SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1997
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OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ______________
Commission file number 0-23880
Monroc, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 87-0436697
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
P.O. Box 537, 1730 Beck Street, Salt Lake City, Utah 84110
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (801) 359-3701
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock The Nasdaq National Market
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o
As of March 19, 1998, 4,514,200 shares of the Company's Common Stock
was outstanding and the aggregate market value of the voting stock held by
non-affiliates of the Company was approximately $23,973,177.
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MONROC, INC.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I ....................................................................1
ITEM 1. BUSINESS................................................. 1
ITEM 2. PROPERTIES...............................................10
ITEM 3. LEGAL PROCEEDINGS........................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......11
PART II ...................................................................12
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS..............................12
ITEM 6. SELECTED FINANCIAL DATA..................................12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.....................20
PART III ...................................................................20
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......20
ITEM 11. EXECUTIVE COMPENSATION...................................22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT...............................................27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........28
PART IV ...................................................................29
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.................................................30
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PART I
ITEM 1. BUSINESS
General
Monroc, Inc., a Delaware corporation ("Monroc" or the "Company"),
produces and sells to the construction industry ready mix concrete, prestressed
and precast concrete building components, sand and gravel products and
accessories for the concrete trade. The Company's products are sold in Utah,
Idaho, Wyoming and adjoining states, including Colorado, Nevada, Oregon, Montana
and, to a lesser extent, Washington and California. The Company owns or leases
38 plants in Utah, Idaho and Wyoming.
The Company was incorporated in Delaware in 1986 and is the successor
to a Utah corporation which was incorporated in 1920. The Company was organized
in 1986 to purchase the assets of its predecessor corporation through a
leveraged employee stock ownership plan. Unless otherwise indicated, references
to "Monroc" or the "Company" mean Monroc, Inc., including its subsidiaries.
Recent Developments
Treasure Valley Concrete Acquisition. On January 6, 1998, the Company
acquired all of the outstanding capital stock of privately held Treasure Valley
Concrete, Inc., an Idaho corporation ("Treasure Valley Concrete"), for
approximately $3.35 million in cash. Treasure Valley Concrete is a producer of
ready mix concrete in the Boise, Idaho market. Upon consummation of the
acquisition, Treasure Valley Concrete became a wholly owned subsidiary of the
Company. Treasure Valley Concrete's operations are included in the description
of properties and markets in this Annual Report on Form 10-K.
Proposed Merger. The Company has entered into an Amended and Restated
Agreement and Plan of Merger dated as of January 29, 1998 and amended and
restated as of March 4, 1998 (the "Merger Agreement") with U.S. Aggregates,
Inc., a privately-held Delaware corporation ("USAI"), and Western Acquisition,
Inc., a Delaware corporation and a subsidiary of USAI ("Sub"), providing for the
merger of Sub with and into the Company (the "Merger"), with the Company
continuing as the surviving corporation and a subsidiary of USAI. Pursuant to
the Merger Agreement, each outstanding share of common stock, par value $.01 per
share, of the Company (the "Common Stock") will be converted into the right to
receive $10.771 per share in cash. In addition, the Merger Agreement provides
that each option or warrant to purchase shares of Common Stock will be cancelled
in consideration for the right to receive in cash an amount equal to the number
of shares subject to such option or warrant multiplied by the difference between
(x) $10.771 and (y) the exercise price of such option or warrant, less any
applicable tax withholdings. The Merger is conditioned upon, among other things,
the approval of the stockholders of the Company, certain regulatory and
governmental approvals and other customary conditions, and is expected to close
during the second quarter of 1998.
Products
The Company's products fall into three principal categories: (i) ready
mix concrete, (ii) prestressed and precast concrete products and (iii) sand and
gravel aggregates. The following table compares the percentage of the Company's
total net sales which were represented by the Company's three product areas over
the last three years:
Percentage of Net Sales
1997 1996 1995
---- ---- ----
Ready Mix Concrete .......................... 57% 49% 66%
Precast/Prestressed/Construction ............ 31 43 25
Sand and Gravel Aggregates .................. 12 8 9
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Ready Mix Concrete. Ready mix concrete is produced by combining rock,
sand, cement and water with certain chemical additives in a "batch plant." This
mixture is then put into a mixer truck where it is mixed thoroughly and
delivered to a construction site. Concrete is one of the most basic building
materials and is used to some degree in almost all construction projects,
including new road and bridge construction, commercial and industrial projects,
residential construction and agricultural construction (such as grain and potato
storage enclosures and dairy farms).
The Company's market areas for its ready mix products are typically
limited to within 20 to 40 miles of each of its plants. Because of the cost of
delivery and the competitiveness of the concrete industry, the Company's ability
to transport ready mix concrete over longer distances is limited depending on
the location of competitors' plants.
Prestressed and Precast Concrete Products. Prestressed and precast
concrete products are used primarily as parts of buildings or highway
structures. These products may be used architecturally, such as in a decorative
wall of a building, or structurally, such as building walls, frames, floors,
roofs or highway bridge beams. Prestressed concrete products are manufactured by
stressing or stretching steel cables, incasing them in concrete, and then
releasing the cable after the concrete has hardened. The contraction of the
cable compresses the concrete, adding to its strength. In the prestressed
manufacturing process, the number of steel cables used, their placement and the
amount of stressing required varies depending on the intended use of the final
product. Manufacturing a bridge beam strong enough to support traffic, for
example, requires careful engineering to determine all of these product
specifications.
Precast concrete products, which include architectural walls and floor
panels, are manufactured by a process similar to the manufacturing process for
prestressed concrete products; however, precast products do not contain steel
cables that have been stretched to strengthen the concrete. Also, precast
products may or may not contain steel bars for reinforcement, depending upon the
intended use of the precast products and the related specifications.
Due to the comparatively higher cost of the labor and materials used in
fabricating prestressed and precast products, freight cost is a relatively less
significant factor in the overall cost of these products than it is for ready
mix concrete. Therefore, prestressed and precast concrete products can often be
shipped over longer distances and sold at prices that remain competitive with
those of other manufacturers. The Company has sold its prestressed and precast
concrete throughout much of the western United States. One of the major sources
of demand for the Company's prestressed and precast products has been prison
construction.
Sand and Gravel Aggregates. Sand and gravel aggregates are produced by
crushing and screening material that is either dug from a bank or quarried from
a solid deposit by blasting or bulldozing. The material is sized and in some
cases washed to remove dirt and other fine materials so it will bond better with
cement in concrete. Sand and gravel aggregates are used to produce concrete and
asphalt and also as a base or foundation material under roads and highways,
airport runways, concrete slabs or floors and other structures. Transportation
is a significant factor in the cost of sand and gravel aggregates. Accordingly,
the market area for sand and gravel aggregates is usually geographically limited
to within 15 to 30 miles of each of the Company's individual plants. The Company
also uses its aggregates as raw materials in its own concrete operations.
The Company's Markets and Industry
The Company has ready mix batch plants and sand and gravel pits in the
Salt Lake City and Park City areas of Utah, in all the major metropolitan areas
across the southern half of Idaho and in the Big Horn basin area of Wyoming.
Additionally, with precast plants in Salt Lake City, Utah and in Boise and Idaho
Falls, Idaho, the Company can provide prestressed and precast products to
projects in most of the western United States. See "--Company Facilities and
Equipment."
The Company's business is heavily dependent upon the construction
industry and is directly affected by the level of construction activity in the
geographic areas in which it operates. The level of construction activity is
cyclical and the Company's business varies accordingly. The demand for
construction varies depending upon a number of factors, including weather
conditions, the availability of construction financing at favorable interest
rates, overall overbuilding, labor relations in the construction industry and
the levels of material and energy supplies. In addition, local, state and
federal building projects are dependent upon budgets and, in many cases, voter
approved bonds.
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Most of the intermountain west is currently experiencing strong
construction growth rates. In Utah and Idaho, the number of construction
contracts has increased at steady growth rates since 1990. Utah and Idaho
represent two of the top seven fastest growing states in the United States, and
Salt Lake City, Utah and Boise, Idaho are two of the top four fastest growing
cities in the country. Significant amounts of public construction, including
highway infrastructure and new prison construction, as well as private projects
are underway in the Company's market areas. In the Salt Lake Valley, several
billion dollars will be spent on infrastructure construction in the next few
years.
The Company will be involved in several of these construction projects
in 1998. The Company is supplying over 40% of the aggregates being used on the
reconstruction of I-15 through the Salt Lake Valley over the next three years.
Also, in 1998 the Company will supply ready mix concrete for a new light rail
transportation system being constructed in the Salt Lake Valley and will supply
aggregates and concrete for new roads as well as expansion projects at the Salt
Lake International Airport. In Idaho, the Company has a $6 million project to
supply precast cells and prestress products for an expansion of the Idaho State
Prison south of Boise.
The Company generally sells its products to contractors. On certain
projects, the Company may also act as a subcontractor and erect or install its
precast or prestressed concrete products. Most of the Company's sales are made
pursuant to bid proposals submitted to one or more contractors. Concrete
products are typically purchased from the supplier submitting the lowest bid;
however, projects are occasionally awarded based upon product quality. Some of
the Company's sales contracts are obtained by negotiation with owners and
architects.
Company Facilities and Equipment
The Company operates 38 plants at 23 sites in Utah, Idaho and Wyoming.
In addition, the Company operates a fleet of approximately 160 transit mixing
trucks to deliver ready mixed concrete to its customers, a fleet of tractors and
trailers for hauling prestress/precast products and cement and a few dump trucks
to deliver sand and gravel. Some of the products sold by the Company are shipped
on temporarily leased vehicles, vehicles operated by contract truckers or
customers' vehicles loaded at the Company's plants. Preventive maintenance
programs and policies are maintained by the Company for maximum utilization of
equipment and facilities.
Utah Operations
Salt Lake City. The Company currently operates two ready mix batch
plants in the Salt Lake Valley, including a new central mix plant opened in
mid-1996 on its property located at the southern end of the Salt Lake Valley
(the "Point of the Mountain Site"). The Company's other ready mix plant in the
Salt Lake City area is located in Northern Salt Lake City on Beck Street (the
"Beck Street Site") where the Company's headquarters are also located.
Presently, the Company operates a fleet of 25 ready mix trucks in the Salt Lake
Valley. The largest of the Company's prestress/precast plants is also located on
the Beck Street property.
The Company also owns or leases four sand and gravel pits in the Salt
Lake City. The two sand and gravel pits located at the Beck Street Site and the
Point of the Mountain Site are owned by the Company. The pit located at the Beck
Street Site property totals approximately 256 acres and has total reserves
estimated to be approximately 135,000,000 tons. The estimated reserves increased
in 1997 as a result of final approval on a reclamation plan regarding the Beck
Street Site. The Point of the Mountain pit totals about 150 acres and has total
reserves estimated to be approximately 93,000,000 tons. Aggregates for the
Company's ready mix operations are presently produced at the Point of the
Mountain Site pit. The Company believes the Point of the Mountain Site, together
with the Beck Street Site, should provide adequate resources for the Company's
Salt Lake Valley operations in the foreseeable future.
In late 1996, the Company leased 94 acres of property on the west side
of the Salt Lake Valley containing estimated aggregate reserves of approximately
5,000,000 tons on which it produces road base. In May 1997, the Company also
leased a 108 acre pit on the west side of the Salt Lake Valley containing over
10,000,000 tons of aggregate. The Company is still applying for the necessary
permits but expects to install an aggregate wash plant capable of producing a
range of products on this site in 1998.
The Company's management believes its reserves in the Salt Lake Valley
are adequate for the foreseeable future. Zoning and environmental permits have
become more difficult to obtain for new aggregate pits in the Salt Lake Valley
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because acceptable sites for such pits are becoming fewer and are located closer
to expanding residential areas which fosters opposition from residents and
increases the difficulty of obtaining such permits. Accordingly, the Company
believes it has a competitive advantage over competitors that are attempting to
obtain necessary permits and enter into the aggregate industry in the Salt Lake
Valley. Additionally, the Company believes its four strategically located pits
in the Salt Lake Valley increases its competitive advantage over such
competitors because the Company's transportation costs may be less than such
costs for the competitors.
Park City and Heber City. The Company has a two ready mix plants
located on one site in Park City, Utah, a resort community which is
approximately 40 miles from Salt Lake City. The Park City area contains several
ski resorts and is scheduled to host several Olympic events in connection with
the 2002 Winter Olympics. The Park City area is experiencing significant
population growth and the Company's management believes the Park City area will
continue to grow.
In 1994, the Company constructed a ready mix plant in Heber City, Utah,
which is approximately 18 miles from Park City. Because of the high cost of
housing in Park City, Heber is often selected as a place of residence by persons
who are employed by the Park City resorts.
The Company operates 14 ready mix trucks in connection with its Park
City and Heber City operations. Sand and gravel is trucked from sources in the
Salt Lake Valley to produce the concrete at these sites.
Idaho Operations
Boise, Idaho. The Company has both ready mix and prestress/precast
operations in Boise, Idaho. The Company installed a new central mix batch plant
in 1994 at its Eagle site which enhances the Company's ability to deliver ready
mix concrete in the Boise area. In addition, the Company acquired Treasure
Valley Concrete in January 1998. Treasure Valley Concrete has two concrete batch
plants that will provide the Company with greater coverage of the Boise market
area. The Company is the largest ready mix concrete supplier in Boise and
operates a fleet of 48 ready mix trucks in this market.
Products from the prestress/precast operations in Boise are sold
throughout southern Idaho and into the neighboring states of Nevada, Oregon, and
Washington. The Company also operates a sand and gravel pit with estimated
reserves of approximately 4,000,000 tons. The Company's Boise facilities are
located on a 265 acre site located adjacent to the Boise River. The Boise area
is currently experiencing significant development.
In late 1997, the Company purchased 270 acres containing estimated
aggregate reserves of approximately 14,000,000 tons in Middleton, Idaho, which
is approximately 15 miles west of its current Boise operations. The purchase
price was approximately $2.7 million, of which approximately $2.0 million is
payable over ten years between 1997 and 2007. Residential and commercial
development in the area is moving westward towards this site. With these
aggregate reserves, the Company believes it is well positioned to take advantage
of future construction activity in the Boise area. The Company also obtained
mineral rights to approximately 1,000,000 tons of aggregate reserves with the
acquisition of Treasure Valley Concrete.
Magic Valley Operations. The Company operates several ready mix batch
plants in the south central part of Idaho in an area known as Magic Valley.
These plants are located at Twin Falls, Ketchum, Bellevue, Wendell and Burley,
Idaho. The Company maintains 25 ready mix trucks to service the Magic Valley
markets.
The Company operates a ready mix batch plant in Twin Falls, Idaho. The
sand and gravel used in this operation is mined and processed at a leased pit
north of Twin Falls. Upon the condition that the Company continues to extract
sand and gravel from the pit, the terms of the lease permit the Company to use
the pit until all sand and gravel resources have been depleted. The Company
believes the Twin Falls pit has adequate reserves for the foreseeable future.
In each of Ketchum and Bellevue, Idaho, the Company has a ready mix
plant. Both of these plants service primarily the Sun Valley resort area. The
Company supplies a majority of the concrete used in this area. Concrete
aggregates for the Company's operations at this location are purchased from a
local sand and gravel supplier.
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The Company also maintains a ready mix batch plant in the farming
community of Wendell, Idaho which serves as a satellite for the Twin Falls
operation. Aggregates for the concrete produced at this location are trucked
from Twin Falls.
The Company has a ready mix batch plant in Burley, Idaho, which is
approximately 50 miles east of Twin Falls. Concrete aggregates for the Company's
operations at this location are purchased from a local sand and gravel supplier.
Eastern Idaho Operations. The Company has plants in the cities of Idaho
Falls, Pocatello and Blackfoot, which are located in the eastern portion of
Idaho. The Company operates 25 ready mix trucks to service the eastern Idaho
area.
Idaho Falls is one of the major cities in eastern Idaho. In addition to
a ready mix plant in Idaho Falls, the Company has a prestress plant as well as a
sand and gravel pit located on a 242 acre site. The sand and gravel pit has
estimated reserves of approximately 3,000,000 tons.
The Company maintains ready mix concrete operations in each of
Pocatello and Blackfoot, Idaho that are supplied from Company-owned sand and
gravel pits located in Pocatello and Blackfoot. The Blackfoot operation is
located on 107 acres of land and the Pocatello pit is located on approximately
239 acres. The Company's management believes both pits have adequate sand and
gravel reserves for the foreseeable future.
Wyoming Operations
The Company has ready mix plants in Cody, Powell, Greybull and Worland,
Wyoming. In addition, the Company provides construction services, such as ditch
lining, road grading and excavation through its Wyoming facilities. The Company
operates 26 ready mix trucks among the Cody, Powell, Greybull and Worland ready
mix plants.
Cody. Through its Cody, Wyoming plant, the Company sells ready mix
concrete and sand and gravel, and also provides road grading, excavation and
construction services in the area. Although Cody is primarily an agricultural
area, tourism is a significant industry with the east entrance of Yellowstone
National Park only 50 miles west of the city. The Company has one competitor in
the Cody area.
The sand and gravel used in the Company's Cody operations is presently
mined from a pit owned by the State of Wyoming or from a 20 acre gravel pit
owned by the Company. The Company pays a royalty to the State of Wyoming based
on the number of tons extracted from the state's pit.
Powell. The Company's Powell, Wyoming ready mix batch plant is located
approximately 30 miles northeast of Cody. The Company supplies most of the ready
mix concrete and sand and gravel in the area with the only competition coming
from the competitor in Cody. Sand and gravel aggregates are trucked from the
pits used in connection with the Company's Cody operations.
Greybull. Greybull, Wyoming is a small agricultural town located 54
miles east of Cody. The Company is the only source of concrete and sand and
gravel in the community. The Company owns a 20 acre pit north of Greybull and
also obtains sand and gravel from the Company's Worland, Wyoming source.
Worland. Worland, Wyoming lies 38 miles south of Greybull. The Company
is the sole provider of concrete and sand and gravel in the area. Sand and
gravel used in the Worland operations is mined from a local pit pursuant to an
agreement with the Bureau of Land Management. This agreement expires in 2000 and
is currently subject to a 55,000 ton limit during the term of the agreement.
Future Land Development
When the Company's predecessors acquired and opened the Company's
current large sand and gravel aggregate quarries near Salt Lake City and Boise,
the quarries were located beyond these cities' outskirts. The growth of these
two cities in the intervening years has now placed these land holdings well
within their respective metropolitan areas. This growth currently provides a
significant advantage for the Company as the Company's operations are now close
to important areas of new construction activity.
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In addition, the location of the Company's quarries in growing urban
areas in Salt Lake City and Boise offers the Company the possibility of
eventually converting these land holdings to residential, recreational or
commercial use. The Company believes it is conducting its operations on these
properties in a way that will optimize their potential development value,
although no assurance can be given that the Company will be able to successfully
develop these properties in the future. In 1996, the Company closed its Kearns
pit on the west side of the Salt Lake Valley and in 1997, the Company received
approval of an application to change the zoning of the 158.1 acres to
residential. The Company signed a sales agreement in 1997 to sell the Kearns
property for approximately $6.7 million in three options over the next three
years. The Company also signed a sales agreement to sell 9.9 acres it owns in
the central part of the Salt Lake Valley for approximately $1.9 million, which
sale is expected to close in 1998. Future land development may be possible as
aggregate reserves are depleted on other properties. See "--Company Facilities
and Equipment."
Past independent appraisals of the Company's real property have
indicated that the fair market value of the Company's real property may be
significantly greater than the historical cost shown on the Company's balance
sheet at December 31, 1997. However, the ability of the Company to successfully
develop any of its real property is dependent on such factors as financing and
obtaining necessary zoning and other governmental approvals, as well as real
estate market conditions at the time, and no assurance can be given that the
Company will be able to successfully develop any of its real property in the
future.
Competition
The industries in which the Company operates are highly competitive.
Competitive factors within the industries are primarily based on price and, to a
lesser extent, product quality and customer service. In many of its markets, the
Company has several competitors, in part because equipment for producing ready
mix concrete and aggregates can be leased from several sources. However, in
these markets, a new or existing ready mix concrete or aggregates supplier is
limited by the availability of aggregate sources. New aggregate reserves are
becoming more scarce, and obtaining the necessary zoning changes and operating
permits has become more difficult. See "--Company Facilities and Equipment."
Additionally, such competitors may be forced to incur higher costs than the
Company because of the increasing difficulty of obtaining aggregates.
Although the Company tries to distinguish its products based on quality
and customer service, the Company's products are relatively generic and the
prices the Company charges its customers are not likely to be materially
different from the prices charged by other producers in the same markets.
Accordingly, the Company's profitability generally depends on the level of
demand for its products and its ability to contain operating costs. Prices are
subject to material changes in response to relatively minor fluctuations in the
supply and demand, general economic conditions and other market conditions.
There can be no assurance that prices will not decline in the future or that
such declines will not have a material adverse effect on the results of the
Company's operations.
In Utah, the Company faces competition not only from locally owned and
operated companies but also from larger regional, national and international
companies, some of which may have substantially greater financial and other
resources than the Company. A recent consolidation trend in the Company's
industry has lead to larger, financially stronger competitors of the Company
that have capital sources readily available to improve plants and equipment.
However, the Company's significant aggregate reserve positions in the Salt Lake
Valley will allow it to meet market demand for ready mix concrete and aggregates
and compete effectively in the market in 1998 and the foreseeable future. In
Idaho and Wyoming, the Company faces competition primarily from locally owned
and operated companies.
Competition in the precast and prestress concrete market comes from a
number of companies located in large metropolitan areas in the Western U.S.
since precast and prestress products can be competitively shipped longer
distances. The ability of the Company to be competitive on any individual
construction project depends on its production costs and haul distance to the
job compared to the location and production capability of competitors.
Seasonality and Cyclicality
Due to its location in the Rocky Mountains, the Company's business is
impacted by adverse weather conditions in the winter. Historically, construction
activity decreases significantly in December, January, February and March
because of snow and cold weather. The Company generally experiences losses
during these months.
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The construction industry is highly cyclical and is strongly affected
by changes in economic growth and conditions and changes in interest rates. The
demand for construction varies depending upon a number of factors, including,
weather conditions, the availability of construction financing at favorable
interest rates, overall fluctuations in regional economies, past under or
overbuilding, labor relations in the construction industry and the levels of
material and energy supplies. In the past, the Company's revenues and backlog
have varied significantly because of changes in economic conditions on either
the national or regional level.
Raw Materials and Suppliers
The Company obtains the bulk of its raw materials (other than
aggregates, substantially all of which are produced internally) and supplies
from several sources. The raw materials used by the Company are widely available
for local purchases by the Company at all of its plant locations and the Company
is not dependent upon any one supplier. The Company's management believes that
for the foreseeable future the Company will have reserves of sand and gravel
aggregates sufficient for its operations. See "--Company Facilities and
Equipment."
Regulation and Environmental Matters
The Company's operations are subject to numerous federal, state and
local laws and regulations. The plants and quarries are subject to regulations
and safety standards established by the Mine Safety and Health Act and the
Occupation Safety and Health Act, and the federal agencies which oversee
compliance with such acts, as well as the safety codes of state and local
governments.
The Company's management believes that the Company has all approvals
and permits from local governing bodies which are required for the mining of
sand and gravel aggregates and the conduct of the Company's other businesses.
State and local authorities, however, may adopt new laws and regulations
relating to land use which may, in some instances, reduce or restrict uses of
the Company's properties.
Because the Company sometimes acts as a subcontractor in erecting its
prestressed and precast concrete products, it must maintain contractor's
licenses in the states in which it sells these products. The Company presently
has current contractor's licenses in all states in which it does business.
The Company's plants are also subject to governmental regulations
concerning environmental pollution. The Company believes that it is
substantially in compliance with all applicable regulations. The cost of
maintaining such compliance is not considered to be material. During the normal
course of its operations, the Company uses and disposes of materials, such as
solvents and lubricants used in equipment maintenance, which are classified as
hazardous by government agencies which regulate environmental quality. The
Company attempts to minimize the generation of such waste as much as possible,
and to recycle such wastes. Remaining wastes are disposed of in permitted
off-site disposal sites.
The Company is currently the owner of 9.9 acres of land located in
Murray, Utah which contains mining slag previously deposited by ASARCO, the
former owner. The slag contains certain heavy metals, including lead and
arsenic, which may have leached from the slag into the environment. This and
adjoining properties formerly owned by ASARCO have been proposed by the
Environmental Protection Agency (the "EPA") for listing on the National
Priorities List for cleanup of the lead slag and potential groundwater
contamination from arsenic laden soils. Although the Company did not generate
the slag material, under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), the current owner of a property may be liable for
cleanup costs. In such case, the Company would have a claim against the former
owner, ASARCO, for its respective share of these costs.
In May 1997, all of the landholders and the City of Murray entered into
an Agreement in Principle in which the landholders agreed to donate land for a
roadway through the properties which would be used as a depository for some of
the hazardous wastes on the site. In addition, the parties agreed to cooperate
in the remediation efforts to be conducted by ASARCO.
All parties concerned including the EPA are currently in negotiations
regarding a proposed draft Remedial Design/Remedial Action Consent Decree
("Consent Decree"). As proposed, the Consent Decree requires the Company
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to (i) contribute a certain amount of its property for the roadway
(approximately 1.8 acres with a book value of approximately $19,000) as its
share of the cleanup costs, (ii) participate in a local improvement district for
the installation of curb, gutter, and sidewalks along the proposed roadway, (an
approximately $30,000 assessment over a ten-year period) and (iii) implement
certain institutional controls. In return, the Company will receive contribution
protection and a covenant not to sue. Under the current draft of the Consent
Decree, the Company's obligations terminate upon sale of the property. The
Company's estimated cost to satisfy these requirements under the proposed
Consent Decree are immaterial.
On May 5, 1997, the Company entered into an agreement to sell its total
acreage in Murray, Utah to The Boyer Company, L.C. for a total purchase price of
approximately $1.9 million. The agreement is subject to the purchaser obtaining
necessary approvals. Pursuant to the agreement, the purchaser will assume the
Company's liabilities under the Agreement in Principle and the Consent Decree
described above. Subject to certain conditions, the Company expects the sale of
the Murray property to close on or before January 1, 1999.
Prior to learning of the potential presence of lead in the slag from
the Murray site, the Company sold some of the slag for use in road base and
railroad fill. The Company has not sold any material from this site since 1988.
