<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO ______________
Commission File Number 1-7035
CALMAT CO.
- - --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-0645790
- - ------------------------------------------------ ------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3200 San Fernando Road, Los Angeles, California 90065
- - ------------------------------------------------ ------------------------
(Address of Principal Executive Offices) (ZIP Code)
(323) 258-2777
- - --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
- - --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
23,795,779 shares of Common Stock were outstanding at July 29, 1998.
<PAGE>
CALMAT CO.
INDEX
-----
PART I - FINANCIAL INFORMATION PAGE
<TABLE>
<CAPTION>
PAGE
Item 1. - Financial Statements
<S> <C>
(a) Consolidated Balance Sheets:
June 30, 1998 and December 31, 1997 3
(b) Consolidated Statements of Operations:
For the Three and Six Months Ended June 30, 1998 and 1997 4
(c) Consolidated Statements of Cash Flow:
For the Six Months Ended June 30, 1998 and 1997 5
(d) Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
-2-
<PAGE>
CALMAT CO.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,518 $ 2,519
Cash held in trust for section 1031 exchanges 9,787 5,547
Trade accounts receivable, less allowance for discounts 85,265 75,305
and doubtful accounts ($6,044 in 1998 and $5,898 in 1997)
Income taxes receivable 1,510 6,252
Inventories 18,712 15,466
Prepaid expenses and other 2,771 4,187
Deferred income taxes 9,536 9,536
Installment notes receivable - current portion 513 2,740
---------- ---------
Total current assets 134,612 121,552
Installment notes receivable and other assets 35,380 34,059
Costs in excess of net assets of businesses acquired, net 48,022 48,719
Property, plant and equipment, at cost:
Land and deposits 193,622 193,332
Buildings, machinery and equipment 503,528 504,889
Construction in progress 46,694 38,447
---------- ---------
743,844 736,668
Less: Accumulated depreciation and depletion (307,291) (305,190)
---------- ---------
Property, plant and equipment, net 436,553 431,478
---------- ---------
Total assets $ 654,567 $ 635,808
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,403 $ 32,257
Accrued liabilities 37,933 38,872
Notes and bonds payable - current portion 191 337
Dividends payable 2,380 2,346
---------- ---------
Total current liabilities 74,907 73,812
Note and bonds payable - long-term portion 133,330 118,401
Other liabilities and deferred credits 37,291 37,701
Deferred income taxes 59,355 59,349
---------- ---------
Total liabilities 304,883 289,263
---------- ---------
Stockholders' equity:
Common stock 23,795 23,579
Additional paid-in capital 52,458 48,374
Retained earnings 273,431 274,592
---------- ---------
Total stockholders' equity 349,684 346,545
---------- ---------
Total liabilities and stockholders' equity $ 654,567 $ 635,808
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
CALMAT CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Net sales and operating revenues $ 130,662 $ 115,724 $ 224,030 $ 204,506
Net gain on sales of real estate 783 634 783 1,566
Interest and other revenue 1,932 2,079 3,315 2,984
--------- --------- --------- ---------
133,377 118,437 228,128 209,056
--------- --------- --------- ---------
Costs and expenses:
Cost of products sold and operating expenses 108,672 96,425 193,713 176,139
Selling, general and administrative expenses 11,802 11,168 23,256 21,036
Interest expense 2,394 1,919 3,962 3,846
Other expense 938 312 1,138 460
--------- --------- --------- ---------
123,806 109,824 222,069 201,481
--------- --------- --------- ---------
Income before taxes 9,571 8,613 6,059 7,575
Federal and state income taxes 3,324 3,127 2,303 2,727
--------- --------- --------- ---------
Net income $ 6,247 $ 5,486 $ 3,756 $ 4,848
========= ========= ========= =========
Weighted-average shares outstanding - basic 23,798 23,248 23,739 23,245
======== ========= ========= =========
Weighted-average shares outstanding - diluted 24,017 23,418 23,999 23,416
======== ========= ========= =========
Per share data:
Net income - basic $ 0.26 $ 0.24 $ 0.16 $ 0.21
======== ========= ========= =========
Net income - diluted $ 0.26 $ 0.23 $ 0.16 $ 0.21
======== ========= ========= =========
Cash dividends per share $ 0.10 $ 0.10 $ 0.20 $ 0.20
======== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
CALMAT CO.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited, amounts in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,756 $ 4,848
Depreciation, cost depletion and amortization 18,704 17,267
Other (13,696) (20,076)
-------- --------
Cash provided by operating activities 8,764 2,039
-------- --------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (29,117) (18,815)
Proceeds from sale of real estate 3,104 6,488
Proceeds from sale of a business 14,363 -
Businesses acquired (6,545) -
Other 3,447 (235)
-------- --------
Cash used for investing activities (14,748) (12,562)
-------- --------
FINANCING ACTIVITIES:
Net borrowings - bank lines of credit 15,000 -
Principal payments on bonds payable (218) (33)
Stock options exercised / repurchased 4,146 611
Payment of cash dividends (4,732) (4,648)
Other 27 112
-------- --------
Cash provided by (used for) financing activities 14,223 (3,958)
-------- --------
Increase (decrease) in cash 8,239 (14,481)
Increase (decrease) in cash held in trust for section 1031 exchanges 4,240 (3,339)
-------- --------
Increase (decrease) in cash and cash equivalents 3,999 (11,142)
Cash and cash equivalents, beginning of period 2,519 17,127
-------- --------
Cash and cash equivalents, end of period $ 6,518 $ 5,985
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
CALMAT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. In the opinion of management, the interim financial information furnished
herein reflects all adjustments, including those of a normal recurring
nature, necessary for a fair presentation of the consolidated financial
position and consolidated results of operations for the interim periods.
There have been no changes in the significant accounting policies as
discussed in Note 1 of Notes to Consolidated Financial Statements contained
in the Company's 1997 Annual Report on Form 10-K.
2. Reclassification: During the fourth quarter of 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share (EPS)", which establishes standards for computing and presenting EPS.
This statement simplifies the previous standard for computing EPS and makes
it comparable to international EPS standards. This statement requires
restatement of all prior period EPS data presented.
3. Basic and diluted earnings per share were computed using the method
prescribed by SFAS No. 128. Basic EPS was computed by dividing income
available to common shares outstanding during the period by the weighted
average common shares outstanding during the period. Diluted EPS is similar
to basic EPS except that the denominator is increased to include the number
of additional common shares that would have been outstanding if dilutive
additional common shares had been issued.
4. Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". This statement establishes standards for reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. This statement had no impact on reporting by
the Company. At the same time, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information". This statement
establishes standards for the way that public enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. Operating segments are
components of an enterprise that are evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance. This statement does not change the business segment
information previously or currently reported by the Company.
-6-
<PAGE>
CALMAT CO.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- - -------------------------------------------------------------------------------
of Operations
- - -------------
Results of Operations
- - ---------------------
The Company reported net income of $6.2 million, or $0.26 per share, for the
second quarter of 1998, compared with $5.5 million, or $0.23 per share, for the
prior year's second quarter. The earnings improved despite the adverse impact
of rainfall during the current quarter on volume. Rain days ranged from 8 days
to 27 days in the Company's various California markets versus no rain days in
the prior year's second quarter.
Net income was $3.8 million, or $0.16 per share, for the six months ended June
30, 1998, compared with $4.8 million, or $0.21 per share, for the comparable
period in 1997. Operating results were negatively impacted by the record
rainfall in the Company's California markets in the entire first half of the
year. Rain days ranged from 33 days to 78 days in the Company's various
California markets versus 6 days to 15 days in the prior year.
Business segment information for the three and six months ended June 30, 1998
and 1997 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
--------- --------- --------- ---------
(unaudited, amounts in thousands)
<S> <C> <C> <C> <C>
Revenues:
Construction Materials $ 125,037 $ 110,532 $ 213,646 $ 194,423
Properties - Operations 5,625 5,192 10,384 10,083
Properties - Real Estate Gains 783 634 783 1,566
Corporate and Other 1,932 2,079 3,315 2,984
--------- --------- --------- ---------
$ 133,377 $ 118,437 $ 228,128 $ 209,056
========= ========= ========= =========
Income Before Income Taxes:
Construction Materials $ 12,561 $ 9,515 $ 11,689 $ 9,832
Properties - Operations 2,333 2,436 4,064 4,769
Properties - Real Estate Gains 783 634 783 1,566
Corporate and Unallocated Expenses, Net (3,890) (3,524) (7,394) (6,595)
Interest Expense (2,394) (1,919) (3,962) (3,846)
Other Income 178 1,471 879 1,849
--------- --------- --------- ---------
$ 9,571 $ 8,613 $ 6,059 $ 7,575
========= ========= ========= =========
</TABLE>
Income before income taxes by segment represents total revenues less direct
operating expenses, segment selling, general and administrative expenses and
certain allocated corporate general and administrative expenses. Corporate and
Unallocated Expenses, Net includes corporate administrative expenses and support
expenses not allocated to business segments. Other Income includes interest
income and other miscellaneous items.
-7-
<PAGE>
CALMAT CO.
Construction Materials Division
- - -------------------------------
<TABLE>
<CAPTION>
Sales volumes are shown below:
Volumes in Thousands Three Months Ended Six Months Ended
- - -------------------- June 30, June 30,
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Aggregates:
Tons sold to outside customers 5,341 5,170 9,334 9,314
Tons used in ready mixed concrete 920 789 1,655 1,473
Tons used in asphalt 1,535 1,472 2,498 2,496
------- ------- ------- -------
7,796 7,431 13,487 13,283
======= ======= ======= =======
Tons of hot-mix asphalt sold 2,161 2,026 3,561 3,482
======= ======= ======= =======
Yards of ready mixed concrete sold 762 660 1,360 1,194
======= ======= ======= =======
</TABLE>
Revenues in the Construction Materials Division were $125.0 million in the
second quarter of 1998, up $14.5 million, or 13% compared with the corresponding
1997 period. Revenues were $213.6 million in the first six months of 1998, an
increase of $19.2 million, or 10% compared with the same period in 1997. The
revenue increase for the current quarter and six-month period was primarily the
result of higher sales volumes for aggregates, asphalt and ready mixed concrete
operations and higher average selling prices for aggregates, asphalt and ready
mixed concrete operations.
The Division's pre-tax income from operations for the quarter increased to $12.6
million from $9.5 million in the year earlier quarter. The improved results
reflect higher earnings from our aggregates, asphalt and ready mixed concrete
operations. Sales volumes increased 5% for aggregates, 7% for asphalt and 15%
for ready mixed concrete. Average selling prices increased 6% for aggregates,
2% for asphalt and 5% for ready mixed concrete. Unit production costs declined
2% for asphalt, primarily due to lower costs for liquid asphalt. Partly
offsetting the improvements were 7% higher unit production costs for aggregates,
primarily the result of higher repair and maintenance costs, due in part to the
Company's program to increase plant efficiencies and productivity. Ready mixed
concrete unit production costs were 4% higher, due to higher cement costs.
The Division's pre-tax income from operations for the six months in 1998
increased to $11.7 million from $9.8 million for the same period in 1997. The
improved results reflect higher earnings from our asphalt and ready mixed
concrete operations. Earnings from asphalt operations were higher because of 2%
higher sales volumes, 1% higher average selling prices and 3% lower unit
production costs. The decrease in unit production costs is due to lower costs
of liquid asphalt. Earnings from ready mixed concrete operations were higher
due to 14% higher sales volumes and 4% higher average selling prices, partly
offset by 4% higher unit production costs, in turn the result of higher cement
costs. Earnings from aggregates operations were lower because of 8% higher unit
production costs, partly offset by 2% higher sales volumes and 5% higher average
selling prices. The increase in aggregates unit production cost is largely the
result of higher plant repair and maintenance costs, due in part to the
Company's program to increase plant efficiencies and productivity. Also
contributing to the higher costs were inefficiencies caused by handling
unusually wet material as a result of the record rainfall in the Company's
California markets.
Properties Division
- - -------------------
Revenues in the Properties Division, excluding gains on sales of real estate,
were $5.6 million in the second quarter of 1998, up $0.4 million, or 8% from
revenues of $5.2 million in the corresponding 1997 period, and $10.4 million in
the first six months of 1998, up $0.3 million or 3% from revenues of $10.1
million in the first six months of 1997. The increase in revenue for the current
quarter and six-month period was primarily due to increased revenue from
landfill operations.
-8-
<PAGE>
CALMAT CO.
