
Gloria Satterfield................... 4,126 897,667
Murray S. Simpson(3)................. 327 233,760
Neil J. Vannucci..................... 4,126 897,667
Robert S. Walker(4).................. 6,331 2,234,339
--------- ------------
Total........................... $ 19,384 7,314,112
========= ============
</TABLE>
- ------------
(1) Includes amounts received as co-trustee of a trust.
(2) 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.
(3) Includes amounts received by Mr. Simpson or his wife as trustees of trusts
and amounts deemed received by Mr. Simpson or his family through American
Ready-Mix.
(4) Includes amounts deemed beneficially received as co-trustee of a trust and
as general partner of a limited partnership.
For a discussion of how we determined the amount of consideration we will
pay for each of the six businesses we initially will acquire, see
"-- Organizational Transactions."
58
<PAGE>
REAL ESTATE AND OTHER TRANSACTIONS
When this offering closes, we will enter into new facilities leases or, in
some cases, extend existing leases, with stockholders or affiliates of
stockholders 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 of stockholders, of the indicated businesses during
the initial lease terms:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
FACILITIES ANNUAL RENTALS
--------- --------------
<S> <C> <C>
Central......................... 2 $272,400
Baer............................ 2 228,000
</TABLE>
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 had a book 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 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 substantially equivalent terms we could obtain from an
unaffiliated third party.
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 for their respective fair
market values. 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.
59
<PAGE>
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 5% 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 our directors and executive officers as a
group.
<TABLE>
<CAPTION>
SHARES TO BE
BENEFICIALLY OWNED
----------------------
BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------- ----------- -------
<S> <C> <C>
Robert S. Walker(1).................. 2,234,339 14.3%
Main Street Merchant Partners II,
L.P.(2)............................ 1,602,255 10.2%
Vincent D. Foster(3)................. 1,602,255 10.2%
Thomas J. Albanese(4)................ 1,313,575 8.4%
William T. Albanese(5)............... 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(6)................. 301,845 1.9%
Eugene P. Martineau(7)............... 300,000 1.9%
Michael W. Harlan(8)................. 150,000 *
Charles W. Sommer.................... 50,000 *
John R. Colson(9).................... 25,000 *
Peter T. Dameris(9).................. 25,000 *
Directors and executive officers as a
group (11 persons)................. 7,323,210 46.8%
</TABLE>
- ------------
* 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) Main Street Merchant Partners II, L.P., is a Delaware limited partnership
whose only general partner is Main Street Management Partners, L.P., a
Delaware limited partnership whose only general partner is Main Street
Merchant Advisors, L.L.C., a Delaware limited liability company whose only
members are Sam W. Humphries and Vincent D. Foster, one of our directors.
(3) Includes 1,602,255 shares issued to Main Street Merchant Partners, II,
L.P., of which Mr. Foster is a managing director.
(4) Includes amounts deemed beneficially received by Mr. Albanese as co-trustee
of the Thomas J. Albanese Trust.
(5) Includes amounts deemed beneficially received by Mr. Albanese as co-trustee
of the William T. Albanese 1981 Trust.
(6) Includes (1) 116,880 shares deemed beneficially owned by Mr. Simpson's wife
as trustee of the MSS 1998 GRAT, (2) 116,880 shares deemed beneficially
owned by Mr. Simpson as trustee of the CSS 1998 GRAT and (3) 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
128,880 of those shares.
(7) Includes 100,000 shares owned by American Ready-Mix L.L.C., of which Mr.
Martineau owns a 12.5% interest.
(8) Includes 50,000 shares owned by Mr. Harlan, as trustee of the Michael and
Bonnie Harlan 1996 Trust.
(9) 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.
60
<PAGE>
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 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 each holder 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, which will be 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 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, we may not
issue any shares without the prior written consent of Scott & Stringfellow,
Inc., except in connection with acquisitions and incentive-plan awards. See
"Underwriting."
Our executive officers, directors and current stockholders and the owners
of the businesses we will initially acquire 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. Under Securities Act Rule 145, the volume limitations and other
applicable requirements of Rule 144 will apply to resales of these shares by
affiliates of the businesses we acquire for (1) a period of one year from the
date of their acquisition or (2) 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. Sales of these shares during the 180 days following the date of this
prospectus 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 under 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.
61
<PAGE>
DESCRIPTION OF CAPITAL STOCK
When this offering closes, our certificate of incorporation will authorize
us to issue 60,000,000 shares of common stock and 10,000,000 shares of preferred
stock. Each authorized share has a par value of $.001. 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 our certificate of
incorporation, which is an exhibit to the registration statement of which this
prospectus is a part and which qualifies the following summary in its entirety
by this reference.
COMMON STOCK
Each share of common stock has one vote in the election of each director
and on other corporate matters, other than any matter that (1) solely relates to
the terms of any outstanding series of preferred stock or the number of shares
of that series and (2) does not affect the number of authorized shares of
preferred stock or the powers, privileges and rights pertaining to the common
stock. No share of common stock affords any cumulative voting or preemptive
rights or is 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 for the payment of dividends. See
"Dividend Policy."
PREFERRED STOCK
At the direction of our board, we may issue shares of preferred stock from
time to time. Our board may, without any action by holders of the common stock:
o adopt resolutions to issue preferred stock in one or more classes
or series;
o fix or change the number of shares constituting any class or
series of preferred stock; and
o establish or change the rights of the holders of any class or
series of preferred stock.
The rights any class or series of preferred stock may evidence may include:
o general or special voting rights;
o preferential liquidation or preemptive rights;
o preferential cumulative or noncumulative dividend rights;
o redemption or put rights; and
o conversion or exchange rights.
We may issue shares of, or rights to purchase, preferred stock the terms of
which might:
o adversely affect voting or other rights evidenced by, or amounts
otherwise payable with respect to, the common stock;
o discourage an unsolicited proposal to acquire us; or
o facilitate a particular business combination involving us.
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 to purchase
from us a unit consisting of one one-hundredth of a share of our Series A junior
participating preferred stock at an exercise price of $35.00 per unit, subject
to adjustment. We refer you to the rights agreement between a rights agent and
us, the form of which is an exhibit to the registration statement of which this
prospectus is a part and which qualifies the following summary of the rights in
its entirety.
62
<PAGE>
The rights are attached to all certificates representing our currently
outstanding common stock and will attach to all common stock certificates we
issue prior to the "rights distribution date." That date would occur, except
in some cases, on the earlier of:
o 10 days following a public announcement that a person or group of
affiliated or associated persons (collectively, an "acquiring
person") has acquired or obtained the right to acquire beneficial
ownership of 15% or more of the outstanding common stock; or
o 10 business days following the start of a tender or exchange offer
that would result, if closed, in a person becoming an acquiring
person.
Our board may defer the rights distribution date in some circumstances, and some
inadvertent acquisitions will not result in a person becoming an acquiring
person if the person promptly divests itself of sufficient common stock.
Until the rights distribution date:
o common stock certificates will evidence the rights;
o the rights will be transferable only with those certificates;
o those certificates will contain a notation incorporating the rights
agreement by reference; and
o 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 after the rights distribution date and
will expire at the close of business on April 30, 2009, unless we earlier redeem
or exchange them as we describe below.
As soon as practicable after the rights distribution date, the rights agent
will mail certificates representing the rights to holders of record of common
stock as of the close of business on that date and, from and after that date,
only separate rights certificates will represent the rights.
We will not issue rights with any shares of common stock we issue after the
rights distribution date, except (1) as our board otherwise may determine and
(2) together with shares of common stock we issue as a result of previously
established incentive plans or convertible securities.
A "flip-in event" will occur under the rights agreement when a person
becomes an acquiring person otherwise than pursuant to a "permitted offer."
The rights agreement defines "permitted offer" to mean 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 our board determines to be fair to and
otherwise in our best interests and the best interests of our stockholders.
If a flip-in event occurs, we may, at any time until 10 days following the
first date that the flip-in event is publicly announced, redeem the rights in
whole, but not in part, at a redemption price of $.01 per right. At our option,
we may pay that redemption price in cash, shares of common stock or any other
consideration our board selects. If our board timely orders the redemption of
the rights, the rights will terminate on the effectiveness of that action.
If a flip-in event occurs and we do not redeem the rights, each right,
other than any right that has become null and void as we describe below, will
become exercisable, at the time we no longer may redeem it, to receive the
number of shares of common stock (or, in some cases, cash, property or other of
our securities) which has a "current market price" (as the rights agreement
defines that term) equal to two times the exercise price of the right.
63
<PAGE>
When a flip-in event occurs, all rights that then are, or under the
circumstances the rights agreement specifies previously were, beneficially owned
by an acquiring person or specified related parties will become null and void in
the circumstances the rights agreement specifies.
A "flip-over event" will occur under the rights agreement when, at any
time from and after the time a person becomes an acquiring person, (1) we are
acquired in a merger or other business combination transaction, other than
specified mergers that follow a permitted offer of the type we describe above,
or (2) 50% or more of our assets or earning power is sold or transferred. If a
flip-over event occurs, each holder of a right (except rights that previously
have become void as we describe above) thereafter will have the right to
receive, on exercise of that right, the number of shares of common stock of the
acquiring company which has a current market price equal to two times the
exercise price of the right.
The number of outstanding rights associated with a share of common stock,
the number of fractional shares of junior participating preferred stock issuable
on exercise of a right and the exercise price of the rights 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 rights distribution
date. The exercise price of the rights and the number of fractional shares of
junior participating preferred stock or other securities or property issuable,
on exercise of the rights also 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 exercise price of the rights until cumulative adjustments amount to at least
1% of that exercise price. It also will not require us to issue fractional
shares of junior participating preferred stock that are not integral multiples
of one one-hundredth and, in lieu thereof, we will make a cash adjustment based
on the market price of the junior participating preferred stock on the last
trading date prior to the date of exercise. The rights agreement reserves to us
the right to require prior to the occurrence of any flip-in event or flip-over
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 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 as follows:
o to cure any ambiguity, defect or inconsistency;
o to make changes that do not materially adversely affect the
interests of holders of rights, excluding the interests of any
acquiring person; or
o to shorten or lengthen any time period under the rights
agreement; provided, however, that we cannot lengthen the time
period governing redemption if the rights are no longer
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.
The rights will have antitakeover effects. They will cause substantial
dilution to any person or group that attempts to acquire us 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.
64
<PAGE>
STATUTORY BUSINESS COMBINATION PROVISION
As a Delaware corporation, we are subject to Section 203 of the Delaware
General Corporation Law. Section 203 prevents an "interested stockholder,"
which is defined generally as a person owning 15% or more of a Delaware
corporation's outstanding voting stock or any affiliate or associate of that
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 completion 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, other than stock held by (1)
directors who are also officers of the corporation or (2) any
employee stock plan that does 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
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
specific business combinations proposed by an interested stockholder following
the announcement or notification of designated 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. Our certificate of incorporation 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 Delaware General
Corporation Law; or
o for any transaction from which the member derived an improper
personal benefit.
This 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
65
<PAGE>
our stockholders and us. Our bylaws provide indemnification to our officers and
directors and other specified 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 certificate of incorporation permit.
Our certificate of incorporation 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 our board or a majority of
the board may call a special meeting of our board or of our stockholders.
Our certificate of incorporation 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 certificate of incorporation 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 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, along with the provisions
authorizing the 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. These stockholder proposal deadlines are subject to exceptions (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 our board or a majority of the board calls 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 of which this prospectus is a part and qualify the
foregoing summary by this reference.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company will serve as the transfer agent
and registrar for the common stock.
66
<PAGE>
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:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ---------------------------------------- ---------
<S> <C>
Scott & Stringfellow, Inc...............
Sanders Morris Mundy Inc................
---------
Total.............................. 3,800,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to 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 some 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 specified legal matters by counsel for the underwriters and other
conditions the underwriting agreement describes. 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 specified 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
other specified 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
other specified 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 the conditions the underwriting
agreement describes, 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. The warrants provide that the
representatives may not transfer the warrants for a period of one year from the
effective date of the registration statement relating to this offering;
provided, however, that during that period the warrants and any shares issued
pursuant to the exercise of the warrants may be transferred to any member of the
National Association of Securities Dealers who is participating in the offering
and their officers or partners.
67
<PAGE>
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.
<TABLE>
<CAPTION>
WITH
PER SHARE WITHOUT OPTION OPTION
--------- -------------- ------
<S> <C> <C> <C>
Public Offering Price................... $ $ $
Underwriting Discount................... $ $ $
Proceeds to U.S. Concrete............... $ $ $
</TABLE>
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, 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. In
evaluating any request for such a consent, Scott & Stringfellow, Inc. has
advised us that it will consider, in accordance with its customary practice, all
relevant facts and circumstances at the time of the request, including the
recent trading market for our common stock, the number of shares to which the
request relates and, in the case of a request we make to issue additional equity
securities, the purpose of that issuance.
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) 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 specified liabilities, including civil liabilities under the Securities
Act, or will contribute to payments the underwriters may be required to make in
respect thereof.
The underwriters have reserved for sale, at the initial public offering
price, up to 380,000 shares of common stock for our employees, directors and
business associates, and other persons we have designated, who have expressed an
interest in purchasing shares of our common stock. The number of shares
available for sale to the general public in this offering will be reduced to the
extent those persons purchase the reserved shares. Any reserved shares not so
purchased will be offered to the general public on the same basis as other
shares offered hereby.
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:
o the operating histories of the six businesses we initially will
acquire viewed on a combined basis;
o the future prospects for U.S. Concrete and the ready-mixed
concrete industry;
o the present state of U.S. Concrete's development;
68
<PAGE>
o an assessment of U.S. Concrete's management;
o the general condition of the economy and the securities markets at
the time of this offering; and
o the market prices of and demand for publicly traded common stock
of comparable companies in recent periods.
Our common stock has been approved for quotation on the Nasdaq National
Market, subject to official notice of issuance, 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 specified selling group members to
bid for and purchase the common stock. As an exception to these rules, the
representatives are permitted to engage in specified transactions that stabilize
the price of the common stock. These 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 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 underwriters and selling group members in some cases.
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 those 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 Merchant Partners II, L.P. 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 U.S. Concrete 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 U.S. Concrete and each of the companies
we initially will acquire which are included in this prospectus 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.
69
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes a part of a registration statement on Form S-1
we have filed 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 its exhibits, in accordance with the rules and
regulations of the SEC, and we refer you 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
necessarily are summaries of their material provisions, 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
its exhibits, 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 part 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.
70
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro Forma Combined
Financial Statements
Basis of Presentation........... F-2
Unaudited Pro Forma Combined
Balance Sheet -- March 31,
1999........................... F-3
Unaudited Pro Forma Combined
Statement of Operations for the
Year Ended December 31, 1998... F-4
Unaudited Pro Forma Combined
Statement of Operations for the
Three Months Ended March 31,
1999 F-5
Unaudited Pro Forma Combined
Statement of Operations for the
Three Months Ended March 31,
1998........................... F-6
Notes to Unaudited Pro Forma
Combined Financial
Statements..................... F-7
Historical Financial Statements
U.S. Concrete, Inc.
Report of Independent Public
Accountants.................... F-15
Balance Sheets.................. F-16
Statements of Operations........ F-17
Statements of Stockholders'
Equity......................... F-18
Statements of Cash Flows........ F-19
Notes to Financial Statements... F-20
Central Concrete Supply Co., Inc.
Report of Independent Public
Accountants.................... F-24
Balance Sheets.................. F-25
Statements of Operations........ F-26
Statements of Stockholders'
Equity......................... F-27
Statements of Cash Flows........ F-28
Notes to Financial Statements... F-29
Walker's Concrete, Inc.
Report of Independent Public
Accountants.................... F-38
Balance Sheets.................. F-39
Statements of Operations........ F-40
Statements of Stockholder's
Equity......................... F-41
Statements of Cash Flows........ F-42
Notes to Financial Statements... F-43
Bay Cities Building Materials Co.,
Inc. And Subsidiary
Report of Independent Public
Accountants.................... F-51
Consolidated Balance Sheets..... F-52
Consolidated Statements of
Operations..................... F-53
Consolidated Statements of
Stockholders' Equity........... F-54
Consolidated Statements of Cash
Flows.......................... F-55
Notes to Consolidated Financial
Statements..................... F-56
Opportunity Concrete Corporation
Report of Independent Public
Accountants.................... F-63
Balance Sheets.................. F-64
Statements of Operations........ F-65
Statements of Stockholders'
Equity......................... F-66
Statements of Cash Flows........ F-67
Notes to Financial Statements... F-68
Baer Concrete, Incorporated
Report of Independent Public
Accountants.................... F-74
Balance Sheets.................. F-75
Statements of Operations and
Other Comprehensive Income..... F-76
Statements of Stockholders'
Equity......................... F-77
Statements of Cash Flows........ F-78
Notes to Financial Statements... F-79
</TABLE>
F-1
<PAGE>
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. ("U.S. Concrete" 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
U.S. Concrete's initial public 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 U.S. Concrete.
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 March 31, 1999. The unaudited pro forma
combined statement of operations gives effect to these transactions and events
as if they had occurred on January 1, 1998 and 1999, respectively.
U.S. Concrete 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.
U.S. Concrete 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. U.S. Concrete cannot
quantify these savings until completion of the acquisitions and expects that
they will be substantially offset by U.S. Concrete'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 U.S. Concrete.
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. Management,
however, does not expect the revisions, if any, to materially affect the
accompanying pro forma information and does not believe that there are any other
identifiable intangible assets to which any material purchase price can be
allocated. The pro forma financial data do not purport to represent what U.S.
Concrete'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 U.S. Concrete'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 U.S. Concrete 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 -- MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
CONCRETE 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.......... $ -- $ 5,439 $ 2,223 $ 2,868 $ 1,465 $ 195 $ 192 $12,382
Trade accounts and notes
receivable....................... -- 8,517 4,507 8,763 619 1,304 272 23,982
Receivable from owners of the
Founding Companies............... -- -- -- -- -- -- -- --
Other receivables.................. -- 2 94 -- 14 120 -- 230
Inventories........................ -- 815 255 124 79 96 316 1,685
Prepaid expenses................... -- 737 173 12 140 -- 3 1,065
Other current assets............... -- 38 106 500 3 58 5 710
Deferred tax asset................. -- 12 110 -- -- 55 -- 177
-------- -------- --------- ---------- ----------- --------- ---------- --------
Total current assets............. -- 15,560 7,468 12,267 2,320 1,828 788 40,231
Property, plant and equipment, net... -- 9,674 9,321 5,651 2,002 3,546 137 30,331
Other assets, net.................... 7,356 1,155 545 230 42 765 -- 10,093
Goodwill............................. -- -- -- -- -- -- -- --
-------- -------- --------- ---------- ----------- --------- ---------- --------
Total assets..................... $ 7,356 $ 26,389 $ 17,334 $ 18,148 $ 4,364 $ 6,139 $ 925 $80,655
======== ======== ========= ========== =========== ========= ========== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt............................. $ -- $ 1,083 $ 692 $ 337 $ 303 $ 454 $ -- $ 2,869
Line of credit..................... -- -- 2,764 -- -- -- -- 2,764
Payable to owners of the Founding
Companies........................ -- -- -- -- -- -- -- --
Accounts payable and accrued
liabilities...................... 1,564 6,792 4,020 9,586 796 1,524 212 24,494
-------- -------- --------- ---------- ----------- --------- ---------- --------
Total current liabilities........ 1,564 7,875 7,476 9,923 1,099 1,978 212 30,127
New credit facility.................. -- -- -- -- -- -- -- --
Long-term debt....................... -- 4,029 1,158 2,171 607 1,091 -- 9,056
Deferred tax liability............... -- 46 1,096 196 69 482 -- 1,889
Stockholders' equity
Subscription receivable............ (2) -- -- -- -- -- -- (2)
Common stock....................... 1 70 4 41 14 12 1 143
Additional paid-in capital......... 9,572 554 38 38 7 10 -- 10,219
Treasury stock..................... -- -- -- -- -- (936) -- (936)
Retained earnings.................. (3,779) 13,815 7,562 5,779 2,568 3,502 712 30,159
-------- -------- --------- ---------- ----------- --------- ---------- --------
Total stockholders' equity....... 5,792 14,439 7,604 5,858 2,589 2,588 713 39,583
-------- -------- --------- ---------- ----------- --------- ---------- --------
Total liabilities and
stockholders' equity........... $ 7,356 $ 26,389 $ 17,334 $ 18,148 $ 4,364 $ 6,139 $ 925 $80,655
======== ======== ========= ========== =========== ========= ========== ========
<CAPTION>
PRO FORMA PRO FORMA POST MERGER AS
ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ (12,382) a,d,e $ -- $ -- f,g $ --
Trade accounts and notes
receivable....................... -- 23,982 -- 23,982
Receivable from owners of the
Founding Companies............... -- c,d -- -- --
Other receivables.................. (120) c 110 -- 110
Inventories........................ -- 1,685 -- 1,685
Prepaid expenses................... -- 1,065 -- 1,065
Other current assets............... (11) c 699 -- 699
Deferred tax asset................. -- 177 -- 177
----------- --------- ----------- ---------
Total current assets............. (12,513) 27,718 -- 27,718
Property, plant and equipment, net... 14,250d 44,581 -- 44,581
Other assets, net.................... (8,775) a,c,d 1,318 (1,228) g 90
Goodwill............................. 51,610d 51,610 -- 51,610
----------- --------- ----------- ---------
Total assets..................... $ 44,572 $125,227 $ (1,228) $ 123,999
=========== ========= =========== =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt............................. $ (2,869) e $ -- $ -- $ --
Line of credit..................... (2,764) e -- -- --
Payable to owners of the Founding
Companies........................ 23,312 b,d,e 23,312 (23,312) g --
Accounts payable and accrued
liabilities...................... (1,564) d,e 22,930 -- 22,930
----------- --------- ----------- ---------
Total current liabilities........ 16,115 46,242 (23,312) 22,930
New credit facility.................. 16,449 e 16,449 (3,727) g 12,722
Long-term debt....................... (9,056) e -- -- --
Deferred tax liability............... -- 1,889 -- 1,889
Stockholders' equity
Subscription receivable............ 2 d -- -- --
Common stock....................... (25) b,d 118 38 f 156
Additional paid-in capital......... 53,370 b,d 63,589 25,773 f,g 89,362
Treasury stock..................... 936 d -- -- --
Retained earnings.................. (33,219) a,b,c,d (3,060) -- (3,060)
----------- --------- ----------- ---------
Total stockholders' equity....... 21,064 60,647 25,811 86,458
----------- --------- ----------- ---------
Total liabilities and
stockholders' equity........... $ 44,572 $125,227 $ (1,228) $ 123,999
=========== ========= =========== =========
</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
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
U.S.
CONCRETE 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........................... 198 4,712 3,022 3,962 2,352 1,195 1,024 16,465
STOCK COMPENSATION CHARGE............ 2,678 -- -- -- -- -- -- 2,678
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
======== ======= ======= =========== =========== ========= ========== ========
<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..................................................... (3,144) a 13,321
STOCK COMPENSATION CHARGE...................................... -- 2,678
DEPRECIATION AND AMORTIZATION.................................. 1,989 b 4,995
----------- ----------
Income (loss) from operations.................................. 1,155 14,169
OTHER INCOME
(EXPENSE)....................................................
Interest income (expense),
net....................................................... (17) c (827)
Other income, net............................................ -- 900
----------- ----------
Income (loss) before provision for
income taxes................................................. 1,138 14,242
PROVISION FOR INCOME TAXES..................................... 3,507 d 6,337
----------- ----------
NET INCOME (LOSS).............................................. $(2,369) $ 7,905
=========== ==========
NET INCOME PER SHARE........................................................ $ 0.51
SHARES USED IN COMPUTING NET INCOME PER SHARE............................... 15,638,543 e
SUPPLEMENTAL PRO FORMA DATA:
NET INCOME EXCLUDING STOCK COMPENSATION CHARGE.............................. $ 9,491
==========
NET INCOME PER SHARE EXCLUDING STOCK COMPENSATION CHARGE.................... $ 0.61
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
U.S.
CONCRETE CENTRAL WALKER BAY CITIES OPPORTUNITY BAER SANTA ROSA COMBINED
-------- ------- ------ ----------- ----------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SALES................................ $ -- $12,956 $8,244 $12,548 $ 2,164 $ 2,024 $ 525 $38,461
COST OF GOODS SOLD................... -- 10,625 6,944 10,555 1,619 1,870 373 31,986
-------- ------- ------ ----------- ----------- --------- ---------- --------
Gross profit......................... -- 2,331 1,300 1,993 545 154 152 6,475
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 138 1,323 850 553 575 260 176 3,875
STOCK COMPENSATION CHARGE............ 765 -- -- -- -- -- -- 765
DEPRECIATION AND AMORTIZATION........ -- 292 220 103 59 137 11 822
-------- ------- ------ ----------- ----------- --------- ---------- --------
Income (loss) from operations........ (903) 716 230 1,337 (89) (243) (35) 1,013
OTHER INCOME (EXPENSE)...............
Interest income (expense), net..... -- 38 (75) (40) (16) (49) (1) (143)
Other income (expense), net........ -- 189 8 120 83 95 2 497
-------- ------- ------ ----------- ----------- --------- ---------- --------
Income (loss) before provision for
income taxes....................... (903) 943 163 1,417 (22) (197) (34) 1,367
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. -- 17 76 599 (2) (51) -- 639
-------- ------- ------ ----------- ----------- --------- ---------- --------
NET INCOME (LOSS).................... $ (903) $ 926 $ 87 $ 818 $ (20) $ (146) $ (34) $ 728
======== ======= ====== =========== =========== ========= ========== ========
<CAPTION>
PRO FORMA AS
ADJUSTMENTS ADJUSTED
----------- ----------
<S> <C> <C>
SALES.......................................................... $ -- $ 38,461
COST OF GOODS SOLD............................................. -- 31,986
----------- ----------
Gross profit................................................... -- 6,475
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES..................................................... (557) a 3,318
STOCK COMPENSATION CHARGE...................................... -- 765
DEPRECIATION AND AMORTIZATION.................................. 498 b 1,320
----------- ----------
Income (loss) from operations.................................. 59 1,072
OTHER INCOME (EXPENSE).........................................
Interest income (expense), net............................... (64) c (207)
Other income (expense), net.................................. -- 497
----------- ----------
Income (loss) before provision for
income taxes................................................. (5) 1,362
PROVISION (BENEFIT) FOR INCOME
TAXES........................................................ 48 d 687
----------- ----------
NET INCOME (LOSS).............................................. $ (53) $ 675
=========== ==========
NET INCOME PER SHARE........................................................ $ 0.04
SHARES USED IN COMPUTING NET INCOME PER SHARE............................... 15,638,543 e
SUPPLEMENTAL PRO FORMA DATA:
NET INCOME EXCLUDING STOCK COMPENSATION CHARGE.............................. $ 1,128
==========
NET INCOME PER SHARE EXCLUDING STOCK COMPENSATION CHARGE.................... $ 0.07
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-5
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
U.S.
CONCRETE CENTRAL WALKER BAY CITIES OPPORTUNITY BAER SANTA ROSA COMBINED
-------- ------- ------ ---------- ----------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SALES................................ $ -- $ 9,918 $5,842 $ 10,908 $ 4,266 $ 2,084 $ 163 $ 33,181
COST OF GOODS SOLD................... -- 8,537 5,270 9,440 3,005 1,901 124 28,277
-------- ------- ------ ---------- ----------- --------- ---------- --------
Gross profit......................... 1,381 572 1,468 1,261 183 39 4,904
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... -- 600 707 697 586 286 44 2,920
STOCK COMPENSATION CHARGE............ -- -- -- -- -- -- -- --
DEPRECIATION AND
AMORTIZATION....................... -- 188 285 121 61 104 4 763
-------- ------- ------ ---------- ----------- --------- ---------- --------
Income (loss) from operations........ -- 593 (420) 650 614 (207) (9) 1,221
OTHER INCOME (EXPENSE)............... -- --
Interest income (expense), net..... -- 43 (58) (45) 6 (23) -- (77)
Other income (expense), net........ -- 53 9 66 (3) 9 -- 134
-------- ------- ------ ---------- ----------- --------- ---------- --------
Income (loss) before provision for
income taxes....................... -- 689 (469) 671 617 (221) (9) 1,278
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. -- 6 (229) 315 50 (96) -- 46
-------- ------- ------ ---------- ----------- --------- ---------- --------
NET (INCOME) LOSS.................... $ -- $ 683 $ (240) $ 356 $ 567 $ (125) $ (9) $ 1,232
======== ======= ====== ========== =========== ========= ========== ========
<CAPTION>
PRO FORMA AS
ADJUSTMENTS ADJUSTED
----------- ----------
<S> <C> <C>
SALES.............................................................. $ -- $ 33,181
COST OF GOODS SOLD................................................. -- 28,277
----------- ----------
Gross profit....................................................... -- 4,904
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES......................................................... (766) a 2,154
STOCK COMPENSATION CHARGE.......................................... -- --
DEPRECIATION AND AMORTIZATION...................................... 498 b 1,261
----------- ----------
Income (loss) from operations...................................... 268 1,489
OTHER INCOME (EXPENSE).............................................
Interest income (expense), net................................... (130) c (207)
Other income (expense), net...................................... -- 134
----------- ----------
Income (loss) before provision for
income taxes..................................................... 138 1,416
PROVISION (BENEFIT) FOR INCOME
TAXES............................................................ 664 d 710
----------- ----------
NET (INCOME) LOSS.................................................. $ (526) $ 706
=========== ==========
NET INCOME PER SHARE............................................................ $ 0.05
SHARES USED IN COMPUTING NET INCOME PER SHARE................................... 15,638,543 e
SUPPLEMENTAL PRO FORMA DATA:
NET INCOME EXCLUDING STOCK COMPENSATION CHARGE.................................. $ 706
==========
NET INCOME PER SHARE EXCLUDING STOCK COMPENSATION CHARGE........................ $ 0.05
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-6
<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. U.S. Concrete 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 Staff Accounting
Bulletin (SAB) No. 80, promulgated by the Securities and Exchange Commission.
2. ACQUISITIONS:
When the offering closes, U.S. Concrete will pay a total of $23.3 million
in cash and issue 8,985,288 shares of its common stock to the owners of the
Founding Companies in exchange for all the outstanding capital stock of the
Founding Companies, as set forth in the following table. The estimated purchase
price is based upon preliminary estimates and is subject to certain purchase
price adjustments at and following closing. In this table, the estimated fair
value of U.S. Concrete's common stock is $7.65 per share, which reflects a 10%
discount from the assumed initial public offering price of $8.50 per share
because of the restrictions on the sale and transferability of the shares to be
issued. The cash column in the table excludes increases or decreases in the cash
paid which may result from post-closing working capital adjustments. The cash
column also excludes the following items:
o S corporation AAA distributions of $9.5 million and of life insurance
policies having $1.2 million related to cash surrender value;
o C corporation distributions of cash surrender value of life insurance
policies and other personal assets of $0.5 million; and
o $0.6 million which one former owner will use immediately after this
offering closes to purchase life insurance policies, notes owed by
his family members and other assets at their respective fair values.
U.S. Concrete will account for its acquisition of the Founding Companies
using the purchase method of accounting, with Central being reflected as the
accounting acquirer because its owners will represent the largest voting
interest in U.S. Concrete. As the accounting acquirer, Central is presented as
the purchaser of the other Founding Companies and the issuance by U.S. Concrete
of 2,453,255 shares of its common stock to Main Street and American Ready Mix is
presented as a purchase transaction by Central and included in the total
purchase price paid by Central. Also, included in these shares are 50,000 shares
issued to U.S. Concrete management.
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------
VALUE OF
CASH SHARES SHARES
--------- ----------- --------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Accounting Acquirer:
Central......................... $ 3,888 3,120,130 $ 23,869
Remaining Founding Companies:
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
--------- ----------- --------
Total...................... $ 23,312 8,985,288 $ 68,738
========= =========== ========
</TABLE>
F-7
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the total purchase price paid and residual
goodwill resulting from these purchase transactions:
<TABLE>
<CAPTION>
U.S. CONCRETE WALKER'S BAY CITIES OPPORTUNITY BAER SANTA ROSA TOTAL
-------------- --------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Total purchase price...... $ 18,767 $25,504 $ 25,060 $ 9,527 $ 4,404 $ 4,169 $ 87,161
Historical net assets..... (5,792) (7,604) (5,858) (2,589) (2,588) (713) (25,144)
Purchase adjustments...... -- (4,958) (4,966) 630 (2,500) 703 (10,407)
-------------- --------- ----------- ------------ --------- ----------- ---------
Residual goodwill......... $ 12,975 $12,642 $ 14,236 $ 7,598 $ -- $ 4,159 $ 51,610
============== ========= =========== ============ ========= =========== =========
</TABLE>
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
(a) Records (i) the distribution of $10.7 million by Central ($8.0
million), Opportunity ($2.0 million) and Santa Rosa ($0.7 million),
which represents the portions of their retained earnings as of March
31, 1999, on which their owners have paid or will pay income taxes,
and (ii) the elimination of these amounts from their retained
earnings.
(b) Records the liability for the cash portion of the consideration to be
paid to Central, (net of a $0.5 million working capital adjustment)
the accounting acquirer, and the combination of U.S. Concrete with
Central. Additionally records $3.1 million as the effect of a
non-cash, non-recurring compensation charge for the issuance of
400,000 shares of common stock to management and two non-employee
directors.
(c) Records the transfer of the cash surrender value of certain insurance
policies and other personal assets to the Founding Companies
concurrent with the Acquisition at a price equal to the net book value
of such assets, and a receivable from one former owner for the
purchase of life insurance policies, notes owed by his family members
and other assets at their respective fair values. Management believes
that the historical carrying value of such net non-operating assets
approximates fair value.
(d) Records the purchase transactions at a total estimated purchase price
of $87.2 million consisting of:
(i) $19.5 million payable to Founding Company owners (other than
Central);
(ii) $4.0 million representing the net post-closing adjustment for
working capital changes in the Founding Companies (excluding $0.5
million payable by Central); and
(iii) $44.9 million consisting of 5.9 million shares of U.S. Concrete
common stock isssued to owners of the Founding Companies (other
than Central);
(iv) $18.8 million consisting of 2.5 million shares issued to the
current stockholders of U.S. Concrete.
This transaction results in an excess purchase price of $51.6 million over the
$34.6 million of net assets acquired. It also records the $0.5 million repayment
of notes receivables from stockholders. 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, approximates fair value and that there are no other identifiable
intangible assets to which any material purchase price can be allocated.
Included in the entry is an adjustment to the net assets acquired of $14.3
million to reflect the estimated fair value of the property, plant and
equipment.
F-8
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reflects the historical assets acquired and liabilities
to be assumed in the acquisitions of the Founding Companies (excluding Central
and U.S. Concrete). The table does not reflect (i) the payment of the
distribution of the S corporation AAA, (ii) the transfer of the cash surrender
value of certain insurance policies and other personal assets, and (iii) the
excess cash balances.
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 6,943
Trade accounts and notes
receivable...................... 15,465
Other receivables............... 228
Inventories..................... 870
Prepaid expenses................ 328
Other current assets............ 672
Deferred tax asset.............. 165
---------
Total current assets....... 24,671
Property, plant and equipment, net... 20,657
Other assets, net.................... 1,582
---------
Total assets............... $ 46,910
=========
LIABILITIES
Current liabilities:
Current portion of long-term
debt............................ $ 1,786
Line of credit.................. 2,764
Accounts payable and accrued
liabilities..................... 16,138
---------
Total current
liabilities.................. 20,688
Long-term debt....................... 5,027
Deferred tax liability............... 1,843
---------
Total liabilities.......... $ 27,558
=========
</TABLE>
(e) Records the refinancing of $14.7 million of historical indebtedness of the
Founding Companies, the $3.5 million payment to the Founding Companies of
additional cash consideration and the payment of $1.6 million of
acquisition costs with borrowings under the credit facility.