The Company may be liable for cleanup costs if it is determined that the lead
from this slag poses an environmental hazard. The Company has not determined
that the lead from this slag poses an environmental hazard, nor has the Company
received any notice of government or private action on this matter. The
potential cost to the Company, if any, is not ascertainable at the present
time. The Company's management believes that there are economically reasonable
methods of containing the slag should this become necessary.
Backlog
A significant portion of the Company's business, particularly for
prestressed and precast concrete, is based on orders for delivery at times which
may be many months after the order date. Therefore, the Company generally has a
significant amount of outstanding work orders. The Company's backlogs for
prestressed and precast concrete products as of December 31, 1997 and 1996 were
approximately $14,316,000 and 12,085,000, respectively.
Employees
As of December 31, 1997, the Company had 451 employees, of which 85
were in administrative or clerical areas and 366 were in production.
Approximately 283 of the production employees are represented by various unions.
Four contracts covering a total of 157 employees in Utah and Idaho will expire
in 1998 and will be renegotiated with the applicable unions regarding these
contracts. The Company believes its relations with its employees and their
unions are satisfactory.
Forward-Looking Statements and Risk Factors
Forward-Looking Statements. Certain statements made herein, including
without limitation statements made under the captions "Business--The Company's
Markets and Industry," "--Company Facilities and Equipment," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). In addition, when used in this
Annual Report on Form 10-K the words or phrases "will likely result," "expects,"
"intends," "will continue," "is anticipated," "estimates," "projects,"
"management believes," "the Company believes" and similar expressions are
intended to identify forward-looking statements within the meaning of the Reform
Act.
Forward-looking statements include plans and objectives of management
for future operations, including plans and objectives relating to the products
and the future economic performance and financial results of the Company. All
forward-looking statements involve predictions and are subject to known and
unknown risks and uncertainties, including, without limitation, those discussed
below as well as general economic and business conditions, that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. Readers should not place undue reliance on any such
forward-looking statements, which speak only as of the date made. The factors
listed below and elsewhere in this Annual Report on Form 10-K could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions, views or statements
expressed with respect to future periods. In light of the significant
uncertainties inherent in forward-looking statements, the inclusion of any such
statement should not be regarded as a representation by the Company or any other
person that the objectives
8
<PAGE>
or plans of the Company will be achieved. The Company disclaims any obligation
or intent to update any such factors or forward-looking statements to reflect
future events or developments.
Dependence on the Construction Industry; Economic Conditions. The
Company's business is heavily dependent upon the construction industry and is
directly affected by the level of construction activity in the geographic areas
in which it operates. The demand for construction varies depending upon a number
of economic factors, including fluctuations in regional growth rates and
interest rates, the availability of financing, the availability of public funds
for infrastructure projects and levels of material and energy supplies.
Accordingly, adverse economic conditions in the Company's markets or a worsening
of general economic conditions could adversely affect the Company's operating
results. While at the present time economic conditions for the construction
industry are favorable in the Company's areas of operation, these areas have
suffered economic difficulties in the past and there can be no assurance that
these economic conditions will not decline again in the future or that demand
for the Company's products will remain at current levels.
Environmental Regulation. The Company is subject to a wide range of
federal, state and local laws, regulations and ordinances. In particular, may of
these laws and regulations pertain to the protection of the environment and
regulate water discharges and air emissions, as well as the handling, use and
disposal of hazardous and non-hazardous waste materials. In addition, the
Company's plants and quarries are subject to regulations and safety standards
established by the Mine Safety and Health Act and the Occupation Safety and
Health Act, the federal agencies which oversee compliance with those acts and
the safety codes of state and local government. While the Company believes it is
substantially in compliance with all such applicable laws and regulations, there
can be no assurance that the Company is, or in the future will be, able to
comply with, or continue to comply with, current or future government
regulations in every jurisdiction in which it may conduct its business
operations. The Company's operating costs may be affected by the obligation to
pay for the cost of complying with existing environmental and safety laws,
ordinances and regulations. In addition, in the event any future legislation is
adopted, the Company may, from time to time, be required to make significant
capital and operating expenditures in response to such legislation.
The Company is currently the owner of 9.9 acres of land located in
Murray, Utah which contains mining slag previously deposited by ASARCO, the
former owner. The slag contains certain heavy metals, including lead and
arsenic, which may have leached from the slag into the environment. This and
adjoining properties formerly owned by ASARCO have been proposed by the EPA for
listing on the National Priorities List for cleanup of the lead slag and
potential groundwater contamination from arsenic laden soils. Although the
Company did not generate the slag material, under CERCLA, the current owner of a
property may be liable for cleanup costs. In such case, the Company would have a
claim against the former owner, ASARCO, for its respective share of these costs.
In May 1997, all of the landholders and the City of Murray entered into
an Agreement in Principle in which the landholders agreed to donate land for a
roadway through the properties which would be used as a depository for some of
the hazardous wastes on the site. In addition, the parties agreed to cooperate
in the remediation efforts to be conducted by ASARCO.
All parties concerned including the EPA are currently in negotiations
regarding a proposed draft Consent Decree. As proposed, the Consent Decree
requires the Company to (i) contribute a certain amount of its property for the
roadway (approximately 1.8 acres with a book value of approximately $19,000) as
its share of the cleanup costs, (ii) participate in a local improvement district
for the installation of curb, gutter, and sidewalks along the proposed roadway
(an approximately $30,000 assessment over a ten-year period) and (iii) implement
certain institutional controls. In return, the Company will receive contribution
protection and a covenant not to sue. Under the current draft of the Consent
Decree, the Company's obligations terminate upon sale of the property. The
Company's estimated cost to satisfy these requirements under the proposed
Consent Decree are immaterial. However, no assurance can be given that the
Consent Decree will approved or, if approved, will contain the terms as
presently proposed.
On May 5, 1997, the Company entered into an agreement to sell its total
acreage in Murray, Utah to The Boyer Company, L.C. for a total purchase price of
approximately $1.9 million. The agreement is subject to the purchaser obtaining
necessary approvals. Pursuant to the agreement, the purchaser will assume the
Company's liabilities under the agreement in principle and the Consent Decree
described above. Subject to certain conditions, the Company expects the sale of
the Murray property to close on or before January 1, 1999. However, no assurance
can be given that the sale of the Murray property will occur.
9
<PAGE>
Prior to learning of the potential presence of lead in the slag from
the Murray site, the Company sold some of the slag for use in road base and
railroad fill. The Company has not sold any material from this site since 1988.
The Company may be liable for cleanup costs if it is determined that the lead
from this slag poses an environmental hazard. The Company has not determined
that the lead from this slag poses an environmental hazard nor has the Company
received any notice of government or private action on this matter. The
potential cost to the Company, if any, is not ascertainable at this time.
Risks Related to the Proposed Merger and Other Potential Dispositions.
The Company believes that the proposed Merger will offer opportunities for
long-term efficiencies in operations that should positively affect future
results of the combined operations of the Company and USAI. However, no
assurances can be given whether or when such efficiencies will be realized.
Although the parties to the Merger have entered into definitive agreements, the
closing of the Merger is subject to the timely satisfaction of certain
conditions contained in the Merger Agreement. Although the Company currently
expects that such closing conditions will be satisfied or waived, there can be
no assurance that the closing of the Merger will occur. Such conditions include,
among others, the receipt of all necessary consents and approvals from
governmental officials and other third parties and the absence of certain
material adverse changes in the business or operations of the Company. See
"--Recent Developments" and "Item 7--Management's Discussion and Analysis of
Financial Condition and Results of Operations--Subsequent Events."
The Company is also pursuing the sale of certain assets of its
prestressed/precast division and its Wyoming subsidiary. See"Item
7--Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." No assurance can be given that any
of these contemplated transactions will occur.
Seasonality. The Company services the construction industry principally
in geographic areas where construction activity may be restricted during the
winter months. As a result, the Company experiences reduced revenues from
December to March and realizes a substantial part of its revenues during the
other months of the year. The Company generally incurs losses during the winter
months and must have sufficient working capital to fund its operations at a
reduced level until the spring construction season. No assurance can be given
that the Company will continue to have sufficient working capital to fund its
operations during the winter months.
Competitive and Price Sensitive Industry. The industries in which the
Company operates are highly competitive. Competitive factors within the
industries are primarily based on price and, to a lesser extent, product quality
and customer service. With respect to the Company's ready mix operations, in
Idaho and Wyoming the Company faces competition primarily from locally owned and
operated companies; however, in Utah the Company additionally competes with
larger regional, national and international companies that likely have
substantially greater financial and other resources than the Company. In the
precast and prestressed concrete market, the Company faces competition from
metropolitan areas throughout the western states because precast and prestressed
concrete products easily can be shipped over long distances.
The Company's products are relatively generic, and the prices the
Company charges its customers are not likely to be materially different from the
prices charged by other producers in the same markets. Accordingly, the
Company's profitability generally depends on the level of demand for its
products and its ability to contain operating costs. Prices are subject to
material changes in response to relatively minor fluctuations in the supply and
demand, general economic conditions and other market conditions. There can be no
assurance that prices will not decline in the future or that such declines will
not have a material adverse effect on the results of the Company's operations.
Labor Agreements. As of December 31, 1997, the Company had 451
employees, of which approximately 283 were represented by various unions. Four
union contracts covering a total of 157 employees will expire in 1998. No
assurance can be given that the Company will be able to negotiate the union
contracts on the same terms and conditions as those presently in effect or terms
and conditions acceptable to the Company.
ITEM 2. PROPERTIES
The Company operates 38 plants at 23 sites in Utah, Idaho and Wyoming.
See "Item 1--Business--Company Facilities and Equipment" for information
relating to the Company's properties. All of the Company's existing personal
property and real property are used as collateral to secure certain Company
borrowings. See "Item 7--Management's
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<PAGE>
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 6 to the Company's
Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims, either
asserted or unasserted, which arise in the ordinary course of business. While
the outcome of these claims cannot be predicted with certainty, management does
not believe that the outcome of any of these legal matters will have a material
effect on the Company's consolidated results of operations or consolidated
financial position.
The Company is currently the owner of 9.9 acres of land located in
Murray, Utah that contains mining slag previously deposited by ASARCO, the
former owner. The slag contains certain heavy metals, including lead and
arsenic, which may have leaked from the slag into the environment. This and
adjoining properties formerly owned by ASARCO have been proposed by the EPA for
listing on the National Priorities List for cleanup of the lead slag and
potential groundwater contamination from arsenic laden soils. All parties
concerned, including the EPA, are currently in negotiations regarding a proposed
draft Consent Decree. See "Business--Regulation and Environmental Matters"
and--"Forward-Looking Statements and Risk Factors--Environmental Regulation."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on The Nasdaq Stock Market under
the symbol "MROC." The following table sets forth, for the calendar quarters
indicated, the high and low closing prices for the Company's Common Stock as
reported by Nasdaq. These quotations represent interdealer prices, without
retail mark-ups, mark-downs or commissions, and may not represent actual
transactions.
High Low
1997:
First Quarter $ 6.50 $ 5.25
Second Quarter 9.75 6.25
Third Quarter 12.88 9.25
Fourth Quarter 12.13 9.88
1996:
First Quarter $ 5.63 $ 4.13
Second Quarter 5.38 4.50
Third Quarter 6.25 4.63
Fourth Quarter 6.38 4.50
The closing price of the Company's Common Stock on March 19, 1998 was
$10.625. As of March 19, 1998, the Company had approximately 43 stockholders of
record.
The Company has never paid a cash dividend on its Common Stock and does
not contemplate paying cash dividends on its Common Stock in the foreseeable
future.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data presented below has been derived
from the Company's audited consolidated financial statements. The selected
historical financial data should be read in conjunction with "Item
7--Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements, related notes and other
financial information included elsewhere in this report.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net Sales............................... $61,383,362 $70,401,396 $48,302,240 $41,156,276 $34,547,464
ESOP contribution....................... 800,000 800,000 800,000 800,000 937,816
Operating profit (loss)................. 1,074,024 (884,993) 2,511,755 1,160,462 937,318
Net earnings (loss)..................... 239,119 (1,367,679) 1,355,651 283,582 763,872
Net earnings (loss) per share........... 0.05 (0.31) 0.48 0.11 0.34
Weighted average common shares.......... 4,485,376 4,467,000 2,835,063 2,611,521 2,235,730
CONSOLIDATED BALANCE
SHEET DATA:
Total assets $42,515,723 $40,638,252 $35,607,756 $26,578,145 $20,008,378
Long-term obligations (net of current
maturities)............................. 6,826,736 5,161,742 6,591,329 9,020,569 6,771,793
Stockholders' equity.................... 19,736,731 18,670,583 19,236,262 8,306,366 4,922,549
</TABLE>
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company produces and sells sand and gravel products, ready mix
concrete, prestress and precast concrete products and accessories to the
building and construction industry. The Company owns or leases 38 plants in
Utah, Idaho and Wyoming. The Company's products are sold principally in Utah,
Idaho and Wyoming and to a lesser extent in Colorado, Montana, Washington,
Oregon, Arizona, New Mexico and California.
The Company entered into an Agreement and Plan of Merger dated as of
January 29, 1998 and amended and restated as of March 4, 1998 (the "Merger
Agreement") with U.S. Aggregates, Inc., a Delaware corporation ("USAI"), and
Western Acquisition, Inc., a Delaware corporation and a subsidiary of USAI
("Sub"), providing for the merger of Sub with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation and as a
subsidiary of USAI. Pursuant to the Merger Agreement, each outstanding share of
Common Stock will be converted into the right to receive $10.771 per share in
cash. In addition, the Merger Agreement provides that each option or warrant to
purchase shares of Common Stock will be cancelled in consideration for the right
to receive in cash an amount equal to the number of shares subject to such
option or warrant multiplied by the difference between $10.771 and the exercise
price of such option or warrant, less any applicable tax withholdings. The
Merger is conditioned upon, among other things, the approval of the stockholders
of the Company, certain regulatory and governmental approvals and other
customary conditions. In connection with the proposed Merger, the Board of
Directors of the Company received a fairness opinion (the "Opinion") from SBC
Warburg Dillon Read Inc. to the effect that, as of the date of the Opinion, the
Merger consideration is fair to the stockholders of the Company from a financial
point of view. See "--Subsequent Events."
Net sales consist of total sales less discounts, returns and
allowances. While net sales decreased in 1997 compared to 1996, gross profit,
operating profit and net earnings increased in 1997 compared to 1996. The
decrease in net sales resulted from completion of the $21.6 million Snake River
Correction Facility precast project in early 1997. Generally, the Company's
prestress/precast concrete products carry smaller gross profit margins than are
associated with the Company's sand and gravel and ready mix concrete products.
The increase in profitability in 1997 was primarily attributable to a change in
the Company's sales mix in 1997 to reflect more high margin sand and gravel and
ready mix concrete products and lower relative sales of prestress/precast
concrete products.
Cost of sales for ready mix concrete products consists of material
costs, production costs, freight charges, equipment depreciation and maintenance
expenses, fuel costs and direct labor costs. Cost of sales for prestress/precast
concrete products consists of material costs, freight costs, equipment
depreciation and maintenance costs, fuel costs, direct labor costs and erection
costs. Cost of sales for sand and gravel products consists of depletion cost,
processing costs, direct labor cost, equipment depreciation and maintenance
costs, fuel costs and in some cases, freight costs. The Company's sales of sand
and gravel in connection with the I-15 reconstruction project have no
corresponding cost of sale other than depletion costs. Depletion cost varies
based on the particular aggregate reserve being depleted. During 1997, depletion
costs recorded by the Company ranged from $0.01 to $ 0.06 per ton of aggregate.
The Company's contributions to its Employee Stock Ownership Plan
("ESOP") are non-cash contributions and do not decrease the level of
stockholder's equity. The contributions are charged against income and are
deductible for federal and state income tax purposes. The original borrowings
that the ESOP used to acquire the Company's Common Stock were loaned to the ESOP
by the Company, which had borrowed these funds from two banks. Contributions to
the ESOP are non-cash expenses for the Company for purposes of its financial and
tax accounting. Although the original borrowings with which the ESOP was
financed have now been retired, an ESOP liability to the Company remains
outstanding. The ESOP repays this liability to the Company with contributions
the ESOP receives from the Company. The Company intends to continue to make
contributions to the ESOP as determined by the Company's management in amounts
which are deductible for tax purposes in order to permit the ESOP to repay its
liability to the Company. Subject to various regulations and conditions, the
Company is generally allowed to deduct ESOP and pension plan contributions in an
amount equal to 25% of its qualified payroll. While the contributions to the
ESOP are repaid to the Company by the ESOP, resulting in no net cash outflow,
and are a deductible expense for tax purposes, these amounts directly reduce
13
<PAGE>
the Company's reported earnings. As of December 31, 1997, the outstanding
balance of the ESOP's note to the Company was $1.72 million.
In addition to its effect on the Company's income statements, ESOP
accounting also impacts the Company's balance sheets. Amounts received by the
Company representing principal payments on the loan to the ESOP are recorded as
reductions of the ESOP note receivable. Additionally, since the loan to the ESOP
is carried on the Company's balance sheet as a reduction of stockholders' equity
rather than as an asset, repayments of principal on the loan to the ESOP result
in increases in stockholders' equity, which offset the reductions in equity
caused by the non-cash contributions charged against earnings. Consequently, the
ESOP contributions since the original acquisition of the stock have had no
effect on total stockholders' equity and will have no effect on total
stockholders' equity as long as contributions are used to reduce the note
receivable from the ESOP.
In the third quarter of 1996, the Company's management restructured the
Company's operations and as a result recorded a one-time restructuring charge of
$1.5 million. The Company periodically engages in sales of property, plant,
equipment and land and recognizes a gain or loss equal to the purchase price
received minus the book value of the property, plant, equipment for land sold.
Results of Operations
The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items included in the Company's
Consolidated Statements of Operations:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Net sales ........................................... 100.0% 100.0% 100.0%
Costs and expenses .................................. 98.3 101.3 94.8
Operating profit (loss) ............................. 1.7 (1.3) 5.2
Other income (expense) net .......................... (1.6) (1.0) (2.5)
Earnings (loss) before income taxes ................. 0.1 (2.3) 2.7
Income taxes (benefit) .............................. (0.3) (0.4) (0.1)
Net earnings (loss) ................................. 0.4 (1.9) 2.8
</TABLE>
Comparison of Years Ended December 31, 1997 and 1996
Net sales decreased $9.0 million, or 15%, from $70.4 million for the
year ended December 31, 1996 (the "1996 Period") to $61.4 million for the year
ended December 31, 1997 (the "1997 Period"). Sand and gravel sales increased
$2.1 million, or 38%, to $7.6 million for the 1997 Period compared to $5.5
million for the 1996 Period primarily because of increased sales in connection
with the I-15 freeway reconstruction project ongoing in Salt Lake City, Utah.
However, net sales by the Company's prestress/precast concrete division
decreased $11.2 million, or 37%, to $19.2 million compared to $30.4 million for
the 1996 Period, primarily due to the completion of the Snake River Correctional
Facility in early 1997 and the lack of new or existing precast project contracts
capable of sustaining 1996 precast net sales volumes. Net sales of ready mix
concrete increased to $34.3 million, or 1%, in the 1997 Period compared to $34.0
million for the 1996 Period. This increase was primarily attributable to
sustained construction activity in the Company's market areas.
Cost of sales decreased $10.4 million, or 17%, from $63.0 million in
the 1996 Period to $52.6 million in the 1997 Period. This decrease was primarily
due to a lower volume of net sales in the 1997 Period of pre-stress/precast
concrete products which carry a higher cost of sales component relative to the
Company's sand and gravel and ready mix concrete products. Gross profit
increased from $7.4 million in the 1996 Period to $8.8 million in the 1997
Period and increased as a percentage of net sales from 10% in the 1996 period to
14% in the 1997 period. The increase in gross profit was also due primarily to a
lower volume of net sales of prestress/precast concrete products in the 1997
Period which carry lower margins and an increase in net sales of ready mix
concrete and sand and gravel. Ready mix operating profit margins increased from
9% in the 1996 Period to 12.3% in the 1997 Period. The improvement in ready mix
concrete operating profit margins was primarily attributable to price increases
and improved efficiencies in the Company's
14
<PAGE>
ready mix concrete operations. Sand and gravel product operating profit margins
increased to approximately 36% for the 1997 Period compared to 15% for the 1996
Period. The higher profitability of sand and gravel sales for the 1997 Period is
primarily attributable to an increase in sand and gravel sold for use in the
I-15 reconstruction project in Salt Lake City during the 1997 Period and to high
start up costs for the Company's Point of the Mountain pit and costs of closing
down the Company's aggregate operations at the Kearns pit incurred during the
1996 Period. Sales in the 1997 Period relating to the I-15 reconstruction
project are based on a royalty of $0.50 per ton of aggregate with no
corresponding cost of sales other than depletion of $0.01 per ton sold.
General and administrative expenses increased $1.0 million, or 14%,
from $5.9 million in the 1996 Period to $6.9 million in the 1997 Period. This
increase was primarily attributable to payment of increased health care claims
in the 1997 Period as well as an increase in salary costs incurred as a result
of the employment of several new managers, bonuses paid under the Company's
manager incentive program and severance compensation paid to terminated
employees in the 1997 Period. As a percentage of net sales, general and
administrative expenses increased from 8% in the 1996 Period to 11% in the 1997
Period.
Contributions to the ESOP remained constant at $800,000 for the 1997
period and for the 1996 period. However, as a percent of net sales, the
Company's contribution to the ESOP Plan increased from 1.1% for the 1996 period
to 1.3% for the 1997 period. Restructuring charges of $1,500,000 were incurred
on a one-time basis in the third quarter of the 1996 Period.
Operating profit increased $2.0 million to $1.1 million for the 1997
Period as compared to an operating loss of $884,993 in the 1996 Period due to
factors set forth above.
Net other expense increased from $700,381 for the 1996 Period to $1.0
million for the 1997 Period. This increase resulted primarily from an increase
of $236,711 in interest expense for the 1997 Period to $1.0 million as compared
to $810,122 for the 1996 Period because of increased borrowings and higher
average balances outstanding under the Credit Facility (defined below). In
addition, the Company recognized a loss on sale of property, plant, equipment
and land of $16,029 for the 1997 Period as compared to a gain on sale of
property, plant, equipment and land of $35,930 in the 1996 Period. Interest
income decreased $40,224 to $33,587 for the 1997 Period as compared to $73,811
for the 1996 Period.
Earnings before income taxes increased $1.6 million to $44,749 for the
1997 Period as compared to a loss of $1.6 million for the 1996 Period. Net
earnings after taxes increased $1.6 million to $239,119 for the 1997 Period as
compared to a loss of $1.4 million for the 1996 Period for the reasons stated
above.
Comparison of Years ended December 31, 1996 and 1995
Net sales increased 22.1 million, or 46%, from $48.3 million for the
year ended December 31, 1995 (the "1995 Period") to $70.4 million for the 1996
Period. Sales of prestress/precast products increased 149% from $12.2 million in
the 1995 Period to $30.4 million in the 1996 Period due to production during the
1996 Period on the Snake River Correctional Facility, a $21.6 million contract.
Ready mix concrete sales increased $2.7 million, or 9%, from $31.3 million in
the 1995 Period to $34.0 million in the 1996 Period due primarily to sustained
construction activity in the Company's market areas. Sand and gravel sales
increased 31% from $4.2 million in the 1995 Period to $5.5 million in the 1996
Period due to increased volume of processed aggregates.
Cost of sales increased $22.8 million, or 57%, to $63.0 million for the
1996 Period compared to $40.2 million for the 1995 Period. This increase was
primarily attributable to increased prestress/precast concrete sales due to the
Snake River Correctional Facility project. Gross profit decreased to $7.4
million for the 1996 Period as compared to $8.1 million for the 1995 Period, and
gross profit as a percentage of net sales decreased from approximately 17% for
the 1995 Period to 10% for the 1996 Period. Operating profit margin on
prestress/precast concrete products was 12% in the 1996 Period compared to 23%
in the 1995 Period due to significantly lower bid margins on the Snake River
Correctional Facility contract. Operating profit margins on ready mix concrete
decreased from 12% in the 1995 Period to 9% in the 1996 Period because of lower
prices due to a shift of demand to commercial construction. Sand and gravel
operating margins also decreased from 27% in the 1995 Period to 13% in the 1996
Period primarily due to high start up costs in the Company's Point of the
Mountain pit and costs of closing down its aggregate operations at the Kearns
pit.
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<PAGE>
General and administrative expenses increased $1.1 million, or 24%, to
$5.9 million for the 1996 Period as compared to $4.8 million for the 1995
Period. This increase was due primarily to payment during the 1996 Period of a
$200,000 consulting fee to Building and Construction Capital Partners, L.P., the
general partner of BCCP I, L.P. ("BCCP I") which is a significant stockholder of
the Company, increased personnel, administrative, legal and professional
expenses incurred in connection with the redirection of the Company and
increased administrative costs related to the Snake River Correctional Facility
construction.
Contribution to the Company's ESOP remained constant for the 1995 and
1996 Periods at $800,000. The Company recorded a restructuring charge of $1.5
million in the third quarter of the 1996 Period. This one-time restructuring
charge included a write-off of certain facilities and equipment obsoleted by new
operating strategies totaling $715,000, the closure of undersized and
unprofitable operations in Utah and Wyoming totaling $351,000, and accruals of
the remaining two years of the employment agreement with the Company's former
president and chief executive officer totaling $333,000 and costs associated
with the restructuring of management totaling $101,000.
Operating loss reported by the Company for the 1996 Period totaled
$884,993 as compared to operating profit of $2.5 million recorded by the Company
for the 1995 Period. Other expense decreased to $700,381 for the 1996 Period as
compared to $1.2 million for the 1995 Period. This decrease in other expense net
was primarily attributable to lower interest expense of $810,122 for the 1996
Period as compared to $1.4 million for the 1995 Period resulting from the use of
proceeds from the sale of Common Stock to BCCP I to temporarily pay down the
Company's debt and an increase in interest income to $73,811 for the 1996 Period
as compared to $34,222 for the 1995 Period, partially offset by a decrease in
gain on sale of property, plant, equipment and land to $35,930 in the 1996
Period from $129,085 for the 1995 Period.
Earnings loss before income taxes totaled $1.6 million for the 1996
Period as compared to earnings before income taxes of $1.3 million for the 1995
Period for the reasons set forth above. The Company incurred a net loss after
tax of $1.4 million for the 1996 Period as compared to net earnings of $1.4
million for the 1995 Period for the reasons set forth above.
