AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 1999.
REGISTRATION NO. 333-74855
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
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 18, 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 will 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>
[U S CONCRETE PICTURES]
<PAGE>
TABLE OF CONTENTS
PAGE
-----
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
------------------------
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
<TABLE>
<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:
EBITDA(7)........................ $ 19,164 $ 2,750 $ 2,392
================= ============ ============
</TABLE>
AS OF MARCH 31, 1999
-------------------------------
COMBINED(8) AS ADJUSTED(9)
------------ ---------------
(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
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. Upon
consummation of our initial acquisitions, we will record a stock
compensation charge of $3.1 million related to 400,000 shares issued to
management and non-employee directors. We will record goodwill on the
additional 50,000 shares issued to management, as these shares were issued
for services related to these acquisitions.
(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
--------- --------- --------- --------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
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.
AS A RESULT OF CAPITAL CONSTRAINTS AND OTHER FACTORS, 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.
The failure of consolidators in other industries to execute their
business plans may adversely affect our ability to raise capital.
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 because prospective sellers will not accept it or, as a
result of the price at which it is trading, its use would be
dilutive to our existing stockholders.
o We may not be able to identify and acquire sufficient suitable
acquisition candidates available for sale at reasonable prices
and on other reasonable terms for a number of reasons, including:
o the unwillingness of candidates to sell during a period of
growing demand for ready-mixed concrete:
o competitors in our industry may outbid us; or
o we may not have sufficient available capital to pay for
acquisitions.
o The businesses we do acquire may fail to meet our earnings
expectations for a 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.
IF OUR SENIOR MANAGEMENT DOES NOT EXECUTE OUR BUSINESS PLAN, 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 we can implement centralized systems.
o Our resources, including management resources, are limited and may
be strained if we engage in a significant number of acquisitions,
and acquisitions may divert our management's attention from
initiating or carrying out programs to save costs or enhance
revenues.
o We have assembled our senior management only recently, and they may
not be able to work effectively together or with our operating
managements.
o Only two members of our senior management have any experience in
our industry.
o Our ability to realize significant cost savings and customer
cross-selling opportunities in any market will depend on the extent
to which our acquisition strategy succeeds in that market.
9
<PAGE>
o We may fail in our efforts to identify and hire the skilled
personnel we will need to implement and maintain various training
programs we expect would improve our performance, including
programs designed to:
o develop a professional sales force; and
o expand our expertise in the design and variation of concrete
mixes.
OUR SUCCESS WILL DEPEND ON OUR RETAINING EXISTING PERSONNEL, HIRING ADDITIONAL
CORPORATE OFFICERS AND MANAGERS AND, WHEN NECESSARY, 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 and the senior
management of the businesses we initially acquire. Our success also will depend
on our supplementing our initial four corporate officers and managers with
additional officers and managers and, in most cases, on our maintaining 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."
OUR PRO FORMA FINANCIAL STATEMENTS MAY NOT REFLECT THE RATE AT WHICH WE WILL
WRITE OFF THE SIGNIFICANT GOODWILL ON OUR BALANCE SHEET AND THUS MAY OVERSTATE
OUR PRO FORMA EARNINGS
Our pro forma financial statements may not reflect the rate at which we
will write off the significant goodwill on our balance sheet and thus may
overstate our pro forma earnings. According to press reports, the Financial
Accounting Standards Board expects to announce soon whether it will preserve the
current maximum write-off period of 40 years for goodwill or reduce that period
to as little as 10 years for most companies. Our pro forma financial statements
in this prospectus reflect that we currently plan to:
o record, as a result of our initial acquisitions, a significant
amount of goodwill on our balance sheet which, on a pro forma
basis, constituted approximately 41.6% of our assets at March 31,
1999; and
o write off that goodwill as a noncash operating expense in our
statements of operations at the annual rate of $1.3 million over
a period of 40 years.
We will have to accelerate the rate at which we will write off our goodwill
if:
o the FASB effects a change in generally accepted accounting
principles which requires us to do so; or
o we determine at some future time that our then remaining balance
of goodwill has become impaired.
Any such acceleration would cause our reported earnings to decrease for some
period of time, and that decrease might cause the market price of our common
stock to drop.
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
10
<PAGE>
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
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 governmental requirements 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.
Governmental requirements that will impact our operations include those
relating to air quality, solid waste management and water quality. These
requirements 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 requirements when we performed them. Our
compliance with amended, new or more stringent requirements, stricter
interpretations of existing requirements 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 15, 1999, approximately 75% of the employees of the businesses we
initially will acquire were represented by labor unions having collective
bargaining agreements with five of those businesses. Any inability by us to
negotiate acceptable new contracts with these unions could cause strikes or
other work stoppages by the affected employees, and new contracts could result
in increased operating costs attributable to both union and non-union employees.
If any such strikes or other work stoppages were to occur, or if other of our
employees were to become represented by a union, we could experience a
significant disruption of our operations and higher ongoing labor costs which
could materially adversely affect our business, financial condition and results
of operations. In addition, the coexistence of union and non-union employees may
lead to conflicts between union and non-union employees or impede our ability to
integrate our operations efficiently. Labor relations matters affecting our
suppliers of cement and aggregates could adversely impact our business from time
to time. See "Business -- Employees."
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.
11
<PAGE>
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 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 or earlier 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. Any failure on our
part or on the part of our significant service providers or materials suppliers
to have year 2000 compliant programs and systems timely in place could have a
material adverse effect on our ability to serve our customers in a timely manner
and result in lost business and revenues or increased costs. 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. 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. See "Security Ownership of Certain
Beneficial Owners and Management."
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, MAY NOT
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
12
<PAGE>
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. An active trading market for our
common stock may not develop for a number of reasons. For example, the shares we
sell in this offering initially will constitute the only publicly tradable
shares and prospective investors may be deterred by the fact these shares
represent only a 24.3% interest in our company. Other factors that may affect
the extent to which a market for the common stock will develop include:
o the extent to which securities analysts at the major national
brokerages do research and publish reports on our company; and
o the extent to which those interested in investing in our industry
prefer to do so through investments in vertically integrated
manufacturers of cement and ready-mixed concrete.
If an active trading market does develop for our common stock, it may not
continue to exist.
OUR STOCK PRICE MAY BE VOLATILE AFTER THIS OFFERING
The market price of our common stock after this offering may be volatile.
Factors that could cause that volatility include:
o the relatively small number of shares of our common stock that
initially will be publicly tradable;
o fluctuations in our annual or quarterly financial results or those
of our competitors or consolidators having growth strategies
similar to ours in other industries;
o price and volume volatility in the stock market generally or in
the group of companies having smaller market capitalizations
similar to ours;
o changes in the market valuations of other consolidators;
o failures of our operating results to meet the estimates of
securities analysts or the expectations of our stockholders or
changes by securities analysts in their estimates of our future
earnings;
o changing conditions in our cyclical industry or in the local and
regional economies in which we operate; and
o unfavorable publicity or changes in laws or regulations which
adversely affect our industry or us.
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;
o postponements or delays of projects during sustained periods of
inclement weather and other extreme weather conditions; 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."
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."
13
<PAGE>
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 VOTING POWER
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 voting power or
value of our common stock. For example, we might afford holders of preferred
stock the right to elect some number of our directors in all events or on the
happening of specified events or the right to veto specified transactions.
Similarly, the repurchase or redemption rights or liquidation preferences we
might assign to holders of preferred stock could affect the residual value of
the common stock. See "Description of Capital Stock -- Preferred Stock" and
"-- Stockholders Rights Plan."
PROVISIONS IN OUR CORPORATE DOCUMENTS AND DELAWARE LAW COULD DELAY OR PREVENT A
CHANGE IN CONTROL OF OUR COMPANY, EVEN IF THAT CHANGE WOULD BE BENEFICIAL TO OUR
STOCKHOLDERS
The existence of some provisions in our corporate documents and Delaware
law could delay or prevent a change in control of our company, even if that
change would be beneficial to our stockholders. 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."
14
<PAGE>
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.
15
<PAGE>
THE COMPANY
The six businesses we will acquire when this offering closes 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;
o the MCI Arena;
16
<PAGE>
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 $9.0 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 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.
17
<PAGE>
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.
18
<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 $9.0 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 our entire available discretionary cash flow
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."
19
<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.
MARCH 31, 1999
-----------------------------
PRO FORMA
COMBINED(1) AS ADJUSTED
------------- ------------
(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
============= ============
- ------------
(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 $9.0 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 of the businesses we initially will
acquire 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."
20
<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:
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
=========
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>
21
<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
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
(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
----------------------- -------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<S> <C> <C> <C>
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:
EBITDA(7).......................... $ 19,164 $ 2,750 $ 2,392
======================= ============== ==============
</TABLE>
23
<PAGE>
AS OF MARCH 31, 1999
--------------------------
AS
COMBINED(8) ADJUSTED(9)
----------- -----------
(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
24
<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. Upon
consummation of our initial acquisitions, we will record a stock
compensation charge of $3.1 million related to 400,000 shares issued to
management and non-employee directors. We will record goodwill on the
additional 50,000 shares issued to management, as these shares were issued
for services related to these acquisitions.
(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.
25
<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 refinance the assumed indebtedness we do not
repay with proceeds of this offering with our initial borrowings under the
credit facility we describe below. We will then terminate all the agreements
relating to that indebtedness.
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 on 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.
28
<PAGE>
Approximately 90 days after this offering closes, we will adjust the
purchase prices for our initial acquisitions to take into account changes in
working capital from December 31, 1998 to the date this offering closes. As of
March 31, 1999, the net adjustments would have required us to pay a total of
$3.5 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 $9.0 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 or earlier 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 program 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 of the small number of information technology systems each company uses.
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
estimate that we have completed 80% of this process and expect to complete it by
June 30, 1999.
29
<PAGE>
We are also contacting various third parties to obtain representations and
assurances that their hardware, embedded technology systems and software which
we use or will impact us are, or will be modified on a timely basis to be, year
2000 compliant. We identified approximately 50 third parties to be contacted,
based on our identification of those persons as being either significant service
providers or materials suppliers to our business. These third parties include
banks, cement and aggregates suppliers, gas, electricity and water suppliers and
telephone companies. We began contacting these third parties in April 1999 and
have received responses from approximately 50% to date. All the third parties
that have responded have stated that they are or expect to be year 2000
compliant by the end of 1999. We expect to have this part of our program
completed by June 30, 1999. To date, our costs associated with assessing and
monitoring the progress of third parties in resolving their year 2000 issues
have not been significant, and we do not expect to incur any material costs in
the future relating to this aspect of our year 2000 program.
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 estimate that we have
completed approximately 40% of this phase and expect to complete it by June 30,
1999.
As part of our consolidation of our six initial businesses, we are
replacing some of their financial and other systems in order to obtain internal
consistency. Some systems we are replacing happen not to be year 2000 compliant,
but we would replace them in all events this year and are not including the cost
of their replacements as a part of our year 2000 program.
We have decided not to develop formal budgets or perform detailed 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
estimate our external costs of our year 2000 program total approximately $50,000
to date and expect that any additional costs of this program will be nominal. We
expect to pay these costs with the cash flow from our consolidated operations.
We have incurred substantially all these costs in investigating systems for year
2000 compliance and have not incurred any material costs to replace or repair
noncompliant systems. 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 expect
that we will develop any necessary contingency plans in the fourth quarter of
1999 and that these will primarily consist of replacing noncompliant third-party
suppliers or making arrangements with compliant third-party suppliers to backup
any delivery failures and developing back up procedures to handle the failure of
any of our internal systems.
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.
Our most likely worst-case year 2000 noncompliance scenarios are:
o loss of gas, electricity, water or phone service;
o failures or delays in the daily delivery of raw materials;
o equipment failures;
o an interruption in our ability to collect amounts due from
customers; and
o loss of accurate accounting records.
Depending on the length of any noncompliance or system failure, any of
these situations could have a material adverse impact on our ability to serve
our customers in a timely manner and result in lost business and revenues or
increased costs.
30
<PAGE>
This disclosure is subject to protection under the Year 2000 Information
and Readiness Disclosure Act of 1998, Public Law 105-271, as a "Year 2000
Statement" and "Year 2000 Readiness Disclosure" as that Act defines those
terms.
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
-------------------- -------------------- -------------------- --------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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%
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
1999
--------------------
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%
========= =========
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%
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
1999
--------------------
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%
========= =========
- ------------
* Consists of unallocated administrative items.
31
<PAGE>
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, as a result of sales volume increases and higher average sales prices
and the strong marginal contribution from these increased volumes and prices
attributable to the fixed-cost nature of Central's business. 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 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 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,
these expenses decreased from 7.9% in 1997 to 7.1% in 1998.
32
<PAGE>
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, these 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 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. We will terminate this line of credit when we acquire
Central.
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.
33
<PAGE>
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)%
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
1999
--------------------
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%
========= =========
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 because of costs incurred in connection with our acquisition of
Walker's and higher average compensation levels. As a percentage of sales, these
expenses decreased from 12.1% in the first quarter of 1998 to 10.3% in the first
quarter of 1999.
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, these 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.
34
<PAGE>
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, these
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. We will repay that
indebtedness and terminate the line of credit when we acquire Walker's.
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.
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%
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
1999
--------------------
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%
========= =========
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.
35
<PAGE>
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
costs incurred in connection with our acquisition of Bay Cities. As a percentage
of sales, these 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, these 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.
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, these
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. We will repay that indebtedness and terminate the related loan agreements
when we acquire Bay Cities.
36
<PAGE>
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 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 and the impact of these reduced volumes attributable to the
fixed-cost nature of Opportunity's business.
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. As a percentage of sales, these
expenses increased from 13.7% in the first quarter of 1998 to 26.6% in the first
quarter of 1999 because of the reduction in sales and the fixed-cost nature of
these expenses.
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. Gross margins decreased from 31.2% in 1997 to 30.2% in 1998
because increases in cement prices and other costs more than offset the higher
sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained constant at $2.4 million in 1998 compared to
1997. As a percentage of sales, these expenses decreased from 15.3% in 1997 to
14.5% in 1998 because of the increase in sales and the fixed-cost nature of
these expenses.
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
37
<PAGE>
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. We will
terminate this line of credit when we acquire Opportunity.
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
-------------------- --------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
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>
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 slightly lower sales volumes and the impact of these
reduced volumes attributable to the fixed-cost nature of Baer's business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained constant at $0.3 million in 1999 compared to
1998. As a percentage of sales, these expenses decreased from 13.7% in the first
quarter of 1998 to 12.8% in the first quarter of 1999 because of a decrease in
owner's compensation that was partially offset by costs incurred in connection
with our acquisition of Baer.
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. We will terminate this line of credit when we acquire Baer.
38
<PAGE>
BUSINESS
GENERAL
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:
Commercial and industrial
construction......................... 44%
Residential construction............. 33%
Street and highway construction and
paving............................... 18%
Other public works and infrastructure
construction......................... 5%
---
Total........................... 100%
===
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:
Commercial and industrial
construction......................... 18%
Residential construction............. 22%
Street and highway construction and
paving............................... 32%
Other public works and infrastructure
construction......................... 28%
---
Total........................... 100%
===
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.
43
<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
works 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 operates the hopper that dispenses
those materials into the appropriate storage bins;
o a batch operator prepares the specified mixture from the order and
oversees the loading of the 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;
45
<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 15, 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 15, 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:
47
<PAGE>
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
48
<PAGE>
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.
49
<PAGE>
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 15,
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>
- ------------
* Key Employee.
(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
50
<PAGE>
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 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
51
<PAGE>
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 their annualized base salaries will be: Eugene P. Martineau --
$150,000; and Michael W. Harlan. 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; and Mr. Harlan --
175,000. The initial exercise price of those options will be the initial per
share price to the public the front cover page of this prospectus sets forth.
Those options will vest in 25% annual increments, beginning on the first
anniversary of the date this offering closes. 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, and Harlan
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
52
<PAGE>
compensation during the two years preceding the date the notice of termination
is given. In each agreement, "good reason" includes our failure to nominate the
employee for reelection to our board of directors at the 2000 annual meeting of
our stockholders and a change of control of our company. If a change of control
of the Company occurs, the employee will be entitled to terminate his employment
at any time during the 365-day period following that change of control and
receive a lump-sum payment equal to the base salary that would be payable to the
employee over the remainder of the employee's initial term of employment or, if
longer, 24 months. 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 stock 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 our 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;
53
<PAGE>
o waive any restriction or other provision of the incentive plan or
in any employee award;
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
54
<PAGE>
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 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
55
<PAGE>
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the board of directors will be authorized in its
sole discretion, to:
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.
56
<PAGE>
CERTAIN TRANSACTIONS
ORGANIZATIONAL TRANSACTIONS
We issued and sold 200 shares of common stock in October 1997 to Main
Street Merchant Partners II, L.P. 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, 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 -- $1.4 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.
SHARES OF
CASH COMMON STOCK
----------- ------------
(DOLLARS IN THOUSANDS)
Central.............................. $ 3,888 3,120,130
Walker's............................. 6,331 2,234,339
Bay Cities........................... 8,602 1,871,310
Opportunity.......................... 1,430 1,034,291
Baer................................. 1,200 423,529
Santa Rosa........................... 1,861 301,689
----------- ------------
Total........................... $23,312 8,985,288
=========== ============
57
<PAGE>
Central, Opportunity and Santa Rosa are S corporations. Before this
offering closes, they will make distributions in cash or other assets or
short-term notes to their owners in amounts equal to the balances of their
retained earnings on which those owners have paid or will pay income taxes,
including 1999 earnings. At 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:
SHARES OF
NAME CASH COMMON STOCK
- ------------------------------------- --------- ------------
(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
========= ============
- ------------
(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:
NUMBER OF AGGREGATE
FACILITIES ANNUAL RENTALS
--------- --------------
Central......................... 2 $272,400
Baer............................ 2 228,000
We believe the rentals we will pay under each of these leases are 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 owned by 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 on 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, we expect any future 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.
SHARES TO BE
BENEFICIALLY OWNED
----------------------
BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------- ----------- -------
Robert S. Walker(1).................. 2,234,339 14.3%
Main Street Merchant Partners II,
L.P.(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%
- ------------
* 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. Humphreys 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.
62
<PAGE>
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.
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:
NUMBER
UNDERWRITER OF SHARES
- ---------------------------------------- ---------
Scott & Stringfellow, Inc...............
Sanders Morris Mundy Inc................
---------
Total.............................. 3,800,000
=========
The underwriting agreement provides that the obligations of the
underwriters are subject to 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.
WITH
PER SHARE WITHOUT OPTION OPTION
--------- -------------- ------
Public Offering Price............. $ $ $
Underwriting Discount............. $ $ $
Proceeds to U.S. Concrete......... $ $ $
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
make 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 make 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
PAGE
----
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
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 (1) 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 (2) 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
</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
</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
</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. The distribution is comprised of cash of $9.5 million and
cash surrender value of certain life insurance policies of $1.2
million.
(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 to
purchase common stock will have an exercise price equal to the initial
public offering price, will vest in 25% annual increments, beginning
on the first anniversary of the date this offering closes, and will be
issued to the following persons or groups of persons: (i) 540,000
shares to U.S. Concrete's executive officers and key management
employees; (ii) 20,000 shares to U.S. Concrete's nonemployee
directors; (iii) 503,000 shares to employees of the Founding
Companies, and (iv) 87,000 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 to
purchase common stock will have an exercise price equal to the initial
public offering price, will vest in 25% annual increments, beginning
on the first anniversary of the date this offering closes, and will be
issued to the following persons or groups of persons: (i) 540,000
shares to U.S. Concrete's executive officers and key management
employees; (ii) 20,000 shares to U.S. Concrete's nonemployee
directors; (iii) 503,000 shares to the employees of the Founding
Companies, and (iv) 87,000 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 to
purchase common stock will have an exercise price equal to the initial
public offering price, will vest in 25% annual increments beginning on
the first anniversary of the date this offering closes, and will be
issued to the following persons or groups of persons: (i) 540,000
shares to U.S. Concrete's executive officers and key management
employees; (ii) 20,000 shares to U.S. Concrete's nonemployee
directors; (iii) 503,000 shares to the employees of the Founding
Companies, and (iv) 87,000 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. Upon consummation of the
Acquisitions, the Company will record a stock compensation charge of $3.1
million related to 400,000 shares issued to management and non-employee
directors. Goodwill will be recorded on the additional 50,000 shares issued for
services related to the Acquisitions.
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 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
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 9.0 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.
SEC Registration Fee................. $ 11,542
NASD Filing Fee...................... 4,652
NASDAQ National Market Listing Fee... 90,500
Accounting Fees and Expenses......... 2,380,000
Legal Fees and Expenses.............. 850,000
Printing Expenses.................... 250,000
Transfer Agent's Fees................ 7,500
Directors and Officers Insurance..... 85,000
Miscellaneous........................ 520,800
------------
Total........................... $ 4,200,000
============
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.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
- -------------------------------------------------------------
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.
4.3 -- Funding Agreement dated as of
September 10, 1999 by and between
U.S. Concrete and Main Street
Merchant Partners II, L.P.
4.4 -- Rights Agreement by and between U.S.
Concrete and American Stock Transfer
& Trust Company, including form of
Rights Certificate attached as
Exhibit B thereto.
4.5 -- Commitment Letter and Term Sheet
dated as of April 16, 1999 by and
among U.S. Concrete, Chase Bank of
Texas, National Association and Chase
Securities Inc.
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 -- Form of Employment Agreement between U.S.
Concrete and Michael W. Harlan
10.4 -- Form of Employment Agreement between U.S.
Concrete and Eugene P. Martineau
II-4
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- -------------------------------------------------------------
10.5* -- Employment Agreement between U.S.
Concrete and Michael D. Mitschele.
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 -- Form of Employment Agreement between U.S.
Concrete and Terry Green.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Intentionally omitted.
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.
- ------------
* Previously filed.
(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.
II-5
<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 17, 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 17, 1999
EUGENE P. MARTINEAU and Director
(Principal Executive Officer)
/s/ MICHAEL W. HARLAN Chief Financial Officer and May 17, 1999
MICHAEL W. HARLAN Director (Principal Financial
and Accounting Officer)
/s/ VINCENT D. FOSTER Director May 17, 1999
VINCENT D. FOSTER
</TABLE>
II-7
EXHIBIT 1.1
3,800,000 SHARES
U.S. CONCRETE, INC.
COMMON STOCK
------------------------
UNDERWRITING AGREEMENT
------------------------
SCOTT & STRINGFELLOW, INC.
As Representative of the Several
Underwriters Named in Schedule I hereto
909 East Main Street
Richmond, Virginia 23219
[May ____], 1999
Dear Sirs:
U.S. Concrete, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to Scott &
Stringfellow, Inc. ("S&S" or the "Representative") and the several other
underwriters named in Schedule I hereto (collectively, with the Representative,
the "Underwriters") an aggregate of 3,800,000 shares (the "Firm Securities") of
Common Stock, $.001 par value per share, of the Company ("Common Stock") and, at
the election of the Underwriters, up to 570,000 additional shares (the "Optional
Securities") of Common Stock. The Firm Securities and the Optional Securities
that the Underwriters elect to purchase pursuant to Section 2, if any, hereof
are collectively called the "Securities."
Additionally, as a portion of the Underwriters' compensation, the Company
will, pursuant to the Warrant Agreement among the Company and S&S and Sanders
Morris Mundy Inc. ("SMM"), dated May , 1999 (the "Warrant Agreement"), grant to
S&S and SMM warrants (the "Warrants") to purchase an aggregate of 200,000 shares
of Common Stock at the price described in the Warrant Agreement. As described in
the Warrant Agreement, such warrants will be exercisable on or after
<PAGE>
the first anniversary of the initial public offering of the Common Stock (the
"IPO") and on or prior to the third anniversary of the IPO.
1. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to, and agrees with the several
Underwriters that:
(a) In connection with the transactions contemplated by this Underwriting
Agreement (the "Agreement"), a registration statement on Form S-1 (File No.
333-74855), and as a part thereof a preliminary prospectus, in respect of the
Securities has been prepared by the Company in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and has been filed with
the Securities and Exchange Commission (the "Commission") in the form heretofore
delivered to you; such registration statement, as amended, has been declared
effective by the Commission; and no stop order suspending the effectiveness of
such registration statement has been issued and no proceeding for that purpose
has been instituted or threatened by the Commission (any preliminary prospectus
included in such registration statement, as amended, or filed by the Company
with the Commission pursuant to Rule 424(a) under the Act in connection with the
offering of the Securities, being hereinafter called a "Preliminary Prospectus";
the various parts of such registration statement, including all exhibits thereto
and including the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) of this Agreement and deemed by virtue of Rule 430A under the Act
to be a part of the registration statement at the time it was declared
effective, each as amended at the time such part became effective, and any
registration statement filed pursuant to Rule 462(b) under the Act registering
additional shares of Common Stock which the Company has filed or is required to
file pursuant to the terms hereof being hereinafter called collectively the
"Registration Statement" and the final prospectus, in the form first filed by
the Company pursuant to Rule 424(b) under the Act, being hereinafter called the
"Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, complied in all material respects with the
applicable requirements of the Act and the rules and regulations of the
Commission thereunder;
(c) The Registration Statement complies in all material respects with the
applicable requirements of the Act and the rules and regulations of the
Commission thereunder and did not, as of its effective date contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to any
statements in or omissions from the Registration Statement made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Underwriter through you expressly for use therein;
(d) The Prospectus, as amended or supplemented, as of its date and at all
subsequent times, did not contain an untrue statement of a material fact or omit
to state a material fact required
<PAGE>
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements in or
omissions from the Prospectus, or any amendments or supplements thereto, made in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through you expressly for use
therein.