(f) Records the cash proceeds of $27.0 million from the issuance of shares of
common stock net of estimated offering costs of $3.0 million. Offering
costs primarily consist principally of underwriting discounts and
commissions, accounting fees, legal fees and printing expenses.
(g) Records (i) payment of the cash portion of the consideration to the
stockholders of the Founding Companies (including Central) of $23.3
million which is net of the receivable from a former owner of $0.6 million
and (ii) the repayment of $3.7 million of borrowings under the new credit
facility using the remaining proceeds from the offering.
F-9
<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 E ADJUSTMENTS
--------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets --
Cash and cash equivalents........ $ (9,508) $ -- $ -- $ 455 $ (3,329) $(12,382)
Other receivables................ -- -- (120) -- -- (120)
Receivable from owners of
Founding Companies............. -- -- 638 (638) -- --
Other current assets............. -- -- (11) -- -- (11)
--------- --------- --------- --------- --------- ------------
Total current assets........ (9,508) -- 507 (183) (3,329) (12,513)
Property, plant and equipment........ -- -- -- 14,250 -- 14,250
Other long-term assets............... (1,155) -- (1,037) (6,583) -- (8,775)
Goodwill............................. -- -- -- 51,610 -- 51,610
--------- --------- --------- --------- --------- ------------
Total assets................ $ (10,663) $ -- $ (530) $ 59,094 $ (3,329) $ 44,572
========= ========= ========= ========= ========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities --
Current maturities of long-term
debt........................... $ -- $ -- $ -- $ -- $ (2,869) $ (2,869)
Line of credit................... -- -- -- -- (2,764) (2,764)
Payables to owners of Founding
Companies...................... -- 3,352 -- 23,487 (3,527) 23,312
Accounts payable and accrued
liabilities.................... -- -- -- (2) (1,562) (1,564)
--------- --------- --------- --------- --------- ------------
Total current liabilities... -- 3,352 -- 23,485 (10,722) 16,115
New credit facility.................. -- -- -- -- 16,449 16,449
Long-term debt....................... -- -- -- -- (9,056) (9,056)
Subscription receivable.............. -- -- -- 2 -- 2
Common stock......................... -- (36) 11 -- (25)
Additional paid-in capital........... -- 5,609 -- 47,761 -- 53,370
Treasury stock....................... -- -- -- 936 -- 936
Retained earnings.................... (10,663) (8,925) (530) (13,101) -- (33,219)
--------- --------- --------- --------- --------- ------------
Total stockholders'
equity.................... (10,663) (3,352) (530) 35,609 -- 21,064
--------- --------- --------- --------- --------- ------------
Total liabilities and
stockholders' equity...... $ (10,663) $ -- $ (530) $ 59,094 $ (3,329) $ 44,572
========= ========= ========= ========= ========= ============
</TABLE>
F-10
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
ADJUSTMENT
-------------------- POST MERGER
F G ADJUSTMENTS
--------- --------- -----------
<S> <C> <C> <C>
ASSETS
Current assets --
Cash and cash equivalents........ $ 27,039 $ (27,039) $ --
--------- --------- -----------
Total current assets........ 27,039 (27,039) --
Other long-term assets............... -- (1,228) (1,228)
--------- --------- -----------
Total assets................ $ 27,039 $ (28,267) $ (1,228)
========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities --
Payables to owners of Founding
Companies...................... $ -- $ (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 (1,228) 25,773
--------- --------- -----------
Total stockholders'
equity.................... 27,039 (1,228) 25,811
--------- --------- -----------
Total liabilities and
stockholders' equity...... $ 27,039 $ 28,267 $ (1,228)
========= ========= ===========
</TABLE>
4. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:
YEAR ENDED DECEMBER 31, 1998
(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. This reduction is partially offset by a
$330,000 charge for recurring contractual salaries of management.
(b) Reflects the amortization of goodwill to be recorded as a result of
these Acquisitions over a 40-year estimated life. Also records $0.7
million in additional depreciation expense to reflect the impact of
the fair value adjustment of equipment.
(c) Reflects interest expense of $0.8 million on borrowings of $12.7
million necessary to fully fund the acquisition of the Founding
Companies, net of interest savings of $1.2 million on $14.7 million of
historical debt to be repaid using proceeds from the offering and
borrowings under our credit facility, and the elimination of $0.4
million of interest income reflected in the historical financial
statements. The additional $0.8 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 40.8% 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) Includes: (i) 2,853,255 shares issued by U.S. Concrete 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 U.S.
Concrete expects to grant on consummation of this offering and (b) a
warrant for 200,000 shares which U.S. Concrete will issue to the
managing underwriters for this offering for services it will render
through the date this offering closes. The 1,150,000 options will have
an exercise price equal to the initial public offering price and will
be issued as follows: (i) 465,000 shares to U.S. Concrete's executive
officers; (ii) 20,000 shares to U.S. Concrete's nonemployee directors;
(iii) 503,000 shares to the employers of the employees of the Founding
Companies, and (iv) 162,000 shares to other employees in U.S.
Concrete's corporate office.
F-11
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------------ PRO FORMA
A B C D ADJUSTMENTS
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Selling, general and administrative
expenses........................... $ (3,144) $ -- $ -- $ -- $(3,144)
Depreciation and amortization........ -- 1,989 -- -- 1,989
--------- --------- --------- --------- -----------
Income (loss) from operations........ 3,144 (1,989) -- -- 1,155
Interest income................. -- -- (442) -- (442)
Interest expense................ -- -- 459 -- 459
--------- --------- --------- --------- -----------
Interest, net........................ -- -- (17) -- (17)
--------- --------- --------- --------- -----------
Income before provision for income
taxes.............................. 3,144 (1,989) (17) -- 1,138
Provision for income taxes........... -- -- -- 3,507 3,507
--------- --------- --------- --------- -----------
Net income (loss).................... $ 3,144 $ (1,989) $ (17) $ (3,507) $(2,369)
========= ========= ========= ========= ===========
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999
(a) Reflects the $0.7 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. This reduction is partially offset by a $0.1
million charge for recurring contractual salaries of U.S. Concrete
management.
(b) Reflects the amortization of goodwill to be recorded as a result of
these Acquisitions over a 40-year estimated life. Also records $0.2
million in additional depreciation expense to reflect the impact of
the fair market adjustment of equipment.
(c) Reflects interest expense of $0.2 million on borrowings of $12.7
million necessary to fully fund the acquisition of the Founding
Companies, net of interest savings of $0.2 million on $14.7 million of
historical debt to be repaid using proceeds from the offering and
borrowings under our credit facility, and the elimination of $0.1
million of interest income reflected in the historical financial
statements. The additional $0.2 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 40.8% 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) Includes: (i) 2,853,255 shares issued by U.S. Concrete 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 U.S.
Concrete expects to grant on consummation of this offering and (b) a
warrant for 200,000 shares which U.S. Concrete will issue to the
managing underwriters for this offering for services it will render
through the date this offering closes. The 1,150,000 options will have
an exercise price equal to the initial public offering price and will
be issued as follows: (i) 465,000 shares to U.S. Concrete's executive
officers; (ii) 20,000 shares to U.S. Concrete's nonemployee directors;
(iii) 503,000 shares to the employers of the employees of the Founding
Companies, and (iv) 162,000 shares to other employees in U.S.
Concrete's corporate office.
F-12
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENTS
--------------------------------------------------------
PRO FORMA
A B C D ADJUSTMENTS
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Selling, general and administrative
expenses........................... $ (557) $ -- $ -- $ -- $ (557)
Depreciation and amortization........ -- 498 -- -- 498
--------- --------- --------- --------- -----------
Income (loss) from operations........ 557 (498) -- -- 59
Interest income................. -- -- (74) -- (74)
Interest expense................ -- -- 10 -- 10
--------- --------- --------- --------- -----------
Interest, net........................ -- -- (64) -- (64)
--------- --------- --------- --------- -----------
Income (loss) before provision for
income taxes....................... 557 (498) (64) -- (5)
Provision for income taxes........... -- -- -- 48 48
--------- --------- --------- --------- -----------
Net income (loss).................... $ 557 $ (498) $ (64) $ (48) $ (53)
========= ========= ========= ========= ===========
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998
(a) Reflects the $0.9 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. This reversal is partially offset by a $0.1
million charge for recurring contractual salaries of U.S. Concrete
management.
(b) Reflects the amortization of goodwill to be recorded as a result of
these Acquisitions over a 40-year estimated life. Also records $0.2
million in additional depreciation expense to reflect the impact of
the fair market adjustment of equipment.
(c) Reflects interest expense of $0.2 million on borrowings of $12.7
million necessary to fully fund the acquisition of the Founding
Companies, net of interest savings of $0.2 million on $14.1 million of
historical debt to be repaid using proceeds from the offering and
borrowings under our credit facility, and the elimination of $0.1
million in interest income reflected in the historical financial
statements. The additional $0.2 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 40.8% 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) Includes: (i) 2,853,255 shares issued by U.S. Concrete 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 U.S.
Concrete expects to grant on consummation of this offering and (b) a
warrant for 200,000 shares which U.S. Concrete will issue to the
managing underwriters for this offering for services it will render
through the date this offering closes. The 1,150,000 options will have
an exercise price equal to the initial public offering price and will
be issued as follows: (i) 465,000 shares to U.S. Concrete's executive
officers; (ii) 20,000 shares to U.S. Concrete's nonemployee directors;
(iii) 503,000 shares to the employers of the employees of the Founding
Companies, and (iv) 162,000 shares to other employees in U.S.
Concrete's corporate office.
F-13
<PAGE>
U.S. CONCRETE, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------------ PRO FORMA
A B C D ADJUSTMENTS
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Selling, general and administrative
expenses........................... $ (766) $ -- $ -- $ -- $ (766)
Depreciation and amortization........ -- 498 -- -- 498
--------- --------- --------- --------- -----------
Income from operations............... 766 (498) -- -- 268
Interest income................. -- -- (120) -- (120)
Interest expense................ -- -- (10) -- (10)
--------- --------- --------- --------- -----------
Interest, net........................ -- -- (130) -- (130)
--------- --------- --------- --------- -----------
Income (loss) before provision for
income taxes....................... 766 (498) (130) -- 138
Benefit for income taxes............. -- -- -- 664 664
--------- --------- --------- --------- -----------
Net income (loss).................... $ 766 $ (498) $ (130) $ (664) $ (526)
========= ========= ========= ========= ===========
</TABLE>
5. SUPPLEMENTAL PRO FORMA DATA:
During December 1998 and March 1999, the Company issued 350,000 and 100,000
shares of common stock to management and non-employee directors and recorded a
stock compensation charge of $2.7 million and $0.8 million, respectively, which
has been recorded in the historical financial statements of U.S. Concrete during
those periods. The value associated with these shares was determined using an
estimated fair value of $7.65 per share which reflects a 10% discount from the
assumed initial public offering price of $8.50 per share due to the restrictions
on the sale and transferability of the shares issued. The supplemental pro forma
data has been presented to reflect pro forma net income and earnings per share
of the Company excluding the above-described stock compensation charge. This
supplemental pro forma data has been presented because management deems it
relevant due to the noncash, non-recurring nature of such charges.
F-14
<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-15
<PAGE>
U.S. CONCRETE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31
1997 1998 1999
---- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CASH AND CASH EQUIVALENTS............ $ -- $ -- $ --
DEFERRED OFFERING COSTS.............. -- 355 1,228
OTHER ASSETS......................... -- -- 6,128
---- --------- -----------
Total assets............... $ -- $ 355 $ 7,356
==== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCRUED LIABILITIES AND AMOUNTS DUE
TO STOCKHOLDER..................... $ -- $ 553 $ 1,564
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par
value, 10,000,000 authorized,
none issued and outstanding... -- --
Class A Common stock, $.001 par
value, one share authorized,
issued and outstanding........ -- --
Common stock, $.001 par value,
60,000,000 shares authorized,
350,000, and 1,251,000 shares
issued and outstanding,
respectively.................. -- -- 1
Receivable from stockholders.... (2) (2) (2)
Additional paid-in capital...... 2 2,680 9,572
Retained deficit................ -- (2,876) (3,779)
---- --------- -----------
Total stockholders' equity
(deficit)............... -- (198) 5,792
---- --------- -----------
Total liabilities and
stockholders' equity.... $ -- $ 355 $ 7,356
==== ========= ===========
</TABLE>
Reflects a 10,000 for-one stock split effected in March 1999.
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
U.S. CONCRETE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION
(JULY 15, 1997) THREE MONTHS ENDED
THROUGH YEAR ENDED MARCH 31
DECEMBER 31 DECEMBER 31 --------------------
1997 1998 1998 1999
----------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
SALES................................ $ -- $ -- $ -- $ --
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... -- 198 -- 138
STOCK COMPENSATION CHARGE............ -- 2,678 -- 765
----- ------------- --------- ---------
Loss Before Provision for Income
Taxes......................... -- (2,876) -- (903)
Provision for Income Taxes...... -- -- -- --
----- ------------- --------- ---------
NET LOSS............................. $ -- $(2,876) $ -- $ (903)
===== ============= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
U.S. CONCRETE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK RECEIVABLE ADDITIONAL
------------------- ------------------- FROM PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT STOCKHOLDERS CAPITAL DEFICIT
-------- ------- -------- ------- ------------- ----------- ---------
<S> <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 --
NET LOSS............................. -- -- -- -- -- -- (2,876)
-------- ------- -------- ------- --- ----------- ---------
BALANCE, December 31, 1998........... 1 -- 350,000 -- (2) 2,680 (2,876)
ISSUANCE OF SHARES TO AMERICAN
READY-MIX, L.L.C. (UNAUDITED)...... -- -- 801,000 1 -- 6,127 --
ISSUANCE OF SHARES TO MANAGEMENT AND
NONEMPLOYEE DIRECTORS
(UNAUDITED)........................ -- -- 100,000 -- -- 765 --
NET LOSS (UNAUDITED)................. -- -- -- -- -- -- (903)
-------- ------- -------- ------- --- ----------- ---------
BALANCE, March 31, 1999
(UNAUDITED)........................ 1 $ -- 1,251,000 $ 1 $(2) $ 9,572 $(3,779)
======== ======= ======== ======= === =========== =========
Reflects a 10,000 for-one stock split effected in March 1999.
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(DEFICIT)
-------------
<S> <C>
BALANCE, INCEPTION (July 15, 1997)... $ --
ISSUANCE OF SHARES................... --
NET INCOME (LOSS).................... --
-------------
BALANCE, December 31, 1997........... $ --
ISSUANCE OF ADDITIONAL SHARES TO
MANAGEMENT......................... 2,678
NET LOSS............................. (2,876)
-------------
BALANCE, December 31, 1998........... (198)
ISSUANCE OF SHARES TO AMERICAN
READY-MIX, L.L.C. (UNAUDITED)...... 6,128
ISSUANCE OF SHARES TO MANAGEMENT AND
NONEMPLOYEE DIRECTORS
(UNAUDITED)........................ 765
NET LOSS (UNAUDITED)................. (903)
-------------
BALANCE, March 31, 1999
(UNAUDITED)........................ $ 5,792
=============
Reflects a 10,000 for-one stock split
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
U.S. CONCRETE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION THREE MONTHS ENDED
(JULY 15, 1997) MARCH 31
THROUGH YEAR ENDED --------------------
DECEMBER 31, 1997 DECEMBER 31, 1998 1998 1999
----------------- ----------------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................... $ -- $(2,876) $ -- $ (903)
Non-cash stock compensation
charge........................... -- 2,678 -- 765
Adjustments to reconcile net loss
to net cash used in operating
activities --
Changes in assets and
liabilities --
Increase in deferred
offering costs........ -- (355) -- (873)
Increase in amounts due
to stockholder........ -- 553 -- 1,011
-------- ----------------- --------- ---------
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................................ $ -- $ -- $ -- $ --
======== ================= ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH
FINANCING ACTIVITIES:
Common stock issued for
acquisition-related services..... $ -- $ -- $ -- $ 6,128
======== ================= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
U.S. CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
U.S. Concrete, Inc., a Delaware corporation ("U.S. Concrete" 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. U.S. Concrete 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.
U.S. Concrete 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 and March 31, 1999, costs
of approximately $355,000 and $1,228,000 (unaudited) respectively, have been
incurred in connection with the Offering, and such costs will be treated as a
reduction of the proceeds from the Offering. U.S. Concrete has treated costs
incurred through December 31, 1998 and March 31, 1999, as deferred offering
costs in the accompanying balance sheet. U.S. Concrete 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 U.S. Concrete 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 and March 31, 1999, these advances totaled
$553,000 and $1,564,000 (unaudited) respectively.
2. INTERIM FINANCIAL INFORMATION:
INTERIM FINANCIAL INFORMATION
The interim financial statements as of March 31, 1999, and for the three
months ended March 31, 1999 and 1998, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements have
been included. Due to seasonality and other factors, the results of operations
for the interim periods are not necessarily indicative of the results for the
entire fiscal year.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-20
<PAGE>
U.S. CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
3. STOCKHOLDERS' EQUITY:
COMMON STOCK AND PREFERRED STOCK
In connection with its organization and initial capitalization, the Company
issued 2,000,000 shares (as restated for the 10,000 for-one stock split
discussed in Note 6) of common stock at $.001 par value for $2,000. In March
1999, the 2,000,000 shares were recapitalized into one share of Class A common
stock which will automatically convert into 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) 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-cash, non-recurring compensation
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.
4. 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 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.
5. 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.
6. SUBSEQUENT EVENT:
U.S. Concrete 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 60,000,000 and
increased the number of authorized shares of $.001 par value preferred stock to
10,000,000. 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.
F-21
<PAGE>
U.S. CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. 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 one share of Class A common stock.
The Class A common stock will, immediately prior to the effective time of the
first acquisition by the Company of a Founding Company, automatically convert
into 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 acquisition-related services
and has reflected the fair value of such shares of approximately $6.1 million in
other assets in the accompanying March 31, 1999 unaudited balance sheet. The
Company accounted for such shares issued as deferred acquisition costs. The fair
value of such shares has been determined to be $7.65 per share (a discount of
10% from the assumed 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 the 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 the Offering
closes.
In March 1999, following the 10,000 for-one split, the Company issued
50,000 shares of common stock to a member of management and 25,000 shares each
to two prospective 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- cash,
non-recurring compensation 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 assumed 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 the 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
responsibility with the Company 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, (2) nonemployee
Directors and (3) nonemployee consultants and other independent contractors
providing, or who will provide, services to the Company.
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 options to purchase a specified number of shares of common stock at a
specified price which may be denominated in either or both of common
stock or units denominated in common stock;
o stock appreciation rights, or SAR's, 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;
o restricted or unrestricted stock awards consisting of common stock or
units denominated in common stock;
o cash awards; and
F-22
<PAGE>
U.S. CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
o performance awards denominated in cash, common stock, units denominated
in common stock or any other property which are subject to the
attainment of one or more performance goals.
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.
U.S. Concrete 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 U.S. Concrete to acquire
the Founding Companies consists of (1) approximately $23.3 million in cash,
subject to post-closing increases or decreases attributable to working capital
changes, the maximum amount of which will be approximately 8.0 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 U.S.
Concrete. 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 will enter into a $75,000,000 three-year revolving 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 subsidiaries of the Company will guarantee the repayment
of all amounts due under the facility, and the Company will secure the facility
with the capital stock and assets of the subsidiaries and accounts receivable
and inventories. The Company expects that the credit facility will require the
consent of the lenders for acquisitions, prohibit the payment of cash dividends,
restrict the ability to incur additional indebtedness and require compliance
with stringent financial covenants. The failure to comply with these covenants
and restrictions would constitute an event of default under the facility.
F-23
<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-24
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- MARCH 31
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 1,945 $ 4,213 $ 5,439
Trade accounts receivable, net
of allowance for doubtful
accounts of $80, $97, and $97,
respectively.................. 6,650 7,641 6,480
Receivables from related
parties......................... 2,091 2,712 2,037
Inventories..................... 941 792 815
Prepaid expenses................ 273 833 737
Other current assets............ 187 156 52
--------- --------- ---------
Total current assets....... 12,087 16,347 15,560
PROPERTY, PLANT AND EQUIPMENT, net... 6,784 9,138 9,674
CASH SURRENDER VALUE OF LIFE
INSURANCE............................ 966 1,155 1,155
--------- --------- ---------
Total assets............... $ 19,837 $ 26,640 $26,389
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt............................ $ 776 $ 1,006 $ 1,083
Accounts payable................ 5,427 7,042 5,662
Accrued compensation and
benefits........................ 985 868 1,130
--------- --------- ---------
Total current
liabilities................ 7,188 8,916 7,875
LONG-TERM DEBT, net of current
portion.............................. 1,884 2,524 4,029
DEFERRED TAX LIABILITY............... 34 46 46
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value;
100,000 shares authorized,
4,572 shares issued and
outstanding................... 70 70 70
Additional paid-in capital...... 554 554 554
Retained earnings............... 10,107 14,530 13,815
--------- --------- ---------
Total stockholders'
equity..................... 10,731 15,154 14,439
--------- --------- ---------
Total liabilities and
stockholders' equity....... $ 19,837 $ 26,640 $26,389
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
SALES................................ $ 39,204 $ 53,631 $ 66,499 $ 9,918 $ 12,956
COST OF GOODS SOLD................... 33,402 43,794 53,974 8,537 10,625
--------- --------- --------- --------- ---------
Gross profit............... 5,802 9,837 12,525 1,381 2,331
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 3,644 4,265 4,712 600 1,323
DEPRECIATION......................... 1,203 1,330 930 188 292
--------- --------- --------- --------- ---------
Income from operations..... 955 4,242 6,883 593 716
OTHER INCOME (EXPENSE):
Interest expense, net........... (185) (226) (165) 43 38
Other income (expense), net..... (3) 26 36 53 189
--------- --------- --------- --------- ---------
Income before provision for
income taxes............ 767 4,042 6,754 689 943
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. 303 (457) 100 6 17
--------- --------- --------- --------- ---------
Net income................. $ 464 $ 4,499 $ 6,654 $ 683 $ 926
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(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
Net income (Unaudited).......... -- -- -- 926 926
Distributions (Unaudited)....... -- -- -- (1,641) (1,641)
------ ------ ---------- --------- -------------
BALANCE, March 31, 1999
(Unaudited).......................... 4,572 $ 70 $ 554 $ 13,815 $14,439
====== ====== ========== ========= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 464 $ 4,499 $ 6,654 $ 683 $ 926
Adjustments to reconcile net income
to net cash provided by operating
activities --
Depreciation................... 1,203 1,330 930 188 292
Net gain on sale of property,
plant and equipment......... (9) (27) (36) (28) (189)
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) 2,828 1,836
Income taxes and other
receivables............... (535) (505) 139 14 (2)
Prepaid expenses............ (60) (6) (560) 51 96
Other current assets........ 13 (372) 41 (418) 79
Accounts payable............ 29 1,991 1,615 (452) (1,380)
Accrued compensation and
benefits.................. 177 (46) (117) (443) 262
--------- --------- --------- --------- ---------
Net cash provided by
operating
activities............ 1,453 2,248 6,859 2,423 1,920
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment........................ (1,842) (2,222) (3,300) (624) (1,768)
Proceeds from disposals of
property, plant and equipment.... 78 91 52 -- 1,129
Increase in cash surrender value of
life insurance................... (117) (177) (189)
--------- --------- --------- --------- ---------
Net cash used in
investing
activities............ (1,881) (2,308) (3,437) (624) (639)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt....... 1,207 1,570 2,006 1,373 1,613
Repayments on long-term debt....... (622) (640) (1,136) -- (31)
Distributions to stockholders...... -- (240) (2,024) -- (1,637)
--------- --------- --------- --------- ---------
Net cash provided by
(used in) financing
activities............ 585 690 (1,154) 1,373 (55)
--------- --------- --------- --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 157 630 2,268 3,172 1,226
CASH AND CASH EQUIVALENTS, at
beginning of period................ 1,158 1,315 1,945 1,945 4,213
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, at end of
period............................. $ 1,315 $ 1,945 $ 4,213 $ 5,117 $ 5,439
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest......................... $ 221 $ 285 $ 344 $ 6 $ 18
Cash paid during the periodfor
income taxes..................... 938 749 78 20 40
NONCASH FINANCING ACTIVITY:
Distribution of note receivable to
stockholder...................... -- -- $ 207 -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<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. ("U.S. Concrete"), 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 U.S.
Concrete'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.
INTERIM FINANCIAL STATEMENTS
The interim financial statements as of March 31, 1999, and for the three
months ended March 31, 1999 and 1998, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
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.
F-29
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO 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.
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.
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.
F-30
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 U.S. Concrete 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 (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:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31
USEFUL LIVES ---------------------
IN YEARS 1997 1998
------------ --------- ----------
<S> <C> <C> <C>
(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
========= ==========
</TABLE>
F-31
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Rollforward of allowance for doubtful accounts is as follows (in
thousands):
<TABLE>
<S> <C>
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
Change in allowance for
doubtful accounts......... --
------
March 31, 1999 (unaudited)...... $ 97
======
</TABLE>
Receivables from related parties consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Trade accounts receivable from
related party................. $ 1,739 $ 2,712
Notes receivable from
employees/stockholders........ 352 --
--------- ---------
$ 2,091 $ 2,712
========= =========
</TABLE>
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Raw materials........................ $ 236 $ 259
Building materials................... 705 533
--------- ---------
$ 941 $ 792
========= =========
</TABLE>
5. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(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
6.95% 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
========= =========
</TABLE>
F-32
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Scheduled maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
For the year ending December 31 --
1999............................ $ 1,006
2000............................ 1,083
2001............................ 806
2002............................ 532
2003............................ 103
---------
$ 3,530
=========
</TABLE>
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.
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):
<TABLE>
<S> <C>
For the year ending December 31 --
1999............................ $ 321
2000............................ 200
2001............................ 197
2002............................ 160
2003............................ 160
---------
$ 1,038
=========
</TABLE>
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:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Federal --
Current......................... $ 296 $ (32) $ --
Deferred........................ (62) (393) --
State --
Current......................... 87 58 89
Deferred........................ (18) (90) 11
--------- --------- ---------
$ 303 $ (457) $ 100
========= ========= =========
</TABLE>
F-33
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
F-34
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Customer A.............................. 13% 14% 16%
Customer B (related party).............. 12 20 22
</TABLE>
12. SIGNIFICANT SUPPLIERS:
Significant suppliers of the Company represented purchases (as a percent of
total purchases) as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Supplier A.............................. 22% 23% 22%
Supplier B.............................. 13 16 19
Supplier C.............................. 19 22 18
Supplier D.............................. 13 10 9
</TABLE>
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.
F-35
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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>
MARCH 31, 1998 (UNAUDITED) MARCH 31, 1999 (UNAUDITED)
----------------------------------------------- -----------------------------------
READY-MIXED WESTSIDE OTHER TOTAL READY-MIXED WESTSIDE OTHER
------------ --------- ------ --------- ------------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales................................ $8,639 $ 1,367 $ (88 ) $ 9,918 $ 11,259 $ 1,697
Cost of Goods Sold................... 7,116 1,201 220 8,537 9,245 1,210 170
------------ --------- ------ --------- ------------ --------- ------
Gross profit......................... 1,523 166 (308) 1,381 $ 2,014 $ 487 (170)
============ ========= ============ =========
Selling, general, and administrative
expenses........................... 600 600 1,323
Depreciation......................... 188 188 292
Interest income...................... 49 49 56
Interest expense..................... (6) (6) (18)
Other income (expense)............... 53 53 189
---------
Income before provision for income
taxes.............................. 689
Provision for income taxes........... 6
---------
Net income........................... $ 683
=========
<CAPTION>
TOTAL
---------
<S> <C>
Sales................................ $ 12,956
Cost of Goods Sold................... 10,625
---------
Gross profit......................... 2,331
Selling, general, and administrative
expenses........................... 1,323
Depreciation......................... 292
Interest income...................... 56
Interest expense..................... (18)
Other income (expense)............... 189
---------
Income before provision for income
taxes.............................. 943
Provision for income taxes........... 17
---------
Net income........................... $ 926
=========
</TABLE>
<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
expenses............................ 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
expenses............................ 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>
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.
F-36
<PAGE>
CENTRAL CONCRETE SUPPLY CO., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 U.S. Concrete providing for U.S. Concrete'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 U.S. Concrete, 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-37
<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.
ARTHUR ANDERSEN LLP
San Francisco, California
March 8, 1999
F-38
<PAGE>
WALKER'S CONCRETE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- MARCH 31
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 1,192 $ 1,805 $ 2,223
Trade accounts and notes
receivable, net of allowance
for doubtful accounts of $151,
$238 and $230, respectively... 4,670 5,376 4,601
Inventories..................... 257 212 255
Prepaid expenses................ 148 228 279
Deferred tax assets............. 125 134 110
--------- --------- -----------
Total current assets....... 6,392 7,755 7,468
NOTE RECEIVABLE FROM STOCKHOLDER..... 384 -- --
PROPERTY, PLANT, AND EQUIPMENT,
net................................ 7,315 8,414 9,321
CASH SURRENDER VALUE OF LIFE
INSURANCE POLICIES................. 426 530 530
OTHER ASSETS, net.................... 48 19 15
--------- --------- -----------
Total assets............... $ 14,565 $ 16,718 $17,334
========= ========= ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt............................ $ 555 $ 567 $ 692
Line of credit.................. 3,232 3,005 2,764
Accounts payable and accrued
liabilities..................... 3,186 3,125 3,723
Income tax payable.............. 26 590 297
--------- --------- -----------
Total current
liabilities................ 6,999 7,287 7,476
LONG-TERM DEBT, net of current
portion.............................. 870 813 1,158
DEFERRED TAX LIABILITY............... 976 1,101 1,096
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $1 par: 100,000
shares authorized; 4,000
shares outstanding............ 4 4 4
Additional paid-in capital...... 38 38 38
Retained earnings............... 5,678 7,475 7,562
--------- --------- -----------
Total stockholder's
equity..................... 5,720 7,517 7,604
--------- --------- -----------
Total liabilities and
stockholder's equity....... $ 14,565 $ 16,718 $17,334
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-39
<PAGE>
WALKER'S CONCRETE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
SALES................................ $ 31,008 $ 37,990 $ 41,615 $ 5,842 $ 8,244
COST OF GOODS SOLD................... 26,162 31,141 33,756 5,113 6,788
COST OF GOODS SOLD FROM RELATED
PARTY................................ 293 657 772 157 156
--------- --------- --------- --------- ---------
Gross profit............... 4,553 6,192 7,087 572 1,300
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,155 2,953 3,022 707 850
DEPRECIATION AND AMORTIZATION
EXPENSE............................ 767 828 896 285 220
--------- --------- --------- --------- ---------
Income from operations..... 1,631 2,411 3,169 (420) 230
OTHER INCOME (EXPENSE):
Interest expense, net........... (339) (379) (377) (58) (75)
Other income, net............... 412 137 307 9 8
--------- --------- --------- --------- ---------
Income (loss) before
provision for taxes........ 1,704 2,169 3,099 (469) 163
PROVISION (BENEFIT) FOR TAXES........ 793 860 1,262 (229) 76
--------- --------- --------- --------- ---------
Net income (loss).......... $ 911 $ 1,309 $ 1,837 $ (240) $ 87
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-40
<PAGE>
WALKER'S CONCRETE, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
(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
Net loss (unaudited)............ -- -- -- 87 87
------ ------ --- -------- --------------
BALANCE, March 31, 1999
(unaudited)........................ 4,000 $ 4 $ 38 $7,562 $7,604
====== ====== === ======== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-41
<PAGE>
WALKER'S CONCRETE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................... $ 911 $ 1,309 $ 1,837 $ (240) $ 87
Adjustments to reconcile net income to
net cash provided by operating
activities:.........................
Depreciation and amortization..... 767 828 896 285 220
Net loss (gain) on sale of
property, plant and
equipment...................... (73) 63 (60) -- --
Deferred income tax provision..... 13 250 115 (27) 19
Changes in operating assets and
liabilities:
Trade accounts and notes
receivable, net of
allowances................... (901) (870) (717) 1,487 775
Inventories.................... (34) (74) 45 3 (43)
Prepaid expenses and other
assets....................... (69) 4 (64) (347) (50)
Accounts payable and accrued
liabilities.................. (639) 567 (61) 777 598
Income tax payable............. 134 (348) 564 (27) (293)
--------- --------- --------- --------- ---------
Net cash provided by
operating activities..... 109 1,729 2,555 1,911 1,313
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in cash surrender
value of life insurance............. (100) 18 (104) (49) --
Purchases of property, plant, and
equipment........................... (1,187) (1,541) (2,066) (1,321) (1,124)
Proceeds from sales of property,
plant, and equipment................ 87 40 145 -- --
--------- --------- --------- --------- ---------
Net cash used in investing
activities............... (1,200) (1,483) (2,025) (1,370) (1,124)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from line of credit.... 663 929 (227) (1,357) (241)
Proceeds from long-term debt.......... 710 317 598 597 643
Repayments on long-term debt.......... (432) (570) (643) (150) (173)
Dividends paid to stockholders........ -- -- (40) -- --
Repayments on notes receivable to
stockholders........................ 150 270 395 59 --
--------- --------- --------- --------- ---------
Net cash provided by (used
in) financing
activities............... 1,091 946 83 (851) 229
--------- --------- --------- --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................... -- 1,192 613 (310) 418
CASH AND CASH EQUIVALENTS, at beginning
of the period......................... -- -- 1,192 1,192 1,805
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, at end of the
period................................ $ -- $ 1,192 $ 1,805 $ 882 $ 2,223
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest................ $ 334 $ 377 $ 376 $ 85 $ 68
Cash paid for income taxes............ 638 962 583 110 380
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTION:
Dividend and reduction of notes
receivable to stockholder........... (20) (40) -- -- --
</TABLE>
The accompanying notes are an integral part of these statements.
F-42
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS
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. ("U.S. Concrete"), 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 U.S. Concrete common stock concurrent with the
closing of U.S. Concrete'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.
INTERIM FINANCIAL STATEMENTS
The interim financial statements as of March 31, 1999, and for the three
months ended March 31, 1999 and 1998, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
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
F-43
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-44
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31
USEFUL LIVES --------------------
IN YEARS 1997 1998
------------ --------- ---------
<S> <C> <C> <C>
(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
========= =========
</TABLE>
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Trade accounts receivable and notes receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- MARCH 31,
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
(IN THOUSANDS) (UNAUDITED)
Accounts receivable, trade........... $ 4,639 $ 5,518 $ 4,737
Notes receivable..................... 182 96 94
--------- --------- -----------
4,821 5,614 4,831
Less: Allowance for doubtful
accounts............................. (151) (238) (230)
--------- --------- -----------
Trade accounts and notes receivable,
net.................................. $ 4,670 $ 5,376 $ 4,601
========= ========= ===========
</TABLE>
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.
F-45
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable, trade.............. $ 2,376 $ 2,110
Accrued compensation and benefits.... 509 706
Other accrued liabilities............ 301 309
--------- ---------
$ 3,186 $ 3,125
========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(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%
</TABLE>
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.