Subsequent Events
On January 29, 1998, the Company signed a definitive Merger Agreement
with USAI pursuant to which USAI will acquire for cash all of the outstanding
shares of Common Stock for $10.771 per share, or $57.6 million. Although the
transaction has been approved by the Board of Directors of both companies, the
transaction is contingent upon, among other things, approval of Monroc's
stockholders, certain regulatory approvals and other customary conditions. The
transaction is currently expected to close in the second quarter of 1998 subject
to stockholder and regulatory approvals. BCCP I, which currently owns
approximately 37 percent of the outstanding shares of Common Stock, has agreed
to vote in favor of the transaction. USAI, is a portfolio company of Golder,
Thoma, Cressey, Rauner, Inc., a Chicago based private equity investment group.
On January 6, 1998, the Company acquired all of the capital stock of
Treasure Valley Concrete, Inc. for $3.35 million in cash. The Company financed
the entire purchase price with borrowings under the term loan portion of the
Credit Facility (defined below). Treasure Valley Concrete produces and sells
ready mix concrete in the greater Boise, Idaho area, and had revenues of
approximately $7 million in 1997. The Company intends to integrate Treasure
Valley Concrete's operations into its current Boise, Idaho operations.
Liquidity and Capital Resources
The Company's primary sources of liquidity have been comprised of cash
flow from operating activities, borrowings under its $15.0 million credit
facility provided by the CIT Group (the "Credit Facility") and the issuance of
Common Stock. The Company requires capital for the procurement of property,
plant, equipment, aggregate deposits, land and inventory, normal operating
expenses and for general working capital purposes. The Credit Facility, which is
the Company's principal source of liquidity, was renewed in February 1996
increasing the total credit available from $11.0 million to $15.0 million. The
interest rate accruing under the Credit Facility was reduced in February 1996
from the prime rate plus 2.5% to the prime rate plus 0.75%. The Credit Facility
provides for both revolving and term loans. Under the revolving portion of the
Credit Facility, the Company may borrow up to 85% of eligible receivables at any
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<PAGE>
time. Borrowings under the term loan are limited by the value of the Company's
real and personal property with a maximum limit of $10.0 million. The Credit
Facility requires that the Company pay a monthly fee on the unused portion of
the Credit Facility at the rate of 0.5% per annum. Between February 1996 and
February 1997 and between February 1997 and February 1998, the terms of the
Credit Facility required the Company to pay interest on minimum outstanding
balances of $2.0 million and $4.0 million, respectively. During these periods,
the Company's outstanding borrowings under the Credit Facility exceeded these
minimum amounts. As of December 31, 1997, outstanding borrowings on the Credit
Facility in the form of revolving loans totaled $5.9 million compared to $5.4
million as of December 31, 1996. As of December 31, 1997, the outstanding term
loan balance under the Credit Facility was $2.0 million. Subsequent to year end,
the Company increased the outstanding term loan portion of the Credit Facility
to $5.35 million in connection with the acquisition of Treasure Valley Concrete.
See "--Subsequent Events." At December 31, 1997, the Company had a maximum
credit availability under the Credit Facility of $7.1 million. Availability
under the Credit Facility is based upon the level of eligible receivables and
the amount of unamortized availability under the term loan. The Credit Facility
is secured by a general lien on all of the Company's assets and expires in
February, 2002.
In addition to the Company's borrowings under the Credit Facility, at
December 31, 1997 the Company had notes outstanding to the previous owners of
the Company's Wyoming subsidiary in the amount of $406,822 as compared to an
outstanding balances under such notes at December 31, 1996 of $598,142. These
notes bear interest at the prime rate plus 2% and are secured by the fixed
property and inventory of the subsidiary.
The Company also had outstanding notes payable to Colonial Commercial
Corp. ("Colonial") in the amount of $298,750 at December 31, 1997. Colonial is a
minority stockholder of the Company. These notes bear interest at the prime
rate. Principal payments under these notes are due each year in eight monthly
installments of $30,000 each. No principal payments are required for the months
of January, February, March and December. These notes are subordinated to the
Credit Facility.
In December 1995, the Company issued 1,650,000 shares of Common Stock
to BCCP I at a price of $5.50 per share for net proceeds of $8.8 million. The
Company used $3.4 million of the net proceeds to pay down outstanding balances
under the Company's then existing credit facility with CIT Group leaving $5.4
million in cash and cash equivalents at December 31, 1995. Since December 31,
1995, the Company has used the remaining net proceeds for the purchase of
property, plant and equipment, aggregate deposits and land and for the financing
of working capital and inventory.
Concurrently with the issuance of Common Stock to BCCP I, the Company
issued a warrant to BCCP I to purchase up to 1,500,000 additional shares of
Common Stock at a price of $6.25 per share. This warrant is exercisable through
December 28, 2000. If this warrant were exercised in full, the gross proceeds to
the Company would be $9.4 million. No assurances can be given that this warrant
will ever be exercised.
For the year ended December 31, 1997, net cash provided by operating
activities equaled $5.1 million, consisting primarily of net earnings,
depreciation and amortization of property, plant and equipment, contribution to
the Company's ESOP and accounts receivable, partially offset by inventories and
trade accounts payable. For the year ended December 31, 1997, net cash used in
investing activities equaled $7.6 million, consisting primarily of purchases of
property, plant and equipment and purchases of additional aggregate deposits
including 270 acres with over 14,000,000 tons of aggregate reserves near
Middleton, Idaho. For the year ended December 31, 1997, net cash provided by
financing activities totaled $2.1 million, consisting primarily of increased
borrowings under the Credit Facility and the issuance of notes for 75% of the
purchase price of the Middleton land, partially offset by principal payments on
long-term obligations and the repurchase of certain outstanding warrants.
The Company finances a portion of its equipment through operating
leases and anticipates continuing to finance a portion of its equipment in this
manner. The Company anticipates that it will have the ability to refinance
certain equipment as needed thereby generating additional cash for operations.
In 1996, the Snake River Correction Facility project required
significant capital resources and put heavy demands on the Company's cash and
liquidity. The project was completed in early 1997 and the Company currently has
no similar prestress/precast projects ongoing and does not currently anticipate
any similar projects during the next 12 months.
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<PAGE>
The Company is also pursuing the sale of certain assets of its
prestress/precast division. The Company has been in negotiations with a
potential buyer since early 1997. The Company is currently uncertain as to
whether negotiations with the potential purchaser will continue. If such
negotiations are terminated, the Company currently intends to continue pursuing
a sale of such assets. The Company anticipates that such an asset sell would
generate additional cash for operations. In addition, the Company is pursuing
the sale of its Wyoming subsidiary. Such a sale would also generate cash for
operations. The Company has not entered into a definitive agreement with a buyer
of its prestress/precast assets or its Wyoming subsidiary. No assurances can be
given that a definitive agreement will be entered into or that the Company will
be able to successfully consummate the sale of such operations.
The Company believes that its existing cash balances, combined with
additional availability under the Credit Facility, cash from operations and cash
from planned asset sales and equipment refinancings, will enable it to meet its
working capital requirements for at least 12 months. However, if the Company's
capital requirements increase or if the Company is unable to conserve cash or
generate cash through asset sales, the Company could be required to limit its
capital expenditures, aggregate deposit purchases and acquisition activities or
secure additional sources of capital. There can be no assurance the Company will
be capable of securing additional capital or that the terms upon which such
capital will be available to the Company will be acceptable.
Inflation
Inflation in the U.S. economy has been relatively moderate during the
last few years. Price increases for labor and materials have kept pace with
inflation, but the Company has generally been successful in passing cost
increases on to customers. In 1997, price increases were introduced in most
markets. The Company continues to pursue work at higher prices to cover ongoing
cost increases and improve operating margins.
Seasonality
Because of the location of its operations in the intermountain west
region of the Western United States, the Company experiences significantly lower
sales during the winter months due to adverse weather conditions. The Company
usually experiences losses during these months because of the lower sales
volume.
Year 2000 Compliance
The Company has reviewed its software systems, all of which are
provided by outside vendors, and based upon representations by the outside
vendors regarding the year 2000 issue, no modifications to such systems will be
required. Based on this review, the Company does not anticipate the need to
invest any capital resources to address the year 2000 issue.
Outlook
The Company currently expects to consummate the Merger during the
second quarter of 1998, subject to stockholder and regulatory approval. In
addition, the Company intends to continue to pursue the strategic sale of
certain assets including certain assets of its prestress/precast division and
its Wyoming subsidiary.
Without giving effect to the Merger or any operational changes which
may occur following the Merger, the Company currently expects that net sales of
sand and gravel and ready mix concrete products will increase in the aggregate
and as a percentage of total net sales in the near term and that gross profit as
a percentage of net sales will increase to reflect the increased gross profit
associated with the sale of sand and gravel and ready mix concrete products. The
Company also anticipates that general and administrative expenses will increase
in the near term as a result of costs incurred in connection with the Merger.
The Company also anticipates procuring additional aggregate reserves as
such reserves become available, provided they can be purchased on terms
acceptable to the Company. The Company's operational activities pending
consummation of the Merger are subject to certain restrictions set forth in the
Merger Agreement and the Company is generally restricted to conducting its
business in the ordinary course consistent with past practice. Certain material
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<PAGE>
variations from the Company's past operational practice would require the
consent of the other parties to the Merger Agreement.
Forward-Looking Statements
Certain statements set forth above under the captions "Overview",
"Liquidity and Capital Resources", "Seasonality" and "Outlook" are
forward-looking statements including, without limitation, statements related to
(i) the Merger; (ii) planned asset sales and equipment refinancings; (iii) the
expected increase in net sales of sand and gravel and ready mix concrete
products and the corresponding expected increase in gross profit and gross
profit as a percent of net sales; (iv) the Company's cash usage trend and the
Company's potential need for and access to capital sources; (v) operational
restrictions applicable to the Company pending consummation of Merger; (vi)
anticipated increases in general and administrative expenses; (vii) the
Company's projected liquidity for the next 12 months; (viii) integration of the
Treasure Valley Concrete operations; (ix) the Company's readiness for the year
2000 computer issue; (x) seasonality issues: and (xi) other statements
containing the words "expects", "intends", "anticipates", "estimates",
"projects", "will continue", "plans", or words of similar effect and that are
not statements of historical fact. These forward-looking statements are subject
to certain risks, uncertainties and factors which could cause the anticipated
results to not be realized. These risks, uncertainties and factors include,
without limitation, (a) the Merger may not be consummated or may not be
consummated on the terms currently set forth in the Merger Agreement; (b) in the
event of price competition or a decrease in demand for the Company's sand and
gravel or ready mix concrete products for reasons of market proximity, price,
quality, general economic conditions, or state of federal budgetary changes
affecting freeway projects generally and the I-15 reconstruction project
specifically, the Company may not be able to increase sales of its sand and
gravel or its ready mix concrete products or may not be able to do so at
anticipated profit margins; (c) weather conditions and other circumstances
beyond the Company's control may impact its ability to increase sales of sand
and gravel and ready mix concrete products; (d) if the Company is forced to
conserve cash or is unable to access liquidity under its Credit Facility,
through the debt or equity capital markets or through asset sales, the Company
may be unable to fund operations or purchase additional aggregate properties and
in any event may be unable to purchase such properties on terms acceptable to
the Company; (e) the Company may be unable to consummate a sale of its
prestress/precast concrete division or its Wyoming subsidiary; and (f) any of
the factors listed under "Item 1--Forward Looking Statements and Risk Factors"
may occur causing outcomes to differ materially from those anticipated in the
forward- looking statements. Although the Company believes that its assumptions
underlying the forward-looking statements contained herein are reasonable, any
of those assumptions could prove inaccurate and, therefore, there is no
assurance that the results contemplated in any such forward-looking statement
will be utilized. Budgeting and other management decisions are subjective in
many respects and thus susceptible to interpretations and periodic revision. The
impact of actual experience and business developments may cause the Company to
alter its marketing, capital expenditure plans or other budgets, which may in
turn affect the Company's results of operations. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of any such statement should not be regarded as a representation by
the Company or any other person that the objectives or plans of the Company will
be achieved.
Due to factors noted above and elsewhere in this filing, the Company's
future earnings and stock price may be subject to significant volatility,
particularly on a quarterly basis. Past financial performance should not be
considered a reliable indicator of future performance and investors should not
use historical trends to anticipate results or trends in future periods. Any
shortfall in sales or earnings from the levels anticipated by parties other than
the Company could have an immediate and significant effect on the trading price
of the Company's Common Stock in any given period. Additionally, the Company may
not learn of such shortfalls until late in the fiscal quarter, which would
result in an even more immediately and adverse effect on the trading price of
the Company's Common Stock.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements and supplementary data required by
this Item 8 are set forth at the pages indicated in Item 14(a) below.
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<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On April 9, 1997, the Board of Directors of the Company, upon
recommendation of its Audit Committee, approved a change in the Company's
independent accountants from Grant Thornton LLP to Deloitte & Touche LLP
effective for the year ended December 31, 1997. During the two fiscal years
ended December 31, 1996 and 1995 and thereafter, the Company did not have any
disagreements with Grant Thornton LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, nor
did any reports issued by Grant Thornton LLP contain an adverse opinion or a
disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principles. The information provided in
the Company's Current Report on Form 8-K dated as of April 14, 1997 is
incorporated herein by reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company as of March 19,
1998 were as follows:
Name Age Position
Robert L. Miller 57 Chairman of the Board
Ronald D. Davis 52 President, Chief Executive Officer and
Director
L. William Rands 53 Chief Financial Officer, Vice President
- Finance, Secretary and Treasurer
James E. Dahl 62 Director
Michael A. Kane 36 Director
William T. Lightcap 60 Director
Jules Ross 65 Director
Marc T. Scholvinck 40 Director
Delbert T. Tanner 46 Director
Robert L. Miller has been Chairman of the Board and a director of the
Company since December 1995. In 1994, Mr. Miller became a limited partner of
Building and Construction Capital Partners, L.P. ("BCCP"). A family trust
controlled by Mr. Miller is a limited partner of BCCP I, L.P. ("BCCP I"), a
principal stockholder of the Company. From 1991 to 1994, Mr. Miller was a
private investor, investing during that period in, among other projects, a
residential development and fast food franchise. In 1980, Mr. Miller co-founded
West Venture Development Company, a developer of land, single family housing and
shopping centers in Southern California, and was responsible for the operations
of that company until it was sold in 1991.
Ronald D. Davis has served as President, Chief Executive Officer and a
director of the Company since July 1996. From 1985 to 1996, he was Vice
President and General Manager of CalMat Inc.'s Central and Northern California
operations. Prior to that, he was President of Bakersfield Ready mix.
L. William Rands has served as Chief Financial Officer, Vice President -
Finance and Treasurer of the Company since June 1985. Mr. Rands was elected
Secretary of the Company in 1992. Prior to joining the Company, he held
financial positions at the Carborundum Company, Occidental Petroleum and
McKinsey & Co.
James E. Dahl has been a director of the Company since December 1995.
Mr. Dahl has served as a consultant to the construction and materials industry
since 1992. From 1989 to 1992, he was Vice President and General Manager of the
Northwest Division of Beazer West, Inc. ("Beazer West"), a company located in
the United Kingdom and engaged in the business of sand and gravel aggregates and
ready mix concrete. From 1968 to 1989, Mr. Dahl held various management
positions at Kaiser sand and gravel Company, his last position being that of
President and General Manager before it was acquired by Beazer West.
Michael A. Kane has been a director of the Company since December 1995.
Mr. Kane has served as a Managing Director of Libra/Mezzanine Partners, L.P.
since September 1997. From 1994 to September 1997, Mr. Kane was a
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Managing Director of Richard C. Blum & Associates, L.P. ("Blum & Associates").
From 1992 to 1994, Mr. Kane was a Vice President of General Electric Capital
Corporation, with nationwide responsibility for transactions in the cement and
aggregates business, and from 1987 to 1992 he held various other positions with
that corporation. Blum & Associates is a money management firm with its
headquarters located in San Francisco, California, and it is the general partner
of BCCP, a limited partnership which makes investments in building and
construction industries. BCCP is the general partner of BCCP I, the principal
stockholder of the Company.
William T. Lightcap has been a director of the Company since 1992. Mr.
Lightcap has been a management consultant since 1995. From 1993 to 1995, he was
executive director of Hart, King & Coldren, a law firm located in Santa Ana,
California. He was self-employed from April 1992 to January 1993 and was a Vice
President and General Manager of Beazer West from 1990 to March 1992.
Jules Ross has been a director of the Company since 1987. Mr. Ross has
been a Vice President and director of Thackeray Corporation (NYSE), a real
estate investment corporation located in New York City since 1988. He also has
been a Managing Director of the RDR Group, a private investment company located
in Pomona, New York, since 1996. Mr. Ross has been a principal of Odyssey
Partners, L.P., an investment partnership located in New York City since 1987
("Odyssey Partners"). From 1991 to 1993, Mr. Ross was President and Chief
Executive Officer of CER Corporation, an engineering consulting firm located in
Las Vegas, Nevada.
Marc T. Scholvinck has been a director of the Company since March 1997.
Mr. Scholvinck has been a Managing Director and Chief Financial Officer of Blum
& Associates since 1996, and was Director of Finance and Controller of Blum &
Associates from 1991 to 1996, except for a ten-month period in 1993 when he was
a self-employed financial consultant and Financial Director of Leopard Rock
Hotel Company in Zimbabwe. Prior to joining Blum & Associates in 1991, Mr.
Scholvinck worked for Deloitte & Touche LLP in San Francisco, California, San
Jose, California and Cape Town, South Africa.
Delbert H. Tanner has been a director of the Company since July 1996.
Mr. Tanner has been the Chief Executive Officer of Channel Partners, an
outsource marketing firm located in Gilbert, Arizona since 1996. From 1993 to
1995, Mr. Tanner was Executive Vice President of CalMat, Inc., a construction
materials firm located in Los Angeles, California and from 1987 to 1993, he was
Regional Vice President of APAC, a subsidiary construction firm of Ashland Oil
located in Atlanta, Georgia.
The Company is not aware of any family relationships among any director
or executive officer of the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors and persons who own beneficially
more than ten percent of a registered class of the Company's equity securities
to file with the Securities and Exchange Commission and Nasdaq initial reports
of ownership and reports of changes in ownership of the Company's equity
securities. Officers, directors and greater than ten percent beneficial owners
are required to furnish the Company with copies of all Section 16(a) reports
they file.
Based solely upon a review of the copies of such reports furnished to
the Company or written representations that no other reports were required, the
Company believes that during the fiscal year ended December 31, 1997 the
Company's officers, directors and greater than ten percent beneficial owners
complied with all applicable Section 16(a) filing requirements.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual
and long-term compensation for services rendered to the Company in all
capacities for the fiscal years ended December 31, 1995, 1996 and 1997 of the
Chief Executive Officer and the other executive officers of the Company whose
salary and bonus exceeded $100,000 for the fiscal year ended 1997 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
------------
Restricted
Annual Compensation Stock Awards
------------------------------------------------------- -----------
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation(5) Compensation
- --------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Davis................ 1997 $152,083(1) $40,012(3) -- -- $9,409(7)
President and Chief 1996 75,000(2) 50,000(4) -- 200,000(6) 4,305(7)
Executive Officer 1995 -- -- -- -- --
L. William Rands............... 1997 90,000 14,040(3) -- 12,000(6) 1,140(7)
Vice President--Finance, 1996 82,333 -0- -- -- 1,032(7)
Chief Financial Officer, 1995 82,000 16,400(3) -- -- 815(7)
Treasurer and Secretary
</TABLE>
- ---------------------------
(1) Includes an annualized salary of $150,000 from January 1, 1997 until
October 31, 1997 and an increase in annualized salary to $165,000 for the
remaining two months in 1997.
(2) Mr. Davis was employed by the Company on July 1, 1996, at which time he
became the Company's President and Chief Executive Officer. Accordingly,
Mr. Davis' salary and bonus for 1996 are for the period from July 1, 1996
to December 31, 1996.
(3) Cash bonus pursuant to the Senior Management Bonus Program.
(4) Cash signing bonus paid to Mr. Davis upon commencement of his employment.
(5) The total value of certain benefits provided by the Company to the Named
Executive Officers is less than either $50,000 or 10% of the total annual
salary and bonus of the Named Executive Officers.
(6) Stock options granted to the respective Named Executive Officer under the
Company's 1996 Stock Option Plan.
(7) Annual life insurance premiums paid by the Company.
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<PAGE>
The following table sets forth certain information with respect to grants
of stock options pursuant to the Company's 1996 Stock Option Plan during fiscal
year 1997 to the Named Executive Officers.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Percentage Realizable Value at
of Total Assumed Annual
Options Exercise Rates of Stock Price
Granted to or Base Appreciation
Options Employees Price for Option Term(1)
Granted in Fiscal per Expiration --------------------
Name (Shares) Year Share Date 5% 10%
- ----- -------- ---- ----- ---- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Davis ............... 0 -- -- -- -- --
L. William Rands .............. 12,000 12.50% $5.25 03/20/02 $39,620 $100,406
</TABLE>
- ---------------------------
(1) Potential gains are net of the exercise price, but before taxes associated
with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. The assumed 5% and 10% rates of stock price appreciation are provided
in accordance with the rules of the Securities and Exchange Commission, and
do not represent the Company's estimate or projection of the future Common
Stock price. Actual gains, if any, on stock option exercises are dependent
upon the future financial performance of the Company, overall market
conditions and the option holder's continued employment through the vesting
period. This table does not take into account any actual appreciation in
the price of the Common Stock from the date of grant.
The following table sets forth certain information with respect to the
unexercised options to purchase shares of Common Stock under the Company's 1996
Stock Option Plan held by the Named Executive Officers at December 31, 1997. No
options were exercised by the Named Executive Officers during 1997.
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options In-the-Money Options
at December 31, 1997 at December 31, 1997(1)
---------------------- -----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald D. Davis................... 80,000 120,000 $375,000 $297,000
L. William Rands.................. 29,000 -- 145,625 --
- ---------------------------
</TABLE>
(1) Based on the closing sales price of $10.125 on December 31, 1997 of the
Company's Common Stock listed on The Nasdaq National Market.
Employment Agreements
On June 2, 1996, the Company entered into an Employment Agreement with
Ronald D. Davis pursuant to which Mr. Davis is employed as President and Chief
Executive Officer of the Company until June 2, 1999. Mr. Davis' Employment
Agreement provides for an initial annualized base salary of $150,000 per annum,
which may be increased at the discretion of the Board of Directors, and an
annual incentive bonus in such amount as may be determined by the Board of
Directors. Effective November 1997, the Board of Directors approved an increase
in Mr. Davis' annualized base salary to $165,000.
Pursuant to his Employment Agreement, in 1996 the Company paid Mr.
Davis a signing bonus of $50,000, and reimbursed him for his moving and
temporary housing expenses. The Company also granted Mr. Davis options under the
Company's 1996 Stock Option Plan to purchase 200,000 shares of Common Stock at
prices ranging from $5.125 to $8.75 per share. The options vest over a period of
four years ending July 1, 2000. In March 1998, the Company agreed to pay $50,000
to Mr. Davis upon the sale of all or part of the Company as additional
compensation for Mr. Davis'
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<PAGE>
services provided in connection with such transaction. Accordingly, Mr. Davis
will receive such $50,000 payment upon consummation of the Merger.
On July 25, 1995, the Company entered into an Employment Agreement with
L. William Rands pursuant to which Mr. Rands is employed as Vice President of
Finance, Secretary and Treasurer of the Company until July 31, 1998. Mr. Rands'
Employment Agreement provides for an initial annualized base salary of $82,000
per annum, which may be increased at the discretion of the Board of Directors,
and an annual incentive bonus in such amount as may be determined by the Board
of Directors. Effective December 1996, the Board of Directors approved an
increase in Mr. Rands' annualized base salary to $90,000.
Pursuant to an agreement dated as of June 23, 1997 between the Company
and Mr. Rands, the Company has agreed to pay $50,000 to Mr. Rands upon the sale
of all or part of the Company as additional compensation for Mr. Rands' services
provided in connection with such transaction. Accordingly, Mr. Rands will
receive such $50,000 payment upon consummation of the Merger.
Pension Plan
The Company provides certain retirement benefits to its employees
pursuant to an Employee Pension Plan and Trust Agreement, as amended and
restated (the "Pension Plan"). Employees are eligible to participate in the
Pension Plan after they have completed one year of service with the Company.
Pursuant to the Pension Plan, the Company contributes a specified
percentage of each participating employee's compensation to the Pension Plan in
each year. For 1997, the specified percentage was 7%, subject to certain
limitations and exceptions. The Company's contributions are allocated to the
account of each participating employee, subject to a maximum permissible amount.
Employees may also make voluntary contributions to the Pension Plan, subject to
certain limitations. A participating employee's account at his or her selection
is invested among a limited number of mutual funds.
Upon retirement, an employee may elect the distribution of his or her
accrued benefit in the form of a lump sum payment, various forms of annuities or
installment payments. Accordingly, the annual benefits payable to an employee
under the Pension Plan would depend upon the form of payment elected. Assuming
Mr. Davis and Mr. Rands elected to receive distributions in the form of
installment payments over 20 years, and assuming a yield of 10% with no salary
increases, the estimated annual payments payable to Mr. Davis and Mr. Rands upon
retirement at the normal retirement age (65) would be approximately $35,000 and
$45,000, respectively.
The Employee Stock Ownership Plan
The Company's ESOP owns approximately 1,163,719 shares or approximately
26% of the Company's Common Stock. The ESOP is an employee stock ownership plan
qualified under Section 401(a) of the Internal Revenue Code (the "Code").
The ESOP is currently administered by the Company as the ESOP Plan
Administrator and the Company's Chief Executive Officer is authorized to act on
behalf of the Company. The ESOP also allows the Board of Directors to appoint
other individuals or an Advisory Committee to administer the plan. The assets of
the ESOP are held in trust by First Security Bank of Utah, N.A. (the "Trustee").
The Trustee holds legal title to all assets of the ESOP and as a result has the
power to buy and sell the Common Stock held by the ESOP, but only pursuant to
written directions of the Company.
Each employee of the Company with at least one year of service is
eligible to participate in the ESOP. The ESOP Plan Administrator establishes and
maintains an account for each participant that reflects the participant's
allocable share of the ESOP's assets. Each participant's share of the Company's
contribution for a plan year is determined by multiplying the total amount
contributed by a fraction equal to the proportion that the participant's salary
bears to the total salary of all participant's for such year subject to
individual allocation limits under the Code. A participant's account becomes
fully vested and nonforfeitable after six years of employment with the Company,
or earlier if the participant attains age 62, becomes totally disabled or dies.