(e) Schedule II hereto lists (i) all the Company's subsidiaries as of the
date hereof (the "Subsidiaries") and (ii) all the companies the Company will
acquire (the "Founding Companies") on the First Delivery Date (as herein
defined) pursuant to the acquisition transactions the Registration Statement
describes (the "Acquisitions"). None of the Company, the Subsidiaries and the
Founding Companies has sustained since the date of the latest audited financial
statements included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or expressly contemplated in the
Prospectus, except for any such loss or interference that would not, singly or
in the aggregate, have a material adverse effect on the business, properties,
financial condition or results of operations of the Company, the Subsidiaries
and the Founding Companies, taken as a whole (a "Material Adverse Effect");
(f) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise set forth or
expressly contemplated therein, (i) there has not been any change in the capital
stock or increase in the long term debt of the Company, the Subsidiaries or the
Founding Companies, respectively, or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company, the Subsidiaries and the Founding Companies taken
as a whole and (ii) there have been no transactions entered into by the Company
, the Subsidiaries or the Founding Companies, other than transactions entered
into in the ordinary course of business, that are material with respect to the
Company, the Subsidiaries and the Founding Companies taken as a whole;
(g) The Company, the Subsidiaries and the Founding Companies have good and
indefeasible title to all real property and good and marketable title to all
personal property reflected as owned by them, respectively, in the financial
statements referred to in Section 1(t) below (or elsewhere in the Prospectus),
in each case free and clear of all liens, encumbrances and defects except such
as are described in the Prospectus or such as do not materially and adversely
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company, the Subsidiaries
and the Founding Companies; and any real property and buildings reflected as
being held under lease by the Company, the Subsidiaries and the Founding
Companies, respectively, in the financial statements referred to in Section 1(t)
below (or elsewhere in the Prospectus) are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company, the Subsidiaries and the Founding Companies;
<PAGE>
(h) The Company, the Subsidiaries and the Founding Companies have been
duly incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, with the
requisite corporate power and authority to own or lease their respective
properties and conduct their respective businesses as described in the
Prospectus; and each has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any business, so
as to require such qualification, except where the failure to so qualify would
not result in a Material Adverse Effect; and each of the Company, the
Subsidiaries and the Founding Companies holds all material licenses,
certificates, authorizations and permits from governmental authorities necessary
for the conduct of its business as described in the Prospectus;
(i) The Company has an authorized capitalization as set forth in the
Prospectus; all of the issued and outstanding shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
nonassessable and conform in all material respects to the description of the
capital stock of the Company contained in the Prospectus; except as described in
the Prospectus there are no preemptive or other rights to subscribe for or to
purchase any securities of the Company under the Certificate of Incorporation of
the Company or under Delaware law; except as described in the Prospectus, there
are no warrants, options or other rights to purchase any securities of the
Company which have been granted by the Company; and neither the filing of the
Registration Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any rights for or relating to the
registration of any securities of the Company;
(j) All outstanding shares of capital stock of the Subsidiaries are duly
authorized and validly issued and are fully paid and non-assessable and, except
as described in the Prospectus, are owned, directly or indirectly, by the
Company free and clear of any perfected security interest and any other security
interests, claims, liens or encumbrances; as of the First Delivery Date, the
Company will own, directly or indirectly, all the issued and outstanding shares
of capital stock of the Founding Companies, free and clear of any security
interests, claims, liens or encumbrances (except for those that are described in
the Prospectus), and all those shares will have been validly issued and will be
fully paid and nonassessable; and, other than the Subsidiaries and the Founding
Companies, the Company does not own or control, directly or indirectly, any
corporation, association or other entity;
(k) The Securities have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company against
payment therefor as provided herein, will be validly issued, fully paid and
nonassessable and will conform in all material respects to the description of
the Securities contained in the Prospectus;
(l) The issuance and sale of the Securities being issued at each Delivery
Date (as hereinafter defined) by the Company and the performance of this
Agreement and the consummation by the Company of the other transactions herein
contemplated will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or the Subsidiaries pursuant to, any indenture, mortgage,
deed of trust, loan agreement or
<PAGE>
other agreement or instrument to which the Company or any of the Subsidiaries or
the Founding Companies is a party or by which the Company or any of the
Subsidiaries or the Founding Companies is bound or to which any of the property
or assets of the Company or any of the Subsidiaries or the Founding Companies is
subject, nor will such action result in any violation of the provisions of the
Certificate or Articles of Incorporation or Bylaws of the Company or any of the
Subsidiaries or the Founding Companies or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of the Subsidiaries or the Founding Companies or any of their
respective properties, except for any such conflicts, breaches, violations,
defaults, liens, charges or encumbrances as would not, singly or in the
aggregate, result in a Material Adverse Effect; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issuance and sale of the
Securities or the consummation by the Company of the transactions contemplated
by this Agreement, except for (i) such consents, approvals, authorizations,
orders, registrations or qualifications as may be required under the Act and the
rules and regulations thereunder, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations thereunder under
state securities or Blue Sky laws, and under the rules of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with the
purchase and distribution of the Securities by the Underwriters and (ii) such
consents, approvals, authorizations, orders, registrations or qualifications as
to which the failure to obtain would not, singly or in the aggregate, result in
a Material Adverse Effect;
(m) None of the Company, the Subsidiaries and the Founding Companies is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and the Subsidiaries, taken as a whole, to which the
Company or any of the subsidiaries is a party or by which the Company or any of
the Subsidiaries or their respective property is bound, except for such defaults
as would not, singly or in the aggregate, result in a Material Adverse Effect;
(n) There are no legal or governmental proceedings pending to which the
Company or any of the Subsidiaries or the Founding Companies is a party or of
which any of their respective property or assets is subject, which, if
determined adversely to the Company or the Subsidiaries, would individually or
in the aggregate, have a Material Adverse Effect and to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or by others;
(o) None of the Company, the Subsidiaries and the Founding Companies has
violated any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), except
for such violations that would not, singly or in the aggregate, have a Material
Adverse Effect;
(p) Each of the Company, the Subsidiaries and the Founding Companies has
such permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each an
<PAGE>
"Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect (each such
Authorization being a "Material Authorization"). Each Material Authorization is
valid and in full force and effect and each of the Company, the Subsidiaries and
the Founding Companies is in compliance, in all material respects, with all the
terms and conditions thereof and with the applicable rules and regulations of
the authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after notice or
lapse of time or both, would allow revocation, suspension or termination of any
such Material Authorization or results or, after notice or lapse of time or
both, would result in any other impairment of the rights of the holder of any
such Material Authorization; and none of the Authorizations contain restrictions
that are burdensome, in any material respect, to the Company, any of the
Subsidiaries or the Founding Companies;
(q) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
Material Adverse Effect;
(r) Arthur Andersen, LLP, which has certified certain financial statements
of the Company and the Founding Companies, are independent public accountants
within the meaning of the Act and the rules and regulations of the Commission
thereunder;
(s) All employee benefit plans established, maintained or contributed to
by the Company or any of the Subsidiaries or Founding Companies comply in all
material respects with all applicable requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and no such plan has incurred
or assumed an "accumulated funding deficiency" within the meaning of Section 302
of ERISA or has incurred or assumed any material liability to the Pension
Benefit Guaranty Corporation;
(t) The historical financial statements of the Company and the Founding
Companies, together with related notes, as set forth in the Registration
Statement and Prospectus (and any supplement or amendment thereto) present
fairly in all material respects the financial position and the results of
operations of the Company and the Founding Companies at the indicated dates and
for the indicated periods, all in accordance with generally accepted accounting
principles, consistently applied throughout the periods presented except as
noted in such financial statements and the notes thereto; and the selected
financial information included in the Prospectus presents fairly the information
shown therein and has been compiled on a basis consistent with the financial
statements presented therein; and the other historical financial and statistical
information and data respecting the Company and the Founding Companies set forth
in the Registration Statement and the Prospectus
<PAGE>
(and any amendment and supplement thereto) are, in all material respects,
accurately presented and prepared on a basis consistent with such financial
statements and the books and records of the Company and the Founding Companies,
as applicable. The PRO FORMA combined financial statements of the Company and
the Founding Companies and the related notes thereto set forth in the
Registration Statement and the Prospectus (and any supplement or amendment
thereto) have been prepared in accordance with the applicable requirements of
Rule 11-02 of Regulation S-X promulgated by the Commission and have been
properly compiled on the pro forma bases described therein and the assumptions
used in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions or circumstances referred to
therein. The other PRO FORMA financial and statistical information and data set
forth in the Registration Statement and the Prospectus (and any supplement or
amendment thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with the PRO FORMA financial statements. No other
financial statements or supporting schedules, other than the Financial Data
Schedule required by Item 601(c) of Regulation S-K under the Securities Act, are
required to be included in the Registration Statement. As of the date of the
Prospectus, neither the Company nor any of the Subsidiaries or the Founding
Companies is engaged in substantive discussions with any third party with
respect to, or obligated to complete, any acquisitions (other than the
Acquisitions) for which disclosure of PRO FORMA financial information in the
Prospectus is required by the Act;
(u) The Company is not and, after giving effect to the offering and sale
of the Securities and the application of the proceeds thereof as described in
the Prospectus, will not be, an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended;
(v) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under
the Act with respect to any securities of the Company or to require the Company
to include such securities with the Securities registered pursuant to the
Registration Statement;
(w) The Company, the Subsidiaries and the Founding Companies have filed
all federal, state, local and foreign income and franchise tax returns that have
been required to be filed (or have properly requested extensions with respect
thereto) other than those filings being contested in good faith, and have paid,
or made adequate reserves for, all taxes indicated by said returns and all
assessments received by them to the extent that such taxes have become due and
are not being contested in good faith, except where the failure to do so would
not, singly or in the aggregate, result in a Material Adverse Effect.
(x) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters on any Delivery Date shall be
deemed to be a representation and warranty by the Company to the Underwriters as
to the matters covered thereby;
(y) The Company and the Founding Companies are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; and neither the Company nor any of the
<PAGE>
Subsidiaries (i) has received notice from any insurer or agent of such insurer
that substantial capital improvements or other material expenditures will have
to be made in order to continue such insurance or (ii) has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers at a
cost that would not have a Material Adverse Effect;
(z) There is no (i) significant unfair labor practice complaint, grievance
or arbitration proceeding pending or threatened against the Company or any of
the Subsidiaries or Founding Companies before the National Labor Relations Board
or any state or local labor relations board, (ii) strike, labor dispute,
slowdown or stoppage pending or threatened against the Company or any of the
Subsidiaries or (iii) union representation question existing with respect to the
employees of the Company or any of the Subsidiaries or Founding Companies,
except for such actions specified in clause (i), (ii) or (iii) above, which,
singly or in the aggregate, would not have a Material Adverse Effect.
(aa) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) its transactions and those
of its subsidiaries are executed in accordance with management's general or
specific authorizations; (ii) its transactions and those of its subsidiaries are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to its assets and those of its
subsidiaries is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for its assets and
those of its subsidiaries is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences;
(bb) No relationship, direct or indirect, exists between or among the
Company or any of the Subsidiaries or Founding Companies, on the one hand, and
the directors, officers, shareholders, customers or suppliers of the Company or
any of the Subsidiaries or Founding Companies, on the other hand, that is
required by the Act or by the rules and regulations thereunder to be described
in the Registration Statement and the Prospectus which is not so described;
(cc) None of the Company, the Subsidiaries or the Founding Companies have
taken and will not take, directly or indirectly, any action which is designed to
or which has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities;
(dd) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as that
enforceability may be subject to the effect of (i) any applicable bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, (ii) general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law) and (iii) any implied covenant of good faith or fair dealing,
and except as rights to indemnity and contribution hereunder may be limited by
federal or state law;
<PAGE>
(ee) The execution and delivery of, and the performance by the Company,
the Founding Companies and the shareholders of each Founding Company of their
respective obligations under, the agreements relating to the Acquisitions,
included as exhibits to the Registration Statement (the "Acquisition
Agreements") to which they are parties, respectively, have been duly and validly
authorized by the Company, the Founding Companies and the shareholders of each
Founding Company and each Acquisition Agreement has been duly executed and
delivered by the Company and each Founding Company and Founding Company
shareholder which is a party to such agreement, and constitutes the legal, valid
and binding agreement of the Company and each such Founding Company and Founding
Company shareholder, enforceable in accordance with its terms, except as that
enforceability may be subject to the effect of (i) any applicable bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, (ii) general principles or equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law) and (iii) any implied covenant of good faith or fair dealing,
and except as rights to indemnity and contribution thereunder may be limited by
applicable law; and
(ff) The Securities have been approved for inclusion on the Nasdaq
National Market, subject to notice of issuance and compliance with certain
requirements of The Nasdaq Stock Market, Inc.
2. PURCHASE AND SALE OF THE SECURITIES.
Subject to the terms and conditions herein set forth, (a) the Company
agrees to sell to the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price per
share of [$ ], the number of Firm Securities (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying the aggregate number of
Firm Securities to be sold by the Company by a fraction, the numerator of which
is the aggregate number of Firm Securities to be purchased by such Underwriter
as set forth opposite the name of such Underwriter in Schedule I hereto, and the
denominator of which is the aggregate number of Firm Securities to be purchased
by all the Underwriters from the Company as set forth in Schedule I hereto and
(b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Securities as provided below, the Company agrees
to sell to the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the same purchase price set forth
in clause (a) of this Section 2, that portion of the number of Optional
Securities as to which such election shall have been exercised (to be adjusted
by you so as to eliminate fractional shares) determined by multiplying such
number of Optional Securities by a fraction, the numerator of which is the
aggregate number of Firm Securities to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto, and the
denominator of which is the aggregate number of Firm Securities to be purchased
by all the Underwriters from the Company as set forth in Schedule I hereto.
The Company grants the Underwriters the right to purchase at their
election up to 570,000 Optional Securities, at the purchase price per share set
forth in the preceding paragraph, for the sole purpose of covering
overallotments, in the sale of the Firm Securities. Any such election to
purchase the Optional Securities may be exercised no more than once by written
notice from you to the
<PAGE>
Company, given within a period of 30 days after the date of this Agreement,
setting forth the aggregate amount of the Optional Securities to be purchased
and the date on which such Optional Securities are to be delivered, as
determined by you but in no event earlier than the First Delivery Date (as
defined in Section 4 hereof) or, unless you otherwise agree in writing, earlier
than two or later than seven business days after the date of such notice.
The Company hereby agrees not to offer, pledge, sell, contract to sell,
sell any option to purchase, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock except to the Underwriters pursuant to this Agreement and to
stockholders of the Founding Companies pursuant to the Acquisition Agreements,
for a period of 180 days after the date of the Prospectus without the prior
written consent of Scott & Stringfellow, Inc. During such period (i) the Company
may issue shares of Common Stock in connection with acquisitions after the
thirtieth day following the date of the Prospectus, (ii) the Company may grant
stock options and issue shares of Common Stock on the exercise of stock options
pursuant to the company's existing incentive plan and (iii) the Company may
issue shares of Common Stock upon the exercise of any option or warrant or the
conversion of any convertible security outstanding on the date hereof. The
Company also agrees not to amend the provisions of Section 10.14(a) of each of
the Acquisition Agreements, or to waive the provisions thereof or give its
consent thereunder, for a period of 180 days after the date of the Prospectus
without the prior written consent of Scott & Stringfellow, Inc. Notwithstanding
the foregoing, during such period the Company may register 3,000,000 shares of
Common Stock under the Act for use by the Company in future acquisitions. The
Company shall, prior to or concurrently with the execution of this Agreement,
deliver an agreement executed by (i) each of the directors and officers of the
Company and (ii) each stockholder listed on Annex II hereto to the effect that
such person will not, during the period commencing on the date such person signs
such agreement and ending 180 days after the date of the Prospectus, without the
prior written consent of Scott & Stringfellow, Inc., (A) engage in any of the
transactions described in the first sentence of this paragraph or (B) make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable for
Common Stock.
3. OFFERING BY THE UNDERWRITERS.
Upon authorization by you of the release of the Firm Securities, the
Underwriters propose to offer the Firm Securities for sale upon the terms and
conditions set forth in the Prospectus.
4. DELIVERY AND PAYMENT.
Certificates in definitive form for the Securities to be purchased by each
Underwriter hereunder, and in such denominations and registered in such names as
you may request upon at least two business days' prior notice to the Company,
shall be delivered by or on behalf of the Company to you for the account of each
Underwriter, against payment of the purchase price therefor by wire transfer in
immediately available funds, all at the offices of Baker & Botts L.L.P., 3000
One Shell Plaza, Houston, Texas (or such other place as may be agreed to by the
Company and the
<PAGE>
Representatives). The time and date of such delivery and payment shall be, with
respect to the Firm Securities, 8:00 a.m., Houston time, on _________, 1999, or
at such other time and date as you and the Company may agree upon in writing
and, with respect to the Optional Securities, 8:00 a.m., Houston time, on the
date specified by you in the written notice of the Underwriters' election to
purchase such Optional Securities in accordance with the provisions of Section
2, or at such other time and date as you and the Company may agree upon in
writing. Such time and date for delivery of the Firm Securities is herein called
the "First Delivery Date," such time and date for delivery of the Optional
Securities, if not the First Delivery Date, is herein called the "Second
Delivery Date," and each such time and date for delivery is herein called a
"Delivery Date." Such certificates will be made available to the Underwriters
for checking and packaging at least twenty-four hours prior to each Delivery
Date at the offices of Scott & Stringfellow, Inc. in Richmond, Virginia or such
other location designated by the Underwriters to the Company.
5. AGREEMENTS OF THE COMPANY.
The Company agrees with the Underwriters:
(a) To prepare the Prospectus in a form reasonably approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act within the time
period prescribed or, if applicable, such earlier time as may be required by
Rule 430A under the Act; to make no amendment or supplement to the Registration
Statement or Prospectus which shall be reasonably disapproved by you promptly
after reasonable notice thereof; to advise you, promptly after it receives
notice thereof, of the time when any amendment to the Registration Statement has
been filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with copies thereof; to
advise you, promptly after it receives notice thereof, if the Company is
required to file a Rule 462(b) Registration Statement after the effectiveness of
this Agreement, when the Rule 462(b) Registration Statement has become
effective; to file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission subsequent to
the date of the Prospectus and for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Securities; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
(b) Promptly from time to time to take such actions as you may reasonably
request to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as you have requested and to comply with such laws so
as to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Securities,
provided that in connection therewith the Company shall not be required to
qualify as a foreign
<PAGE>
corporation or to take any action that would subject it to general service of
process in any such jurisdiction where it is not presently qualified or where it
would be subject to taxation as a foreign corporation.
(c) To furnish the Underwriters with copies of the Registration Statement
and the Prospectus in such quantities as you may from time to time reasonably
request during such period following the date hereof as a prospectus is required
to be delivered in connection with offers or sales of Securities, and, if the
delivery of a prospectus is required and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary during such
period to amend or supplement the Prospectus in order to comply with the Act, to
prepare and file with the Commission an appropriate amendment or supplement to
the Prospectus so that the statements in the Prospectus, as so amended or
supplemented, will not in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with applicable
law, and to notify you and upon your request furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may from time
to time reasonably request of such amended Prospectus or supplement to the
Prospectus;
(d) As soon as practicable, but not later than the Availability Date (as
defined below), to make generally available to its security holders and deliver
to you an earnings statement of the Company (which need not be audited) covering
a period of at least 12 months beginning after the effective date of the
Registration Statement which will satisfy the provisions of Section 11(a) of the
Act (for the purpose of this subsection 5(d) only, "Availability Date" means the
45th day after the end of the fourth fiscal quarter following the fiscal quarter
that includes the effective date of the Registration Statement, except that, if
such fourth fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter);
(e) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders, and deliver to
you as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed or the Nasdaq
National Market; and (ii) such additional information concerning the business
and financial condition of the Company as you may from time to time reasonably
request;
(f) To apply the net proceeds from the sale of the Securities for the
purposes set forth in the Prospectus;
(g) To use its best efforts to list, subject to notice of issuance, the
Securities on the Nasdaq National Market and to maintain the listing of the
Securities on the Nasdaq National Market for a period of three years after the
date of this Agreement;
<PAGE>
(h) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
each Delivery Date, and to satisfy all conditions precedent to the delivery of
the Securities; and
(i) If the Registration Statement at the time of the effectiveness of this
Agreement does not cover all the Securities, to file a Rule 462(b) Registration
Statement with the Commission registering the Securities not so covered in
compliance with Rule 462(b) by the date of this Agreement and to pay to the
Commission the filing fee for such Rule 462(b) Registration Statement at the
time of the filing thereof or to give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act.
6. PAYMENT OF EXPENSES.
The Company agrees with the several Underwriters that the Company will pay
or cause to be paid the following, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Securities under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or
reproducing this Agreement and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii) all expenses in
connection with the qualification, if required, of the Securities for offering
and sale under state securities laws as provided in Section 5(b) hereof,
including the reasonable fees and disbursements of counsel for the Underwriter
in connection with any such required qualification; (iv) the filing fees
incident to securing any required review by the NASD of the terms of the sale of
the Securities; (v) the cost of preparing stock certificates; (vi) the costs or
expenses of any transfer agent or registrar with respect to the Securities;
(vii) all fees relating to the inclusion of the Securities on the Nasdaq
National Market; and (viii) all other costs and expenses incident to the
performance of the Company's obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that
except as provided in this Section, Section 8 and Section 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Securities by them,
and any advertising expenses connected with any offers they may make.
7. CONDITIONS TO OBLIGATIONS OF THE UNDERWRITERS.
The obligations of each Underwriter hereunder, as to the Securities to be
delivered at each Delivery Date, shall be subject, in its discretion, to the
condition that all representations and warranties and other statements of the
Company are, at and as of the date hereof and each Delivery Date, true and
correct in all material respects and the condition that the Company shall have
performed in all material respects all of its obligations hereunder theretofore
to be performed, and the following additional conditions:
<PAGE>
(a) The Registration Statement is effective; if the filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the
Prospectus, or any such supplement, will be filed in the manner and within the
time period required by Rule 424(b); no stop order suspending the effectiveness
of the Registration Statement shall be in effect and no proceeding for that
purpose shall be pending before or threatened by the Commission; and all
requests for additional information on the part of the Commission shall have
been complied with to your reasonable satisfaction;
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by the date of this
Agreement; and no stop order suspending the effectiveness of such Rule 462(b)
Registration Statement shall be in effect and no proceedings for that purpose
shall be pending before or threatened by the Commission;
(c) On each Delivery Date, Andrews & Kurth L.L.P., counsel for the
Underwriters, shall have furnished to you their written opinion, dated such
date, with respect to the incorporation of the Company, the validity of the
Securities being issued on such Delivery Date, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(d) On each Delivery Date, counsel for the Company shall have furnished to
you their written opinion, dated such date, substantially in the form attached
hereto as Annex I;
(e) On each Delivery Date, counsel for the Founding Companies shall have
furnished to you their written opinion, dated such date, substantially in the
form provided for by the Acquisition Agreements;
(f) On the date of this Agreement and also at each Delivery Date, Arthur
Andersen, LLP shall have furnished to you a letter in each case, dated the date
of delivery thereof, in form and substance reasonably satisfactory to you, to
the effect set forth in Annex II hereto;
(g) (i) Neither the Company nor the Subsidiaries shall have sustained
since the date of the latest audited financial statements included in the
Prospectus, any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or expressly contemplated in the Prospectus, except for any
such loss or interference that would not, singly or in the aggregate, result in
a Material Adverse Effect, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been any change in
the capital stock or increase in the long-term debt of the Company, the
Subsidiaries or the Founding Companies or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company, the Subsidiaries and the Founding Companies taken
as a whole, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is in your
reasonable judgment so material and adverse as to make it
<PAGE>
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities being issued at such Delivery Date on the terms and in the
manner contemplated by the Prospectus;
(h) The Company shall have furnished or caused to be furnished to you the
agreements provided for in the last sentence of Section 2 herein.
(i) The Company shall have furnished or caused to be furnished to you on
the date of this Agreement and on the Delivery Date certificates of officers of
the Company satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of the date hereof and the Delivery
Date, as to the performance by the Company of all of its obligations hereunder
to be performed at or prior to the Delivery Date, as to the matters set forth in
subsections (a) and (f) of this Section and as to such other matters as you may
reasonably request;
(j) On the First Delivery Date, the Acquisitions shall have been
consummated on the terms set forth in the Registration Statement and the
Acquisition Agreements, without waiver or modification of any material terms or
provisions of any Acquisition Agreement, except as may be approved by you;
(k) The Securities shall have been duly approved for inclusion on the
Nasdaq National Market, subject to notice of issuance; and
(l) The Company shall have entered into employment agreements (in form and
substance satisfactory to you) with each of Eugene P. Martineau and Michael W.
Harlan.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will indemnify and hold harmless each Underwriter, its
directors, its officers and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement 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 or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto), or any omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating, preparing to defend or defending, or appearing as
a third party witness in connection with, any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or
<PAGE>
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by you expressly for use therein; provided, further,
that with respect to any Preliminary Prospectus, the foregoing indemnity
agreement shall not inure to the benefit of any Underwriter from whom the person
asserting any loss, claim, damage or liability purchased Securities, or any
person controlling such Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to Section 5 and a copy of the Prospectus
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense.
(b) Each Underwriter will indemnify and hold harmless the Company, each of
its directors and officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which the Company or any such director,
officer or controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement, or
arise out of or are based upon the 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 each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, Registration Statement
or Prospectus or any such amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through you expressly for use therein; and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating, preparing to defend or defending, or appearing as
a third party witness in connection with, any such action or claim as such
expenses are incurred. The Company acknowledges that for purposes of this
Agreement the last sentence on the front cover page of the Prospectus and the
statements set forth in the first through fourth paragraphs, the tenth paragraph
(regarding sales to accounts over which the representatives of the Underwriters
exercise discretionary authority) and fourteenth through sixteenth paragraphs in
the Preliminary Prospectus and the Prospectus under the heading "Underwriting"
constitute the only information furnished in writing by or on behalf of the
several Underwriters for inclusion in the Preliminary Prospectus or the
Prospectus, and you confirm, as the Representative, that such statements are
correct.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection, unless and to the extent that such
indemnifying party did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights or
defenses. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to
<PAGE>
participate therein and, to the extent that it shall elect, jointly with any
other indemnifying party similarly notified, by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have been advised by counsel
that representation of such indemnified party and the indemnifying party would
present such counsel with a conflict of interest under applicable standards of
professional conduct due to actual or potential differing interests between them
or that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to defend such action and to otherwise participate in
the defense of such action on behalf of such indemnified party or parties. It is
understood that the indemnifying party shall, in connection with any such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm or
attorneys together with appropriate local counsel at any time for all
indemnified parties not having actual or potential differing interests with any
indemnified party. Upon receipt of notice from the indemnifying party to such
indemnified party of the indemnifying party's election so to appoint counsel to
defend such action and approval by the indemnified party of such counsel, the
indemnifying party will not be liable for any settlement entered into without
its consent and will not be liable to such indemnified party under this Section
8 for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to the next
preceding sentence, (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action or
(iii) the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying party; and except
that, if clause (i) or (iii) is applicable, such liability shall be only in
respect of the counsel referred to in such clause (i) or (iii). Notwithstanding
the immediately preceding sentence and the third preceding sentence, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its consent if (i) such settlement is entered into
more than 30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying
<PAGE>
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company on the one hand and the Underwriters
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other, in connection with the offering of the Securities pursuant to this
Agreement, shall be deemed to be in the same respective proportions as the total
net proceeds from the offering (after deducting the underwriting discount, but
before deducting expenses) received by the Company bear to the total
underwriting discounts received by the Underwriters, in each case as set forth
on the cover page of the Prospectus. The relative fault of the Company on the
one hand and the Underwriters on the other shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company on the one hand or the Underwriters on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) the provisions of the
Agreement Among Underwriters shall govern contribution among the Underwriters,
(ii) no Underwriter (except as provided in the Agreement Among Underwriters)
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. Notwithstanding the
provisions of this subsection (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations under this subsection (d) are
several in proportion to their respective underwriting obligations and not
joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director, employee and
agent of the Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act;
and the obligations of the Underwriters under this Section 8 shall be in
addition to any liability which the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company and to each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
<PAGE>
9. SUBSTITUTION OF UNDERWRITERS.
(a) If any of the Underwriters fail to purchase on a Delivery Date the
Securities agreed to be purchased on such Delivery Date by such Underwriter or
Underwriters, and the aggregate number of Securities which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase does not
exceed 10% of the aggregate number of the Securities to be purchased on such
date, the other Underwriters shall be obligated, severally, in the proportions
that the number of Firm Securities set forth opposite their respective names on
Schedule I hereto bears to the aggregate number of Firm Securities set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as may be specified by the Representative with the consent of the
non-defaulting Underwriters, to purchase the Securities which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If on the First Delivery Date or the Second Delivery Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase
Securities and the aggregate number of Securities with respect to which such
default occurs exceeds 10% of the aggregate number of Securities to be purchased
on such date, and arrangements satisfactory to the Representative and the
Company for the purchase of such Securities are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party
(other than a defaulting underwriter or underwriters) to any other party. In any
such case, the provisions of Sections 5, 6, 8, 11, 12, 13 and 15 through 18
shall survive such termination. In any such case either the Representative or
the Company shall have the right to postpone the First Delivery Date or the
Second Delivery Date, as the case may be, but in no event for longer than seven
days in order that the required changes, if any, to the Registration Statement
and the Prospectus or any other documents or arrangements may be effected. This
Section 9 will not affect the liability of the defaulting Underwriters to the
Company or the nondefaulting Underwriters arising out of such default. A
substitute underwriter under this Section 9 will be deemed an Underwriter for
all purposes of this Agreement.
10. REPRESENTATIONS AND WARRANTIES TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation (or any statement as to the results
thereof) made by or on behalf of the Underwriters or any controlling person of
any Underwriter, or the Company, or any officer or director or controlling
person of the Company, and shall survive delivery of and payment for the
Securities.
11. TERMINATION AND PAYMENT OF EXPENSES.
(a) This Agreement shall be subject to termination in your absolute
discretion, by notice given to the Company prior to the delivery of any payment
for the Securities, if prior to such time there shall have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or the Nasdaq National Market; (ii) a
general moratorium on commercial banking activities in New York or Virginia
declared by federal, New
<PAGE>
York State or Virginia authorities; (iii) the outbreak or escalation of
hostilities involving the United States or the declaration by the United States
of a national emergency or war, if any such event specified in this clause (iii)
would have such a materially adverse effect, in your judgment, as to make it
impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus; or (iv) such a material adverse change in
general economic, political, financial or international conditions affecting
financial markets in the United States having a material adverse impact on
trading prices of securities in general, as, in your judgment, makes it
impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus.