F-46
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LONG-TERM DEBT
Long-term debt consists of the following as of December 31:
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
(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
========= =========
</TABLE>
Scheduled maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
For the year ending December 31 --
1999............................ $ 567
2000............................ 378
2001............................ 253
2002............................ 132
2003............................ 50
---------
$ 1,380
=========
</TABLE>
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):
<TABLE>
<S> <C>
For the year ending December 31 --
1999............................ $ 85
2000............................ 1
2001............................ 1
---
$ 87
===
</TABLE>
F-47
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Federal:
Current......................... $ 604 $ 474 $ 897
Deferred........................ 9 199 92
State:
Current......................... 177 136 250
Deferred........................ 3 51 23
--------- --------- ---------
$ 793 $ 860 $ 1,262
========= ========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(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
========= ========= =========
</TABLE>
F-48
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences representing deferred tax assets
and liabilities result principally from the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(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)
========= ========= =========
</TABLE>
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.
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.
F-49
<PAGE>
WALKER'S CONCRETE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company made contributions to employee pension, health, and welfare
plans for employees under collective bargaining agreements of $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 four
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 U.S. Concrete providing for U.S. Concrete'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-50
<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.
ARTHUR ANDERSEN LLP
San Francisco, California
January 29, 1999
F-51
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- MARCH 31
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 343 $ 2,642 $ 2,868
Trade accounts and notes
receivable, net of allowance
for doubtful accounts of
$50........................... 8,503 7,871 8,529
Receivables from
related-party................... 250 309 234
Inventories..................... 106 124 124
Prepaid expenses................ 18 15 12
Short-term investment........... 200 500 500
--------- --------- -----------
Total current assets....... 9,420 11,461 12,267
NOTE RECEIVABLE FROM STOCKHOLDERS,
net of unamortized discount of $42,
$34 and $32, respectively.......... 193 201 203
PROPERTY, PLANT AND EQUIPMENT, net... 4,206 5,494 5,651
LONG-TERM INVESTMENT................. 500 -- --
OTHER ASSETS, net.................... 11 11 27
--------- --------- -----------
Total assets............... $ 14,330 $ 17,167 $18,148
========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt.......................... $ 297 $ 335 $ 337
Accounts payable................ 6,513 6,995 8,387
Related-party accounts
payable....................... 122 59 --
Accrued liabilities and other
payables...................... 1,295 1,823 1,199
--------- --------- -----------
Total current
liabilities................ 8,227 9,212 9,923
LONG-TERM DEBT, net of current
portion............................ 1,875 2,209 2,171
DEFERRED TAX LIABILITIES............. 578 706 196
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $10 par; 20,000
shares authorized, 4,088.58
shares issued and
outstanding................... 41 41 41
Additional paid-in capital...... 38 38 38
Retained earnings............... 3,571 4,961 5,779
--------- --------- -----------
Total stockholders'
equity................... 3,650 5,040 5,858
--------- --------- -----------
Total liabilities and
stockholders' equity..... $ 14,330 $ 17,167 $18,148
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-52
<PAGE>
BAY CITIES BUILDINGS MATERIALS CO., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
SALES................................ $ 30,496 $ 45,312 $ 53,600 $ 10,908 $ 12,548
COST OF GOODS SOLD................... 27,287 40,292 46,766 9,440 10,555
--------- --------- --------- --------- ---------
Gross profit............... 3,209 5,020 6,834 1,468 1,993
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,090 2,778 3,962 697 553
DEPRECIATION AND AMORTIZATION........ 458 458 505 121 103
--------- --------- --------- --------- ---------
Income from operations..... 661 1,784 2,367 650 1,337
OTHER INCOME (EXPENSE):
Interest expense, net.............. (186) (136) (156) (45) (40)
Other income, net.................. 177 49 141 66 120
--------- --------- --------- --------- ---------
Income before provision for
income taxes............ 652 1,697 2,352 671 1,417
PROVISION FOR INCOME TAXES........... 260 696 962 315 599
--------- --------- --------- --------- ---------
Net income................. $ 392 $ 1,001 $ 1,390 $ 356 $ 818
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(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
---------- ------ --- -------- -------------
Net income (unaudited).......... -- -- -- 818 818
---------- ------ --- -------- -------------
BALANCE, March 31, 1999
(unaudited)........................ 4,088.58 $ 41 $ 38 $5,779 $ 5,858
========== ====== === ======== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 392 $ 1,001 $ 1,390 $ 356 $ 818
Adjustments to reconcile net income
to net cash provided by operating
activities --
Depreciation and
amortization................ 458 458 505 121 103
Deferred income tax provision
(benefit)................... 156 420 (25) (576) (510)
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) 573 472 (583)
Inventories................. (21) 152 (18) -- --
Prepaid expenses............ (53) 55 3 (35) 3
Other assets................ 33 (5) (9) 301 (18)
Accounts payable............ (847) 3,066 419 (862) 971
Accrued liabilities and
other payables............ 276 100 528 (260) (262)
--------- --------- --------- --------- ---------
Net cash provided by
(used in) operating
activities............ 489 526 3,494 (483) 522
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and
equipment........................ (465) (807) (1,806) (66) (260)
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....................... -- -- 200 200 --
Repayments on note receivable from
stockholders..................... 1,053 -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by
(used in) investing
activities............ 51 (983) (1,567) 134 (260)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt....... 179 214 913 545 106
Repayments on long-term debt....... (295) (334) (541) (132) (142)
--------- --------- --------- --------- ---------
Net cash provided by
(used in) financing
activities............ (116) (120) 372 413 (36)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 424 (577) 2,299 64 226
CASH AND CASH EQUIVALENTS, at
beginning of the period............ 496 920 343 343 2,642
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, at end of
the period......................... $ 920 $ 343 $ 2,642 $ 407 $ 2,868
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest............. $ 226 $ 197 $ 217 $ 59 $ 49
Cash paid for income taxes......... -- 182 315 190 291
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-55
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. ("U.S. Concrete"), 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 U.S. Concrete common stock concurrent with the
closing of U.S. Concrete'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.
INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements as of March 31, 1999, and for
the three months ended March 31, 1999 and 1998, are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements, have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
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.
F-56
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-57
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31
USEFUL LIVES --------------------
IN YEARS 1997 1998
-------------- --------- ---------
<S> <C> <C> <C>
(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
========= =========
</TABLE>
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Trade accounts receivable and notes receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(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
========= =========
</TABLE>
F-58
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accrued liabilities and other payables consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(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
========= =========
</TABLE>
5. LONG-TERM DEBT:
Long-term debt, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(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
========= =========
</TABLE>
Scheduled maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
For the year ending December 31 --
1999............................ $ 335
2000............................ 336
2001............................ 349
2002............................ 218
2003............................ 754
Thereafter...................... 552
---------
$ 2,544
=========
</TABLE>
F-59
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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):
<TABLE>
<S> <C>
For the year ending December 31 --
1999............................ $ 1,334
2000............................ 1,160
2001............................ 800
2002............................ 602
2003............................ 223
---------
$ 4,119
=========
</TABLE>
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.
7. INCOME TAXES:
The provision for federal and state income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Federal --
Current......................... $ 164 $ 243 $ 655
Deferred........................ 36 302 98
State --
Current......................... 76 32 180
Deferred........................ (16) 119 29
--------- --------- ---------
$ 260 $ 696 $ 962
========= ========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(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
========= ========= =========
</TABLE>
F-60
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences representing deferred tax assets
and liabilities principally from the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(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)
========= ========= =========
</TABLE>
The Company believes that all tax assets are realizable and therefore has
not offset any of these balances with a valuation allowance.
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.
F-61
<PAGE>
BAY CITIES BUILDING MATERIALS CO., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 U.S. Concrete providing for U.S. Concrete's
acquisition of the Company.
F-62
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Opportunity Concrete Corporation:
We have audited the accompanying balance sheets of Opportunity Concrete
Corporation (the Company) (a District of Columbia corporation) as of December
31, 1997 and 1998, and the related statements of operations, stockholders'
equity and cash flows for the years 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 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 Opportunity Concrete
Corporation as of December 31, 1997 and 1998, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.
January 29, 1999
F-63
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
-------------------- ------------
1997 1998 1999
--------- --------- ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 1,819 $ 1,634 $ 1,465
Accounts receivable............. 704 504 633
Inventories..................... 93 72 79
Prepaid expenses................ 127 134 140
Other current assets............ 25 3 3
--------- --------- ------------
Total current assets....... 2,768 2,347 2,320
PROPERTY, PLANT AND EQUIPMENT, net... 1,844 2,060 2,002
OTHER ASSETS, net.................... 35 42 42
--------- --------- ------------
Total assets............... $ 4,647 $ 4,449 $ 4,364
========= ========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt.......................... $ 206 $ 298 $ 303
Accounts payable and accrued
liabilities................... 719 509 796
--------- --------- ------------
Total current
liabilities.............. 925 807 1,099
LONG-TERM DEBT, net of current
portion............................ 633 684 607
DEFERRED TAX LIABILITY............... 52 69 69
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $100 par; 500
shares authorized, 140 shares
outstanding................... 14 14 14
Additional paid-in capital...... 7 7 7
Retained earnings............... 3,016 2,868 2,568
--------- --------- ------------
Total stockholders'
equity................... 3,037 2,889 2,589
--------- --------- ------------
Total liabilities and
stockholders' equity..... $ 4,647 $ 4,449 $ 4,364
========= ========= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
-------------------- --------------------
1997 1998 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
SALES................................ $ 15,550 $ 16,180 $ 4,266 $ 2,164
COST OF GOODS SOLD................... 10,698 11,296 3,005 1,619
--------- --------- --------- ---------
Gross profit............... 4,852 4,884 1,261 545
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,380 2,352 586 575
DEPRECIATION AND AMORTIZATION
EXPENSE............................ 232 245 61 59
--------- --------- --------- ---------
Operating (loss) income.... 2,240 2,287 614 (89)
OTHER INCOME:
Interest, net................... 5 8 6 (16)
Other income, net............... (2) 14 (3) 83
--------- --------- --------- ---------
Income (loss) before
provision for income
taxes................... 2,243 2,309 617 (22)
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. 173 187 50 (2)
--------- --------- --------- ---------
Net income (loss)............... $ 2,070 $ 2,122 $ 567 $ (20)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
(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, 1996........... 140 $ 14 $ 7 $ 2,339 $ 2,360
Net income...................... -- -- -- 2,070 2,070
Distributions................... -- -- -- (1,393) (1,393)
------- ------- --- --------- -------------
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
Net income (unaudited).......... -- -- -- (20) (20)
Distributions (unaudited)....... -- -- -- (280) (280)
------- ------- --- --------- -------------
BALANCE, March 31, 1999
(unaudited).......................... 140 $ 14 $ 7 $ 2,568 $ 2,589
======= ======= === ========= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
-------------------- --------------------
1997 1998 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............... $ 2,070 $ 2,122 $ 567 $ (20)
Adjustments to reconcile net
income to net cash provided by
operating activities --
Depreciation and
amortization............ 232 245 61 59
Net loss (gain) on sale of
property, plant and
equipment............... (16) 3 (2) (1)
Equity in loss of joint
venture................. 18 7 -- --
Deferred income tax
provision............... 10 17 -- --
Changes in operating assets
and liabilities:
Accounts receivable... (48) 200 (540) (129)
Inventories........... (11) 21 4 (7)
Prepaid expenses...... (29) (7) (22) (6)
Other current
assets............. (17) 14 9 --
Accounts payable and
accrued
liabilities........ (41) (210) 538 287
--------- --------- --------- ---------
Net cash
provided by
operating
activities.... 2,168 2,412 615 183
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment..................... (389) (463) (45) --
Increase in cash surrender value
of life insurance............. (6) (7) -- --
Investment in joint venture..... 21 -- -- --
--------- --------- --------- ---------
Net cash
provided by
(used in)
investing
activities.... (374) (470) (45) --
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.... 306 377 --
Repayments on long-term debt.... (254) (234) (48) (72)
Distributions to stockholders... (1,393) (2,270) -- (280)
--------- --------- --------- ---------
Net cash used in
financing
activities.... (1,341) (2,127) (48) (352)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 453 (185) 522 (169)
CASH AND CASH EQUIVALENTS, at
beginning of the period............ 1,366 1,819 1,819 1,634
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, at end of
the period......................... $ 1,819 $ 1,634 $ 2,341 $ 1,465
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......... $ 65 $ 75 $ 17 $ 19
Cash paid for income taxes...... 162 187 -- 7
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-67
<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. ("U.S. Concrete"), 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 U.S. Concrete common stock concurrent with the closing of
U.S. Concrete'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.
INTERIM FINANCIAL STATEMENTS
The interim financial statements as of March 31, 1999, and for the three
months ended March 31, 1999 and 1998, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
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.
F-68
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
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
statements 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 U.S. Concrete 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, 1997 and
1998, and, therefore, that those values were not impaired at those dates.
F-69
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31
USEFUL LIVES --------------------
IN YEARS 1997 1998
------------ --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Leasehold improvements............... 5-7 $ 49 $ 49
Machinery and equipment.............. 3-20 1,423 1,423
Mixers, trucks and other vehicles.... 3-12 2,242 2,223
Furniture and fixtures............... 3-8 405 374
--------- ---------
4,119 4,069
Less -- Accumulated depreciation..... (2,275) (2,009)
--------- ---------
Property, plant and equipment,
net........................... $ 1,844 $ 2,060
========= =========
</TABLE>
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Accounts receivable, trade........... $ 672 $ 477
Other receivables.................... 32 27
--------- ---------
$ 704 $ 504
========= =========
</TABLE>
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Accounts payable, trade.............. $ 639 $ 324
Accrued compensation and benefits.... 51 82
Other accrued liabilities............ 29 103
--------- ---------
$ 719 $ 509
========= =========
</TABLE>
F-70
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(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.......................... $ 283 $ 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.... 551 676
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.............................. 5 --
--------- ---------
839 982
Less -- Current portion.............. (206) (298)
--------- ---------
$ 633 $ 684
========= =========
</TABLE>
Scheduled maturities of long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
For the year ending December 31 --
<S> <C>
1999............................ $ 298
2000............................ 319
2001............................ 239
2002............................ 113
2003............................ 13
------------
$ 982
============
</TABLE>
At December 31, 1997 and 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 and 1997.
F-71
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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):
<TABLE>
<CAPTION>
For the year ending December 31 --
<S> <C>
1999............................ $ 177
2000............................ 136
2001............................ 140
2002............................ 143
2003............................ 146
------------
$ 742
============
</TABLE>
Total rent expense under all operating leases was approximately $362,000
and $264,000 for the years ended December 31, 1997 and 1998, respectively.
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 $52,000 and $69,000 for
December 31, 1997 and 1998, respectively, 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:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING
DECEMBER 31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
State:
Current............................ $ 163 $ 170
Deferred........................... 10 17
--------- ---------
$ 173 $ 187
========= =========
</TABLE>
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 years ended December 31,
1997 and 1998, was approximately $123,000 and $125,000, respectively.
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.
F-72
<PAGE>
OPPORTUNITY CONCRETE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
10. SIGNIFICANT CUSTOMERS:
Sales from significant customers consist of the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Company A............................... 15% 14%
Company B............................... 4 18
Company C............................... 3 20
Company D............................... 20 --
</TABLE>
11. SIGNIFICANT SUPPLIERS:
The Company purchased approximately 38% and 34% of its materials from two
suppliers in 1997 and 1998, respectively.
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 U.S. Concrete providing for U.S. Concrete's acquisition of the
Company.
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 is approximately $2,868,000.
F-73
<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-74
<PAGE>
BAER CONCRETE, INCORPORATED
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
1998 1999
------------ ----------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents....... $1,410 $ 195
Available for sale securities... 20 11
Accounts receivable, net of
allowance for doubtful accounts
of $52 and $43, respectively... 1,754 1,304
Receivable from related party... 50 120
Inventories..................... 104 96
Deferred tax assets............. 46 55
Other current assets............ 30 47
------------ ----------
Total current assets....... 3,414 1,828
PROPERTY, PLANT AND EQUIPMENT, net... 3,518 3,546
CASH SURRENDER VALUE OF LIFE
INSURANCE.......................... 401 413
STOCKHOLDER'S NOTES RECEIVABLE....... 252 252
OTHER ASSETS......................... 94 100
------------ ----------
Total assets............... $7,679 $6,139
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt........................... $ 755 $ 419
Current portion of other
long-term obligations.......... 53 35
Accounts payable and accrued
liabilities.................... 1,747 1,524
------------ ----------
Total current
liabilities............. 2,555 1,978
LONG-TERM DEBT, net of current
portion............................ 1,675 1,045
OTHER LONG-TERM OBLIGATIONS.......... 99 46
DEFERRED TAX LIABILITY............... 482 482
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
6% cumulative preferred stock,
$100 par; 3,000 shares
authorized, 1,225 and 120
shares outstanding,
respectively................... 123 12
5% noncumulative preferred
stock, $1 par; 14,000 shares
authorized, 14,000 and 0 shares
outstanding, respectively...... 14 --
Common stock, no par; 2,500
shares authorized, 1,580 shares
outstanding................... -- --
Additional paid-in capital...... 10 10
Treasury stock, at cost (1,350
common shares and 775 preferred
shares)........................ (936) (936)
Unrealized loss on securities
available for sale............. (181) (190)
Retained earnings............... 3,838 3,692
------------ ----------
Total stockholders'
equity.................. 2,868 2,588
------------ ----------
Total liabilities and
stockholders' equity.... $7,679 $6,139
============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-75
<PAGE>
BAER CONCRETE, INCORPORATED
STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31
DECEMBER 31 --------------------
1998 1998 1999
------------ --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
SALES................................... $ 11,973 $ 2,084 $ 2,024
COST OF GOODS SOLD...................... 9,910 1,901 1,870
------------ --------- ---------
Gross profit.................. 2,063 183 154
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 1,195 286 260
DEPRECIATION EXPENSE.................... 412 104 137
------------ --------- ---------
Income (loss) from
operations................. 456 (207) (243)
OTHER INCOME (EXPENSE):
Interest expense, net.............. (105) (23) (49)
Other income, net.................. 379 9 95
------------ --------- ---------
Income (loss) before provision
for income taxes........... 730 (221) (197)
PROVISION FOR (BENEFIT) INCOME TAXES.... 307 (96) (51)
------------ --------- ---------
NET INCOME (LOSS)....................... 423 (125) (146)
OTHER COMPREHENSIVE INCOME:
Unrealized loss on securities
available for sale............... (24) (21) (9)
------------ --------- ---------
COMPREHENSIVE INCOME (LOSS)............. $ 399 $ (146) $ (155)
============ ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-76
<PAGE>
BAER CONCRETE, INCORPORATED
STATEMENTS 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
------ ------ ------ ------ ------ ------ --- -------- ---------
Net loss (unaudited)............... -- -- -- -- -- -- -- -- (146)
Redemption of preferred stock
(unaudited)...................... (1,105) (111) (14,000) (14) -- -- -- -- --
Unrealized loss on securities
available for sale (unaudited)... -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ --- -------- ---------
BALANCE, March 31, 1999
(unaudited)......................... 120 $ 12 -- $ -- 1,580 $ -- $ 10 $ (936) $ 3,692
====== ====== ====== ====== ====== ====== === ======== =========
<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
------------- -------------
Net loss (unaudited)............... -- (146)
Redemption of preferred stock
(unaudited)...................... -- (125)
Unrealized loss on securities
available for sale (unaudited)... (9) (9)
------------- -------------
BALANCE, March 31, 1999
(unaudited)......................... $(190) $ 2,588
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-77
<PAGE>
BAER CONCRETE, INCORPORATED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31
DECEMBER 31 --------------------
1998 1998 1999
------------ --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................. $ 423 $ (125) $ (146)
Adjustments to reconcile net income
to net cash provided by
operating activities --
Depreciation and amortization... 412 104 137
Net gain on sale of property,
plant and equipment............. (323) -- (80)
Deferred income tax provision... 244 114 (9)
Changes in operating assets and
liabilities --
Accounts receivable, net of
allowance..................... (106) 150 450
Inventories................... (12) (12) 8
Other assets.................. 37 (32) (35)
Accounts payable and accrued
liabilities................... 450 (60) (223)
------------ --------- ---------
Net cash provided by
operating activities....... 1,125 139 102
------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property,
plant and equipment................ 323 -- 80
Purchases of property, plant and
equipment.......................... (1,022) (48) (165)
------------ --------- ---------
Net cash used in investing
activities................. (699) (48) (85)
------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of stockholder notes
receivable, net.................. 1,257 116 --
Repayments of receivable from
related party, net............... 8 -- (70)
Borrowings on line of credit....... 125 125 --
Payments on line of credit......... (125) -- --
Proceeds from long-term debt....... 714 -- --
Repayments on long-term debt....... (901) (211) (1,074)
Repayments on other long-term
obligations...................... (100) -- (71)
Dividends paid..................... (8) -- --
Redemption of preferred stock...... -- -- (17)
------------ --------- ---------
Net cash provided by
financing activities..... 970 30 (1,232)
------------ --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 1,396 121 (1,215)
CASH AND CASH EQUIVALENTS, at
beginning of the period............ 14 14 1,410
------------ --------- ---------
CASH AND CASH EQUIVALENTS, at end of
the period......................... $ 1,410 $ 135 $ 195
============ ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest............. $ 211 $ -- $ --
Cash paid for income taxes......... 39 52 43
Unrealized loss on securities
available for sale.............. (24) (21) (9)
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTION (unaudited)
Redemption of preferred stock for
notes........................... $ -- $ -- $ 108
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-78
<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. ("U.S. Concrete"), 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 U.S. Concrete common stock concurrent with the
closing of U.S. Concrete'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.
INTERIM FINANCIAL STATEMENTS
The interim financial statements as of March 31, 1999, and for the three
months ended March 31, 1999 and 1998, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting princples, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
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.
F-79
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-80
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS
------------
<S> <C> <C>
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
=========
</TABLE>
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):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ -----------
<S> <C> <C>
(UNAUDITED)
Accounts receivable, trade........... $1,714 $ 1,255
Refund receivable.................... 92 92
Less: Allowance for doubtful
accounts........................... (52) (43)
------------ -----------
$1,754 $ 1,304
============ ===========
</TABLE>
Accounts payable and accrued liabilities at December 31, 1998, consist of
the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Accounts payable, trade.............. $ 1,503
Accrued compensation and benefits.... 244
---------
$ 1,747
=========
</TABLE>
F-81
<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):
<TABLE>
<S> <C>
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
=========
</TABLE>
Scheduled maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
For the year ending December 31 --
1999............................... $ 755
2000............................... 620
2001............................... 497
2002............................... 389
2003............................... 129
Thereafter......................... 40
---------
$ 2,430
=========
</TABLE>
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):
<TABLE>
<S> <C>
For the year ending December 31 --
1999............................... $ 53
2000............................... 53
2001............................... 34
2002............................... 12
---------
$ 152
=========
</TABLE>
F-82
<PAGE>
BAER CONCRETE, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES:
The components of provision for federal and state income taxes follow:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
------------------
<S> <C>
(IN THOUSANDS)
Federal --
Current............................ $ 63
Deferred........................... 177
State --
Current............................ --
Deferred........................... 67
------
$ 307
======
</TABLE>
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:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
------------------
<S> <C>
(IN THOUSANDS)
Provision at the statutory rate......... $ 255
Increase resulting from --
State income tax, net of federal
benefit.......................... 44
Nondeductible expenses............. 8
------
$ 307
======
</TABLE>
The tax effects of temporary differences representing deferred tax assets
and liabilities result principally from the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
(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)
=======
</TABLE>
F-83
<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.
10. 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):
<TABLE>
<S> <C>
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
============
</TABLE>
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-84
<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.
11. 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.
12. 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 U.S. Concrete providing for U.S. Concrete'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 U.S. Concrete, 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.
On March 31, 1999, the Company redeemed 1,105 shares of 6% cumulative
preferred stock and 14,000 shares of 5% noncumulative preferred stock for
$16,500 in cash and $108,000 in notes. The notes bear interest at an annual rate
of 6%, and mature 2009. All shares were retired.
F-85
<PAGE>
INNOVATIVE
USES OF
CONCRETE
[GRAPHIC OF PRECAST CONCRETE PRODUCTS OMITTED]
Precast Concrete
Insulated Concrete Forms
[GRAPHIC OF PRECAST CONCRETE PRODUCTS OMITTED]
Flowable Fill
[GRAPHIC OF FLOWABLE FILL OMITTED]
[GRAPHIC OF CONCRETE FRAME CONSTRUCTION OMITTED]
Concrete Frame Construction
<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
[LOGO--U.S. CONCRETE, INC.--LOGO]
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 U.S. Concrete. All of these amounts, except the SEC registration fee,
the NASD filing fee and the NASDAQ National Market listing fee, are estimated.
<TABLE>
<S> <C>
SEC Registration Fee................. $ 11,542
NASD Filing Fee...................... 4,652
NASDAQ National Market Listing Fee... 90,500
Accounting Fees and Expenses......... *
Legal Fees and Expenses.............. *
Printing Expenses.................... *
Transfer Agent's Fees................ *
Miscellaneous........................ *
---------
Total........................... $ *
=========
</TABLE>
- ------------
* 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 U.S. Concrete'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,
II-2
<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 U.S. Concrete's Bylaws further provides that
U.S. Concrete shall indemnify its officers, directors and employees to the
fullest extent permitted by law.
INDEMNIFICATION AGREEMENTS
U.S. Concrete 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 indemnify U.S. Concrete, its
officers and directors, and persons who control U.S. Concrete within the meaning
of the Securities Act against liabilities in some cases.
U.S. Concrete intends to maintain liability insurance for the benefit of
its directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is 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. for $10.00 per share. Vincent D. Foster, the
chairman of our 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 one of our directors, for $10 per share. At that time, we
also issued and sold 15 shares of common stock to Michael W. Harlan, our chief
financial officer and one of our directors, together with his family trust, 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, Main Street
now owns one share of Class A common stock, Mr. Martineau owns 200,000 shares of
common stock and Mr. Harlan, together with his family trust, owns 150,000 shares
of common stock. The share of Class A common 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, following the stock split, 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
nonemployee 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 six
businesses. 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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<C> <S>
1.1+ -- Form of Underwriting Agreement.
1.2+ -- Form of Warrant Agreement among U.S. Concrete, Scott &
Stringfellow, Inc. and Sanders Morris Mundy, Inc.
2.1* -- Agreement and Plan of Reorganization dated as of March 22,
1999 by and among U.S. Concrete, 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 U.S. Concrete, 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 U.S. Concrete, 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 U.S. Concrete, 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 U.S. Concrete, 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 U.S. Concrete, Santa Rosa Acquisition, Inc.,
R. G. Evans/Associates d/b/a Santa Rosa Cast Products Co. 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 U.S. Concrete.
3.2 -- Bylaws of U.S. Concrete.
4.1 -- Form of Certificate representing common stock.
4.2 -- Form of Registration Rights Agreement by and among U.S.
Concrete and the stockholders listed on the signture pages
thereto.
4.9 -- Funding Agreement dated as of September 10, 1999 by and
between U.S. Concrete and Main Street Merchant Partners II, L.P.
4.10+ -- Forms of Rights Agreement by and between U.S. Concrete and ,
including form of Rights Certificate attached as Exhibit B
thereto. U.S. Concrete and some of its subsidiaries are parties
to debt instruments under which the total amount of securities
authorized does not exceed 10% of the total assets of U.S.
Concrete and its subsidiaries on a consolidated basis. Pursuant
to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, U.S.
Concrete agrees to furnish a copy of such instruments to the SEC
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 U.S. Concrete and William T.
Albanese.
10.3 -- Employment Agreement between U.S. Concrete and Michael W.
Harlan
10.4+ -- Employment Agreement between U.S. Concrete and Eugene P.
Martineau
10.5* -- Employment Agreement between U.S. Concrete and Michael D.
Mitschele.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<C> <S>
10.6 -- Employment Agreement between U.S. Concrete and Charles W.
Sommer.
10.7* -- Employment Agreement between U.S. Concrete and Neil J.
Vannucci.
10.8* -- Employment Agreement between U.S. Concrete and Robert S.
Walker.
10.9 -- Form of Indemnification Agreement between U.S. Concrete and
each of its directors and officers.
10.10+ -- Employment Agreement between U.S. Concrete and Terry Green.
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.
</TABLE>
- ------------
* Previously filed.
+ 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 SEC 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 amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on May 5, 1999.
U.S. CONCRETE, INC.
By: /s/EUGENE P. MARTINEAU
EUGENE P. MARTINEAU
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this amendment
to 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 May 5, 1999
EUGENE P. MARTINEAU and Director
(Principal Executive Officer)
/s/MICHAEL W. HARLAN Chief Financial Officer and May 5, 1999
MICHAEL W. HARLAN Director (Principal Financial
and Accounting Officer)
/s/VINCENT D. FOSTER Director May 5, 1999
VINCENT D. FOSTER
</TABLE>
II-7
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
U.S. CONCRETE, INC.
U.S. Concrete, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), hereby adopts this Restated Certificate of Incorporation,
which accurately restates and integrates the provisions of the existing
Certificate of Incorporation of the Corporation as heretofore amended (as so
amended, the "Certificate of Incorporation") and does hereby further certify
that:
1. The name of the Corporation is U.S. Concrete, Inc. The original
certificate of incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on July 15, 1997 under the original name Main
Street Equity III, Inc.
2. The Board of Directors of the Corporation has duly adopted this
Restated Certificate of Incorporation in accordance with Section 245 of the DGCL
and without a vote of the Corporation's stockholders. This Restated Certificate
of Incorporation only restates and integrates and does not further amend the
provisions of the Certificate of Incorporation, and no discrepancy exists
between those provisions and the provisions hereof.
3. The Certificate of Incorporation is hereby restated to read in
its entirety as follows:
RESTATED CERTIFICATE OF INCORPORATION
FIRST: The name of the Corporation is U.S. Concrete, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of the Corporation's registered agent at that address is
the Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful
business, act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware or any successor statute (the
"DGCL").
FOURTH: The aggregate number of shares of capital stock which the
Corporation will have authority to issue is Seventy Million and One
(70,000,001), divided into Sixty Million (60,000,000) shares of common stock,
par value $.001 per share ("Common Stock"), One (1) share of Class A common
stock, par value $.001 per share ("Class A Stock"), and Ten Million (10,000,000)
shares of preferred stock, par value $.001 per share ("Preferred Stock"). The
Corporation may issue shares of any class of its capital stock for such
consideration and for such corporate purposes as the Board of Directors of the
Corporation (the "Board of Directors") may from time to time determine.
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<PAGE>
Except as applicable law otherwise provides, the holder of the share
of Class A Stock and the holders of the Common Stock will vote together as a
single class on all matters on which holders of Common Stock are entitled to
vote. The share of Class A Stock will be entitled to 2,000,000 votes on each
such matter, and each share of Common Stock will be entitled to one vote on each
such matter.
Prior to the effective time of the first acquisition by the
Corporation of an operating business (the "Effective Time"), the share of Class
A Stock will be deemed to have converted into 2,000,000 issued and outstanding
shares of Common Stock prior to the record date the Corporation fixes for
determining the holders of shares of Common Stock entitled to participate in any
dividend the Corporation declares to be paid on the outstanding Common Stock or
to share in the assets of the Corporation in the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, and, on the basis
of that deemed conversion, the holder of the Class A Stock and the holders of
all outstanding shares of Common Stock will so participate and so share ratably
on a share for share basis. Immediately prior to the Effective Time, the Class A
Stock automatically will convert into 1,602,255 shares of Common Stock. Once the
Class A Stock has been converted into Common Stock, it will be cancelled and not
reissued.
The Preferred Stock may be divided into and issued from time to time
in one or more series as may be fixed and determined by the Board of Directors.
The relative rights and preferences of the Preferred Stock of each series will
be such as are stated in any resolution or resolutions adopted by the Board of
Directors setting forth the designation of that series and fixing and
determining the relative rights and preferences thereof, any such resolution or
resolutions being herein called a "Directors' Resolution." The Board of
Directors hereby is authorized to fix and determine the powers, designations,
preferences, and relative, participating, optional or other rights (including,
without limitation, voting powers, full or limited, preferential rights to
receive dividends or assets on liquidation, rights of conversion or exchange
into Common Stock, Preferred Stock of any series or other securities, any right
of the Corporation to exchange or convert shares into Common Stock, Preferred
Stock of any series or other securities, or redemption provisions or sinking
fund provisions) as between series and as between or among series of Preferred
Stock and as between the Preferred Stock or any series thereof and the Common
Stock, and the qualifications, limitations or restrictions thereof, if any, all
as shall be stated in a Directors' Resolution, and the shares of Preferred Stock
or any series thereof may have full or limited voting powers, or be without
voting powers, all as shall be stated in a Directors' Resolution.
Consistent with this Article FOURTH and applicable law, any of the
voting powers, designations, preferences, rights and qualifications, limitations
or restrictions of any series of Preferred Stock may be dependent on facts
ascertainable outside this Restated Certificate of Incorporation (this
"Certificate of Incorporation") or any amendment hereto, or outside resolutions
of the Board of Directors pursuant to authority expressly vested in it by this
Certificate of Incorporation. Except as applicable law or this Certificate of
Incorporation otherwise may require, the terms of any series of Preferred Stock
may be amended without consent of the holders of any other series of Preferred
Stock or of any class of capital stock of the Corporation.
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<PAGE>
No stockholder will, by reason of the holding of shares of any class
or series of capital stock of the Corporation, have a preemptive or preferential
right to acquire or subscribe for any shares or securities of any class, whether
now or hereafter authorized, which may at any time be issued, sold or offered
for sale by the Corporation, unless a Directors' Resolution specifically so
provides with respect to a series of Preferred Stock.
Cumulative voting of shares of any class or series of capital stock
having voting rights is prohibited unless specifically provided for in a
Directors' Resolution with respect to a series of Preferred Stock.
FIFTH: (a) DIRECTORS. The business and affairs of the Corporation
will be managed by or under the direction of the Board of Directors. In addition
to the authority and powers conferred on the Board of Directors by the DGCL or
by the other provisions of this Certificate of Incorporation, the Board of
Directors hereby is authorized and empowered to exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation, subject
to the provisions of the DGCL, this Certificate of Incorporation and any Bylaws
adopted by the stockholders of the Corporation; PROVIDED, HOWEVER, that no
Bylaws hereafter adopted by the stockholders of the Corporation, or any
amendments thereto, will invalidate any prior act of the Board of Directors that
would have been valid if such Bylaws or amendment had not been adopted.
(b) NUMBER, ELECTION AND TERMS OF DIRECTORS. The number of directors
which will constitute the whole Board of Directors shall be fixed from time to
time by a majority of the directors then in office, subject to an increase in
the number of directors by reason of any provisions contained in or established
pursuant to Article FOURTH, but in any event will not be less than three. The
directors, other than those who may be elected by the holders of any series of
Preferred Stock, will be divided into three classes: Class I, Class II and Class
III. Each director will serve for a term ending on the third annual meeting
following the annual meeting at which that director was elected; provided,
however, that the directors first designated as Class I directors will serve for
a term expiring at the annual meeting next following the end of the calendar
year 1999, the directors first designated as Class II directors will serve for a
term expiring at the annual meeting next following the end of the calendar year
2000, and the directors first designated as Class III directors will serve for a
term expiring at the annual meeting next following the end of the calendar year
2001. Each director will hold office until the annual meeting at which that
director's term expires and, the foregoing notwithstanding, will serve until his
successor shall have been duly elected and qualified or until his earlier death,
resignation or removal.