The participant's account otherwise vests at a rate of 20% per year of
employment beginning with the second year of employment. The Company pays all
administrative costs of the ESOP.
24
<PAGE>
Mr. Davis does not participate in the ESOP. Mr. Rand's is a participant
in the ESOP and his allocable share of the ESOP's assets for the years 1995,
1996 and 1997 were valued at $4,564, $5,192 and $5,919, respectively.
Compensation of Directors
Each non-employee director receives $1,000 per Board of Directors
meeting attended, plus expenses, and $500 for each standing Board of Directors
Committee meeting which he attends (Audit Committee, Compensation Committee and
Strategic Planning Committee). The Company also has entered into a consulting
agreement with BCCP pursuant to which the Company pays BCCP $200,000 per year.
Marc T. Scholvinck is a Managing Director of Blum & Associates, the general
partner of BCCP, and Robert L. Miller is a limited partner of BCCP. BCCP is the
general partner of BCCP I, a significant stockholder of the Company, and a
family trust controlled by Mr. Miller is a limited partner of BCCP I. See "Item
13--Certain Relationships and Related Transactions--Consulting Agreement." The
Company has also granted stock options to certain directors pursuant to its 1994
Stock Option Plan and its 1996 Stock Option Plan. See "Item 13--Certain
Relationships and Related Transactions."
COMPENSATION COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of the
previous filings made by the Company under the Securities Act of 1933, as
amended, or the Securities Act of 1934, as amended, that might incorporate
future filings, including, but not limited to, this Annual Report on Form 10-K,
in whole or in part, the following Compensation Committee Report and the
performance graph appearing herein shall not be deemed to be incorporated by
reference into any such future filings.
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The role of the Compensation
Committee, which is comprised entirely of outside, non-employee directors, is to
review and approve salaries and other compensation of the executive officers of
the Company. The Committee also reviews and approves various other Company
compensation policies and administers the Company's 1994 Stock Option Plan, 1996
Stock Option Plan, including the review and approval of stock option grants to
the executive officers of the Company. This Compensation Committee Report
discusses the Company's executive compensation policies and the basis for the
compensation paid to the Company's executive officers, including its Chief
Executive Officer, Ronald D. Davis, during the fiscal year ended December 31,
1997.
Executive Compensation Philosophy
In designing its compensation programs, the Company follows its belief
that compensation should reflect the value created for stockholders while
supporting the Company's business strategies and short-terms operating goals.
Accordingly, the Company's policy with respect to executive compensation has
been designed to align the interests of management with the interests of the
Company's stockholders adequately and fairly compensate executive officers in
relation to their responsibilities, capabilities and contributions to the
Company in a manner that is comparable with compensation paid by companies of
comparable size or within the Company's industry.
Total cash compensation for the executive officers consists of the
following components: (a) base salary, (b) annual bonus compensation, (c)
incentive compensation in the form of stock options granted pursuant to the 1994
Stock Option Plan and the 1996 Stock Option Plan and (d) certain other benefits
provided to the Company's executive officers.
Base Salary. Base salaries in 1997 for the executive officers are
established at levels considered appropriate in respect to the duties and scope
of responsibilities of each executive officer's position. Each executive is
reviewed individually on an annual basis. Salary adjustments are based on the
individual's experience and background, performance during the prior year, the
general movement of salaries in the marketplace, and the Company's fiscal
position.
Annual Bonus Compensation. Pursuant to the Senior Management Bonus
Program Fiscal 1997, the Compensation Committee may grant annual bonus awards to
individual executive officers based on the executive officer's performance in
assisting the Company in meeting expected stockholder returns and management
goals. The Compensation Committee has the authority to select the executive
officers and employees who will be granted bonuses and to determine
25
<PAGE>
the timing, pricing and amount of any such bonus. In determining the amount of
bonus to be paid to the Company's Chief Executive Officer and the salary, bonus
and other compensation to be paid to the other executive officers of the
Company, the Compensation Committee considered a number of factors relating to
corporate performance, including, among others, whether the Company had been
successful in meeting management's earnings projections, whether the Company had
met its goals for expanding its business operations and whether management had
met its goals for strengthening the Company's management team. The Committee
also considered whether the compensation paid to executive officers was
sufficient to attract and retain qualified executive officers.
Incentive Compensation. The Compensation Committee is also responsible,
within the terms of the respective plans, for administering the 1994 Stock
Option Plan and the 1996 Stock Option Plan. The Compensation Committee provides
intermediate and long-term incentives through grants of stock options to
executive officers. Stock options are designed to provide incentive for future
performance.
Other Benefits. Other elements of compensation include medical life
insurance benefits available to employees generally. Executive officers also
receive supplemental life insurance benefits which, in addition to the life
insurance benefits received by all employees.
Compensation of the Chief Executive Officer. The Chief Executive
Officer, Mr. Ronald D. Davis, participates in the executive compensation
programs described in this report. Mr. Davis became the Chief Executive Officer
on July 1, 1996 with an initial annualized base salary of $150,000. Effective
November 1997, Mr. Davis's salary was increased to $165,000 based on the factors
discussed above in "Base Salary," including a review of market pay trends. For
services rendered during fiscal 1997, the Committee awarded Mr. Davis a bonus of
approximately $40,012 pursuant to the Senior Management Bonus Program Fiscal
1997 based on achieving certain financial objectives during the fiscal year
1997. The Company typically grants options to is executive officers in January
of each year. However, pending consummation of the proposed Merger, the Company
has not granted any stock options to executive officers during 1998. In March
1998, the Company has agreed to pay $50,000 to Mr. Davis upon the sale of all or
part of the Company as additional compensation for Mr. Davis' services provided
in connection with such transaction. Accordingly, Mr. Davis will receive $50,000
upon consummation of the Merger.
Robert L. Miller, Chair
James E. Dahl
William T. Lightcap
Delbert H. Tanner
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors, which is
responsible for the compensation policies of the Company with respect to its
executive officers, is comprised of Robert L. Miller, James E. Dahl, William T.
Lightcap and Delbert H. Tanner. Mr. Miller is a limited partner of BCCP and a
family trust controlled by Mr. Miller is a limited partner of BCCP I. BCCP I is
a significant stockholder of the Company, and BCCP is the general partner of
BCCP I. BCCP has entered into a consulting agreement with the Company pursuant
to which the Company pays BCCP $200,000 annually for consulting services
rendered to the Company by BCCP. See "Item 13--Certain Relationships and Related
Transactions--Consulting Agreement."
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder return (stock price appreciation plus dividends) of the Company's
Common Stock with the cumulative total return of the Nasdaq Market Index and a
market weighted index of publicly traded peers for the period from May 5, 1994
(the date of the Company's initial public offering) through December 31, 1997.
The graph assumes that $100 is invested in each of the Common Stock, the Nasdaq
Market Index and the index of publicly traded peers on May 5, 1994 and that all
dividends are reinvested. The publicly traded companies in the peer group are
CalMat Co., Centex Construction Products, Inc., Dravo Corp., Florida Rock
Industries, Inc., LaFarge Corp., Lone Star Industries, Inc., Medusa Corp.,
Southdown, Inc., Texas Industries, Inc., United States Lime & Mineral, Inc. and
Vulcan Materials Corp.
26
<PAGE>
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
AMONG MONROC, INC.;
PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
Measurement Period Company Nasdaq Market Index Peer Group Index
------------------ ------- ------------------- ----------------
<S> <C> <C> <C>
May 5, 1994 $100.00 $100.00 $100.00
December 31, 1994 70.00 101.44 94.57
December 31, 1995 107.50 131.58 110.88
December 31, 1996 127.50 163.51 127.61
December 31, 1997 202.50 200.01 201.66
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 20, 1998 by (i) each person known to
the Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) each executive officer of the
Company and (iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percent
Name and Address of Beneficial Owner Owned(1) of Class
- ------------------------------------ ---------- --------
<S> <C> <C>
Richard C. Blum (2) .................................... 3,721,577 61.9%
909 Montgomery Street, Suite 400
San Francisco, CA 94133
Colonial Commercial Corp................................ 328,071 7.3
3601 Hemstead Turnpike
Suite 121-1
Levittown, NY 11756
Monroc, Inc. Employee Stock Ownership Plan(3)........... 1,163,719 25.8
James E. Dahl(4)........................................ 13,000 *
Ronald D. Davis(5)...................................... 80,000 1.7
Michael A. Kane......................................... -- *
William Lightcap(7)..................................... 15,000 *
Robert L. Miller(6)..................................... 3,721,577 61.9
L. William Rands(8)..................................... 43,658 1.0
Jules Ross(9)........................................... 21,566 *
Marc T. Scholvinck(6)................................... 3,721,577 61.9
Delbert H. Tanner(10)................................... 13,100 *
All directors and executive officers as a group
(14 persons)........................................... 3,907,901 63.4
</TABLE>
- ---------------------------
* Represents ownership of less than 1.0%.
(1) Except as indicated below, each of the beneficial owners listed in the
above table has, to the knowledge of the Company, sole voting and
investment power with respect to the indicated shares of Common Stock.
27
<PAGE>
(2) Mr. Blum is a controlling person and Chairman of Richard C. Blum &
Associates Inc. ("RCBA Inc."), which is the general partner of Richard C.
Blum & Associates LP ("Blum & Associates"). Blum & Associates is the
general partner of Building and Construction Partners, L.P. ("BCCP"), which
is the general partner of BCCP I, L.P. ("BCCP I"). These shares of Common
Stock include (i) 1,650,000 shares held directly by BCCP I, (ii) 1,500,000
shares subject to an unexercised warrant held by BCCP I that entitles BCCP
I to purchase up to 1,500,000 shares of Common Stock for $6.25 per share at
any time prior to December 28, 2000, (iii) 328,071 shares held by Colonial
Commercial Corp. ("Colonial") that are subject to certain agreements
pursuant to which Colonial has agreed to vote its shares in favor of
persons originally nominated as directors by BCCP, so long as such persons
are nominated for re-election, until the end of the year 2000 (see "Item
13--Certain Relationships and Related Transactions--Certain Purchase and
Consulting Agreements) and (iv) 243,506 unallocated shares owned by the
ESOP, under the terms of which unallocated shares owned by the ESOP are
voted by management in accordance with the determination of the Board of
Directors of the Company, 50% of the directors of which have has been
nominated by or are affiliated with BCCP (see "Item 13--Certain
Relationships and Related Transactions--Certain Purchase and Consulting
Agreements). Mr. Blum disclaims beneficial ownership of these securities
except to the extent of his pecuniary interest thereof.
(3) ESOP participants vote the shares allocated to their individual accounts on
matters submitted to a vote of stockholders. Under the terms of the ESOP,
the 243,506 unallocated shares owned by the ESOP are to be voted in
accordance with the determination of the Board of Directors of the Company.
(4) Includes options to purchase 13,000 shares granted to Mr. Dahl which are
exercisable within 60 days.
(5) Includes options to purchase 80,000 shares granted to Mr. Davis which are
exercisable within 60 days.
(6) Includes 3,721,577 shares beneficially owned by BCCP I. Mr. Scholvinck is a
Managing Director and the Chief Financial Officer of Blum & Associates, the
general partner of BCCP. BCCP is the general partner of BCCP I. Mr. Miller
is a limited partner of BCCP and a family trust controlled by Mr. Miller is
a limited partner of BCCP I.
(7) Includes 10,000 shares owned directly by Mr. Lightcap and options to
purchase 5,000 shares granted to Mr. Lightcap which are exercisable within
60 days.
(8) Includes 14,658 shares allocated to Mr. Rands held in the ESOP and options
to purchase 29,000 shares granted to Mr. Rands which are exercisable within
60 days.
(9) Includes 11,566 shares owned directly by Mr. Ross, and options to purchase
10,000 shares granted to Mr. Ross which are exercisable within 60 days.
(10) Includes 100 shares beneficially owned by Mr. Tanner and options to
purchase 13,000 shares granted to him which are exercisable within 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Purchase and Consulting Agreements
BCCP I acquired an interest in the Company on December 28, 1995
pursuant to a Stock Purchase Agreement between the Company and BCCP (the "Stock
Purchase Agreement"). Prior to the closing of the stock purchase transaction,
BCCP assigned to its affiliate, BCCP I, all of its rights under the Stock
Purchase Agreement (other than its right to designate directors and rights under
a consulting agreement between BCCP and the Company). BCCP is the general
partner of BCCP I. Robert L. Miller, a director of the Company, is a limited
partner of BCCP and a family trust controlled by Mr. Miller is a limited partner
of BCCP I. Marc T. Scholvinck, a director of the Company, is a Managing Director
and the Chief Financial Officer of Blum & Associates, the general partner of
BCCP.
Pursuant to the Stock Purchase Agreement, BCCP had the right to
nominate four directors to be appointed immediately following the consummation
of the stock purchase transaction. Of the four directors originally nominated
28
<PAGE>
by BCCP pursuant to the Stock Purchase Agreement and thereafter elected to the
Board of Directors, three were re-elected at the Company's 1997 annual meeting
of stockholders (Messrs. Miller, Kane and Dahl). Mr. Scholvinck, a Managing
Director and the Chief Financial Officer of Blum & Associates, was appointed to
the Board of Directors in March 1997 to fill a vacancy resulting from the
resignation of a director and was re-elected to the Board of Directors at the
Company's 1997 annual meeting of stockholders.
Pursuant to the Stock Purchase Agreement, the Company and BCCP entered
into a consulting agreement which provides that, so long as BCCP's nominees
constitute a majority of the Board of Directors, BCCP will offer consultation
and advice with respect to the Company's business, including strategic
acquisitions, financing and business strategy. As compensation for these
services, the Company agreed to pay BCCP $200,000 per year and to reimburse BCCP
for its out of pocket expenses. In 1997, the Company paid BCCP $200,000 for such
services and reimbursed BCCP approximately $5,700 for expenses.
Promissory Notes to Stockholders
The Company has issued to Wel-Com Financial Services, Inc. ("Wel-Com")
a promissory note in the principal amount of $718,750. The terms of this note
require the Company to pay $120,000 per year, together with interest at the
prime rate, through the year 2001. As of December 31, 1997, the outstanding
balance of this note was $298,750. Wel- Com is a wholly-owned subsidiary of
Colonial, which owns 328,071 shares or approximately 7.3% of the outstanding
Common Stock of the Company. The President of Colonial, Bernard Korn, was
formerly a director of the Company, and pursuant to an agreement between the
Company and Colonial, he has been designated as an observer to attend meetings
of the Board of Directors of the Company. See "--Consulting Agreement."
The Company issued a promissory note to a group of seven investors,
including Odyssey Partners, in the principal amount of $718,750. The terms of
the note required the Company to pay $120,000 per year, together with interest
at the prime rate, through the year 2001. On June 26, 1997, the Company paid the
remaining outstanding principal balance of $373,750, less a ten percent
prepayment discount. Jules Ross, a director of the Company, is a principal of
Odyssey.
Indebtedness of Management
On October 18, 1996, the Company loaned $140,000 to Ronald D. Davis,
President and Chief Executive Officer of the Company, in connection with his
purchase of a residence. The promissory note evidencing this loan is secured by
a deed of trust on Mr. Davis' residence and bears interest at the rate of 7% per
annum. The promissory note required payments of interest only until October 23,
1997, when the entire principal balance became due. On January 1, 1998, Mr.
Davis tendered a replacement one-year promissory note due on January 1, 1999 on
the same terms as the original note. Mr. Davis continued to pay interest at the
rate of 7% per annum through December 31, 1997. During 1997, Mr.
Davis paid a total of $9,800 pursuant to this loan.
Employment Agreements
The Company has entered into employment with certain of its executive
officers. See "Item 11--Executive Compensation--Employment Agreements."
29
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Index to Consolidated Financial Statements
Report of Deloitte & Touche LLP, Independent Certified
Public Accountants........................................F-1
Report of Grant Thornton LLP, Independent Certified
Public Accountants........................................F-2
Consolidated Balance Sheets at December 31, 1997
and 1996..................................................F-3
Consolidated Statements of Operations for the Years
ended December 31, 1997, 1996 and 1995....................F-5
Consolidated Statements of Stockholders' Equity
for the Years ended December 31, 1997, 1996 and 1995......F-6
Consolidated Statements of Cash Flows for the Years
ended December 31, 1997, 1996 and 1995....................F-7
Notes to Financial Statements.............................F-9
(a) (2) Financial Statement Schedules
Report of Deloitte & Touche LLP, Certified Public
Accountants..............................................F-25
Report of Grant Thornton LLP, Certified Public
Accountants..............................................F-25
Schedule II - Valuation and Qualifying Accounts..........F-25
(b) Reports on Form 8-K
None
(c) Exhibits
2.1 Stock Purchase Agreement dated January 6, 1998
between the Company and Treasure Valley Concrete, Inc.(7)
2.2 Agreement and Plan of Merger dated January 29, 1998 among
the Company, U.S. Aggregates, Inc. and Western
Acquisition, Inc.(8)
3.1 Certificate of Incorporation(1)
3.2 By Laws(1)
10.1 Monroc, Inc. Employee Stock Ownership Plan, amended and
restated as of April 1, 1987(1)
10.2 Monroc, Inc. 1994 Stock Option Plan, amended as of April
18, 1997(3)
10.3 Form of indemnity agreements with directors(1)
10.4 Amendment dated February 27, 1996 to the Loan and
Security Agreement dated July 26, 1993 between the
Company and CIT Group/Credit Finance, Inc. (4)
30
<PAGE>
10.5 Loan and Security Agreement dated July 26, 1993 between
the Company and CIT Group/Credit Finance, Inc. (1)
10.6 Stock Purchase Agreement dated July 26, 1995 by and
between Building and Capital Construction Partners, L.P.
and Monroc, Inc.(2)
10.7 Consulting Agreement dated December 28, 1995 by and
between Building and Capital Construction Partners, L.P.
and Monroc, Inc.(2)
10.8 Voting Agreement dated December 28, 1995 by and between
Building and Capital Construction Partners, L.P. and
Colonial Commercial Corp.(2)
10.9 Voting Agreement dated December 28, 1995 by and between
Building and Capital Construction Partners, L.P. and
Odyssey Partners (1)
10.10 Employment Agreement dated July 25, 1995 with L. William
Rands(5)
10.11 Monroc, Inc. 1996 Stock Option Plan, amended April 18,
1997(3)
10.12 Employment Agreement dated June 2, 1996 with Ronald D.
Davis(5)
10.13 Real Estate Purchase Agreement dated December 27,1996
between the Company and Whitney Family Trust(5)
10.14 Snake River Correctional Institution Subcontract
Agreement dated September 12, 1995 by and between Monroc,
Inc. and Hoffman Construction Co.*
10.15 Snake River Correctional Institution Subcontract
Agreement dated December 14, 1995 by and between Monroc,
Inc. and Hoffman Construction Co.*
10.16 Sand and Gravel Lease dated May 1, 1996 by and between
Monroc, Inc. and the State of Wyoming, Board of Land
Commissioners*
10.17 Sand and Gravel Lease dated October 25, 1996 by and
between Monroc, Inc. and LLK, Inc.*
10.18 Sand and Gravel Lease dated April May 29, 1997 by and
between Monroc, Inc. and Alma L. Rushton*
10.19 Memorandum of Agreement dated September 17, 1997 by and
between Monroc, Inc. and Kenneth Dunn*
16 Letter from Grant Thornton LLP dated April 10, 1997(6)
21 Subsidiaries of Monroc, Inc.*
23.1 Consent of Deloitte & Touche LLP*
23.2 Consent of Grant Thornton LLP*
27 Financial Data Schedule*
99.1 Voting Agreement dated January 29, 1995 between U.S.
Aggregates, Inc., and BCCP I, L.P.(8)
- ---------------------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-75172).
31
<PAGE>
(2) Incorporated by reference to the Company's Current Report on Form 8-K filed
December 28, 1995.
(3) Incorporated by reference to the Company's Proxy Statement dated April 18,
1997.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
(6) Incorporation by reference of the Company's Current Report on Form 8-K
filed April 14, 1997.
(7) Incorporation by reference to the Company's Current Report on Form 8-K
filed January 15, 1998.
(8) Incorporation by reference to the Company's Current Report on Form 8-K
filed February 3, 1998.
* Filed herewith
32
<PAGE>
MONROC, INC. AND SUBSIDIARY
Consolidated Financial Statements for the Years Ended December 31, 1997 and 1996
and for the Three Years in the Period Ended December 31, 1997 and Independent
Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Monroc, Inc.:
We have audited the accompanying consolidated balance sheet of Monroc, Inc. and
Subsidiary (the Company) as of December 31, 1997 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. The consolidated financial
statements of the Company for each of the two years in the period ended December
31, 1996 were audited by other auditors whose report, dated February 11, 1997,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such 1997 consolidated financial statements present fairly, in
all material respects, the financial position of Monroc, Inc. and Subsidiary as
of December 31, 1997, and the results of their operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
March 31, 1998
F-1
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Monroc, Inc.
We have audited the accompanying consolidated balance sheet of Monroc, Inc. and
Subsidiary, as of December 31, 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the two years in
the period ended December 31, 1996. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Monroc, Inc. and
Subsidiary, as of December 31, 1996, and the consolidated results of their
operations and their consolidated cash flows for each of the two years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Salt Lake City, Utah
February 11, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
__________________________________________________________________________________________________
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 752,280 $ 1,189,631
Accounts receivable, net of allowance for discounts and
doubtful accounts of $263,165 in 1997 and $301,624 in 1996 9,022,922 13,201,601
Other receivables 157,236
Note receivable from officer 140,000
Costs and estimated earnings in excess of billings
on uncompleted contracts 215,045 181,634
Inventories 4,684,107 3,977,274
Prepaid expenses 1,165,697 1,305,491
----------- -----------
Total current assets 16,137,287 19,855,631
----------- -----------
PROPERTY, PLANT, AND EQUIPMENT - At cost 30,021,473 27,310,062
Less accumlated depreciation and amortization 12,363,433 11,802,432
----------- -----------
Total property, plant, and equipment 17,658,040 15,507,630
----------- -----------
AGGREGATE DEPOSITS 5,394,458 2,477,154
Less accumulated depletion 444,496 337,595
----------- -----------
Total aggregate deposits 4,949,962 2,139,559
----------- -----------
LAND 1,377,190 1,436,204
LAND HELD FOR SALE 1,667,329 915,951
OTHER ASSETS, At cost, less accumulated amorization of
$359,307 in 1997 and $301,545 in 1996 725,915 783,277
----------- -----------
TOTAL $42,515,723 $40,638,252
=========== ===========
</TABLE>
See notes to consolidated financial statements. (Continued)
F-3
<PAGE>
<TABLE>
<CAPTION>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
_________________________________________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
<S> <C> <C>
CURRENT LIABILITIES:
Line of credit $ 5,898,872 $ 5,354,688
Current maturities of long-term obligations:
Related parties 120,000 240,000
Other 1,244,444 891,289
Trade accounts payable 4,581,624 6,328,925
Accrued liabilities 2,419,969 1,549,652
Billings in excess of costs and estimated earnings
on uncompleted contracts 161,221 690,254
----------- -----------
Total current liabilities 14,426,130 15,054,808
LONG-TERM OBLIGATIONS, Less current maturities:
Related parties 178,750 597,500
Other 6,647,986 4,564,243
DEFERRED COMPENSATION 748,641 779,263
DEFERRED INCOME TAXES 777,485 971,855
COMMITMENTS AND CONTINGENCIES (Notes 6 and 11)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 1,000,000
shares authorized; none issued
Common stock, $0.01 par value; 20,000,000 shares
authorized; issued and outstanding 4,514,200 and
4,467,000 as of December 31, 1997 and 1996 respectively 45,142 44,670
Capital in excess of par value 24,717,191 24,481,864
Accumulated deficit (3,301,556) (3,331,905)
----------- -----------
Total 21,460,777 21,194,629
Less unpaid principal of Employee Stock Ownership
Plan note receivable (1,724,046) (2,524,046)
Total stockholders' equity 19,736,731 18,670,583
----------- -----------
TOTAL $42,515,723 $40,638,252
=========== ===========
</TABLE>
See notes to consolidated financial statements. (Concluded)
F-4
<PAGE>
<TABLE>
<CAPTION>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
________________________________________________________________________________________________________________
1997 1996 1995
<S> <C> <C> <C>
NET SALES $61,383,362 $70,401,396 $48,302,248
COSTS AND EXPENSES:
Cost of sales 52,584,214 63,045,372 40,206,797
General and administrative expenses 6,925,124 5,941,017 4,783,696
Contribution to ESOP 800,000 800,000 800,000
Restructuring charges 1,500,000
----------- ----------- -----------
Total costs and expenses 60,309,338 71,286,389 45,790,493
----------- ----------- -----------
OPERATING PROFIT (LOSS) 1,074,024 (884,993) 2,511,755
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Gain (loss) on sale of property, plant,
equipment, and land (16,029) 35,930 129,085
Interest income 33,587 73,811 34,222
Interest expense (1,046,833) (810,122) (1,385,434)
----------- ----------- -----------
Total other expense (1,029,275) (700,381) (1,222,127)
----------- ----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES 44,749 (1,585,374) 1,289,628
INCOME TAX BENEFIT (194,370) (217,695) (66,023)
----------- ----------- -----------
NET EARNINGS (LOSS) $ 239,119 $(1,367,679) $ 1,355,651
=========== =========== ===========
BASIC EARNINGS PER COMMON SHARE $ 0.05 $ (0.31) $ 0.48
=========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE $ 0.05 $ (0.31) $ 0.48
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
________________________________________________________________________________________________________________
Employee
Stock
Capital in Ownership
Excess of Accumulated Plan Note
Common Stock Par Value Deficit Receivable
-----------------------
Shares Amount
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995 2,817,000 $28,170 $15,722,119 $(3,319,877) $(4,124,046)
Common stock issued 1,650,000 16,500 8,759,745
Net earnings for the year 1,355,651
Reduction of ESOP not receivable 800,000
--------- ------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1995 4,467,000 44,670 24,481,864 (1,964,226) (3,324,046)
Net loss for the year (1,367,679)
Reduction of ESOP note receivable 800,000
--------- ------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1996 4,467,000 44,670 24,481,864 (3,331,905) (2,524,046)
Common stock issued 47,200 472 235,327
Purchase of stock warrants (208,770)
Net earnings for the year 239,119
Reduction of ESOP note receivable 800,000
--------- ------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1997 4,514,200 $45,142 $24,717,191 $(3,301,556) $(1,724,046)
========== ======= =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
________________________________________________________________________________________________________________
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 239,119 $(1,367,679) $ 1,355,651
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization of property, plant,
and equipment 2,302,722 2,376,609 2,384,383
Deferred income tax expense (194,370) (217,695) (106,887)
Restructuring charges 1,500,000
Provision for contribution to ESOP and repayment
of ESOP note receivable 800,000 800,000 800,000
Amortization of other assets 57,362 81,886 82,153
Provision for discounts and doubtful accounts 397,402 536,863 532,764
Depletion of aggregate deposits 106,902 107,210 60,776
(Gain) loss on sale of property, plant and
equipment, and land 16,029 (35,197) (129,085)
Changes in assets and liabilities:
Accounts receivable 3,624,041 (7,098,586) (2,597,383)
Note receivable from officer (140,000)
Costs and estimated earnings in excess
of billings on uncompleted contracts (33,411) (28,691) 5,943
Inventories (761,485) (1,161,494) (846,865)
Prepaid expenses 139,794 (215,599) (693,941)
Other assets 518,213 (158,710)
Trade accounts payable (1,747,301) 1,021,622 2,280,071
Accrued liabilities 870,317 26,864 365,864
Billings in excess of costs and estimated
earnings on uncompleted contracts (529,033) 447,724 84,325
Deferred compensation (30,622) 18,779 92,441
----------- ----------- -----------
Net cash provided by (used in) operating activities 5,117,466 (2,689,171) 3,511,500
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment (4,357,454) (4,502,562) (1,996,270)
Proceeds from sale of property, plant,
equipment, and land 306,293 329,323 390,572
Additions to aggregate deposits (2,917,305) (22,500)
Addition to land (637,712) (842,083) (40,278)
----------- ----------- -----------
Net cash used in investing activities (7,606,178) (5,037,822) (1,645,976)
----------- ----------- -----------
(Continued)
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
MONROC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
________________________________________________________________________________________________________________
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in line of credit $ 544,184 $ 5,268,170 $ (787,846)
Principal payments on long-term obligations (1,656,388) (3,626,970) (4,287,363)
Issuance of long-term obligations 3,136,536 768,673 457,110
Purchase of stock warrants (208,770)
Issuance of common stock 235,799 8,776,245
----------- ----------- -----------
Net cash provided by financing activities 2,051,361 2,409,873 4,158,146
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (437,351) (5,317,120) 6,023,670
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 1,189,631 6,506,751 483,081
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 752,280 $ 1,189,631 $ 6,506,751
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 981,672 $ 907,054 $ 1,468,677
Income taxes None 32,410 960
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES - The Company acquired equipment
under capital lease obligations totaling $418,000, $1,424,000, and $19,060 in
1997, 1996, and 1995, respectively. Additionally, inventory valued at a cost of
$54,652 was transferred to the cost of land due to land reclamation activities
during 1997.