Properties Division - continued
- - -------------------
The Properties Division's pre-tax income from operations of $3.1 million was
unchanged from the prior year's second quarter. Included in the current quarter
are $0.8 million of gains from real estate sales, compared with gains of $0.6
million in the prior year's quarter. Pre-tax income from operations was $4.8
million in the first six months of 1998 compared with $6.3 million in the prior
period. Gains from real estate sales of $0.8 million are included in 1998
versus gains of $1.6 million in 1997. The prior year period also included $0.2
million of non-recurring income related to the closure of an environmental
clean-up project. Excluding real estate gains and non-recurring income,
Properties Division pre-tax income from operations decreased $0.5 million, due
in part to recent sales of income producing properties.
Other
- - -----
Other income in the prior year's quarter and in the first six months of 1997
includes a $1.1 million refund received as settlement of a prior year tax claim
of a former subsidiary.
Liquidity and Capital Resources
- - -------------------------------
Cash and cash equivalents were $6.5 million at June 30, 1998 compared with $2.5
million at December 31, 1997. Cash provided by operating activities was $8.8
million for the six months ended June 30, 1998. Cash used for investing
activities was $14.8 million, including $29.1 million for the purchase of
property, plant and equipment and $6.5 million for business acquisitions,
partially offset by proceeds from sale of a business of $14.4 million and
proceeds from sales of real estate of $3.1 million. Cash provided by financing
activities was $14.2 million, including $14.8 million net increase in debt, and
$4.1 million of proceeds from the exercise of stock options, partially offset by
cash dividends of $4.7 million.
Working capital totaled $59.7 million at June 30, 1998, a $12.0 million increase
from $47.7 million at December 31, 1997. The increase in working capital was
due mainly to a $11.6 million increase in trade accounts receivable. Current
ratios were 1.8 and 1.6 at June 30, 1998 and December 31, 1997, respectively.
Total consolidated long-term and short-term borrowings at June 30, 1998 and
December 31, 1997 were $133.5 million and $118.7 million, respectively. Debt as
a percent of total capitalization was 27.6% and 25.5% at June 30, 1998 and
December 31, 1997, respectively.
Other Information
- - -----------------
In May 1998, Mr. George H. Gilmore, Jr., was elected to the position of
President and Chief Operating Officer. Prior to joining CalMat, Mr. Gilmore
served as President of Moore Document Solutions, a division of Moore
Corporation, and President of Moore Business Systems in Lake Forest, Illinois.
Prior to his tenure with Moore Corporation, he was President of AM
Multigraphics, a division of AM International and President of AM's
International Division in Chicago, Illinois.
The Company announced on June 2, 1998 that it sold its construction materials
operations in Tucson, Arizona, in a cash transaction. The Company received
$14.4 million, which was equal to book value. CalMat has retained its
developable real estate in Tucson and, as previously announced, will continue
its efforts to sell these assets.
-9-
<PAGE>
CALMAT CO.
Other Information - continued
- - ------------------
The Company announced on July 14, 1998 that it has entered into a letter of
intent to exchange certain of its assets located in Pleasanton, California, with
Hanson, PLC, London, England for cash and certain assets owned by Hanson's
Cornerstone C&M, Inc. entity. CalMat's assets subject to the letter of intent
include its aggregates reserves, aggregates processing plant, landfill, and
recycling operations located in Pleasanton, California. The Cornerstone assets
that would be acquired by CalMat include eight aggregates facilities, nine ready
mixed concrete plants, seven asphalt plants, two portable ready mixed concrete
plants, two portable asphalt plants, eight commercial recycling sites and a
construction contracting business. These operations are located in California,
Idaho, and Washington. The transaction is subject to the successful negotiation
and execution of a definitive agreement between the parties. There is no
assurance that a definitive agreement will be reached. The Company filed a
Notification and Report Form with the Federal Trade Commission and the
Department of Justice as required under the Hart-Scott-Rodino Act/Antitrust
Improvements Act of 1976, and the required waiting period has expired.
Management does not anticipate making any further announcements concerning this
matter until a definitive agreement has been reached or a decision to terminate
the discussions has been made. If an agreement is reached, the transaction is
unlikely to close until late in 1998.
The Company announced on July 22, 1998 that its wholly-owned subsidiary,
Triangle Rock Products, Inc., has purchased the assets of Los Banos Gravel
Company, Inc., a privately held company located in Los Banos, California, which
produced and sold approximately 500,000 tons of aggregates and 100,000 yards of
ready mixed concrete in its most recent year. The assets include land, over 40
million tons of fully permitted aggregates reserves, an aggregates processing
plant and four ready mixed concrete plants.
-10-
<PAGE>
CALMAT CO.
Part II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- - ---------------------------
The Company has received a federal grand jury subpoena requesting information
concerning its Fresno, California, asphalt operations and is providing
information in response. Also, the Company has been informed that it is a
target of an investigation by the U.S. Department of Justice, Antitrust
Division, regarding possible violations of antitrust laws at these operations.
Based on information available to it at this time, the Company does not
anticipate that the outcome of the investigation will have a material effect on
its financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- - -------------------------------------------------------------
The annual meeting of stockholders of the Company was held in Los Angeles,
California on May 27, 1998. Items that were submitted to a voting of
stockholders included 1) a proposal to elect twelve directors, all of whom were
elected, 2) a proposal to ratify the selection of PricewaterhouseCoopers LLP
(formerly Coopers & Lybrand LLP) as the Company's independent auditors for 1998,
3) a proposal to approve the Employee Stock Purchase Plan and 4) a proposal to
approve the 1998 Stock Option Plan for Officers, Directors and Key Employees of
CalMat Co. All four proposals were passed and approved.
The results of the voting are detailed below:
Shares outstanding and entitled to vote: 23,775,479
Total shares voted: 22,353,892
% of shares outstanding: 94.021
Items Submitted to a Vote:
- - --------------------------
1. To elect twelve directors, comprising the entire Board of Directors, to serve
during the ensuing year and until their successors are elected or appointed:
<TABLE>
<CAPTION>
Nominees Broker
-------- For Withheld Non-Votes
---------- --------- ---------
<S> <C> <C> <C>
Argue, J.C. 20,105,791 2,248,101 -0-
% of votes cast 89.943 10.057
% of shares outstanding 84.565 9.456
Brown, A. 20,102,276 2,251,616 -0-
% of votes cast 89.927 10.073
% of shares outstanding 84.550 9.470
</TABLE>
-11-
<PAGE>
CALMAT CO.