At each annual election, the directors chosen to succeed those whose
terms then expire will be of the same class as the directors they succeed,
unless, by reason of any intervening changes in the authorized number of
directors, the Board of Directors shall have designated one or more
directorships whose term then expires as directorships of another class in order
more nearly to achieve equality of number of directors among the classes.
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<PAGE>
In the event of any change in the authorized number of directors,
each director then continuing to serve as such will nevertheless continue as a
director of the class of which he is a member until the expiration of his
current term, or his prior death, resignation or removal. The Board of Directors
will specify the class to which a newly created directorship will be allocated.
Election of directors need not be by written ballot unless the
Bylaws of the Corporation so provide.
(c) REMOVAL OF DIRECTORS. No director of the Corporation may be
removed from office as a director by vote or other action of the stockholders or
otherwise except for cause, and then only by the affirmative vote of the holders
of at least a majority of the voting power of all outstanding shares of capital
stock of the Corporation generally entitled to vote in the election of
directors, voting together as a single class. Except as applicable law otherwise
provides, cause for the removal of a director will be deemed to exist only if
the director whose removal is proposed: (i) has been convicted, or has been
granted immunity to testify in any proceeding in which another has been
convicted, of a felony by a court of competent jurisdiction and that conviction
is no longer subject to direct appeal; (ii) has been found to have been grossly
negligent or guilty of misconduct in the performance of his duties to the
Corporation in any matter of substantial importance to the Corporation by (A)
the affirmative vote of a majority of the Directors then in office at any
meeting of the Board of Directors called for that purpose or (B) a court of
competent jurisdiction; or (iii) has been adjudicated by a court of competent
jurisdiction to be mentally incompetent and mental incompetency directly affects
his ability to serve as a director of the Corporation. Notwithstanding the
foregoing, whenever holders of outstanding shares of one or more series of
Preferred Stock are entitled to elect members of the Board of Directors pursuant
to the provisions applicable in the case of arrearages in the payment of
dividends or other defaults contained in the Directors' Resolution providing for
the establishment of any series of Preferred Stock, any such director of the
Corporation so elected may be removed in accordance with the provisions of that
Directors' Resolution.
(d) VACANCIES. Except as a Directors' Resolution providing for the
establishment of any series of Preferred Stock may provide otherwise, newly
created directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
removal or other cause will be filled by the affirmative vote of a majority of
the remaining directors then in office, even though less than a quorum of the
Board of Directors. Any director elected in accordance with the preceding
sentence will hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until that director's successor shall have been elected and qualified or until
his earlier death, resignation or removal. No decrease in the number of
directors constituting the Board of Directors will shorten the term of any
incumbent director.
SIXTH: From and after the first date as of which the Corporation has
a class or series of capital stock registered under the Securities Exchange Act
of 1934, as amended, except as a Directors' Resolution may establish with
respect to any series of Preferred Stock, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at an annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent
-4-
<PAGE>
in writing by those stockholders. Except as applicable law requires, or as a
Directors' Resolution may prescribe, special meetings of stockholders of the
Corporation may be called only by (i) the Chairman of the Board of Directors or
(ii) the Board of Directors pursuant to a resolution a majority of the entire
Board of Directors approves by an affirmative vote.
SEVENTH: No director of the Corporation will be personally liable to
the Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director; PROVIDED, HOWEVER, that the foregoing provisions
will not eliminate or limit the liability of a director (a) for any breach of
that director's duty of loyalty to the Corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the DGCL, as the same exists
or as that provision hereafter may be amended, supplemented or replaced, or (d)
for any transactions from which that director derived an improper personal
benefit. If the DGCL is amended after the filing of this Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided
herein, will be limited to the fullest extent permitted by that law, as so
amended. Any repeal or modification of this Article SEVENTH by the stockholders
of the Corporation will be prospective only and will not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of that repeal or modification.
EIGHTH: In furtherance of, and not in limitation of, the powers
conferred by statute, the Board of Directors is expressly authorized to adopt,
amend or repeal the Bylaws of the Corporation, or adopt new Bylaws, without any
action on the part of the stockholders, except as applicable law or the Bylaws
of the Corporation may provide otherwise.
NINTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Corporation under
Section 291 of Title 8 of the Delaware Code, or on the application of trustees
in dissolution or of any receiver or receivers appointed for the Corporation
under Section 279 of Title 8 of the Delaware Code, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If the majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders, of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of that compromise or arrangement, the said
compromise or arrangement and the said reorganization will, if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
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IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be executed this 4th day of May, 1999.
U.S. CONCRETE, INC.
By:/S/ EUGENE P. MARTINEAU
Eugene P. Martineau
Chief Executive Officer and President
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EXHIBIT 3.2
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AMENDED AND RESTATED
BYLAWS
OF
U.S. CONCRETE, INC.
EFFECTIVE AS OF MARCH 22, 1999
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TABLE OF CONTENTS
PAGE NO.
ARTICLE I STOCKHOLDERS...............................................1
Section 1.1 Annual Meetings............................................1
Section 1.2 Special Meetings...........................................1
Section 1.3 Notice of Meetings.........................................1
Section 1.4 Adjournments...............................................2
Section 1.5 Quorum.....................................................2
Section 1.6 Organization...............................................2
Section 1.7 Voting; Proxies............................................2
Section 1.8 Fixing Date for Determination of Stockholders of Record....3
Section 1.9 List of Stockholders Entitled To Vote......................4
Section 1.10 Election of Directors.....................................4
Section 1.11 Other Stockholder Business................................6
Section 1.12 Approval or Ratification of Acts or Contracts by
Stockholders..............................................8
Section 1.13 Action By Consent of Stockholders.........................8
Section 1.14 Conduct of Meetings.......................................8
ARTICLE II BOARD OF DIRECTORS.........................................9
Section 2.1 Regular Meetings...........................................9
Section 2.2 Special Meetings...........................................9
Section 2.3 Telephonic Meetings........................................9
Section 2.4 Organization...............................................9
Section 2.5 Order of Business..........................................9
Section 2.6 Notice of Meetings.........................................9
Section 2.7 Quorum; Vote Required for Action..........................10
Section 2.8 Informal Action by Directors..............................10
ARTICLE III BOARD COMMITTEES..........................................10
Section 3.1 Board Committees..........................................10
Section 3.2 Board Committee Rules.....................................11
ARTICLE IV OFFICERS..................................................11
Section 4.1 Designation...............................................11
Section 4.2 CEO.......................................................11
Section 4.3 Powers and Duties of Other Officers.......................11
Section 4.4 Term of Office, etc.......................................11
ARTICLE V CAPITAL STOCK.............................................12
Section 5.1 Certificates..............................................12
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Section 5.2 Transfer of Shares........................................12
Section 5.3 Ownership of Shares.......................................12
Section 5.4 Regulations Regarding Certificates........................12
Section 5.5 Lost or Destroyed Certificates............................12
ARTICLE VI INDEMNIFICATION...........................................13
Section 6.1 General...................................................13
Section 6.2 Expenses..................................................13
Section 6.3 Advances..................................................13
Section 6.4 Request for Indemnification...............................14
Section 6.5 Nonexclusivity of Rights..................................14
Section 6.6 Insurance and Subrogation.................................14
Section 6.7 Severability..............................................14
Section 6.8 Certain Actions Where Indemnification Is Not Provided.....15
Section 6.9 Definitions...............................................15
Section 6.10 Notices..................................................16
Section 6.11 Contractual Rights.......................................16
ARTICLE VII MISCELLANEOUS...................................................16
Section 7.1 Fiscal Year...............................................16
Section 7.2 Seal......................................................16
Section 7.3 Interested Directors; Quorum..............................16
Section 7.4 Form of Records...........................................17
Section 7.5 Bylaw Amendments..........................................17
Section 7.6 Notices; Waiver of Notice.................................17
Section 7.7 Resignations..............................................18
Section 7.8 Facsimile Signatures......................................18
Section 7.9 Reliance On Books, Reports and Records....................18
Section 7.10 Certain Definitional Provisions..........................18
Section 7.11 Captions.................................................18
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AMENDED AND RESTATED
BYLAWS
OF
U.S. CONCRETE, INC.
The Board of Directors of U.S. Concrete, Inc. (the "Corporation") by
resolution has duly adopted these Bylaws to govern the Corporation's internal
affairs.
ARTICLE I
STOCKHOLDERS
Section 1.1 ANNUAL MEETINGS. The Corporation will hold an annual
meeting of the holders of its capital stock (each, a "Stockholder") for the
election of directors of the Corporation (each, a "Director") at such date, time
and place as the Board of Directors of the Corporation (the "Board") by
resolution may designate from time to time. The Corporation may transact any
other business at an annual meeting which has properly come before that meeting
in accordance with Section 1.11.
Section 1.2 SPECIAL MEETINGS. Any of the following may call special
meetings of Stockholders for any purpose or purposes at any time and designate
the date, time and place of any such meeting: (i) the Board pursuant to a
resolution that a majority of the total number of Directors the Corporation
would have if there were no vacancies (the "Whole Board") has duly adopted; (ii)
any committee of the Board (each, a "Board Committee") the Board has duly
designated and empowered to call special meetings; and (iii) the chairman of the
Board (the "Chairman"). Except as the certificate of incorporation of the
Corporation (as amended from time to time and including each certificate of
designation, if any, respecting any class or series of preferred stock of the
Corporation which has been executed, acknowledged and filed in accordance with
applicable law, the "Certificate of Incorporation") or applicable law otherwise
provides, no other Person or Persons may call a special meeting of Stockholders.
Section 1.3 NOTICE OF MEETINGS. By or at the direction of the
Chairman or the secretary of the Corporation (the "Secretary") whenever
Stockholders are to take any action at a meeting, the Corporation will give a
written notice of that meeting to the Stockholders entitled to vote at that
meeting which states the place, date and hour of that meeting and, in the case
of a special meeting, the purpose or purposes for which that meeting is called.
Unless the Certificate of Incorporation, these Bylaws or applicable law
otherwise provides, the Corporation will give the written notice of any meeting
of Stockholders not less than 10 nor more than 60 days before the date of that
meeting. If mailed to any Stockholder, any such notice will be deemed given
(whether or not
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delivered) when deposited in the United States mail, postage prepaid, directed
to that Stockholder at his address as it appears in the stock records of the
Corporation.
Section 1.4 ADJOURNMENTS. Any meeting of Stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business it
might have transacted at the original meeting. If the adjournment is for more
than 30 days, or if after the adjournment the Board fixes a new record date for
the adjourned meeting, the Corporation will give, in accordance with Section
1.3, notice of the adjourned meeting to each Stockholder of record and entitled
to vote at the adjourned meeting.
Section 1.5 QUORUM. Except as the Certificate of Incorporation,
these Bylaws or applicable law otherwise provides: (i) at each meeting of
Stockholders the presence in person or by proxy of the holders of shares of
stock having a majority of the votes the holders of all outstanding shares of
stock entitled to vote at the meeting could cast will be necessary and
sufficient to constitute a quorum; and (ii) the holders of stock so present and
entitled to vote at any duly convened meeting at which the necessary quorum has
been ascertained may continue to transact business until that meeting adjourns
notwithstanding any withdrawal from that meeting of shares of stock counted in
determining the existence of that quorum. In the absence of a quorum, the
chairman of the meeting or the Stockholders so present may, by majority vote,
adjourn the meeting from time to time in the manner Section 1.4 provides until a
quorum attends. Shares of its own stock belonging to the Corporation or to
another corporation, limited liability company, partnership or other entity
(each, an "Entity"), if the Corporation, directly or indirectly, holds a
majority of the shares entitled to vote in the election of directors (or the
equivalent) of that other Entity, will be neither entitled to vote nor counted
for quorum purposes; provided, however, that the foregoing will not limit the
right of the Corporation to vote stock, including but not limited to its own
stock, it holds in a fiduciary capacity.
Section 1.6 ORGANIZATION. The Chairman will chair and preside over
any meeting of Stockholders at which he is present. The Board will designate the
chairman and presiding officer over any meeting of Stockholders from which the
Chairman is absent. The Secretary will act as secretary of meetings of
Stockholders, but in his absence from any such meeting the chairman of that
meeting may appoint any person to act as secretary of that meeting. The chairman
of any meeting of Stockholders will announce at that meeting the date and time
of the opening and the closing of the polls for each matter on which the
Stockholders will vote at that meeting.
Section 1.7 VOTING; PROXIES. (a) Except as the Certificate of
Incorporation otherwise provides, each Stockholder entitled to vote at any
meeting of Stockholders will be entitled to one vote for each share of capital
stock of the Corporation he holds which has voting power on the matter in
question. Each Stockholder entitled to vote at a meeting of Stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy, but no proxy will
be voted or acted on after three years from its date, unless that proxy provides
for a longer period. A proxy will be irrevocable if it states that it is
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irrevocable and if, and only so long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A Stockholder may revoke any
proxy he has given for a meeting which is not irrevocable by attending that
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by delivering a proxy in accordance with applicable law bearing a later
date to the Secretary. Proxies for use at any meeting of Stockholders must be
filed, before or at the time of that meeting, with the Secretary or such other
person as the Board by resolution may designate from time to time.
(b) The secretary of any meeting of Stockholders will take charge of
and canvass all ballots delivered at that meeting and will decide all questions
relating to the qualification of voters, the validity of proxies and the
acceptance or rejection of votes at that meeting, unless the chairman has
appointed an inspector or inspectors to decide those questions. Voting at
meetings of Stockholders: (i) need not be by written ballot unless the Board, in
its discretion, by resolution so requires or, in the case of any such meeting,
the chairman of that meeting, in his discretion, so requires; and (ii) unless
applicable law otherwise requires, need not be conducted by inspectors of
election unless so determined by the holders of shares of stock having a
majority of the votes the holders of all outstanding shares of stock entitled to
vote thereon which are present in person or by proxy at that meeting could cast.
(c) At all meetings of Stockholders at which a quorum is present for
the election of Directors, a plurality of the votes cast by the holders of
outstanding shares of stock of the Corporation entitled to vote in the election
of Directors will be sufficient to elect, except as the Certificate of
Incorporation may otherwise provide. In the case of any question to which the
stockholder approval policy of any national securities exchange or quotation
system on which capital stock of the Corporation is traded or quoted on the
Corporation's application, the requirements under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any provision of the Internal Revenue
Code of 1986, as amended, or the rules and regulations thereunder (the "Code")
applies, in each case for which question the Certificate of Incorporation, these
Bylaws or the General Corporation Law of the State of Delaware, as amended (the
"DGCL"), does not specify a higher voting requirement, that question will be
decided by the requisite vote that stockholder approval policy, Exchange Act
requirement or Code provision, as the case may be, specifies (or the highest
requisite vote if more than one applies). A majority of the votes cast on the
question whether to approve the appointment of independent public accountants
(if that question is submitted for a vote of Stockholders) will be sufficient to
approve. All other elections and questions which have properly come before any
meeting will, unless the Certificate of Incorporation, these Bylaws or
applicable law otherwise provides, be decided by the vote of the holders of
shares of stock of the Corporation present in person or by proxy at that meeting
and having a majority of the votes entitled to vote thereon.
Section 1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the Stockholders entitled to notice
of or to vote at any meeting of Stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment
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of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board by resolution may fix a record date, which record date: (i) must not
precede the date on which the Board adopts that resolution; (ii) in the case of
a determination of Stockholders entitled to vote at any meeting of Stockholders
or adjournment thereof, will, unless applicable law otherwise requires, not be
more than 60 nor less than 10 days before the date of that meeting; (iii) in the
case of a determination of Stockholders entitled to express consent to corporate
action in writing without a meeting, will not be more than 10 days from the date
on which the Board adopts the resolution fixing the record date; and (iv) in the
case of any other action, will not be more than 60 days prior to that other
action. If the Board does not fix a record date: (i) the record date for
determining Stockholders entitled to notice of or to vote at a meeting of
Stockholders will be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (ii) the record
date for determining Stockholders entitled to express consent to corporate
action in writing without a meeting will be (A) if applicable law does not
require a prior action by the Board, the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation in accordance with applicable law; and (B) if applicable law
requires prior action by the Board, at the close of business on the day on which
the Board adopts the resolution taking that prior action; and (iii) the record
date for determining Stockholders for any other purpose will be at the close of
business on the day on which the Board adopts the resolution relating thereto. A
determination of Stockholders of record entitled to notice of or to vote at a
meeting of Stockholders will apply to any adjournment of that meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
Section 1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary
will prepare and make, at least 10 days before each meeting of Stockholders, a
list of the Stockholders entitled to vote at that meeting which complies with
the requirements of Section 219 of the DGCL as in effect at that time.
Section 1.10 ELECTION OF DIRECTORS. (a) Subject to such rights of
the holders of any class or series of the Corporation's capital stock as the
Certificate of Incorporation may prescribe, only persons who are nominated in
accordance with the procedures this Section 1.10 sets forth will be eligible for
election by Stockholders as Directors. Nominations of persons for election to
the Board may be made at any meeting of Stockholders at which Directors are to
be elected: (i) by or at the direction of the Board or any Board Committee the
Board has duly designated and empowered to nominate persons for election as
Directors; or (ii) by any Stockholder who (A) is a Stockholder of record at the
time that Stockholder gives the notice this Section 1.10 specifies below, (B)
will be entitled to vote at that meeting in the election of the Director for
which that Stockholder is making the nomination and (C) complies with this
Section 1.10.
(b) For a Stockholder to bring any nomination of a person for
election as a Director properly before any meeting of Stockholders held after
the date the first registration of any class or series of the Corporation's
capital stock becomes effective under the Exchange Act (that date
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being the "Exchange Act Effective Date"), that Stockholder must have given
timely notice of that nomination (a "Nomination Notice") in proper written form
to the Secretary. To be timely, a Stockholder's Nomination Notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation: (i) if it relates to an election at any annual meeting of
Stockholders, not later than the close of business on the 90th day and not
earlier than the 120th day prior to the first anniversary of the preceding
year's annual meeting; provided, however, that (i) with respect to the first
annual meeting to be held after the Exchange Act Effective Date or in the event
that the date of the pending annual meeting is more than 30 days before or more
than 60 days after that anniversary date, that it will be timely if it is so
delivered not later than the last to occur of the close of business on (A) the
90th day prior to the pending annual meeting or (B) the 10th day following the
day on which the Corporation first makes a public announcement of the date of
the pending annual meeting; and (ii) if it relates to any special meeting of
Stockholders, not earlier than 120 days prior to that special meeting and not
later than the last to occur of the close of business on (A) the 90th day prior
to that special meeting or (B) the 10th day following the day on which the
Corporation first makes a public announcement of the date of that special
meeting. The public disclosure of an adjournment of any annual or special
meeting will not in any event commence a new time period for the giving of any
Nomination Notice.
(c) To be in proper written form, any Nomination Notice of a
Stockholder must: (i) set forth (A) as to each person whom that Stockholder
proposes to nominate for election as a Director, (1) the name, age and business
address of that person, (2) the principal occupation or employment of that
person, (3) the class or series and number of shares of capital stock of the
Corporation which that person owns beneficially or of record and (4) all other
information, if any, relating to that person which Section 14 of the Exchange
Act and the rules and regulations thereunder would require the Corporation or
that Stockholder to disclose in a proxy statement or any other filing in
connection with solicitations of proxies for an election of directors and (B) as
to that Stockholder and the beneficial owner, if any, of capital stock of the
Corporation on whose behalf the nomination is being made, (1) the name and
address of that Stockholder as they appear in the stock records of the
Corporation and the name and address of that beneficial owner, (2) the class or
series and the number of shares of capital stock of the Corporation which that
Stockholder and that beneficial owner each owns beneficially or of record, (3) a
description of all arrangements and understandings between that Stockholder or
that beneficial owner and each proposed nominee of that Stockholder and any
other person or persons (including their names) pursuant to which the
nomination(s) are to be made by that Stockholder, (4) a representation by that
Stockholder that he intends to appear in person or by proxy at that meeting to
nominate the person(s) named in that Nomination Notice and (5) all other
information, if any, relating to that Stockholder and that beneficial owner
which Section 14 of the Exchange Act and the rules and regulations thereunder
would require the Corporation or that Stockholder to disclose in a proxy
statement or any other filing in connection with solicitations of proxies for an
election of directors; and (ii) be accompanied by a written consent of each
person that Stockholder proposes to nominate for election as a Director to be
named as such a nominee and to serve as a Director if elected.
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(d) Except as the Certificate of Incorporation, these Bylaws or
applicable law otherwise provides, the chairman of any meeting of Stockholders
at which Directors are to be elected will have the power and duty to determine
whether nominations of persons for election as Directors have been made in
accordance with the procedures this Section 1.10 sets forth and, if that
chairman determines that any such nomination has not been made in compliance
with these procedures, to declare to that meeting that such nomination is
defective and will be disregarded.
(e) Notwithstanding anything in Section 1.10(b) to the contrary, if
the number of Directors to be elected at an annual meeting of Stockholders held
after the Exchange Act Effective Date is increased and the Corporation has not
made a public announcement (i) at least 90 days prior to the date of that
meeting, in the case of the first annual meeting of Stockholders held after the
Exchange Act Effective Date, or (ii) at least 100 days prior to the first
anniversary of the preceding year's annual meeting, in the case of any other
annual meeting of Stockholders held after the Exchange Act Effective Date, which
announcement (A) names all the nominees for Director of the Board or any duly
designated and empowered Board Committee or (B) specifies the size of the
increased Board, a Stockholder's Nomination Notice will be timely, but only with
respect to nominees for any new positions that increase creates, if that
Nomination Notice is delivered to, or mailed and received at, the principal
executive offices of the Corporation not later than the close of business on the
10th day following the day on which the Corporation first makes that public
announcement.
(f) For purposes of Section 1.11 and this Section 1.10, "public
announcement" means disclosure in a press release the Dow Jones News Service,
Associated Press or any comparable national news service in the United States
reports or in a document the Corporation publicly files with the Securities and
Exchange Commission (the "SEC") pursuant to the Exchange Act; provided, however,
that prior to the Exchange Act Effective Date, a written notice the Corporation
mails, postage prepaid, to Stockholders of record at their addresses as they
appear in the stock records of the Corporation will be a "public announcement"
three days after the date of that mailing.
(g) Notwithstanding the foregoing provisions of this Section 1.10, a
Stockholder also must comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters this
Section 1.10 sets forth.
Section 1.11 OTHER STOCKHOLDER BUSINESS. (a) At any annual meeting
the Corporation holds pursuant to Section 1.1, the Stockholders will transact
only such business, in addition to the election of Directors, as has been
properly brought before that meeting. Except as the Certificate of Incorporation
otherwise provides, to be brought properly before any annual meeting, business
other than the election of Directors ("Other Business") must be (i) business the
notice of that meeting (or any supplement thereto) given by or at the direction
of the Board specifies, (ii) business otherwise properly brought before that
meeting by or at the direction of the Board and (iii) business (A) properly
brought before that meeting by a Stockholder who (1) is a Stockholder of record
at the time that Stockholder gives the notice this Section 1.11 specifies below,
(2) will be
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entitled to vote on that business at that meeting and (3) complies with this
Section 1.11, (B) that is a proper subject for Stockholder action and (C) is
properly introduced at that meeting.
(b) For a Stockholder to bring any Other Business properly before
any annual meeting of Stockholders held after the Exchange Act Effective Date,
that Stockholder must have given timely notice thereof (a "Business Notice") in
proper written form to the Secretary. To be timely, a Stockholder's Business
Notice must be delivered to, or mailed and received at, the principal executive
offices of the Corporation not later than the close of business on the 90th day
and not earlier than the 120th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that with respect to the
first annual meeting to be held after the Exchange Act Effective Date or in the
event that the date of the pending annual meeting is more than 30 days before or
more than 60 days after that anniversary date, that Business Notice will be
timely if it is so delivered not later than the last to occur of the close of
business on (A) the 90th day prior to that pending annual meeting or (B) the
10th day following the day on which the Corporation first makes a public
announcement of the date of the pending meeting. The public disclosure of an
adjournment of any annual meeting will not in any event commence a new time
period for the giving of any Business Notice.
(c) To be in proper written form, any Business Notice of a
Stockholder must set forth: (i) as to each matter of Other Business that
Stockholder proposes to bring before an annual meeting, (A) a brief description
of that Other Business, (B) the reasons for conducting that Other Business at an
annual meeting and (C) each material interest in that Other Business of that
Stockholder and the beneficial owner, if any, of capital stock of the
Corporation on whose behalf that proposal is being made; and (ii) as to that
Stockholder and each such beneficial owner, (A) the name and address of that
Stockholder as they appear on the Corporation's books and the name and address
of that beneficial owner, (B) the class or series and the number of shares of
capital stock of the Corporation which that Stockholder and that beneficial
owner each owns beneficially or of record, (C) a description of all arrangements
and understandings between that Stockholder or that beneficial owner and any
other person or persons (including their names) in connection with that Other
Business and (D) a representation by that Stockholder that he intends to appear
in person or by proxy at that meeting to bring that Other Business before that
meeting.
(d) Except as applicable law otherwise provides, the chairman of any
annual meeting of Stockholders will have the power and duty to determine whether
proposals by Stockholders of any Other Business to be brought before that
meeting have been made in accordance with the procedures this Section 1.11 sets
forth and, if that chairman determines that any such proposal has not been made
in compliance with these procedures, to declare to that meeting that such
proposal is defective and will be disregarded.
(e) At any special meeting the Corporation holds pursuant to Section
1.2, the Stockholders will transact only such business as (i) the notice given
of that meeting pursuant to Section 1.3 sets forth and (ii) constitutes matters
incident to the conduct of that meeting as the chairman of that meeting
determines to be appropriate.
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(f) Notwithstanding the foregoing provisions of this Section 1.11,
after the Exchange Act Effective Date, a Stockholder also must comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters this Section 1.11 sets forth.
Section 1.12 APPROVAL OR RATIFICATION OF ACTS OR CONTRACTS BY
STOCKHOLDERS. The Board in its discretion may submit any act or contract for
approval or ratification at any annual meeting of Stockholders, or at any
special meeting of Stockholders called for the purpose of considering any such
act or contract, and any act or contract that the holders of shares of stock of
the Corporation present in person or by proxy at that meeting and having a
majority of the votes entitled to vote on that approval or ratification approve
or ratify will (provided that a quorum is present) be as valid and as binding on
the Corporation and on all Stockholders as if every Stockholder had approved or
ratified it.
Section 1.13 ACTION BY CONSENT OF STOCKHOLDERS. Unless the
Certificate of Incorporation otherwise provides, Stockholders may, prior to the
Exchange Act Effective Date but not thereafter, without a meeting, prior notice
or a vote, take any action they must or may take at any annual or special
meeting, if the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take that action at a
meeting at which all shares entitled to vote thereon were present sign a written
consent to that action which sets forth that action and cause the delivery of
that consent (by hand or by certified or registered mail, return receipt
requested) to the Corporation (i) at its registered office in the State of
Delaware or its principal place of business or (ii) to an officer or agent of
the corporation having custody of the books in which the Corporation records
minutes of proceedings or other actions of Stockholders. Stockholders may
execute any consent pursuant to this Section 1.12 in counterparts, all of which
together will constitute a single consent. The Corporation will give prompt
notice of the taking pursuant to this Section 1.12 of any action without a
meeting by less than unanimous written consent to those Stockholders who have
not consented to that action in writing.
Section 1.14 CONDUCT OF MEETINGS. The Board may adopt by resolution
such rules and regulations for the conduct of meetings of Stockholders as it
deems appropriate. Except to the extent inconsistent with those rules and
regulations, if any, the chairman of any meeting of Stockholders will have the
right and authority to prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of that chairman, are appropriate for the
proper conduct of that meeting. Those rules, regulations or procedures may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to Stockholders of record, their
duly authorized and constituted proxies or such other persons as the chairman of
the meeting may determine; (iv) restrictions on entry to the meeting after the
time fixed for the commencement thereof; and (v) limitations on the time
allotted to questions or comments by participants. Except to the extent the
Board or the chairman of any meeting otherwise prescribes, no rules or
parliamentary procedure will govern any meeting of Stockholders.
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ARTICLE II
BOARD OF DIRECTORS
Section 2.1 REGULAR MEETINGS. The Board will hold its regular
meetings at such places, on such dates and at such times as the Board by
resolution may determine from time to time, and any such resolution will
constitute due notice to all Directors of the regular meeting or meetings to
which it relates. By notice pursuant to Section 2.6, the Chairman or a majority
of the Board may change the place, date or time of any regular meeting of the
Board.
Section 2.2 SPECIAL MEETINGS. The Board will hold a special meeting
at any place or time whenever the Chairman or a majority of the Board by
resolution calls that meeting by notice pursuant to Section 2.6.
Section 2.3 TELEPHONIC MEETINGS. Members of the Board may hold and
participate in any Board meeting by means of conference telephone or similar
communications equipment that permits all persons participating in the meeting
to hear each other, and participation of any Director in a meeting pursuant to
this Section 2.3 will constitute the presence in person of that Director at that
meeting for purposes of these Bylaws, except in the case of a Director who so
participates only for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been called or convened in
accordance with applicable law or these Bylaws.
Section 2.4 ORGANIZATION. The Chairman will chair and preside over
meetings of the Board at which he is present. A majority of the Directors
present at any meeting of the Board from which the Chairman is absent will
designate one of their number as chairman and presiding officer over that
meeting. The Secretary will at as secretary of meetings of the Board, but in his
absence from any such meeting the chairman of that meeting may appoint any
person to act as secretary of that meeting.
Section 2.5 ORDER OF BUSINESS. The Board will transact business at
its meetings in such order as the Chairman or the Board by resolution will
determine.
Section 2.6 NOTICE OF MEETINGS. To call a special meeting of the
Board, the Chairman or a majority of the Board must give a timely written notice
to each Director of the time and place of, and the general nature of the
business the Board will transact at, all special meetings of the Board. To
change the time or place of any regular meeting of the Board, the Chairman or a
majority of the Board must give a timely written notice to each Director of that
change. To be timely, any notice this Section 2.6 requires must be delivered to
each Director personally or by mail, telegraph, telecopier or similar
communication at least one day before the meeting to which it relates; provided,
however, that notice of any meeting of the Board need not be given to any
Director who waives the requirement of that notice in writing (whether after
that meeting or otherwise) or is present at that meeting.
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Section 2.7 QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the
Board, the presence in person of a majority of the total number of Directors
then in office will constitute a quorum for the transaction of business, and the
participation by a Director in any meeting of the Board will constitute that
Director's presence in person at that meeting unless that Director expressly
limits that participation to objecting to the transaction of any business at
that meeting on the ground that the meeting has not been called or convened in
accordance with applicable law or these Bylaws. Except in cases in which the
Certificate of Incorporation or these Bylaws otherwise provide, the vote of a
majority of the Directors present at a meeting at which a quorum is present will
be the act of the Board.
Section 2.8 INFORMAL ACTION BY DIRECTORS. Unless the Certificate of
Incorporation or these Bylaws otherwise provides, the Board may, without a
meeting, prior notice or a vote, take any action it must or may take at any
meeting, if all members of the Board consent thereto in writing, and the written
consents are filed with the minutes of proceedings of the Board the Secretary
will keep.
ARTICLE III
BOARD COMMITTEES
Section 3.1 BOARD COMMITTEES. (a) The Board, by resolution a
majority of the Whole Board adopts, may designate one or more Board Committees
consisting of one or more of the Directors. The Board may designate one or more
Directors as alternate members of any Board Committee, who may replace any
absent or disqualified member at any meeting of that committee. The member or
members present at any meeting of any Board Committee and not disqualified from
voting at that meeting may, whether or not constituting a quorum, unanimously
appoint another Director to act at that meeting in any place of any member of
that committee who is absent from or disqualified to vote at that meeting.
(b) The Board by resolution may change the membership of any Board
Committee at any time and fill vacancies on any of those committees. A majority
of the members of any Board Committee will constitute a quorum for the
transaction of business by that committee unless the Board by resolution
requires a greater number for that purpose. The Board by resolution may elect a
chairman of any Board Committee. The election or appointment of any Director to
a Board Committee will not create any contract rights of that Director, and the
Board's removal of any member of any Board Committee will not prejudice any
contract rights that member otherwise may have.
(c) Pursuant to Section 3.1(a), the Board may designate an executive
committee (the "Executive Committee") to exercise, subject to applicable
provisions of law, all the powers of the Board in the management of the business
and affairs of the Corporation when the Board is not in session, including the
powers to (i) declare dividends and (ii) authorize the issuance by the
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Corporation of any class or series of its capital stock. The Executive Committee
will include the Chairman among its members.
(d) Each other Board Committee the Board may designate pursuant to
Section 3.1(a) will, subject to applicable provisions of law, have and may
exercise all the powers and authorities of the Board to the extent the Board
resolution designating that committee so provides.
Section 3.2 BOARD COMMITTEE RULES. Unless the Board otherwise
provides, each Board Committee may make, alter and repeal rules for the conduct
of its business. In the absence of those rules, each Board Committee will
conduct its business in the same manner as the Board conducts its business
pursuant to Article II.
ARTICLE IV
OFFICERS
Section 4.1 DESIGNATION. The officers of the Corporation will
consist of a chief executive officer ("CEO"), chief financial officer, chief
operating officer, chief accounting officer, president, secretary, treasurer and
such senior or other vice presidents, assistant secretaries, assistant
treasurers and other officers as the Board or the CEO may elect or appoint from
time to time. Any person may hold any number of offices of the Corporation.
Section 4.2 CEO. The CEO will, subject to the control of the Board:
(i) have general supervision and control of the affairs, business, operations
and properties of the Corporation; (ii) see that all orders and resolutions of
the Board are carried into effect; (iii) have the power to appoint and remove
all subordinate officers, employees and agents of the Corporation, except for
those the Board elects or appoints; and (iv) sign and execute, under the seal of
the Corporation, all contracts, instruments, mortgages and other documents
(collectively, "documents") of the Corporation which require that seal, except
as applicable law otherwise requires or permits any document to be signed and
executed and except as these Bylaws, the Board or the CEO authorize other
officers of the Corporation to sign and execute documents. The CEO also will
perform such other duties and may exercise such other powers as generally
pertain to his office or these Bylaws or the Board by resolution assigns to him
from time to time.
Section 4.3 POWERS AND DUTIES OF OTHER OFFICERS. The other officers
of the Corporation will have such powers and duties in the management of the
Corporation as the Board by resolution may prescribe and, except to the extent
so prescribed, as generally pertain to their respective offices, subject to the
control of the Board. The Board may require any officer, agent or employee to
give security for the faithful performance of his duties.
Section 4.4 TERM OF OFFICE, ETC. Each officer will hold office until
the first meeting of the Board after the annual meeting of Stockholders next
succeeding his election, and until his successor is elected and qualified or
until his earlier resignation or removal. No officer of the
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Corporation will have any contractual right against the Corporation for
compensation by reason of his election or appointment as an officer of the
Corporation beyond the date of his service as such, except as a written
employment or other contract otherwise may provide. The Board may remove any
officer with or without cause at any time, but any such removal will not
prejudice the contractual rights of that officer, if any, against the
Corporation. The Board by resolution may fill any vacancy occurring in any
office of the Corporation by death, resignation, removal or otherwise for the
unexpired portion of the term of that office at any time.