(b) If this Agreement shall be terminated pursuant to this Section 11, the
Company shall not then be under any liability to any Underwriter except as
provided in Section 6 and Section 8 hereof; but if for any other reason the sale
of the Securities provided for herein is not consummated because any condition
to the obligations of the Underwriters set forth in Section 7 hereof is not
satisfied, because of any termination pursuant to this Section 11 or because of
any refusal, inability or failure on the part of the Company to perform any
agreements herein or comply with the provisions hereof other than by reason of a
default by any of the Underwriters, the Company will be responsible for and will
reimburse the Underwriters upon demand for all out-of-pocket expenses, including
reasonable fees and disbursements of counsel, reasonably incurred by the
Underwriters in connection with the proposed purchase, sale and delivery of the
Securities. Nothing in this Section 11 shall be deemed to relieve the
Underwriters of their liability, if any, to the Company for damages occasioned
by their default hereunder.
12. NOTICES.
In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you. All statements, requests, notices and agreements hereunder shall
be in writing or by telegram or facsimile if promptly confirmed in writing, and
if to the Underwriters shall be sufficient in all respects if delivered or sent
by mail, telegram or facsimile transmission to: Scott & Stringfellow, Inc., 909
East Main Street, Richmond, Virginia 23219, Attention: Corporate Finance
Department, Telecopy: (804) 649-0990; and if to the Company shall be sufficient
in all respects if delivered or sent by mail, telegram or facsimile transmission
to: U. S. Concrete, Inc., 1360 Post Oak Boulevard, Suite 800, Houston, Texas
77056, Attention: Michael W. Harlan, Telecopy: (713) 350-6042, with a copy to
Baker & Botts, Attention: Ted Paris, Suite 3000, One Shell Plaza, Houston, Texas
77002, Telecopy: (713) 229-1522. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. SUCCESSORS.
This Agreement shall be binding upon, and inure solely to the benefit of,
the Underwriters and the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company, the officers and
directors, employees and agents of any Underwriter and each person who controls
the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or
<PAGE>
by virtue of this Agreement. No purchaser of any of the Securities from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. TIME OF THE ESSENCE.
Time shall be of the essence in the performance under this Agreement.
15. BUSINESS DAY.
As used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
16. APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to its conflicts of laws
provisions.
17. CAPTIONS.
The captions included in this Agreement are included solely for
convenience of reference and shall not be deemed to be a part of this Agreement.
18. COUNTERPARTS.
This Agreement may be executed by any one or more of the parties in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us two counterparts hereof, and upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
among each of the Underwriters and the Company. It is understood that your
acceptance of this Agreement on behalf of each of the Underwriters is pursuant
to the authority set forth in a form of Agreement Among Underwriters, the form
of which will be submitted to the Company for examination, upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
U.S. CONCRETE, INC.
By: _______________________________
Eugene P. Martineau
<PAGE>
President and Chief Executive Officer
Accepted as of the date hereof at Richmond, Virginia:
SCOTT & STRINGFELLOW, INC.
As Representative of the Underwriters
By: _______________________________
Title: ____________________________
<PAGE>
SCHEDULE I
UNDERWRITERS
UNDERWRITER FIRM SECURITIES TO BE PURCHASED
--------------------- -----------------------------------
Scott & Stringfellow, Inc.
Sanders Morris Mundy Inc.
TOTAL 3,800,000
<PAGE>
SCHEDULE II
SUBSIDIARIES AND FOUNDING COMPANIES
SUBSIDIARIES
- ------------
Baer Acquisition Inc.
Bay Cities Acquisition Inc.
Central Concrete Acquisition Inc.
OCC Acquisition Inc.
Santa Rosa Acquisition Inc.
Walker's Acquisition Inc.
FOUNDING COMPANIES
- ------------------
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 Co.
<PAGE>
ANNEX I
(TO COME)
<PAGE>
ANNEX II
Pursuant to Section 7(e) of the Underwriting Agreement, Arthur Andersen,
LLP shall furnish letters to the Representative to the effect that:
1. They are independent public accountants with respect to the Company and
its subsidiaries within the meaning of the Act and the applicable published
rules and regulations thereunder;
2. In their opinion, the consolidated audited financial statements audited
by them and included in the Registration Statement and the Prospectus comply as
to form in all material respects with the applicable accounting requirements of
the Act and the related published rules and regulations thereunder;
3. On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a reading
of the latest unaudited financial statements made available by the Company,
inspection of the minute books of the Company and the Subsidiaries since the
date of the latest audited financial statements included in the Prospectus,
inquiries of officials of the Company and the Founding Companies responsible for
financial and accounting matters and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention that caused them to
believe that:
(A) the unaudited consolidated financial statements included in the
Registration Statement or the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and published rules and regulations thereunder or are not presented in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited consolidated
financial statements included in the Registration Statement or Prospectus;
(B) (i) as of a specified date not more than five calendar days
prior to the date of delivery of such letter, there have been any change
in the capital stock, any increase in long-term debt of the Company, or
any decreases in total assets or stockholders' equity as compared with
amounts shown on the most recent consolidated balance sheet included in
the Registration Statement or Prospectus, and (ii) for the period from the
date of the most recent financial statements included in the Registration
Statement or Prospectus to such specified date there were any decreases in
the total or per share amounts of net income as compared with the
corresponding period in the preceding year, except in each case for
increases or decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
4. In addition to the audit referenced in their report included in the
Registration Statement and the Prospectus and the limited procedures, inspection
of minute books, inquiries and
<PAGE>
other procedures referred to above, they have carried out certain specified
procedures, not constituting an audit in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages and financial
information which are derived from the general accounting records of the
Company, the Subsidiaries and the Founding Companies, which appear in any
Preliminary Prospectus, the Prospectus, or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Representative, and
have compared certain of such amounts, percentages and financial information
with the accounting records of the Company and the Founding Companies and have
found them to be in agreement.
EXHIBIT 1.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
AMONG
U. S. CONCRETE, INC.
AND
SCOTT & STRINGFELLOW, INC.
AND
SANDERS MORRIS MUNDY INC.
-----------------------------------
DATED AS OF MAY , 1999
-----------------------------------
Warrants to Purchase 200,000 Common Shares
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
AGREEMENT....................................................................1
1. DEFINITIONS............................................................1
2. WARRANT CERTIFICATES...................................................5
2.1 ISSUANCE OF WARRANT..............................................5
2.2 FORM, DENOMINATION AND DATE OF WARRANTS..........................5
2.3 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES...................5
2.4 TRANSFER AND EXCHANGE; RESTRICTIONS ON TRANSFER; LEGEND..........6
3. EXERCISE AND EXPIRATION OF WARRANTS....................................8
3.1 RIGHT TO ACQUIRE WARRANT SHARES UPON EXERCISE....................8
3.2 EXERCISE AND EXPIRATION OF WARRANTS..............................8
(a) EXERCISE OF WARRANTS.......................................8
(b) EXPIRATION OF WARRANTS.....................................8
(c) METHOD OF EXERCISE.........................................8
(d) PARTIAL EXERCISE...........................................9
(e) ISSUANCE OF WARRANT SHARES.................................9
(f) TIME OF EXERCISE...........................................9
3.3 PAYMENT OF TAXES................................................10
3.4 SURRENDER OF CERTIFICATES.......................................10
3.5 SHARES ISSUABLE.................................................10
4. DISSOLUTION, LIQUIDATION OR WINDING UP................................10
5. ADJUSTMENTS...........................................................11
5.1 ADJUSTMENTS.....................................................11
(a) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS............11
(b) CERTAIN OTHER DIVIDENDS AND DISTRIBUTIONS.................12
(c) RECLASSIFICATIONS.........................................12
(d) DISTRIBUTION OF WARRANTS OR OTHER RIGHTS TO HOLDERS OF
COMMON SHARES.............................................13
(e) SUPERSEDING ADJUSTMENT OF NUMBER OF WARRANT SHARES INTO
WHICH EACH WARRANT IS EXERCISABLE.........................13
(f) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION...................................................13
(g) WARRANT PRICE ADJUSTMENT..................................14
(h) MERGER, CONSOLIDATION OR COMBINATION......................15
(i) COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS.................15
-i-
<PAGE>
(j) OPTIONAL TAX ADJUSTMENT...................................15
(k) WARRANTS DEEMED EXERCISABLE...............................15
(l) LIMITATIONS ON CERTAIN NON-STOCK DIVIDENDS................15
5.2 NOTICE OF ADJUSTMENT............................................16
5.3 STATEMENT ON WARRANT CERTIFICATES...............................16
5.4 FRACTIONAL INTEREST.............................................16
6. LOSS OR MUTILATION....................................................16
7. RESERVATION AND AUTHORIZATION OF WARRANT SHARES.......................17
8. WARRANT TRANSFER BOOKS................................................17
9. WARRANT HOLDERS.......................................................18
9.1 VOTING OR DIVIDEND RIGHTS.......................................18
9.2 RIGHTS OF ACTION................................................19
9.3 TREATMENT OF HOLDERS OF WARRANT CERTIFICATES....................19
9.4 COMMUNICATIONS TO HOLDERS.......................................19
10. NOTICES...............................................................19
10.1 NOTICES GENERALLY...............................................19
10.2 REQUIRED NOTICES TO HOLDERS.....................................21
11. APPLICABLE LAW........................................................21
12. PERSONS BENEFITING....................................................22
13. COUNTERPARTS..........................................................22
14. AMENDMENTS............................................................22
15. INSPECTION............................................................22
16. SUCCESSOR TO THE COMPANY..............................................22
17. ENTIRE AGREEMENT......................................................23
18. HEADINGS..............................................................23
-ii-
<PAGE>
EXHIBITS
A. Form of Warrant Certificate..........................................A-1
-iii-
<PAGE>
WARRANT AGREEMENT
This WARRANT AGREEMENT, dated as of May , 1999, is entered into among U.
S. CONCRETE, INC., a Delaware corporation (the "Company"), SCOTT & STRINGFELLOW
INC., a corporation ("S&S") and SANDERS MORRIS MUNDY INC., a corporation
("SMM").
R E C I T A L S:
A. This Agreement is entered into in connection with a letter agreement,
dated ___________________, 1999 between the Company, S&S and SMM (the
"Engagement Agreement").
B. Pursuant to the Engagement Agreement and in connection with the
Company's proposed initial public offering of its Common Shares (as defined
below), the Company proposes to issue to S&S and SMM an aggregate of 200,000
Warrants, as hereinafter described, each to purchase from time to time at the
Warrant Price (as defined below) one Common Share (as defined below) of the
Company on and after the Issue Date (as defined below) and on or prior to the
Expiration Date (as defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
1. DEFINITIONS
"ADDITIONAL COMMON SHARES" shall mean all Common Shares issued or issuable
by the Company after the date of this Agreement, other than the Warrant Shares.
"AFFILIATE" shall mean, as to any Person, any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control of such Person. For purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AGREEMENT" shall mean this Warrant Agreement, as the same may be amended,
modified or supplemented from time to time.
"BUSINESS DAY" shall mean a day which in New York, New York is neither a
legal holiday nor a day on which banking institutions are authorized by law or
regulation to close.
"CAPITAL STOCK" of any Person shall mean any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock, and any warrants, options or similar rights to acquire such
capital stock.
<PAGE>
"COMMISSION" shall mean the U.S. Securities and Exchange Commission.
"COMMON SHARES" shall mean (i) the common stock, par value $.001 per
share, of the Company, as constituted on the original issuance of the Warrants,
(ii) any Capital Stock into which such Common Shares may thereafter be changed
and (iii) except as provided in Section 5.1(c), any share of Capital Stock of
the Company of any other class issued to holders of Common Shares upon any
reclassification thereof.
"CORPORATE OFFICE" shall mean the executive offices of the Company located
at 1360 Post Oak Boulevard, Suite 800, Houston, Texas 77056 or such other place
as the Company shall locate its executive offices.
"CURRENT MARKET PRICE" shall mean, with respect to any security on any
date the average of the daily Market Price of such security for each Business
Day during the period commencing thirty (30) Business Days before such date and
ending on the date one Business Day prior to such date provided, however, that
if (i) the Current Market Price per share of a security is determined during a
period following the Company's announcement of (A) a dividend or distribution on
such a security payable in shares of such a security or securities convertible
into shares of such a security, or (B) any subdivision, combination or
reclassification of such security and (ii) prior to the expiration of such
thirty (30) Business Day period before such date (or, if applicable, such lesser
number of Business Days before such date for which daily Market Prices are
available) the ex-dividend date for such dividend or distribution or the record
date for such subdivision, combination or reclassification occurs, then, in each
such case, the Current Market Price shall be properly adjusted to take into
account ex-dividend trading.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXPIRATION DATE" shall mean the third anniversary of the Issue Date or
such earlier date as determined in accordance with Section 4.
"HOLDER" or "WARRANTHOLDER" shall mean any Person in whose name at the
time any Warrant Certificate is registered upon the Warrant Register.
"INDEPENDENT" shall mean a nationally recognized investment banking firm
or Person (as the case may be) (i) that does not then have, and for the three
years immediately preceding such time has not had (and, in the case of a
nationally recognized investment banking firm, whose directors, officers,
employees and Affiliates do not then have, and for the three years immediately
preceding such time have not had) a direct or indirect interest in the Company
or any of its Subsidiaries or Affiliates or any successor to any of them and
(ii) that is not then, and for the three years immediately preceding such time
was not (and, in the case of a nationally recognized investment banking firm,
whose directors, officers, employees or Affiliates are not then, and for the
three years immediately preceding such time were not) an employee, consultant,
advisor, director, officer or
-2-
<PAGE>
Affiliate (it being understood that the term "Independent" when applied to a
director of the Company, means a non-employee director of the Company whose only
significant relationship with the Company during the relevant period has been as
a director of the Company) of the Company, any of its Subsidiaries or Affiliates
or any successor to any of them.
"INDEPENDENT FINANCIAL EXPERT" shall mean an Independent nationally
recognized investment banking firm with assets in excess of $1.0 billion
selected by a majority of the members of the Board of Directors (and by a
majority of the Independent members of the board, if any) of the Company.
"ISSUE DATE" shall mean the date on which Common Shares (as herein
defined) are delivered to underwriters and payment is made therefor pursuant to
the Company's initial public offering of Common Shares.
"MARKET PRICE" at any date shall be deemed to be the last reported sale
price, or, in case no such reported sale takes place on such day, the average of
the last reported sale prices for the last three trading days, in either case as
officially reported by the principal securities exchange on which the securities
are listed or admitted to trading or by the NNM, or, if the securities are not
listed or admitted to trading on any national securities exchange or quoted by
NNM, the average closing bid price as furnished by the NASD through NNM or
similar organization if NNM is no longer reporting such information, or if the
securities are not quoted on NNM, as determined in good faith by resolution of
the Board of Directors of the Company.
"NASD" shall mean National Association of Securities Dealers, Inc.
"NNM" shall mean Nasdaq National Market.
"NON-STOCK DIVIDEND" shall mean any payment by the Company to all holders
of outstanding Common Shares of any dividend, or any other distribution by the
Company to such holders, of any shares of Capital Stock of the Company,
evidences of indebtedness of the Company, cash or other assets (including
rights, warrants or other securities (of the Company or any other Person)),
other than any dividend or distribution (i) upon a merger or consolidation or
sale to which Section 5.1(h) applies, (ii) of any Common Shares referred to in
Section 5.1(a) or (iii) of cash not in liquidation of the Company.
"NON-SURVIVING COMBINATION" shall mean any merger, consolidation or other
business combination by the Company with one or more other entities in a
transaction in which the Company is not the surviving entity or becomes a wholly
owned subsidiary of another entity.
"OUTSTANDING" shall mean, as of the time of determination, when used with
respect of any Warrants, all Warrants originally issued under this Agreement
except (i) Warrants that have been exercised pursuant to Section 3.2(a), (ii)
Warrants that have expired pursuant to Sections 3.2(b), 4 or 6 and (iii)
Warrants that have otherwise been acquired by the Company; PROVIDED, HOWEVER,
that in determining whether the Holders of the requisite amount of the
outstanding Warrants have given
-3-
<PAGE>
any request, demand, authorization, direction, notice, consent or waiver under
the provisions of this Agreement, Warrants owned by the Company or any
Subsidiary or Affiliate of the Company or any Person that is at such time a
party to a merger or acquisition agreement with the Company shall be disregarded
and deemed not to be outstanding.
"PERSON" shall mean any individual, corporation (including a business
trust), partnership, joint venture, association, joint-stock company, trust,
estate, limited liability company, unincorporated association, unincorporated
organization, government or agency or political subdivision thereof or any other
entity.
"RECIPIENT" shall have the meaning given such term in Section 3.2(e).
"REGISTRATION STATEMENT" shall mean the registration statement under the
Securities Act relating to the Company's initial public offering of Common
Shares.
"RESTRICTED WARRANT LEGEND" shall mean the legend set forth in Section
2.4(b).
"RULE 144" shall mean Rule 144 promulgated under the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person or a combination
thereof.
"WARRANT CERTIFICATES" shall mean those certain warrant certificates
evidencing the Warrants, substantially in the form of Exhibit A attached hereto.
"WARRANT PRICE" shall mean the exercise price per Warrant Share, initially
set at $ (the initial public offering price per share of the Common Shares
issued in the Company's initial public offering), subject to adjustment as
provided in Section 5.1(g).
"WARRANT REGISTER" shall have the meaning given such term in Section 8.
"WARRANT SHARES" shall mean the Common Shares issuable upon exercise of
the Warrants, the number and nature of which are subject to adjustment from time
to time in accordance with Section 5.
-4-
<PAGE>
"WARRANTS" shall mean those warrants issued hereunder to purchase
initially up to an aggregate of 200,000 Warrant Shares at the Warrant Price,
subject to adjustment pursuant to Section 5.
2. WARRANT CERTIFICATES
2.1 ISSUANCE OF WARRANTS. On the Issue Date the Company shall grant
100,000 Warrants to S&S and 100,000 Warrants to SMM. The Company shall issue to
S&S and SMM Warrant Certificates evidencing such Warrants. Each Warrant
Certificate issued pursuant to this Section 2.1 shall evidence the number of
Warrants specified therein and each Warrant evidenced thereby shall represent
the right, subject to the provisions contained herein and in the Warrant
Certificate, to purchase one Warrant Share, subject to adjustment as provided in
Section 5.
2.2 FORM, DENOMINATION AND DATE OF WARRANTS.
(a) Warrant Certificates shall be in registered form in
substantially the form of Exhibit A hereto. The Warrants shall be numbered,
lettered or otherwise distinguished in such manner as the officers of the
Company executing the same may determine. Each Warrant shall be dated the date
of its execution. Any of the Warrant Certificates may be issued with appropriate
insertions, omissions, substitutions and variations, and may have imprinted or
otherwise reproduced thereon such legend or legends, as may be required to
comply with any law or with any rules or regulations pursuant thereto, or with
the rules of any securities market in which the Warrants or Common Shares are
admitted to trading, or to the extent not inconsistent with the provisions of
this Agreement, to conform to general usage. All Warrants shall be otherwise
substantially identical except as to denomination and as provided herein.
(b) Each Warrant Certificate issued pursuant to this Agreement will
bear the Restricted Warrant Legend unless removed in accordance with Section
2.4.
2.3 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES.
(a) Warrant Certificates evidencing the Warrants which may be
delivered under this Agreement are limited to Warrant Certificates evidencing
200,000 Warrants, except for Warrant Certificates delivered pursuant to Sections
2.4, 3.2(d), 6 and 8 upon registration of transfer of, or in exchange for, or in
lieu of, one or more previously issued Warrant Certificates and as may be
necessary to reflect the adjustments required by Section 5.
(b) At any time and from time to time on or after the date of this
Agreement, Warrant Certificates evidencing the Warrants may be executed and
delivered by the Company for issuance upon transfer of Warrants pursuant to the
provisions of Section 2.4.
(c) The Warrant Certificates shall be executed in the corporate name
and on behalf of the Company by the Chairman (or any Co-Chairman) of the Board,
the Chief Executive
-5-
<PAGE>
Officer, the President or any one of the Vice Presidents of the Company under
corporate seal reproduced thereon and attested to by the Secretary or one of the
Assistant Secretaries of the Company, either manually or by facsimile signature
printed thereon. In case any officer of the Company whose signature shall have
been placed upon any of the Warrant Certificates shall cease to be such officer
of the Company before delivery thereof, such Warrant Certificates may,
nevertheless, be issued and delivered with the same force and effect as though
such person had not ceased to be such officer of the Company, and any Warrant
Certificate may be signed on behalf of the Company by such person as, at the
actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company, although at the date of the execution of this Agreement
any such person was not such an officer.
2.4 TRANSFER AND EXCHANGE; RESTRICTIONS ON TRANSFER; LEGEND.
(a) The Holder of a Warrant Certificate, by its acceptance thereof,
covenants and agrees that the Warrants are being acquired as an investment and
not with a view to the distribution thereof, and that, notwithstanding anything
in this Agreement to the contrary, the Warrants may not be sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part, for a
period of one year from the effective date of the Registration Statement (except
by operation of law or by reason of reorganization of the Company). However,
during such restricted period the Warrants may be transferred to any member of
the NASD participating in the Company's initial public offering (and to their
successors) and to the bona fide officers or partners thereof (and pursuant to
any such individual's last will and testament or the laws of descent and
distribution).
(b) Except as provided in Section 2.4(d), each Warrant Certificate
and each certificate representing Warrant Shares shall bear the following legend
(the "Restricted Warrant Legend"):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE ISSUER THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND
SUCH LAWS IS AVAILABLE WITH RESPECT TO THAT OFFER AND SHARE.
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE
OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF ARE
SUBJECT TO THE CONDITIONS SPECIFIED IN THE WARRANT
AGREEMENT, DATED MAY _________, 1999, AMONG THE COMPANY,
SCOTT & STRINGFELLOW, INC. AND SANDERS MORRIS MUNDY
INC. THE TRANSFER OR EXCHANGE OF THE WARRANT
-6-
<PAGE>
REPRESENTED BY THIS CERTIFICATE AND OTHER SECURITIES ISSUABLE UPON
EXERCISE THEREOF IS RESTRICTED IN ACCORDANCE WITH THE WARRANT
AGREEMENT REFERRED TO HEREIN. A COPY OF THE WARRANT AGREEMENT IS ON
FILE AT THE OFFICES OF U.S. CONCRETE, INC. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND
BY THE PROVISIONS OF THE WARRANT AGREEMENT.
(c) If a Holder of a Warrant wishes at any time to transfer such
Warrant to a Person who wishes to take delivery thereof, such Holder may,
subject to the restrictions on transfer set forth herein, cause the exchange of
such Warrant for one or more Warrants exercisable for the same aggregate number
of Warrant Shares. Upon receipt by the Company at its Corporate Office of (1)
such Warrant, duly endorsed as provided herein, (2) instructions from such
Holder directing the Company to execute and deliver one or more Warrants
exercisable for the same aggregate number of Warrant Shares as the Warrant to be
exchanged, such instructions to contain the name or names of the designated
transferee or transferees, the authorized denomination or denominations of the
Warrants to be so issued and appropriate delivery instructions, and (3) if
required pursuant to Section 2.4(d), an opinion of counsel to the transferor of
such Warrant, reasonably satisfactory to the Company, to the effect that the
transfer of such Warrant has been registered under the Securities Act or is
exempt from registration thereunder pursuant to an applicable exemption
therefrom, then the Company shall cancel or cause to be canceled such Warrant
and, concurrently therewith, the Company shall execute and deliver, one or more
Warrants to the effect set forth therein, in accordance with the instructions
referred to above.
(d) If Warrants or Warrant Shares are issued upon the transfer,
exchange or replacement of Warrants or Warrant Shares bearing the Restricted
Warrant Legend, or if a request is made to remove such Restricted Warrant
Legend, the Warrants or Warrant Shares so issued shall bear the Restricted
Warrant Legend, or the Restricted Warrant Legend shall not be removed, as the
case may be, unless there is delivered to the Company satisfactory evidence,
which may include an opinion of counsel as may be reasonably required by the
Company to the effect that neither the Restricted Warrant Legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
thereof comply with the provisions of the Securities Act or, with respect to
Warrants or Warrant Shares, that such Warrants or Warrant Shares are not
"restricted" within the meaning of Rule 144 under the Securities Act. Upon
provision of such satisfactory evidence the Company shall execute and deliver
Warrant Certificates that do not bear the Restricted Warrant Legend.
(e) No service charge shall be made to a Warrantholder for any
registration of transfer or exchange; PROVIDED, HOWEVER, that the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Warrant Certificates.
-7-
<PAGE>
3. EXERCISE AND EXPIRATION OF WARRANTS
3.1 RIGHT TO ACQUIRE WARRANT SHARES UPON EXERCISE.
Each Warrant Certificate shall entitle the Holder thereof, subject to the
provisions thereof and of this Agreement, to acquire from the Company, for each
Warrant evidenced thereby, one Warrant Share at the Warrant Price, subject to
adjustment as provided in Section 5.1. The Warrants are exercisable at any time
on and after the first anniversary of the Issue Date and on or prior to the
Expiration Date.
3.2 EXERCISE AND EXPIRATION OF WARRANTS.
(a) EXERCISE OF WARRANTS. Subject to the terms and conditions set
forth herein, including, without limitation, the exercise procedure described in
Section 3.2(c), a Holder of a Warrant Certificate may exercise all or any whole
number of the Warrants evidenced thereby, on any Business Day after the first
anniversary of the Issue Date until 5:00 p.m., Houston, Texas time, on the
Expiration Date for the Warrant Shares purchasable thereunder.
(b) EXPIRATION OF WARRANTS. The Warrants shall terminate and become
void as of 5:00 p.m., Houston, Texas time, on the Expiration Date.
(c) METHOD OF EXERCISE. The Holder may exercise all or any whole
number of the Warrants by either of the following methods:
(i) The Holder may deliver to the Company at the Corporate
Office (A) a written notice of such Holder's election to exercise
Warrants, duly executed by such Holder in the form set forth on the
reverse of, or attached to, such Warrant Certificate, which notice
shall specify the number of Warrant Shares to be purchased, (B) the
Warrant Certificate evidencing such Warrants and (C) a sum equal to
the aggregate Warrant Price for the Warrant Shares into which such
Warrants are being exercised, which sum shall be paid in any
combination elected by such Holder of (x) a certified or official
bank check payable to the order of the Company and delivered to the
Company at the Corporate Office, or (y) wire transfers in
immediately available funds to the account of the Company at such
banking institution as the Company shall have given notice to the
Holders in accordance with Section 10.1(b); or
(ii) The Holder may also exercise all or any of the Warrants
in a "cashless" or "net-issue" exercise by delivering to the Company
at the Corporate Office (A) a written notice of such Holder's
election to exercise Warrants, duly executed by such Holder in the
form set forth on the reverse of, or attached to, such Warrant
Certificate, which notice shall specify the number of Warrant Shares
to be delivered to such Holder and the number of Warrant Shares with
respect to which
-8-
<PAGE>
such Warrants are being surrendered in payment of the aggregate
Warrant Price for the Warrant Shares to be delivered to the Holder,
and (B) the Warrant Certificate evidencing such Warrants. For
purposes of this subparagraph (ii), each Warrant Share as to which
such Warrants are surrendered in payment of the aggregate Warrant
Price will be attributed a value equal to (x) the Market Price per
share of Common Shares MINUS (y) the then-current Warrant Price.
Solely for the purpose of this paragraph, the Market Price shall be
calculated as the average of the Market Prices for each of the five
trading days preceding the date the notice of exercise is delivered
to the Company.
(d) PARTIAL EXERCISE. If fewer than all the Warrants represented by
a Warrant Certificate are exercised or surrendered pursuant to the provisions of
Section 3.2(c)(ii), such Warrant Certificate shall be surrendered and a new
Warrant Certificate in the same form and for the number of Warrants which were
not exercised or surrendered shall be executed by the Company. Subject to the
restrictions on transfer herein, the Company shall issue and deliver the new
Warrant Certificate to the Person or Persons as may be directed in writing by
the exercising Holder.
(e) ISSUANCE OF WARRANT SHARES. Upon surrender of a Warrant
Certificate evidencing Warrants in conformity with the foregoing provisions and
payment of the Warrant Price in respect of the exercise of one or more Warrants
evidenced thereby, the Company shall within five Business Days after the Company
receives such notice of exercise and payment, execute or cause to be executed
and deliver or cause to be delivered to the Recipient (as defined below) a
certificate or certificates representing the aggregate number of Warrant Shares
issuable upon such exercise (based upon the aggregate number of Warrants so
exercised), determined in accordance with Section 3.5, together with an amount
in cash in lieu of any fractional share(s) determined in accordance with Section
5.4. The certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as such Holder shall request in
such notice of exercise and shall be registered or otherwise placed in the name
of, and delivered to, the Holder or, subject to Section 2.4 and Section 3.3,
such other Person as shall be designated by the Holder in such notice (the
Holder or such other Person being referred to herein as the "Recipient").