See notes to consolidated financial statements.
F-8
<PAGE>
MONROC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
_______________________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity - Monroc, Inc. and subsidiary (the Company) operate in
one industry segment, the production and sale of sand and gravel products,
ready-mix concrete, prestress/precast concrete products, and accessories
for the building and construction industry, principally in Utah, Idaho, and
Wyoming.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary, Big Horn
Redi-Mix, Inc. (Big Horn). All significant intercompany accounts and
transactions have been eliminated in consolidation.
Inventories - Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method, except for sand
and gravel which uses the lower of average cost or market.
Property, Plant, and Equipment and Aggregate Deposits - Property, plant,
and equipment are stated at cost and are depreciated over their estimated
useful lives. Leased property under capital leases is amortized over the
lives of the respective leases or over the service lives of the assets for
those leases which substantially transfer ownership. The straight-line
method of depreciation is followed for financial reporting purposes;
however, straight-line and accelerated methods are used for tax purposes.
Depletion on aggregate deposits is calculated on a units-of-production
basis. The estimated lives used in determining depreciation and
amortization are:
Years
Mobile equipment 5-12
Plant equipment 5-12
Administrative equipment and buildings 5-50
Other Assets - Other assets include miscellaneous amortizable assets
including financing commitment fees, which fees are being amortized on the
interest method over the term of the notes payable to banks. Other assets
also includes goodwill which is being amortized on the straight-line method
over 20 years. Impairment of long-lived assets is determined by evaluating
long-lived assets on a periodic basis in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and of Long-Lived
Assets to be Disposed Of," which was adopted on January 1, 1996. Assets
determined to be impaired are written down to their fair value. There were
no significant impairments during 1997 or 1996.
Revenue Recognition - Revenues on contracts which are primarily for
prestress/precast concrete products are recognized on the
percentage-of-completion method. The percentage-of-completion is determined
on the units-of-production basis. Under this method, revenues, costs, and
estimated profits are recognized as individual units are completed. The
amounts included in the accompanying balance sheets as "costs and estimated
earnings in excess of billings on uncompleted contracts" represent revenues
recognized in excess of amounts billed (underbillings) and "billings in
excess of costs and estimated earnings on uncompleted contracts" represent
billings in excess of revenues recognized (overbillings).
F-9
<PAGE>
During 1997 and 1996, the Company recognized revenue of approximately
$6,349,000 and $15,600,000, respectively, on a significant project which
was completed during 1997. No single project with revenues recognized in
excess of 10% of total consolidated revenues existed during 1995.
Contract costs include all direct labor and benefits, materials, unique to
or installed in the project, and indirect cost allocations, including
employee benefits and construction equipment expense. As long-term
contracts extend over one or more years, revision in cost and earnings
estimates during the course of the work are reflected in the accounting
period in which the facts which require the revision become known. At the
time a loss on a contract becomes known, the entire amount of the estimated
ultimate loss is recognized in the financial statements.
Costs attributable to contract claims or disputes are recorded in the
accompanying balance sheets only when realization is probable. The amounts
are recorded at the lesser of actual costs incurred or the amount expected
to be realized.
Revenues on other product sales are recognized when the product is shipped.
Income Taxes - The Company utilizes an asset and liability approach for
financial accounting and reporting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities and
are measured using enacted tax rates and laws that will be in effect when
the differences are expected to reverse. An allowance against deferred tax
assets is recorded when it is more likely than not that such tax benefits
will not be realized.
ESOP Accounting - The Company established an Employee Stock Ownership Plan
(ESOP) in 1986 to facilitate the acquisition of assets from a predecessor
company. In conjunction with the acquisition, the Company loaned the ESOP
$10 million, which the ESOP used to finance the acquisition of its interest
in the Company. Generally accepted accounting principles require that the
note receivable from the ESOP be included in the balance sheet as a
reduction of stockholders' equity.
The ESOP allocates the shares issued to the ESOP in 1986 to the
participants of the ESOP as described below. The Company makes
contributions to the ESOP which allow the ESOP to make the debt payments
back to the Company on the note receivable from the ESOP. ESOP
contributions by the Company are expensed and charged against income for
accounting purposes and are deductible for income tax purposes. Shares
allocable to participants for a given year are determined based on the
ratio of the current year's ESOP debt service payments (principal and
interest) on the original note from the Company as compared to the total
remaining required debt service on that loan. The contribution to the ESOP
is a noncash expense of the Company because the contributions are paid back
to the Company and reduce the note receivable from the ESOP. Consequently,
no cash is consumed as a result of the contributions. Furthermore, since
the note receivable from the ESOP is reduced by contributions, total
stockholders' equity is not affected by the contributions to the ESOP.
Cash Equivalents - For financial statement purposes, the Company considers
all highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents.
Concentration of Credit Risk - A significant portion of the Company's sales
are to customers whose activities are related to the building and
construction industry. These customers are located primarily in the
intermountain west. The Company generally extends credit to these customers
and, therefore,
F-10
<PAGE>
collection of receivables is affected by the economy of the building and
construction industry. However, the Company closely monitors extensions of
credit.
The Company maintains cash and money market balances at several financial
institutions in the intermountain west. Accounts at each institution are
insured up to $100,000 by the Federal Deposit Insurance Corporation.
Uninsured balances aggregate to approximately $615,000 and $860,000 at
December 31, 1997 and 1996, respectively.
Estimates and Assumptions - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Related Parties - The Company made consulting fee payments of $200,000
during the years ended December 31, 1997 and 1996 to an entity with
controlling ownership of the Company (see Note 12). These payments are
included in general and administrative expenses in the consolidated
statements of operations. There were no such payments in 1995. As of
December 31, 1997, the Company had a note receivable in the amount of
$140,000 from the Company's president which bears interest at the rate of
7% per annum with interest only payments until January 1, 1999 when the
entire principal balance becomes due. See description of notes payable to
related parties at Note 6.
Reclassifications - Certain amounts in 1996 and 1995 have been reclassified
to conform to classifications adopted in 1997.
2. CONTRACTS IN PROCESS
Costs incurred to date, estimated earnings, and the related progress
billings are as follows:
1997 1996
Costs incurred to date $ 1,631,558 $20,418,275
Estimated earnings 103,131 1,303,930
----------- -----------
Revenue recognized 1,734,689 21,722,205
Less billings to date (1,680,865) (22,230,825)
----------- -----------
Total $ 53,824 $ (508,620)
=========== ===========
The above are included in the accompanying balance sheets under the
following captions:
1997 1996
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 215,045 $ 181,634
Billings in excess of costs and estimated
earnings on uncompleted contracts (161,221) (690,254)
----------- -----------
Total $ 53,824 $ (508,620)
=========== ===========
F-11
<PAGE>
Retainage on uncompleted contracts amounts to $1,234,140 and $869,884 at
December 31, 1997 and 1996, respectively. All accounts receivable,
including retainage, under contracts in process are expected to be
collected within one year.
A significant portion of the Company's business, particularly for
prestressed and precast concrete, is based on orders for delivery at times
which may be many months after the order date. Therefore, the Company
generally has a significant amount of outstanding work orders. The
Company's backlogs for prestressed and precast concrete products as of
December 31, 1997 and 1996 were approximately $14,316,000 and $12,085,000,
respectively.
3. INVENTORIES
Inventories are summarized as follows:
1997 1996
Raw materials $1,507,715 $ 605,182
Resale and admixture products 411,714 409,836
Supplies 208,411 142,710
Sand and gravel 2,556,267 2,819,546
---------- ----------
Total $4,684,107 $3,977,274
========== ==========
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are summarized as follows:
1997 1996
Mobile equipment $15,424,667 $14,639,448
Plant equipment 12,124,843 10,555,358
Administrative equipment buildings 1,045,015 870,391
Construction in progress 1,426,948 1,244,865
----------- -----------
Total $30,021,473 $27,310,062
=========== ===========
Included above is $2,795,389 and $2,293,287 in 1997 and 1996, respectively,
of equipment under capital leases. The related accumulated amortization is
$500,179 and $239,756 at 1997 and 1996, respectively.
5. LINE OF CREDIT
At December 31, 1997 and 1996, the Company has a $15 million credit
facility with a financing company which includes a line of credit and term
loans. The line of credit bears interest at prime plus .75% (9.25% and 9%
at December 31, 1997 and 1996, respectively), payable monthly. Advances on
the line of credit are limited to 85% of qualified accounts receivable up
to a maximum of $15,000,000 minus the balances on the other notes payable
to this financing company. The line of credit is cross-collateralized with
the $2,000,000 notes payable through a security interest on all the
Company's personal and real property. The agreement also requires the
Company pay a fee of 0.5% per annum of the unused credit line of
$15,000,000. The line of credit agreement expires in February 2002.
F-12
<PAGE>
The Company borrows on the line to pay for all operating costs, debt
service, and other costs. The Company deposits all daily cash collections
from accounts receivable and other sources against the line to minimize
amounts outstanding on the line.
6. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<S> <C> <C>
1997 1996
Variable interest rate notes payable to the financing company at
prime plus .75% (9.25% at December 31, 1997); to be paid in full no
later than February 27, 2002; cross-collateralized with the line of
credit through a security interest on all the Company's personal
and real property. The agreements require, among other things, that
the Company maintain minimum levels of working capital and net
worth and prohibits the payment of dividends $ 2,000,000 $ 2,000,000
Variable interest rate notes payable to entities owned or controlled
by stockholders at prime (8.5% at December 31, 1997); principal due
in eight installments per year; interest payments are due monthly;
not collateralized; subordinated to the line of credit and notes
payable to a financing company. 298,750 837,500
Variable interest rate notes payable to individuals at prime plus 2%
(10.5% at December 31, 1997); principal payments due in equal
monthly installments of $20,409 through September 1999;
collateralized by land, buildings, and inventory. 406,822 598,142
Two fixed rate notes payable to individuals at 9.0%; principal
payments due in equal monthly installments totaling $20,519 until
December 15, 2007 and January 2, 2008 when all remaining principal
and interest is due; collateralized by land. 2,051,024
6.0% to 16.6% notes and capital leases payable in monthly
installments of principal plus interest, collateralized by
equipment and land. 3,434,584 2,857,390
------------ -------------
Total 8,191,180 6,293,032
Less current maturities 1,364,444 1,131,289
------------ --------------
Total $ 6,826,736 $ 5,161,743
============ ==============
</TABLE>
F-13
<PAGE>
The following is a schedule of maturities of long-term debt obligations at
December 31, 1997:
Year ending December 31:
1998 $1,364,444
1999 1,287,696
2000 993,949
2001 700,323
2002 3,496,991
Thereafter 347,777
----------
Total $8,191,180
==========
The following is a schedule of capital lease obligations included above at
December 31, 1997:
Year ending December 31:
1998 $ 552,748
1999 489,657
2000 448,589
2001 356,722
----------
Total minimum lease payments 1,847,716
Less amount representing interest 274,744
----------
Present value of minimum lease payments 1,572,972
Less current maturities 430,630
----------
Long-term maturities $1,142,342
==========
The Company has entered into several operating leases on certain equipment
expiring through 2003. Lease expense for the years ended December 31, 1997,
1996, and 1995 was $2,626,518, $1,492,798, and $687,462, respectively. The
following is a schedule of future minimum lease payments on the Company's
operating leases at December 31, 1997:
Year ending December 31:
1998 $2,649,899
1999 2,145,671
2000 1,830,574
2001 1,359,949
2002 539,176
Thereafter 97,360
----------
Total $8,622,629
==========
Not included in the above schedule are production royalties which the
Company has agreed to pay on aggregate deposits mined on lease property.
The payments are based on a progressive scale ranging from $0.25 per ton in
1997 to $0.48 per ton in 2000. The annual expense for these royalties were
$116,776, $67,334, and $93,134 for 1997, 1996, and 1995, respectively.
F-14
<PAGE>
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
1997 1996
Deferred restructuring costs $ 97,665 $ 192,127
Vacation payable 408,598 389,215
Accrued payroll taxes 59,193 241,660
Workers compensation payable 442,669 115,043
Property taxes payable 155,265 91,569
Sales and use tax payable 231,656 198,893
Interest payable 79,533 14,372
Other accrued liabilities 945,390 306,773
---------- ----------
Total $2,419,969 $1,549,652
========== ==========
8. INCOME TAXES
Income tax benefit consists of the following:
1997 1996 1995
Current - Federal $ 40,864
Deferred - Federal $(194,370) $(217,695) (106,887)
--------- --------- ---------
Total $(194,370) $(217,695) $ (66,023)
========= ========= =========
The components of the Company's deferred tax assets and liabilities are as
follows:
1997 1996
Deferred tax assets (liabilities):
Net operating loss carryforward $1,798,843 $1,914,893
Deferred compensation 262,024 243,356
Allowance for doubtful accounts 92,108 102,790
Accrued expenses 357,509 258,536
Inventory cost capitalization 119,679 74,266
Other 16,572 10,955
Excess of tax depreciation and amorization (1,220,679) (1,096,580)
Difference in assigned values and tax basis
in purchase of subsidiaries (777,485) (971,855)
Valuation allowance (1,426,056) (1,508,216)
---------- ----------
Net deferred tax liability $ (777,485) $ (971,855)
========== ==========
There were no deferred tax assets or income tax benefits recorded in the
financial statements for net deductible temporary differences or net
operating loss carryforwards due to the fact that the likelihood of
realization of the related tax benefits cannot be established. A deferred
tax liability was recognized upon
F-15
<PAGE>
the purchase of three subsidiary corporations during 1994. The initial
deferred liability was calculated on the differences between the assigned
values and tax bases of the assets and liabilities acquired in the
purchase.
At December 31, 1997, the Company had net operating loss carryforwards for
tax reporting purposes of approximately $5,100,000, which expire through
the year 2012. The net operating loss carryforwards are subject to
limitation in any given year upon the occurrence of certain events,
including significant changes in ownership.
The net change in the Company's valuation allowance for the deferred tax
assets was $(82,160) and $249,650 for 1997 and 1996, respectively.
Reconciliation of income taxes computed at the federal statutory rate and
income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Income tax (benefit) computed at the
Federal statutory rate $ 15,662 $(554,881) $ 451,370
Net operating loss (utilized) generated (82,159) 402,108 (524,941)
Percentage depletion (144,646) (89,693) (51,098)
Alternative minimum tax 40,864
Nondeductible expenses 16,773 32,804 21,417
All other, net (8,033) (3,635)
--------- --------- ---------
Income tax benefit $(194,370) $(217,695) $ (66,023)
========= ========= =========
</TABLE>
9. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Company has an ESOP covering substantially all full-time employees who
have at least one year of service. Under the terms of the ESOP, the Company
contributes amounts as determined by the Board of Directors. Shares of
stock allocated for a given year are further allocated to individual
participants based on the ratio of the participants' annual compensation to
total compensation for all participants. Shares allocated to participants
vest over six years.
In 1986, the ESOP purchased 1,606,796 shares of the Company's common stock
representing a 68% interest, in exchange for a $10,000,000 promissory note.
The balance on the note receivable from ESOP was $1,724,046 and $2,524,046
at December 31, 1997 and 1996, respectively. As of December 31, 1997, there
were 1,164,075 shares of the Company's common stock remaining in the ESOP
with 920,569 shares allocated to participants' accounts and 243,506 shares
remaining to be allocated based on future contributions by the Company. All
shares in the ESOP are considered issued and outstanding for purposes of
calculating earnings per share. Participants vote the shares in their
accounts on any stockholder vote while the unallocated shares are voted by
the ESOP trustee under instructions from the Company's Board of Directors.
As of December 31, 1997, the fair value of the 243,506 shares still to be
allocated to participants' accounts was $2,465,508. The principal
reductions on the ESOP note were $800,000 for each of the three years ended
December 31, 1997, 1996, and 1995, and were shown as contributions to the
ESOP.
F-16
<PAGE>
The accumulated deficit at December 31, 1997 includes $8,275,954 of
contributions since 1986 to the ESOP, which have been used to reduce
principal on the ESOP note.
10. RETIREMENT PLANS
The Company makes payments to a defined contribution pension plan (Plan)
covering most full-time nonbargaining employees who have completed at least
one full year of service with the Company based on a percentage of the
employee's salary. Payments are made to the Plan as they accrue. The
contributions for the years ended December 31, 1997, 1996, and 1995 were
$523,128, $480,757, and $344,968, respectively. There are also certain
bargaining employees who are covered under this Plan. The Company has no
liability under the Plan beyond the amounts contributed. The Company also
makes payments to various bargaining union trust funds, as negotiated under
union contracts. The contributions for the years ended December 31, 1997,
1996, and 1995 were $286,504, $334,364, and $220,791, respectively.
11. COMMITMENTS AND CONTINGENCIES
Deferred Compensation and Employment Agreements - In May 1996, the Company
amended the employment agreement with its former president and chief
executive officer (president). The amended agreement stipulates that the
Company will no longer accrue amounts towards the former president's
deferred compensation effective May 22, 1996. In addition, the amount
accrued in the former president's unfunded deferred compensation account
will continue to earn interest at 1% below the prime interest rate (7.5% at
December 31, 1997). The total accrued amount will be paid over a period
equal to one and one-fourth times the length of Company service of the
president as follows:
Year ending December 31:
1998 $111,955
1999 30,220
2000 32,544
2001 35,047
2002 37,744
Thereafter 598,796
--------
Total $846,306
========
Deferred compensation of $748,641 and $779,263 was accrued in this account
and a payable under the former president's employment agreement of $97,665
and $192,127 was included in accrued liabilities (see Note 7) as of
December 31, 1997 and 1996, respectively.
The Company has entered into employment agreements with certain officers.
These agreements provide for annual compensation through July 1998 as
determined by the Board of Directors. The Board of Directors has approved
annual compensation of $255,000 for these officers as of December 31, 1997.
Environmental Matters - The Company is currently the owner of 9.9 acres of
land located in Murray, Utah that contains mining slag previously deposited
by the former owner. The slag contains certain heavy metals including lead
and arsenic that may have leached from the slag into the environment. This
and adjoining properties have been proposed by the Environmental Protection
Agency (EPA) for listing on the National Priorities List for cleanup of the
lead slag and potential groundwater contamination. Although the Company did
not generate the slag material, under the Comprehensive Environmental
Response,
F-17
<PAGE>
Compensation and Liability Act ("CERCLA"), the current owner of a property
may be liable for cleanup costs. In such case, the Company would have a
claim against the former owner for its respective share of these costs. All
the landholders and the City of Murray entered, in May 1997, into an
Agreement in Principle in which landholders agreed to donate land for a
roadway through the properties which would be used as a depository for some
of the hazardous wastes on the site. In addition, the parties agreed to
cooperate in the remediation efforts to be conducted by the former owner.
The parties are currently in negotiations regarding a proposed draft,
Remedial Design/Remedial Action Consent Decree ("CD"). As proposed, the CD
requires the Company to (i) contribute a certain amount of its property for
the roadway (approximately 1.8 acres with a book value of approximately
$19,000) as its share of the cleanup costs, (ii) participate in a local
improvement district for the installation of a curb, gutter, and sidewalks
along the proposed roadway (approximately a $30,000 assessment over a
ten-year period), and (iii) implement certain institutional controls. In
return, the Company will receive contribution protection and a covenant not
to sue. Under the current draft of the CD, the Company's obligations
terminate upon sale of the property. The Company's estimated cost to
satisfy these requirements of the CD as outlined above are immaterial.
On May 5, 1997, the Company entered into an agreement to sell its total
acreage in Murray, Utah to The Boyer Company, L.C. for a total purchase
price of approximately $1.9 million. The agreement is subject to the
purchaser obtaining necessary approvals. Pursuant to the agreement, the
purchaser will assume the Company's liabilities under the agreement in
principle and the proposed EPA consent agreement described above including
the dedication of the land for the roadway and the participation in the
improvement district. If the sale to the Boyer Group does not occur, then
the Company would be responsible for those costs. Subject to certain
conditions, the Company expects the sale of the Murray property to close on
or before January 1, 1999.
Prior to learning of the potential presence of lead in the slag from the
Murray site, the Company sold some of the slag for use in road base and
railroad fill. The Company has not sold any slag material from this site
since 1988. The Company may be liable for cleanup costs if it is determined
that the lead from this slag poses an environmental hazard. The Company has
not received any notice of government or private action on this matter. The
potential cost to the Company, if any, is not ascertainable at the present
time because no action currently is pending by any party and it is unknown
whether any action will be taken in the future. The Company's management
believes that there are economically reasonable methods of containing the
slag should this become necessary.
Other - The Company is engaged in various lawsuits as plaintiff or
defendant arising in the normal course of business. In the opinion of
management, based upon advice of counsel, the ultimate outcome of these
lawsuits will not have a material impact on the Company's financial
statements.
12. CAPITAL STOCK
On December 28, 1995, the Company issued 1,650,000 shares of common stock
in a private placement to a single purchaser at $5.50 per share. Net
proceeds of $8,776,245 after issuance costs of $298,755 were received. The
Company also entered into an agreement with the purchaser wherein the
purchaser will receive $200,000 per year, payable in quarterly
installments, for consulting services so long as the purchaser's nominees
constitute a majority of the members of the board of directors.
F-18
<PAGE>
Earnings (Loss) Per Share - Effective December 31, 1997, the Company
adopted SFAS No. 128, "Earnings Per Share", and retroactively restated its
earnings per share (EPS) for 1997, 1996, and 1995 to conform with SFAS No.
128.
Basic and diluted earnings per share are calculated as follows for the year
ended December 31, 1997:
<TABLE>
<CAPTION>
Per
Average Share
Income Shares Amount
<S> <C> <C> <C>
Income $239,119
--------
EPS basic:
Income available to common stockholders 239,119 4,485,376 $0.05
-------- =====
Effect of dilutive securities - options and warrants 546,524
-------
EPS diluted:
Income available to common stockholders
with assumed conversions $239,119 5,031,900 $0.05
======== ========= =====
</TABLE>
Earnings per common share diluted are computed using the treasury stock
method. Average shares outstanding were 4,467,000 and 2,835,063 for 1996
and 1995, respectively. During 1996 and 1995, no options or warrants
outstanding were "in the money" and as such there was no dilutive effect.
13. STOCK OPTIONS AND WARRANTS
Effective January 20, 1994, the Company adopted a stock option plan which
provides for the granting of stock options to purchase up to 200,000 shares
of common stock, subject to adjustment under certain circumstances. In
1997, the Company amended this plan and increased the shares available
under the 1994 option plan to 260,000. As of December 31, 1997, the Company
had granted stock options under the 1994 stock option plan to various
officers, directors, and employees of the Company covering the aggregate
amount of 119,600 shares of common stock.
On May 22, 1996, the stockholders approved the Company's 1996 stock option
plan which provides for the granting of stock options to purchase up to
300,000 shares of common stock. In 1997, the Company amended this plan and
increased the shares available under the 1996 option plan to 600,000. As of
December 31, 1997, the Company had granted stock options under the 1996
stock option plan covering 296,000 shares of common stock. Of these,
136,000 options had vested as of December 31, 1997. The remaining 160,000
options vest annually through July 2000 with 60,000 to vest in 1998 and
1999 with the remaining 40,000 to vest in 2000.
In conjunction with its initial public offering in 1994, the Company issued
60,000 warrants at $5.50 per share to various entities involved in helping
the Company go public. During 1997, 58,750 of these warrants were
repurchased at a cost of $208,770. As of December 31, 1997, none of the
remaining 1,250 warrants had been exercised.
On December 28, 1995, in connection with the issuance of 1,650,000 shares
of common stock (Note 12), the Company issued a warrant to a single
purchaser to purchase 1,500,000 shares of common stock at an
F-19
<PAGE>
exercise price of $6.25 per share. The warrant was exercisable at the
issuance date and expires in December 2000. As of December 31, 1997, the
warrant has not been exercised.