<TABLE>
<CAPTION>
Nominees - continued
- - -------- Broker
For Withheld Non-Votes
---------- --------- ---------
<S> <C> <C> <C>
Brown, D.R. 20,133,665 2,220,227 -0-
% of votes cast 90.068 9.932
% of shares outstanding 84.682 9.338
Conger, H.M. 20,140,431 2,213,461 -0-
% of votes cast 90.098 9.902
% of shares outstanding 84.711 9.310
Dezember, R.S. 20,140,194 2,213,698 -0-
% of votes cast 90.097 9.903
% of shares outstanding 84.710 9.311
Gerstell, A.F. 20,121,477 2,232,415 -0-
% of votes cast 90.013 9.987
% of shares outstanding 84.631 9.390
Grant, R.A. 20,139,706 2,214,186 -0-
% of votes cast 90.095 9.905
% of shares outstanding 84.708 9.313
Landry, E.A. 19,282,406 2,871,486 -0-
% of votes cast 86.260 12.846
% of shares outstanding 81.102 12.078
Lee, T.L. 20,109,592 2,244,300 -0-
% of votes cast 89.960 10.040
% of shares outstanding 84.581 9.440
Linden, T.M. 20,137,805 2,216,087 -0-
% of votes cast 90.086 9.914
% of shares outstanding 84.700 9.321
Nelson, G.R. 20,130,564 2,223,328 -0-
% of votes cast 90.054 9.946
% of shares outstanding 84.669 9.351
Peeler, S.T. 20,109,916 2,243,976 -0-
% of votes cast 89.962 10.038
% of shares outstanding 84.583 9.438
</TABLE>
-12-
<PAGE>
CALMAT CO.
2. To ratify the selection of PricewaterhouseCoopers LLP (formerly Coopers &
Lybrand LLP) as independent auditors for 1998:
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
---------- ------- --------- ---------
<S> <C> <C> <C> <C>
22,288,268 28,589 37,035 -0-
% of votes cast 99.706 .128 .166
% of shares outstanding 93.745 .120 .156
</TABLE>
3. To approve the Employee Stock Purchase Plan:
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
---------- ------- --------- ---------
<S> <C> <C> <C> <C>
20,415,238 141,130 1,472,095 325,429
% of votes cast 92.677 .641 6.683 -
% of shares outstanding 85.867 .594 6.192 .014
</TABLE>
4. To approve the 1998 Stock Option Plan for Officers, Directors and Key
Employees of CalMat Co.:
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
---------- ------- --------- ---------
<S> <C> <C> <C> <C>
19,532,922 818,080 1,677,461 325,429
% of votes cast 88.671 3.714 7.615 -
% of shares outstanding 82.156 3.441 7.055 .014
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- - ------------------------------------------
(a) Exhibit 10.1: Employment Agreement between Registrant and George H.
Gilmore, Jr., executed May 19, 1998.
Exhibit 10.2: Letter of Intent with respect to an exchange of assets with
Hanson, PLC, from Registrant to Cornerstone C&M, Inc., dated June 11,
1998.
Exhibit 27: Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1998.
-13-
<PAGE>
CALMAT CO.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CALMAT CO.
--------------------------------------------
(Registrant)
Date: July 31, 1998 By: /s/ H. James Gallagher
----------------------------------------
H. James Gallagher
Executive Vice President, Finance,
Chief Financial Officer and Treasurer
Date: July 31, 1998 By: /s/ Brent L. Stumme
----------------------------------------
Brent L. Stumme
Vice President, Controller
-14-
<PAGE>
EXHIBIT 10.1
[LETTERHEAD OF CALMAT]
May 11, 1998
Mr. George H. Gilmore
631 Blackthorn Road
Winnetka, Illinois 60093
Dear George:
It is with a great deal of pleasure that I am extending to you an
offer to join CalMat in the position of President and Chief Operating Officer.
This letter will outline the terms of CalMat's offer. We ask that you signify
your acceptance of employment on these terms by signing the duplicate copy of
this letter that is enclosed, and returning it to me as soon as possible.
I. Base Salary
-----------
From the time you begin work at CalMat your base salary will be
$35,416.67 per month (which annualizes to $425,000 a year). This salary is to
be reviewed from time to time in accordance with the CalMat Executive
Compensation Program.
II. Bonus
-----
You will be eligible for bonus consideration for fiscal year 1998 and
future years in accordance with the Company's program for senior executive
bonuses. Your target bonus under the program will be 50% of your base salary.
In view of the fact that you will be working only for a portion of fiscal 1998,
your bonus for this year will be pro-rated from the commencement of employment.
As an additional inducement to employment with CalMat, you shall
receive a $75,000 bonus payable in two increments: $37,500.00 upon commencement
of employment; and, $37,500.00 upon the date that you and your family take up
residence in a home in the Los Angeles area. You may elect to defer some or all
of these payments.
<PAGE>
Mr. George H. Gilmore
May 11, 1998
Page 2
III. Stock Options
-------------
Effective upon your employment, you will receive 50,000 shares as an
initial grant of stock options, pursuant to the terms of the Company's existing
stock option plans. Such options will vest at 25% per year, from date of grant.
Any future grants would be made in accordance with the CalMat Executive
Compensation & Stock Option program, but are anticipated to fall within a
targeted range of 40,000 to 50,000 shares, annually.
IV. Pension/401-K
-------------
You will be eligible to participate in the CalMat Salaried Employees
Thrift and Profit Sharing Retirement Plan. Please note that this plan has a
one-year waiting period which cannot be waived. You may elect to roll over any
401-K monies you currently have into the CalMat plan. You also will be eligible
to participate in the CalMat Supplemental Executive Retirement Plan (SERP).
V. Nonqualified Deferred Compensation Plan
---------------------------------------
You will be eligible to participate in the Nonqualified Deferred
Compensation Plan and have the option of deferring salary and bonus, in
accordance with plan rules.
VI. Health and Welfare
------------------
You will participate in the CalMat Health and Welfare Plan for
salaried employees, following a 60-day waiting period. To the extent not paid
by your former employer, the Company will reimburse your current employee COBRA
cost through the duration of the waiting period. Once you are covered by the
CalMat Health and Welfare Plan, you will receive medical and dental benefits in
accordance with the plan. In addition, the Company will provide Company-paid
life insurance of three times annual base salary; travel accident insurance; and
long-term disability insurance providing for 60% of base salary after a 90-day
waiting period. You may purchase supplemental accident insurance.
VII. Other Benefits
--------------
You will be reimbursed for the initiation and monthly dues incurred by
you as a member of a downtown Los Angeles club, of your choice, and upon full
relocation a country club, to be mutually agreed upon. A company car will be
provided to you.