(f) TIME OF EXERCISE. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date on which all
requirements set forth in Section 3.2(c) applicable to such exercise have been
satisfied. Subject to Section 5.1(f)(iv), certificate(s) evidencing the Warrant
Shares issued upon the exercise of such Warrant shall be deemed to have been
issued and, for all purposes of this Agreement, the Recipient shall, as between
such Person and the Company, be deemed to be and entitled to all rights of the
holder of record of such Warrant Shares as of such time.
3.3 PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if any, attributable to
the initial issuance of Warrants and the Warrant Shares issuable upon exercise
of the Warrants; provided, however, that
-9-
<PAGE>
Company shall not be required to pay any tax or other charge imposed in respect
of (i) any transfer (including any transfer effected pursuant to the provisions
of Section 3.2(d) or (e)) or exchange of any Warrant Certificates or any
certificates for Warrant Shares or (ii) payment of cash to any Recipient other
than the Holder of the Warrant Certificate surrendered upon the exercise of a
Warrant, and in case of such transfer, exchange or payment, the Company shall
not be required to issue or deliver any certificate or pay any cash until (a)
such tax or charge has been paid or an amount sufficient for the payment thereof
has been delivered to the Company or (b) it has been established to the
Company's satisfaction that any such tax or other charge that is or may become
due has been paid.
3.4 SURRENDER OF CERTIFICATES.
Any Warrant Certificate surrendered for exercise shall be promptly
canceled by the Company and shall not be reissued.
3.5 SHARES ISSUABLE.
The number of Warrant Shares "issuable upon exercise" of Warrants at any
time shall be the number of Warrant Shares into which such Warrants are then
exercisable. The number of Warrant Shares "into which each Warrant is
exercisable" initially shall be one share, subject to adjustment as provided in
Section 5.1.
4. DISSOLUTION, LIQUIDATION OR WINDING UP
If, on or prior to the Expiration Date, the Company shall effect or
otherwise be subject to a voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, each Warrantholder shall receive the
securities, money or other property which such Warrantholder would have been
entitled to receive had such Warrantholder been the holder of record of the
Warrant Shares into which the Warrants were exercisable immediately prior to
such dissolution, liquidation or winding up (net of the then applicable Warrant
Price), and the rights to exercise such Warrants shall terminate.
If, on or prior to the Expiration Date, the Company (or any other Person
controlling the Company) shall propose a voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, the Company shall give
written notice thereof to all Holders of Warrant Certificates in the manner
provided in Section 10 prior to the date on which such transaction is expected
to become effective or, if earlier, the record date for such transaction. Such
notice shall also specify the proposed date (if then determinable) as of which
the holders of record of the Common Shares shall be entitled to exchange their
shares for moneys, securities or other property deliverable upon such
dissolution, liquidation or winding up, as the case may be, the proposed date
(if then determinable) on which each Holder of Warrant Certificates shall be
entitled to receive the moneys, securities or other property which such Holder
would have been entitled to receive had such Holder been the holder of record of
the Warrant Shares into which the Warrants were exercisable
-10-
<PAGE>
immediately prior to such dissolution, liquidation or winding up (net of the
then applicable Warrant Price) and the date on which the rights to exercise the
Warrants shall terminate.
In case of any such voluntary or involuntary dissolution, liquidation or
winding up of the Company, the Company shall retain any money, securities or
other property which the Holders are entitled to receive under this Agreement.
After any Holder has surrendered a Warrant Certificate to the Company, the
Company shall make payment in the appropriate amount to such Person or Persons
as it may be directed in writing by the Holder surrendering such Warrant
Certificate. The Company shall not be required to pay interest on any money
deposited pursuant to the provisions of this Section 4.
5. ADJUSTMENTS
5.1 ADJUSTMENTS.
The number of Warrant Shares into which each Warrant is exercisable and
the Warrant Price shall be subject to adjustment from time to time after the
date hereof in accordance (and only in accordance) with the provisions of this
Section 5:
(a) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. In case at any
time or from time to time after the date hereof and before the Expiration Date
the Company shall:
(i) pay to all holders of outstanding Common Shares a dividend
payable in, or make any other distribution on any class of its capital
stock in, Common Shares (other than a dividend or distribution upon a
merger or consolidation or sale to which Section 5.1(h) applies);
(ii) subdivide its outstanding Common Shares into a larger number
of Common Shares (other than a subdivision upon a merger or consolidation
or sale to which Section 5.1(h) applies); or
(iii) combine its outstanding Common Shares into a smaller number
of Common Shares (other than a combination upon a merger or consolidation
or sale to which Section 5.1(h) applies);
then, (x) in the case of any such dividend or distribution, effective
immediately after the time for the determination of the holders of Common Shares
entitled to receive such dividend or distribution or (y) in the case of any
subdivision or combination, effective immediately after the time as of which
such subdivision or combination becomes effective, the number of Warrant Shares
into which each Warrant is exercisable shall be adjusted to that number of
Warrant Shares determined by (A) in the case of any such dividend or
distribution, multiplying the number of Warrant Shares into which each Warrant
is exercisable immediately prior to the time for such determination by a
fraction (not to be less than one), (1) the numerator of which shall be equal to
the sum of the number of Common
-11-
<PAGE>
Shares outstanding immediately prior to the time for such determination and the
total number of shares constituting such dividend or distribution and (2) the
denominator of which shall be equal to the number of Common Shares outstanding
immediately prior to the time for such determination, or (B) in the case of any
such combination, by proportionately reducing, or, in the case of any such
subdivision, by proportionately increasing, the number of Warrant Shares into
which each Warrant is exercisable immediately prior to the time as of which upon
which such subdivision or combination becomes effective.
(b) CERTAIN OTHER DIVIDENDS AND DISTRIBUTIONS. In case at any time
or from time to time after the date hereof and before the Expiration Date the
Company shall effect a Non-Stock Dividend (other than any dividend or
distribution of any warrants, options or rights referred to in Section 5.1(d)),
then, and in each such case, effective immediately after the time for the
determination of the holders of Common Shares entitled to receive such
distribution, the number of Warrant Shares into which each Warrant is
exercisable shall be adjusted to that number determined by multiplying the
number of Warrant Shares into which each Warrant is exercisable immediately
prior to such time of determination by a fraction, (i) the numerator of which
shall be the Current Market Price per Common Share on such date of determination
and (ii) the denominator of which shall be such Current Market Price per Common
Share minus the portion applicable to one Common Share of the fair market value
(as determined in good faith by an Independent Financial Expert) of such
securities or other assets so distributed pursuant to such Non-Stock Dividend.
(c) RECLASSIFICATIONS. A reclassification of the Common Shares
(other than any such reclassification in connection with a merger or
consolidation or sale to which Section 5.1(h) applies and other than a change in
par value, or from par value to no par value, or from no par value to par value)
into Common Shares and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Shares of such shares
of such other class of stock for the purposes and within the meaning of Section
5.1(b) (and the effective time of such reclassification shall be deemed to be
"the time for the determination of the holders of Common Shares entitled to
receive such distribution" for the purposes and within the meaning of Section
5.1(b)) and, if the outstanding number of Common Shares shall be changed into a
larger or smaller number of Common Shares as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may be, of
the outstanding Common Shares for the purposes and within the meaning of Section
5.1(a) (and the effective time of such reclassification shall be deemed to be
"the time as of which such subdivision or combination becomes effective" for the
purposes and within the meaning of Section 5.1(a)).
(d) DISTRIBUTION OF WARRANTS OR OTHER RIGHTS TO HOLDERS OF COMMON
SHARES In case at any time or from time to time after the date hereof and before
the Expiration Date the Company shall make a distribution to all holders of
outstanding Common Shares of any warrants, options or other rights to subscribe
for or purchase any Additional Common Shares or securities convertible into or
exchangeable for Additional Common Shares (other than a distribution of such
warrants, options or rights upon a merger or consolidation or sale to which
Section 5.1(h) applies), whether or not the rights to subscribe or purchase
thereunder are immediately exercisable, and the
-12-
<PAGE>
gross consideration per share (computed as the gross amount of cash or the fair
market value (as determined in good faith by the Company's Board of Directors)
of other assets received by the Company before deduction of any underwriting or
similar commissions, compensation, discounts or concessions paid or allowed by
the Company in connection with such issue or sale and before deduction of any
other expenses payable in connection therewith) for which Additional Common
Shares may thereafter be issuable pursuant to such warrants or other rights
shall be less than the Current Market Price per Common Share on the date fixed
for determination of the holders of Common Shares entitled to receive such
distribution, then, and for each such case, effective immediately after the
opening of business on the day after the date for determination, the number of
Warrant Shares into which each Warrant is exercisable shall be adjusted to that
number determined by multiplying the number of Warrant Shares into which each
Warrant is exercisable immediately prior to such time for determination by a
fraction (not less than one), (i) the numerator of which shall be the number of
Common Shares outstanding immediately prior to such time for determination plus
the maximum number of Additional Common Shares issuable pursuant to all such
warrants or other rights issued in the distribution which triggered the
adjustment and (ii) the denominator of which shall be the number of Common
Shares outstanding immediately prior to such time for determination plus the
number of Common Shares that the minimum consideration received and receivable
by the Company for the issuance of such maximum number of Additional Common
Shares pursuant to the terms of such warrants or other rights would purchase at
such Current Market Price.
(e) SUPERSEDING ADJUSTMENT OF NUMBER OF WARRANT SHARES INTO WHICH
EACH WARRANT IS EXERCISABLE. In case at any time after any adjustment of the
number of Warrant Shares into which each Warrant is exercisable shall have been
made pursuant to Section 5.1(d) on the basis of the distribution of warrants or
other rights or after any new adjustment of the number of Warrant Shares into
which each Warrant is exercisable shall have been made pursuant to this Section
5.1(e), such warrants or rights shall expire, and all or a portion of such
warrants or rights shall not have been exercised, then, and in each such case,
such previous adjustment in respect of such warrants or rights which have
expired without exercise shall be rescinded and annulled as to any then
outstanding Warrants, and the Additional Common Shares that were deemed for
purposes of the computations set forth in Section 5.1(d) to have been issued or
sold by virtue of such adjustment in respect of such warrants or rights shall no
longer be deemed to have been distributed.
(f) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments of the
number of Warrant Shares into which each Warrant is exercisable and to the
Warrant Price under this Section 5.1:
(i) TREASURY STOCK. The sale or other disposition of any issued
Common Shares owned or held by or for the account of the Company shall be
deemed an issuance or sale of Additional Common Shares for purposes of
this Section 5 if the gross consideration to be received by the Company
per Common Share (before reduction for any underwriting discounts or
commission or brokerage commissions) is less than the Current Market
Price. The Company shall not pay any dividend on or make any distribution
on Common Shares held in the treasury of the Company. For the purposes of
this Section 5.1, the number of
-13-
<PAGE>
Common Shares at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of Common Shares.
(ii) WHEN ADJUSTMENTS ARE TO BE MADE. The adjustments required by
Sections 5.1(a), 5.1(b), 5.1(c), 5.1(d) and 5.1(e) shall be made whenever
and as often as any specified event requiring an adjustment shall occur,
except that no adjustment of the Warrant Shares into which each Warrant is
exercisable that would otherwise be required shall be made unless and
until such adjustment either by itself or with other adjustments not
previously made increases or decreases the Warrant Shares into which each
Warrant is exercisable immediately prior to the making of such adjustment
by at least 1%. Any adjustment representing a change of less than such
minimum amount (except as aforesaid) shall be carried forward and made as
soon as such adjustment, together with other adjustments required by
Sections 5.1(a), 5.1(b), 5.1(c), 5.1(d) and 5.1(e) and not previously
made, would result in such minimum adjustment.
(iii) FRACTIONAL INTERESTS. In computing adjustments under this
Section 5, fractional interests in Common Shares shall be taken into
account to the nearest one-thousandth of a share.
(iv) DEFERRAL OF ISSUANCE UPON EXERCISE. In any case in which
this Section 5 shall require that an adjustment to the Warrant Shares into
which each Warrant is exercisable be made effective pursuant to Section
5.1(a), 5.1(b) or 5.1(d) prior to the occurrence of a specified event and
any Warrant is exercised after the time at which the adjustment became
effective but prior to the occurrence of such specified event, the Company
may elect to defer until the occurrence of such specified event the
issuing to the Holder of the Warrant Certificate evidencing such Warrant
(or other Person entitled thereto) of, and may delay registering such
Holder or other Person as the recordholder of, the Warrant Shares over and
above the Warrant Shares issuable upon such exercise determined in
accordance with Section 3.5 on the basis of the Warrant Shares into which
each Warrant is exercisable prior to such adjustment determined in
accordance with Section 3.5; PROVIDED, however, that the Company shall
deliver to such Holder or other person a due bill or other appropriate
instrument evidencing the right of such Holder or other Person to receive,
and to become the record holder of, such Additional Common Shares, upon
the occurrence of the event requiring such adjustment.
(g) WARRANT PRICE ADJUSTMENT. Whenever the number of Warrant Shares
into which a Warrant is exercisable is adjusted as provided in this Section 5.1,
the Warrant Price payable upon exercise of the Warrant shall simultaneously be
adjusted by multiplying such Warrant Price immediately prior to such adjustment
by a fraction, the numerator of which shall be the number of Warrant Shares into
which such Warrant was exercisable immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares into which such
Warrant was exercisable immediately thereafter.
-14-
<PAGE>
(h) MERGER, CONSOLIDATION OR COMBINATION. In the event the Company
merges, consolidates or otherwise combines with or into any Person after the
date hereof and before the Expiration Date, then, as a condition of such merger,
consolidation or combination, lawful and adequate provisions shall be made
whereby Warrantholders shall, in addition to their other rights hereunder,
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions specified in this Agreement upon exercise of the Warrants
and in lieu of the Warrant Shares immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding Common Shares equal to the number of
Warrant Shares immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, and in any such case appropriate
provision shall be made (including the execution by the Person formed by
consolidation, merger or combination of a supplemental Warrant Agreement) with
respect to the rights and interests of the Warrantholders to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the number of Warrant Shares) shall thereafter be applicable, as nearly as may
be practicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. This Section 5.1(h) shall
similarly apply to successive consolidations, mergers or combinations.
(i) COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Before taking any
action that would cause an adjustment reducing the Warrant Price below the then
par value of any of the Warrant Shares into which the Warrants are exercisable,
the Company will take any corporate action that may be necessary in order that
the Company may validly and legally issue fully paid and non assessable Warrant
Shares at such adjusted Warrant Price.
(j) WARRANTS DEEMED EXERCISABLE. For purposes solely of this Section
5, the number of Warrant Shares which the holder of any Warrant would have been
entitled to receive had such Warrant been exercised in full at any time or into
which any Warrant was exercisable at any time shall be determined assuming such
Warrant was exercisable in full at such time, although such Warrant may not be
exercisable in full at such time pursuant to Section 3.2(a).
(k) LIMITATIONS ON CERTAIN NON-STOCK DIVIDENDS. The Company agrees
that, during the period from the date hereof through the Expiration Date, it
will not declare or pay any Non-Stock Dividend subject to Section 5.1(b) hereof
to the extent that the fair market value of the property or other assets to be
distributed in respect of one Common Share equals or exceeds the Current Market
Price per Common Share at the date of determination.
5.2 NOTICE OF ADJUSTMENT.
Whenever the number of Warrant Shares into which a Warrant is exercisable
is to be adjusted, or the Warrant Price is to be adjusted, in either case as
herein provided, the Company shall compute the adjustment in accordance with
Section 5.1, and shall, promptly after such adjustment becomes effective, cause
a notice of such adjustment or adjustments to be given to all Holders in
accordance with Section 10.1(b).
-15-
<PAGE>
5.3 STATEMENT ON WARRANT CERTIFICATES.
Irrespective of any adjustment in the number or kind of shares into which
the Warrants are exercisable, Warrant Certificates theretofore or thereafter
issued may continue to express the same price and number and kind of shares
initially issuable pursuant to this Agreement.
5.4 FRACTIONAL INTEREST.
The Company shall not issue fractional Warrant Shares on the exercise of
Warrants. If Warrant Certificates evidencing more than one Warrant shall be
presented for exercise at the same time by the same Holder, the number of full
Warrant Shares which shall be issuable upon such exercise thereof shall be
computed on the basis of the aggregate number of Warrants so to be exercised. If
any fraction of a Warrant Share would, except for the provisions of this Section
5.4, be issuable on the exercise of any Warrant (or specified portion thereof),
the Company shall, in lieu of issuing any fractional Warrant Shares, pay an
amount in cash calculated by it to be equal to the then Current Market Price per
Common Share on the date of such exercise multiplied by such fraction computed
to the nearest whole cent. The Holders, by their acceptance of the Warrant
Certificates, expressly waive their right to receive any fraction of a Warrant
Share or a stock certificate representing a fraction of a Warrant Share.
6. LOSS OR MUTILATION
Upon (i) receipt by the Company of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
any Warrant Certificate and such reasonable and customary security or indemnity
as may be required by the Company to hold the Company harmless and (ii)
surrender, in the case of mutilation, of the mutilated Warrant Certificate to
the Company and cancellation thereof, then, in the absence of notice to the
Company that the Warrants evidenced thereby have been acquired by a bona fide
purchaser, the Company shall execute and deliver to the registered Holder of the
lost, stolen, destroyed or mutilated Warrant Certificate, in exchange therefor
or in lieu thereof, a new Warrant Certificate of the same tenor and for a like
aggregate number of Warrants. At the written request of such registered Holder,
the new Warrant Certificate so issued shall be retained by the Company as having
been surrendered for exercise, in lieu of delivery thereof to such Holder, and
shall be deemed for purposes of Section 3.2 to have been surrendered for
exercise on the date the conditions specified in clauses (i) and (ii) of the
immediately preceding sentence were first satisfied.
Upon the issuance of any new Warrant Certificate under this Section 6, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto.
The provisions of this Section 6 are exclusive and shall preclude (to the
extent lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen, or destroyed Warrant Certificates.
-16-
<PAGE>
7. RESERVATION AND AUTHORIZATION OF WARRANT SHARES
The Company shall at all times reserve and keep available, free from
preemptive rights, solely for issue upon the exercise of Warrants as herein
provided, such number of its authorized but unissued Warrant Shares deliverable
upon the exercise of Warrants as will be sufficient to permit the exercise in
full of all outstanding Warrants. The Company covenants that all Warrant Shares
will, at all times that Warrants are exercisable, be duly approved for listing
subject to official notice of issuance on each securities exchange, if any, or
the Nasdaq National Market, if applicable, on which the Common Shares are then
listed or traded. The Company covenants that (i) all Warrant Shares that may be
issued upon due exercise of Warrants shall upon issuance be duly and validly
authorized, issued and fully paid and nonassessable and free of preemptive or
similar rights and (ii) the stock certificates issued to evidence any such
Warrant Shares will comply with Section 158 of the Delaware General Corporation
Law (or its successor) and any other applicable law.
The Company hereby authorizes and directs its current and future transfer
agents for the Common Shares at all times to reserve stock certificates for such
number of authorized shares as shall be requisite for such purpose. The Company
will supply such transfer agents with duly executed stock certificates for such
purposes.
8. WARRANT TRANSFER BOOKS
Warrant Certificates may be surrendered for registration of transfer or
exchange, and Warrant Certificates may be surrendered for exercise of Warrants
evidenced thereby, at the Corporate Office. The Company will give prompt written
notice to all Holders of Warrant Certificates of any change in the location of
the Corporate Office.
The Company shall cause to be kept at the Corporate Office a warrant
register (the "Warrant Register") in which, subject to such reasonable
regulations as the Company may prescribe and such regulations as may be
prescribed by applicable law, the Company shall provide for the registration of
Warrant Certificates and of transfers or exchanges of Warrant Certificates as
herein provided.
Subject to the provisions of Sections 2.4, 3.2 and 3.3, upon surrender for
registration of transfer of any Warrant Certificate at the Corporate Office, the
Company shall execute and deliver, in the name of the designated transferee or
transferees, one or more new Warrant Certificates evidencing a like aggregate
number of Warrants.
Subject to Section 2.4, (i) at the option of the Holder, Warrant
Certificates may be exchanged at the Corporate Office upon payment of the
charges herein provided for other Warrant Certificates evidencing a like
aggregate number of Warrants and (ii) whenever any Warrant Certificates are so
surrendered for exchange, the Company shall execute and deliver the Warrant
Certificates of the same tenor and evidencing the same number of Warrants as
evidenced by the Warrant Certificates surrendered by the Holder making the
exchange.
-17-
<PAGE>
All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant Certificates shall be the valid obligations of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange.
Subject to Section 2.4, every Warrant Certificate surrendered for
registration of transfer or exchange shall (if so required by the Company) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company, duly executed by the Holder thereof or his attorney
duly authorized in writing.
9. WARRANT HOLDERS
9.1 VOTING OR DIVIDEND RIGHTS.
Prior to the exercise of the Warrants, except as may be specifically
provided for herein, (i) no Holder of a Warrant Certificate, as such, shall be
entitled to any of the rights of a holder of Common Shares, including, without
limitation, the right to vote at or to receive any notice of any meetings of
stockholders of the Company; (ii) the consent of any Holder shall not be
required with respect to any action or proceeding of the Company; (iii) except
as provided in Section 4, no Holder, by reason of the ownership or possession of
a Warrant or the Warrant Certificate representing the same, shall have any right
to receive any stock dividends, allotments or rights or other distributions
paid, allotted or distributed or distributable to the stockholders of the
Company prior to, or for which the relevant record date preceded, the date of
the exercise of such Warrant; and (iv) no Holder shall have any right not
expressly conferred by this Agreement or Warrant Certificate held by such
Holder.
9.2 RIGHTS OF ACTION.
All rights of action against the Company in respect of this Agreement are
vested in the Holders of the Warrant Certificates, and any Holder of any Warrant
Certificate, without the consent of the Holder of any other Warrant Certificate,
may, on such Holder's own behalf and for such Holder's own benefit, enforce and
may institute and maintain any suit, action or proceeding against the Company
suitable to enforce, or otherwise in respect of, such Holder's right to
exercise, exchange or tender for purchase such Holder's Warrants in the manner
provided in this Agreement.
9.3 TREATMENT OF HOLDERS OF WARRANT CERTIFICATES.
Every Holder of a Warrant Certificate, by accepting the same, consents and
agrees with the Company and with every subsequent holder of such Warrant
Certificate that, prior to due presentment of such Warrant Certificate for
registration of transfer, the Company and any agent of the Company may treat the
Person in whose name the Warrant Certificate is registered as the owner thereof
for all purposes and as the Person entitled to exercise the rights granted under
the Warrants represented by such Warrant Certificate, and neither the Company
nor any agent of the Company shall be affected by any notice to the contrary.
-18-
<PAGE>
9.4 COMMUNICATIONS TO HOLDERS.
(a) If any Holder of a Warrant Certificate applies in writing to the
Company and such application states that the applicant desires to communicate
with other Holders with respect to its rights under this Agreement or under the
Warrants, then the Company shall, within five (5) Business Days after the
receipt of such application, and upon payment to the Company by such applicant
of the reasonable expenses of preparing such list, provide to such applicant a
list of the names and addresses of all Holders of Warrant Certificates as of the
most recent practicable date.
(b) Every Holder of Warrant Certificates, by receiving and holding
the same, agrees with the Company that neither the Company nor any agent of the
Company shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with
Section 9.4(a).
10. NOTICES
10.1 NOTICES GENERALLY.
(a) Any request, notice, direction, authorization, consent, waiver,
demand or other communication required or permitted by this Agreement to be made
upon, given or furnished to or filed with the Company by the other party hereto
or by any Holder shall be sufficient for every purpose hereunder if in writing
(including telecopy communication) and telecopied or delivered by hand
(including by courier service) as follows:
If to the Company, to it at:
U. S. Concrete, Inc.
1360 Post Oak Boulevard
Suite 800
Houston, Texas 77056
Attention: Chief Financial Officer
Telecopy No.: (713) 350-0617
-19-
<PAGE>
(or such other address as shall have been set forth in a notice
delivered in accordance with this Section 10.1(a)).
_______________________
_______________________
_______________________
If to a Holder, to it at the address for that the address for that
Holder reflected in the Warrant Register, which for each of the
initial Holders, is initially as follows:
Scott & Stringfellow, Inc.
Attention: Frank Mountcastle
909 East Main Street
Richmond, Virginia 23219
Sanders Morris Mundy
Attention: Charles Davis
3100 Chase Tower
Houston, Texas 77002
All such communications shall, when so telecopied or delivered by hand, be
effective when telecopied with confirmation of receipt or received by the
addressee, respectively.
Any Person that telecopies any communication hereunder to any Person
shall, on the same date as such telecopy is transmitted, also send, by first
class mail, postage prepaid and addressed to such Person as specified above, an
original copy of the communication so transmitted.
(b) Where this Agreement provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at the address of such Holder as it appears
in the Warrant Register, not later than the latest date (if any), and not
earlier than the earliest date (if any), prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Agreement provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail, then
such notification as shall be made by a method reasonably approved in good faith
by the Company as one which would be most reliable under the circumstances for
successfully delivering the notice to the addressees shall constitute a
sufficient notification for every purpose hereunder.
-20-
<PAGE>
10.2 REQUIRED NOTICES TO HOLDERS.
In case the Company shall propose (i) to pay any dividend payable in stock
of any class to the holders of its Common Shares, to pay a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings or other
extraordinary cash dividend, or to make any other distribution to the holders of
its Common Shares for which an adjustment is required to be made pursuant to
Section 5, (ii) to distribute to all holders of outstanding Common Shares rights
to subscribe for or to purchase any Additional Common Shares or shares of stock
of any class or any other securities, rights or options, (iii) to effect any
reclassification of Common Shares, (iv) to effect any transaction described in
Section 5.1(h) or (v) to effect the liquidation, dissolution or winding up of
the Company or a sale of all or substantially all of its assets, then, and in
each such case, the Company shall give to each Holder, in accordance with
Section 10.1(b), a notice of such proposed action or event. Such notice shall
specify (x) the date on which a record is to be taken for the purposes of such
dividend or distribution; and (y) the date on which the Company expects such
reclassification, transaction, event, liquidation, dissolution or winding up to
become effective and the date as of which the Company expects that holders of
Common Shares of record will be entitled to exchange their Common Shares for
securities, cash or other property deliverable upon such reclassification,
transaction, event, liquidation, dissolution or winding up. Such notice shall be
given, in the case of any action covered by clause (i) or (ii) above, at least
fifteen (15) days prior to the record date for determining holders of the Common
Shares for purposes of such action or, in the case of any action covered by
clauses (iii) through (v), at least twenty (20) days prior to the applicable
effective or expiration date specified above or, in any such case, prior to such
earlier time as notice thereof shall be required to be given pursuant to Rule
10b-17 under the Exchange Act, if applicable.
If at any time the Company shall cancel any of the proposed transactions
for which notice has been given under this Section 10.2 prior to the
consummation thereof, the Company shall give each Holder prompt notice of such
cancellation in accordance with Section 10.1(b) hereof.
11. APPLICABLE LAW
THIS AGREEMENT, EACH WARRANT CERTIFICATE ISSUED HEREUNDER, EACH WARRANT
EVIDENCED THEREBY AND ALL RIGHTS ARISING HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THE APPLICATION OF THE
LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
12. PERSONS BENEFITING
This Agreement shall be binding upon and inure to the benefit of the
Company, S&S and SMM, and their respective successors and assigns and the
Holders from time to time. Nothing in this Agreement is intended or shall be
construed to confer upon any Person, other than the Company,
-21-
<PAGE>
S&S and SMM and the Holders, any right, remedy or claim under or by reason of
this Agreement or any part hereof. Each Holder, by acceptance of a Warrant
Certificate, agrees to all of the terms and provisions of this Agreement
applicable thereto.
13. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.
14. AMENDMENTS
This Agreement may be amended by the Company only with the consent of the
Holders of a majority of the then outstanding Warrants. Notwithstanding the
foregoing, the consent of each Holder of a Warrant affected shall be required
for any amendment pursuant to which the Warrant Price would be increased or the
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided for herein).
Upon execution and delivery of any amendment pursuant to this Section 14,
such amendment shall be considered a part of this Agreement for all purposes and
every Holder of a Warrant Certificate theretofore or thereafter delivered
hereunder shall be bound thereby.