The Company accounts for stock based compensation under APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations
under which no compensation cost has been recognized. The Company accounts
for stock-based compensation under APB Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations under which no
compensation cost has been recognized. During 1996, the Company adopted the
disclosure provision of Financial Accounting Standard No. 123, "Accounting
for Stock-Based Compensation" (FAS 123). If the Company had elected to
recognize compensation expense based upon the fair value at the grant date
for awards under these plans consistent with the methodology prescribed by
FAS 123, the Company's net earnings (loss) and earnings (loss) per share
would be reduced to the pro forma amounts indicated below:
1997 1996
Net earnings (loss):
As reported $239,119 $(1,367,679)
Pro forma 160,599 (1,565,723)
Earnings (loss) per common share:
As reported - basic $ 0.05 $ (0.31)
Pro forma - basic 0.04 (0.35)
As reported - diluted 0.05 (0.31)
Pro forma - diluted 0.03 (0.35)
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation costs related
to grants made before 1995. The fair value of the applicable options was
estimated at the date of grant using the modified Black-Scholes American
option-pricing model with the following weighted-average assumptions for
1997 and 1996: expected volatility of 57% and 61%, risk-free interest rate
of 5.18% and 6%, and expected life of .25 and 3.6 years, respectively. The
weighted average fair value of options granted during 1997 and 1996 was
$.70 and $3.07, respectively.
Option pricing models require the input of highly subjective assumptions
including the expected stock price volatility. Also, the Company's employee
stock options have characteristics significantly different from those of
traded options and changes in the subjective input assumptions can
materially affect the fair value estimate. Management believes the best
input assumptions available were used to value the options and the
resulting option values are reasonable.
F-20
<PAGE>
Information with respect to the Company's stock option plans at December
31, 1997 and changes for the three years then ended is as follows:
Weighted
Average
Stock Exercise Exercise
Options Price Price
Outstanding at January 1, 1995 136,500 $5.00 $5.00
Granted 20,100 5.00 5.00
-------
Outstanding at December 31, 1995 156,600
Granted 217,700 5.00-8.75 6.61
Canceled 6,700 5.00-8.75 5.00
Outstanding at December 31, 1996 367,600 5.00-8.75 5.95
Granted 112,000 5.25-7.50 5.94
Canceled 16,800 5.00 5.00
Exercise 47,200 5.00 5.00
-------
Outstanding at December 31, 1997 415,600 $5.00-8.75 $6.11
======= ========== =====
Exercisable at December 31, 1997 255,600 $5.00-7.50 $5.35
======= ========== =====
Additional information about stock options outstanding and exercisable at
December 31, 1997 is summarized as follows:
Options Outstanding
Weighted-
Average Weighted-
Range of Remaining Average
Exercise Number Contractual Exercise
Prices Outstanding Life (Years) Price
$5.00-$5.75 259,600 2.69 $5.25
6.60 40,000 5.00 6.60
6.80 20,000 5.00 6.80
7.50 16,000 4.50 7.50
7.60 40,000 5.00 7.60
8.75 40,000 5.00 8.75
------- -----
415,600 $6.11
======= =====
F-21
<PAGE>
Options Exercisable
Weighted-
Range of Average
Exercise Number Exercise
Prices Exercisable Price
$5.00-$5.75 239,600 $5.21
7.50 16,000 7.50
------- -----
255,600 $5.35
======= =====
14. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial results for the year ended December 31, 1997, 1996, and
1995 are as follows:
<TABLE>
<CAPTION>
Basic Diluted
Operating Net Earnings Earnings
Net Profit Earnings (Loss) (Loss)
Sales (Loss) (Loss) Per Share Per Share
<S> <C> <C> <C> <C> <C>
1997
First quarter $14,913,135 $ 234,371 $ 7,328 N/A N/A
Second quarter 16,352,296 803,956 763,914 $ 0.17 $ 0.15
Third quarter 16,192,520 1,198,274 1,050,878 0.23 0.19
Fourth quarter 13,925,411 (1,162,577) (1,583,001) (0.35) (0.29)
----------- ----------- ----------- ------ ------
Total $61,383,362 $ 1,074,024 $ 239,119 $ 0.05 $ 0.05
=========== =========== =========== ====== ======
1996
First quarter $ 9,204,260 $ (916,431) $(1,040,688) $(0.23) $(0.23)
Second quarter 19,416,157 888,028 771,339 0.17 0.17
Third quarter 22,245,881 (458,711) (656,845) (0.15) (0.15)
Fourth quarter 19,535,098 (397,879) (441,485) (0.10) (0.10)
----------- ----------- ----------- ------ ------
Total $70,401,396 $ (884,993) $(1,367,679) $(0.31) $(0.31)
=========== =========== =========== ====== ======
1995
First quarter $ 7,132,047 $ (341,526) $ (665,505) $(0.24) $(0.24)
Second quarter 12,500,024 1,269,853 911,321 0.32 0.32
Third quarter 14,876,696 1,493,652 1,199,899 0.43 0.43
Fourth quarter 13,793,481 89,776 (90,064) (0.03) (0.03)
----------- ----------- ----------- ------ ------
Total $48,302,248 $ 2,511,755 $ 1,355,651 $ 0.48 $ 0.48
=========== =========== =========== ====== ======
</TABLE>
Year end adjustments to accrued liabilities, accounts receivable, property,
and contract estimates made in the fourth quarter of 1997 had the effect of
decreasing net income by approximately $925,000 or $.25 per common share -
basic/ $.18 per common share - diluted. Additionally, the Company
experienced operating losses during the fourth quarter of 1997.
F-22
<PAGE>
15. RESTRUCTURING CHARGES AND PLANT CLOSING
A change in control of the Company occurred in 1995. The Company's new
management restructured the operations so that the Company can be more
responsive to the needs of the marketplace and improve operating
efficiencies. Due to these changes, the Company incurred certain
restructuring charges totaling $1,500,000 ($0.34 per share) during 1996.
These one time restructuring charges included: (i) the write-off of certain
facilities and equipment obsolete by new operating strategies ($715,000);
(ii) the closure of undersized and unprofitable operations in Utah and
Wyoming ($351,000); (iii) the payout remaining on the Company's two-year
employment agreement with its former president and chief executive officer
($333,000); and (iv) costs associated with restructuring management
($101,000).
Also during 1996, the Company closed a plant and has spent approximately
$638,000 and $842,000 in 1997 and 1996, respectively, to prepare the land
for commercial or residential development. The Company does not believe the
closure of the plant will have a significant impact on future operations.
The following table presents a summary of activity with respect to the
restructuring reserve for the year ended December 31, 1997:
Balance at December 31, 1996 $192,127
Cash outlays 94,462
--------
Balance at December 31, 1997 $ 97,665
========
16. SUBSEQUENT EVENTS
On January 6, 1998, the Company acquired all the outstanding common stock
of Treasure Valley Concrete, Inc., an Idaho corporation, for $3,350,000 in
cash and the assumption of $1,141,000 of liabilities. Treasure Valley
Concrete, Inc., with annual revenues of approximately $7 million, is a
producer of ready mix concrete, serving the Boise, Idaho area. With the
close of the transaction, Treasure Valley Concrete becomes a wholly owned
subsidiary of Monroc, Inc.
The Company has entered into an Amended and Restated Agreement and Plan of
Merger dated as of January 29, 1998 and amended and restated as of March 4,
1998 (the Merger Agreement) with U.S. Aggregates, Inc., a Delaware
corporation (USAI), and Western Acquisition, Inc., a Delaware corporation
and a subsidiary of USAI (Sub), providing for the merger of Sub with and
into the Company (the Merger), with the Company continuing as the surviving
corporation and a subsidiary of USAI. Pursuant to the Merger Agreement,
each outstanding share of common stock, par value $.01 per share, of the
Company (the Common Stock) will be converted into the right to receive
$10.771 per share in cash. In addition, the Merger Agreement provides that
each option or warrant to purchase shares of Common Stock will be canceled
in consideration for the right to receive in cash an amount equal to the
number of shares subject to such option or warrant multiplied by the
difference between $10.771 and the exercise price of such option or
warrant, less any applicable tax withholdings.
The Merger is conditioned upon, among other things, the approval of the
stockholders of the Company, certain regulatory and governmental approvals
and other customary conditions. In connection with the proposed Merger, the
Board of Directors of the Company received a fairness opinion from SBC
Warburg Dillion Read Inc. to the effect that, as of the date of the
opinion, the merger consideration is fair to the stockholders of the
Company from a financial point of view.
F-23
<PAGE>
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The amounts presented in the consolidated financial statements of the
Company's financial instruments, consisting of notes payable, long-term
debt, and capital lease obligations, when stated at fair value using
current interest rates, would not be significantly different.
18. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general purpose financial statements. This
Statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section
of a statement of financial position. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is
required. The adoption of SFAS No. 130 will require the Company to add
disclosure to the financial statements about comprehensive income.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which redefines how public business
enterprises report information about operating segments in annual financial
statements. It also establishes standards for related disclosures about
products and services, geographical areas, and major customers. SFAS No.
131 is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. The adoption of SFAS No.
131 will result in additional disclosures regarding the Company's segments.
******
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Monroc, Inc.:
We have audited the consolidated financial statements of Monroc, Inc., and
Subsidiary (the Company) as of December 31, 1997, and for the year then ended,
and have issued our report thereon dated March 31, 1998; such report is included
elsewhere in this Form 10-K. Our audit also included the consolidated financial
statement schedule of the Company, listed in Item 14. This consolidated
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audit. The consolidated
financial statements of the Company for the years ended December 31, 1996 and
1995 were audited by other auditors whose report, dated February 11, 1997,
expressed an unqualified opinion on those consolidated statements. In our
opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
March 31, 1998
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULE
Board of Directors
Monroc, Inc.
In connection with our audit of the consolidated financial statements of Monroc,
Inc. and Subsidiary, referred to in our report dated February 11, 1997, which
included in the annual report to stockholders and Form 10-K, we have also
audited Schedule II for each of the two years in the period ended December 31,
1996. In our opinion, this schedule presents fairly, in all material respects,
the information required to be set forth therein.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Salt Lake City, Utah
February 11, 1997
<TABLE>
<CAPTION>
MONROC, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- -------------------------------------------------------------------------------------------------
(1) (2)
Charged
Balance at Charged to to Other Balance at
Beginning Costs and Accounts Deductions End
of Period Expenses Describe Write-Offs of Period
<C> <C> <C> <C> <C> <C>
ALLOWANCE FOR DISCOUNTS
AND DOUBTFUL ACCOUNTS
Year ended December 31:
1997 $ 301,624 $ 397,402 $ 999,999 $ (435,861) $ 263,165
1996 296,647 536,863 (531,886) 301,624
1995 209,495 532,764 (445,612) 296,647
DEFERRED TAXES
VALUATION ALLOWANCE
Year ended December 31:
1997 $1,508,216 $ (82,160) $1,426,056
1996 1,258,566 $ 249,650 1,508,216
1995 1,783,302 (524,736) 1,258,566
</TABLE>
F-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Monroc, Inc.
Date: April 10, 1998 By: /s/ Ronald D. Davis
--------------------
Ronald D. Davis
President and Chief Executive Officer
Pursuant to the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated, on the date set forth above.
Signature Title
/s/ Robert L. Miller Chairman of the Board
Robert L. Miller
/s/ Ronald D. Davis President and Chief Executive Officer
Ronald D. Davis
/s/ L. William Rands Vice President - Finance, Treasury
L. William Rands and Secretary (Principal Financial
and Accounting Officer)
/s/ William T. Lightcap Director
William T. Lightcap
/s/ Jules Ross Director
Jules Ross
/s/ Marc T. Scholvinck Director
Marc T. Scholvinck
/s/ Delbert H. Tanner Director
Delbert H. Tanner
/s/ Michael A. Kane Director
Michael A. Kane
/s/ James E. Dahl Director
James E. Dahl
<PAGE>
INDEX TO EXHIBITS
2.1 Stock Purchase Agreement dated January 6, 1998 between the Company and
Treasure Valley Concrete, Inc.(7)
2.2 Agreement and Plan of Merger dated January 29, 1998 among the Company, U.S.
Aggregates, Inc. and Western Acquisition
3.1 Certificate of Incorporation(1)7
3.2 By Laws(1)
10.1 Monroc, Inc. Employee Stock Ownership Plan, amended and restated effective
as of April 1, 1987(1)
10.2 Monroc, Inc. 1994 Stock Option Plan, amended and restated as of April 1,
1987(1)
10.3 Form of indemnity agreements with directors(1)
10.4 Amendment dated February 27, 1996 to the Loan and Security Agreement dated
July 26, 1993 between the Company and CIT Group/Credit Finance, Inc.(4)
10.5 Loan and Security Agreement dated July 26, 1993 between the Company and CIT
Group/Credit Finance, Inc.(1)
10.6 Stock Purchase Agreement dated July 26, 1995 by and between Building and
Capital Construction Partners, L.P. and Monroc, Inc.(2)
10.7 Consulting Agreement dated December 28, 1995 by and between Building and
Capital Construction Partners, L.P. and Monroc, Inc.(2)
10.8 Voting Agreement dated December 28, 1995 by and between Building and
Capital Construction Partners, L.P. and Colonial Commercial Corp.(2)
10.9 Voting Agreement dated December 28, 1995 by and between Building and
Capital Construction Partners, L.P. and Odyssey Partners(1)
10.10 Employment Agreement dated July 25, 1995 with L. William Rands.(5)
10.11 Monroc, Inc. 1996 Stock Option Plan, amended April 18, 1997(3)
10.12 Employment Agreement dated July 2, 1996 with Ronald D. Davis(5)
10.13 Real Estate Purchase Agreement dated December 27, 1996 between the Company
and Whitney Family Trust(5)
10.14 Snake River Correctional Institution Subcontract Agreement dated September
12, 1995 by and between Monroc, Inc. and Hoffman Construction Co.*
10.15 Snake River Correctional Institution Subcontract Agreement dated December
14, 1995 by and between Monroc, Inc. and Hoffman Construction Co.*
10.16 Sand and Gravel Lease dated May 1, 1996 by and between Monroc, Inc. and
the State of Wyoming, Board of Land Commissioners*
<PAGE>
10.17 Sand and Gravel Lease dated October 25, 1996 by and between Monroc, Inc.
and LLK, Inc.*
10.18 Sand and Gravel Lease dated May 29, 1997 by and between Monroc, Inc. and
Alma L. Rushton*
10.19 Memorandum of Agreement dated September 17, 1997 by and between Monroc,
Inc. and Kenneth Dunn*
16 Letter from Grant Thornton LLP dated April 10, 1997(6)
21 Subsidiaries of Monroc, Inc.*
23.1 Consent of Deloitte & Touche LLP*
23.2 Consent of Grant Thornton LLP*
27 Financial Data Schedule*
99.1 Voting Agreement dated January 29, 1995 between U.S. Aggregates, Inc., and
BCCP I, L.L.P.(8)
- ---------------------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-75172).
(2) Incorporated by reference to the Company's Current Report on Form 8-K filed
December 28, 1995.
(3) Incorporated by reference to the Company's Proxy Statement dated April 29,
1996.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
(6) Incorporation by reference of the Company's Current Report on Form 8-K
filed April 14, 1997.
(7) Incorporation by reference to the Company's Current Report on Form 8-K
filed January 15, 1998.
(8) Incorporation by reference to the Company's Current Report on Form 8-K
filed February 3, 1998.
* Filed herewith
HOFFMAN CONSTRUCTION COMPANY SUBCONTRACT
OF OREGON DATE: 9/12/95
P.O. BOX 1300, 1300 SW SIXTH AVENUE NUMBER: 95096-7757
PORTLAND, OR 97207 COST CODE: 03400
TEL: 221-8811 FAX: 221-8934 PAGE 1 OF 2
SUBCONTRACTOR:
Monroc Incorporated
P.O. Box 789
2755 E. State Street
Eagle, ID 83616
Phone: (208) 939-6831
Fax: (208) 939-2151
License No: 64925
Vendor No: 287523
PROJECT: Snake River Correctional Institution, Phase II-Ontario, OR
JOB NO. 95096
The following attachments are herein included as part of this Subcontract:
DATE PAGES
"A" Project Requirements 7/17/95 1
"B" Insurance Requirements 7/17/95 1
Safety Plan
Drug Testing
"C" Subcontract General Provisions 10/10/94 2
Bond Requirements: Yes X No
WITNESSETH
Contractor has entered into a Contract with Oregon Department of
Corrections (Owner) pertaining to the construction of the project above; and
whereas, Contractor and Subcontractor desire to enter into this Agreement for
Subcontractor's performance of a portion of the work called for by the Contract.
Therefore, for and in consideration of the promises and other good and
valuable consideration and sufficiency of which is hereby expressly
acknowledged, the parties agree as follows:
ARTICLE 1 - THE WORK
Subcontractor agrees to furnish all supervision, engineering, management,
labor, tools equipment, materials, supplies, facilities and financing and to
secure all field measurements necessary to perform and to fully complete the
following described work and all work incidental thereto. The term "Work" as
used herein includes, without limitation, all of the aforesaid together with the
following described work: SPECIFICATION SECTION: 1. Section 03490 - Structural
Precast Concrete Cells CLARIFICATIONS: 1. This work is based on Bid Package No.
1 documents as amended by Addendum No. 1 dated August 9, 1995, Addendum No. 2
dated August 15, 1995 and Addendum No. 3 dated August 16, 1995, including all
drawings issued therewith. 2. Subcontractor shall furnish and install all work
complete in accordance with the contract documents. 3. Subcontractor's work
includes but is not limited to the following: a) 602 Double Cell Units b) 80
Single Cell Units 4. Subcontractor excludes the following: a) Backer Rod and
Pick Proof Sealant b) Cell Furniture and Plumbing Fixtures
ARTICLE 2 - THE SUBCONTRACT PRICE
Contractor shall pay Subcontractor for the performance of the work, subject
to additions and deductions modifications as provided in the contract documents,
the total of ("THE SUBCONTRACT PRICE") which includes all taxes except those
specifically excluded herein.
Four Million, Eight Hundred Twenty-Three Thousand, Two Hundred Twenty-Eight
and No/100 Dollars--$4,823,228.00
Retainage: 5%
See Article II, "Attachment C:
Both parties have read and understand this Subcontract. This Subcontract
constitutes the entire Subcontract, and supersedes all prior proposals and
agreements. The Contractor assumes no responsibility or representation made by
any of its officers or agents or any other persons during or prior to the
execution of this Subcontract unless such understanding or representations are
expressly stated herein. No provision of this Subcontract may be waived or
changed, except in writing by Contractor.
IN WITNESS WHEREOF, Contractor and Subcontractor have executed this
agreement in duplicate by their proper officers or duly authorized agents.
SUBCONTRACTOR HOFFMAN CONSTRUCTION COMPANY OF OREGON
BY: _____________________________ BY: ____________________________
SIGNATURE Wayne Drinkward, President
Wm. Richard Johnson
BY: Executive Vice President License Number: 28417 DOM:mhk
_____________________________
NAME/TITLE
XVI. Subcontractor shall guarantee its Work to the same extent that
Contractor is obligated to guaranteee its work under the Contract, and to such
greater extent as required by law, but in any event shall guarantee its Work
against all defects in materials or workmanship for a period of one year from
the date of final acceptance of the Project by Owner. Subcontractor agrees to
provide such further guarantees, warranties, bonds and assurances as required by
the Contract or as customary in the type of construction called for on the
Project. Nothing herein shall relieve Subcontractor of liability for direct and
consequential damages arising from any failure to perform the obligations of
this Subcontract.
XVII (a) Should Owner file a claim, counterclaim or cross claim against
Contractor relating to, or arising out of, in whole or part, performance of
Subcontractor's Work, Subcontractor and its surety agree to be bound to
Contractor to the same extent that Contractor is bound to Owner by the terms of
the Contract and shall likewise be bound by all rulings, decisions or
determinations made pursuant to the Contract including but not limited to the
final decision of an appeal board, arbitration or court of competent
jurisdiction whether or not Subcontractor or its surety is a party to such
proceeding. If called for by Contractor, Subcontractor shall defend at no cost
to Contractor all claims or that portion thereof, relating to or arising out of
the performance of Subcontractor's Work, and shall become a part to such
proceeding or determination.
(b) As to any claim by Subcontractor on account of acts or omissions of
Owner, or its representatives, Contractor agrees to present to Owner, in
Contractor's name, all of Subcontractor's claims for extras and equitable
adjustments and to further invoke on behalf of Subcontractor those provisions of
the Contract for determining disputes. Subcontractor shall have full
responsibility for preparation and presentation of such claims and shall bear
all expenses thereof, including attorney's fees. Subcontractor agrees to be
bound by the procedure and final determinations as specified in the Contract and
agrees that it will not take any other action with respect to any such claims
and will pursue no independent litigation with respect thereto or any disputes
resolution procedures. Subcontractor shall not be entitled to receive any
greater amount from Contractor. Subcontractor shall accept such amount, if any
as full discharge of all such claims. With respect to such claims, Subcontractor
shall given written notice to Contractor within sufficient time to permit
Contractor to give notice to Owner within the time allowed by the Contract.
Failure to give such notice shall constitute a waiver of such claim.
(c) Notwithstanding paragraph (b) of this Section, Contractor shall have
the right, at any time, to settle or otherwise dispose of any claim by
Subcontractor on account of acts or omissions of Owner or its representatives .
Should Contractor exercise this right, Contractor shall determine the amount, if
any to be paid to Subcontractor on account of such claim. Such decision shall be
final and binding unless Contractor's decision is submitted to arbitration in
accordance with paragraph (d) of this Section.
(d) Should a dispute arise which is not controlled or determined by the
above paragraphs of this Section or other provisions of this Subcontract, then
said dispute shall be settled by Contractor's written decision with respect to
such dispute Such written decision shall be conclusive and shall be final and
binding on Subcontractor and its surety unless Subcontractor within thirty (30)
days following the receipt of such written decision, shall file a demand for
arbitration in accordance with the then current rules of the Construction
Industry Arbitration Rules of the American Arbitration Association, unless the
parties mutually agree otherwise. If such demand is filed, then the dispute
shall be decided by arbitration in accordance with such Rules, before three (3)
neutral arbitrators. This agreement to arbitrate shall be specifically
enforceable and the arbitration decision shall be final and binding as between
Contractor and Subcontractor and its surety. If arbitration is conducted
involving Owner, Contractor or any other party concerning or in any way relating
to: responsibility under this Subcontract; any dispute relating to the Work
required or alleged to be required herein; this Subcontract; or Subcontractor;
then in any of these events, Subcontractor expressly agrees to a consolidated or
joint arbitration, if and as called for by Contractor.
(e) Subcontractor shall proceed diligently with the Work pending final
determination of any dispute or claim.
(f) The provisions of this Section shall survive the completion or
termination of this Subcontract.
(g) Subcontractor covenants and expressly agrees that if for any reason the
Subcontract is not completed a contemplated herein or if any dispute shall arise
over the entitlement or the rights of Subcontractor, Subcontractor's sole
recourse shall be an action as provided herein to enforce the several terms and
provisions of this Subcontract, and no action shall be in favor of Subcontractor
in the nature of quantum meruit, quantum valebant, quasi contract, or any other
theory of law or equity.
XVIII. If at any time Subcontract shall: (a) become insolvent or be unable
to pay its debts as they mature or commit any act of bankruptcy or have filed or
suffered to be filed a petition of bankruptcy against Subcontractor or have a
receive or trustee appointed or suffered the appointment of a receiver or
trustee to take charge of its property or to be adjudicated bankrupt, or (b)
fail to pay promptly when due all bill and charges for labor, materials,
equipment and services used in the performance of this Subcontract or required
to be paid by this Subcontract, or (c) fail or refuse to proceed with or to
properly perform its Work as directed by Contractor, or (d) fail or refuse to
properly perform or abide by any term or condition of this Subcontract, then
Subcontractor shall be deemed in default and Contractor may give Subcontractor
written notice of such default. If Contractor determines that Subcontractor has
not remedied such default within five (5) days after the date of Contractor's
notice, Contractor, by Subcontractor or otherwise, at its option may, without
prejudice to any other right or remedy, take over the Work or any part thereof
and complete the same at the expense of Subcontractor, or without taking over
the Work, may furnish the necessary equipment, materials and workmen to remedy
the situation at the expense of Subcontractor. If Contractor takes over the Work
pursuant to this Section it is specifically agreed that Contractor may take
possession of the premises and all materials, tools, equipment, drawings and
appliances of Subcontractor at the site for the purpose of completing the Work
covered by this Subcontract. Subcontractor shall pay to Contractor a sum equal
to Contractor's total cost including but not limited to all monies expended and
all costs, losses, damages and extra expense, including all management,
administrative and other direct and indirect expenses, plus attorneys' fees,
incurred by Contractor because of such default, together with all such costs
incident to taking over and completing the Work or any part thereof or
furnishing the necessary equipment, material or workmen. Subcontractor's
liability shall include without limitation all payments made, expenses and
losses incurred, damages sustained and obligations assumed by Contractor in good
faith and under the belief that such payments or assumptions were necessary,
whether or not they were actually necessary or required, including but not
limited to payments made in settlement or compromise of claims or payment of
judgments arising out of or related to the Work. Subcontractor agrees that
should Owner terminate the Contract then Subcontractor's remedies shall be as,
and only as, provided for in the Contract and Subcontractor shall be paid only
such sums as shall be paid by Owner for the account of Subcontractor, excluding
such amounts as may be paid for Contractor's overhead and profit, if any,
Contractor's determination that Subcontractor is in default and that
Subcontractor has failed to remedy such default as required herein, made in good
faith and under the belief that a default existed and that Subcontractor failed
to remedy such default, shall be conclusive as to Contractor's right to proceed
as provided herein. Any action by Contractor which is, or is subsequently
determined to be, without default or sufficient default by Subcontractor, or is
otherwise determined to be, for any reason, improper, wrongful or in breach of
the terms and provisions of this Subcontract, shall be treated, for all
purposes, under Section XIX.