<PAGE>
Mr. George H. Gilmore
May 11, 1998
Page 3
VIII. Relocation
----------
To aid in your relocation you will be entitled to a payment equal to
the sales costs (e.g. broker fees, etc.) attributable to your current home. You
agree to use your best efforts to sell your home for its estimated value.
However, if you cannot do so by June 30, 1999, CalMat will cause a third party
relocation service selected by it to purchase such home, and will pay the costs
attributable to such service.
To aid in your search for new housing in California, the Company will
reimburse you (in accordance with it's customary business travel policies)
travel, meals and hotel costs incurred in a reasonable number of visits to Los
Angeles over the next 12 months. In addition, if you select a home to purchase
in the Los Angeles area, CalMat will, at your request, guarantee a reasonable
bridge loan to purchase such home and pay up to two points of any loan fees
incurred for such purchase. CalMat will also reimburse you for other costs
directly associated with the purchase of a new home. You will be reimbursed for
the actual moving charges incurred by you in transporting (and temporarily
storing, if necessary) your household effects to your new home. The foregoing
relocation, travel and housing costs reimbursed or paid to you will be "grossed-
up" such that, to the extent possible, you receive such amounts net of income
taxes. You will also receive a one-time payment of one month's salary for your
assistance in the relocation.
IX. At-Will Employment and Severance Arrangements
---------------------------------------------
By accepting employment on the terms set forth in this offer letter,
you agree that your employment and compensation are at-will and therefore can be
terminated, with or without cause, at any time, and without prior notice, at
your option or the Company's option. Terminations for cause, as determined by
CalMat, are of course without severance. This at-will employment relationship
will remain in effect throughout your employment with the Company, unless it is
specifically modified by an express written employment agreement, authorized by
the Company's Board of Directors.
No CalMat employment policy, nor any written or oral statement or
promise, nor any course of conduct, practice, award, promotion, transfer, or
length of service creates an express or implied contract modifying this at-will
relationship. Your acceptance of at-will employment with CalMat is a material
part of this offer of employment and is an express condition of your employment.
In the event that CalMat at any time chooses to exercise its right to
terminate you without cause, you will receive a lump-sum payment equal to two
years of your then-existing base salary, less legally required deductions and
withholdings, as severance pay. In addition,
<PAGE>
Mr. George H. Gilmore
May 11, 1998
Page 4
CalMat will waive payment of costs of continued health coverage under COBRA for
up to twenty-four months. These will be the only payments to which you will be
entitled in the event of termination without cause.
X. Change in Control
-----------------
We are also prepared to enter into a Change in Control Agreement, in
the form attached as Annex A to this letter, to offer you certain additional
benefits in the event of a change in control of CalMat.
* * * * *
In accordance with our normal employment practice, this offer is
conditioned upon successful completion of the Company's standard pre-employment
physical examination. Also, this offer is conditioned upon approval by the
CalMat Board of Directors.
We are very excited about your joining CalMat, and we look forward to
having you on board.
Very truly yours,
/s/ A. Frederick Gerstell
A. Frederick Gerstell
Acceptance of offer of employment:
I hereby accept employment with CalMat on the terms and conditions stated above.
Dated: May 19, 1998
/s/ George H. Gilmore, Jr.
________________________________
George H. Gilmore
<PAGE>
EXHIBIT 10.1
ANNEX A
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement ("Agreement") is effective as of May 27,
1998, between CALMAT CO., a Delaware corporation (hereinafter called "Company")
and GEORGE H. GILMORE (hereinafter called "Executive").
RECITALS
A. The Executive presently serves as President and Chief Operating
Officer of the Company.
B. In the event the Company becomes subject to any proposed or threatened
change in control, it is imperative that the Company and the Board of Directors
be able to rely upon Executive's advice as to the best interests of the Company
and its stockholders without concern that the Executive might be distracted by
the personal uncertainties and risks created by such a proposal or threat.
C. In the event the Company receives any such proposal or threat,
Executive may, in addition to Executive's regular duties, be called upon to
assist in the assessment of such matters, advise management and the Board of
Directors as to whether such proposals or other matters would be in the best
interests of the Company and its stockholders, and to take such other actions as
the Board of Directors might determine to be appropriate.
D. Accordingly, the Management Development and Compensation Committee
(the "Compensation Committee") has authorized the Company to enter into this
Agreement with Executive to assure the Company that it will have the continued
dedication of Executive and the availability of Executive's advice and counsel,
notwithstanding the possibility, threat or occurrence of an effort to take over
control of the Company, and to induce Executive to remain in the employ of the
Company.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the promises
and conditions herein contained, it is agreed that the following terms of
employment which are set forth in this Agreement shall take effect automatically
without any further action by the Company, Board of Directors or Compensation
Committee on the day preceding any Change in Control of the Company (as defined
in Section 3.4 below), but such terms of employment shall have no force or
effect unless a Change in Control occurs.
1
<PAGE>
This Agreement shall remain in effect unless otherwise terminated by
resolution of the Compensation Committee or the Board of Directors.
Notwithstanding the foregoing, in no event shall this Agreement terminate within
three (3) years after a Change in Control of the Company without the written
consent of Executive. It is the Company's intention to provide to Executive the
benefits set forth herein if the Company is subject to any Change in Control and
the other applicable conditions of this Agreement are satisfied. The Company
shall notify Executive in writing at least three (3) years prior to the
effective date of termination if the Compensation Committee or Board of
Directors determines to terminate this Agreement.
Unless this Agreement is terminated as provided above, the following terms
of employment which are set forth in this Agreement shall become effective on
the day preceding any Change in Control of the Company.
Until the terms of employment set forth in this Agreement become effective,
the letter agreement dated May __, 1998, previously entered into by the Company
and Executive, as such agreement may be amended from time to time (hereinafter
referred to as the "Letter Agreement") shall remain in effect. The Letter
Agreement shall terminate upon a Change in Control of the Company and thereafter
shall have no further force or effect. In no event shall the amounts and
benefits under the Letter Agreement and this Agreement be additive to one
another.
ARTICLE I
EMPLOYMENT
Section 1.1: Position, Duties and Responsibilities of Executive
--------------------------------------------------
The Company shall employ the Executive as President and Chief Operating
Officer. In such position, the Executive shall have at least such
responsibilities and powers as set forth in the Bylaws of the Company in effect
on the date hereof. During his employment hereunder, the Executive shall devote
his full energies, interest, abilities and productive time during normal
business hours to the performance of this Agreement and shall, without the
Company's prior written consent in each instance, refrain from rendering
services of any kind to others for compensation or which would materially
interfere with the performance of his duties under this Agreement.