Promptly after the execution by the Company of any such amendment, the
Company shall give notice to the Holders, setting forth in general terms the
substance of such amendment, in accordance with the provisions of Section
10.1(b). Any failure of the Company to mail such notice or any defect therein,
shall not, however, in any way impair or affect the validity of any such
amendment.
15. INSPECTION
The Company may require each Holder to submit his Warrant Certificate for
inspection by the Company.
16. SUCCESSOR TO THE COMPANY
So long as Warrants remain outstanding, the Company will not enter into
any Non-Surviving Combination unless the acquirer (or its parent company under
any triangular acquisition) shall expressly assume by a supplemental agreement,
executed and delivered to the Company, in form reasonably satisfactory to the
Company, the due and punctual performance of every covenant of this Agreement on
the part of the Company to be performed and observed and shall have provided for
exercise rights in accordance with Section 5.1(h). Upon the consummation of such
Non-Surviving Combination, the acquirer (or its parent company under any
triangular acquisition) shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this
-22-
<PAGE>
Agreement with the same effect as if such acquirer (or its parent company under
any triangular acquisition) had been named as the Company herein.
17. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement of the parties hereto as to
the subject matter hereof and supersedes all previous agreements among all or
some of the parties hereto with respect thereto, whether written, oral or
otherwise.
18. HEADINGS
The descriptive headings of the several Sections of this Agreement are
inserted for convenience and shall not control or affect the meaning or
construction of any of the provisions hereof.
-23-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
U. S. CONCRETE, INC.
By: /s/ EUGENE P. MARTINEAU
Eugene P. Martineau
Chief Executive Officer
SCOTT & STRINGFELLOW, INC.
By: _________________________________
Print Name: _____________________
Title: __________________________
SANDERS MORRIS MUNDY INC.
By: _________________________________
Print Name: _____________________
Title: __________________________
-24-
<PAGE>
EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS IS AVAILABLE WITH RESPECT
TO THAT OFFER AND SHARE.
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF ARE SUBJECT TO THE CONDITIONS SPECIFIED IN
THE WARRANT AGREEMENT, DATED MAY , 1999, AMONG THE COMPANY, SCOTT &
STRINGFELLOW, INC. AND SANDERS MORRIS MUNDY INC. THE TRANSFER OR EXCHANGE
OF THE WARRANT REPRESENTED BY THIS CERTIFICATE AND OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF IS RESTRICTED IN ACCORDANCE WITH THE
WARRANT AGREEMENT REFERRED TO HEREIN. A COPY OF THE WARRANT AGREEMENT IS
ON FILE AT THE OFFICES OF U.S. CONCRETE, INC. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE
PROVISIONS OF THE WARRANT AGREEMENT.
U. S. CONCRETE, INC.
WARRANT CERTIFICATE
EVIDENCING
WARRANTS TO PURCHASE COMMON SHARES
EXERCISABLE ON OR BEFORE
5:00 P.M. HOUSTON,
TEXAS TIME,
ON
______________, 2002
No. ___________________ ________________ Warrants
A-1
<PAGE>
THIS CERTIFIES THAT, for value received, _______________________
___________________________, or registered assigns, is the registered owner of
______________________ Warrants to Purchase Common Shares of U. S. Concrete,
Inc., a Delaware corporation (the "Company," which term includes any successor
thereto under the Warrant Agreement), and is entitled, subject to and upon
compliance with the provisions hereof and of the Warrant Agreement, at such
Holder's option, at any time when the Warrants evidenced hereby are exercisable,
to purchase from the Company one Warrant Share for each Warrant evidenced
hereby, at the purchase price of $_______ per share (as adjusted from time to
time, the "Warrant Price"), payable in full at the time of purchase, the number
and nature of Warrant Shares into which and the Warrant Price at which each
Warrant shall be exercisable, each being subject to adjustment as provided in
Section 5 of the Warrant Agreement.
The Holder of this Warrant Certificate may exercise all or any whole
number of the Warrants evidenced hereby, on any Business Day on and after the
first anniversary of the Issue Date until 5:00 p.m., Houston, Texas time, on ,
2002 (subject to earlier expiration pursuant to Section 4 of the Warrant
Agreement, the "Expiration Date") for the Warrant Shares purchasable hereunder.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this certificate to be duly
executed under its corporate seal.
U. S. CONCRETE, INC.
[SEAL] By: /s/ EUGENE P. MARTINEAU
Eugene P. Martineau
Chief Executive Officer
ATTEST:
______________________________
Dated: May _____, 1999
A-2
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
U. S. CONCRETE, INC.
WARRANT CERTIFICATE
EVIDENCING
WARRANTS TO PURCHASE COMMON SHARES
1. GENERAL.
Each Warrant evidenced hereby is one of a duly authorized issue of
Warrants of the Company designated as its Warrants to Purchase Common Shares
("Warrants"), limited in aggregate number to 200,000 Warrants (subject to
adjustment pursuant to Section 5 of the Warrant Agreement) issued under and in
accordance with the Warrant Agreement, dated as of ________________, 1999 (the
"Warrant Agreement"), between the Company, Scott & Stringfellow, Inc. and
Sanders Morris Mundy Inc., to which Warrant Agreement and all amendments thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, Scott &
Stringfellow, Inc. and Sanders Morris Mundy Inc., the Holders of this Warrant
Certificate and the owners of the Warrants evidenced hereby. A copy of the
Warrant Agreement is available during normal business hours at the Corporate
Office for inspection by the Holder hereof.
Subject to the provisions of Sections 2.4, 3.2 and 3.3 of the Warrant
Agreement, in the event of the exercise of less than all of the Warrants
evidenced hereby, a new Warrant Certificate in the same form and for the number
of Warrants which are not exercised shall be issued by the Company in the name
or upon the written order of the Holder of this Warrant Certificate upon the
cancellation hereof.
All Warrant Shares issuable by the Company upon the exercise of Warrants
shall, upon such issuance, be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive or similar rights. The Company will pay all
documentary stamp taxes attributable to the initial issuance of Warrants and the
Warrant Shares issuable upon exercise of the Warrants. The Company shall not be
required to pay any tax or other charge imposed in respect of (i) any transfer
or exchange of any Warrant Certificate or any certificates for Warrant Shares or
(ii) payment of cash to any Person other than the Holder of the Warrant
Certificate surrendered upon the exercise of a Warrant, and in case of such
transfer, exchange or payment, the Company shall not be required to issue or
deliver any certificate or pay any cash until (a) such tax or charge has been
paid or an amount sufficient for the payment thereof has been delivered to the
Company or (b) it has been established to the Company's satisfaction that any
such tax or other charge that is or may become due has been paid.
The Warrant Certificates are issuable only in registered form in
denominations of whole numbers of Warrants. Upon surrender at the Corporate
Office and payment of the charges specified herein and in the Warrant Agreement,
this Warrant Certificate may be exchanged for Warrant Certificates in other
authorized denominations or the transfer hereof may be registered in whole or
A-3
<PAGE>
in part in authorized denominations to one or more designated transferees,
subject to the restrictions on transfer set forth in the Warrant Agreement;
provided, however, that such other Warrant Certificates issued upon exchange or
registration of transfer shall evidence the same aggregate number of Warrants as
this Warrant Certificate. The Company shall cause to be kept at the Corporate
Office the Warrant Register in which, subject to such reasonable regulations as
the Company may prescribe and such regulations as may be prescribed by
applicable law, the Company shall provide for the registration of Warrant
Certificates and of transfers or exchanges of Warrant Certificates as provided
in the Warrant Agreement.
2. EXPIRATION.
Except as provided in Section 4 of the Warrant Agreement and Section 3 of
this Warrant Certificate, all outstanding Warrants shall expire and all rights
of the Holders of Warrant Certificates evidencing such Warrants shall terminate
and cease to exist, as of 5:00 p.m., Houston, Texas time, on the Expiration
Date. "Expiration Date" shall mean ______________, 2002, or such earlier date as
determined in accordance with Section 4 of the Warrant Agreement and Section 3
of this Warrant Certificate.
3. LIQUIDATION OF THE COMPANY.
If, on or prior to the Expiration Date, the Company shall effect or
otherwise be subject to a voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, each Warrantholder shall receive the
securities, money or other property which such Warrantholder would have been
entitled to receive had such Warrantholder been the holder of record of the
Warrant Shares into which the Warrants were exercisable immediately prior to
such dissolution, liquidation or winding up (net of the then applicable Warrant
Price), and the rights to exercise such Warrants shall terminate.
4. ANTI-DILUTION ADJUSTMENTS.
The number and nature of Warrant Shares issuable upon exercise of a
Warrant and the Warrant Price shall be adjusted on occurrence of certain events
as provided in the Warrant Agreement, including, without limitation, the payment
of certain dividends on, or the making of certain distributions in respect of,
the Common Shares, including the distribution of rights to purchase Common
Shares (or securities convertible into or exchangeable for Common Shares) at a
price below the Current Market Price. An adjustment shall also be made in the
event of a combination, subdivision or reclassification of the Common Shares.
Adjustments will be made whenever and as often as any specified event requires
an adjustment to occur in accordance with the Warrant Agreement.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Warrant Price and the
number and/or nature of securities or property issuable upon the exercise of the
Warrants; provided however, that the failure of the
A-4
<PAGE>
Company to issue such new Warrant Certificates shall not in any way change,
alter, or otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
5. PROCEDURE FOR EXERCISING WARRANT.
Subject to the provisions hereof and of the Warrant Agreement, the Holder
of this Warrant Certificate may exercise all or any whole number of the Warrants
evidenced hereby by either of the following methods:
(A) The Holder may deliver to the Corporate Office (i) a written
notice of such Holder's election to exercise all or a portion of the
Warrants evidenced hereby, duly executed by such Holder in the form set
forth below, which notice shall specify the number of Warrant Shares to be
purchased, (ii) this Warrant Certificate and (iii) a sum equal to the
aggregate Warrant Price for the Warrant Shares into which the Warrants
represented by this Warrant Certificate are being exercised, which sum
shall be paid in any combination elected by such Holder of (x) a certified
or official bank check payable to the order of the Company and delivered
to the Company at the Corporate Office, or (y) wire transfers in
immediately available funds to the account of the Company at such banking
institution as the Company shall have given notice to the Holders in
accordance with the Warrant Agreement; or
(B) The Holder may also exercise all or any of the Warrants in a
"cashless" or "net-issue" exercise by delivering to the Company at the
Corporate Office (i) a written notice of such Holder's election to
exercise all or a portion of the Warrants evidenced hereby, duly executed
by such Holder in the form set forth below, which notice shall specify the
number of Warrant Shares to be delivered to such Holder and the number of
Warrant Shares with respect to which Warrants represented by this Warrant
Certificate are being surrendered in payment of the aggregate Warrant
Price for the Warrant Shares to be delivered to the Holder, and (ii) this
Warrant Certificate. For purposes of this subparagraph (B), each Warrant
Share as to which such Warrants are surrendered in payment of the
aggregate Warrant Price will be attributed a value equal to (x) the Market
Price per share of Common Shares MINUS (y) the then-current Warrant Price.
Solely for the purpose of this paragraph, the Market Price shall be
calculated as the average of the Market Prices for each of the five
trading days preceding such date.
6. REGISTERED HOLDER.
Prior to and including due presentment of this Warrant Certificate for
registration of transfer, the Company and any agent of the Company may treat the
Person in whose name this Warrant Certificate is registered as the owner hereof
for all purposes, and neither the Company nor any agent of the Company shall be
affected by notice to the contrary.
A-5
<PAGE>
7. AMENDMENT.
The Warrant Agreement permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of Warrant Certificates
under the Warrant Agreement at any time by the Company with the consent of the
Holders of a majority of the then outstanding Warrants.
8. STATUS AS WARRANTHOLDER.
Prior to the exercise of the Warrants, except as may be specifically
provided for in the Warrant Agreement, (i) no Holder of a Warrant Certificate,
as such, shall be entitled to any of the rights of a holder of Common Shares,
including, without limitation, the right to vote at, or to receive any notice
of, any meetings of stockholders of the Company; (ii) the consent of any Holder
shall not be required with respect to any action or proceeding of the Company;
(iii) except as provided in the Warrant Agreement with respect to the
dissolution, liquidation or winding up of the Company, no Holder, by reason of
the ownership or possession of a Warrant or the Warrant Certificate representing
the same, shall have any right to receive any stock dividends, allotments or
rights or other distributions (except as specifically provided in the Warrant
Agreement), paid, allotted or distributed or distributable to the stockholders
of the Company prior to or for which the relevant record date preceded the date
of the exercise of such Warrant; and (iv) no Holder shall have any right not
expressly conferred by the Warrant Agreement or Warrant Certificate held by such
Holder.
9. GOVERNING LAW.
THIS WARRANT CERTIFICATE, EACH WARRANT EVIDENCED HEREBY AND THE WARRANT
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS TO
THE EXTENT THAT APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
10. DEFINITIONS.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
A-6
<PAGE>
FORM OF EXERCISE
In accordance with and subject to the terms and conditions hereof and of
the Warrant Agreement, the undersigned registered Holder of this Warrant
Certificate hereby irrevocably elects to exercise ____________________ Warrants
evidenced by this Warrant Certificate and represents that such Holder has
tendered the Warrant Price for each of the Warrants evidenced hereby being
exercised in the aggregate amount of $_________ in the indicated combination of:
(i) cash ($____________);
(ii) certified bank check in funds payable to the order of the
Company
($____________);
(iii) official bank check in funds payable to the order of the
Company
($____________);
(iv) or wire transfer in immediately available funds to the
account designated by the Company for such purpose ($________); or
(v) "cashless" or "net-issue" exercise with respect to ________
Warrants pursuant to Section 3.2(c)(ii) of the Warrant Agreement and
Section 5(B) of this Warrant
Certificate.
The undersigned requests that the Warrant Shares issuable upon exercise be
in fully registered form in such denominations and registered in such names and
delivered, together with any other property receivable upon exercise, in such
manner as is specified in the instructions set forth below.
If the number of Warrants exercised is less than all of the Warrants
evidenced hereby, the undersigned requests that a new Warrant Certificate
representing the remaining Warrants evidenced hereby be issued and delivered to
the undersigned unless otherwise specified in the instructions below.
A-7
<PAGE>
Dated: __________________________ Name: ________________________________
(Please Print)
_________________________________
(Insert Social Security or Other
Identifying Number of Holder) Address: _____________________________
______________________________________
______________________________________
Signature
Signature Guaranteed:
_____________________________
Instructions (i) as to denominations and names of Warrant Shares issuable
upon exercise and as to delivery of such securities and any other property
issuable upon exercise and (ii) if applicable, as to Warrant Certificates
evidencing unexercised Warrants:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
A-8
<PAGE>
ASSIGNMENT
(Form of Assignment To Be Executed If Holder Desires To Transfer
Warrant Certificate)
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers
unto
Please insert social security
or other identifying number
_______________________________________
___________________________________________________
(Please print name and address including zip code)
___________________________________________________
the Warrants represented by the within Warrant Certificate and does hereby
irrevocably constitute and appoint _________________ Attorney, to transfer said
Warrant Certificate on the books of the within-named Company with full power of
substitution in the premises.
Dated:
_____________________________________
Signature
Signature Guaranteed:
___________________________
A-9
EXHIBIT 4.3
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
1
<PAGE>
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 4.4
- --------------------------------------------------------------------------------
U.S. CONCRETE, INC.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY,
RIGHTS AGENT
----------------
RIGHTS AGREEMENT
DATED AS OF MAY 10, 1999
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section 1. Certain Definitions........................................1
Section 2. Appointment of Rights Agent................................9
Section 3. Issue of Rights Certificates...............................9
Section 4. Form of Rights Certificates...............................10
Section 5. Countersignature and Registration.........................11
Section 6. Transfer, Split-Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or
Stolen Rights Certificates................................12
Section 7. Exercise of Rights; Purchase Price........................13
Section 8. Cancellation and Destruction of Rights Certificates.......15
Section 9. Reservation and Availability of Capital Stock.............15
Section 10. Preferred Stock Record Date...............................16
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights................................17
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares.................................................26
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power...................................27
Section 14. Fractional Rights and Fractional Shares...................30
Section 15. Rights of Action..........................................30
Section 16. Agreement of Rights Holders...............................31
Section 17. Rights Certificate Holder Not Deemed a Stockholder........32
Section 18. Concerning the Rights Agent...............................32
Section 19. Merger or Consolidation or Change of Name of
Rights Agent..............................................32
Section 20. Duties of Rights Agent....................................33
-i-
<PAGE>
Section 21. Change of Rights Agent....................................35
Section 22. Issuance of New Rights Certificates.......................36
Section 23. Redemption and Termination................................36
Section 24. Exchange..................................................38
Section 25. Notice of Certain Events..................................39
Section 26. Notices...................................................40
Section 27. Supplements and Amendments................................40
Section 28. Successors................................................41
Section 29. Determinations and Actions by the Board of
Directors, etc............................................41
Section 30. Benefits of this Agreement................................42
Section 31. Severability..............................................42
Section 32. Governing Law.............................................42
Section 33. Counterparts..............................................42
Section 34. Descriptive Headings......................................42
Exhibit A - Form of Certificate of Designations of Series A
Junior Participating Preferred Stock
Exhibit B - Form of Rights Certificate
Exhibit C - Summary of Rights
-ii-
<PAGE>
RIGHTS AGREEMENT
This Rights Agreement, dated as of May 10, 1999 (the "Agreement"),
between U.S. Concrete, Inc., a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company, a New York banking corporation (the
"Rights Agent"),
W I T N E S S E T H:
WHEREAS, on May 10, 1999 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend of one
Right for each share of common stock, par value $.001 per share, of the Company
(the "Common Stock") outstanding at the close of business on May 10, 1999 (the
"Record Date"), and has authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
each share of Common Stock of the Company issued (whether originally issued or
delivered from the Company's treasury) between the Record Date and the earlier
of the Distribution Date (as hereinafter defined) and the Expiration Date (as
hereinafter defined), and, in certain circumstances provided for in Section 22
hereof, after the Distribution Date, each Right initially representing the right
to purchase one Fractional Share (as hereinafter defined) of Series A Junior
Participating Preferred Stock of the Company, upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding, but shall not
include any Exempt Person; PROVIDED, however, that a Person shall not be or
become an Acquiring Person if such Person, together with its Affiliates and
Associates, shall become 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 due to the repurchase of Common Stock by the
Company, unless and until such time as such Person or any Affiliate or Associate
of such Person shall purchase or otherwise become 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 shall become an Affiliate
or Associate of such Person, unless, in either such case, such Person, together
with all Affiliates and Associates of such Person, is not then the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding; and
PROVIDED, further, that if the Board of Directors, with the concurrence of a
majority of the members of the Board of Directors who are not, and are not
representatives, nominees, Affiliates or Associates of, such Person or an
Acquiring
-1-
<PAGE>
Person, determines in good faith that a Person that would otherwise be an
"Acquiring Person" has become such inadvertently (including, without limitation,
because (i) such Person was unaware that it beneficially owned a percentage of
Common Stock that would otherwise cause such Person to be an "Acquiring Person"
or (ii) such Person was aware of the extent of its Beneficial Ownership of
Common Stock but had no actual knowledge of the consequences of such Beneficial
Ownership under this Agreement) and without any intention of changing or
influencing control of the Company, and if such Person as promptly as
practicable divested or divests itself of Beneficial Ownership of a sufficient
number of shares of Common Stock so that such Person would no longer be an
"Acquiring Person," then such Person shall not be deemed to be or to have become
an "Acquiring Person" for any purposes of this Agreement.
At any time that the Rights are redeemable, the Board of Directors
may, generally or with respect to any specified Person or Persons, determine to
increase to a specified percentage greater than that set forth herein or
decrease to a specified percentage lower than that set forth herein or determine
a number of shares to be (but in no event less than or equal to the percentage
or number of shares of Common Stock then beneficially owned by such Person), the
level of Beneficial Ownership of Common Stock at which a Person or such Person
or Persons becomes an Acquiring Person.
Notwithstanding anything in this Agreement to the contrary, no
Person shall be or become an Acquiring Person until after the consummation of
the Company's initial public offering of the Common Stock.
"Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) hereof.
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as in effect
on the date of this Agreement.
"Associate" shall mean, with reference to any Person, (1) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a Subsidiary of the Company) of which
such 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 equity securities, (2) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity and (3) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, is the "beneficial owner" of (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement) or
otherwise has the right to vote or dispose of, including pursuant to any
agreement,
-2-
<PAGE>
arrangement or understanding (whether or not in writing); PROVIDED,
however, that a Person shall 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 such security
if such agreement, arrangement or understanding: (A) arises solely from a
revocable proxy or consent given in response to a public (I.E., not
including a solicitation exempted by Rule 14a-2(b)(2) of the General Rules
and Regulations under the Exchange Act as in effect on the date of this
Agreement) proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act and (B) is not then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or
successor report);
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to acquire
(whether such 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 upon the exercise of conversion rights, exchange rights, other rights,
warrants or options, or otherwise; PROVIDED, however, that a Person shall
not be deemed the "Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering Event which Rights were acquired
by such Person or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3(a) or Section 22 hereof
(the "Original Rights") or pursuant to Section 11(i) or (p) hereof in
connection with an adjustment made with respect to any Original Rights; or
(iii) that are beneficially owned, directly or indirectly, by (A)
any other Person (or any Affiliate or Associate thereof) with which such
Person or any of such 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 that term is used in Rule 13d-5(b) of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this
Agreement) of which such Person is a member;
PROVIDED, however, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
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 Regulation M promulgated under
the Exchange Act, or to cover overallotments created in connection with a public
offering) until the expiration of forty days after the date of such acquisition;
PROVIDED FURTHER, however, that no such Person shall be deemed to be an
Acquiring Person as a result of such Person's participation as an underwriter in
the Company's
-3-
<PAGE>
initial public offering. For purposes of this Agreement, "voting" a security
shall include 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, as in effect on the date of this Agreement)
in respect of such security.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"close of business" on any given date shall mean 5:00 p.m., New York
time, on such date; PROVIDED, however, that if such date is not a Business Day,
it shall mean 5:00 p.m., New York time, on the next succeeding Business Day.
"Closing Price" of a security for any day shall mean the last sales
price, regular way, on such day or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, on such day,
in either case as reported in the principal transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange, or, if such security is not listed or admitted to trading on the New
York Stock Exchange, on the principal national securities exchange on which such
security is listed or admitted to trading, or, if such security is not listed or
admitted to trading on any national securities exchange but sales price
information is reported for such security, as reported by NASDAQ or such other
self-regulatory organization or registered securities information processor (as
such terms are used under the Exchange Act) that then reports information
concerning such security, or, if sales price information is not so reported, the
average of the high bid and low asked prices in the over-the-counter market on
such day, as reported by NASDAQ or such other entity, or, if on such day such
security is not quoted by any such entity, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in such
security selected by the Board of Directors of the Company. If on such day no
market maker is making a market in such security, the fair value of such
security on such day as determined in good faith by the Board of Directors of
the Company shall be used.
"Common Stock" shall mean the common stock, par value $.001 per
share, of the Company, except that "Common Stock" when used with reference to
equity interests issued by any Person other than the Company shall mean the
capital stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such Person.
"Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Company" shall mean the Person named as the "Company" in the
preamble of this Agreement until a successor Person shall have become such or
until a Principal Party shall assume, and thereafter be liable for, all
obligations and duties of the Company hereunder, pursuant to the
-4-
<PAGE>
applicable provisions of this Agreement, and thereafter "Company" shall mean
such successor Person or Principal Party.
"Current Market Price" shall have the meaning set forth in
Section 11(d) hereof.
"Current Value" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Distribution Date" shall mean the earlier of (i) the close of
business on the tenth day (or, if such Stock Acquisition Date results from the
consummation of a Permitted Offer, such later date as may be determined by the
Company's Board of Directors as set forth below before the Distribution Date
occurs) after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date) or (ii) the close of business on the tenth Business Day (or such
later date as may be determined by the Company's Board of Directors as set forth
below before the Distribution Date occurs) after the date that a tender offer or
exchange offer by any Person (other than any Exempt Person) is first published
or sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act as then in effect, if upon consummation
thereof, such Person would be an Acquiring Person, other than a tender or
exchange offer that is determined before the Distribution Date occurs to be a
Permitted Offer. The Board of Directors of the Company may, to the extent set
forth in the preceding sentence, defer the date set forth in clause (i) or (ii)
of the preceding sentence to a specified later date or to an unspecified later
date to be determined by a subsequent action or event (but in no event to a date
later than the close of business on the tenth day after the first occurrence of
a Triggering Event).
"Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall have the meaning set forth in Section 24
hereof.
"Exempt Person" shall mean the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, and 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.
"Expiration Date" shall mean the earliest of (i) the Final
Expiration Date, (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof, (iii) the time at which the Rights expire pursuant to Section
13(d) hereof and (iv) the time at which all Rights then outstanding and
exercisable are exchanged pursuant to Section 24 hereof.
"Final Expiration Date" shall mean the close of business on April
30, 2009.
"Flip-In Event" shall mean an event described in Section
11(a)(ii) hereof.
-5-
<PAGE>
"Flip-In Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Flip-Over Event" shall mean any event described in clause (x), (y)
or (z) of Section 13(a) hereof, but excluding any transaction described in
Section 13(d) hereof that causes the Rights to expire.
"Fractional Share" with respect to the Preferred Stock shall mean
one one-hundredth of a share of Preferred Stock.
"NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotations System.
"Original Rights" shall have the meaning set forth in the definition
of "Beneficial Owner."
"Permitted Offer" shall mean a tender offer or an exchange offer for
all outstanding shares of Common Stock at a price and on terms determined, prior
to the time the Person making the offer or any Affiliate or Associate thereof is
an Acquiring Person, by at least a majority of the members of the Board of
Directors who are not officers or employees of the Company and who are not, and
are not representatives, nominees, Affiliates or Associates of, an Acquiring
Person or the person making the offer, after receiving advice from one or more
investment banking firms, to be (a) at a price and on terms that are fair to
stockholders (taking into account all factors that such members of the Board
deem relevant including, without limitation, prices that could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value) and (b) otherwise in the best interests of the Company
and its stockholders.
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other entity.
"Preferred Stock" shall mean shares of Series A Junior Participating
Preferred Stock, par value $.001 per share, of the Company having the rights,
powers and preferences set forth in the form of Certificate of Designations
attached hereto as Exhibit A and, to the extent that there is not a sufficient
number of shares of Series A Junior Participating Preferred Stock authorized to
permit the full exercise of the Rights, any other series of Preferred Stock, par
value $.001 per share, of the Company designated for such purpose containing
terms substantially similar to the terms of the Series A Junior Participating
Preferred Stock.
"Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
"Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
"Record Date" shall have the meaning set forth in the recitals
clause at the beginning of this Agreement.
-6-
<PAGE>
"Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
"Rights" shall have the meaning set forth in the recitals clause at
the beginning of this Agreement.
"Rights Agent" shall mean the Person named as the "Rights Agent" in
the preamble of this Agreement until a successor Rights Agent shall have become
such pursuant to the applicable provisions hereof, and thereafter "Rights Agent"
shall mean such successor Rights Agent. If at any time there is more than one
Person appointed by the Company as Rights Agent pursuant to the applicable
provisions of this Agreement, "Rights Agent" shall mean and include each such
Person.
"Rights Certificates" shall mean the certificates evidencing the
Rights.
"Rights Dividend Declaration Date" shall have the meaning set forth
in the recitals clause at the beginning of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
"Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition and Section 23, shall
include, without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
"Subsidiary" shall mean, with reference to any Person, any
corporation or other Person of which an amount of voting securities sufficient
to elect at least a majority of the directors or other persons performing
similar functions is beneficially owned, directly or indirectly, by such Person,
or otherwise controlled by such Person.
"Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Summary of Rights" shall mean the Summary of Rights sent pursuant
to Section 3(b) hereof.
"Trading Day" with respect to a security shall mean a day on which
the principal national securities exchange on which such security is listed or
admitted to trading is open for the transaction of business, or, if such
security is not listed or admitted to trading on any national securities
exchange but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if
such security is not so quoted, a Business Day.
"Triggering Event" shall mean any Flip-In Event or any Flip-Over
Event.
-7-
<PAGE>
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent (i) to act as agent for the Company and (ii) to take certain
actions in respect of the holders of the Rights (who, in accordance with Section
3 hereof, shall prior to the Distribution Date also be the holders of the Common
Stock) (although it is expressly agreed that the Rights Agent shall not act as
agent for such holders) in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Company may from time to
time appoint such Co- Rights Agents as it may deem necessary or desirable.