XIX. Contractor reserves the right, in its sole and exclusive discretion,
with or without cause, to terminate this Subcontract, as to all or any part of
the work, for Contractor's convenience at any time prior to completion of the
Work, by written notice effective upon Subcontractors' receipt of notice or such
later time as such notice may provide. In such event, Subcontractor shall cease
performance of the Work at the time provided, shall secure and protect any
portion of the Work then performed and all materials and equipment theretofore
furnished, and shall promptly notify all of its subcontractors and suppliers to
the same effect. Subcontractor, for itself and for all of its subcontractors and
suppliers, shall thereafter present to Contractor a termination inventory in
writing describing the nature, quantity, cost and location of all materials and
equipment theretofore furnished or ordered for the Work, and shall, at
Contractors' option, assign to Contractor such subcontracts and purchase orders
as Contractor may direct. Subcontractor shall take such actions as Contractor
may direct or as may be reasonable to terminate, cancel, assign, assemble,
return, sell or otherwise account for the termination inventory, and shall
thereafter account to Contractor for all costs of labor, materials, equipment
and overhead incurred by Subcontractor pursuant to this Subcontract, and all
credits realized upon termination. Such accounting shall be supported by such
documentation, and shall be subject to such verification as Contractor shall
reasonably require. Contractor shall thereupon pay to Subcontractor the amount
of Subcontractor's net costs incurred together with an allowance of ten percent
(10%) as general overhead and profit, but in no event more than the Subcontract
price, less such amount as Subcontractor may have previously received as partial
payment upon the Subcontract price. The cost principles and procedures of Part
31 of the Federal Acquisition Regulation of the united States of America in
effect on the date of this Subcontract shall govern all costs claimed, agreed to
or determined under this paragraph. Subcontractor shall not be entitled to any
lost profit on uncompleted Subcontract work or any indirect costs, expenses or
damages arising out of the termination.
XX. Subcontractor agrees to reimburse Contractor for any and all liquidated
or actual damages that may be assessed against and collected from Contractor
which are attributable to or caused by Subcontractor's failure to perform the
Work required by this Subcontract within the time fixed or in the manner
provided for herein, and in addition thereto, agrees to pay to Contractor such
other or additional damages, including attorneys' fees, as Contractor may
sustain by reason of Subcontractor's delay or failure to perform in accordance
with this Subcontract. The payment of such damages shall not release
Subcontractor from any liability assumed hereunder or its obligations to
otherwise fully perform this Subcontract.
XXI. All labor used by Subcontractor throughout the Work shall be
acceptable to Owner and Contractor and shall be of a standing or affiliation
that will permit the work of the Contract to be carried on harmoniously and
without delay and will in no case or under any circumstances cause any
disturbance, interference, or delay to the progress of the Contract. Failure at
any time to comply with any of the provisions of this Section will constitute a
default by Subcontractor, and Contractor shall have all of the rights contained
in Section XVIII with regard to such default. If, by reason of strikes,
picketing, refusals to work or disputes of any nature, whether the result of
disputes with Contractor, Subcontractor or other persons, Subcontractor,
Subcontractor or other persons, Subcontractor Should be persistently,
repeatedly, or for a total of five (5) consecutive days, unable to supply enough
properly skilled craftspeople/personnel/employees or proper materials to execute
the Work, then Contractor may either directly or by engaging other
Subcontractors, furnish the materials and/or employ the
craftspeople/personnel/employees necessary to continue the performance of the
Work, at the expense of Subcontractor, and Contractor, shall have all rights set
forth in Section XVII for Subcontractor's default. Notwithstanding any provision
thereof, Subcontractor shall be an independent contractor, maintaining control
over its employees and operations and neither Subcontractor nor anyone employed
by Subcontractor shall be deemed to be the servant, employee or agent of
Contractor o Owner.
XXII. Subcontractor shall not assign or sublet this Subcontract ro any part
thereof without firs obtaining the written consent of Contractor. Unless
Contractor's written consent specifically provides otherwise, Subcontractor's
duties and obligations hereunder shall not be modified by any such assignment or
Subcontract.
XXIII. Subcontractor agrees to comply with the terms, covenants,
conditions, and provisions of the Contract and shall complete the Work in strict
accordance with the plan, specifications, schedules, drawings and the like and
further agrees not to violate any term, covenant, condition or provision of the
Contract. Any enumeration herein of any specific items of work, materials or
equipment shall not be construed to exclude other items. If any provision herein
is inconsistent with Contractor's Contract with Owner, or with the drawings or
specifications, the specific provision herein shall govern.
XXIV. the parties herein intend for the terms, covenants, conditions and
provisions of the Subcontract to be divisible so that should any provision or
term of this Subcontract now or at any time during the term hereof be in
conflict with any Federal, state or municipal law, regulation or the like, or
any applicable judicial or arbitration decision, then such provision shall
continue in full effect only to the extent permitted. In the event any provision
of this agreement is thus held inoperative, the remaining provisions of this
agreement, shall nonetheless remain in full force and effect as if the
invalidated portion did not appear when this Subcontract was executed.
XXV. A waiver by Contractor of any breach or violation by Subcontractor of
any provision hereof or of the Contract shall not constitute a waiver of any
further or additional breach of such provision or of any other provision. No
provision of this Subcontract, including theses Subcontract General Provisions,
may be waived by Contractor except in _____ and this Subcontract may only be
amended by written agreement of Contractor and Subcontractor.
XXVI. Subcontractor enters into this Subcontract based upon its own
investigation of all relevant matters and is in no way relying upon any opinions
or representations of Contractor. Any failure by Subcontractor to gain all
necessary knowledge and familiarize himself with the available information will
not relieve Subcontractor from responsibility for estimating properly the
difficulty or cost of successfully performing the Work nor from the satisfactory
performance thereof. Contractor assumes no responsibility for any understanding
of the partie and is the complete and exclusive statement of all of the terms
and conditions of the agreement between Contractor and Subcontractor and all the
representations of the parties and supersedes all prior oral or written
agreements or representations. This Subcontract shall not be varied,
supplemented, qualified or interpreted by any prior course of dealing between
the parties or by any usage or trade, except as otherwise provided herein.
XXVII. Subject to the other provisions hereof, this Subcontract shall be
binding upon and shall inure to the benefit of the successors and assigns of the
parties hereto.
ATTACHMENT "A" - PROJECT REQUIREMENTS
JOB: Snake River -95096
DATE: 7/17/95
Subcontract will perform all work complete in strict accordance with
Specifications for The Snake River Correctional Institution, Phase II-Ontario,
Oregon as proposed by HOK Architecture, P.C., including all drawings issued
therewith as noted on the Drawing Index. This work includes without limitation
all of the Specifications and, all General Conditions, Supplementary Conditions,
and General Requirements of the Specifications as they apply to the work being
performed under this Subcontract.
INCLUSIONS:
This Subcontract will also include without limitation the following:
1. Submittals: Subcontractor will furnish all submittals of Shop Drawings,
Product Data, and Samples as required in ample time to prevent any delay
due to lack of approval. Subcontractor shall thoroughly review the
submittals of its sub tier vendors and subcontractors. All such submittals
shall be approved by Subcontractor prior to transmittal to Contractor, and
Contractor shall have the right to rely upon Subcontractor's approval as
constituting compliance with the Contract Documents.
2. Subcontractor will pay special attention to the Certification of Payroll
provisions of the Documents. Subcontractor will submit Certified Payrolls
as required by the Contract Documents on the dates established by
Contractor.
3. State of Oregon Standard General Conditions: (Bound in Specifications)
4. Traffic Control and Flagging: All Subcontractors shall be responsible for
providing all traffic control, wheel washes, street cleaning, dust and
noise control to comply with all applicable codes and regulations as it
pertains to their work.
SCHEDULE:
Subcontractor will coordinate the schedule for the work contained herein
with Contractor's Superintendent. Subcontractor recognizes that time is of the
essence and will complete all work as scheduled to avoid delaying other work
activities and the completion dates for the total project.
MISCELLANEOUS PROVISIONS:
1. Quality: The quality of the workmanship and materials furnished and
installed under this Subcontract shall be of the highest level and shall,
in all respects, be of industry accepted standards for quality and
workmanship. Any work or materials which do not exhibit the highest level
of standards for quality and workmanship, shall be removed and replaced at
no additional charge to the Owner or Contractor.
2. Jobsite Appearance/Storage: Contractor has implemented a Jobsite
Appearance/Storage. Contractor has implemented a Jobsite Appearance/Storage
Program. Subcontractor shall comply with/and is apprised that extremely
crowded conditions will exist at the jobsite. Subcontractor will coordinate
its work with and obtain Contractor's job superintendent's prior approval
of Subcontractor schedule for delivery, installation and/or placement of
its material, equipment and crew shacks on the jobsite.
3. Clean-up: Subcontractor will continually and thoroughly cleanup and remove
from Jobsite, at its expense, all waste, debris, surplus equipment and
surplus materials resulting from Subcontractor's operations and is advised
that recycling of debris will be utilized on this project. Such cleanup
shall occur on at least a weekly basis and more often if, based on the
judgment of Contractor's Superintendent, more frequent cleanup is necessary
to prevent risk of injury to employees or crafts people or personnel on the
jobsite. If Subcontractor fails to cleanup such waste, debris, surplus
materials and surplus equipment, such clean up and removal will be done by
others and costs for this work will be deducted from the Subcontract.
4. Utilization of Contractor's Equipment: If Subcontractor uses Contractor's
joisting facilities or borrows, rents, or otherwise performs any work with
scaffoldings, tools or equipment owned or furnished by Contractor, by so
using such facilities, scaffold, tools or equipment, Subcontractor accepts
such items in an "as is" condition. In addition, Subcontractor shall
inspect such items and accept full responsibility for the safety of
Subcontractor's personnel and promises that it shall to the full extent
allowed by law, defend, indemnify and save Contractor harmless from all
claims (including costs and reasonable attorneys fees) which may be brought
against Contractor arising our of Subcontractor or its employees, agents or
sub-subcontractor's use of such items. The obligations under this paragraph
are in addition to all other obligations assumed by Subcontractor,
including but not limited to Subcontractor's assumed liability for injury
to its employees as stated in the insurance and indemnity requirements set
forth in Attachment "B".
5. Security Requirements: The Snake River correctional Institution
Construction Security Procedures dated July 26, 1995. (Bound in
Specifications).
6. Security Check Form: (Bound in Specifications)
7. Inmate Labor: Subcontractor shall comply with Contractors and Owners Inmate
Labor Requirements to the maximum extent possible.
8. Firestop and Sleeves: Subcontractor includes furnishing and setting of all
sleeves and firestopping connected with its work in strict accordance with
"Firestopping" of the Specifications.
9. Joint Sealants: Unless specifically excluded elsewhere, Subcontractor shall
do all caulking connected with its work in strict accordance with "Joint
Sealants" of the Specifications.
NONDISCRIMINATORY PROVISIONS
This Subcontract is subject to the provisions of Executive Order 11246
(Equal Opportunity Clause as amended; the regulations in 40 CFR 60-4 Equal
Opportunity Clause); Executive Order 11701 (Job Openings to Veterans); 20 CFR,
Section 741.3 and 741.29; together with 20 CFR, Chapter VI, 741 (Employment of
Handicapped); and the Vietnam Era Veterans' Readjustment Act of 1972, as
amended.
Subcontractor will not discriminate against any employee or applicant for
employment because of race, creed, color, national origin, sex or age.
Subcontractor ensure that applicants are employed, and that employees are
treated during employment without regard to their race, creed, color, national
origin, sex or age. Such action shall include but not be limited to the
following: employment, upgrading, demotion or transfer, recruitment or
recruitment advertising, layoff or termination, rates of pay or other forms of
compensation and selection for training.
Subcontractor will send to each labor union or representative of workers
with which it has a collective bargaining agreement or other contract or
understanding, a notice advising the said labor union or workers' representative
of the bidder's commitments under this Section. The words "Equal Opportunity
Employer" shall be used in all advertisements for employees.
Subcontractors will include the provisions of the last three foregoing
paragraphs, as well as all other applicable portions of the Contract
Requirements in every contract or purchase order issued by Subcontractor for
goods or services required under this Subcontract.
ATTACHMENT "B" - PROJECT INSURANCE REQUIREMENTS
JOB: Snake River-95096
DATE: 7/17/95
Subcontractor agrees to obtain, maintain and pay for such workmen's
compensation and employer's liability insurance as may be required by the
Contract or by law. Subcontractor shall also provide and maintain in full force
and effect during the term of the Subcontract comprehensive general liability
insurance (including but not limited to contractual liability assumed under this
Subcontract and completed operations coverage) and comprehensive automobile
liability insurance, protecting Subcontractor, Owner and Contractor against
liability from damages because of injuries, including death, suffered by
persons, including employees of Subcontractor, and liability from damages to
property, arising from or growing out of the Work hereunder or Subcontractor's
operations in connection with the performance of this Subcontract. Such
insurance shall be in the amounts specified in the Contract, but in no event,
shall such insurance be in amounts less than the following:
Comprehensive General Liability Comprehensive Automobile Liability
Bodily Injury Bodily Injury
$1,000,000 per occurrence $1,000,000 per person
$1,000,000 aggregate $1,000,000 per occurrence
Property Damage Property Damage
$1,000,000 per occurrence $1,000,000 per occurrence
$1,000,000 aggregate
Said insurance is to be in form and issued by a company or companies
satisfactory to Contractor. Written proof of compliance with these insurance
requirements shall be furnished to Contractor. Such proof of insurance shall be
in a form satisfactory to Contractor and provide for ten (10) days written
notice to Contractor prior to cancellation or modification of any insurance
referred to therein.
Subcontractor in addition to its obligations to provide insurance as
required by this Subcontract, shall indemnify, defined and save harmless
Contractor and its officers, agents and employees from and against all claims,
loss, damage, liability costs charge or expense (including attorneys' fees)
directly or indirectly arising out of or resulting from any failure of
Subcontractor to perform any of the terms and conditions of this Subcontract or
the performance of or failure to perform the Work or in any manner caused or
claimed to be caused by any act, inaction, fault or negligence of Subcontractor
or anyone acting on its behalf, even though the same may have resulted from the
joint, concurring or contributory act or negligence of Contractor, or those in
privity of Contract with Contractor, unless the same be caused by the sole
negligence or willful misconduct of Contractor, or those in privity of contract
with Contractor. Without limiting the generality of the foregoing. Subcontractor
agrees to assume entire responsibility and liability for all claims for damage
or injury to all persons, whether employees or otherwise and to all property,
arising out of, resulting from or in any manner connect with, the execution of
the Work or occurring or resulting from the use by Subcontractor, its agents or
employees, or materials, equipment, instrumentalities or other property, whether
the same be owned by Contractor, Subcontractor or third parties. In any instance
whereby Contractor is entitled to be indemnified by or to recover any monies
from Subcontractor, Contractor shall be entitled, in addition, to recover from
Subcontractor (a) interest on any sums due from Subcontractor at the maximum
legal rate of interest per annum from date due until paid; (b) reasonable
attorney's fees incurred by Contractor for all investigation, negotiation,
litigation, arbitration or other such services commonly performed by attorneys;
and (c) all court costs, fees paid to experts, arbitration fees and like
expenses.
In addition to the insurance and indemnify requirements set forth above,
Subcontractor expressly agrees to defend, indemnify and hold Owner, its
Architects and Engineers, Hoffman Corporation, its subsidiaries, their officers,
agents and employees harmless from all claims and loss (including reasonable
attorney fees) arising from injuries, including death, to its employees and
employees of its subcontractors. The Subcontractors hereby assumes liability for
actions brought by its employees and waives its immunity under the applicable
Worker's Compensation Law to extent permitted under such law. The indemnities
assumed by Subcontractor shall not, however, extend to injuries or damages
caused by injuries or damages caused by or resulting from the sole negligence of
the Contractor. Subcontractor further agrees to add Owner, its Architects and/or
Engineers, Hoffman Corporation, its subsidiaries, their officers, agents and
employees as additional insureds under its general liability policies, including
coverage for liability of the additional insureds with respect to injuries,
including death, to employees of the Subcontractor and its subcontractors. Such
insurance shall be primary and any insurance maintained by the additional
insureds shall be excess and non-contributory. If the Subcontractor's general
liability insurance policy has a general aggregate, then the general aggregate
shall apply separately to this Subcontract.
PROJECT SAFETY PLAN
SAFETY PRECAUTIONS AND PROGRAMS
Subcontractor shall comply with Contractor's Safety Program. Subcontractor,
its project supervision and personnel shall attend and participate in safety
meetings and programs as required by Contractor. Subcontractor shall use every
device, care and precaution which it is practicable to use for the protection
and safety of life and limb and without regard to the additional cost of
suitable material or safety appliances and devises. Without limiting the
foregoing, Subcontractor shall provide protection to prevent damage, injury or
loss to:
1. All employees on the work and all other persons who may be affected
thereby;
2. All the work and all materials and equipment to be incorporated therein,
whether in storage on or off the site, under the care, custody or control
of the Subcontractor or any of its subcontractors; and
3. Other property at the site or adjacent thereto, including trees, shrubs,
lawns, walks, pavements, roadways, structures, and utilities not designated
for removal, relocation or replacement in the course of construction.
Subcontractor shall give all notices and comply with all applicable laws,
ordinances, rules, regulations including State and Federal Hazardous
Communication Regulations and lawful orders of any public authority bearing on
the safety of persons or property or their protection from damage, injury or
loss.
Subcontractor shall designate a responsible member of its organization at
the site whose duty shall be the prevention of accidents. This person shall be
the Subcontractor's superintendent unless otherwise designated by the
Subcontractor in writing to the Contractor.
PROJECT DRUG AND ALCOHOL TESTING
DRUG AND ALCOHOL TESTING REQUIREMENT
The Contractor has implemented a drug and alcohol testing program which
shall apply to this Project. Subcontractor agrees that it, its employees and its
subcontractors and their employees shall be bound by the Alcohol and Drug Policy
implemented by the Contractor. Adherence to the same shall be a condition of
employment for all employees stationed at this Project site.
Under this program, Contractor has employed a lab which will conduct
alcohol and drug testing. Testing shall be conducted for all employees,
including all supervisory and craft employees, and subcontractors at every tier.
Employees who fail the drug/alcohol screen administered by the selected lab,
shall not be employed or perform any work at the Project site. Testing costs
charged by Contractors selected lab shall be paid by Contractor. All other costs
associated with or arising out of Contractor's testing program shall be borne by
the Subcontractor and its sub-subcontractors.
The Subcontractor shall comply with all provisions of Contractor's drug and
alcohol testing program. In the event of Subcontractor's noncompliance, this
Subcontract may be canceled, terminated, or suspended, in whole or in part, and
Contractor may complete the work and charge the cost to Subcontractor in
accordance with the Insurance Provisions of the subcontract. The Subcontractor
shall include the provisions of this Drug and Alcohol Testing Requirement in
every subcontract and require that its subcontractors include it in theirs so
that such provisions will be binding upon each Subcontractor and their
employees, at every tier.
I. The term "Contract" as used herein refers to all the General and Special
Conditions, Drawings, Specifications, Addenda, Amendments, Modifications and all
other documents forming or by reference made a part of the contract between
Contractor and Owner. All of the aforesaid shall be considered a part of this
Subcontract by reference hereto and insofar as they do not conflict with the
terms and conditions of this Subcontract, they and each of them are hereby
Incorporated into this Subcontract as fully and particularly as if copied
verbatim herein. Subcontractor agrees to be bound to Contractor by the terms of
the Contract, and any amendments thereto, insofar as they are applicable to the
Work described herein and shall assume toward Contractor all the obligations and
responsibilities that Contractor assumes toward Owner. Subcontractor certifies
that it is fully familiar with all the terms and obligations of the Contract,
that it has inspected the job site, that it is familiar with the location of the
job site and existing job site conditions, including, without limitation, labor,
weather, supply, physical and subsurface conditions, and that it has informed
himself of all conditions relating to the execution of the Work and the
conditions under which the Work is to be performed.
II. The Work is to be fully completed and delivered to Contractor according
to the terms and conditions of this Subcontract, including the Subcontract
General Provisions, subject to additions and deductions for changes agreed upon
or determined, as provided herein. Partial payments will be made to
Subcontractor each month in an amount equal to the value of the work completed
less retainage, computed on the basis of the price set forth above, of the
quantity of the Work performed hereunder, less the aggregate of previous
payments, provided that such partial payments shall not become due to
Subcontractor until five (5) days after Contractor received payment for such
Work from Owner. If Contractor received payment from Owner for less than the
full value of materials delivered to the site but not yet incorporated into the
Work, the amount due Subcontractor on account of such materials delivered to the
site shall be proportionately reduced. Upon complete performance of this
Subcontract by Subcontractor, final written approval and acceptance of
Subcontractor's Work by Owner, and furnishing by Subcontractor of a complete
release of any and all claims arising out of this Subcontract, Contractor will
make final payment to Subcontractor of the balance due under this Subcontract
within ten (10) days after Contractor receives full and final payment from Owner
under the Contract. Contractor may deduct from any amounts due or to become due
to Subcontractor any sum or sums owed by Subcontractor to Contractor.
III. If called for by Contractor, Subcontractor shall furnish a performance
bond and a payment bond, each in an amount equal to the full Subcontract price.
Such bonds shall be on forms furnished by and with sureties satisfactory to
Contractor. Premium for bonds will be paid direct to Subcontractor's insurance
broker by Contractor. Contractor shall have the right to call for bonds at any
time. Should Subcontractor fail to furnish the required bonds, Contractor shall
the right to declare Subcontractor to be in default and to take over the Work
pursuant to Section XVIII below and/or to withhold all payments due hereunder.
IV. Subcontractor shall furnish all samples, brochures, shop drawings,
color charts, schedules and descriptive literature required for submission
within ample time to allow for checking and to prevent any delay due to lack of
approval. Subcontractor shall furnish all copies of approved and corrected
submittals required for distribution. Approval of the same does not relieve
Subcontractor of responsibility for compliance with all requirements of the
Contract and this Subcontract.
V. (a) Subcontractor shall submit in writing to Contractor a complete and
accurate schedule of values of the various parts of the Work, aggregating the
total sum of this Subcontract, itemized and detailed as required by Contractor
and supported by such evidence as to its completeness and correctness as
Contractor may require. This schedule when approved by Contractor shall be used
as the basis for making payments hereunder unless it is found to be in error or
in conflict with the procedures or determinations of Owner regarding progress
payments to Contractor. This requirement to submit a schedule of values to
Contractor shall be in addition to any submittals required by the Contract or
Owner.
(b) Subcontractor further agrees that no payment, whether progress or final
payment, made under this Subcontract, or certificate thereof, shall operate as
approval or acceptance of Work furnished hereunder or be evidence of performance
by Subcontractor hereunder, either wholly or in part, and that no payment or
certificate therefor shall be construed to be an acceptance of defective or
improper materials, equipment or workmanship or any element of Subcontractor's
performance determined to be at variance with this Subcontract or the Contract.
No payment or certificate therefor shall constitute a waiver by Contractor of
any right to require fulfillment of all the terms, covenants and conditions of
this Subcontract not shall such payment or certificate alter the effectiveness
of any warranties, implied or expressed, which attach to any work performed by
Subcontractor, or to any equipment or materials furnished by Subcontractor.
VI. (a) Subcontractor shall commence the Work upon receipt of Contractor's
notice to proceed and shall diligently prosecute the same and perform
progressively as, when and in such order as directed by Contractor. If
Contractor provides Subcontractor with a progress schedule, Subcontractor shall
follow such schedule which may be changed by Contractor from time to time for
any reason. Subcontractor shall perform in accordance with such modified
schedule(s). Subcontractor shall not be entitled to any claim for damages for
performing in accordance with such modified schedules nor shall Subcontractor be
entitled to any claim for damages on account of hindrances, interferences,
disruptions or delays from any cause whatsoever.
(b) Should Subcontractor be hindered or delayed by an act or omission on
the part of Contractor or those in privity of contract with Contractor, such
act, hindrance or delay may entitle Subcontractor only to an extension of time
in which to complete the work and Subcontractor expressly agrees that such
extension of time, if any, shall constitute Subcontractor's sole and exclusive
remedy. Subcontractor shall notify Contractor in writing by certified mail of
the cause of such act, hindrance or delay within five (5) days after its
occurrence and agrees that failure to give such written notice shall constitute
a waiver by Subcontractor to any extension of time. Such time extension, if any,
is to be determined by Contractor whose decision shall be final and binding
unless Contractor's decision is submitted to arbitration in accordance with
Section XVII(d) below.
(c) In the event Subcontractor is hindered or delayed by an act or omission
on part of Owner or its representatives, such act, hindrance or delay may
entitle Subcontractor to a claim which shall be controlled and disposed of as
set forth in Section XVII below. Provided, however, Subcontractor shall not be
entitled to such claim unless it gives notice in writing to Contractor of the
cause of such act, hindrance or delay within five (5) days after its occurrence.
VII. Should Subcontractor fail in any respect to prosecute the Work with
promptness and diligence and is such manner as not to delay Contractor or
progress of the Project, or if the progress of the Work is such that in
Contractor's sole opinion the completion of the Work or any part thereof within
the time specified is doubtful and Contractor gives Subcontractor written notice
thereof, Subcontractor agrees to take all action necessary to ensure the
completion of the Work or any part thereof within the time specified, including
but not limited to any or all of the following: increase construction manpower
in critical quantities and crafts, increase the number of working hours per
shift, increase the number of shifts per working day, increase the number of
working days per week, increase the amount of construction equipment, or perform
any combination of the foregoing actions. Subcontractor agrees that it shall
have no claim for any adjustment in the Subcontract price or reimbursement
because of extra expenses occasioned by compliance with this section. compliance
with this section shall not release or relieve Subcontractor from any other
obligation or liability assumed under this Subcontract, not shall such
compliance prevent or estop Contractor from enforcing any other right or
collecting any damages or costs to which it is entitled under this Subcontract.
VIII. Before proceeding with any item of Work, Subcontractor shall
accurately inspect and check all previously completed and surrounding work done
by Contractor or others. Failure of Subcontractor to detect and report in
writing to Contractor any defects or discrepancies shall be an admission by
Subcontractor that the previously completed and surrounding work has been done
in a proper manner. Subcontractor, however, will not be responsible for talent
defects which could not have been discovered by such inspection.
IX. Subcontractor will employ no person whose employment on or in
connection with this Subcontract may be objectionable to Contractor, and
Subcontractor will discharge any such person when objected to by Contractor. At
all times when its Work is being performed on the job site, Subcontractor shall
assign to and keep on the Project a competent superintendent who shall have full
authority to act for Subcontractor in all matters pertaining to this
Subcontract.
X. (a) Subcontractor specifically agrees that it is responsible for the
protection of its Work until final completion and acceptance thereof by Owner
and that it will make good or replace, at no expense to Contractor, any damage
to its Work which occurs prior to said final acceptance.