Notwithstanding the foregoing, the Executive may serve as a director of other
companies with the consent of the Company's Board of Directors.
Section 1.2: Term of Employment
------------------
(a) The Executive shall be employed for a term commencing on the day
preceding any Change in Control of the Company, and ending upon such termination
date as is set forth in a written
2
<PAGE>
notice given by either party terminating this Agreement, provided that such
termination date will occur not less than three years subsequent to the date
upon which such notice is given. For example, this Agreement could be
terminated on the third anniversary of a Change in Control by written notice
given by either party on the date of the Change in Control.
(b) During the term of employment, this Agreement for the Executive's
employment shall not be subject to termination at the instance of the Company
for any reason except for Cause pursuant to Section 1.2(c). Except in the event
of termination of Executive's employment for Cause pursuant to Section 1.2(c),
the Executive's compensation and other benefits as provided herein shall
continue unabated during the full term of employment under this Agreement and
otherwise as provided herein; provided, however, that the Board of Directors of
the Company shall have the right, acting in accordance with the Bylaws of the
Company, to remove the Executive from office as President and Chief Operating
Officer of the Company in the event the Executive acts in any way which has a
direct, substantial and adverse effect upon the reputation or condition of the
Company, in which event the Executive may terminate his employment pursuant to
Section 1.5. The Board of Directors of the Company may also terminate
Executive's employment for Cause pursuant to Section 1.2(c).
(c) Notwithstanding any other provision of this Agreement, the Board of
Directors of the Company may terminate Executive's employment for Cause pursuant
to this Section 1.2(c). The Company shall have the right to terminate
Executive's employment with the Company for Cause (A) immediately upon written
notice from the Company, if the Board of Directors shall reasonably determine
that the conduct on cause specified in such notice is not curable, or (B) upon
thirty days' written notice from the Company, if the Board of Directors shall
determine that the conduct or cause specified in such notice is curable, unless
the Executive has commenced to cure the conduct or cause specified in such
notice within 10 days following the date of such notice and has completed the
cure within 30 days following the date of such notice.
For the purposes of this Agreement, "Cause" means: (i) willful malfeasance
or gross negligence by Executive in the performance of his duties under this
Agreement, (ii) any act of fraud, insubordination or other conduct by Executive
which demonstrates gross unfitness for service, or (iii) Executive's conviction
(or entry of a plea of guilty, nolo contendere or the equivalent) for any crime
involving moral turpitude, dishonesty or breach of trust or any felony which is
punishable by imprisonment in the jurisdiction involved.
If the Executive's employment is terminated for Cause, the Company will pay
Executive his base salary and continue to provide the benefits described in
Section 3.2 through the date of
3
<PAGE>
termination and thereafter will not have further obligations under this
Agreement.
Section 1.3: Termination of Agreement Upon Disability of Executive
-----------------------------------------------------
If at the end of any calendar month the Executive is and has, for six (6)
full months, continuously been unable, due to mental or physical illness or
injury, to perform his duties under this Agreement in his normal and regular
manner, this Agreement shall be terminated subject to the provisions of Section
3.1.
Section 1.4: Termination of Agreement Upon Death of Executive
------------------------------------------------
If the Executive dies, this Agreement shall be terminated on the last day
of the calendar month of his death.
Section 1.5: Termination of Employment by the Executive
------------------------------------------
If, without the Executive's express written consent, the Company (i)
significantly reduces the importance of the functions, duties, responsibilities
or authority of the Executive, (ii) reduces the Executive's compensation or
benefits, or (iii) relocates the principal executive office of the Company to a
location outside of Los Angeles County or reassigns the Executive to a location
other than the principal executive office of the Company (except for required
travel on the Company's business to an extent substantially consistent with the
Executive's travel obligations existing on the date of this Agreement), then the
Executive may inform the Company that such action by the Company constitutes
constructive notification under Section 1.2 that this Agreement will be
terminated three years thereafter. After any such constructive notice or actual
notice to the Executive of the termination of this Agreement pursuant to Section
1.2 other than for Cause, the Executive may at any time terminate his employment
with the Company. In the event of such a termination of employment by the
Executive, the Company shall within 72 hours after such termination make a
payment to the Executive of the lump-sum value (without any present-value
discount or adjustment for inflation) of the salary and benefits that would have
been provided to the Executive for the period from the date of such termination
until the date which is three years from the date of such constructive or actual
notice, and the Executive shall be free to seek and obtain other employment or
arrangements for the rendition of personal services with or to others,
notwithstanding the provisions of Section 1.1, and without a reduction of
compensation and benefits hereunder.
4
<PAGE>
ARTICLE II
COMPENSATION
Section 2.1: Salary
------
The Company shall pay a base salary to the Executive from the term
hereof at the minimum rate which was in effect on the day preceding the Change
in Control of the Company. During the term hereof, the Executive's salary may
be increased by the Company's Board of Directors, in which event this Agreement
shall be deemed amended to reflect such increases.
Section 2.2: Travel and Entertainment Expense
--------------------------------
The Company shall reimburse the Executive for reasonable travel and
entertainment expenses incurred in behalf of the Company in the performance of
this duties hereunder.
ARTICLE III
OTHER BENEFITS
Section 3.1: Payments on Account of Disability of Executive
----------------------------------------------
If this Agreement is terminated under Section 1.3 after a Change in
Control of the Company, the Company shall continue to pay to the Executive on
account of his disability the biweekly or semimonthly salary installments under
Section 2.1 at the salary rate in effect on the date of said termination
(subject to adjustment pursuant to Section 3.3) and to provide him with benefits
as described in Section 3.2, until three years after the Executive is given
notice of such termination; provided, however, that in the event of the
Executive's death such monthly installments as shall be payable hereunder shall
terminate. The payments made hereunder will be reduced by any disability
benefits paid to Executive under disability plans or insurance provided by the
Company.