ARTICLE V
CAPITAL STOCK
Section 5.1 CERTIFICATES. Shares of capital stock of the Corporation
will be evidenced by certificates in such form or forms as the Board by
resolution may approve from time to time or, if and to the extent the Board so
authorizes by resolution, may be uncertificated. The Chairman, the president or
any vice president of the Corporation and the Secretary or any assistant
secretary of the Corporation may sign certificates evidencing certificated
shares. Any of or all the signatures and the Corporation's seal on each such
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before the
Corporation issues that certificate, the Corporation may issue that certificate
with the same effect as if he were such officer, transfer agent or registrar at
the date of that issue.
Section 5.2 TRANSFER OF SHARES. The Corporation may act as its own
transfer agent and registrar for shares of its capital stock or use the services
of such one or more transfer agents and registrars as the Board by resolution
may appoint from time to time. Shares of the Corporation's capital stock will be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives on
surrender and cancellation of certificates for a like number of shares.
Section 5.3 OWNERSHIP OF SHARES. The Corporation will be entitled to
treat the holder of record of any share or shares of its capital stock as the
holder in fact thereof and, accordingly, will not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it has express or other notice thereof, except
as the applicable laws of the State of Delaware otherwise provide.
Section 5.4 REGULATIONS REGARDING CERTIFICATES. The Board will have
the power and authority to make all such rules and regulations as it may deem
expedient concerning the issue, transfer and registration or the replacement of
certificates for shares of capital stock of the Corporation.
Section 5.5 LOST OR DESTROYED CERTIFICATES. The Board may determine
the conditions on which a new certificate of stock may be issued in place of a
certificate alleged to
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have been lost, stolen or destroyed and may, in its discretion, require the
owner of the allegedly lost, stolen or destroyed certificate or his legal
representative to give bond, with sufficient surety, to indemnify the
Corporation and each transfer agent and registrar against any and all losses or
claims that may arise by reason of the issue of a new certificate in the place
of the one allegedly so lost, stolen or destroyed.
ARTICLE VI
INDEMNIFICATION
Section 6.1 GENERAL. The Corporation will, to the fullest extent
applicable law as it presently exists permits, and to such greater extent as
applicable law hereafter may permit, indemnify and hold harmless each Indemnitee
from and against any and all judgments, penalties, fines (including excise
taxes), amounts paid in settlement and, subject to Section 6.2, Expenses
whatsoever arising out of any event or occurrence by reason of the fact that
such Indemnitee is or was a Director or an officer of the Corporation. The
Corporation may, but need not, indemnify and hold harmless any Indemnitee from
and against any and all judgments, penalties, fines (including excise taxes),
amounts paid in settlement and, subject to Section 6.2, Expenses whatsoever
arising out of any event or occurrence by reason of the fact that such
Indemnitee is or was an employee or agent of the Corporation or is or was
serving in another Corporate Status (other than as a Director or an officer of
the Corporation) at the written request of the Corporation.
Section 6.2 EXPENSES. If any Indemnitee is, by reason of his serving
as a director, officer, employee or agent of the Corporation, a party to and is
successful, on the merits or otherwise, in any Proceeding, the Corporation will
indemnify him against all his Expenses in connection therewith. If that
Indemnitee is not wholly successful in that Proceeding but is successful, on the
merits or otherwise, as to any Matter in that Proceeding, the Corporation will
indemnify him against all his Expenses relating to that Matter. The termination
of any Matter against which any Indemnitee is defending himself by dismissal of
that Matter with or without prejudice will constitute success of that Indemnitee
with respect to that Matter. If any Indemnitee is, by reason of any Corporate
Status other than his serving as a director, officer, employee or agent of the
Corporation, a party to and is successful, on the merits or otherwise, in any
Proceeding, the Corporation may, but need not, indemnify him against all his
Expenses in connection therewith. If any Indemnitee is, by reason of his
Corporate Status, a witness in any Proceeding, the Corporation may, but need
not, indemnify him against all his Expenses in connection therewith.
Section 6.3 ADVANCES. In the event of any threatened or pending
Proceeding in which any Indemnitee is a party or is involved and that may give
rise to a right of that Indemnitee to indemnification under this Article VI,
following written request to the Corporation by that Indemnitee, the Corporation
promptly will pay to that Indemnitee amounts to cover his Expenses in connection
with that Proceeding in advance of its final disposition on the receipt by the
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Corporation of (i) a written undertaking of that Indemnitee executed by or on
behalf of that Indemnitee to repay the advance if it ultimately is determined
pursuant to the provisions of this Article VI or by final judgment or other
final adjudication under the provisions of any applicable law that the
Indemnitee is not entitled to be indemnified by the Corporation pursuant to
these Bylaws and (ii) satisfactory evidence as to the amount of those Expenses.
Section 6.4 REQUEST FOR INDEMNIFICATION. To request indemnification,
any Indemnitee must submit to the Secretary a written claim or request therefor
which contains sufficient information to reasonably inform the Corporation about
the nature and extent of the indemnification or advance sought by that
Indemnitee. The Secretary will promptly advise the Board of each such request.
Section 6.5 NONEXCLUSIVITY OF RIGHTS. The rights of indemnification
and advancement of Expenses this Article VI provides are not exclusive of any
other rights to which any Indemnitee may at any time be entitled under
applicable law, the Certificate of Incorporation, these Bylaws, any agreement, a
vote of Stockholders or a resolution of Directors, or otherwise. No amendment,
alteration or repeal of this Article VI or any provision hereof will be
effective as to any Indemnitee for acts, events and circumstances that occurred,
in whole or in part, before that amendment, alteration or repeal. The provisions
of this Article VI will continue as to any Indemnitee whose Corporate Status has
ceased for any reason and will inure to the benefit of his heirs, executors and
administrators. Neither the provisions of this Article VI nor those of any
agreement to which the Corporation is a party will preclude the indemnification
of any person whom this Article VI does not specify as having the right to
receive indemnification or is not a party to any such agreement, but whom the
Corporation has the power or obligation to indemnify under the provisions of the
DGCL.
Section 6.6 INSURANCE AND SUBROGATION. The Corporation will not be
liable under this Article VI to make any payment of amounts otherwise
indemnifiable hereunder to or for the benefit of any Indemnitee if, but only to
the extent that, that Indemnitee has otherwise actually received such payment
under any insurance policy, contract or agreement or otherwise. In the event of
any payment hereunder to or for the benefit of any Indemnitee, the Corporation
will be subrogated to the extent of that payment to all the rights of recovery
of that Indemnitee, who shall execute all papers required and take all action
the Corporation reasonably requests to secure those rights, including execution
of such documents as are necessary to enable the Corporation to bring suit to
enforce those rights.
Section 6.7 SEVERABILITY. If any provision or provisions of this
Article VI shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired thereby; and, to the
fullest extent possible, the provisions of this Article VI will be construed so
as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
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<PAGE>
Section 6.8 CERTAIN ACTIONS WHERE INDEMNIFICATION IS NOT PROVIDED.
Notwithstanding any other provision of this Article VI, no person will be
entitled to indemnification or advancement of Expenses under this Article VI
with respect to any Proceeding, or any Matter therein, brought or made by that
person against the Corporation; provided, however, if any Indemnitee seeks a
judicial adjudication of or an award in arbitration to enforce his rights under,
or to recover damages for breach of, this Article VI, that Indemnitee will be
entitled to recover from the Corporation, and will be indemnified by the
Corporation against, all his Expenses in that judicial adjudication or
arbitration, but only if he prevails therein; and if it is determined in that
judicial adjudication or arbitration that he is entitled to receive part of, but
not all, the indemnification or advancement of expenses sought, his Expenses in
connection with that judicial adjudication or arbitration will be appropriately
prorated between those in respect of which this Section 6.8 entitles him to
indemnification and those he must bear.
Section 6.9 DEFINITIONS. For purposes of this Article VI:
"CORPORATE STATUS" describes the status of a person who is or
was a director, officer, employee or agent of the Corporation or of any
other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, provided that person is or was serving in that
capacity at the written request of the Corporation. For purposes of these
Bylaws, "serving at the written request of the Corporation" includes any
service by an Indemnitee (at the written request of the Corporation) which
imposes duties on or involves services by that Indemnitee with respect to
any employee benefit plan or its participants or beneficiaries.
"EXPENSES" of any person include all the following that are
actually and reasonably incurred by or on behalf of that person: all
reasonable attorneys' fees, retainers, court costs, transcript costs, fees
of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees and all
other disbursements or expenses of the types customarily incurred in
connection with prosecuting, defending, preparing to prosecute or defend,
investigating or being or preparing to be a witness in a Proceeding.
"INDEMNITEE" includes any person who is, or is threatened to
be made, a witness in or a party to any Proceeding as described in Section
6.1 or 6.2 hereof by reason of his Corporate Status.
"MATTER" is a claim, a material issue or a substantial request
for relief.
"PROCEEDING" includes any action, suit, alternate dispute
resolution mechanism, hearing or any other proceeding, whether civil,
criminal, administrative, arbitrative, investigative or mediative, any
appeal in any such action, suit, alternate dispute resolution mechanism,
hearing or other proceeding and any inquiry or investigation that could
lead to any such action, suit, alternate dispute resolution mechanism,
hearing or other
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<PAGE>
proceeding, except one (i) initiated by an Indemnitee to enforce his
rights under this Article VI or (ii) pending on or before the date of
adoption of these Bylaws.
Section 6.10 NOTICES. Promptly after receipt by any Indemnitee of
notice of the commencement of a Proceeding in respect of which he contemplates
seeking any indemnification or advance or reimbursement of Expenses pursuant to
this Article VI, that Indemnitee must notify the Corporation of the commencement
of that Proceeding; provided, however, that (i) any delay in so notifying the
Corporation will not constitute a waiver or release by that Indemnitee of any
rights hereunder and (ii) any omission by Indemnitee to so notify the
Corporation will not relieve the Corporation from any liability that it may have
to Indemnitee otherwise than under this Article VI. Any communication required
or permitted to the Corporation must be addressed to the Secretary at the
Corporation's principal executive offices, and any such communication to any
Indemnitee must be addressed to that Indemnitee's address as shown in the
Corporation's records, unless he specifies otherwise, and must be personally
delivered or delivered by overnight mail delivery. Any such notice will be
effective upon receipt.
Section 6.11 CONTRACTUAL RIGHTS. The right to be indemnified or to
the advancement or reimbursement of Expenses (i) is a contract right based on
good and valuable consideration pursuant to which any Indemnitee may sue as if
these provisions were set forth in a separate written contract between that
Indemnitee and the Corporation, (ii) is and is intended to be retroactive and
will be available as to events occurring prior to the adoption of these
provisions and (iii) will continue after any rescission or restrictive
modification of these provisions as to events occurring prior thereto.
ARTICLE VII
MISCELLANEOUS
Section 7.1 FISCAL YEAR. The Board by resolution will determine the
fiscal year of the Corporation.
Section 7.2 SEAL. The corporate seal will have the name of the
Corporation inscribed thereon and will be in such form as the Board by
resolution may approve from time to time.
Section 7.3 INTERESTED DIRECTORS; QUORUM. No contract or transaction
between the Corporation and one or more of its Directors or officers, or between
the Corporation and any other Entity in which one or more of its Directors or
officers are directors or officers (or hold equivalent offices or positions), or
have a financial interest, will be void or voidable solely for this reason, or
solely because the Director or officer is present at or participates in the
meeting of the Board or Board Committee which authorizes the contract or
transaction, or solely because his or their votes are counted for that purpose,
if: (i) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board or the Board
Committee, and the
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Board or Board Committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested Directors, even though
the disinterested Directors be less than a quorum; or (ii) the material facts as
to his relationship or interest and as to the contract or transaction are
disclosed or are known to the Stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of those
Stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board, a Board
Committee or the Stockholders. Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board or of a Board
Committee which authorizes the contract or transaction.
Section 7.4 FORM OF RECORDS. Any records the Corporation maintains
in the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time.
Section 7.5 BYLAW AMENDMENTS. The Board has the power to adopt,
amend and repeal from time to time the Bylaws of the Corporation, subject to the
right of Stockholders entitled to vote with respect thereto to amend or repeal
those Bylaws as adopted or amended by the Board. Bylaws of the Corporation may
be adopted, amended or repealed by the affirmative vote of the holders of at
least 66.7%of the combined voting power of the outstanding shares of all classes
of capital stock of the Corporation entitled to vote generally in the election
of Directors, voting together as a single class, at any annual meeting, or at
any special meeting if notice of the proposed amendment is contained in the
notice of that special meeting, or by the Board as specified in the preceding
sentence.
Section 7.6 NOTICES; WAIVER OF NOTICE. Whenever any notice is
required to be given to any Stockholder, Director or member of any Board
Committee under the provisions of the DGCL, the Certificate of Incorporation or
these Bylaws, that notice will be deemed to be sufficient if given (i) by
telegraphic, facsimile, cable or wireless transmission or (ii) by deposit of the
same in the United States mail, with postage paid thereon, addressed to the
person entitled thereto at his address as it appears in the records of the
Corporation, and that notice will be deemed to have been given on the day of
such transmission or mailing, as the case may be.
Whenever any notice is required to be given to any Stockholder or
Director under the provisions of the DGCL, the Certificate of Incorporation or
these Bylaws, a waiver thereof in writing signed by the person or persons
entitled to that notice, whether before or after the time stated therein, will
be equivalent to the giving of that notice. Attendance of a person at a meeting
will constitute a waiver of notice of that meeting, except when the person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Stockholders, the Board
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<PAGE>
or any Board Committee need be specified in any written waiver of notice unless
the Certificate of Incorporation or these Bylaws so require.
Section 7.7 RESIGNATIONS. Any Director or officer of the Corporation
may resign at any time. Any such resignation must be made in writing and will
take effect at the time specified in that writing, or, if that resignation does
not specify any time, at the time of its receipt by the Chairman or the
Secretary. The acceptance of a resignation will not be necessary to make it
effective, unless that resignation expressly so provides.
Section 7.8 FACSIMILE SIGNATURES. In addition to the provisions for
the use of facsimile signatures these Bylaws elsewhere specifically authorize,
facsimile signatures of any officer or officers of the Corporation may be used
as and whenever the Board by resolution so authorizes.
Section 7.9 RELIANCE ON BOOKS, REPORTS AND RECORDS. Each Director
and each member of any Board Committee designated by the Board will, in the
performance of his duties, be fully protected in relying in good faith on the
books of account or reports made to the Corporation by any of its officers, or
by an independent certified public accountant, or by an appraiser selected with
reasonable care by the Board or by any such committee, or in relying in good
faith upon other records of the Corporation.
Section 7.10 CERTAIN DEFINITIONAL PROVISIONS. (a) When used in these
Bylaws, the words "herein," "hereof" and "hereunder" and words of similar import
refer to these Bylaws as a whole and not to any provision of these Bylaws, and
the words "Article" and "Section" refer to Articles and Sections of these Bylaws
unless otherwise specified.
(b) 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.
(c) 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 7.11 CAPTIONS. Captions to Articles and Sections of these
Bylaws are included for convenience of reference only, and these captions do not
constitute a part hereof for any other purpose or in any way affect the meaning
or construction of any provision hereof.
End of Bylaws
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EXHIBIT 4.1
U.S. CONCRETE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK SEE REVERSE FOR CERTAIN
DEFINITIONS AND LEGENDS
THIS CERTIFIES THAT CUSIP 90333L 10 2
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE
OF $.001 PER SHARE OF THE COMMON STOCK OF
U.S. CONCRETE, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
and the shares represented hereby are issued and shall be subject to all the
provisions of the laws of the State of Delaware and to all of the provisions of
the Certificate of Incorporation and the By-Laws of the Corporation, as amended
from time to time (copies of which are on file at the office of the
Corporation), to all of which the holder of this certificate by acceptance
hereof assents. This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its duly authorized officers and its corporate seal to be hereto
affixed.
Dated:
____________________ [SEAL] _____________________
PRESIDENT SECRETARY
COUNTERSIGNED AND REGISTERED
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
<PAGE>
U.S. CONCRETE, INC.
The Corporation is authorized to issue Common Stock, par value $.001 per
share, and Preferred Stock, par value $.001 per share. The Board of Directors of
the Corporation has authority to fix the number of shares and the designation of
any series of Preferred Stock and to determine the powers, designations,
preferences and relative, participating, optional or other special rights
between classes of stock or series thereof of the Corporation, and the
qualifications, limitations or restrictions of such preferences and/or rights.
The Corporation will furnish without charge to each stockholder who so requests
a full statement of the foregoing as established from time to time by the
Certificate of Incorporation of the Corporation and by any certificate of
designation. Any such requests should be made to the Secretary of the
Corporation at the offices of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT-__________ Custodian____________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of
survivorship and not as tenants under Uniform Gifts to Minors
in common Act__________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received,_______________________________________________________
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint_____________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________
NOTICE:
THE SIGNATURE(S) TO THIS X___________________________________________
ASSIGNMENT MUST CORRES- (SIGNATURE)
POND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF X___________________________________________
THE CERTIFICATE IN EVERY (SIGNATURE)
PARTICULAR WITHOUT ALTER-
ATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO
S.E.C. RULE 17Ad-15.
- --------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
- --------------------------------------------------------------------------------
This certificate also evidences and entitles the holder hereof to certain Rights
as set forth in the Rights Agreement between U.S. Concrete, Inc. (the
"Company") and American Stock Transfer & Trust Company (the "Rights Agent")
dated as of May 10, 1999 as it may from time to time be supplemented or
amended (the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights may be redeemed, may be exchanged, may expire or may be evidenced by
separate certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge promptly after
receipt of a written request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights beneficially owned by or transferred to any Person
who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement), and certain transferees
thereof (as such terms are defined in the Rights Agreement), and certain
transferees thereof, will become null and void and will no longer be
transferable.
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
__________, 1999 by and among U.S. Concrete, Inc., a Delaware corporation
("USC"), the Holders listed on the signature pages hereof (the "Initial
Holders") and any Holder hereafter becoming a party hereto in accordance with
the provisions hereof.
PRELIMINARY STATEMENT
Each Initial Holder has received, or will receive on the IPO Closing
Date (as hereinafter defined), shares of common stock, par value $.001 per
share, of USC pursuant to an agreement with USC, and USC, in order to induce
that Initial Holder to enter into that agreement, has agreed to provide
registration rights on the terms this Agreement sets forth for the benefit of
that Initial Holder.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties to this Agreement agree
as follows:
Section 1. DEFINED TERMS. The following terms this Agreement uses
have the meanings this Section 1 assigns to them.
"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. This definition uses "control" to mean the possession,
directly or indirectly, of the power to direct or cause the direction of
the management or policies of a Person (whether through ownership of
capital stock of that Person, by contract or otherwise).
"Blue Sky Laws" has the meaning Section 4(f) specifies.
"Claims" has the meaning Section 10(a) specifies.
"Common Stock" means the common stock, par value $.001 per
share, of USC.
"Eligible Offering" has the meaning Section 3(a) specifies.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor thereto and the rules and regulations
thereunder.
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"Exempt Offering" means any offering by USC of shares of Common
Stock (i) in connection with or pursuant to any benefit, compensation,
incentive or savings plan or program in which any of the officers,
directors, employees or independent contractors of USC or any of its
subsidiaries participate, (ii) as consideration in any business
combination or other acquisition transaction, (iii) as the securities into
or for which other equity or debt securities are convertible or
exchangeable, or as the securities that may be acquired by the exercise of
options, warrants or other rights, in each case at a conversion, exchange
or exercise price representing a premium over the trading price of the
Common Stock at the time of the offering, (iv) made pursuant to Regulation
S under the Securities Act (or any similar provision then in force) or (v)
made only to existing holders of securities issued by USC.
"Holder" means at any time any Person then owning Registrable Common
and having the rights and obligations of a Holder and which (i) is an
Initial Holder, (ii) has been assigned those rights and obligations
pursuant to Section 9(a) or (iii) has become a Holder pursuant to Section
9(b).
"Indemnified Party" has the meaning Section 10(b) specifies.
"Initial Holder" has the meaning the preamble hereto specifies.
"IPO" means the first time a registration statement USC has filed
under the Securities Act and respecting an underwritten primary offering
by USC of shares of Common Stock becomes effective under the Securities
Act and USC issues and sells any of those registered shares.
"IPO Closing Date" means the date on which USC first receives
payment for shares of Common Stock it sells in the IPO.
"Inspector" has the meaning Section 4(e) specifies.
"Lockup Period" has the meaning Section 7 specifies.
"Person" means any natural person, sole proprietorship, corporation,
partnership, limited liability company, business trust, unincorporated
organization or association, estate or trust.
"Proceeding" has the meaning Section 10(b) specifies.
"Records" has the meaning Section 4(e) specifies.
"Red Herring Prospectus" means, as applied to any registration
statement USC files under the Securities Act to register unissued shares
of Common Stock for its public offering
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of those shares (other than in an Exempt Offering), the prospectus that
registration statement includes which is labeled "subject to completion"
and is first used in "roadshow" presentations by USC to potential
investors in connection with that offering.
"Registrable Common" means (i) the Common Stock USC issues to the
Initial Holders on or before the IPO Closing Date and (ii) the Common
Stock USC designates in writing as Registrable Common and issues to
Persons who become Holders pursuant to Section 9(b). For purposes of this
Agreement, a share of Registrable Common will cease to be Registrable
Common when (i) a registration statement covering that share has been
filed and become effective under the Securities Act and its Holder
distributes it by means of that effective registration statement, (ii) its
Holder distributes it to the public pursuant to Rule 144 or (iii) it may
be distributed to the public in the United States without being registered
for resale under the Securities Act or subject to the volume limitations
of Rule 144.
"Registration Notice" has the meaning Section 3(b) specifies.
"Related Party" means, as to any specified Person, any other Person
who is an officer, director or agent of the specified Person or who
controls the specified Person within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act.
"Requesting Holder" has the meaning Section 3(d) specifies.
"Request Notice" has the meaning Section 3(c) specifies.
"Restricted Period" means (i) the period from and including the date
hereof through and including the first anniversary of the IPO Closing Date
and, as applied to Persons who become Holders at the option of USC
pursuant to Section 9(b), (ii) the period USC designates in writing as
their "Restricted Period."
"Rule 144" means Rule 144 (or any similar or successor provision)
under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and
any successor thereto and the rules and regulations thereunder.
"SEC" means the Securities and Exchange Commission and any successor
thereto as the agency administering the Securities Act.
"Selling Holder" has the meaning Section 4(c) specifies.
"Sellers' Registration Statement" means a registration statement
filed by USC under the Securities Act to register shares of Registrable
Common for resale by Holders pursuant to the exercise of the registration
rights Section 3 provides.
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Section 2. OTHER DEFINITIONAL PROVISIONS. (a) This Agreement uses
the words "herein," "hereof," "hereto" and "hereunder" and words of similar
import to refer to this Agreement as a whole and not to any provision of this
Agreement.
(b) Whenever the context so requires, the singular number includes
the plural and vice versa, and a reference to one gender includes the other
genders.
(c) The word "including" (and, with correlative meaning, the word
"include") means including with limiting the generality of any description
preceding that word, and the verbs "shall" and "will" are used interchangeably
and have the same meaning.
(d) The term "underwriter," as used herein, does not include any
Holder.
Section 3. PIGGYBACK REGISTRATION RIGHTS. (a) If USC proposes to
register any shares of Common Stock for its own account under the Securities Act
at any time or times after the Restricted Period for a public offering, other
than an Exempt Offering, in the United States of those shares for cash (each
such public offering, other than an Exempt Offering, being an "Eligible
Offering"), then, at each of those times, each then Holder will, subject to the
terms and conditions hereof, be entitled to have such number of shares of that
Holder's Registrable Common as that Holder may request in accordance with
Section 3(c) registered under the Securities Act for disposition by means of the
registration statement relating to that Eligible Offering.
(b) In the case of each Eligible Offering, USC will deliver to each
then Holder a written notice of that offering (a "Registration Notice") at least
15 days prior to its filing with the SEC of the registration statement, or the
amendment thereto, which includes the Red Herring Prospectus for that offering.
USC will briefly describe in each Registration Notice the Eligible Offering to
which that notice relates and inform the addressee that it has 10 days within
which to request to include shares of its Registrable Common in the registration
statement for that offering.
(c) Any Holder desiring to participate in any Eligible Offering must
deliver to USC within 10 days after the Holder receives the Registration Notice
for that offering a written notice to that effect (a "Request Notice") which
specifies the number of shares of the Holder's Registrable Common the Holder
desires to have registered under the Securities Act for inclusion in that
offering. Any Holder that does not deliver a Request Notice for an Eligible
Offering within that 10-day period will be deemed to have waived its right to
participate in that offering unless USC agrees otherwise in writing.
(d) Any holder that delivers a Request Notice relating to an
Eligible Offering on a timely basis, or as otherwise agreed by USC, pursuant to
Section 3(c) (each such Holder being a "Requesting Holder") will be entitled to
offer and sell shares of its Registrable Common in that offering on the terms
and conditions on which USC offers and sells shares of Common Stock in that
offering if the Requesting Holder complies with the applicable provisions of
Sections 5, 6 and 11; provided, however, that: (i) USC may reserve to itself the
right to be the exclusive grantor of any
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underwriter's overallotment option; and (ii) the shares of Registrable Common
any Requesting Holder will be entitled to offer and sell will be subject to
reduction as Section 3(e) provides.
(e) USC will have the right to determine the aggregate size of each
Eligible Offering and to limit the number of shares of Registrable Common to be
included in that offering without reducing the number of shares of Common Stock
to be offered by USC in that offering, as follows: (i) if the lead managing
underwriter selected by USC for an Eligible Offering (or, if that offering will
not be underwritten, a financial advisor to USC) determines that marketing
factors render necessary or advisable a limitation on the number of shares of
Registrable Common to be included in that offering, USC will be required to
include in that offering only such number of shares of Registrable Common, if
any, as that lead managing underwriter (or financial advisor, as the case may
be) believes (as evidenced by its written advice to USC) will not jeopardize the
success of the primary offering by USC; and (ii) if USC limits the number of
shares of Registrable Common that Requesting Holders may have included in any
Eligible Offering pursuant to clause (i), but does not exclude all shares of
Registrable Common from that offering, the maximum number of shares of
Registrable Common to be included in that offering on behalf of each of those
Requesting Holders will be the product of (A) the number of shares of
Registrable Common that Requesting Holder has specified in its Request Notice
relating to that offering multiplied by (B) the fraction the numerator of which
is the number of shares of Registrable Common that Requesting Holder has
specified in its Request Notice relating to that offering and the denominator of
which is the aggregate number of shares of Registrable Common all those
Requesting Holders have specified in their Request Notices relating to that
offering. If USC reasonably determines, on the basis of advice of its tax
counsel or independent accountants, that the inclusion of a Requesting Holder's
shares of Registrable Common in any Eligible Offering likely would jeopardize
the nonrecognition status under the Internal Revenue Code of 1986, as amended,
of any acquisition transaction effected by USC, USC will be entitled to limit
the number of shares that Requesting Holder may have included in that offering
to such number, if any, as USC determines will not jeopardize that status.
(f) In connection with each Eligible Offering, USC, in its sole
discretion, will determine whether to proceed with or terminate that offering
and to select any underwriter or underwriters to administer that offering.
Section 4. REGISTRATION PROCEDURES. Whenever USC must include shares
of Registrable Common in a registration statement relating to an Eligible
Offering pursuant to Section 3, it will, subject to the applicable terms and
conditions hereof:
(a) cause those shares to be registered under the Securities Act by
means of a Seller's Registration Statement, in either the original filing
thereof or in a pre-effective amendment to a previously filed registration
statement;
(b) prior to the first to occur of (i) the sale by the Holders
thereof, by means of the Sellers' Registration Statement after it becomes
effective under the Securities Act, of all the shares of Registrable
Common covered by the Sellers' Registration Statement when it
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becomes effective under the Securities Act and the elapse of the period in
which a dealer is required by the Securities Act to deliver a prospectus
in connection with its offer and sale of any of those shares and (ii) the
withdrawal by USC of the Sellers' Registration Statement pursuant to
Securities Act Rule 477, prepare and file with the SEC under the
Securities Act such amendments (including post-effective amendments) to
the Sellers' Registration Statement and supplements to the related
prospectus as are necessary (A) to reflect the plan of distribution
contemplated by the Sellers' Registration Statement and (B) so that (1)
neither the Sellers' Registration Statement nor that prospectus contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and (2) both the Sellers' Registration Statement and that
prospectus comply in all material respects with all other applicable legal
requirements;
(c) provide to each Holder named as a selling stockholder in the
Sellers' Registration Statement in accordance with such Holder's exercise
of the registration rights Section 3 provides (each a "Selling Holder")
such number of prospectuses (including preliminary prospectuses) and other
documents incident to the offering and sale of that Selling Holder's
Registrable Common by means of the Sellers' Registration Statement as that
Selling Holder from time to time reasonably may request;
(d) prior to the time the Seller's Registration Statement or any
post-effective amendment thereto becomes effective under the Securities
Act, provide an opportunity to review and comment with respect to that
document to one counsel selected by Selling Holders holding a majority of
the shares of Registrable Common covered by that document and reasonably
satisfactory to USC;
(e) provide to each Selling Holder, any managing underwriter
participating in the distribution of the shares of Registrable Common
covered by the Sellers' Registration Statement and any accountant, lawyer
or other professional retained by that Selling Holder or managing
underwriter (each an "Inspector") reasonable access to appropriate
officers and employees of USC to ask questions and obtain information
reasonably requested by that Inspector in connection with that Sellers'
Registration Statement; provided, however, that in connection with any
such access or request, each Selling Holder will and will cause each of
its representative Inspectors to, and USC may require each other Inspector
to, (i) cooperate to the extent reasonably practicable to minimize any
disruption in the operation by USC of its business, (ii) keep confidential
all records, documents and information USC advises are confidential or of
a proprietary nature (collectively, the "Records") and (iii) not use the
information it obtains from the Records as a basis for any market
transactions in the securities of USC unless and until that information is
in the public domain or otherwise becomes publicly available;
(f) use its good-faith efforts to register and qualify the
Registrable Common covered by the Sellers' Registration Statement under
the applicable securities or "blue sky"
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laws (collectively, "Blue Sky Laws") of such jurisdictions as any Selling
Holder reasonably may request; provided that it will not be required to
(i) qualify generally to do business in any jurisdiction where it
otherwise would not be required to qualify but for this paragraph (f),
(ii) subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction;
(g) notify each Selling Holder promptly (i) when it is informed that
the Sellers' Registration Statement or any post-effective amendment
thereto becomes effective under the Securities Act, (ii) of any request by
the SEC for an amendment to the Sellers' Registration Statement or a
supplement to any related prospectus, (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Sellers' Registration
Statement or any order preventing or suspending the use of any related
prospectus or the initiation or threat by the SEC of any proceeding for
any of those purposes, (iv) of the suspension of the qualification of any
shares of Registrable Common covered by the Sellers' Registration
Statement for sale in any jurisdiction or the initiation or threat of any
proceeding for that purpose and (v) of any determination by it that any
event has occurred or fact exists which makes untrue any statement of a
material fact included in the Sellers' Registration Statement or any
related then current prospectus or which requires the making of a change
in the Sellers' Registration Statement or that prospectus in order that
the same will not contain any untrue statement of a material fact or omit
to state a material fact required to be contained therein or necessary to
make the statements therein not misleading;
(h) if any order is issued which (i) suspends the effectiveness of
the Sellers' Registration Statement, (ii) suspends or prevents the use of
any related then current prospectus or (iii) suspends the qualification of
any shares of Registrable Common covered by the Sellers' Registration
Statement for sale in any jurisdiction, use commercially reasonable
efforts to obtain the withdrawal of that order;
(i) if the Eligible Offering to which the Sellers' Registration
Statement relates is being underwritten by underwriters, (i) enter into
agreements customary at the time (including an underwriting or purchase
agreement in then-customary form) as those underwriters reasonably may
request in order to facilitate the disposition of the shares of
Registrable Common in that offering, (ii) use reasonable diligence to
obtain an opinion of legal counsel (who may be its general counsel)
covering such matters as are then customarily covered by opinions
addressed to those underwriters by an issuer's counsel and (iii) use
reasonable diligence to obtain a "comfort" letter or letters from its
independent public accountants in their customary form and covering such
matters of the type then customarily covered by "comfort" letters as those
underwriters reasonably may request; and
(j) otherwise use its good-faith efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings statement
that (i) covers a period of at least 12 months beginning
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within three months after the effective date of the Sellers' Registration
Statement and (ii) satisfies the provisions of Section 11(a) of the
Securities Act.
Section 5. UNDERWRITING ARRANGEMENTS. No Holder will be permitted to
participate in any registration hereunder of securities being underwritten and
offered for resale by underwriters unless the Holder (i) agrees to sell the
Holder's Registrable Common on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve those
arrangements, (ii) enters into a written agreement with the managing underwriter
or the representative of the underwriters in such form and containing such
provisions as are then customary in the securities business for such an
arrangement between those underwriters and issuers of USC's size and investment
stature and (iii) completes and executes all questionnaires, powers of attorney,
indemnities and other documents, and obtains such spousal or other consents, as
are reasonably required under the terms of those arrangements and this
Agreement. If a Selling Holder disapproves of the proposed terms of any such
underwriting, it may elect to withdraw therefrom by written notice to USC and
the managing underwriter, delivered not less than 10 days before the Sellers'
Registration Statement is first declared effective under the Securities Act.
Section 6. RULE 144 REPORTING. USC will:
(i) make and keep public information available (as those terms are
understood and defined in Rule 144) at all times from and after 90 days
following the IPO Closing Date;
(ii) use its good-faith efforts to file with the SEC in a timely
manner all reports and other documents Section 13 or 15(d) of the Exchange
Act, as applicable, requires it to file with the SEC; and
(iii) so long as a Holder owns shares of Registrable Common, deliver
to the Holder, on the Holder's request, a written statement as to whether
it is in compliance with the requirements referred to in clause (ii) above
(if it is then subject to those requirements).
Section 7. MARKET STANDOFF. Each Holder agrees, to the extent
permitted by applicable law, that, for so long as the Holder holds shares of
Registrable Common, the Holder will not, except as Section 3 permits, sell,
transfer or otherwise dispose of in a public transaction (including through put
or short-sale arrangements) shares of Common Stock in the period (i) beginning
10 days prior to the effectiveness under the Securities Act of any registration
statement covering shares of Common Stock being publicly offered in an Eligible
Offering or in an Exempt Offering of the type specified in clause (iii) of the
definition of Exempt Offering and (ii) ending 90 days following the date of that
effectiveness (each such period being a "Lockup Period"). USC will provide each
Holder written notice of any Lockup Period.
Section 8. REGISTRATION EXPENSES. (a) Except as Section 8(b)
provides, USC will pay or otherwise bear all the expense attributable to the
registration of Registrable Common under the Securities Act for sale pursuant to
Section 3, including all the following: (i) registration and
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filing fees payable under the Securities Act or Blue Sky Laws; (ii) fees and
expenses incurred in complying with Blue Sky Laws, including the reasonable fees
and disbursements of counsel incurred in that connection; (iii) printing
expenses; (iv) messenger and delivery expenses; (v) USC's internal expenses,
including the salaries and expenses of its employees; (vi) fees and expenses
attributable to the listing of the Registrable Common on each securities
exchange (including, for this purpose, the Nasdaq National Market) on which the
Common Stock is then listed or included at USC's initiation; (vii) registrar and
transfer agents' fees; (viii) fees and disbursements of USC's counsel and
independent certified public accountants; (ix) securities act liability
insurance premiums (if USC elects to obtain that insurance); and (x) fees and
expenses of any special experts or other Persons USC retains in connection with
its compliance with this Agreement.