Section 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for Common Stock registered in the names of the holders of the
Common Stock and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Stock as of the close
of business on the Distribution Date (other than any Person referred to in the
first sentence of Section 7(e)), at the address of such holder shown on the
records of the Company, one or more Rights Certificates, evidencing one Right
for each share of Common Stock so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C, by first-class, postage prepaid mail, to each
record holder of Common Stock as of the close of business on the Record Date, at
the address of such holder shown on the records of the Company. With respect to
certificates for Common Stock outstanding as of the Record Date, until the
Distribution Date or the earlier surrender for transfer thereof or the
Expiration Date, the Rights associated with the shares of Common Stock
represented by such certificates shall be evidenced by such certificates for
Common Stock together with the Summary of Rights, and the registered holders of
the Common Stock shall also be the registered holders of the associated Rights.
Until the earlier of the Distribution Date or the Expiration Date, the transfer
of any of the certificates for Common Stock outstanding on the Record Date, with
or without a copy of the Summary of Rights, shall also constitute the transfer
of the Rights associated with the Common Stock represented by such certificates.
(c) Rights shall be issued in respect of all shares of Common Stock
that are issued (whether originally issued or delivered from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date or, in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates issued representing such
shares of Common Stock that shall so become outstanding or shall be transferred
or exchanged after the
-8-
<PAGE>
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date shall also be deemed to be certificates for Rights, and shall bear the
following legend:
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 AN AFFILIATE OR
ASSOCIATE 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.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone, and registered holders of Common Stock shall also be
the registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof), when, as and if issued,
shall be substantially in the form set forth in Exhibit B hereto and may have
such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or quotation system
on which the Rights may from time to time be listed or quoted, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever issued, shall be dated as of the Record Date and on their
face shall entitle the holders thereof to purchase such number of Fractional
Shares of Preferred Stock as shall be set forth therein at the price set forth
therein (such exercise price per Fractional Share (or, as set forth in this
Agreement, for other securities), the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
-9-
<PAGE>
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by a Person
described in the first sentence of Section 7(e), and any Rights Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any such Rights, shall contain (to the extent
feasible) the following legend, modified as applicable to apply to such Person:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby [will] [have] become null and void in the circumstances
and with the effect specified in Section 7(e) of such Agreement.
The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Rights Certificate. The
Company shall give notice to the Rights Agent promptly after it becomes aware of
the existence of any Acquiring Person or any Associate or Affiliate thereof.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof, which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be countersigned by the Rights Agent,
either manually or by facsimile signature, and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the certificate number and the date of
each of the Rights Certificates.
-10-
<PAGE>
Section 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e), Section
13(d), Section 14 and Section 24 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of Fractional Shares of Preferred Stock (or, following a Triggering Event,
Common Stock, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Rights Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Rights Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) thereof or of the Affiliates or Associates thereof as
the Company shall reasonably request. Thereupon the Rights Agent shall, subject
to Section 4(b), Section 7(e), Section 13(d), Section 14 and Section 24 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment by the holder of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer,
split-up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will, subject to Section 4(b), Section 7(e), Section
13(d), Section 14 and Section 24, execute and deliver a new Rights Certificate
of like tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE.
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly completed and executed, to the
Rights Agent at the principal office or offices of the Rights Agent
-11-
<PAGE>
designated for such purpose, together with payment of the aggregate Purchase
Price with respect to the total number of Fractional Shares of Preferred Stock
(or other securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the Expiration Date.
(b) The Purchase Price for each Fractional Share of Preferred Stock
pursuant to the exercise of a Right shall initially be $35, and shall be subject
to adjustment from time to time as provided in Sections 11 and 13(a) hereof and
shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side thereof duly executed, accompanied by payment, with respect to each Right
so exercised, of the Purchase Price per Fractional Share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly
(i)(A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of Fractional Shares of Preferred Stock to be
purchased, and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the shares of Preferred Stock issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing interests in such number of
Fractional Shares of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in cash
or by certified check, cashier's or official bank check or bank draft payable to
the order of the Company or the Rights Agent. In the event that the Company is
obligated to issue other securities (including Common Stock) of the Company, pay
cash and/or distribute other property pursuant to Section 11(a) or Section 13(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock would
be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of,
-12-
<PAGE>
the registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, subject to the provisions of Section
14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event, any Rights beneficially
owned by or transferred to (i) an Acquiring Person or an Associate or Affiliate
of an Acquiring Person other than any such Person that became such pursuant to a
Permitted Offer and the Board of Directors in good faith determines was not
involved in and did not cause or facilitate, directly or indirectly, such
Triggering Event, (ii) a direct or indirect transferee of such Rights from such
Acquiring Person (or any such Associate or Affiliate) who becomes a transferee
after such Triggering Event or (iii) a direct or indirect transferee of such
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with such Triggering Event and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
such Acquiring Person (or such Affiliate or Associate) to holders of equity
interests in such Acquiring Person (or such Affiliate or Associate) or to any
Person with whom such Acquiring Person (or such Affiliate or Associate) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Directors of the Company determines
is part of a plan, arrangement or understanding that has as a primary purpose or
effect the avoidance of this Section 7(e), shall become null and void without
any further action, no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise, and such Rights shall not be transferable. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
-13-
<PAGE>
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares, or out of
its authorized and issued shares held in its treasury, the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement, including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as any shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights are listed on any national
securities exchange or quoted on any trading system, the Company shall use its
best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange, or quoted on such system, upon official notice of issuance upon such
exercise. Following the occurrence of a Triggering Event, the Company will use
its best efforts to list (or continue the listing of) the Rights and the
securities issuable and deliverable upon the exercise of the Rights on one or
more national securities exchanges or to cause the Rights and the securities
purchasable upon exercise of the Rights to be reported by NASDAQ or such other
transaction reporting system then in use.
(c) The Company shall use its best efforts to (i) prepare and file,
as soon as practicable following the first occurrence of a Flip-In Event or, if
applicable, as soon as practicable following the earliest date after the first
occurrence of a Flip-In Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), a
registration statement on an appropriate form under the Securities Act with
respect to the securities purchasable upon exercise of the Rights, (ii) cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed 90 days after the date set forth in clause (i) of the
first sentence of this Section 9(c), the exercisability of the Rights in order
to prepare and file such registration statement and permit it to become
effective. In addition, if the Company shall determine that the Securities Act
requires an effective registration statement under the Securities Act following
the Distribution Date, the Company may temporarily suspend the exercisability of
the Rights until such time as such a registration statement has been declared
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be
-14-
<PAGE>
permitted under applicable law or any required registration statement shall not
have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Fractional Shares of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock and/or
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges that
may be payable in respect of the issuance or delivery of the Rights Certificates
and of any certificates for a number of Fractional Shares of Preferred Stock (or
Common Stock and/or other securities, as the case may be) upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax that
may be payable in respect of any transfer or delivery of Rights Certificates to
a Person other than, or the issuance or delivery of a number of Fractional
Shares of Preferred Stock (or Common Stock and/or other securities, as the case
may be) in respect of a name other than that of, the registered holder of the
Rights Certificates evidencing Rights surrendered for exercise or to issue or
deliver any certificates for a number of Fractional Shares of Preferred Stock
(or Common Stock and/or other securities, as the case may be) in a name other
than that of the registered holder upon the exercise of any Rights until such
tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
Section 10. PREFERRED STOCK RECORD DATE. Each Person in whose name
any certificate for a number of Fractional Shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of such shares (fractional or otherwise) of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares or other
securities subject to purchase
-15-
<PAGE>
upon exercise of each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a)(i)In the event the Company shall at any time after the
Rights Dividend Declaration Date (A) declare a dividend on the outstanding
shares of Preferred Stock payable in shares of Preferred Stock, (B)
subdivide the outstanding shares of Preferred Stock, (C) combine the
outstanding shares of Preferred Stock into a smaller number of shares or
(D) otherwise reclassify the outstanding shares of Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock or
capital stock or other securities, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of
the Purchase Price then in effect, the aggregate number and kind of shares
of Preferred Stock or capital stock or other securities, as the case may
be, which, if such Right had been exercised immediately prior to such date
and at a time when the Preferred Stock transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or reclassification.
If an event occurs that would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for
in this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Sections 23 and 24 of this Agreement, in the
event any Person shall, at any time after the Rights Dividend Declaration
Date, become an Acquiring Person, unless the event causing such Person to
become an Acquiring Person is (1) a Flip- Over Event or (2) an acquisition
of shares of Common Stock pursuant to a Permitted Offer (PROVIDED that
this clause (2) shall cease to apply if such Acquiring Person thereafter
becomes the Beneficial Owner of any additional shares of Common Stock
other than pursuant to such Permitted Offer or a transaction set forth in
Section 13(a) or 13(d) hereof), then (x) the Purchase Price shall be
adjusted to be the Purchase Price immediately prior to the first
occurrence of a Flip-In Event multiplied by the number of Fractional
Shares of Preferred Stock for which a Right was exercisable immediately
prior to such first occurrence and (y) each holder of a Right (except as
provided below in Section 11(a)(iii) and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof at a price
equal to the Purchase Price in accordance with the terms of this
Agreement, in lieu of the shares of Preferred Stock otherwise purchasable
thereunder, such number of shares of Common Stock of the Company as shall
equal the result obtained by dividing the Purchase Price by 50% of the
Current Market Price per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares"); PROVIDED that
the Purchase Price and the number of Adjustment Shares shall be further
adjusted as provided in this Agreement to reflect any events occurring
after the date of such first occurrence.
-16-
<PAGE>
(iii) In the event that the number of shares of Common Stock
that are authorized by the Company's certificate of incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company shall, to the extent permitted by applicable law and
regulation, (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (computed using the Current
Market Price used to determine the number of Adjustment Shares) (the
"Current Value") over (2) the Purchase Price (such excess is herein
referred to as the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon the
exercise of the Rights and payment of the applicable Purchase Price, (1)
cash, (2) a reduction in the Purchase Price, (3) Common Stock or other
equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock (including, without limitation, the
Preferred Stock) that the Board of Directors of the Company has determined
to have the same value as shares of Common Stock (such shares of preferred
stock are herein referred to as "Common Stock Equivalents")), (4) debt
securities of the Company, (5) other assets or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where
such aggregate value has been determined by the Board of Directors of the
Company based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors of the Company; PROVIDED,
however, if the Company shall not have made adequate provision to deliver
value pursuant to clause (B) above within 30 days following the later of
(x) the first occurrence of a Flip-In Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires (the later
of (x) and (y) being referred to herein as the "Flip-In Trigger Date"),
then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price,
shares of Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the
Spread. If the Board of Directors of the Company shall determine in good
faith that it is likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of the Rights, the
30-day period set forth above may be extended to the extent necessary, but
not more than 90 days after the Flip-In Trigger Date, in order that the
Company may seek stockholder approval for the authorization of such
additional shares (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company or the Board of Directors
determines that some action need be taken pursuant to the first and/or
second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares and/or to
decide the appropriate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer
in effect. For purposes of this Section 11(a)(iii), the value of the
Common Stock shall be the Current Market Price per share of the Common
Stock on the Flip-In Trigger Date
-17-
<PAGE>
and the value of any Common Stock Equivalent shall be deemed to have the
same value as the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within 45 calendar days after
such record date) Preferred Stock (or shares having substantially the same
rights, privileges and preferences as the shares of Preferred Stock ("Equivalent
Preferred Stock")) or securities convertible into Preferred Stock or Equivalent
Preferred Stock at a price per share of Preferred Stock or per share of
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the Current Market Price per share of Preferred Stock on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares of Preferred
Stock that the aggregate offering price of the total number of shares of
Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
Equivalent Preferred Stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration, part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price that would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent) of the portion of the cash,
assets or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to a share of Preferred Stock and the denominator
of which shall be such Current Market Price per share of
-18-
<PAGE>
Preferred Stock. Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price that would have
been in effect if such record date had not been fixed.
(d)(i)For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current Market
Price" per share of Common Stock of a Person on any date shall be deemed to be
the average of the daily Closing Prices per share of such Common Stock for the
30 consecutive Trading Days immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the "Current Market
Price" per share of Common Stock on any date shall be deemed to be the average
of the daily Closing Prices per share of such Common Stock for the 10
consecutive Trading Days immediately following such date; PROVIDED, however,
that in the event that the Current Market Price per share of Common Stock is
determined during a period following the announcement of (A) a dividend or
distribution on such Common Stock other than a regular quarterly cash dividend
or the dividend of the Rights, or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, shall not have occurred prior to the commencement of the
requisite 30 Trading Day or 10 Trading Day period, as set forth above, then, and
in each such case, the Current Market Price shall be properly adjusted to take
into account ex-dividend trading. If the Common Stock is not publicly held or
not so listed or traded, "Current Market Price" per share shall mean the fair
value per share as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "Current
Market Price" per share (or Fractional Share) of Preferred Stock shall be
determined in the same manner as set forth above for the Common Stock in clause
(i) of this Section 11(d) (other than the last sentence thereof). If the Current
Market Price per share (or Fractional Share) of Preferred Stock cannot be
determined in the manner provided above or if the Preferred Stock is not
publicly held or listed or traded in a manner described in clause (i) of this
Section 11(d), the "Current Market Price" per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date of
this Agreement) multiplied by the Current Market Price per share of the Common
Stock. If neither the Common Stock nor the Preferred Stock is publicly held or
so listed or traded, Current Market Price per share of the Preferred Stock shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes. For all
purposes of this Agreement, the Current Market Price of a Fractional Share of
Preferred Stock shall be equal to the Current Market Price of one share of
Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; PROVIDED, however,
that any adjustments that by reason of this Section 11(e) are not required to be
made shall be carried forward and taken into account in any
-19-
<PAGE>
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a share of Common Stock or
other share or to the nearest ten- thousandth of a Fractional Share of Preferred
Stock, as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which mandates
such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive in respect of such Right any shares of capital stock
other than Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Sections 11(a), (b), (c), (e), (f), (g), (h), (i), (j), (k) and (m)
hereof, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Fractional Shares of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result
of the calculations made in Sections 11(b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Fractional Shares of Preferred Stock (calculated to the nearest one
ten-thousandth of a Fractional Share) obtained by (i) multiplying (x) the number
of Fractional Shares of Preferred Stock covered by a Right immediately prior to
this adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect, on or after the date of any adjustment of
the Purchase Price, to adjust the number of Rights in lieu of any adjustment in
the number of Fractional Shares of Preferred Stock purchasable upon the exercise
of a Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of Fractional Shares of Preferred
Stock for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest ten-thousandth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
10 days later than the date of the public announcement. If Rights Certificates
have been
-20-
<PAGE>
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of Fractional Shares of Preferred Stock issuable upon the exercise
of the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Fractional Share and the number of
Fractional Shares that were expressed in the initial Rights Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, or the stated capital of
the number of Fractional Shares of Preferred Stock or of the number of shares of
Common Stock or other securities issuable upon exercise of a Right, the Company
shall take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable such number of Fractional Shares of Preferred Stock or such number
of shares of Common Stock or other securities at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Fractional Shares of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of Fractional Shares of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; PROVIDED, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities that by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv)
-21-
<PAGE>
stock dividends or (v) issuance of rights, options or warrants referred to in
this Section 11 hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
that there is an Acquiring Person, (i) consolidate with any other Person, (ii)
merge with or into any other Person, or (iii) sell, lease or transfer (or permit
one or more Subsidiaries to sell, lease or transfer), in one transaction or a
series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons, if (x) at the time of or immediately
after such consolidation, merger, sale, lease or transfer there are any rights,
warrants or other instruments or securities of the Company or any other Person
outstanding or agreements, arrangements or understandings in effect that would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, (y) prior to, simultaneously with or immediately after
such consolidation, merger, sale, lease or transfer, the stockholders or other
equity owners of the Person who constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates or
Associates, or (z) the identity, form or nature of organization of the Principal
Party (including, without limitation, the selection of the Person that will be
the Principal Party as a result of the Company's entering into one or more
consolidations, mergers, sales, leases, transfers or transactions with more than
one party) would preclude or limit the exercise of Rights or otherwise diminish
substantially or eliminate the benefits intended to be afforded by the Rights.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, Section 24 or Section 27
hereof, take (or permit any Subsidiary to take) any action if the purpose of
such action is to, or if at the time such action is taken it is reasonably
foreseeable that such action will, diminish substantially or eliminate the
benefits intended to be afforded by the Rights.
(p) Notwithstanding Section 3(c) hereof or any other provision of
this Agreement to the contrary, in the event that the Company shall at any time
after the Rights Dividend Declaration Date and prior to the Distribution Date
(i) declare a dividend on the outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
(iii) combine the outstanding shares of Common Stock into a smaller number of
shares or (iv) otherwise reclassify the outstanding shares of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter with Rights, shall be proportionately adjusted so
that the number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Common Stock immediately prior to
such event by a fraction (the "Adjustment Fraction"), the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event. In lieu of such adjustment in the number of Rights
associated with one share of Common Stock, the Company may
-22-
<PAGE>
elect to adjust the number of Fractional Shares of Preferred Stock purchasable
upon the exercise of one Right and the Purchase Price. If the Company makes such
election, the number of Rights associated with one share of Common Stock shall
remain unchanged, and the number of Fractional Shares of Preferred Stock
purchasable upon exercise of one Right and the Purchase Price shall be
proportionately adjusted so that (i) the number of Fractional Shares of
Preferred Stock purchasable upon exercise of a Right following such adjustment
shall equal the product of the number of Fractional Shares of Preferred Stock
purchasable upon exercise of a Right immediately prior to such adjustment
multiplied by the Adjustment Fraction and (ii) the Purchase Price following such
adjustment shall equal the product of the Purchase Price immediately prior to
such adjustment multiplied by the Adjustment Fraction.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate and (c) mail a
brief summary thereof to each registered holder of a Rights Certificate (or, if
prior to the Distribution Date, to each registered holder of a certificate
representing shares of Common Stock) in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS
OR EARNING POWER.
(a) In the event that, from and after the time an Acquiring Person
has become such, directly or indirectly, (x) the Company shall consolidate with,
or merge with and into, any other Person, and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger, and, in connection with such consolidation or merger, all or part of
the outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of the Company or any other Person or cash or any
other property, or (z) the Company shall sell, lease or otherwise transfer (or
one or more of its Subsidiaries shall sell, lease or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any wholly owned Subsidiary of the Company or any combination thereof in one
or more transactions each of which complies (and all of which together comply)
with Section 11(o) hereof), then, and in each such case (except as may be
contemplated by Section 13(d) hereof), proper provision shall be made so that:
(i) the Purchase Price shall be adjusted to be the Purchase Price immediately
prior to the first occurrence of a Triggering Event multiplied by the number of
Fractional Shares of Preferred Stock for which a Right was exercisable
immediately prior to such first occurrence; (ii) on and after the Distribution
Date, each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the Purchase
Price in accordance with the terms of this Agreement, in lieu of shares of
Preferred
-23-
<PAGE>
Stock or Common Stock of the Company, such number of validly authorized and
issued, fully paid, nonassessable and freely tradeable shares of Common Stock of
the Principal Party (as such term is hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by dividing the Purchase Price by 50% of the
Current Market Price per share of the Common Stock of such Principal Party on
the date of consummation of such Flip-Over Event; PROVIDED that the Purchase
Price and the number of shares of Common Stock of such Principal Party issuable
upon exercise of each Right shall be further adjusted as provided in this
Agreement to reflect any events occurring after the date of such first
occurrence of a Triggering Event or after the date of such Flip-Over Event, as
applicable; (iii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Flip-Over Event, all the obligations and duties of the
Company pursuant to this Agreement; (iv) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Flip-Over Event; (v) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (vi) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the occurrence of any Flip-Over Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), (A) the Person that is the issuer of
any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, or, if there is more than one
such issuer, the issuer the Common Stock of which has the greatest
aggregate market value, or (B) if no securities are so issued, (x) the
Person that survives such consolidation or is the other party to the
merger and survives such merger, or, if there is more than one such
Person, the Person the Common Stock of which has the greatest aggregate
market value or (y) if the Person that is the other party to the merger
does not survive the merger, the Person that does survive the merger
(including the Company if it survives); and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant
to such transaction or transactions, or, if each Person that is a party to
such transaction or transactions receives the same portion of the assets
or earning power so transferred, or if the Person receiving the greatest
portion of the assets or earning power cannot be determined, the Person
the Common Stock of which has the greatest aggregate market value;
PROVIDED, however, that in any such case, if the Common Stock of such Person is
not at such time and has not been continuously over the preceding twelve-month
period registered under Section 12 of the Exchange Act, and if (1) such Person
is a direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to such other
-24-
<PAGE>
Person; (2) such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of all of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value; and (3) such Person is
owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules set
forth in (1) and (2) above shall apply to each of the chains of ownership having
an interest in such joint venture as if such party were a "Subsidiary" of both
or all of such joint venturers and the Principal Parties in each such chain
shall bear the obligations set forth in this Section 13 in the same ratio as
their direct or indirect interests in such Person bear to the total of such
interests.
(c) The Company shall not consummate any Flip-Over Event unless each
Principal Party (or Person that may become a Principal Party as a result of such
Flip-Over Event) shall have a sufficient number of authorized shares of its
Common Stock that have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and each such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of such Flip-Over Event, the
Principal Party at its own expense will
(i) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the "blue sky"
laws of such jurisdictions as may be necessary or appropriate;
(iii) use its best efforts, if the Common Stock of the Principal
Party is or shall become listed on a national securities exchange, to list
(or continue the listing of) the Rights and the securities purchasable
upon exercise of the Rights on such securities exchange and, if the Common
Stock of the Principal Party shall not be listed on a national securities
exchange, to cause the Rights and the securities purchasable upon exercise
of the Rights to be reported by NASDAQ or such other transaction reporting
system then in use; and
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that comply
in all respects with the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Flip-Over Event
shall occur at any time after the occurrence of a Flip-In Event, the Rights that
have not theretofore been exercised shall thereafter become exercisable in the
manner described in Section 13(a).
-25-
<PAGE>
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a Permitted
Offer (or a wholly owned subsidiary of any such Person or Persons), (ii) the
price per share of Common Stock offered in such transaction is not less than the
price per share of Common Stock paid to all holders of Common Stock whose shares
were purchased pursuant to such Permitted Offer, and (iii) the form of
consideration being offered to the remaining holders of shares of Common Stock
pursuant to such transaction is the same as the form of consideration paid
pursuant to such Permitted Offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates or scrip evidencing fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the Closing Price
of one Right for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable.
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than, except as provided in Section 7(c) hereof,
fractions that are integral multiples of a Fractional Share of Preferred Stock)
upon exercise of the Rights or to distribute certificates or scrip evidencing
fractional shares of Preferred Stock (other than, except as provided in Section
7(c) hereof, fractions that are integral multiples of a Fractional Share of
Preferred Stock). Interests in fractions of shares of Preferred Stock in
integral multiples of a Fractional Share of Preferred Stock may, at the election
of the Company in its sole discretion, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the shares of Preferred Stock
represented by such depositary receipts. In lieu of fractional shares of
Preferred Stock that are not integral multiples of a Fractional Share of
Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of one one-hundredth of the Closing Price of
a share of Preferred Stock for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute certificates or scrip evidencing fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the Closing Price of one share of Common Stock for the Trading Day
immediately prior to the date of such exercise.
-26-
<PAGE>
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement, other than rights of action vested in the Rights Agent pursuant
to Section 18 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered holders
of the Common Stock) and, where applicable, the Company; and any registered
holder of any Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), without the consent of the Rights Agent or of the holder of any
other Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
After a Triggering Event, holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred by them in
any action to enforce the provisions of this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will not be evidenced
by Rights Certificates and will be transferable only in connection with the
transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates will be
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the form of assignment set forth on the reverse side thereof and the
certificate contained therein duly completed and fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary; and
-27-
<PAGE>
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of Fractional
Shares of Preferred Stock or any other securities of the Company that may at any
time be issuable upon the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other reasonable disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it, after proper inquiry or examination, to be
genuine and to be signed, executed and, where necessary, guaranteed, verified or
acknowledged, by the proper Person or Persons.
-28-
<PAGE>
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; PROVIDED, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Current Market Price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full
-29-
<PAGE>
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct. In no event shall the Rights Agent
be liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of action.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt of actual knowledge of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Preferred Stock or Common Stock or other securities to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any shares of
Preferred Stock or Common Stock or other securities will, when so issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or
-30-
<PAGE>
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
omission, default, neglect or misconduct; PROVIDED, however, that reasonable
care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and the Preferred Stock, by registered or
certified mail, and to the registered holders, if any, of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent (with or without cause) upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock and the Preferred Stock, by registered
or certified mail, and to the registered holders of the Rights Certificates, if
any, by first-class mail. If the Rights Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. Notwithstanding the foregoing provisions of this
Section 21, in no event shall the resignation or removal of a Rights Agent be
effective until a successor Rights Agent shall have been appointed and have
accepted such appointment. If the Company shall fail to make such appointment
within a period of 30 days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the registered holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the Rights Agent or the registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized and doing
business under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such corporation is authorized
to conduct a stock transfer or corporate trust
-31-
<PAGE>
business in the State of New York), in good standing, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50,000,000 or (b) an affiliate of a corporation described in clause (a)
of this sentence. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders, if any, of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the Expiration Date, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement granted or awarded on or prior
to the Distribution Date, or upon the exercise, conversion or exchange of
securities issued by the Company on or prior to the Distribution Date, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; PROVIDED, however,
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the close of business on the tenth day
following the first date of public announcement of the occurrence of a Flip-In
Event (or, if such date shall have occurred prior to the Record Date, the close
of business on the tenth day following the Record Date) and (ii) the Expiration
Date, cause the Company to redeem all but not less than all the then outstanding
Rights at a redemption price of $.01 per Right, as such amount may be
appropriately adjusted, if necessary, to reflect any stock split, stock dividend
or similar transaction occurring after the Rights Dividend
-32-
<PAGE>
Declaration Date (such redemption price being hereinafter referred to as the
"Redemption Price"); PROVIDED, however, that the Rights may not be redeemed
following any merger to which the Company is a party that (i) occurs when there
is an Acquiring Person and (ii) was not approved prior to such merger by the
Board of Directors of the Company and by the stockholders of the Company at a
stockholders' meeting. Notwithstanding anything contained in this Agreement to
the contrary, the Rights shall not be exercisable after the first occurrence of
a Flip-In Event until such time as the Company's right of redemption hereunder
has expired. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the Current Market Price of the Common Stock at
the time of redemption) or any other form of consideration deemed appropriate by
the Board of Directors.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the redemption of the Rights (the
effectiveness of which action may be conditioned on the occurrence of one or
more events or on the existence of one or more facts or may be effective at some
future time), evidence of which shall be filed with the Rights Agent and without
any further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Promptly after the
effectiveness of the action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and the registered holders of the then outstanding Rights by mailing such notice
to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Company for the Common Stock. Any notice that is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state the method by
which the payment of the Redemption Price will be made.
Section 24. EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at any
time and from time to time after the occurrence of a Flip-In Event, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for shares of Common Stock or Common Stock Equivalents or any combination
thereof, at an exchange ratio of one share of Common Stock, or such number of
Common Stock Equivalents or units representing fractions thereof as would be
deemed to have the same value as one share of Common Stock, per Right,
appropriately adjusted, if necessary, to reflect any stock split, stock dividend
or similar transaction occurring after the Rights Dividend Declaration Date
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors may not effect such
exchange at any time after (i) any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Common Stock then outstanding
or (ii) the occurrence of a Flip-Over Event.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to and in
accordance with subsection (a)
-33-
<PAGE>
of this Section 24 (the effectiveness of which action may be conditioned on the
occurrence of one or more events or on the existence of one or more facts or may
be effective at some future time) and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock and/or Common Stock Equivalents equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange; PROVIDED, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the registered holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of the shares of Common Stock and/or Common Stock Equivalents for
Rights will be effected and, in the event of any partial exchange, the number of
Rights that will be exchanged. Any partial exchange shall be effected as nearly
pro rata as possible based on the number of Rights (other than Rights that have
become void pursuant to the provisions of Section 7(e) hereof) held by each
holder of Rights.