Section 3.2: Participation in Other Company Benefits
---------------------------------------
In addition to the benefits provided in this Agreement the Executive
shall throughout the term hereof (prior to death) be entitled to and shall
receive all other benefits generally available to other executives of the
Company, including (without limitation) benefits under the Company's medical,
health, disability, death benefit, profit sharing and bonus and other incentive
compensation plans (other than stock option plans). The Executive shall be
entitled to receive benefits which are at least as great in scope and amount as
those which he received immediately prior to the Change in Control. The
Executive shall
5
<PAGE>
also be entitled to benefits under the Company's Supplemental Executive
Retirement Plan ("SERP"), whether or not the SERP is available to other
executives. If the Executive's employment is terminated after a Change in
Control pursuant to Section 1.2(b), Section 1.3 or Section 1.5:(i) the amount
the Executive otherwise would have received as bonus payments for the period
after the termination shall be determined assuming that he would be entitled to
an annual bonus or bonuses at an annual rate at least equal to the average of
his annual bonuses for the preceding two years (or if terminated prior to
December 31, 1999 at 50% of base salary), and that he would be entitled to
receive a pro-rata portion of such amount for any period shorter than a full
calendar year; (ii) the amount of the profit sharing plan contributions
otherwise made on behalf of the Executive shall be determined assuming that the
level of Company contributions to the plan would equal the average of such
levels for the preceding two years (or if termination occurs prior to December
31, 1999, at an amount equal to the annualized 1998 contribution); (iii) the
payment for the value of welfare benefits shall be based on the current cost of
such coverage to the Company and shall take into account the Executive's
entitlement to participate in the Company's welfare benefit plans for retirees
(if he would have qualified for such participation assuming he had an additional
three years of service); (iv) the amount to which the Executive would otherwise
be entitled under the SERP shall be determined (A) based on his age at the date
he would otherwise have terminated employment, (B) taking into account the years
of vesting service and the salary and bonuses he would have earned through such
date based on his salary rate in effect at his actual termination date and
assuming that he would be entitled to bonuses as provided in (i) above,
increased using the 6.5% compensation scale assumption adopted by the SERP for
funding the SERP trusts, (C) deeming the amount of the Executive's Employer
Contribution Benefit (as defined in the SERP) to include the amount in (ii)
above, (D) assuming payments of SERP benefits would not have commenced prior to
the date of the Executive would otherwise have terminated employment, and (E)
permitting the Executive to elect to receive (without a penalty) a lump sum
payment upon his termination of employment which is the Actuarial Equivalent (as
defined in the SERP) of the lump sum payment which would have been payable to
Executive (if he made a timely election to receive a lump sum payment) on the
date he would have otherwise terminated employment; and (v) the Executive's
vested interest under all Company plans shall be determined assuming he had an
additional three years of service.
Section 3.3: Cost of Living Adjustment
-------------------------
The biweekly or semimonthly payments to be paid to or on account of
the Executive in any year under Section 3.1 shall be increased on January 1 of
each year after Executive terminates employment (the "adjustment date") in the
same proportion as the
6
<PAGE>
proportional difference between the "Consumer Price Index for Urban Wage
Earners, Clerical Workers, all items (Los Angeles -Long Beach - Anaheim areas),"
published by the United States Department of Labor, Bureau of Labor Statistics
(the "CPI"), in effect on the adjustment date and the CPI in effect on January
of the year in which Executive terminates employment. Should the Bureau of
Labor Statistics discontinue publication of the CPI, or publish the same less
frequently, or alter the same in any manner, then the Company may adopt a
substitute index or substitute procedure which reasonably reflects and monitors
consumer prices. A decline in the CPI shall not serve as a basis for a
reduction in the biweekly or semimonthly payments to be paid to or on account of
the Executive.
Section 3.4: Stock Options
-------------
The Company shall amend all outstanding Stock Option Agreements with
the Executive to provide, and shall provide in future options under the
Company's Stock Option Plans or future stock option plans, that the Executive
may accelerate the exercisability of all options to acquire shares covered by
such Stock Option Agreements and by future agreements (i) on the termination of
the Executive's employment by the Company after a Change in Control of the
Company for any reason other than Cause (as such terms are defined in this
Agreement) or (ii) the occurrence of a "Change in Control of the Company." For
the purpose of this Agreement, a "Change in Control of the Company" or "Change
in Control" shall be deemed to have occurred if (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other fiduciary holding
securities under and employee benefit of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities regardless of
whether or not the Board of Directors shall have approved such Change in
Control, (ii) the shareholders of the Company approve (a) a merger or
consolidation of the Company with any other corporation regardless of which
entity is the surviving company, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation or
(b) a plan of complete liquidation of the Company or agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets,
or (iii) during any period of two consecutive years, individuals who at the
beginning of any such period constitute the Directors of other Company cease for
any reason to
7
<PAGE>
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's stockholders, of each new Director of the Company
was approved by a vote of at least a majority of such Directors of the Company
then still in office who were Directors of the Company at the beginning of any
such period.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1: Assignability of Agreement
--------------------------
The rights and duties of the parties hereunder shall not be assignable
by either party, except that this Agreement and all rights and obligations
hereunder shall be assigned by the Company and its express assumption in writing
required by any corporation or other business entity which succeeds to all or
substantially all of the business of the Company through merger, consolidation,
corporate reorganization, or by acquisition of all or substantially all of the
assets of the Company.
Section 4.2: Integration
-----------
Except for the Letter Agreement and as provided in Section 2.1 and 3.2
hereof, this Agreement contains the entire agreement between the parties and
supersedes all prior agreements, understandings, commitments and practices,
whether written or oral. No amendments to this Agreement may be made except by
a writing signed by both parties. This Agreement shall be construed according
to the laws of the State of California.
Section 4.3: Notices
-------
Any notice to the Company required or permitted hereunder shall be
given in writing to the Secretary of the Company either by personal service or
by registered mail, postage prepaid, addressed to the Company at its principal
place of business. Any such notice to the Executive shall be given in a like
manner and if mailed shall be addressed to the Executive at his home address
then shown in the files of the Company. For the purpose of determining
compliance with any time element herein, a notice shall be deemed given on the
postmarked date.
Section 4.4: Indemnification Provisions
--------------------------
The indemnification provisions set forth in Article VII of the Bylaws
of the Company in effect on the date hereof are hereby incorporated by reference
as a material term of this Agreement, constitute material consideration for the
Executive's agreement
8
<PAGE>
hereunder and will, as in effect on the date hereof, continue to be a material
term of this Agreement without regard to their future amendment or repeal unless
the Executive expressly agrees in writing to accept such amendment or repeal as
an amendment of this Agreement.