(b) Each Selling Holder will pay or otherwise bear all underwriting
commissions and discounts and transfer taxes attributable to that Selling
Holder's sale or other disposition of shares of Registrable Common, and each
Holder will pay or otherwise bear (i) the fees and expenses of that Holder's
counsel and any other special experts or Persons that Holder retains in
connection with any Seller's Registration Statement or the sale or other
disposition of that Holder's Registrable Common and (ii) that Holder's internal
expenses, including the salaries and expenses of that Holder's employees.
Section 9. TRANSFERS AND ADDITIONAL GRANTS OF REGISTRATION RIGHTS.
(a) A Holder may not transfer the registration rights this Agreement affords the
Holder to any other Person except as follows: (i) a Holder who is a natural
person may transfer those rights to a member of his immediate family or a trust
for the benefit of one or more members of his immediate family; (ii) a Holder
that is a corporation or other entity may transfer those rights to an Affiliate
of the Holder which also is a corporation or other entity; and (iii) a Holder
may transfer those rights to any other Holder; provided, that any such transfer
will be permitted only if the transferee executes an addendum to this Agreement,
in a form satisfactory to USC, in which that transferee agrees to comply with
and otherwise be bound by all the terms and conditions hereof.
(b) USC may, without the consent of any Holder, extend the
registration rights this Agreement provides to additional Persons who become
holders of Common Stock after the date hereof, in each case by entering into one
more addenda to this Agreement with those Persons pursuant to which, for all
purposes hereof, those Persons will become Holders and any shares of Common
Stock to which those addenda refer will become Registrable Common. Nothing
herein will limit or otherwise restrict the ability or right of USC to grant to
any Person any registration or similar rights in the future respecting shares of
Common Stock or any other securities USC may issue, whether pursuant to the
provisions of this Section 9 or otherwise.
Section 10. INDEMNIFICATION; CONTRIBUTION. (A) INDEMNIFICATION BY
USC USC will, to the extent applicable law permits, indemnify each Selling
Holder who sells shares of Registrable Common by means of a Sellers'
Registration Statement and each of that Selling Holder's Related Parties
against, and hold each of those Persons harmless from and in respect of, any and
all claims, damages, losses, liabilities and expenses (including reasonable
legal expenses) whatsoever
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(collectively, "Claims") that arise from or are based on any untrue statement or
alleged untrue statement of a material fact contained in that Sellers'
Registration Statement or any prospectus (including any preliminary prospectus)
forming a part thereof, or any amendment thereof or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, except insofar as those
Claims arise out of or are based on any such untrue statement or omission or
allegation thereof based on information furnished in writing to USC by or on
behalf of that Selling Holder expressly for use therein. In connection with any
underwritten offering of shares of Registrable Common, USC will indemnify and
hold harmless each participating underwriter and each of that underwriter's
Related Parties on either (i) substantially the same basis on which it will
indemnify each Selling Holder and that Selling Holder's Related Parties pursuant
to this Section 10(a) or (ii) such other basis as underwriters customarily
obtain from issuers at the time of that offering. Notwithstanding the foregoing,
USC's obligations to indemnify and hold harmless pursuant to this Section 10(a)
with respect to any Claim (or action or proceeding in respect thereof) that
arises from or is based on any untrue or alleged untrue statement contained in,
or any omission or alleged omission from, any preliminary prospectus will not
inure to the benefit of any Selling Holder or underwriter or its Related Parties
if it is determined that (i) a copy of the prospectus used to confirm the sale
of shares of Registrable Common to the Person asserting that claim was not sent
or given to that Person at or prior to the written confirmation of that sale,
(ii) the untrue statement or alleged untrue statement or the omission or alleged
omission was corrected by that prospectus and (iii) it was the responsibility of
that Selling Holder or that underwriter (or any dealer acquiring those shares
directly or indirectly from that underwriter) to send or give that prospectus to
that Person.
(b) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Each Person claiming
indemnification from USC pursuant to this Section 10 (an "Indemnified Party")
will, promptly after that Indemnified Party becomes aware of any assertion or
commencement of any action or proceeding against that Indemnified Party in
respect of which indemnity may be sought from USC (a "Proceeding"), promptly
notify USC in writing of the Proceeding; provided, that an Indemnified Party's
failure to so notify USC will not relieve USC from any liability it may have to
that Indemnified Party otherwise than pursuant to the provisions of this Section
10. If any Proceeding is brought against any Indemnified Party and that
Indemnified Party duly notifies USC thereof: (i) USC will have the right, at its
expense, to assume the defense thereof, including the employment of counsel; and
(ii) the Indemnified Party will have the right to employ separate counsel in the
Proceeding and participate in the defense thereof, but the Indemnified Party
will pay the fees and expenses of that separate counsel unless (A) USC has
agreed in writing to pay those fees and expenses or (B) the named parties to the
Proceeding (including any impleaded parties) include both the Indemnified Party
and USC, and counsel advises the Indemnified Party in writing that one or more
legal defenses may be available to the Indemnified Party which is or are
different from or additional to those available to USC (in which case, if the
Indemnified Party notifies USC in writing that the Indemnified Party elects to
employ separate counsel at the expense of USC, USC will not have the right to
assume the defense of the Proceeding on behalf of the Indemnified Party; it
being understood, however, that USC will not, in connection with any one
Proceeding or separate but
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substantially similar or related Proceedings in the same jurisdiction and
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate law firm (together with appropriate
local counsel) at any time for all Indemnified Parties). USC will not be liable
for any settlement of any Proceeding which any Indemnified Party effects without
USC's written consent.
(c) INDEMNIFICATION BY SELLING HOLDERS. Each Selling Holder will, to
the extent applicable law permits, indemnify USC and each of its Related Parties
against, and hold each of those Persons harmless from and in respect of, Claims
to the same extent as the indemnity from USC to that Selling Holder in Section
10(a), but only with respect to information that is furnished by or on behalf of
that Selling Holder expressly for use in a Sellers' Registration Statement or
any prospectus (including any preliminary prospectus) forming a part thereof, or
any amendment thereof or supplement thereto. If any action or proceeding is
brought against USC or any of its Related Parties in respect of which any of
those Persons may seek indemnity from a Selling Holder pursuant to this Section
10(c), that Selling Holder will have the rights and duties given to USC, and
each of those Persons will have the rights and duties given to that Selling
Holder and that Selling Holder's Related Parties, by Section 10(b). Each Selling
Holder also will, to the extent applicable law permits, indemnify and hold
harmless the underwriters of the shares of Registrable Common offered by that
Selling Holder on substantially the same basis on which USC will indemnify and
hold harmless those Persons pursuant to Section 10(a).
(d) CONTRIBUTION. If the indemnification this Section 10 provides
for is unavailable to any party intended to be indemnified pursuant to this
Section 10 in respect of any Claims referred to herein, the parties who would
have indemnified that party in the contemplation of this Section 10 will, in
lieu of providing that indemnification, contribute to the amount paid or payable
by that party as a result of those Claims, as follows:
(i) as between USC and the Selling Holders, on the one hand, and the
underwriters of shares of Registrable Common, on the other hand, (A) in
such proportion as is appropriate to reflect the relative benefits
received by USC and the Selling Holders and by those underwriters from the
offering of those shares or, if that allocation is not permitted by
applicable law, (B) in such proportion as is appropriate to reflect not
only those relative benefits, but also the relative faults of USC and the
Selling Holders and of those underwriters in connection with the
statements or omissions that resulted in those Claims, as well as any
other relevant equitable considerations; and
(ii) as between USC, on the one hand, and each Selling Holder, on
the other hand, in such proportion as is appropriate to reflect the
relative faults of USC and of that Selling Holder in connection with those
statements or omissions, as well as any other relevant equitable
considerations.
The relative benefits received by USC and the Selling Holders, on the one hand,
and the underwriters participating in the underwritten offering of shares of
Registrable Common, on the other hand, will
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<PAGE>
be deemed to be in the same proportion as the total proceeds from that offering
(including shares of Common Stock, if any, being offered by USC), net of
underwriting discounts and commissions, but before deducting expenses, bear to
the total amount of underwriting discounts and commissions received by those
underwriters in that offering, while (i) relative faults of USC and the Selling
Holders and of those underwriters will be determined by reference to, among
other facts, whether the statements or omissions that resulted in the Claims in
respect of which contribution is being made are or relate to information
supplied by USC and the Selling Holders or by those underwriters and (ii) the
relative faults of USC and of the Selling Holders will be determined by
reference to, among other facts, (A) whether those statements or omissions are
or relate to information supplied by USC or by the Selling Holders and (B) those
Persons' relative intent, knowledge, access to information and opportunity to
correct those statements or omissions or prevent them from being made. USC and
the Selling Holders agree it would not be just or equitable if contribution
pursuant to this Section 10(d) were to be determined by pro rata allocation
(even if the underwriters, if any, were to be treated as one entity for this
purpose) or by any other allocation method that does not take into account the
equitable considerations referred to in this Section 10(d).
(e) LIMITATIONS ON CONTRIBUTION. No underwriter will be required to
contribute to USC or the Selling Holders, pursuant to Section 10(d) or
otherwise, any amount in excess of the amount by which (i) the total price at
which the shares of Registrable Common underwritten by it and distributed to the
public were offered to the public exceeds (ii) the amount of any damages it
otherwise has been required to pay by reason of the statements or omissions that
resulted in the Claims in respect of which contribution is being made, and no
Selling Holder will be required to contribute to USC or any underwriter,
pursuant to Section 10(d) or otherwise, any amount in excess of the amount by
which (i) the total price at which that Selling Holder's shares of Registrable
Common were offered to the public exceeds (ii) the amount of any damages that
Selling Holder otherwise has been required to pay by reason of those statements
or omissions. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation. If
indemnification is available under this Section 10, the indemnifying parties
will indemnify each indemnified party to the full extent Sections 10(a) and (c)
provide without regard to the relative fault of any Person or any other
equitable consideration referred to in Section 10(d).
Section 11. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. Except as
otherwise provided herein, the provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless USC has obtained the written consent
of Holders of at least 51% of the shares of Registrable Common then outstanding.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder 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 Houston, Texas business day next
following the day
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<PAGE>
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 or
referred to below (or at such other address as that party may designate by
written notice to each other party in accordance herewith):
(A) if to a Holder, at the most current address given by that Holder
to USC in a writing making specific reference to this Agreement, with a
copy (which will not constitute notice for purposes of this Agreement) to
such legal counsel, if any, as that Holder may designate in that writing;
and
(B) if to USC, at the following address:
U.S. Concrete, Inc.
1360 Post Oak Boulevard, Suite ____
Houston, Texas 77065
Attn: Chief Financial Officer
Telecopy: (713) ________
with copies to: Baker & Botts, L.L.P.
One Shell Plaza
Houston, Texas 77002-4995
Attn: Ted W. Paris, Esq.
Telecopy: (713) 229-1522
(c) SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit
of and be binding on the heirs, executors, administrators, successors and
assigns of each of the parties hereto.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed will be deemed to be an original and all of which taken
together will constitute one and the same agreement.
(e) HEADINGS AND REFERENCES. The headings in this Agreement are for
convenience of reference only and will not limit or otherwise affect the meaning
hereof. References herein to "Sections" are to Sections of this Agreement unless
otherwise indicated.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY WITHIN THAT STATE.
(g) SEVERABILITY. If any one or more of the provisions herein, or
the application thereof in any circumstances, is invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of that provision in every other respect and of the remaining
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<PAGE>
provisions contained herein will not be in any way impaired thereby, it being
intended by each party hereto that all the rights and privileges of all parties
hereto will be enforceable to the fullest extent permitted by law.
(h) ENTIRE AGREEMENT; TERMINATION. The parties hereto intend that
this Agreement will be considered for all purposes as the final expression, and
a complete and exclusive statement, of their mutual agreement and understanding
in respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties to this Agreement with
respect to that subject matter.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
U.S. CONCRETE, INC.
By: _____________________________________
Eugene P. Martineau
President and Chief Executive Officer
HOLDERS:
MAIN STREET MERCHANT PARTNERS II, L.P.
By: _____________________________________
Name: _______________________________
Title: ______________________________
AMERICAN READY MIX, L.L.C.
By:______________________________________
Name: _______________________________
Title: ______________________________
_________________________________________
Eugene P. Marineau
_________________________________________
Michael W. Harlan
_________________________________________
William T. Albanese
_________________________________________
Daniel C. Albanese
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<PAGE>
_________________________________________
Lauren M. Albanese
_________________________________________
Thomas J. Albanese
_________________________________________
Nicole M. Albanese
_________________________________________
Jennifer A. Albanese
_________________________________________
Michelle L. Albanese
_________________________________________
Monte E. Newman, trustee of the Monte E.
Newman Revocable Trust
_________________________________________
Murry S. Simpson, trustee of the CSS 1998
GRAT
_________________________________________
James E. McNair, independent trustee of the
CSS 1998 GRAT
_________________________________________
Cora S. Simpson, trustee of the MSS 1998
GRAT
_________________________________________
James E. McNair, independent trustee of the
MSS 1998 GRAT
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<PAGE>
_________________________________________
Edmund G. Simpson
_________________________________________
Virginia A. Simpson
_________________________________________
Robert Evans
_________________________________________
Neal J. Vannucci
_________________________________________
Gloria Satterfield
_________________________________________
Nino Campagna
_________________________________________
William Monlux
_________________________________________
Michael D. Mitschele
-17-
EXHIBIT 4.9
FUNDING AGREEMENT
THIS FUNDING AGREEMENT (this "Agreement"), is made as of September
10, 1998 by and between RMX Industries, Inc., a Delaware corporation (the
"Company"), and Main Street Merchant Partners II, L.P., a Delaware limited
partnership ("Sponsor").
PRELIMINARY STATEMENT
The Company proposes to acquire a number of companies (each, a
"Founding Company") in the ready-mixed concrete and related products industry
(the "Proposed Acquisitions") for combinations of cash and common stock of the
Company ("Common Stock") prior to any initial underwritten public offering of
Common Stock by the Company.
The Company desires to obtain up to $3,000,000.00 of financing to
pay the fees and expenses of its legal counsel and independent public
accountants, its organizational expenses and the various other expenses the
Company expects to incur up to the time the Proposed Acquisitions close
(collectively, the "Expenses"). To the date hereof, Sponsor has paid an
aggregate of $45,000.00 of Expenses on behalf of the Company (the "Previously
Advanced Amount"), and Sponsor is willing to make that commitment on the terms
and subject to the conditions this Agreement hereinafter sets forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements this Agreement contains, the parties hereto hereby agree as follows:
ARTICLE I
THE COMMITMENT
Section 1.01 THE ADVANCES. (a) Subject to the terms and conditions
of this Agreement, Sponsor will make advances (the "Advances") to the Company
from time to time between the date hereof and the Termination Date (as
hereinafter defined) up to an aggregate principal amount of $3,000,000.00,
including the Previously Advanced Amount. The term "Termination Date" means the
earliest of (i) September 30, 1999, (ii) the date on which the Company first
effects the acquisition of one or more Founding Companies (the "Closing Date")
or (iii) the tenth calendar day after either party to this Agreement receives
written notice of termination from the other party hereto (which notice may be
given by either party hereto at any time in its sole discretion).
Section 1.02 THE PROMISSORY NOTE. When the Company executes and
delivers this Agreement to Sponsor, the Company also will execute and deliver to
Sponsor a Promissory Note
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in the form of Exhibit A hereto (the "Note"). The Note will evidence the
Company's obligation to repay the Previously Advanced Amount and all Advances
Sponsor makes pursuant to this Agreement.
Section 1.03 PROCEDURE FOR ADVANCES. Between the date hereof and the
Termination Date, the Company may request an Advance hereunder by delivering to
Sponsor a written or oral request for Advance (a "Request for Advance"). A
Request for Advance may request that Sponsor make the Advance to the Company or
directly to such third parties as the Request for Advance specifies. Any amounts
Sponsor pays to third parties pursuant to such a direction in a Request for
Advance will be deemed to be made on behalf of the Company and, to the extent
those amounts constitute expenses, those amounts will constitute expenses of the
Company for all purposes and the Company will be the owner of any and all
benefits attributable to those expenses. Within five business days after Sponsor
receives any Request for Advance from the Company, Sponsor will notify the
Company in writing as to whether or not Sponsor will make the Advance requested
thereby and the date by which Sponsor will make the Advance. Notwithstanding any
provision hereof to the contrary, Sponsor may decline to make any Advance
hereunder for any reason in its sole discretion.
Section 1.04 REPAYMENT OF THE NOTE. The Note will become due and
payable on the Termination Date.
Section 1.05 INTEREST RATE. The Advances will bear interest at the
rate of 6% per annum unless an Event of Default (as defined in Section 5.01)
occurs and is continuing. On the occurrence and during the continuance of an
Event of Default, the Advances will bear interest at the rate of 10% per annum.
Interest on the Note will be computed on the basis of a year of 365 or 366 days,
as the case may be, and will be payable on the Termination Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Sponsor that all the
following representations this Article II sets forth are as of the date of this
Agreement, and will be on each date Sponsor makes an Advance, true and correct:
Section 2.01 ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to (i) conduct its business as now
conducted and as proposed to be conducted, (ii) enter into and perform its
obligations under this Agreement and (iii) issue and perform its obligations
under the Note.
Section 2.02 PROPOSED ACQUISITIONS. The Company has provided to
Sponsor a copy of each letter of intent it heretofore has entered into with
respect to any Proposed Acquisition, if any.
2
<PAGE>
Section 2.03 NO LITIGATION. No claims, actions, suits, proceedings
or investigations are pending or, to the knowledge of the Company, threatened
against the Company. The Company is not subject to any continuing court or
administrative order, writ, injunction or decree applicable to it or its assets
or operations. No outstanding judgments against the Company exist.
Section 2.04 NO GOVERNMENTAL APPROVALS. No authorization, approval,
consent or order of, or registration, declaration or filing with, any court or
governmental body is required by or on behalf of the Company in connection with
the Company's execution or performance of this Agreement or the Note. To the
Company's knowledge, the Company and its subsidiaries are conducting their
respective businesses and operations in compliance with all governmental rules
and regulations applicable thereto, including, without limitation, those
relating to occupational safety, health and employment practices, and none of
them is in violation or default in any material respect under any statute, law,
rule, ordinance, judgment, order, decree or other governmental authorization or
approval applicable to it, except for any such violation or default that would
not result in a material adverse effect on the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SPONSOR
Sponsor represents and warrants to the Company as follows:
Section 3.01 AUTHORITY OF SPONSOR. Sponsor has all requisite
authority to enter into this Agreement and to perform all the obligations
required to be performed by Sponsor under this Agreement.
Section 3.02 NO GOVERNMENTAL APPROVALS. No authorization, approval,
consent or order of, or registration, declaration or filing with, any court or
governmental body is required by or on behalf of Sponsor in connection with
Sponsor's execution or performance of this Agreement.
ARTICLE IV
CONDITIONS TO ADVANCES
Section 4.01 CONDITIONS. Sponsor will not be obligated to make any
Advance unless it has received the Note, duly executed and delivered by the
Company and has notified the Company in writing that Sponsor will make the
Advance requested in a Request for Advance pursuant to Section 1.03. In
addition, Sponsor will not be obligated to make any Advance unless on the
applicable date it is to make that Advance (and after giving effect to the
requested Advance): (i) all the representations and warranties of the Company in
this Agreement are true and correct in all material respects; and (ii) no
Default or Event of Default (as defined in Section 5.01) exists.
3
<PAGE>
ARTICLE V
EVENTS OF DEFAULT AND CONSEQUENCES
Section 5.01 EVENTS OF DEFAULT. For purposes of this Agreement, the
occurrence of any one or more of the following events is an "Event of Default"
(and the occurrence of an event that, but for the passage of time or the giving
of notice or both, would be an Event of Default is a "Default"):
(i) the failure of the Company to pay any amount due under the Note
when it becomes due;
(ii) the Company (A) voluntarily seeks, consents to or acquiesces in
the benefit or benefits of any Debtor Relief Law (as hereinafter defined)
or (B) becomes party to (or becomes the subject of) any proceeding any
Debtor Relief Law provides, other than as a creditor or claimant, that
could suspend or otherwise adversely affect the rights this Agreement and
the Note afford Sponsor (or the then current holder of the Note) (unless
in the event that proceeding is involuntary, the petition instituting the
same is dismissed within 90 days of the filing of same) (as used herein,
the term "Debtor Relief Law" means the Bankruptcy Code of the United
States of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency,
reorganization or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally); or
(iii) any material representation or warranty made by the Company
herein at any time proves to have been materially incorrect when made.
Section 5.02 CONSEQUENCES. If an Event of Default Section 5.01(ii)
describes exists, Sponsor's commitment to make Advances automatically will
terminate and the entire unpaid balance of the Advances automatically will
become due and payable without any action of any kind by Sponsor. If any other
Event of Default exists, Sponsor may do any one or more of the following: (i)
declare the entire unpaid balance of all or any part of the Advances immediately
due and payable; (ii) reduce any claim to judgment; and (iii) exercise any and
all other legal or equitable rights afforded by this Agreement or the Note or
the laws of the State of New York or any other applicable jurisdiction. The
Company waives presentment and demand for payment, protest, notice of intention
to accelerate, notice of acceleration and notice of protest and nonpayment. No
waiver of a Default or an Event of Default by Sponsor will be deemed a waiver of
any other then existing or subsequent Default or Event of Default. No delay or
omission by Sponsor in exercising any right under this Agreement or the Note
will impair that right or be construed as a waiver of that right, nor will any
single partial exercise of any right preclude any other or further exercise of
that or any other right.
4
<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.01 REMEDIES NOT EXCLUSIVE. No remedy any provision of this
Agreement confers is intended by either party hereto to be exclusive of any
other remedy, and each and every remedy will be cumulative and in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. The election of any one or more remedies by
either party hereto will not constitute a waiver of the right to pursue other
available remedies.
Section 6.02 PARTIES BOUND; ASSIGNMENT. Except as this Agreement
otherwise expressly provides, this Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person will have
any right, benefit or obligation hereunder. The Company may assign its rights
and obligations hereunder to any corporation of which it becomes a wholly owned
subsidiary, but these rights and obligations are not otherwise assignable
without the prior written consent of Sponsor.
Section 6.03 NOTICES. All notices, reports, records or other
communications that are required or permitted to be given to the parties under
this Agreement will be sufficient in all respects if given in writing and
delivered in person, by telecopy, by overnight courier or by registered or
certified mail, postage prepaid, return receipt requested, to the receiving
party at the following address:
If to Sponsor: Main Street Merchant Partners II, L.P.
1360 Post Oak Blvd, Suite 800
Houston, Texas 77056
Attention: Vincent D. Foster
If to the Company:RMX Industries, Inc.
1360 Post Oak Blvd, Suite 800
Houston, Texas 77056
Attention: Michael W. Harlan
or to such other address as such party may have given to the other party by
notice pursuant to this Section 6.03. Notice will be deemed given on the date of
delivery, in the case of personal delivery or telecopy, or on the delivery or
refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
Section 6.04 GOVERNING LAW. This Agreement will be construed and
interpreted, and the rights of the parties hereto will be determined in
accordance with, the laws of the State of New York, without regard to any
conflicts of law provisions thereof.
5
<PAGE>
Section 6.05 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, and the Note constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. Except as this Agreement sets forth, no
warranties, representations or other agreements between the parties exist in
connection with the subject matter hereof. No supplement, modification or waiver
of any of the provisions of this Agreement will be binding unless it is
specifically designated to be a supplement, modification or waiver of this
Agreement and is executed in writing by each party to be bound thereby.
Section 6.06 FURTHER ASSURANCES. From time to time hereafter and
without further consideration, each party hereto will execute and deliver such
documents and instruments and take such actions as the other party hereto may
reasonably request in order to more effectively consummate the transactions this
Agreement contemplates or as shall be reasonably necessary or appropriate in
connection with the carrying out of the parties' respective obligations
hereunder or the purposes of this Agreement.
Section 6.07 SEVERABILITY. If any one or more of the provisions
herein, or the application thereof in any circumstances, is invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions herein will not be in any way impaired thereby, it being intended by
the parties hereto that all their respective rights and privileges hereunder
will be enforceable to the fullest extent applicable law permits.
Section 6.08 NO PARTNERSHIP. Nothing in this Agreement creates or is
intended by the parties hereto to create any partnership or joint venture
between Sponsor and the Company.
Section 6.09 NO RECOURSE TO OTHERS. No stockholder, director,
officer, incorporator, controlling person, employee or agent of the Company will
have any liability for (i) any obligations of the Company on the Note or under
this Agreement or (ii) any claim based on, in respect of or by reason of those
obligations or their creation, and Sponsor, for itself and its successor and
assigns and any subsequent holder of the Note, waives and releases all those
liabilities.
Section 6.10 MULTIPLE COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which will be deemed an original, but all
of which together will constitute one and the same agreement.
Section 6.11 HEADINGS AND REFERENCES. Headings of Sections are for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement. References in this Agreement to
"Sections" are to Sections of this Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
RMX INDUSTRIES, INC.
By: /S/ MICHAEL W. HARLAN
Michael W. Harlan
Chief Financial Officer
MAIN STREET MERCHANT PARTNERS II, L.P.
By:/s/SAM W. HUMPHREYS
Sam W. Humphreys
Managing Director
7
<PAGE>
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY BE
SOLD OR OTHERWISE TRANSFERRED ONLY IF THE HOLDER HEREOF COMPLIES WITH THAT LAW
AND OTHER APPLICABLE SECURITIES LAWS.
PROMISSORY NOTE
$3,000,000.00 September 10, 1998
FOR VALUE RECEIVED, the undersigned, RMX Industries, Inc., a Delaware
corporation ("Maker"), hereby promises to pay to the order of Main Street
Merchant Partners II, L.P., a Delaware limited partnership ("Payee"), at such
address as Payee specifies in writing to Maker, the principal sum of Three
Million United States Dollars (U.S. $3,000,000.00) or, if less, the aggregate
principal amount of all Advances (this and certain other terms this Promissory
Note (this "Note") uses, but does not define, having the meanings the Funding
Agreement referred to below assigns to them) made by Payee to Maker, at the time
specified in the Funding Agreement. The Funding Agreement prescribes when the
unpaid principal amount hereof will become payable. Maker promises to pay
interest on the unpaid principal amount hereof until that principal amount is
repaid in full at the rate per annum of 6%; provided, that during the
continuation of each Event of Default, if any, that rate per annum will be 10%.
When the principal amount of this Note becomes payable, the interest accrued
hereon also will become payable; provided, however, that if the principal amount
of this Note does not become due and payable on or before the first anniversary
of the date of this Note, an installment of interest on this Note will become
due and payable on that anniversary. This Note is the Note referred to in, and
is entitled to the benefits of, the Funding Agreement dated as of September 10,
1998, by and between Maker and Payee (as supplemented, modified and amended from
time to time, the "Funding Agreement"), which Funding Agreement contains among
its provisions certain provisions for the acceleration of the maturity of this
Note on the happening of certain stated events.
EXECUTED as of the date set forth above.
RMX INDUSTRIES, INC.
By:___________________________________
Michael W. Harlan
Chief Financial Officer
A-1
EXHIBIT 10.1
1999 INCENTIVE PLAN
OF
U.S. CONCRETE, INC.
1. ESTABLISHMENT OF THIS PLAN. U.S. Concrete, Inc., a Delaware
corporation (the "Company"), hereby establishes this 1999 Incentive Plan of U.S.
Concrete, Inc. (this "Plan"), effective as of January 1, 1999. References in
this Plan to "Paragraphs" are to Paragraphs of this Plan.
2. DEFINITIONS. The following terms this Plan uses have the
following respective meanings:
"Annual Director Award Date" means, for each calendar year beginning
on or after the IPO Closing Date, the first business day of the month next
succeeding the date on which the Annual Meeting is held in that year.
"Annual Meeting" means any annual meeting of the Company's
stockholders the Company holds pursuant to Section 211(b) of the Delaware
General Corporation Law.
"Authorized Officer" means the CEO (or any other senior officer of
the Company to whom the CEO delegates, by written notice to the Committee
of that delegation, authority to execute any Award Agreement).
"Award" means an Employee Award, a Director Award or an Independent
Contractor Award.
"Award Agreement" means any Employee Award Agreement, Director Award
Agreement or Independent Contractor Award Agreement.
"Board" means the Board of Directors of the Company.
"Cash Award" means an award denominated in cash.
"CEO" means at any time the chief executive officer of the Company
at that time.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means the Compensation Committee of the Board or any
other committee of the Board which the Board designates by a written
resolution to administer this Plan.
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"Common Stock" means the Common Stock, par value $.001 per share, of
the Company.
"Company" means U.S. Concrete, Inc., a Delaware corporation.
"Director" means an individual serving as a member of the Board.
"Director Award" means the grant under this Plan of a Director
Option or Director Restricted Stock.
"Director Award Agreement" means a written agreement between the
Company and a Participant who is a Nonemployee Director which sets forth
the terms, conditions and limitations applicable to a Director Award
granted to that Nonemployee Director.
"Director Options" means Nonqualified Options granted to Nonemployee
Directors pursuant to Paragraph 9(b).
"Director Restricted Stock" means Restricted Stock granted to
Nonemployee Directors pursuant to Paragraph 9(c).
"Disability" of a Nonemployee Director means the Nonemployee
Director is unable to perform the duties of a member of the Board for a
continuous period of more than 90 days by reason of any medically
determinable physical or mental impairment.
"Dividend Equivalents" means, with respect to shares of Restricted
Stock, an amount equal to all dividends and other distributions (or the
economic equivalent thereof) that are payable to stockholders of record
during the Restriction Period applicable to those shares on a like number
of shares of Common Stock.
"Employee" means any salaried employee of the Company or any of its
Subsidiaries.
"Employee Award" means the grant under this Plan of any Option, SAR,
Stock Award, Cash Award or Performance Award, whether granted singly or in
combination or tandem with any other Award, to a Participant who is an
Employee on such terms and subject to such conditions and limitations as
the Committee may establish pursuant to this Plan.
"Employee Award Agreement" means a written agreement between the
Company and a Participant who is an Employee which sets forth the terms,
conditions and limitations applicable to an Employee Award granted to that
Employee.
"Fair Market Value" of a share of Common Stock means, as of a
particular date, (i) if shares of Common Stock are listed on a national
securities exchange, the mean between the highest and lowest sales price
per share of Common Stock on the consolidated transaction reporting system
for the principal national securities exchange on which shares of Common
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<PAGE>
Stock are listed on that date, or, if no such sale is so reported on that
date, on the last preceding date on which such a sale was so reported,
(ii) if shares of Common Stock are not so listed but are quoted on the
Nasdaq National Market, the mean between the highest and lowest sales
price per share of Common Stock reported by the Nasdaq National Market on
that date, or, if no such sale is so reported on that date, on the last
preceding date on which such a sale was so reported, (iii) if the Common
Stock is not so listed or quoted, the mean between the closing bid and
asked price on that date, or, if there are no quotations available for
that date, on the last preceding date for which those quotations are
available, as reported by the Nasdaq Stock Market, or, if not reported by
the Nasdaq Stock Market, by the National Quotation Bureau Incorporated, or
(iv) if shares of Common Stock are not publicly traded, the most recent
value determined by an independent appraiser the Company appoints for that
purpose. For purposes of the Director Options to be awarded on the IPO
Closing Date pursuant to Paragraph 9(b), the Company has determined that
the Fair Market Value of a share of Common Stock on the IPO Closing Date
will be the IPO Price.
"Incentive Option" means an Option intended to comply with Section
422 of the Code.
"Independent Contractor" means a person providing services to the
Company or any of its Subsidiaries otherwise than as an Employee or a
Nonemployee Director.
"Independent Contractor Award" means the grant under this Plan of
any Nonqualified Stock Option, SAR, Stock Award, Cash Award or Performance
Award, whether granted singly or in combination or tandem with any other
Award, to a Participant who is an Independent Contractor on such terms and
subject to such conditions and limitations as the Committee may establish
pursuant to this Plan.
"IPO" means the first time a registration statement the Company has
filed under the Securities Act of 1933, as amended, and respecting an
underwritten primary offering by the Company of shares of Common Stock
becomes effective under that Act and the Company issues and sells any of
the shares registered by that registration statement.
"IPO Closing Date" means the date on which the Company first
receives payment for the shares of Common Stock it sells in the IPO.
"IPO Price" has the meaning Paragraph 9(b) specifies.
"Independent Contractor Award Agreement" means a written agreement
between the Company and a Participant who is an Independent Contractor
which sets forth the terms, conditions and limitations applicable to an
Independent Contractor Award granted to that Independent Contractor.
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"Nonemployee Director" has the meaning Paragraph 4(b) specifies.
"Nonqualified Option" means an Option that is not an Incentive
Option.
"Option" means a right to purchase a specified number of shares of
Common Stock at a specified price.
"Participant" means an Employee, Nonemployee Director or Independent
Contractor to whom an Award has been made under this Plan.
"Performance Award" means an award to a Participant who is an
Employee or Independent Contractor the earning of which is subject to the
attainment of one or more Performance Goals.
"Performance Goal" means a standard the Committee establishes to
determine in whole or in part whether a Performance Award will be earned.
"Restricted Stock" means any Common Stock whose transfer is
restricted or which is subject to forfeiture provisions as the Award
Agreement relating thereto provides.
"Restriction Period" means a period of time beginning as of the
effective date as of which an Award of Restricted Stock is made and ending
as of the date on which the Common Stock subject to that Award is no
longer restricted as to its transfer or subject to forfeiture provisions.
"SAR" means a right to receive a payment, in cash or Common Stock,
equal to the excess of the Fair Market Value or other specified valuation
of a specified number of shares of Common Stock on the date the right is
exercised over a specified strike price, in each case as the Committee
determines.
"Stock-based Awards Limitations" has the meaning Paragraph 8(b)
specifies.
"Stock Award" means an award in the form of Common Stock or units
denominated in Common Stock.
"Subsidiary" means: (i) in the case of a corporation, any
corporation of which the Company directly or indirectly owns shares
representing more than 50% of the combined voting power of the shares of
all classes or series of capital stock of that corporation which have the
right to vote generally on matters submitted to a vote of the stockholders
of that corporation; and (ii) in the case of a partnership or other
business entity not organized as a corporation, any such business entity
of which the Company directly or indirectly owns more than 50% of the
voting, capital or profits interests.
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3. OBJECTIVES. The Company has designed this Plan (i) to attract and
retain key Employees, qualified Nonemployee Directors and Independent
Contractors, (ii) to encourage the sense of proprietorship of these persons in
the Company and (iii) to stimulate the active interest of these persons in the
development and financial success of the Company by making Awards.
4. ELIGIBILITY. (a) EMPLOYEES. Employees assigned or to be assigned
positions of responsibility and whose performance, in the judgment of the
Committee, can have a significant effect on the success of the Company are
eligible for Employee Awards.
(b) DIRECTORS. Directors who are not employees of the Company or any
of its Subsidiaries ("Nonemployee Directors") are eligible for Director Awards.
(c) INDEPENDENT CONTRACTORS. Independent Contractors providing, or
who will provide, services to the Company or any of its Subsidiaries are
eligible for Independent Contractor Awards.