(c) In the event that the number of shares of Common Stock that are
authorized by the Company's certificate of incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights is not
sufficient to permit an exchange of Rights as contemplated in accordance with
this Section 24, the Company may, at its option, take all such action as may be
necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights.
(d) The Company shall not be required to issue fractions of shares
of Common Stock or to distribute certificates or scrip evidencing fractional
shares of Common Stock upon exchange of the Rights. In lieu of such fractional
shares of Common Stock, the Company shall pay to the registered holders of
Rights with regard to which such fractional shares of Common Stock would
otherwise be issuable an amount in cash equal to the same fraction of the value
of a whole share of Common Stock. For purposes of this Section 24, the value of
a whole share of Common Stock shall be the Closing Price per share of Common
Stock for the Trading Day immediately prior to the date of exchange pursuant to
this Section 24, and the value of any Common Stock Equivalent shall be deemed to
have the same value as the Common Stock on such date.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person
-34-
<PAGE>
(other than a wholly owned Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof), or to effect any sale, lease or other
transfer of all or substantially all the Company's assets to any other Person or
Persons (other than a wholly owned Subsidiary of the Company in a transaction
that complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of record of a Rights Certificate, to the extent
feasible and in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, lease, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the shares of Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock, whichever shall be the earlier.
The failure to give notice required by this Section 25 or any defect therein
shall not affect the legality or validity of the action taken by the Company or
the vote upon any such action.
(b) In case any Flip-In Event or Flip-Over Event shall occur, then
(i) the Company shall as soon as practicable thereafter give to each registered
holder of a Rights Certificate (or if occurring prior to the Distribution Date,
the registered holders of Common Stock), in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) or
Section 13(a) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.
Section 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
U.S. Concrete, Inc.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77056
Attention: __________________
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
-35-
<PAGE>
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Except as provided in the
last sentence of this Section 27, at any time when the Rights are then
redeemable, the Company may in its sole and absolute discretion and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement in any respect without the approval of any holders of Rights or
holders of Common Stock. At any time when the Rights are not redeemable, except
as provided in the last sentence of this Section 27, the Company may and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein that may
be defective or inconsistent with any other provisions herein, (iii) to shorten
or lengthen any time period hereunder or (iv) to change or supplement the
provisions hereunder in any manner that the Company may deem necessary or
desirable; PROVIDED that no such amendment or supplement shall materially
adversely affect the interests of the holders of Rights (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person); and FURTHER
PROVIDED that this Agreement may not be supplemented or amended pursuant to this
sentence to lengthen (A) a time period relating to when the Rights may be
redeemed or (B) any other time period unless the lengthening of such other time
period is for the purpose of protecting, enhancing or clarifying the rights of,
and/or the benefits to, the holders of Rights (other than any Acquiring Person
and its Affiliates and Associates). Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment; PROVIDED, however, that the Rights
Agent may, but shall not be obligated to, enter into any such supplement or
amendment that affects the Rights Agent's own rights, duties or immunities under
this Agreement. Notwithstanding anything contained in this Agreement to the
contrary, no supplement or amendment shall be made that decreases the Redemption
Price.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
ETC. For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement. The Board of
Directors of the Company (or, as set forth herein, certain specified members
thereof) shall have the exclusive power
-36-
<PAGE>
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board of Directors of the Company or to the Company,
or as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including, without
limitation, a determination to redeem or not redeem the Rights or to amend this
Agreement). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) that are done or made by the Board of Directors of the Company in
good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights, as such, and all other parties, and (y)
not subject the Board of Directors to any liability to the holders of the
Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, then, unless there has occurred any merger referred to
in the proviso to the first sentence of Section 23(a), the right of redemption
set forth in Section 23 hereof shall be reinstated and shall not expire until
the close of business on the tenth day following the date of such determination
by the Board of Directors of the Company or, if earlier, immediately prior to
any such merger. Without limiting the foregoing, if any provision requiring that
a determination be made by less than the entire Board of Directors of the
Company is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, such determination shall then be made by the
entire Board of Directors of the Company.
Section 32. GOVERNING LAW. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
-37-
<PAGE>
Section 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
U.S. CONCRETE, INC.
By: /s/ EUGENE P. MARTINEAU
Eugene P. Martineau
President and Chief Executive Officer
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: /s/ HERBERT J. LEMMER
Herbert J. Lemmer
Vice President
-38-
<PAGE>
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATIONS
of
Series A Junior Participating Preferred Stock
of
U.S. CONCRETE, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
U.S. CONCRETE, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Restated Certificate of Incorporation of
the said Corporation, the said Board of Directors on May 10, 1999 adopted the
following resolution creating a series of 400,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Restated Certificate of Incorporation, a series of Preferred Stock, par
value $.001 per share, of the Corporation be and hereby is created, and
that the designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other rights
of the shares of such series and the qualifications, limitations and
restrictions thereof are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. DESIGNATION AND AMOUNT. There shall be a series of Preferred
Stock that shall be designated as "Series A Junior Participating Preferred
Stock," and the number of shares constituting such series shall be 400,000. Such
number of shares may be increased or decreased by resolution of the Board of
Directors; provided, however, that no decrease shall reduce the number of shares
of Series A Junior Participating Preferred Stock to less than the number of
shares then issued and outstanding plus the number of shares issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
A-1
<PAGE>
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock, in
preference to the holders of shares of any class or series of stock of the
Corporation ranking junior to the Series A Junior Participating Preferred Stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on March 31, June 30, September 30 and December 31 in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) the Adjustment Number (as defined below) times the aggregate
per share amount of all cash dividends, and the Adjustment Number times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $.001 per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. The "Adjustment Number" shall initially be
100. In the event the Corporation shall at any time after May 10, 1999 (the
"Rights Declaration Date") (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record
A-2
<PAGE>
date for the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Junior Participating Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock
shall entitle the holder thereof to a number of votes equal to the Adjustment
Number on all matters submitted to a vote of the stockholders of the
Corporation.
(B) Except as otherwise provided herein, in the Restated Certificate
of Incorporation or by law, the holders of shares of Series A Junior
Participating Preferred Stock, the holders of shares of any other class or
series entitled to vote with the Common Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C)(i)If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") that shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, (1) the number of
Directors shall be increased by two, effective as of the time of election of
such Directors as herein provided, and (2) the holders of Preferred Stock
(including holders of the Series A Junior Participating Preferred Stock) upon
which these or like voting rights have been conferred and are exercisable (the
"Voting Preferred Stock") with dividends in arrears in an amount equal to six
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect such two Directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at
any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that such voting right shall not be exercised unless the
holders of at least one-third in number of the shares of Voting Preferred Stock
outstanding shall be present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by the holders of
Voting Preferred Stock of such voting right.
A-3
<PAGE>
(iii) Unless the holders of Voting Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent of the total number of shares
of Voting Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Voting Preferred Stock, which
meeting shall thereupon be called by the Chairman of the Board, the President, a
Vice President or the Secretary of the Corporation. Notice of such meeting and
of any annual meeting at which holders of Voting Preferred Stock are entitled to
vote pursuant to this paragraph (C)(iii) shall be given to each holder of record
of Voting Preferred Stock by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than 20 days and not later than 60 days after
such order or request or, in default of the calling of such meeting within 60
days after such order or request, such meeting may be called on similar notice
by any stockholder or stockholders owning in the aggregate not less than ten
percent of the total number of shares of Voting Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no such special
meeting shall be called during the period within 60 days immediately preceding
the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, after the holders of Voting Preferred
Stock shall have exercised their right to elect Directors voting as a class, (x)
the Directors so elected by the holders of Voting Preferred Stock shall continue
in office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the Board of
Directors may be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class or classes of stock which
elected the Director whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular class or
classes of stock shall include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Voting Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of Voting
Preferred Stock as a class shall terminate and (z) the number of Directors shall
be such number as may be provided for in the Restated Certificate of
Incorporation or By-Laws irrespective of any increase made pursuant to the
provisions of paragraph (C) of this Section 3 (such number being subject,
however, to change thereafter in any manner provided by law or in the Restated
Certificate of Incorporation or By-Laws). Any vacancies in the Board of
Directors effected by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
A-4
<PAGE>
4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
A Junior Participating Preferred Stock, except dividends paid ratably on
the Series A Junior Participating Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
or
(iii) redeem or purchase or otherwise acquire for
consideration any shares of Series A Junior Participating Preferred Stock,
or any shares of stock ranking on a parity with the Series A Junior
Participating Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of
Directors) to all holders of Series A Junior Participating Preferred
Stock, or to all such holders and the holders of any such shares ranking
on a parity therewith, upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. REACQUIRED SHARES. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to any conditions and restrictions on issuance set forth
herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the
A-5
<PAGE>
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received $10.00 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment (the "Series A Junior Participating
Preferred Stock Liquidation Preference"). Following the payment of the full
amount of the Series A Junior Participating Preferred Stock Liquidation
Preference, no additional distributions shall be made to the holders of shares
of Series A Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series A
Junior Participating Preferred Stock Liquidation Preference by (ii) the
Adjustment Number. Following the payment of the full amount of the Series A
Junior Participating Preferred Stock Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series A Junior Participating
Preferred Stock and Common Stock, respectively, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common Stock shall,
subject to the prior rights of all other series of Preferred Stock, if any,
ranking prior thereto, receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Series A Junior Participating Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Junior Participating
Preferred Stock Liquidation Preference and the liquidation preferences of all
other series of Preferred Stock, if any, that rank on a parity with the Series A
Junior Participating Preferred Stock, then such remaining assets shall be
distributed ratably to the holders of such parity shares in proportion to their
respective liquidation preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the Common Adjustment,
then such remaining assets shall be distributed ratably to the holders of Common
Stock.
(C) Neither the merger or consolidation of the Corporation into or
with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6, but the sale, lease or conveyance of all or substantially all the
Corporation's assets shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this Section 6.
7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
A-6
<PAGE>
8. REDEMPTION. (A) The Corporation, at its option, may redeem shares
of the Series A Junior Participating Preferred Stock in whole at any time and in
part from time to time, at a redemption price equal to the Adjustment Number
times the current per share market price (as such term is hereinafter defined)
of the Common Stock on the date of the mailing of the notice of redemption,
together with unpaid accumulated dividends to the date of such redemption. The
"current per share market price" on any date shall be deemed to be the average
of the closing price per share of such Common Stock for the ten consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; PROVIDED, however, that in the event that the current per share market
price of the Common Stock is determined during a period following the
announcement of (A) a dividend or distribution on the Common Stock other than a
regular quarterly cash dividend or (B) any subdivision, combination or
reclassification of such Common Stock and the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or
reclassification, shall not have occurred prior to the commencement of such ten
Trading Day period, then, and in each such case, the current per share market
price shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sales price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange but sales price information is reported for such security,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or such other self-regulatory organization or
registered securities information processor (as such terms are used under the
Securities Exchange Act of 1934, as amended) that then reports information
concerning the Common Stock, or, if sales price information is not so reported,
the average of the high bid and low asked prices in the over-the-counter market
on such day, as reported by NASDAQ or such other entity, or, if on any such date
the Common Stock is not quoted by any such entity, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors of the Corporation. If on
any such date no such market maker is making a market in the Common Stock, the
fair value of the Common Stock on such date as determined in good faith by the
Board of Directors of the Corporation shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the Common Stock is listed or admitted to trading is open for the transaction of
business, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange but is quoted by NASDAQ, a day on which NASDAQ
reports trades, or, if the Common Stock is not so quoted, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the State of New
York are not authorized or obligated by law or executive order to close.
(B) In the event that fewer than all the outstanding shares of the
Series A Junior Participating Preferred Stock are to be redeemed, the number of
shares to be redeemed shall be determined by the Board of Directors and the
shares to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors or by any other method that may be
determined by the Board of Directors in its sole discretion to be equitable.
A-7
<PAGE>
(C) Notice of any such redemption shall be given by mailing to the
holders of the shares of Series A Junior Participating Preferred Stock to be
redeemed a notice of such redemption, first class postage prepaid, not later
than the fifteenth day and not earlier than the sixtieth day before the date
fixed for redemption, at their last address as the same shall appear upon the
books of the Corporation. Each such notice shall state: (i) the redemption date;
(ii) the number of shares to be redeemed and, if fewer than all the shares held
by such holder are to be redeemed, the number of such shares to be redeemed from
such holder; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price; and (v) that dividends on the shares to be redeemed will cease to accrue
on the close of business on such redemption date. Any notice that is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the stockholder received such notice, and failure duly to
give such notice by mail, or any defect in such notice, to any holder of Series
A Junior Participating Preferred Stock shall not affect the validity of the
proceedings for the redemption of any other shares of Series A Junior
Participating Preferred Stock that are to be redeemed. On or after the date
fixed for redemption as stated in such notice, each holder of the shares called
for redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the redemption price. If fewer than all the
shares represented by any such surrendered certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(D) The shares of Series A Junior Participating Preferred Stock
shall not be subject to the operation of any purchase, retirement or sinking
fund.
9. RANKING. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise, and shall rank senior to the Common Stock
as to such matters.
10. AMENDMENT. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds or more of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
11. FRACTIONAL SHARES. Series A Junior Participating Preferred Stock
may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
A-8
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate
and does affirm the foregoing as true this ___ day of _______, 199_.
_____________________________________
[Vice] President
A-9
<PAGE>
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER APRIL 30, 2009 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. 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 AN
AFFILIATE OR ASSOCIATE 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.
RIGHTS CERTIFICATE
U.S. CONCRETE, INC.
This certifies that _____________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of May 10, 1999 as it may from time to time be
supplemented or amended (the "Rights Agreement"), between U.S. Concrete, Inc., a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, a national banking association (the "Rights Agent"), to purchase from
the Company at any time prior to 5:00 p.m. (New York time) on April 30, 2009 at
the principal office or offices of the Rights Agent designated for such purpose,
or its successors as Rights Agent, one one-hundredth of a fully paid,
nonassessable share (a "Fractional Share") of Series A Junior Participating
Preferred Stock, par value $.001 per share (the "Preferred Stock"), of the
Company, at a purchase price of $35 per one one-hundredth of a share (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and related Certificate set forth on the
reverse hereof duly executed. The Purchase Price may be paid in cash or by
certified check, cashier's or official bank check or bank draft payable to the
order of the Company or the Rights Agent. The number of Rights evidenced by this
Rights Certificate (and the number of shares that may be purchased upon exercise
thereof) set forth above, and the Purchase Price per Fractional Share set forth
above, are the number and Purchase Price as of May 10, 1999, based on the
Preferred Stock as constituted at such date. The Company reserves the right to
require prior to the occurrence of a Triggering Event (as such term is defined
in the Rights Agreement) that a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.
B-1
<PAGE>
From and after the first occurrence of a Triggering Event (as such
term is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by or transferred to (i) an Acquiring Person
or an Associate or Affiliate of an Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall, with certain exceptions, become null and
void in the circumstances set forth in the Rights Agreement, and no holder
hereof shall have any rights whatsoever with respect to such Rights from and
after the occurrence of such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preferred Stock or other securities or assets that
may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Fractional Shares of Preferred Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at its option
at a redemption price of $.01 per Right, payable, at the election of the
Company, in cash or shares of Common Stock or such other consideration as the
Board of Directors may determine, at any time prior to the earlier of the close
of business on (a) the tenth day following the first public announcement of the
occurrence of a Flip- In Event (as such time period may be extended or shortened
pursuant to the Rights Agreement) and (b) the Expiration Date (as such term is
defined in the Rights Agreement) or (ii) may be exchanged in whole or in part
for shares of Common Stock and/or other equity securities of the Company deemed
to have the same value as shares of Common Stock, at any time prior to a
person's becoming
B-2
<PAGE>
the beneficial owner of 50% or more of the shares of Common Stock outstanding or
the occurrence of a Flip-Over Event.
No fractional shares of Preferred Stock are required to be issued
upon the exercise of any Right or Rights evidenced hereby (other than, except as
set forth above, fractions that are integral multiples of a Fractional Share of
Preferred Stock, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof a cash payment may be made, as
provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company that may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of May 10, 1999
ATTEST: U.S. CONCRETE, INC.
________________________ By ________________________________
Secretary Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By ________________________________
Authorized Signature
B-3
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer any Rights evidenced by the Rights Certificate.)
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns
and transfers unto
(Please print name and address of transferee) _________ Rights
evidenced by this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
__________________ Attorney, to transfer the said Rights on the books of the
within-named Company, with full power of substitution.
Dated: _________________, 199__
______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-4
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being sold, assigned and transferred by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or who is a direct or indirect
transferee of an Acquiring Person or of an Affiliate or Associate of an
Acquiring Person.
Dated: _____________, 199__ ______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-5
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented
by the Rights Certificate.)
To: U.S. CONCRETE, INC.
The undersigned hereby irrevocably elects to exercise _________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person that may be issuable upon the
exercise of the Rights) and requests that certificates for such shares (or other
securities) be issued in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name
of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ____________, 199__
________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
B-6
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or who is a direct or indirect transferee of an
Acquiring Person or of an Affiliate or Associate of an Acquiring Person.
Dated: _____________, 199__ ____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).
NOTICE
The signatures to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
B-7
<PAGE>
EXHIBIT C
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 AN AFFILIATE OR ASSOCIATE 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.
SUMMARY OF RIGHTS
On May 10, 1999, the Board of Directors of U.S. Concrete, Inc. (the
"Company") declared a dividend of one right ("Right") for each outstanding share
of the Company's Common Stock, par value $.001 per share ("Common Stock"), to
stockholders of record at the close of business on May 10, 1999. Each Right
entitles the registered holder to purchase from the Company a unit consisting of
one one-hundredth of a share (a "Fractional Share") of Series A Junior
Participating Preferred Stock,par value $.001 per share (the "Preferred Stock"),
at a purchase price of $35 per Fractional Share, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are set forth in a
Rights Agreement dated as of May 10, 1999 as it may from time to time be
supplemented or amended (the "Rights Agreement") between the Company and
American Stock Transfer & Trust Company, as Rights Agent.
Initially, the Rights will be attached to all certificates
representing outstanding shares of Common Stock, and no separate certificates
for the Rights ("Rights Certificates") will be distributed. The Rights will
separate from the Common Stock and a "Distribution Date" will occur, with
certain exceptions, upon the earlier of (i) ten days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock (the date of
the announcement being the "Stock Acquisition Date"), or (ii) ten business days
following the commencement of a tender offer or exchange offer that would result
in a person's becoming an Acquiring Person. In certain circumstances, the
Distribution Date may be deferred by the Board of Directors. Certain inadvertent
acquisitions will not result in a person's becoming an Acquiring Person if the
person promptly divests itself of sufficient Common Stock. Until the
Distribution Date, (a) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (b) Common Stock certificates will contain a notation
incorporating the Rights Agreement by reference and (c) the surrender for
transfer of any certificate for Common Stock will also constitute the transfer
of the Rights associated with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on April 30, 2009, unless earlier redeemed or
exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of Common Stock as of the close
of business on the Distribution Date and, from and after the Distribution Date,
the separate Rights Certificates alone will represent the Rights. All shares of
Common Stock issued prior to the Distribution Date will be issued with Rights.
Shares of Common Stock issued after the Distribution Date in connection with
certain employee benefit plans
C-1
<PAGE>
or upon conversion of certain securities will be issued with Rights. Except as
otherwise determined by the Board of Directors, no other shares of Common Stock
issued after the Distribution Date will be issued with Rights.
In the event (a "Flip-In Event") that a person becomes the
beneficial owner of 15% or more of the then outstanding shares of Common Stock
(except pursuant to a tender or exchange offer for all outstanding shares of
Common Stock at a price and on terms that a majority of the independent
directors of the Company determines to be fair to and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, a number of shares of Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a Current Market Price
(as defined in the Rights Agreement) equal to two times the exercise price of
the Right. Notwithstanding the foregoing, following the occurrence of any
Triggering Event, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by or transferred to an
Acquiring Person (or by certain related parties) will be null and void in the
circumstances set forth in the Rights Agreement. However, Rights are not
exercisable following the occurrence of any Flip- In Event until such time as
the Rights are no longer redeemable by the Company as set forth below.
In the event (a "Flip-Over Event") that, at any time from and after
the time an Acquiring Person becomes such, (i) the Company is acquired in a
merger or other business combination transaction (other than certain mergers
that follow a Permitted Offer), or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights that
are voided as set forth above) shall thereafter have the right to receive, upon
exercise, a number of shares of common stock of the acquiring company having a
Current Market Price equal to two times the exercise price of the Right. Flip-In
Events and Flip-Over Events are collectively referred to as "Triggering Events."
The number of outstanding Rights associated with a share of Common
Stock, or the number of Fractional Shares of Preferred Stock issuable upon
exercise of a Right and the Purchase Price, are subject to adjustment in the
event of a stock dividend on, or a subdivision, combination or reclassification
of, the Common Stock occurring prior to the Distribution Date. The Purchase
Price payable, and the number of Fractional Shares of Preferred Stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution in the event of certain
transactions affecting the Preferred Stock.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Preferred Stock that are not integral multiples
of a Fractional Share are required to be issued upon exercise of Rights and, in
lieu thereof, an adjustment in cash may be made based on the market price of the
Preferred Stock on the last trading date prior to the date of exercise. Pursuant
to the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, a number of
Rights be exercised so that only whole shares of Preferred Stock will be issued.
C-2
<PAGE>
At any time until ten days following the first date of public
announcement of the occurrence of a Flip-In Event, the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, payable, at the
option of the Company, in cash, shares of Common Stock or such other
consideration as the Board of Directors may determine. Immediately upon the
effectiveness of the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a
person's becoming the beneficial owner of 50% or more of the shares of Common
Stock then outstanding or the occurrence of a Flip-Over Event, the Company may
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 deemed to have the same value as one share of Common
Stock, per Right, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
should not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Company or for the common stock of the acquiring company as set forth above or
are exchanged as provided in the preceding paragraph.
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company as long as the
Rights are redeemable. Thereafter, the provisions of the Rights Agreement other
than the redemption price may be amended by the Board of Directors in order to
cure any ambiguity, defect or inconsistency, to make changes that do not
materially adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or to shorten or lengthen any time period
under the Rights Agreement; PROVIDED, HOWEVER, that no amendment to lengthen the
time period governing redemption shall be made at such time as the Rights are
not redeemable.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an exhibit to the Company's Registration Statement on
Form S-1. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
C-3
EXHIBIT 4.5
[CHASE SECURITIES LETTERHEAD]
U.S. CONCRETE, INC.
SENIOR SECURED CREDIT FACILITY
COMMITMENT LETTER
April 20, 1999
1360 Post Oak Boulevard, Suite 800
Houston, TX 77056
Attention: Mr. Michael Harlan
Ladies and Gentlemen
You have advised Chase Bank of Texas, National Association ("CHASE") and
Chase Securities Inc. ("CSI") that U.S. Concrete, Inc. (the "Borrower" or "U.S.
Concrete"), a Delaware corporation, intends to issue common stock and become a
publicly traded company. Concurrently with the closing of the public offering,
the Borrower intends to acquire six businesses: Central Concrete Supply Co.,
Inc.; Walker's Concrete, Inc.; Bay Cities Building Materials Co., Inc.;
Opportunity Concrete Corporation; Baer Concrete, Incorporated; and R.G.
Evans/Associates d/b/a Santa Rosa Cast Products Co. (together, the "Founding
Companies"). In that connection, you have requested that CSI agree to structure,
arrange and syndicate a senior secured credit Facility in an aggregate amount of
up to $75,000,000 (the "FACILITY"), and that Chase commit to provide $50,000,000
of the Facility and to serve as administrative agent for the Facility.
CSI is pleased to advise you that it is willing to act as exclusive advisor
and arranger for the Facility.
Furthermore, Chase is pleased to advise you of its commitment to provide up
to $50,000,000 of the Facility and to use to use commercially reasonable efforts
to assemble a syndicate of financial institutions identified by CSI and Chase in
consultation with you (the "LENDERS"), to provide the balance of the necessary
commitments for the Facility, in each case upon the terms and subject to the
conditions set forth or referred to in this commitment letter (this "Commitment
Letter") and in the Summary of Terms and Conditions attached hereto as Exhibit A
(the "Term Sheet"). You understand and agree that the first $35,000,000 raised
from Lenders other than Chase will first be used to reduce Chase's hold position
to $15,000,000. Commitments from Lenders above $35,000,000 will be applied to
the balance of the Facility.
_____________________
CHASE SECURITIES INC. IS A MEMBER OF NASD/SIPC, AND IS A WHOLLY-OWNED
SUBSIDIARY OF THE CHASE MANHATTAN CORPORATION
<PAGE>
U.S. CONCRETE, INC. APRIL 20, 1999
It is agreed that Chase will act as the sole and exclusive Administrative
Agent and that CSI will act as the sole and exclusive advisor, lead arranger,
and book manager (in such capacity the "Arranger") for the Facility, and each
will, in such capacities, perform the duties and exercise the authority
customarily performed and exercised by it in such roles. You agree that no other
agents, co-agents or arrangers will be appointed, no other titles will be
awarded and no compensation (other than that expressly contemplated by the Term
Sheet and the Fee Letter referred to below) will be paid in connection with the
Facility unless you and we shall so agree.
We intend to syndicate the facility (including, in our discretion, all or
part of Chase's commitment hereunder) to a group of financial institutions
(together with Chase, the "LENDERS") identified by us in consultation with you.
CSI intends to commence syndication efforts promptly upon the execution of this
Commitment Letter, and you agree actively to assist CSI in completing a
syndication satisfactory to it. Such assistance shall include (a) your using
commercially reasonable efforts to ensure that the syndication efforts benefit
materially from your existing lending relationships and the existing lending
relationships of Main Street Merchant Partners, (b) direct contact between
senior management and advisors of the Borrower, the Founding Companies, Main
Street Merchant Partners and the proposed Lenders, (c) assistance in the
preparation of a Confidential Information Memorandum and other marketing
materials to be used in connection with the syndication and (d) the hosting,
with CSI, of one or more meetings of prospective Lenders.
As the Arranger, CSI will manage all aspects of the syndication, including
decisions as to the selection of institutions to be approached and when they
will be approached, when their commitments will be accepted, which institutions
will participate, the allocations of the commitments among the Lenders and the
amount and distribution of fees among the Lenders. In acting as the Arranger,
CSI will have no responsibility other than to arrange the syndication. To assist
CSI in its syndication efforts, you agree promptly to prepare and provide to CSI
and Chase all information with respect to the Borrower, the Founding Companies
and the other transactions contemplated hereby and by the Term Sheet and the Fee
Letter referred to below, including all financial information and projections
(the "PROJECTIONS"), as we may reasonably request in connection with the
arrangement and syndication of the Facility. You hereby represent and covenant
that (a) all information other than the Projections (the "INFORMATION") that has
been or will be made available to Chase or CSI by you or any of your
representatives is or will be, when furnished, complete and correct in all
material respects and does not or will not, when furnished, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in light of
the circumstances under which such statements are made and (b) the Projections
that have been or will be made available to Chase or CSI by you or any of your
representatives have been or will be prepared in good faith based upon
reasonable assumptions. You understand that in arranging and syndicating the
Facility we may use and rely on the Information and Projections without
independent verification thereof. You hereby acknowledge and consent that CSI
may share the Confidential Information Memorandum, the Information and any other
information or matters relating to the Borrower, the Founding Companies or the
transactions contemplated hereby with affiliates of CSI, including The Chase
Manhattan Bank, and that such affiliates may likewise share information relating
to the Borrower or such transactions with CSI.
-2-
<PAGE>
U.S. CONCRETE, INC. APRIL 20, 1999
As consideration for Chase's commitment hereunder and CSI's agreement to
perform the services described herein, you agree to pay to Chase the
nonrefundable fees set forth in the Fee Letter dated the date hereof and
delivered herewith (the "FEE LETTER").
Chase's commitment hereunder and CSI's agreement to perform the services
described herein are subject to (a) there not occurring or becoming known to us
any material adverse condition or material adverse change in or affecting the
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower and its subsidiaries, taken as a whole, or the Founding
Companies, (b) our not becoming aware after the date hereof of any information
or other matter affecting the Borrower, the Founding Companies or the
transactions contemplated hereby which is inconsistent in a material and adverse
manner with any such information or other matter disclosed to us prior to the
date hereof, (c) there not having occurred a material disruption of or material
adverse change in financial, banking or capital market conditions that, in our
judgment, could materially impair the syndication of the Facility, (d) our
satisfaction that prior to and during the syndication of the Facility there
shall be no competing offering, placement or arrangement of any debt securities
or bank financing by or on behalf of the Borrower or the Founding Companies or
any affiliate thereof, (e) the negotiation, execution and delivery on or before
July 1, 1999 of definitive documentation with respect to the Facility
satisfactory to Chase and its counsel and (f) the other conditions set forth or
referred to in the Term Sheet. The terms and conditions of Chase's commitment
hereunder and of the Facility are not limited to those set forth herein and in
the Term Sheet. Those matters that are not covered by the provisions hereof and
of the Term Sheet are subject to the approval and agreement of Chase, CSI and
the Borrower.