Section 4.5: Additional Payments to the Executive
------------------------------------
In the event that any amounts or benefits which are paid to the
Executive by the Company or any other person or entity pursuant to this
Agreement or any deferred compensation plan or agreement, stock option plan or
other plan, agreement or arrangement are subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or
any similar state tax provision, the Company shall pay the Executive an
additional amount (the "Gross-Up Payment") such that the net amount of the
payments and benefits retained by the Executive, after deduction of any excise
tax thereon and any interest payable with respect to such excise tax, and any
federal and state income tax and any excise tax upon the Gross-Up Payment, shall
be equal to the payments and benefits which the Executive would have received
absent the application of such excise tax. The Gross-Up Payment shall be paid
to the Executive upon the earlier of (i) the time at which the Company
withholds such excise tax from any payments to the Executive or (ii) 30 days
after the Executive notifies the Company that the Executive has filed la tax
return which take the position that such excise tax is due and payable in
reliance on a written opinion of the Executive's tax counsel that it is more
likely than not that such excise tax is due and payable. If the Executive makes
any payment with respect to any such excise tax as a result of an adjustment of
the Executive's tax liability by any federal, state or local authority, the
Company will pay such Gross-Up Payment within 30 days after the Executive
notifies the Company of such payment. Without limiting the obligation of the
Company hereunder, the Executive agrees, in the event the Executive makes any
payment pursuant to the preceding sentence, to negotiate with the Company in
good faith with respect to procedures reasonably requested by the Company which
would afford the Company the ability to contest the imposition of such excise
tax; provided, however, that the Executive will not be required to afford the
Company any right to contest the applicability of any such excise tax to the
extent that the Executive reasonably determines that such contest is
inconsistent with the overall tax interests of the Executive. The Company
agrees to hold in confidence and not to disclose, without the Executive's prior
written consent, any information with regard to the Executive's tax position
which the Company obtains pursuant to this Section 4.5.
9
<PAGE>
Section 4.6: Right to Arbitrate
------------------
The Executive shall have the right, in addition to all other rights
and remedies in law or in equity, at his election, to seek arbitration in Los
Angeles County, California, under the Employment Dispute Resolution Rules of the
American Arbitration Association, in the event of any dispute concerning this
Agreement.
Section 4.7: Attorneys' and Accountants' Fees
--------------------------------
The Company shall pay to the Executive all legal and accounting
expenses and fees incurred by Executive in seeking to obtain or enforce any
right or benefit provided by this Agreement after a Change in Control of the
Company or in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code to any payment or
benefit under this Agreement, without regard to whether the Executive prevails
in obtaining or enforcing such right or benefit. The Company shall pay to the
Executive any expenses and fees incurred in any such proceeding promptly after
receipt by the Company of a written notice by the Executive that he has incurred
such fees or expenses.
EXECUTED by the parties this 26th day of May, 1998
GEORGE H. GILMORE CALMAT CO.
"Executive" "Company"
/s/ George H. Gilmore, Jr. By /s/ A. F. Gerstell
- - -------------------------- -------------------------------
Chairman of the Board and
Chief Executive Officer
By /s/ Paul Stanford
-------------------------------
Secretary
10
<PAGE>
EXHIBIT 10.2
[LETTERHEAD OF CALMAT]
June 11, 1998
CORNERSTONE C&M, INC.
2680 Bishop Drive, Suite 225
San Ramon, CA 94583
ATTN: MR. DANIEL L. GRANT
RE: EXCHANGE OF ASSETS
Gentlemen:
This letter, when the enclosed copy hereof has been signed by you and
returned to the undersigned, will set forth our understanding with respect to
the following exchange transaction:
1. Jamieson Facilities. At the closing, CalMat shall convey to
-------------------
Kaiser (i) the Pleasanton, California, aggregates processing plant and ready mix
concrete facility and the materials and easement to extract materials from the
property located generally adjacent to such facilities, (ii) the recycle
business located at or adjacent to the Jamieson Facilities and (iii) the
landfill business also located on or adjacent to the Jamieson Facilities;
together with the miscellaneous improvements and personal property, including
equipment, rolling stock, inventory and accounts receivable, used or useful in
connection with any thereof, but excluding cash and cash equivalents.
2. Kaiser Assets. At the closing, you shall convey or cause to be
-------------
conveyed to CalMat $34,000,000 in cash, subject to adjustment as provided in the
definitive agreement referred to below, plus the following assets:
(a) Acme. The aggregate sites, ready-mix concrete facilities and
----
asphalt plants and construction business located in Spokane, Washington,
Richland, Washington and Coeur d'Alene, Idaho;
<PAGE>
Mr. Daniel L. Grant
June 11, 1998
Page 2
(b) Central Coast. The aggregate locations, ready-mix concrete
-------------
facilities, asphalt plants and recycle sites located in and known as your
California Central Coast operations;
(c) Asphalt Plants. The three asphalt plants located in
--------------
Pleasanton (Radum), Walnut Creek and Santa Rosa, California;
(d) Recycling. The recycling sites located at Santa Fe Springs,
---------
Huntington Beach, South Gate, Long Beach, Santa Monica, Garfield and
Gardena, California, commonly known as "L.A. Basin Recycle";
(e) El Rio. The ready-mix concrete facility and recycling
------
facility located in El Rio, California; and
(f) Inland Rock. The aggregate site and ready mix concrete
-----------
facility located in Upland, California, commonly known as Inland Rock;
together with the miscellaneous improvements and personal property, including
equipment, rolling stock, inventory and accounts receivable, used or useful in
connection with the ownership or operation of any of the foregoing, but
excluding cash and cash equivalents.
3. Supply Agreement. At the closing, CalMat and you shall enter
----------------
into an agreement for the supply of aggregates to (i) CalMat's bay area asphalt
plants and (ii) CalMat's Albuquerque, New Mexico rock and sand processing
facility, ready mix concrete facility and asphalt plant, in each case upon terms
and conditions to be negotiated.
The foregoing is subject to the negotiation, execution and delivery of
a definitive agreement and the satisfaction of all of the conditions precedent
to the obligations of the parties which may be set forth therein. This letter
does not constitute a binding obligation on the part of any party to consummate
any transaction but merely sets forth the basic terms and conditions upon which
the parties agree to negotiate, in good faith, a definitive agreement along the
lines set forth above.
<PAGE>
Mr. Daniel L. Grant
June 11, 1998
Page 3
If the foregoing accurately sets forth your understanding of our
respective intentions, please so signify by executing and returning to the
undersigned the enclosed copy of this letter.
CALMAT CO.
By /s/ H. James Gallagher
-----------------------------
H. James Gallagher
Executive Vice President, Finance,
Chief Financial Officer and Treasurer
The foregoing is acknowledged and agreed:
CORNERSTONE C&M, INC.
By /s/ Daniel L. Grant
-----------------------------
Daniel L. Grant
Vice President, Corporate Development
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