5. COMMON STOCK AVAILABLE FOR AWARDS. Subject to the provisions of
Paragraph 15, as of any date within any calendar quarter there will be available
for Awards granted wholly or partly in Common Stock (including rights or options
that may be exercised for or settled in Common Stock) an aggregate of the
greater of (i) 2,000,000 shares of Common Stock or (ii) 15% of the number of
shares of Common Stock issued and outstanding on the last day of the immediately
preceding calendar quarter, of which an aggregate of not more than 300,000
shares will be available for Director Awards. No more than 1,500,000 shares of
Common Stock will be used for Awards of Incentive Options. Shares of Common
Stock which are the subject of Awards that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of Common Stock or in a manner such
that all or some of the shares covered thereby are not issued to a Participant
or are exchanged for a consideration that does not involve Common Stock will
again immediately become available for Awards. The Committee may from time to
time adopt and observe such procedures concerning the counting of shares against
the Plan maximum as it may deem appropriate. The Board and the appropriate
officers of the Company will from time to time take whatever actions are
necessary to file any required documents with governmental authorities, stock
exchanges and transaction reporting systems to ensure that shares of Common
Stock are available for issuance pursuant to Awards.
6. ADMINISTRATION. (a) The Committee will administer this Plan.
(b) Subject to the provisions hereof, the Committee will have full
and exclusive power and authority to administer this Plan and to take all
actions this Plan specifically contemplates or are necessary or appropriate in
connection with the administration hereof. The Committee also will have full and
exclusive power to interpret this Plan and to adopt such rules, regulations and
guidelines for carrying out this Plan as it may deem necessary or proper, all of
which powers will be exercised in the best interests of the Company and in
keeping with the objectives of this Plan. Except with respect to Director
Awards, the Committee may, in its discretion, provide for the
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extension of the exercisability of any Award, accelerate the vesting or
exercisability of any Award, eliminate or make less restrictive any restrictions
any Award contains, waive any restriction or other provision of this Plan or any
Award or otherwise amend or modify any Award in any manner that is either (i)
not adverse to the Participant to whom that Award was granted or (ii) consented
to in writing by that Participant. The Committee may grant an Employee Award to
any individual who has agreed in writing to become an Employee within six months
after the date of that agreement, provided that the effectiveness of that Award
will be subject to the condition that the individual actually becomes an
Employee within that time period. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in this Plan or in any Award in the
manner and to the extent the Committee deems necessary or desirable to further
the purposes of this Plan. Any decision of the Committee in the interpretation
and administration of this Plan will lie within its sole and absolute discretion
and will be final, conclusive and binding on all parties concerned.
(c) No Committee member or Company officer to whom the Committee
delegates authority pursuant to Paragraph 7 will be liable for any action that
person takes or omits to take in connection with the performance of any duties
under this Plan, except for his or her own willful misconduct or as any
applicable statute expressly provides.
7. DELEGATION OF AUTHORITY. The Committee may delegate to the CEO
and to other senior officers of the Company its duties under this Plan on such
terms and subject to such conditions or limitations as the Committee may
establish.
8. EMPLOYEE AND INDEPENDENT CONTRACTOR AWARDS. (a) The Committee
will determine the type or types of Employee Awards to be made and will
designate from time to time the Employees who are to receive Employee Awards. An
Employee Award Agreement will (i) evidence each Employee Award, (ii) contain
such terms, conditions and limitations as the Committee determines in its sole
discretion and (iii) be signed by the Participant to whom that Employee Award is
made and an Authorized Officer. Employee Awards may consist of those this
Paragraph 8(a) lists and may be granted singly or in combination or tandem with
other Employee Awards. Employee Awards also may be made in combination or tandem
with, in replacement of or as alternatives to grants or rights under this Plan
or any other employee plan of the Company or any of its Subsidiaries, including
the plan of any acquired entity. An Employee Award may provide for the grant or
issuance of additional, replacement or alternative Employee Awards on the
occurrence of specified events, including the exercise of the original Employee
Award granted to a Participant. All or part of an Employee Award may be subject
to conditions the Committee establishes, which may include, but are not limited
to, continuous service with the Company and its Subsidiaries, achievement of
specific business objectives, increases in specified indices, attainment of
specified growth rates and other comparable measurements of performance. If a
Participant holding an Employee Award ceases to be an Employee, any unexercised,
deferred, unexercisable, unvested or unpaid portion of that Employee Award will
be treated as the applicable Employee Award Agreement sets forth.
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(i) OPTION. An Employee Award may be in the form of an Incentive
Option or a Nonqualified Option. Unless the Committee specifies otherwise
in the case of any Nonqualified Option, the price at which any share of
Common Stock may be purchased on the exercise of any Option will be not
less than the Fair Market Value of a share of the Common Stock on the date
of grant of that Option, and the Committee will determine the other terms,
conditions and limitations applicable to each Option, including its term
and the date or dates on which it becomes exercisable.
(ii) SAR. An Employee Award may be in the form of an SAR the terms,
conditions and limitations applicable to which, including its term and the
date or dates on which it becomes exercisable, the Committee will
determine.
(iii) STOCK AWARD. An Employee Award may be in the form of a Stock
Award the terms, conditions and limitations applicable to which the
Committee will determine.
(iv) CASH AWARD. An Employee Award may be in the form of a Cash
Award the terms, conditions and limitations applicable to which the
Committee will determine.
(v) PERFORMANCE AWARD. An Employee Award may be in the form of a
Performance Award that will be paid or become vested or otherwise
deliverable solely on account of the attainment of one or more
pre-established, objective Performance Goals the Committee establishes
prior to the earlier to occur of (A) 90 days after the commencement of the
period of service to which the Performance Goal relates or (B) the elapse
of 25% of that period (as scheduled in good faith at the time the goal is
established), and in any event while the outcome is substantially
uncertain. A Performance Goal is objective if a third party knowing the
relevant facts could determine whether the goal is met. A Performance Goal
may be based on one or more business criteria, including, but not limited
to, those that apply to the individual, one or more lines or classes of
products or services of the Company, one or more business divisions,
groups or units of the Company, or the Company as a whole, and may include
one or more of the following: increased revenue, net income, stock price,
market share, earnings per share, return on equity, return on assets or
decrease in costs. Unless otherwise stated, a Performance Goal need not be
based on an increase or positive result under a particular business
criterion and could include, for example, maintaining the status quo or
limiting economic losses (measured, in each case, by reference to specific
business criteria). It is the intent of this Plan to conform with the
standards of Section 162(m) of the Code and Treasury Regulation ss.
1.162-27(e)(2)(i) or any successor law or regulation in the case of
Performance Awards, and those provisions will guide the Committee in
establishing those goals and interpreting this Plan. Before any
compensation based on the achievement of Performance Goals is paid, the
Committee must certify in writing that the applicable Performance Goals
were, in fact, satisfied. Subject to the foregoing provisions, the
Committee will determine the terms, conditions and limitations applicable
to Performance Awards.
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(b) The following limitations will apply to each Employee Award:
(i) no Participant may be granted, during any one-year period,
Employee Awards consisting of Options or SARs that are exercisable for
more than 250,000 shares of Common Stock;
(ii) no Participant may be granted, during any one-year period,
Stock Awards covering or relating to more than 10,000 shares of Common
Stock (this limitation and the limitation clause (i) above provides being
the "Stock-based Awards Limitations"); and
(iii) no Participant may be granted Employee Awards consisting of
cash or in any other form this Plan permits (other than Employee Awards
consisting of Options or SARs or otherwise consisting of Common Stock or
units denominated in Common Stock) in respect of any one-year period
having a value determined on the date of grant in excess of $1,000,000.
(c) The Committee will have the sole responsibility and authority to
determine the type or types of Independent Contractor Awards to be made and may
make any such Awards as could be made to an Employee, other than Awards
consisting of Incentive Options, but the Stock-based Awards Limitations will not
apply to Independent Contractor Awards.
9. DIRECTOR AWARDS. (a) Each Nonemployee Director will be granted
Director Awards in accordance with this Paragraph 9 and subject to the
applicable terms, conditions and limitations this Plan and the applicable
Director Award Agreement set forth, provided that Director Awards will not be
made in any year in which a sufficient number of shares of Common Stock are not
available under this Plan to make those Director Awards.
(b) DIRECTOR OPTIONS. On the IPO Closing Date, each Nonemployee
Director will be automatically awarded a Director Option that provides for the
purchase of 10,000 shares of Common Stock. In addition, on each Annual Director
Award Date, each Nonemployee Director will be automatically granted a Director
Option that provides for the purchase of 5,000 shares of Common Stock. Any
individual who first becomes a Nonemployee Director after the IPO Closing Date
otherwise than by election at an Annual Meeting will be automatically granted,
on the date of his or her becoming a Director, a Director Option that provides
for the purchase of a number of shares of Common Stock (rounded up to the
nearest whole number) equal to the product of (i) 10,000 and (ii) 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 has not been scheduled, the first anniversary of the immediately
preceding Annual Director Award Date, if any; provided, that for purposes of any
Director Options awarded prior to the scheduling of the 2000 Annual Meeting,
June 1, 1999 will be the initial Annual Director Award Date) and the denominator
of which is 365. The Board may determine, at its discretion, to increase the
number of shares of Common Stock to be subject to Director Options granted on
any subsequent Annual Director Award Date to not more than 15,000 shares. A
Director Award Agreement will (i) evidence
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each Award of Director Options, (ii) contain the terms, conditions and
limitations set forth above and (iii) be signed by the Participant to whom those
Director Options are granted and an Authorized Officer. Each Director Option
will have a term of five years from the date of grant, subject to any earlier
termination of the status of the holder as a Nonemployee Director, in which
event the term of the Director Option will expire on the date that is 180 days
after the date that status terminates. The purchase price of each share of
Common Stock subject to each Director Option granted on the IPO Closing Date
will be the initial price to the public per share of Common Stock as set forth
on the cover page of the final prospectus for the IPO (the "IPO Price"). The
purchase price of each share of Common Stock subject to any other Director
Option will be equal to the Fair Market Value of a share of the Common Stock on
the date of grant of that Director Option. All Director Options will vest and
become exercisable on the date that is 180 days after the date of grant. Any
Nonemployee Director who resigns as a Director without the consent of a majority
of the other Directors will forfeit all his or her then unexercisable Director
Options.
(c) DIRECTOR RESTRICTED STOCK. Prior to the Annual Director Award
Date in each year, beginning in 2000, a Nonemployee Director may elect to
receive either 50% or 100% (the percentage so elected being the "Elected
Percentage") of the Director's fees (including both annual retainer fees, if
any, and meeting fees) the Company otherwise would pay in cash to the
Nonemployee Director for his service as a Director during the period from and
including that Annual Director Award Date to and excluding the next succeeding
Annual Director Award Date (the "Service Period") in the form of the number of
shares of Director Restricted Stock (rounded up to the nearest whole number)
which equals the quotient of (i) the product of (A) the total amount of those
Director's fees multiplied by (B) the Elected Percentage, divided by (ii) the
Fair Market Value of a share of Common Stock on the first day of that Service
Period. Each annual election made by a Nonemployee Director pursuant to this
Paragraph 9(c) must (i) take the form of a written document signed by the
Nonemployee Director and filed with the Secretary of the Company and (ii)
designate the Elected Percentage of the cash fees the Nonemployee Director
elects to forego in the next Service Period in exchange for Director Restricted
Stock. An Award of Director Restricted Stock at the election of a Nonemployee
Director for any Service Period will be effective on the last day of that
Service Period. A Director Award Agreement will (i) evidence each Award of
Director Restricted Stock, (ii) contain the terms, conditions and limitations
set forth above and (iii) be signed by the Participant to whom that Director
Restricted Stock is granted and an Authorized Officer.
10. PAYMENT OF AWARDS. (a) GENERAL. Payment of Employee Awards or
Independent Contractor Awards may be made in the form of cash or Common Stock,
or a combination thereof, and may include such restrictions as the Committee may
determine, including, in the case of Common Stock, restrictions on transfer and
forfeiture provisions. If payment of an Employee Award or Independent Contractor
Award is made in the form of shares of Restricted Stock, the applicable Award
Agreement relating to those shares will specify whether they are to be issued at
the beginning or end of their Restriction Period. If shares of Restricted Stock
are to be issued at the beginning of their Restriction Period, the certificates
evidencing those shares (to the extent that those shares are so evidenced) will
contain appropriate legends and restrictions that describe the terms and
conditions of the restrictions applicable thereto. If shares of Restricted Stock
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are to be issued at the end of their Restricted Period, the right to receive
those shares will be evidenced by book entry registration or in such other
manner as the Committee may determine.
(b) DEFERRAL. With the approval of the Committee, amounts payable in
respect of Employee Awards or Independent Contractor Awards may be deferred and
paid either in the form of installments or as a lump-sum payment. The Committee
may permit selected Participants to elect to defer payments of some or all types
of Employee Awards or Independent Contractor Awards in accordance with
procedures the Committee establishes. Any deferred payment of an Employee Award
or Independent Contractor Award, whether elected by the Participant or specified
by the applicable Award Agreement or by the Committee, may be forfeited if and
to the extent that the applicable Award Agreement so provides.
(c) DIVIDENDS AND INTEREST. Rights to dividends or Dividend
Equivalents may be extended to and made part of any Employee Award or
Independent Contractor Award consisting of shares of Common Stock or units
denominated in shares of Common Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee also may establish
rules and procedures for the crediting of interest on deferred cash payments and
Dividend Equivalents for Employee Awards or Independent Contractor Awards
consisting of Common Stock or units denominated in Common Stock.
(d) SUBSTITUTION OF AWARDS. At the discretion of the Committee, a
Participant who is an Employee or Independent Contractor may be offered an
election to substitute any Award for another Award or Awards of the same or a
different type.
11. OPTION EXERCISE. The price at which shares of Common Stock may
be purchased under an Option will be paid in full at the time of exercise in
cash or, if elected by the optionee, the optionee may purchase those shares by
means of tendering Common Stock or surrendering another Award, including shares
of Restricted Stock or Director Restricted Stock, valued at their Fair Market
Value per share on the date of exercise, or any combination thereof. The
Committee will determine acceptable methods for Participants who are Employees
or Independent Contractors to tender Common Stock or other Awards; provided that
shares of Common Stock that are or were the subject of a compensatory award
(whether under this Plan or otherwise) may be so tendered only if those shares
have been held by the Participant for at least six months. The Committee may
provide for procedures to permit the exercise or purchase of any Employee Award
or Independent Contractor Award by use of the proceeds to be received from the
sale of Common Stock issuable pursuant to such an Award. Unless the applicable
Award Agreement otherwise provides, if shares of Restricted Stock are tendered
as consideration for the exercise of an Option, the number of the shares issued
on the exercise of the Option which equals the number of shares of Restricted
Stock or Director Restricted Stock used as consideration therefor will be
subject to the same restrictions as the Restricted Stock or Director Restricted
Stock so submitted as well as to any additional restrictions the Committee may
impose.
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12. TAXES. The Company 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 this Plan, or at the time
applicable law otherwise requires, an appropriate amount of cash or number of
shares of Common Stock or a combination thereof for payment of taxes required by
law or to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for withholding of those taxes. The Committee
may permit withholding to be satisfied by the transfer to the Company of shares
of Common Stock theretofore owned by the holder of the Employee Award with
respect to which withholding is required. If shares of Common Stock are used to
satisfy tax withholding, those shares will be valued at their Fair Market Value
per share when the tax withholding is required to be made. The Committee may
provide for loans, on either a short-term or demand basis, from the Company to a
Participant who is an Employee or Independent Contractor to permit the payment
of taxes required by law.
13. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board
may amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose applicable
law permits, except that no amendment or alteration that would adversely affect
the rights of any Participant under any Award previously granted to that
Participant will be made without the consent of that Participant.
14. ASSIGNABILITY. Unless the Committee otherwise determines and
provides in the applicable Award Agreement, no Award or any other benefit under
this Plan will be assignable or otherwise transferable except by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. The Committee may
prescribe and include in any Award Agreement other restrictions on transfer. Any
attempted assignment of an Award or any other benefit under this Plan in
violation of this Paragraph 14 will be null and void.
15. ADJUSTMENTS. (a) The existence of outstanding Awards will not
affect in any manner the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the capital stock of the Company or its business or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
other stock (whether or not that issue is prior to, on a parity with or junior
to the Common Stock) or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding of any kind, whether or not of a character similar
to that of the acts or proceedings enumerated above.
(b) If any subdivision, split or combination of outstanding shares
of Common Stock, or any declaration of a dividend payable in shares of Common
Stock, occurs, then (i) the number of shares of Common Stock reserved under this
Plan, (ii) the number of shares of Common Stock covered by outstanding Awards in
the form of Common Stock or units denominated in Common Stock, (iii) the
exercise or other price in respect of such Awards, (iv) the appropriate Fair
Market Value and other price determinations for such Awards, (v) the number of
shares of Common Stock covered by Director Options automatically granted
pursuant to Paragraph 9(b), (vi) the
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number of shares of Restricted Stock automatically granted pursuant to Paragraph
9(c) and (vii) the Stock-based Awards Limitations each will be proportionately
adjusted by the Board to reflect the consequences of that occurrence. If any
recapitalization or capital reorganization of the Company, any consolidation or
merger of the Company with another corporation or entity, any adoption by the
Company 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 (ii), (iii), (iv), (v), (vi) and
(vii) of the preceding sentence, to give effect to that transaction or event. 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 (i) 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, (ii) 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 (iii) 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.
16. RESTRICTIONS. No Common Stock or other form of payment will be
issued with respect to any Award unless the Company is satisfied, on the basis
of advice of its counsel, that the issuance will comply with applicable federal
and state securities laws, including the Securities Act of 1933, as amended.
Certificates evidencing shares of Common Stock delivered under this Plan (to the
extent that the shares are so evidenced) may be subject to such stop-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations and other require ments of the Securities and Exchange
Commission, any securities exchange or transaction reporting system on which the
Common Stock is then listed or to which it is admitted for quotation and any
applicable federal or state securities law. The Committee may cause a legend or
legends to be placed upon those certificates (if any) to make appropriate
reference to those restrictions.
17. UNFUNDED PLAN. Insofar as this Plan provides for Awards of cash,
Common Stock or rights thereto, it will be unfunded. Although the Company may
establish bookkeeping accounts with respect to Participants who are entitled to
cash, Common Stock or rights thereto under this Plan, it will use any such
accounts merely as a bookkeeping convenience. The Company will not be required
to segregate any assets that may at any time be represented by cash, Common
Stock or rights thereto, nor will this Plan be construed as providing for that
segregation, nor shall the Company, the Board or the Committee be deemed to be a
trustee of any cash, Common Stock or rights thereto to be granted under this
Plan. Any liability or obligation of the Company to any Participant with respect
to an Award of cash, Common Stock or rights thereto under this Plan will be
based solely on any contractual obligations that this Plan and any Award
Agreement create, and no such liability or obligation of the Company will be
deemed to be secured by any pledge or other encumbrance on any property of the
Company. Neither the Company nor the Board nor the Committee will be required to
give any security or bond for the performance of any obligation that this Plan
creates.
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18. GOVERNING LAW. This Plan and all determinations made and actions
taken pur suant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, will be
governed by and construed in accordance with the laws of the State of Delaware.
End of Plan
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EXHIBIT 10.3
Michael W. Harlan
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 W. Harlan (the "Employee").
PRELIMINARY STATEMENT
In entering into this Agreement, the Company desires to provide the
Employee with substantial incentives to serve the Company as a senior executive
performing at the highest levels of leadership and stewardship, 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:
"Acquiring Person" means any Person who or which, together with all
its Affiliates and Associates, is or are the Beneficial Owner of 50.1% or
more of the shares of Common Stock then outstanding, but does not include
any Exempt Person; provided, however, that a person will not be or become
an Acquiring Person if that Person, together with its Affiliates and
Associates, becomes the Beneficial Owner of 50.1% or more of the shares of
Common Stock then outstanding solely as a result of a reduction in the
number of shares of Common Stock outstanding which results from the
Company's repurchase of Common Stock, unless and until such time as that
Person or any Affiliate or Associate of that Person purchases or otherwise
becomes the Beneficial Owner of additional shares of Common Stock
constituting 1% or more of the then outstanding shares of Common Stock or
any other Person (or Persons) who is (or collectively are) the Beneficial
Owner of shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock becomes an Affiliate or Associate of
that Person, unless, in either such case, that Person, together with all
its Affiliates and Associates, is not then the Beneficial Owner of 50.1%
or more of the shares of Common Stock then outstanding.
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"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.
"Affiliate" has the meaning Exchange Act Rule 12b-2 specifies.
"Annual Cash Compensation" of the Employee for any Compensation Year
means the salary the Employee earns during that Compensation Year pursuant
to this Agreement, 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.
"Associate" means, with reference to any Person, (i) any
corporation, firm, partnership, association, unincorporated organization
or other entity (other than the Company or a subsidiary of the Company) of
which that Person is an officer or general partner (or officer or general
partner of a general partner) or is, directly or indirectly, the
Beneficial Owner of 10% or more of any class of its equity securities,
(ii) any trust or other estate in which that Person has a substantial
beneficial interest or for or of which that Person serves as trustee or in
a similar fiduciary capacity and (iii) any relative or spouse of that
Person, or any relative of that spouse, who has the same home as that
Person.
"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
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).
A specified Person is deemed the "Beneficial Owner" of, and is
deemed to "beneficially own," any securities:
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(i) of which that Person or any of its Affiliates or
Associates, directly or indirectly, is the "beneficial owner" (as
determined pursuant to Exchange Act Rule 13d-3) or otherwise has the
right to vote or dispose of, including pursuant to any agreement,
arrangement or understanding (whether or not in writing); provided,
however, that a Person will not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (i)
as a result of an agreement, arrangement or understanding to vote
that security if that agreement, arrangement or understanding: (A)
arises solely from a revocable proxy or consent given in response to
a public (that is, not including a solicitation exempted by Exchange
Act Rule 14a-2(b)(2)) proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the
Exchange Act; and (B) is not then reportable by that Person on
Exchange Act Schedule 13D (or any comparable or successor report);
(ii) which that Person or any of its Affiliates or Associates,
directly or indirectly, has the right or obligation to acquire
(whether that right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of
an event) pursuant to any agreement, arrangement or understanding
(whether or not in writing) or on the exercise of conversion rights,
exchange rights, other rights, warrants or options, or otherwise;
provided, however, that a Person will not be deemed the "Beneficial
Owner" of, or to "beneficially own," securities tendered pursuant to
a tender or exchange offer made by that Person or any of its
Affiliates or Associates until those tendered securities are
accepted for purchase or exchange; or
(iii) which are beneficially owned, directly or indirectly, by
(A) any other Person (or any Affiliate or Associate thereof) with
which the specified Person or any of its Affiliates or Associates
has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy or consent as described in the proviso
to subparagraph (i) of this definition) or disposing of any voting
securities of the Company or (B) any group (as Exchange Act Rule
13d-5(b) uses that term) of which that specified Person is a member;
provided, however, that nothing in this definition will cause a Person
engaged in business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities that Person acquires
through its participation in good faith in a firm commitment underwriting
(including securities acquired pursuant to stabilizing transactions to
facilitate a public offering in accordance with Exchange Act Regulation M
or to cover overallotments created in connection with a public offering)
until the expiration of 40 days after the date of that acquisition. For
purposes of this definition, "voting" a security includes voting, granting
a proxy, acting by consent, making a request or demand relating to
corporate action
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(including calling a stockholder meeting) or otherwise giving an
authorization (within the meaning of Exchange Act Section 14(a)) in
respect of that security.
"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."
"Change of Control" means the occurrence of any of the following
events that occurs after the IPO Closing Date: (i) any Person becomes an
Acquiring Person; (ii) at any time the then Continuing Directors cease to
constitute a majority of the members of the Board; (iii) a merger of the
Company with or into, or a sale by the Company of its properties and
assets substantially as an entirety to, another Person occurs and,
immediately after that occurrence, any Person (other than an Exempt
Person), together with all its Affiliates and Associates, is the
Beneficial Owner of 50.1% or more of the total voting power of the then
outstanding Voting Shares of the Person surviving that transaction (in the
case or a merger or consolidation) or the Person acquiring those
properties and assets substantially as an entirety.
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"Change of Control Payment" means at any time as of which the
Employee terminates his Employment by reason of a Change of Control, an
amount equal to the product of (i) one-twelfth of the Base Salary that
would be paid for the Compensation Year in which the Employee elects to
terminate his Employment pursuant to the provisions of Section 5(b)(i)(B)
multiplied by (ii) the greater of (A) the number of whole and partial
calendar months in the period beginning on the date the Employee so
terminates his Employment and ending on the last day of the Initial Term
and (B) 12.
"Code" means the Internal Revenue Code of 1986.
"Common Stock" means the common stock of the Company.
"Company" means (i) U.S. Concrete, Inc., a Delaware corporation,
and, unless the context otherwise requires, (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 Exchange Act.
"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
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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.
"Continuing Director" means at any time any individual who then (i)
is a member of the Board and was a member of the Board as of the IPO
Closing Date or whose nomination for his first election, or that first
election, to the Board following that date was recommended or approved by
a majority of the then Continuing Directors (acting separately or as a
part of any action taken by the Board of any committee thereof) and (ii)
is not an Acquiring Person, an Affiliate or Associate of an Acquiring
Person or a nominee or representative of an Acquiring Person or of any
such Affiliate or Associate.
"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 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.
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<PAGE>
"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.
"Exchange Act" means the Securities Exchange Act of 1934.
"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.
"Exempt Person" means: (i) (A) the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary of
the Company and (B) any Person organized, appointed or established by the
Company for or pursuant to the terms of any such plan or for the purpose
of funding any such plan or funding other employee benefits for employees
of the Company or any subsidiary of the Company; (ii) the Employee, any
Affiliate or Associate of the Employee or any group (as Exchange Act Rule
13d-5(b) uses that term) of which the Employee or any Affiliate or
Associate of the Employee is a member; (iii) Main Street Merchant Partners
II, L.P. or any of its controlling Affiliates; or (iv) any Person or group
(as Exchange Act Rule 13d-5(b) uses that term) a majority of the
Continuing Directors by resolution deems not to be an "Acquiring Person."
"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 of that subclause (B), the
taking of action, adversely affects Executive Officers generally; (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 or (iv) the failure of
the Board of Directors of the Company to nominate Employee for re-election
as a director of the Company at the 2000 annual meeting of stockholders..
"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
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<PAGE>
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.
"Initial Term" has the meaning Section 3 specifies.
"IPO" means the first time a registration statement the Company has
filed under the Securities Act of 1933 and respecting an underwritten
primary offering by the Company of shares of Common Stock becomes
effective under that act and the Company issues and sells any of the
shares registered by that registration statement.
"IPO Closing Date" means the date on which the Company first
receives payment for the shares of Common Stock it sells 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.
"Outside Director" means at any time a member of the Board at that
time who is not then an employee of the Company or any subsidiary of the
Company.
"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.
"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.
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"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, other than a Notice of Termination by
reason of a Change of Control pursuant to the provisions of Section
5(b)(i)(B).
"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 following a Change of Control, the first date on
which the Company pays to the Employee in full the amounts owed to the
Employee pursuant to Section 5(b)(iii); (iii) 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; (iv) 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 (v) 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.
"Voting Shares" means: (i) in the case of any corporation, stock of
that corporation of the class or classes having general voting power under
ordinary circumstances to elect a majority of that corporation's board of
directors; and (ii) in the case of any other entity, equity interests of
the class or classes having general voting power under ordinary
circumstances equivalent to the Voting Shares of a corporation.
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"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, (ii) following a Change of Control or
(iii) 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,
ERISA and the Exchange Act, 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 Senior Vice
President and Chief Financial Officer of the Company, (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 the
Employee 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 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
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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 (the "Initial Term"), 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 $150,000 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 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.
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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) by reason of a Change of Control at any time
within 365 days after that Change of Control occurs (provided, however, that the
Employee will not be entitled to terminate his Employment by reason of that
Change of Control if it occurs (1) after the Company's receipt of the Employee's
Notice of Termination Without Good Reason, (2) after (a) the receipt by the
Nonterminating Party of the Terminating Party's Notice of Termination pursuant
to Section 5(c) or (b) the Employee's receipt of the Company's Notice of
Termination for a Business Reason (other than in connection with that Change of
Control) or (3) more than 90 days after the Company's receipt of the Employee's
Notice of Termination for Good Reason), (C) Without Good Reason at any time or
(D) 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 by reason of a Change of Control will be effective
on the first date on which the Change of Control Payment shall have been paid in
full to the Employee. The Employee's termination of his Employment Without Good
Reason or by reason of his Retirement will be
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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 by reason of a
Change of Control, the Company will pay to the Employee in a cash lump sum
within 10 business days after the date the Company receives the Employee's
Notice of Termination by reason of that Change of Control 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, (C) any accrued but unpaid vacation pay and (D) the
Change of Control Payment.
(iv) 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
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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.
(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
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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 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
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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 four 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 Houston 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 Houston 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; NON-SOLICITATION. (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
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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) The Employee agrees that he will not, during the period
beginning on the date hereof and ending on the third anniversary of the
Termination Date, directly or indirectly, for any reason, for his own account or
on behalf of or together with any other person, entity or organization:
(i) call on or otherwise solicit any natural person who is at that
time employed by the Company or any subsidiary of the Company in any
capacity with the purpose or intent of attracting that person from the
employ of the Company or any of its subsidiaries;
(ii) call on, solicit or perform services for, either directly or
indirectly, any person, entity or organization that at that time is, or at
any time within two years prior to that time was, a customer of the
Company or any of its subsidiaries, (A) for the purpose of soliciting
business or selling any product or service in competition with the Company
or any of its subsidiaries and (B) with the knowledge of that customer
relationship; or
(iii) call on or otherwise solicit any USC Acquisition Candidate or
the owners of any USC Acquisition Candidate for the purpose of acquiring
that USC Acquisition Candidate or arranging the acquisition of that USC
Acquisition Candidate by any person, entity or organization other than the
Company or any of its subsidiaries (for these purposes, "USC Acquisition
Candidate" means any prospective acquisition candidate engaged in the
ready-mixed concrete industry (A) which the Company has called on in
connection with the possible acquisition of that candidate or (B) of which
the Company has made an acquisition analysis).
(c) 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
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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.
(d) 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.
(e) 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
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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.
(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).
(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
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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 W. Harlan
12111 Pinerock Lane
Houston, Texas 77024
Facsimile: (713) 468-3380
(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 or by reason of a Change of Control) 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 TEXAS, WITHOUT REGARD TO ANY
PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD CAUSE THE LAWS OF ANY OTHER
JURISDICTION TO APPLY.
(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.
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(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 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
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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: /S/ EUGENE P. MARTINEAU
Eugene P. Martineau
President and Chief Executive Officer
EMPLOYEE
/S/ MICHAEL W. HARLAN
Michael W. Harlan
23
EXHIBIT 10.6
Charles W. Sommer
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 Charles W. Sommer (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:
"Acquiring Person" means any Person who or which, together with all
its Affiliates and Associates, is or are the Beneficial Owner of 50.1% or
more of the shares of Common Stock then outstanding, but does not include
any Exempt Person; provided, however, that a person will not be or become
an Acquiring Person if that Person, together with its Affiliates and
Associates, becomes the Beneficial Owner of 50.1% or more of the shares of
Common Stock then outstanding solely as a result of a reduction in the
number of shares of Common Stock outstanding which results from the
Company's repurchase of Common Stock, unless and until such time as that
Person or any Affiliate or Associate of that Person purchases or otherwise
becomes the Beneficial Owner of additional shares of Common Stock
constituting 1% or more of the then outstanding shares of Common Stock or
any other Person (or Persons) who is (or collectively are) the Beneficial
Owner of shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock becomes an Affiliate or Associate of
that Person, unless, in either such case, that Person, together with all
its Affiliates and Associates, is not then the Beneficial Owner of 50.1%
or more of the shares of Common Stock then outstanding.
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"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.
"Affiliate" has the meaning Exchange Act Rule 12b-2 specifies.
"Annual Cash Compensation" of the Employee for any Compensation Year
means the salary the Employee earns during that Compensation Year pursuant
to this Agreement, 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.
"Associate" means, with reference to any Person, (i) any
corporation, firm, partnership, association, unincorporated organization
or other entity (other than the Company or a subsidiary of the Company) of
which that Person is an officer or general partner (or officer or general
partner of a general partner) or is, directly or indirectly, the
Beneficial Owner of 10% or more of any class of its equity securities,
(ii) any trust or other estate in which that Person has a substantial
beneficial interest or for or of which that Person serves as trustee or in
a similar fiduciary capacity and (iii) any relative or spouse of that
Person, or any relative of that spouse, who has the same home as that
Person.
"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
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).
A specified Person is deemed the "Beneficial Owner" of, and is
deemed to "beneficially own," any securities:
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(i) of which that Person or any of its Affiliates or
Associates, directly or indirectly, is the "beneficial owner" (as
determined pursuant to Exchange Act Rule 13d-3) or otherwise has the
right to vote or dispose of, including pursuant to any agreement,
arrangement or understanding (whether or not in writing); provided,
however, that a Person will not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (i)
as a result of an agreement, arrangement or understanding to vote
that security if that agreement, arrangement or understanding: (A)
arises solely from a revocable proxy or consent given in response to
a public (that is, not including a solicitation exempted by Exchange
Act Rule 14a-2(b)(2)) proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the
Exchange Act; and (B) is not then reportable by that Person on
Exchange Act Schedule 13D (or any comparable or successor report);
(ii) which that Person or any of its Affiliates or Associates,
directly or indirectly, has the right or obligation to acquire
(whether that right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of
an event) pursuant to any agreement, arrangement or understanding
(whether or not in writing) or on the exercise of conversion rights,
exchange rights, other rights, warrants or options, or otherwise;
provided, however, that a Person will not be deemed the "Beneficial
Owner" of, or to "beneficially own," securities tendered pursuant to
a tender or exchange offer made by that Person or any of its
Affiliates or Associates until those tendered securities are
accepted for purchase or exchange; or
(iii) which are beneficially owned, directly or indirectly, by
(A) any other Person (or any Affiliate or Associate thereof) with
which the specified Person or any of its Affiliates or Associates
has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy or consent as described in the proviso
to subparagraph (i) of this definition) or disposing of any voting
securities of the Company or (B) any group (as Exchange Act Rule
13d-5(b) uses that term) of which that specified Person is a member;
provided, however, that nothing in this definition will cause a Person
engaged in business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities that Person acquires
through its participation in good faith in a firm commitment underwriting
(including securities acquired pursuant to stabilizing transactions to
facilitate a public offering in accordance with Exchange Act Regulation M
or to cover overallotments created in connection with a public offering)
until the expiration of 40 days after the date of that acquisition. For
purposes of this definition, "voting" a security includes voting, granting
a proxy, acting by consent, making a request or demand relating to
corporate action
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(including calling a stockholder meeting) or otherwise giving an
authorization (within the meaning of Exchange Act Section 14(a)) in
respect of that security.
"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."
"Change of Control" means the occurrence of any of the following
events that occurs after the IPO Closing Date: (i) any Person becomes an
Acquiring Person; (ii) at any time the then Continuing Directors cease to
constitute a majority of the members of the Board; (iii) a merger of the
Company with or into, or a sale by the Company of its properties and
assets substantially as an entirety to, another Person occurs and,
immediately after that occurrence, any Person (other than an Exempt
Person), together with all its Affiliates and Associates, is the
Beneficial Owner of 50.1% or more of the total voting power of the then
outstanding Voting Shares of the Person surviving that transaction (in the
case or a merger or consolidation) or the Person acquiring those
properties and assets substantially as an entirety.