You agree to indemnify and hold harmless Chase, CSI, their affiliates and
their respective officers, directors, employees, advisors, and agents (each, an
"INDEMNIFIED PERSON") from and against any and all losses, claims, damages and
liabilities to which any such Indemnified Person may become subject arising out
of or in connection with this Commitment Letter, the Facility, the use of the
proceeds thereof or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing, regardless of
whether any Indemnified Person is a party thereto, and to reimburse each
Indemnified Person upon demand for any legal or other expenses incurred in
connection with investigating or defending any of the foregoing, PROVIDED that
the foregoing indemnity will not, as to any Indemnified Person, apply to Losses
or related expenses to the extent they arise solely from the willful misconduct
or gross negligence of such Indemnified Person. YOU AGREE THAT THE INDEMNITY
CONTAINED IN THE PRECEDING SENTENCE EXTENDS TO AND IS INTENDED TO COVER LOSSES
AND RELATED EXPENSES ARISING OUT OF THE ORDINARY, SOLE OR CONTRIBUTORY
NEGLIGENCE OF AN INDEMNIFIED PERSON. In addition, you agree to reimburse Chase,
CSI and their affiliates on demand for all reasonable out-of-pocket expenses
(including due diligence expenses, syndication expenses, travel expenses, and
reasonable fees, charges and disbursements of counsel) incurred in connection
with the Facility and any related documentation (including this Commitment
Letter, the Term Sheet, the Fee Letter and the definitive financing
documentation) or the administration, amendment, modification or waiver thereof.
No indemnified person shall be liable for any damages arising from the use by
others of information or other materials obtained through electronic,
telecommunications or other information transmission systems or for any special,
indirect, consequential or punitive damages in connection with the Facility.
-3-
<PAGE>
U.S. CONCRETE, INC. APRIL 20, 1999
This Commitment Letter shall not be assignable by either party without the
prior written consent of the other party (and any purported assignment without
such consent shall be null and void), is intended to be solely for the benefit
of the parties hereto and is not intended to confer any benefits upon, or create
any rights in favor of, any person other than the parties hereto. This
Commitment Letter may not be amended or waived except by an instrument in
writing signed by you, Chase and CSI. This Commitment Letter may be executed in
any number of counterparts, each of which shall be an original, and all of
which, when taken together, shall constitute one agreement. Delivery of an
executed signature page of this Commitment Letter by facsimile transmission
shall be effective as delivery of a manually executed counterpart hereof. This
Commitment Letter (together with the Term Sheet) and the Fee Letter are the only
agreements that have been entered into among us with respect to the Facility and
set forth the entire understanding of the parties with respect thereto. THIS
COMMITMENT LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS.
You acknowledge that CSI, Chase or its affiliates may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. Neither
CSI, Chase, nor its affiliates will use confidential information obtained from
you by virtue of the transactions contemplated by this letter or their other
relationships with you in connection with the performance by CSI, Chase or its
affiliates of services for other companies, and neither CSI, Chase nor its
affiliates will furnish any such information to other companies. You also
acknowledge that CSI, Chase and its affiliates have no obligation to use in
connection with the transactions contemplated by this letter, or to furnish to
you, confidential information obtained from other companies.
The reimbursement and indemnification provisions contained herein and in
the Fee Letter shall remain in full force and effect regardless of whether
definitive financing documentation shall be executed and delivered and
notwithstanding the termination of this Commitment Letter or Chase's commitment
hereunder.
THIS COMMITMENT LETTER, THE ATTACHED TERM SHEET, THE FEE LETTER AND ALL
EXHIBITS, SCHEDULES AND OTHER ATTACHMENTS HERETO AND THERETO CONSTITUTE A "LOAN
AGREEMENT" FOR PURPOSES OF SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE
AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to us executed counterparts hereof and of the Fee Letter not later
than 5:00 p.m., Houston, Texas time, on Wednesday, April 21, 1999. Chase's
commitment and CSI's agreements herein will expire at such time in the event
Chase has not received such executed counterparts in accordance with the
immediately preceding sentence.
Chase and CSI are pleased to have been given the opportunity to assist you
in connection with this important financing.
-4-
<PAGE>
U.S. CONCRETE, INC. APRIL 20, 1999
Very truly yours,
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By: /s/ MICHAEL ONDRUCH
Name: Michael Ondruch
Title: Vice President
CHASE SECURITIES INC.
By: /s/ GREGORY M. SPIN
Name:
Title:
Accepted and agreed to as of the date first above written by:
U.S. CONCRETE, INC.
By:____________________________
Name:
Title:
-5-
<PAGE>
SUMMARY OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
BORROWER: U.S. Concrete, Inc.
GUARANTORS: All subsidiaries of the Borrower.
ADMINISTRATIVE AGENT: Chase Bank of Texas, National Association (in its
capacity as agent, the "Agent" and in its individual
capacity, "Chase").
SOLE LEAD ARRANGER AND
BOOK MANAGER: Chase Securities Inc. ("CSI").
LENDERS: Chase and a syndicate of lenders arranged by CSI and
acceptable to the Borrower, Chase and CSI.
FACILITY: Up to $75,000,000 Revolving Credit Facility (the
"Revolver") with a $5,000,000 sublimit for Letters of
Credit.
PURPOSE: To finance acquisitions, to refinance existing
indebtedness and for general corporate purposes.
MATURITY: Three years from closing.
SECURITY: The Facilities will be secured by a first lien or
first priority security interest in and/or pledge of
(i) all of the Borrower's material assets, including,
without limitation, all accounts receivable,
inventory, equipment (including rolling stock),
furniture, fixtures, real property and improvements,
intangibles, and (ii) the stock of subsidiaries.
INTEREST RATES AND
FEES: See Schedule I.
INTEREST
PERIODS: LIBOR Loans: 1, 2, 3 or 6 months.
Interest on LIBOR loans and advances will be payable
on the last day of each interest period (and at the
end of each three months, in the case of interest
periods of longer than three months), and upon
prepayment if permitted. In respect of LIBOR loans and
advances, interest shall be payable in arrears on the
basis of a 360-day year (calculated on the basis of
actual days elapsed). Interest on Alternate Base Rate
loans will be payable quarterly in arrears, and upon
prepayment, on the basis of a 365/366-day year for
loans when based on the Prime Rate and a 360-day year
for loans when based on the Federal Funds Effective
Rate (in either case calculated on the basis of actual
days elapsed).
1
<PAGE>
CONDITIONS
PRECEDENT: Usual and customary for facilities of this type,
including, but not limited to, the following:
1. acceptable corporate and subsidiary structure;
2. completion of the acquisition of Central
Concrete Supply Co., Inc.; Walker's Concrete,
Inc.; Bay Cities Building Materials Co., Inc.;
Opportunity Concrete Corporation; Baer Concrete,
Incorporated; and R.G. Evans/Associates d/b/a
Santa Rosa Cast Products Co., (together, the
"Founding Companies");
3. receipt by the Borrower of gross cash proceeds
from an Initial Public Offering of common stock
of not less than $23.0 million;
4. fundings under the Facility used to complete the
acquisitions of the Founding Companies,
including the refinancing of any existing debt,
will not exceed audited historical EBITDA plus
SEC allowable addbacks (as reflected in the
final Registration Statement on Form S-1 for
U.S. Concrete, Inc. dated May 1999);
5. completion of a satisfactory asset audit by
Chase;
6. completion of a satisfactory systems audit by
Chase;
7. receipt of an independent auditor's most recent
management letter (to the extent one is
prepared) and unqualified report and opinion on
the Borrower's and the Founding Companies'
financial statements (except Santa Rosa for
which receipt of working papers is required);
8. execution and delivery of loan agreement,
promissory note, security agreements, guarantees
and other loan documents in form and substance
satisfactory to the Lenders;
9. evidence of insurance certificates and loss
payee endorsements;
10. absence of defaults or material adverse
litigation or material adverse change in the
assets, business, financial condition or
prospects of the Founding Companies and the
Borrower and its subsidiaries;
11. accuracy of representations and warranties;
12. the determination by the Agent in its discretion
that it is assuming no material environmental
risk and that potential environmental
liabilities of the Borrower are acceptable;
13. evidence that real property is not in a flood
plain or that flood insurance is satisfactory to
the Lenders;
14. opinions of counsel to the Borrower; and,
2
<PAGE>
15. payments of all fees and expenses.
REPRESENTATIONS
AND WARRANTIES: Usual and customary for facilities of this type,
including, but not limited to, the following (with
exceptions to be agreed upon by the Borrower, Chase
and CSI):
1. due corporate organization, power and
authorization for contemplated transaction;
2. no violations of any provisions in any existing
documents, laws or regulations, judgment decree
or order of any court or regulatory authority
shall be violated by the documents contemplated
in this transaction;
3. absence of material (i) adverse litigation, (ii)
arbitration, (iii) environmental event, or (iv)
change in financial condition;
4. compliance with applicable laws, rules,
regulations, licenses and permits (including but
not limited to those relating to the environment
and ERISA);
5. no liens created by execution of loan documents
except as are in favor of Agent;
6. title to property and possession of all material
permits, licenses, patents, trademarks and other
intangibles necessary to conduct business;
7. absence of defaults;
8. fair presentation of financial statements of the
Borrower and its subsidiaries; and
9. solvency of the Borrower.
COVENANTS: Usual and customary for facilities of this type,
including, but not limited to the following:
1. maintenance of financial covenants;
2. payment of taxes and charges on property;
3. maintenance of corporate existence, compliance
with all applicable laws (including, without
limitation, those related to the environment,
ERISA, and payment of taxes);
4. delivery of financial statements (including
annual audited and quarterly unaudited) and an
officer's certificate demonstrating compliance
with the financial covenants and a certificate
of no default;
5. delivery of financial projections and budgets as
mutually agreed;
3
<PAGE>
6. permitting inspection of books, records and
property;
7. maintenance of books and records in accordance
with generally accepted accounting principles,
consistently applied and maintenance of property
in good repair;
8. maintenance of insurance coverage (including
business interruption insurance) in such types
and amounts and with such deductibles as is
customary for other companies in similar
businesses which, with respect to collateral,
shall name the Agent as loss payee;
9. the giving of notice of certain matters to
Agent;
10. prohibition on transactions with affiliates
other than on an arm's length basis on terms no
less favorable to the Borrower than those
available from third parties;
11. prohibition of any material change in the nature
of business conducted by the Borrower;
12. limitation on the creation of additional
indebtedness, and contingent liabilities except
for mutually agreed upon baskets of certain
indebtedness including, for example,
indebtedness secured by purchase money liens and
other indebtedness incurred in the ordinary
course of business;
13. limitation on additional liens;
14. limitation on mergers and consolidations;
15. limitation on acquisitions including Lender
group approval for acquisitions where cash
consideration (defined as the sum of cash plus
assumed debt) exceeds 7.5% of net worth as of
the most recent quarterly reporting period or
where total consideration (defined as the sum of
cash plus assumed debt plus stock) exceeds 15.0%
of net worth as of the most recent quarterly
reporting period;
16. annual limitation on total capital expenditures
of $10,000,000;
17. limitation on asset dispositions;
18. limitation on restricted payments, including
dividends; and
19. limitation on loans and investments.
4
<PAGE>
FINANCIAL COVENANTS: Usual and customary for facilities of this type,
including, but not limited to the following:
1. MAXIMUM TOTAL LEVERAGE. The Borrower and its
subsidiaries will not permit the ratio of funded
indebtedness to EBITDA (based upon a rolling
four quarters basis and including audited
historical EBITDA and SEC allowable addbacks) to
be greater than 2.25x. In the event that target
financial statements are unaudited, pro forma
EBITDA would be allowed subject to majority
lender approval.
2. MINIMUM FIXED CHARGE COVERAGE RATIO. The
Borrower and its subsidiaries will not permit
the ratio, on a rolling four quarters basis, of
(i) EBITDA less cash taxes to (ii) the sum of
(a) cash interest plus (b) maintenance capital
expenditures (defined as depreciation for the
same period) to be less than 2.25x.
3. MINIMUM NET WORTH. The Borrower and its
subsidiaries will not permit net worth to be
less than the sum of (a) 85% of net worth as
reflected on the final Registration Statement on
Form S-1 plus (b) 50% of cumulative net income
after the closing date (if net income is less
than zero, net income for such period shall be
zero) plus 100% of the net cash proceeds from
the future sale of equity.
4. ASSET COVERAGE RATIO. The Borrower and its
subsidiaries will not permit the ratio of (a)
accounts receivable, plus (b) inventory, plus
(c) net book value of fixed assets, all as
defined by GAAP, to senior funded indebtedness
to be less than 1.5x.
EVENTS OF DEFAULT: Usual and customary for facilities of this type, with
usual and customary notice and cure periods including,
but not limited to, the following:
1. failure to make any required mandatory principal
payment, payment of interest, or payments of
fees;
2. commencement of voluntary or involuntary
bankruptcy or similar proceeding, insolvency, or
dissolution;
3. breach of any Representation, Warranty or
Covenant;
4. default occurring under any indenture or other
agreement under which any indebtedness for
borrowed money may be issued in an aggregate
amount to be mutually agreed and such default
shall continue for a period of time sufficient
to permit the acceleration of the maturity of
any indebtedness;
5. any final judgment in excess of an amount to be
mutually agreed that remains undischarged and
unstayed for a period longer than the appeal
time provided by applicable law, or any
uninsured or indemnified loss in excess of an
amount to be mutually agreed;
6. change of control; and
7. unenforceability of any loan document.
5
<PAGE>
ASSIGNMENTS AND
PARTICIPATIONS: Lenders will be permitted to assign loans, notes, and
commitments in a minimum amount of $5,000,000 with the
consent of Borrower, which consent shall not be
unreasonably withheld. Participation shall be with
notice to the Borrower and shall be without
restriction, provided that voting rights of
participants shall be limited to changes in provisions
relating to amount, rate, fees, collateral, guarantees
and maturity.
VOTING: Amendments and waivers of the credit agreement and
other definitive credit documentation will require
approval of the Lenders holding loans and commitments
representing at least 66 2/3% of the aggregate amount
of the loans and commitments under the Facilities
("Majority Lenders"), except that consent of all the
Lenders shall be required with respect to customary
items, including, but not limited to, the following:
(i) increases in commitments, (ii) reductions in
principal, interest or fees, (iii) extension of any
date for any payment, and (iv) releases of collateral
or guarantors.
CAPITAL ADEQUACY
AND YIELD PROTECTION: The loan documents for the Facilities will contain
yield protection provisions appropriate for facilities
of this type, including, without limitation,
provisions relating to increased reserve requirements,
changes in law and circumstances, possible future
illegality of interest options, taxes (other than on
gross receipts or income), possible inability to
determine market rate, capital adequacy, redeployment
costs and consequential loss.
INDEMNIFICATION: BORROWER WILL INDEMNIFY, DEFEND, AND HOLD THE AGENT,
THE LENDERS, AND THEIR RESPECTIVE SHAREHOLDERS,
DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS HARMLESS
FROM AND AGAINST ALL COSTS, LIABILITY AND EXPENSE
(INCLUDING INTEREST, PENALTIES, ATTORNEYS' FEES AND
AMOUNTS PAID IN SETTLEMENT) TO WHICH ANY OF THEM MAY
BECOME SUBJECT ARISING OUT OF OR BASED UPON THE
FACILITIES, INCLUDING CONSEQUENCES OF THEIR OWN
NEGLIGENCE, WHETHER BY ALLEGED OR ACTUAL NEGLIGENCE OF
THE PARTY TO BE INDEMNIFIED OR OTHERWISE, EXCEPT AND
TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OF
WILLFUL MISCONDUCT OF THE INDIVIDUAL OR ENTITY
OTHERWISE SO INDEMNIFIED.
GOVERNING LAW: State of Texas.
6
<PAGE>
SCHEDULE I
The Borrower may elect that the loans comprising each
borrowing bear interest at a per annum rate equal to
(i) the Alternate Base Rate ("ABR") (defined as the
greater of (a) Agent's "prime rate" or (b) the federal
funds rate plus 1/2%) plus the ABR Margin or (ii) the
LIBOR Rate plus the LIBOR Margin. Additionally, the
Borrower shall pay a commitment fee calculated at the
per annum Commitment Fee Rate on the average daily
unused portion of the Revolver, payable quarterly in
arrears.
The applicable margin for purposes of determining the
applicable interest rate for borrowings and the
Commitment Fee Rate for purposes of determining the
applicable undrawn cost will be determined by the
pricing grid set forth below based upon the ratio of
funded debt to EBITDA (such EBITDA to be based upon a
rolling four quarters basis and to include historical
audited EBITDA of the targets). THE INITIAL LIBOR
MARGIN AND CORRESPONDING COMMITMENT FEE WILL BE 175.0
BPS AND 37.5 BPS, RESPECTIVELY. This pricing will be
in effect beginning at close through the calculation
period for the rolling four quarters ending December
31, 1999. Subsequent to the calculation period for the
rolling four quarters ending December 31, 1999, the
pricing will default to the pricing grid set forth
below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
RATIO OF FUNDED DEBT TO EBITDA LIBOR MARGIN ABR MARGIN COMMITMENT FEE
- ------------------------------ ------------ ---------- --------------
<S> <C> <C> <C>
Greater than or equal to 2.0x 225 bps 125 bps 50.0 bps
Greater than or equal to 1.5x but less than 2.0 200 bps 100 bps 50.0 bps
Greater than or equal to 1.0, but less than 1.5 175 bps 75 bps 37.5 bps
Greater than or equal to 0.5, but less than 1.0 150 bps 50 bps 37.5 bps
Less than 0.5 125 bps 25 bps 25.0 bps
- -----------------------------------------------------------------------------------------------
</TABLE>
7
EXHIBIT 5.1
[Baker & Botts Letterhead]
May 18, 1999
U.S. Concrete, Inc.
1360 Post Oak Boulevard, Suite 800
Houston, Texas 77056
Gentlemen:
As set forth in the Registration Statement (the "Registration Statement")
on Form S-1 (Registration No. 333-74855) filed by U.S. Concrete, Inc., a
Delaware corporation (the "Company"), with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended,
relating to the Company's Common Stock, par value $.001 per share ("Common
Stock"), certain legal matters in connection with the Common Stock are being
passed on for the Company by us. The Registration Statement relates to the
offering of an aggregate of 4,370,000 shares of Common Stock (the "Shares"),
consisting of 3,800,000 shares to be issued and sold by the Company to the
underwriters referred to in the Registration Statement in a firm commitment
underwriting, together with up to 570,000 shares (the "Additional Shares") that
may be issued and sold by the Company pursuant to the underwriters'
over-allotment option as described in the Registration Statement. At your
request, this opinion is being furnished to you for filing as Exhibit 5.1 to the
Registration Statement.
In our capacity as your counsel in the connection referred to above, we
have examined the Registration Statement, the Restated Certificate of
Incorporation and Bylaws of the Company, each as amended to date, and the
originals, or copies certified or otherwise identified, of corporate records of
the Company, including minute books of the Company as furnished to us by the
Company, certificates of public officials and of representatives of the Company,
statutes and other instruments and documents pertaining to the Company as a
basis for the opinions hereinafter expressed. In giving such opinions, we have
relied on certificates of officers of the Company with respect to the accuracy
of the material factual matters contained in those certificates.
On the basis of and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware; and
<PAGE>
U.S. Concrete, Inc. - 2 - May 18, 1999
2. When the Board of Directors of the Company has determined the
price at which the Shares and the Additional Shares are to be sold to the
underwriters by the Company and has authorized the issuance of such Shares
and the Additional Shares, upon the issuance and sale by the Company of
the Shares and any Additional Shares that may be purchased pursuant to the
underwriting agreement referred to in the Registration Statement for the
consideration so determined, such Shares and any such Additional Shares
will be duly authorized, validly issued, fully paid and nonassessable.
The opinion set forth above is limited in all respects to matters of the
laws of the State of Texas, the General Corporation Law of the State of Delaware
and the federal laws of the United States of America, to the extent applicable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement. We also consent to the reference to our name under the
heading "Legal Matters" in the prospectus forming a part of the Registration
Statement.
Very truly yours,
/s/ BAKER & BOTTS, L.L.P.
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.
1
<PAGE>
"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:
2
<PAGE>
(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
3
<PAGE>
(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.
4
<PAGE>
"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) 24.
"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
5
<PAGE>
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.
6
<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
7
<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.
8
<PAGE>
"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.
9
<PAGE>
"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
10
<PAGE>
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.
11
<PAGE>
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
12
<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
13
<PAGE>
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
14
<PAGE>
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
15
<PAGE>
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
16
<PAGE>
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
17
<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
18
<PAGE>
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
19
<PAGE>
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.
20
<PAGE>
(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
21
<PAGE>
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.
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
U.S. CONCRETE, INC.
By:
Eugene P. Martineau
President and Chief Executive Officer
EMPLOYEE
Michael W. Harlan
23
EXHIBIT 10.4
Eugene P. Martineau
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 Eugene P. Martineau (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.
1
<PAGE>
"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:
2
<PAGE>
(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
3
<PAGE>
(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.
4
<PAGE>
"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) 24.
"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
5
<PAGE>
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.
6
<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
7
<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.
8
<PAGE>
"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.
9
<PAGE>
"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 its Chief
Executive Officer and President, (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 Board may assign to him
from time to time; provided that, without the Employee's written consent, those
additional powers, authority, functions, duties and responsibilities must not be
inconsistent or interfere with, or detract from, those herein vested in, or
otherwise then being performed for the Company by, the Employee.
(b) The Employee will not, at any time during his Employment, engage
in any other activities unless those activities do not interfere materially with
the Employee's duties and responsibilities to the Company at that time, except
that the Employee will be entitled, subject to the provisions of Section 7, (i)
to continue with such activities as the Employee has carried on prior to the
Effective Date, including making and managing his personal investments and
participating in other business or civic activities and (ii) to serve on
corporate or other business, civic or charitable boards or committees and trade
association or similar boards or committees.
10
<PAGE>
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.
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
11
<PAGE>
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 effective on the 30th day
following the Employee's delivery of a Notice of Termination Without Good Reason
or by reason of his Retirement.
12
<PAGE>
(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 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
13
<PAGE>
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 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.
14
<PAGE>
(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 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.
15
<PAGE>
(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; PRINCIPAL PLACE OF RESIDENCE. 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. So long as the Employee is able
to (i) be present in the Company's corporate headquarters during normal business
hours on normal business days and (ii) perform his duties to the Company as
Section 2 provides or contemplates, no provision of this Agreement shall be
deemed to require the Employee to maintain his principal residence within the
State of Texas.
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
16
<PAGE>
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");
provided, however, that, if the Company terminates the Employee for a Business
Reason, the restrictions this Section 7(a) sets forth will apply only during the
term of the Employee's Employment and for a period of one year after the
Termination Date and for such additional period, if any, as the Company may
elect (by written notice to the Employee given prior to the first anniversary of
the Termination Date) to continue to make payments of Base Salary (in accordance
with the provisions of Section 5(e), as if the Part-time Employment Period
extended through such additional period), provided that such additional period
may not extend beyond the third anniversary of the Termination Date.
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).
17
<PAGE>
(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 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
18
<PAGE>
Confidential Information, the Company will be entitled to a temporary
restraining order and a preliminary and permanent injunction (without the
necessity of posting any bond in connection therewith) restraining the Employee
from disclosing, in whole or in part, that Confidential Information. Nothing
herein will be construed as prohibiting the Company from pursuing any other
available remedy for that breach or threatened breach, including the recovery of
damages.
Section 9. GENERAL PROVISIONS. (a) SEVERABILITY. If any one or more
of the provisions of this Agreement shall, for any reason, be held or found by
final judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, (i) that invalidity, illegality or
unenforceability will not affect any other provisions of this Agreement and (ii)
this Agreement will be construed as if that invalid, illegal or unenforceable
provision had never been contained herein.
(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).
19
<PAGE>
(e) NOTICES. All notices and other communications required or
permitted under this Agreement must be in writing and will be deemed delivered
and received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom the
notice or communication is sent or (ii) if delivered by mail (whether actually
received or not), at the close of business on the third business day (in the
location where the Company then has its principal executive offices) next
following the day when placed in the mail, postage prepaid, certified or
registered, addressed to the appropriate party or parties at the address of that
party set forth below (or at such other address as that party may designate by
written notice to the other party in accordance herewith):
(A) if to the Employee, addressed as follows:
Eugene P. Martineau
75 Hollymead Dr.
The Woodlands, Texas 77381
Facsimile: _____________________
(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
20
<PAGE>
in the Money Rates column in the then most recently published edition of THE
WALL STREET JOURNAL, or, if that rate is not then so published on at least a
weekly basis, the interest rate announced by The Chase Manhattan Bank (or its
successor), from time to time, as its Base Rate (or prime lending rate), from
the date those amounts were required to have been paid or reimbursed to the
Employee until those amounts are finally and fully paid or reimbursed; provided,
however, that in no event will the amount of interest contracted for, charged or
received hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
(j) TAX WITHHOLDING. Notwithstanding any other provision hereof, the
Company may withhold from amounts payable hereunder all Federal, state, local
and foreign taxes that applicable laws or regulations require it to withhold.
(k) ENTIRE AGREEMENT. The Company and the Employee agree that this
Agreement supersedes all prior written and oral agreements between them with
respect to the employment of the Employee by the Company, but has no effect on
any Compensation Plan in which the Employee was participating prior to the
Effective Date.
(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.
21
<PAGE>
(b) RESOLUTION OF DISPUTES. If a dispute of any type referred to in
Section 10(a) arises between the Company and the Employee and they fail to
resolve that dispute by direct negotiation, the Company and the Employee agree
that the next step taken to resolve that dispute, prior to either party
initiating any litigation to resolve that dispute (not including any litigation
that may be required to enforce the Employee's rights to the payment or
advancement of expenses and legal fees on a current basis pursuant to Section
10(a)) will be to submit the dispute to an agreed Alternative Dispute Resolution
("ADR") process, to which process the parties will strive diligently in good
faith to agree within 10 business days after either party has given written
notice to the other party that it is unable to concur in the other party's final
proposed negotiated resolution of the dispute. If the Company and the Employee
are unable to agree in writing to an acceptable ADR process within that
10-business day period, then the parties will submit to a mandatory ADR process
by making joint application to the then Chief United States Federal District
Judge in the federal district in which the Company then has its principal
executive offices for the selection of an ADR process for the parties. The
parties will diligently in good faith participate in the ADR process that judge
chooses. If the parties are unable to resolve their dispute after diligent good
faith participation in the ADR process, then either party will be free to
initiate such litigation as that party deems appropriate under the
circumstances. Under no circumstances will the Employee be obligated to pay for
the cost of any ADR process or to pay or reimburse the Company for any
attorneys' fees, costs 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.
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
U.S. CONCRETE, INC.
By: _______________________________
Michael W. Harlan
Senior Vice President and Chief
Financial Officer
EMPLOYEE
___________________________________
Eugene P. Martineau
23
EXHIBIT 10.10
Terry Green
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 Terry Green (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.
1
<PAGE>
"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:
2
<PAGE>
(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
3
<PAGE>
(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.
4
<PAGE>
"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
5
<PAGE>
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.
6
<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,
7
<PAGE>
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.
8
<PAGE>
"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.
9
<PAGE>
"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 Vice
President--Operational Integration 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
10
<PAGE>
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 $115,000 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.
11
<PAGE>
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
12
<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
13
<PAGE>
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
14
<PAGE>
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
15
<PAGE>
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
16
<PAGE>
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
17
<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
18
<PAGE>
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
19
<PAGE>
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:
Terry Green
1360 Post Oak Blvd., Suite 800
Houston, Texas 77065
(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.
20
<PAGE>
(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
21
<PAGE>
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.
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year indicated above.
U.S. CONCRETE, INC.
By:
Eugene P. Martineau
President and Chief Executive Officer
EMPLOYEE
Terry Green
23
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 18, 1999