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"Change of Control Payment" means at any time as of which the
Employee terminates his Employment by reason of a Change of Control, an
amount equal to the product of (i) one-twelfth of the Base Salary that
would be paid for the Compensation Year in which the Employee elects to
terminate his Employment pursuant to the provisions of Section 5(b)(i)(B)
multiplied by (ii) the greater of (A) the number of whole and partial
calendar months in the period beginning on the date the Employee so
terminates his Employment and ending on the last day of the Initial Term
and (B) 12.
"Code" means the Internal Revenue Code of 1986.
"Common Stock" means the common stock of the Company.
"Company" means (i) U.S. Concrete, Inc., a Delaware corporation,
and, unless the context otherwise requires, (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 Exchange Act.
"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
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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.
"Continuing Director" means at any time any individual who then (i)
is a member of the Board and was a member of the Board as of the IPO
Closing Date or whose nomination for his first election, or that first
election, to the Board following that date was recommended or approved by
a majority of the then Continuing Directors (acting separately or as a
part of any action taken by the Board of any committee thereof) and (ii)
is not an Acquiring Person, an Affiliate or Associate of an Acquiring
Person or a nominee or representative of an Acquiring Person or of any
such Affiliate or Associate.
"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 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.
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<PAGE>
"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.
"Exchange Act" means the Securities Exchange Act of 1934.
"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.
"Exempt Person" means: (i) (A) the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary of
the Company and (B) any Person organized, appointed or established by the
Company for or pursuant to the terms of any such plan or for the purpose
of funding any such plan or funding other employee benefits for employees
of the Company or any subsidiary of the Company; (ii) the Employee, any
Affiliate or Associate of the Employee or any group (as Exchange Act Rule
13d-5(b) uses that term) of which the Employee or any Affiliate or
Associate of the Employee is a member; (iii) Main Street Merchant Partners
II, L.P. or any of its controlling Affiliates; or (iv) any Person or group
(as Exchange Act Rule 13d-5(b) uses that term) a majority of the
Continuing Directors by resolution deems not to be an "Acquiring Person."
"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 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.
"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,
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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.
"Initial Term" has the meaning Section 3 specifies.
"IPO" means the first time a registration statement the Company has
filed under the Securities Act of 1933 and respecting an underwritten
primary offering by the Company of shares of Common Stock becomes
effective under that act and the Company issues and sells any of the
shares registered by that registration statement.
"IPO Closing Date" means the date on which the Company first
receives payment for the shares of Common Stock it sells 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.
"Outside Director" means at any time a member of the Board at that
time who is not then an employee of the Company or any subsidiary of the
Company.
"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.
"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.
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"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, other than a Notice of Termination by
reason of a Change of Control pursuant to the provisions of Section
5(b)(i)(B).
"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 following a Change of Control, the first date on
which the Company pays to the Employee in full the amounts owed to the
Employee pursuant to Section 5(b)(iii); (iii) 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; (iv) 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 (v) 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.
"Voting Shares" means: (i) in the case of any corporation, stock of
that corporation of the class or classes having general voting power under
ordinary circumstances to elect a majority of that corporation's board of
directors; and (ii) in the case of any other entity, equity interests of
the class or classes having general voting power under ordinary
circumstances equivalent to the Voting Shares of a corporation.
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"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, (ii) following a Change of Control or
(iii) 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,
ERISA and the Exchange Act, 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 Corporate
Controller of the Company, (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 the Employee 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 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
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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 (the "Initial Term"), 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 $110,000 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 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.
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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) by reason of a Change of Control at any time
within 365 days after that Change of Control occurs (provided, however, that the
Employee will not be entitled to terminate his Employment by reason of that
Change of Control if it occurs (1) after the Company's receipt of the Employee's
Notice of Termination Without Good Reason, (2) after (a) the receipt by the
Nonterminating Party of the Terminating Party's Notice of Termination pursuant
to Section 5(c) or (b) the Employee's receipt of the Company's Notice of
Termination for a Business Reason (other than in connection with that Change of
Control) or (3) more than 90 days after the Company's receipt of the Employee's
Notice of Termination for Good Reason), (C) Without Good Reason at any time or
(D) 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 by reason of a Change of Control will be effective
on the first date on which the Change of Control Payment shall have been paid in
full to the Employee. The Employee's termination of his Employment Without Good
Reason or by reason of his Retirement will be
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<PAGE>
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 by reason of a
Change of Control, the Company will pay to the Employee in a cash lump sum
within 10 business days after the date the Company receives the Employee's
Notice of Termination by reason of that Change of Control 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, (C) any accrued but unpaid vacation pay and (D) the
Change of Control Payment.
(iv) 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
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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.
(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
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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 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
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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 four 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 Houston 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 Houston 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; NON-SOLICITATION. (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
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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) The Employee agrees that he will not, during the period
beginning on the date hereof and ending on the third anniversary of the
Termination Date, directly or indirectly, for any reason, for his own account or
on behalf of or together with any other person, entity or organization:
(i) call on or otherwise solicit any natural person who is at that
time employed by the Company or any subsidiary of the Company in any
capacity with the purpose or intent of attracting that person from the
employ of the Company or any of its subsidiaries;
(ii) call on, solicit or perform services for, either directly or
indirectly, any person, entity or organization that at that time is, or at
any time within two years prior to that time was, a customer of the
Company or any of its subsidiaries, (A) for the purpose of soliciting
business or selling any product or service in competition with the Company
or any of its subsidiaries and (B) with the knowledge of that customer
relationship; or
(iii) call on or otherwise solicit any USC Acquisition Candidate or
the owners of any USC Acquisition Candidate for the purpose of acquiring
that USC Acquisition Candidate or arranging the acquisition of that USC
Acquisition Candidate by any person, entity or organization other than the
Company or any of its subsidiaries (for these purposes, "USC Acquisition
Candidate" means any prospective acquisition candidate engaged in the
ready-mixed concrete industry (A) which the Company has called on in
connection with the possible acquisition of that candidate or (B) of which
the Company has made an acquisition analysis).
(c) 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
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<PAGE>
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.
(d) 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.
(e) 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
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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.
(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).
(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
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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:
Charles W. Sommer
2108 Addison
Houston, Texas 77030
(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 or by reason of a Change of Control) 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 TEXAS, WITHOUT REGARD TO ANY
PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD CAUSE THE LAWS OF ANY OTHER
JURISDICTION TO APPLY.
(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.
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(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 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
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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: /s/ EUGENE P. MARTINEAU
Eugene P. Martineau
President and Chief Executive Officer
EMPLOYEE
/s/ CHARLES W. SOMMER
Charles W. Sommer
23
EXHIBIT 10.9
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made as of
___________________, 1999 by and between U.S. Concrete, Inc., a Delaware
corporation (the "Company"), and ____________________ ("Indemnitee").
PRELIMINARY STATEMENT
Highly competent persons have become more reluctant to serve corporations
as directors or in other capacities unless they are provided with adequate
protection through insurance or adequate indemnification against inordinate
risks of claims and actions against them arising out of their service to and
activities on behalf of corporations.
The Board of Directors of the Company (the "Board") has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of that insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Board believes that, given current market
conditions and trends, that insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers and other persons in service to corporations or business enterprises
increasingly are being subjected to expensive and time-consuming litigation
relating to, among other matters, matters that traditionally would have been
brought only against the corporation or business enterprise itself. The
uncertainties relating to liability insurance and to indemnification have
increased the difficult of attracting and retaining those persons, and the Board
has determined that (i) this increased difficulty is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure those persons that there will be increased certainty of such protection
in the future (ii) and it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify those persons to the fullest
extent applicable law permits so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants
herein, the parties to this Agreement agree as follows:
Section 1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a
director and officer of the Company and, as mutually agreed by Indemnitee and
the Company, as a director, officer, employee, agent or fiduciary of other
corporations, partnerships, joint ventures, trusts or other enterprises
(including, without limitation, employee benefit plans)(each, an "Enterprise").
Indemnitee may at any time and for any reason resign from any such position
(subject to any other contractual obligation or any obligation applicable law
imposes), in which event the Company will have no obligation under this
Agreement to continue Indemnitee in that position. This Agreement is not and is
not to be construed as an employment contract between the Company (or any of its
subsidiaries) and Indemnitee. Indemnitee specifically acknowledges that
Indemnitee's employment
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with the Company (or any of its subsidiaries), if any, is at will, and the
Indemnitee may be discharged at any time for any reason, with or without cause,
except as may be otherwise provided in any written employment contract between
Indemnitee and the Company (or any of its subsidiaries), other applicable formal
severance policies duly adopted by the Board or, with respect to service as a
director of the Company, by the Company's Certificate of Incorporation, Bylaws
and the General Corporation Law of the State of Delaware. The foregoing
notwithstanding, subject to Section 12, this Agreement will continue in force
after Indemnitee has ceased to serve as an officer or director of the Company
and no longer serves at the written request of the Company as a director,
officer, employee, agent or fiduciary of any other Enterprise.
Section 2. INDEMNIFICATION--GENERAL. The Company will indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (i) as this Agreement
permits and (ii) (subject to the provisions hereof) to the fullest extent
applicable law in effect on the date hereof and as amended from time to time
permits. The rights the preceding sentence provide to Indemnitee will include,
but will not be limited to, the rights the other Sections hereof set forth.
Section 3. PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE COMPANY.
Indemnitee will be entitled to the rights of indemnification this Section 3
provides if, by reason of his Corporate Status, he is, or is threatened to be
made, a party to or a participant in any threatened, pending or completed
Proceeding (as hereinafter defined), other than a Proceeding by or in the right
of the Company. Pursuant to this Section 3, the Company will indemnify
Indemnitee against, and will hold Indemnitee harmless from and in respect of,
all Expenses, judgments, penalties, fines (including excise taxes) and amounts
paid in settlement (including all interest, assessments and other charges paid
or payable in connection with or in respect of those Expenses, judgments, fines,
penalties or amounts paid in settlement) actually and reasonably incurred by him
or on his behalf in connection with that Proceeding or any claim, issue or
matter therein, 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 Company and, with respect
to any criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section 4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee
will be entitled to the rights of indemnification this Section 4 provides if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
or a participant in any threatened, pending or completed Proceeding brought by
or in the right of the Company to procure a judgment in its favor. Pursuant to
this Section 4, the Company will indemnify Indemnitee against, and will hold
Indemnitee harmless from and in respect of, all Expenses actually and reasonably
incurred by him or on his behalf in connection with that 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 Company; provided, however, that, if applicable law so
provides, no indemnification against those Expenses will be made in respect of
any claim, issue or matter in that Proceeding as to which Indemnitee has been
adjudged to be liable to the Company unless and to the extent that the Court of
Chancery, or the court in which that Proceeding has been brought or is pending,
determines that indemnification may be made.
Section 5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR
PARTLY SUCCESSFUL. Notwithstanding any other provision hereof, to the extent
that Indemnitee is, by reason
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of his Corporate Status, a party to (or a participant in) and is successful, on
the merits or otherwise, in defense of any Proceeding, the Company will
indemnify him against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
defense of any Proceeding but is successful, on the merits or otherwise, as to
one or more but less than all claims, issues or matters in that Proceeding, the
Company will indemnify Indemnitee against all Expenses actually and reasonably
incurred by him or on his behalf in connection with each successfully resolved
claim, issue or matter. For purposes of this Section 5 and without limitation,
the termination of any claim, issue or matter in any Proceeding by dismissal,
with or without prejudice, will be deemed to be a successful result as to that
claim, issue or matter.
Section 6. INDEMNIFICATION FOR EXPENSES AS A WITNESS.
Notwithstanding any other provision hereof, to the extent that Indemnitee is, by
reason of his Corporate Status, a witness in any Proceeding to which Indemnitee
is not a party, the Company will indemnify him against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 7. ADVANCEMENT OF EXPENSES. The Company will advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within 10 days after the Company receives a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of that Proceeding. Each such
statement must reasonably evidence the Expenses incurred by or on behalf of
Indemnitee and include or be preceded or accompanied by an undertaking by or on
behalf of Indemnitee to repay any Expenses advanced if it ultimately is
determined that Indemnitee is not entitled to be indemnified by the Company
against those Expenses. The Company will accept any such undertaking without
reference to the financial ability of Indemnitee to make repayment.
Section 8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION. (a) To obtain indemnification under this Agreement, Indemnitee
must submit to the Company a written request, including therein or therewith
such documentation and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what extent Indemnitee is
entitled to that indemnification. The Secretary of the Company will, promptly on
receiving such a request for that indemnification, advise the Board in writing
of that request.
(b) On written request by Indemnitee for indemnification pursuant to
Section 8(a), a determination, if applicable law requires, with respect to
Indemnitee's entitlement thereto will be made in the specific case: (i) if a
Change of Control has occurred within two years prior to the date of that
request, by an Independent Counsel in a written opinion to the Board, a copy of
which will be delivered to Indemnitee; or (ii) if a Change of Control has not
occurred within two years prior to the date of that request, (A) by a majority
vote of the Disinterested Directors, even though less than a quorum of the
Board, or (B) if there are no Disinterested Directors, or if the Disinterested
Directors so direct, by an Independent Counsel in a written opinion to the
Board, a copy of which will be delivered to Indemnitee; and, if it is so
determined that Indemnitee is entitled to indemnification
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hereunder, the Company will: (i) within 10 days after that determination pay to
Indemnitee all amounts theretofore incurred by or on behalf of Indemnitee in
respect of which Indemnitee is entitled to that indemnification by reason of
that determination; and (ii) thereafter on written request by Indemnitee, pay to
Indemnitee within 10 days after that request such additional amounts theretofore
incurred by or on behalf of Indemnitee in respect of which Indemnitee is
entitled to that indemnification by reason of that determination. Indemnitee
will cooperate with the person, persons or entity making the determination with
respect to Indemnitee's entitlement to indemnification under this Agreement,
including providing to such person, persons or entity on reasonable advance
request any documentation or information which is (i) not privileged or
otherwise protected from disclosure, (ii) reasonably available to Indemnitee and
(iii) reasonably necessary to that determination. The Company will bear all
costs and expenses (including attorneys' fees and disbursements) Indemnitee
incurs in so cooperating (irrespective of the determination as to Indemnitee's
entitlement to indemnification) and hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) If an Independent Counsel is to make the determination of
entitlement to indemnification pursuant to Section 8(b), the Independent Counsel
will be selected as this Section 8(c) provides. If a Change of Control has not
occurred within two years prior to the date of Indemnitee's written request for
indemnification pursuant to Section 8(a), the Board will select the Independent
Counsel, and the Company will give written notice to Indemnitee advising him of
the identity of the Independent Counsel so selected. If a Change of Control has
occurred within two years prior to the date of that written request, Indemnitee
will select the Independent Counsel (unless Indemnitee requests that the Board
make the selection, in which event the preceding sentence will apply), and
Indemnitee will give written notice to the Company advising it of the identity
of the Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 10 days after the written notice of
selection has been given, deliver to the Company or to Indemnitee, as the case
may be, a written objection to the selection; provided, however, that any such
objection may be asserted only on the ground that the Independent Counsel so
selected is not an "Independent Counsel" as Section 17 defines that term, and
the objection must set forth with particularity the factual basis for that
assertion. If any such written objection is so made and substantiated, the
Independent Counsel so selected may not serve as Independent Counsel unless and
until that objection is withdrawn or a court has determined that objection is
without merit. If (i) an Independent Counsel is to make the determination of
entitlement to indemnification pursuant to Section 8(b) and (ii) within 20 days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 8(a), no Independent Counsel has been selected and not objected to,
either the Company or Indemnitee may petition the Court of Chancery or other
court of competent jurisdiction for resolution of any objection that has been
made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the petitioned court or by such other person as the petitioned court
designates, and the person with respect to whom all objections are so resolved
or the person so appointed will act as the Independent Counsel under Section
8(b). The Company will pay any and all reasonable fees and expenses the
Independent Counsel incurs in connection with acting pursuant to Section 8(b),
and the Company will pay all reasonable fees and expenses incident to the
procedures this Section 8(c) sets forth, regardless of the manner in which the
Independent
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Counsel is selected or appointed. If (i) the Independent Counsel selected or
appointed pursuant to this Section 8(c) does not make any determination
respecting Indemnitee's entitlement to indemnification hereunder within 90 days
after the Company receives a written request therefor and (ii) any judicial
proceeding or arbitration pursuant to Section 10(a) is then commenced, that
Independent Counsel will be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
Section 9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. (a) In
making a determination with respect to entitlement to indemnification hereunder,
the person, persons or entity making that determination must presume that
Indemnitee is entitled to indemnification hereunder if Indemnitee has submitted
a request for indemnification in accordance with Section 8(a), and the Company
will have the burden of proof to overcome that presumption in connection with
the making by any person, persons or entity of any determination contrary to
that presumption.
(b) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or on a plea of
nolo contendere or its equivalent, will not (except as this Agreement otherwise
expressly provides) of itself adversely affect the right of Indemnitee to
indemnification hereunder or create a presumption that Indemnitee did not act in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company or, with respect to any criminal Proceeding, that
Indemnitee had reasonable cause to believe that his conduct was unlawful.
(c) Any action Indemnitee takes or omits to take in connection with
any employee benefit plan will, if taken or omitted in good faith by Indemnitee
and in a manner Indemnitee reasonably believed to be in the interest of the
participants in or beneficiaries of that plan, be deemed to have been taken or
omitted in a manner "not opposed to the best interests of the Company" for all
purposes hereof.
Section 10. REMEDIES OF INDEMNITEE. (a) In the event that (i) a
determination is made pursuant to Section 8 that Indemnitee is not entitled to
indemnification hereunder, (ii) advancement of Expenses is not timely made
pursuant to Section 7, (iii) an Independent Counsel is to determine Indemnitee's
entitlement to indemnification hereunder, but does not make that determination
within 90 days after receipt by the Company of the request for that
indemnification, (iv) payment of indemnification is not made pursuant to Section
5 or 6 within 10 days after receipt by the Company of a written request therefor
or (v) payment of indemnification pursuant to Section 8(b) is not made timely,
Indemnitee will be entitled to an adjudication from the Court of Chancery of his
entitlement to that indemnification or advancement of Expenses. Alternatively,
Indemnitee, at his option, may seek an award in arbitration to be conducted by a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Indemnitee must commence any such proceeding seeking an
adjudication or an award in arbitration within 180 days following the date on
which Indemnitee first has the right to commence that proceeding pursuant to
this Section 10(a); provided, however, that this sentence will not apply in
respect of a proceeding brought by Indemnitee to enforce his rights under
Section 5.
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(b) If a determination has been made pursuant to Section 8(b) that
Indemnitee is not entitled to indemnification hereunder, any judicial proceeding
or arbitration commenced pursuant to this Section 10 will be conducted in all
respects as a de novo trial, or arbitration, on the merits and Indemnitee will
not be prejudiced by reason of that adverse determination. In any judicial
proceeding or arbitration commenced pursuant to this Section 10, the Company
will have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination has been made pursuant to Section 8(b) that
Indemnitee is entitled to indemnification hereunder, the Company will be bound
by that determination in any judicial proceeding or arbitration commenced
pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a
material fact, or an omission by Indemnitee of a material fact necessary to make
Indemnitee's statements not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d) If Indemnitee, pursuant to this Section 10, seeks a judicial
adjudication of or an award in arbitration to enforce his rights under, or to
recover damages for breach of, this Agreement, Indemnitee will be entitled to
recover from the Company, and will be indemnified by the Company against, any
and all expenses (of the types described in the definition of Expenses in
Section 17) actually and reasonably incurred by him in that judicial
adjudication or arbitration, but only if he prevails therein. If it is
determined in that judicial adjudication or arbitration that Indemnitee is
entitled to receive part of, but not all, the indemnification or advancement of
expenses sought, the Expenses incurred by Indemnitee in connection with that
judicial adjudication or arbitration will be appropriately prorated between
those in respect of which this Section 10(d) entitles Indemnitee to
indemnification and those Indemnitee must bear.
Section 11. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE;
SUBROGATION. (a) The rights to indemnification and advancement of Expenses this
Agreement provides are not and will not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under applicable law, the
Company's Certificate of Incorporation, the Company's Bylaws, any agreement, a
vote of stockholders or a resolution of directors, or otherwise. No amendment,
alteration or termination of this Agreement or any provision hereof will limit
or restrict any right of Indemnitee hereunder in respect of any action
Indemnitee has taken or omitted in his Corporate Status prior to that amendment,
alteration or termination. To the extent that a change in Delaware law (whether
by statute or judicial decision) permits greater indemnification by agreement
than would be afforded currently under this Agreement, it is the intent and
agreement of the parties hereto that Indemnitee will enjoy by this Agreement the
greater benefits that change affords.
(b) If the Company maintains an insurance policy or policies
providing liability insurance for directors, officers, employees, agents or
fiduciaries of the Company or of any other Enterprise that any such person
serves at the written request of the Company, Indemnitee will be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of
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the coverage available for any such director, officer, employee, agent or
fiduciary under such policy or policies.
(c) The Company will not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received that payment or obtained the entire
benefit therefrom under any insurance policy, contract, agreement or otherwise.
(d) If the Company makes any payment hereunder, it will be
subrogated to the extent of that payment to all the rights of recovery of
Indemnitee, who will execute all papers required and take all action necessary
to secure those rights, including execution of such documents as are necessary
to enable the Company to bring suit to enforce those rights.
(e) The Company's obligation to indemnify or advance Expenses
hereunder to Indemnitee with respect to Indemnitee's service at the written
request of the Company as a director, officer, employee, agent or fiduciary of
any other Enterprise will be reduced by any amount Indemnitee has actually
received as indemnification or advancement of Expenses from that other
Enterprise.
Section 12. DURATION OF AGREEMENT. This Agreement will continue
until and terminate on the later of: (i) 10 years after the date that Indemnitee
has ceased to serve as a director or officer of the Company or as a director,
officer, employee, agent or fiduciary of any other Enterprise that Indemnitee
served on behalf of the Company at the written request of the Company; or (ii)
the final termination of any Proceeding then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of Expenses
hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10
relating thereto. This Agreement will be binding on the Company and its
successors and assigns and will inure to the benefit of Indemnitee and his
spouse (if Indemnitee resides in Texas or another community property state),
heirs, executors and administrators.
Section 13. SEVERABILITY. If any provision or provisions of this
Agreement is or are invalid, illegal or unenforceable for any reason whatsoever:
(i) the validity, legality and enforceability of the remaining provisions hereof
(including, without limitation, each portion of any Section containing any such
invalid, illegal or unenforceable provision which is not itself invalid, illegal
or unenforceable) will not in any way be affected or impaired thereby; (ii) such
provision or provisions will be deemed reformed to the extent necessary to
conform to applicable law and to give the maximum effect to the intent of the
parties hereto; and (iii) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any Section containing
any such invalid, illegal or unenforceable provision which is not itself
invalid, illegal or unenforceable) will be construed so as to give effect to the
intent manifested thereby.
Section 14. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES. Notwithstanding any other provision hereof, Indemnitee will not be
entitled to indemnification or
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advancement of Expenses under this Agreement with respect to any Proceeding
brought by Indemnitee or any claim therein prior to a Change of Control, unless
the Board has approved the bringing of that Proceeding or the making of that
claim.
Section 15. IDENTICAL COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which will for all purposes be deemed to be
an original but all of which together will constitute one and the same
agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section 16. HEADINGS. The headings of the Sections hereof are
inserted for convenience only and do not and will not be deemed to constitute
part of this Agreement or to affect the construction thereof.
Section 17. DEFINITIONS. For purposes of this Agreement:
"ACQUIRING PERSON" means any Person who or which, together with all
its Affiliates and Associates, is or are the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding, but does not include
any Exempt Person; provided, however, that a Person will not be or become
an Acquiring Person if that Person, together with its Affiliates and
Associates, becomes the Beneficial Owner of 15% or more of the shares of
Common Stock then outstanding solely as a result of a reduction in the
number of shares of Common Stock outstanding which results from the
Company's direct or indirect repurchase of Common Stock, unless and until
such time as that Person or any Affiliate or Associate of that Person
purchases or otherwise becomes the Beneficial Owner of additional shares
of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock or any other Person (or Persons) who is (or collectively are)
the Beneficial Owner of shares of Common Stock constituting 1% or more of
the then outstanding shares of Common Stock becomes an Affiliate or
Associate of that Person, unless, in either such case, that Person,
together with all its Affiliates and Associates, is not then the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding.
Notwithstanding anything in this definition of "Acquiring Person" to
the contrary, so long as Main Street Merchant Partners II, L.P., a
Delaware limited partnership ("Main Street"), together with all Affiliates
and Associates thereof, remains the Beneficial Owner of 15% or more of the
outstanding shares of Common Stock, Main Street and any Affiliate or
Associate thereof will not be or become an Acquiring Person unless and
until that Person, together with all Affiliates and Associates thereof,
purchases or otherwise becomes the Beneficial Owner of additional shares
of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock or any other Person (or Persons) who is (or collectively are)
the Beneficial Owner of shares of Common Stock constituting 1% or more of
the then outstanding shares of Common Stock becomes an Affiliate or
Associate of that Person unless, in either such case, that Person,
together with all Affiliates and Associates of that
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Person, is not then the Beneficial Owner of 15% or more of the shares of
Common Stock then outstanding.
"AFFILIATE" has the meaning Exchange Act Rule 12b-2 specifies.
"ASSOCIATE" means, with reference to any Person, (i) any
corporation, firm, partnership, limited liability company, association,
unincorporated organization or other entity (other than the Company or a
subsidiary of the Company) of which that Person is an officer or general
partner (or officer or general partner of a general partner) or is,
directly or indirectly, the Beneficial Owner of 10% or more of any class
of its equity securities or interests, (ii) any trust or other estate in
which that Person has a substantial beneficial interest or for or of which
that Person serves as trustee or in a similar fiduciary capacity and (iii)
any relative or spouse of that Person, or any relative of that spouse, who
has the same home as that Person.
A specified Person is deemed the "BENEFICIAL OWNER" of, and is
deemed to "beneficially own," any securities:
(i) of which that Person or any of that Person's Affiliates or
Associates, directly or indirectly, is the "beneficial owner" (as
determined pursuant to Exchange Act Rule 13d-3) or otherwise has the
right to vote or dispose of, including pursuant to any agreement,
arrangement or understanding (whether or not in writing); provided,
however, that a Person will not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (i)
as a result of an agreement, arrangement or understanding to vote
that security if that agreement, arrangement or understanding: (A)
arises solely from a revocable proxy or consent given in response to
a public (that is, not including a solicitation exempted by Exchange
Act Rule 14a-2(b)(2)) proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the
Exchange Act; and (B) is not then reportable by that Person on
Exchange Act Schedule 13D (or any comparable or successor report);
(ii) which that Person or any of that Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
acquire (whether that right or obligation is exercisable or
effective immediately or only after the passage of time or the
occurrence of an event) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or on the exercise of
conversion rights, exchange rights, other rights, warrants or
options, or otherwise; provided, however, that a Person will not be
deemed the "Beneficial Owner" of, or to "beneficially own,"
securities tendered pursuant to a tender or exchange offer made by
that Person or any of that Person's Affiliates or Associates until
those tendered securities are accepted for purchase or exchange; or
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(iii) which are beneficially owned, directly or indirectly, by
(A) any other Person (or any Affiliate or Associate thereof) with
which the specified Person or any of the specified Person's
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy or
consent as described in the proviso to subparagraph (i) of this
definition) or disposing of any voting securities of the Company or
(B) any group (as Exchange Act Rule 13d-5(b) uses that term) of
which that specified Person is a member;
provided, however, that nothing in this definition will cause a Person
engaged in business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities that Person acquires
through its participation in good faith in a firm commitment underwriting
(including, without limitation, securities acquired pursuant to
stabilizing transactions to facilitate a public offering in accordance
with Exchange Act Regulation M or to cover overallotments created in
connection with a public offering) until the expiration of 40 days after
the date of that acquisition. For purposes of this definition, "voting" a
security includes voting, granting a proxy, acting by consent, making a
request or demand relating to corporate action (including, without
limitation, calling a stockholder meeting) or otherwise giving an
authorization (within the meaning of Section 14(a) of the Exchange Act) in
respect of that security.
"CHANGE OF CONTROL" means the occurrence of any of the following
events that occurs after the IPO Closing Date: (i) any Person becomes an
Acquiring Person; (ii) at any time the then Continuing Directors cease to
constitute a majority of the members of the Board; (iii) a merger of the
Company with or into, or a sale by the Company of its properties and
assets substantially as an entirety to, another Person occurs and,
immediately after that occurrence, any Person, other than an Exempt
Person, together with all Affiliates and Associates of that Person (other
than Exempt Persons), will be the Beneficial Owner of 15% or more of the
total voting power of the then outstanding Voting Shares of the Person
surviving that transaction (in the case or a merger or consolidation) or
the Person acquiring those properties and assets substantially as an
entirety unless that Person, together with all its Affiliates and
Associates, was the Beneficial Owner of 15% or more of the shares of
Common Stock outstanding prior to that transaction.
"COMMON STOCK" means (i) the common stock, par value $.001 per
share, of the Company and (ii) any other class of capital stock of the
Company which is (A) except for less voting rights, identical to the
common stock clause (i) of this definition describes and (B) convertible
into that common stock on a share for share basis on the occurrence of a
Change of Control.
"CONTINUING DIRECTOR" means at any time any individual who then (i)
is a member of the Board and was a member of the Board as of the IPO
Closing Date or whose nomination for his first election, or that first
election, to the Board following that date was
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recommended or approved by a majority of the then Continuing Directors
(acting separately or as a part of any action taken by the Board or any
committee thereof) and (ii) is not an Acquiring Person, an Affiliate or
Associate of an Acquiring Person or a nominee or representative of an
Acquiring Person or of any such Affiliate or Associate.
"CORPORATE STATUS" describes the status of a natural person who is
or was a director, officer, employee or agent of the Company or of any
other Enterprise, provided that person is or was serving in that capacity
at the written request of the Company. For purposes of this Agreement,
"serving at the written request of the Company" includes any service by
Indemnitee which imposes duties on, or involves services by, Indemnitee
with respect to any employee benefit plan or its participants or
beneficiaries.
"COURT OF CHANCERY" means the Court of Chancery of the State of
Delaware.
"DISINTERESTED DIRECTOR" means a director of the Company who is not
and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee hereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXEMPT PERSON" means: (i)(A) the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary of
the Company and (B) any Person organized, appointed or established by the
Company for or pursuant to the terms of any such plan or for the purpose
of funding any such plan or funding other employee benefits for employees
of the Company or any subsidiary of the Company; and (ii) Indemnitee, any
Affiliate or Associate of Indemnitee or any group (as Exchange Act Rule
13d-5(b) uses that term) of which Indemnitee or any Affiliate or Associate
of Indemnitee is a member.
"EXPENSES" include all attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to be a witness
in, or otherwise participating in, a Proceeding and all interest or
finance charges attributable to any thereof. Should any payments by the
Company under this Agreement be determined to be subject to any federal,
state or local income or excise tax, "Expenses" also will include such
amounts as are necessary to place Indemnitee in the same after-tax
position (after giving effect to all applicable taxes) he would have been
in had no such tax been determined to apply to those payments.
"INDEPENDENT COUNSEL" means a law firm, or a member of a law firm,
that or who is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent:
(i) the Company, its affiliates or Indemnitee in any matter
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material to any such party; or (ii) any other party to the Proceeding
giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term "Independent Counsel" does not include at any time any
person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Company or Indemnitee in an action to determine Indemnitee's rights under
this Agreement.
"IPO" means the first time a registration statement the Company has
filed under the Securities Act of 1933, as amended, and respecting an
underwritten primary offering by the Company of shares of Common Stock
becomes effective under that Act and the Company issues and sells any of
the shares registered by that registration statement.
"IPO CLOSING DATE" means the date on which the Company first
receives payment for the shares of Common Stock it sells in the IPO.
"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.
"PROCEEDING" includes any action, suit, alternate dispute resolution
mechanism, hearing or any other proceeding, whether civil, criminal,
administrative, arbitrative, investigative or mediative, any appeal in any
such action, suit, alternate dispute resolution mechanism, hearing or
other proceeding and any inquiry or investigation that could lead to any
such action, suit, alternate dispute resolution mechanism, hearing or
other proceeding, except one (i) initiated by an Indemnitee pursuant to
Section 10 to enforce his rights hereunder or (ii) pending on or before
the date of this Agreement.
"VOTING SHARES" means: (i) in the case of any corporation, stock of
that corporation of the class or classes having general voting power under
ordinary circumstances to elect a majority of that corporation's board of
directors; and (ii) in the case of any other entity, equity interests of
the class or classes having general voting power under ordinary
circumstances equivalent to the Voting Shares of a corporation.
Section 18. MODIFICATION AND WAIVER. No supplement to or
modification or amendment of this Agreement will be binding unless executed in
writing by both parties hereto. No waiver of any of the provisions of this
Agreement will be deemed or will constitute a waiver of any other provisions
hereof (whether or not similar), nor will any such waiver constitute a
continuing waiver.
Section 19. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to
notify the Company in writing on being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses hereunder; provided, however, a failure to give that
-12-
<PAGE>
notice will not deprive Indemnitee of his rights to indemnification and
advancement of Expenses hereunder unless the Company is actually and materially
prejudiced thereby.
Section 20. NOTICES. All notices, requests, demands and other
communications hereunder 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 city
in which the Company's principal executive office is located next following the
day when placed in the mail, postage prepaid, certified or registered, addressed
to the appropriate party 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 Indemnitee, to: ______________________________________
______________________________________
______________________________________
with a copy (which will not constitute notice for the purposes
of this Agreement) to such legal counsel, if any, as the
Indemnitee may designate in writing; and
(b) If to the Company, to: U.S. Concrete, Inc.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77056
Attention: President
Section 21. CONTRIBUTION. To the fullest extent applicable law
permits, if the indemnification this Agreement provides is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying
Indemnitee, will contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed fair
and reasonable in light of all the circumstances of that Proceeding in order to
reflect: (i) the relative benefits received by the Company and Indemnitee as a
result of the event(s) and/or transaction(s) giving rise to that Proceeding;
and/or (ii) the relative fault of the Company (and its directors, officers,
employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s).
Section 22. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and the legal relations among the parties will be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
without regard to its conflict of laws rules. Except with respect to any
arbitration Indemnitee commences pursuant to Section 10(a), the Company and
Indemnitee hereby irrevocably and unconditionally (i) agree that any action or
proceeding arising out of or in connection with this Agreement will be brought
only in the Court of Chancery and not
-13-
<PAGE>
in any other state or federal court in the United States of America or any court
in any other country, (ii) consent to submit to the exclusive jurisdiction of
the Court of Chancery for purposes of any action or proceeding arising out of or
in connection with this Agreement, (iii) waive any objection to the laying of
venue of any such action or proceeding in the Court of Chancery and (iv) waive,
and agree not to plead or to make, any claim that any such action or proceeding
brought in the Court of Chancery has been brought in an improper or otherwise
inconvenient forum.
Section 23. MISCELLANEOUS. Use of one gender herein includes usage
of each other gender where appropriate. This Agreement uses the words "herein,"
"hereof" 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.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
ATTEST: U.S. CONCRETE, INC.
By: ____________________________ By: ___________________________________
Print Name: ____________________ Name: _________________________________
Title: ________________________________
ATTEST: INDEMNITEE:
By:_____________________________ _______________________________________
Print Name:_____________________ [Name]
-15-
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
May 5, 1999
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