(b) Subcontractor will accept responsibility for all damage caused by
Subcontractor which shall be deemed to include, without limiting the generality
of the foregoing, cleaning up of rubbish and debris resulting from
Subcontractor's Work and removal of same from the Project and cleaning f walls,
floors and other surfaces soiled by Subcontractor; provided, however, that
Subcontractor will not be responsible for any damage existing at the time
Subcontractor begins work of which Subcontractor notifies Contractor in writing
prior to commencing work hereunder.
(c) Any damage to Subcontractor's Work inflicted by another Subcontractor
shall be repaired by Subcontractor and be billed by Subcontractor to the
Subcontractor responsible therefor. Subcontractor will give written notice to
Contractor and the party responsible for the damage before making repairs. If
any dispute arises between Subcontractor and another Subcontractor as to which
is responsible for any item of damage, the dispute shall be submitted to
Contractor for decision and its determination as to responsibility shall be
final and binding on Subcontractor, unless Contractor's decision is submitted to
arbitration in accordance with Section XVII(d) below.
XI. Subcontractor shall take all reasonable safety precautions pertaining
to its Work and the conduct thereof. Without limiting the generality of the
foregoing, it shall comply in all applicable laws, ordinances, rules,
regulations and orders issued by a public authority, whether Federal, state,
local or otherwise, including, but not limited to, the Federal Occupational
Safety and Health Act, and shall hold Contractor harmless form all suits,
citations, penalties, losses, damage, costs (including attorney's fees) arising
in whole or in part from any alleged safety violation.
XII. Subcontractor expressly agrees that as a part of its obligations under
this Subcontract, it shall pay all bills for labor, materials, supplies,
equipment and Subcontract work in connection with the Work. In order to protect
the Project, Owner and Contractor from all claims, liens and encumbrances of any
nature, it is expressly agreed that payment of money otherwise due Subcontractor
need not be made by Contractor until all labor, material, tools, equipment,
fees, permits, taxes and other charges in connection with the Work have been
fully paid. If required by Contractor, receipted bills and releases therefor
showing payment in full shall be furnished by Subcontractor to Contractor prior
to contractor's payment of any and all sums to Subcontractor. Subcontractor
shall deliver its work free from all claims, encumbrances or liens and
Subcontractor expressly agrees that monies received for the performance of this
Subcontract shall be held in trust by Subcontractor and first used for labor,
material and equipment entering into or used in connection with the Work and
said monies shall not be diverted to apply to obligations of Subcontractor on
other projects or for other purposes. Should Subcontractor fail or refuse to
remove any liens or encumbrances, Contractor shall have the right to take
whatever action is deemed necessary for their removal, including but not limited
to obtaining a lien bond and Subcontractor expressly agrees to reimburse
Contractor for all costs and expenses (including attorney's fees) so incurred.
Subcontractor further agrees to defend and hold Contractor harmless form all
claims, encumbrances and liens growing out of the performance of this
Subcontract and Subcontractor agrees that it will at its own cost and expense
(including attorney's fees) remove all liens or encumbrances which attach to any
part of the project and which arise in any way out of the performance of this
Subcontract.
XIII. Subcontractor agrees to fully comply with all Federal, state and
local laws, ordinances, codes, rulings and regulations and expressly agrees to
hold Contractor harmless form any and all liability with respect thereto.
Subcontractor shall pay all taxes, contributions to trust funds, licenses and
fees of every nature imposed or charged by any governmental authority or labor
agreement upon the labor, material or other things used int e performance of the
Work or upon the transaction between Contractor and Subcontractor. In the event
Contractor is held liable to pay any such charges, Subcontractor agrees to
supply Contractor with all records necessary to compute the same and to fully
reimburse Contractor upon demand for the amount (including penalties and
interest) paid by Contractor.
XIV. Subcontractor agrees to pay all royalties and license fees, to defend
all suits or claims for infringement of any patent rights involved int he Work
under this Subcontract; and to save Contractor harmless form all loss, cost or
expense on account of such use or infringement by Subcontractor.
XV. (a) Contractor may at any time by written order of contractor's
authorized representative, and without notice to Subcontractor's sureties, and
without invalidating this Subcontract, order extra work or make changes in,
additions to and omissions from the Work to be performed under this Subcontract,
and Subcontractor shall promptly proceed with the performance of this
Subcontract as so changed. Such changes to the Subcontract and appropriate
increases or decreases int he Subcontract price will be made by the issuance of
a written Subcontract Modification executed by the Contractor. If Subcontractor
objects to or otherwise disagrees with such Subcontract Modification,
Subcontractor shall no notify Contractor in writing within ten (10) days of the
date such change is ordered, submitting with such notification a claim for
equitable adjustment. If Subcontractor fails to so notify the Contractor, such
modification becomes final and accepted by Subcontractor and becomes part of the
Subcontract between the parties.
(b) It is expressly agreed that except in an emergence endangering life or
property, no additions or changes to the Work shall be made except upon
Contractor's written order and Contractor shall not be liable to Subcontractor
for any extra labor, materials or equipment furnished without such written
order. No officer, employee or agent of Contractor is presently authorized or
will hereafter be authorized to direct any extra or changed work by oral order.
HOFFMAN CONSTRUCTION COMPANY SUBCONTRACT
OF OREGON DATE: 12/14/95
P.O. BOX 1300, 1300 SW SIXTH AVENUE NUMBER: 95096-8223
PORTLAND, OR 97207 COST CODE: See Below
TEL: 221-8811 FAX: 221-8934 PAGE 1 OF 2
SUBCONTRACTOR:
Monroc, Inc.
P.O. Box 789
Eagle, ID 83616
Phone: (208) 939-6831
Fax: (208) 939-2151
License No: 64925
Vendor No: 287523
PROJECT: Snake River Correctional Institution, Phase II-Ontario, OR
JOB NO. 95096
The following attachments are herein included as part of this Subcontract:
DATE PAGES
"A" Project Requirements 7/17/95 1
"B" Insurance Requirement 7/17/95 1
Safety Plan
Drug Testing
"C" Subcontract General Provisions 10/10/94 2
Bond Requirements: Yes X No
WITNESSETH
Contractor has entered into a contract with Oregon Department of
Corrections (Owner) pertaining to the construction of the project above; and
whereas, Contractor and Subcontractor desire to enter into this Agreement for
Subcontractor's performance of a portion of the work called for by the Contract.
Therefore, for and in consideration of the promises and other good and
valuable consideration and sufficiency of which is hereby expressly
acknowledged, the parties agree as follows:
ARTICLE 1 - THE WORK
Subcontractor agrees to furnish all supervision, engineering, management,
labor, tools, equipment, materials, supplies, facilities and financing and to
secure all field measurements necessary to perform and to fully complete the
following described work and all work incidental thereto. The term "Work" as
used herein includes, without limitation, all of the aforesaid together with the
following described work:
SPECIFICATION SECTION:
1. 03460 "Architectural Precast Insulated Concrete"
2. 03500 "Structural Precast Concrete"
CLARIFICATIONS:
1. This work is based upon Bid Package 3 documents as amended by Addendum No.
1 dated November 20, 1995, Addendum No. 2 dated November 27, 1995, and
Addendum No. 3 dated December 1, 1995.
2. Subcontractor shall furnish and install all work complete in accordance
with the Contract Documents.
3. Subcontractor's work includes, but is not limited to, the following:
a) Furnishing material F.O.B. jobsite, unloading, installation, erecting
and grouting;
b) Pick proof grout at vertical joints in cells.
4. Subcontractor excludes the following:
a) All electrical, mechanical, and plumbing materials, installation and
labor to embed or connect to precast.
b) Threaded rebar extending from splice sleeves into C.I.P. grade beams
and C.I.P. framing beams in Link Corridor Frames.
c) Walls that occur in Central Services on Sheet A200 along grid line 5
in the corridor and in Housing 2 and 3 on Sheet A203 along grid line
5.5 in the corridor. (Insufficient detail)
d) Column anchor bolts and footing embedments.
e) Demolition and/or disconnecting existing wall panels.
f) Modification or repair to existing panels that remain in place or are
relocated.
g) All fire safing.
h) All staining and/or sealing.
i) Cleaning or preparing panels for reinstallation.
j) All on-site cleaning or washing or precast concrete panels.
k) Payment and performance bond costs.
l) All on site material not associated with the erection or work.
m) Frames for doors and/or windows.
n) all galvanized rebar, mesh, and embeds. (Assume "exposed" Pg. 03450-7,
Addendum No. 2) is exposed to the elements)
o) All grouting and caulking related to precast concrete as required for
Bid Packages 1 and 3.
5. Erection to be done from the inside of building(s). Contractor to provide
suitable access to job site for trucks and crane(s).
OPTION:
1. If authorized by Subcontract Modification:
Alternate 1: Expansion of Industry Building no. 2
and Industry Building no. 3................................ADD: $275,000.00
COST CODE DISTRIBUTION:
Cost Code Amount
034000 $15,917,370.00
079200 $13,630.00
---------------------
$15,936,000.00
ARTICLE 2 - THE SUBCONTRACT PRICE
Contractor shall pay Subcontractor for the performance of the work, subject
to additions and deductions modifications as provided in the contract documents,
the total sum of ("THE SUBCONTRACT PRICE") which includes all taxes except those
specifically excluded herein.
Fifteen Million, Nine Hundred Thirty Six and 00/100 Dollars---- $15,936,000.00
- --------------------------------------------------------------------------------
Retainage: 5%
See Article II, "Attachment C"
Both parties have read and understand this Subcontract. This Subcontract
constitutes the entire Subcontract, and supersedes all prior proposals and
agreements. The Contractor assumes no responsibility or representation made by
any of its officers or agents or any other persons during or prior to the
execution of this Subcontract unless such understanding or representations are
expressly stated herein. No provision of this Subcontract may be waived or
changed, except in writing by Contractor.
IN WITNESS WHEREOF, Contractor and Subcontractor have executed this
agreement in duplicate by their proper officers or duly authorized agents.
SUBCONTRACTOR HOFFMAN CONSTRUCTION COMPANY OF OREGON
BY: ____________________________ BY:___________________________________
SIGNATURE Wayne Drinkward, President
Wm. Richard Johnson
BY: Vice President of Operations License Number: 28417 JG:gac
____________________________
NAME/TITLE
ATTACHMENT "A" - PROJECT REQUIREMENTS
JOB: Snake River-95096
DATE: 7/17/95
Subcontractor will perform all work complete in strict accordance with
Specifications for The Snake River Correctional Institution, Phase II - Ontario,
Oregon as proposed by HOK Architecture, P.C., including all drawings issued
therewith as noted on the Drawing Index. This work includes without limitation
all of the Specifications, and all General Conditions, and General Requirements
of the Specifications as they apply to the work being performed under this
Subcontract.
INCLUSIONS
This Subcontract will also include without limitation the following:
1. Submittals: Subcontractor will furnish all submittals of Shop Drawings,
Product Data, and Samples as required in ample time to prevent any delay
due to lack of approval. Subcontractor shall thoroughly review the
submittals of its sub tier vendors and subcontractors. All such submittals
shall be approved by Subcontractor prior to transmittal to Contractor, and
Contractor shall have the right to rely upon Subcontractor's approval as
constituting compliance with the Contract Documents.
2. Subcontractor will pay special attention to the Certification of Payroll
provisions of the Documents. Subcontractor will submit Certified Payrolls
as required by the Contract Documents on the dates established by
Contractor.
3. State of Oregon Standard General Conditions: (Bound in Specifications)
4. Traffic Control and Flagging: All Subcontractors shall be responsible for
providing all traffic control, wheel washes, street cleaning, dust and
noise control to comply with all applicable codes and regulations as it
pertains to their work.
SCHEDULE
Subcontractor will coordinate the schedule for the work contained herein
with Contractor's Superintendent. Subcontractor recognizes that time is of the
essence and will complete all work as scheduled to avoid delaying other work
activities and the completion dates for the total project.
MISCELLANEOUS
1. Quality: The quality of the workmanship and materials furnished and
installed under this Subcontract shall be of the higher level and shall, in
all respects, be of industry accepted standards for quality and
workmanship. Any work or materials which do not exhibit the highest level
of standards for quality and workmanship, shall be removed and replaced at
no additional charge to the Owner or Contractor.
2. Jobsite Appearance/Storage: Contractor has implemented a Jobsite
Appearance/Storage Program. Subcontractor shall comply with/and is apprised
that extremely crowded conditions will exist at the jobsite. Subcontractor
will coordinate its work with and obtain Contractor's job superintendent's
prior approval of Subcontractor's schedule for delivery, installation
and/or placement of its material, equipment and crew shacks on the jobsite.
3. Utilization of Contractor's Equipment: If Subcontractor uses Contractor's
hoisting facilities or borrows, rents or other wise performs any work with
scaffoldings, tools or equipment owned or furnished by Contractor, by so
using such facilities, scaffold, tools or equipment, Subcontractor accepts
such items in an "as-is" condition. Subcontractor in addition to its
obligations to provide insurance as required by this Subcontract, shall
indemnify, defend and save harmless Contractor and its officers, agents and
employees from an against all claims, loss, damage, liability, costs charge
or expense (including attorneys' fees) directly or indirectly arising out
of or resulting from any failure of Subcontractor to perform any of the
terms and conditions of this Subcontract or the performance of or failure
to perform the Work or in any manner caused or claimed to be caused by any
act, inaction, fault or negligence of Subcontractor or anyone acting on its
behalf, even through the same may have resulted from the joint, concurring
or contributory act or negligence of Contractor, or those in privity of
Contract with Contractor, unless the same be caused by the sole negligence
or willful misconduct of Contractor, or those in privity of contract with
Contractor. Without limiting the generality of the foregoing, Subcontractor
agrees to assume entire responsibility and liability for all claims for
damage or injury to all persons, whether employees or otherwise, and to all
property, arising out of, resulting from or in any manner connected with,
the execution of the Work or occurring or resulting from the use by
Subcontractor, its agents or employees, of materials, equipment,
instrumentalities or other property, whether the same be owned by
Contractor, Subcontractor or third parties. In any instance whereby
Contractor is entitled to be indemnified by or to recover any monies from
the use by Subcontractor, its agents or employees, of materials, equipment,
instrumentalities or other property, whether the same be owned by
Contractor, Subcontractor or third parties. In any instance whereby
Contractor is entitled to be indemnified by or to recover any monies from
Subcontractor, Contractor shall be entitled, in addition, to recover from
Subcontractor (a) interest on any sums due from Subcontractor at the
maximum legal rate of interest per annum from date due until paid; (b)
reasonable attorney's fees incurred by Contractor for all investigation,
negotiation, litigation, arbitration or other such services commonly
performed by attorneys; and (c) all court costs, fees paid to experts,
arbitration fees and like expenses.
4. Security Requirements: The Snake River Correctional Institution Security
Procedures dated July 26, 1995. (Bound in Specifications)
5. Security Check Form: (Bound in Specifications)
6. Inmate Labor: Subcontractor shall comply with Contractors and Owners Inmate
Labor Requirements to the maximum extent possible.
7. Firestop and Sleeves: Subcontractor includes furnishing and selling of all
sleeves and firestopping connected with its work in strict accordance with
"Firestopping" of the Specifications.
8. Joint Sealants: Unless specifically excluded elsewhere, Subcontractor shall
do all caulking connected with its work in strict accordance with "Joint
Sealants" of the Specifications.
NONDISCRIMINATORY PROVISIONS
This Subcontract is subject to the provisions of Executive Order 11246
(Equal Opportunity Clause as amended; the regulations in 40 CFR 60-4 Equal
Opportunity Clause); Executive Order 11701 (Job Openings for Veterans); 20 CFR,
Section 741.3 and 741.29; together with 20 CFR, Chapter VI, 741 (Employment of
Handicapped); and the Vietnam Era Veteran's Readjustment Act of 1972, as
amended.
Subcontractor will not discriminate against any employee or applicant for
employment because or race, creed, color, national origin, sex or age.
Subcontractor will ensure that applicants are employed, and that employees are
treated during employment without regard to their race, creed, color, national
origin, sex or age. Such action shall include but not be limited to the
following; employment, upgrading, demotion or transfer, recruitment or
recruitment advertising, layoff or termination, rates of pay or other forms of
compensation and selection for training.
Subcontractor will send to each labor union or representative of workers
with which it has a collective bargaining agreement or other contract or
understanding, a notice advising the said labor union or workers' representative
of the bidder's commitments under this section. The words "Equal Opportunity
Employer" shall be used in all advertisements for employees.
Subcontractors will include the provisions of the last three foregoing
paragraphs, as well as all other applicable portions of the Contract Documents,
in every contract or purchase order issued by Subcontractor for goods or
services required under this Subcontract.
ATTACHMENT "B" - PROJECT INSURANCE REQUIREMENTS
JOB: Snake River-95096
DATE: 7/17/95
Subcontractor agrees to obtain, maintain and pay for such workmen's compensation
and employer's liability insurance as may be required by the Contract or by law.
Subcontractor shall also provide and maintain in full force and effect during
the term of the Subcontract comprehensive general liability insurance (including
but not limited to contractual liability assumed under this Subcontract and
completed operations coverage) and comprehensive automobile liability insurance,
protecting Subcontractor, Owner and Contractor against liability from damages
because of injuries, including death, suffered by persons, including employees
of Subcontractor, and liability from damages to property, arising from or
growing out of the Work hereunder or Subcontractor's operations in connection
with the performance of this Subcontract. Such insurance shall be in the amounts
specified in the Contract but, in no event, shall such insurance be in amounts
less than the following:
Comprehensive General Liability Comprehensive Automobile Liability
Bodily Injury Bodily Injury
$1,000,000 per occurrence $1,000,000 per person
$1,000,000 aggregate $1,000,000 per occurrence
Property Damage Property Damage
$1,000,000 per occurrence $1,000,000 per occurrence
$1,000,000 aggregate
Said insurance is to be in form and issued by a company or companies
satisfactory to Contractor. Written proof of compliance with these insurance
requirements shall be furnished to Contractor. Such proof if insurance shall be
in a form satisfactory to Contractor and provide for ten (10) days written
notice to Contractor prior to cancellation or modification of any insurance
referred to therein.
Subcontractor in addition to its obligations to provide insurance as
required by this Subcontract, shall indemnify, defend and save harmless
Contractor in addition to its obligations to provide insurance as required by
this Subcontract, shall indemnify, defend and save harmless Contractor and its
officer, agents and employees from and against all claims, loss, damage,
liability, costs charge or expense (including attorneys' fees) directly or
indirectly arising out of or resulting from any failure of Subcontractor to
perform any of the terms and conditions of this Subcontract or the performance
of or failure to perform the work or in any manner caused or claimed to be
caused by any act, inaction, fault or negligence of Subcontractor or anyone
acting on its behalf, even though the same may have resulted from the joint,
concurring or contributory act or contributory act or negligence of Contractor,
or those in privity of Contract with Contractor, unless the same be caused by
the sole negligence or willful misconduct of contractor, or those in privity of
Contract with Contractor. Without limiting the generality of the foregoing,
Subcontractor agrees to assume entire responsibility and liability for all
claims for damage or injury to all persons, whether employees or otherwise, and
to all property, arising out of, resulting from or in any manner connected with,
the execution of the Work or occurring or resulting from the use by
Subcontractor, its agents or employees, of materials, equipment,
instrumentalities or other property, whether the same be owned by Contractor,
Subcontractor or third parties. In any instance whereby Contractor is entitled
to be indemnified by or to recover any monies form Subcontractor, Contractor
shall be entitled, in addition, to recover from Subcontractor (a) interest on
any sums due from Subcontractor at the maximum legal rate of interest per annum
from date due until paid; (b) reasonable attorney's fees incurred by Contractor
for all investigation, negotiation, litigation, arbitration or other such
services commonly performed by attorneys; and (c) all court costs, fees paid to
experts, arbitration fees and like expenses.
In addition to the insurance and indemnity requirements set forth above,
Subcontractor expressly agrees to defend, indemnify and hold Owner, its
Architects and Engineers, Hoffman Corporation, its subsidiaries, their officers,
agents and employees harmless from all claims and loss (including reasonable
attorney fees) arising from injuries, including death, to its employees and
employees of its subcontractors. The Subcontractor hereby assumes liability for
actions brought by its employees and waives its immunity under the applicable
Worker's Compensation Law to the extent permitted under such law. The
indemnities assumed by Subcontractor shall not, however, extend to injuries or
damages caused by or resulting from the sole negligence of the Contractor.
Subcontractor further agrees to add Owner, its Architects and/or Engineers,
Hoffman Corporation, its subsidiaries, their officers, agents and employees as
additional insureds under its Architects and/or Engineers, Hoffman Corporation,
its subsidiaries, their officers, agents and employees as additional insureds
under its general liability policies, including coverage for liability of the
additional insureds with respect to injuries, including death, to employees of
the Subcontractor and its subcontractors. Such insurance shall be primary and
any insurance maintained by the additional insureds shall be excess and
non-contributory. If the Subcontractor's general liability insurance policy has
a general aggregate, then the general aggregate shall apply separately to this
Subcontract.
PROJECT SAFETY PLAN
SAFETY PRECAUTIONS AND PROGRAMS
Subcontractor shall comply with Contractor's Safety Program.
Subcontractor, its project supervision and personnel shall attend and
participate in safety meetings and programs as required by Contractor.
Subcontractor shall use every device, care and precaution which it is
practicable to use for the protection and safety of life and limb and without
regard to the additional cost of suitable material or safety appliances and
devices. Without limiting the foregoing, Subcontractor shall provide protection
to prevent damage, injury or loss to:
1. All employees on the Work and all other persons who may be affected
thereby;
2. All the work and all materials and equipment to be incorporated therein,
whether in storage on or off the site, under the care, custody or control
of the Subcontractor or any of its subcontractors; and
3. Other property at
the site or adjacent thereto, including trees, shrubs, lawns, walks,
pavements, roadways, structures, and utilities not designated for removal,
relocation or replacement in the course of construction.
Subcontractor shall give all notices and comply with all applicable laws,
ordinances, rules, regulations including State and Federal Hazardous
Communication Regulations and lawful orders of any public authority bearing on
the safety of persons or property or their protection from damage, injury or
loss.
Subcontractor shall designate a responsible member of its organization at
the site whose duty shall be the prevention of accidents. This person shall be
the Subcontractor's superintendent unless otherwise designated by the
Subcontractor in writing to the Contractor.
PROJECT DRUG AND ALCOHOL TESTING
DRUG AND ALCOHOL TESTING REQUIREMENTS
The Contractor has implemented a drug and alcohol testing program which
shall apply to this Project. Subcontractor agrees that it, its employees and its
subcontractors and their employees shall be bound by the Alcohol and Drug Policy
implemented by the Contractor. Adherence to the same shall be a condition of
employment for all employees stationed at this Project site.
Under this program, Contractor has employed a lab which will conduct
alcohol and drug testing. Testing shall be conducted for all employees,
including all supervisory and craft employees, and subcontractors at every tier.
Employees who fail the drug/alcohol screen administered by the selected lab,
shall not be employed or perform any work at the Project site. Testing costs
charged by Contractor's selected lab shall be paid by Contractor. All other
costs associated with or arising out of Contractor's testing program shall be
borne by the Subcontractor and its sub-subcontractors.
The Subcontractor shall comply with all provisions of Contractor's drug and
alcohol testing program. In the event of Subcontractor's noncompliance, this
Subcontract may be canceled, terminated, or suspended, in whole or in part, and
Contractor may complete the work and charge the cost to Subcontractor in
accordance with the Insurance Provisions of the Subcontract. The Subcontractor
shall include the provisions of this Drug and Alcohol Testing Requirement in
very subcontract and require that its subcontractors include it int heirs wo
that such provisions will be binding upon each subcontractor and their
employees, at ever tier.
ATTACHMENT "C" - SUBCONTRACT GENERAL PROVISIONS
Page 1 of 2
I. The term "Contract" as used herein refers to all the General and Special
Conditions, Drawings, Specifications, Addenda, Amendments, Modifications and all
other documents forming or by reference made a part of the contract between
Contractor and Owner. All of the aforesaid shall be considered a part of this
Subcontract by reference hereto and insofar as they do not conflict with the
terms and conditions of this Subcontract, they and each of them are hereby
Incorporated into this Subcontract as fully and particularly as if copied
verbatim herein. Subcontractor agrees to be bound to Contractor by the terms of
the Contract, and any amendments thereto, insofar as they are applicable to the
Work described herein and shall assume toward Contractor all the obligations and
responsibilities that Contractor assumes toward Owner. Subcontractor certifies
that it is fully familiar with all the terms and obligations of the Contract,
that it has inspected the job site, that it is familiar with the location of the
job site and existing job site conditions, including, without limitation, labor,
weather, supply, physical and subsurface conditions, and that it has informed
himself of all conditions relating to the execution of the Work and the
conditions under which the Work is to be performed.
II. The Work is to be fully completed and delivered to Contractor according
to the terms and conditions of this Subcontract, including the Subcontract
General Provisions, subject to additions and deductions for changes agreed upon
or determined, as provided herein. Partial payments will be made to
Subcontractor each month in an amount equal to the value of the work completed
less retainage, computed on the basis of the price set forth above, of the
quantity of the Work performed hereunder, less the aggregate of previous
payments, provided that such partial payments shall not become due to
Subcontractor until five (5) days after Contractor received payment for such
Work from Owner. If Contractor received payment from Owner for less than the
full value of materials delivered to the site but not yet incorporated into the
Work, the amount due Subcontractor on account of such materials delivered to the
site shall be proportionately reduced. Upon complete performance of this
Subcontract by Subcontractor, final written approval and acceptance of
Subcontractor's Work by Owner, and furnishing by Subcontractor of a complete
release of any and all claims arising out of this Subcontract, Contractor will
make final payment to Subcontractor of the balance due under this Subcontract
within ten (10) days after Contractor receives full and final payment from Owner
under the Contract. Contractor may deduct from any amounts due or to become due
to Subcontractor any sum or sums owed by Subcontractor to Contractor.
III. If called for by Contractor, Subcontractor shall furnish a performance
bond and a payment bond, each in an amount equal to the full Subcontract price.
Such bonds shall be on forms furnished by and with sureties satisfactory to
Contractor. Premium for bonds will be paid direct to Subcontractor's insurance
broker by Contractor. Contractor shall have the right to call for bonds at any
time. Should Subcontractor fail to furnish the required bonds, Contractor shall
the right to declare Subcontractor to be in default and to take over the Work
pursuant to Section XVIII below and/or to withhold all payments due hereunder.
IV. Subcontractor shall furnish all samples, brochures, shop drawings,
color charts, schedules and descriptive literature required for submission
within ample time to allow for checking and to prevent any delay due to lack of
approval. Subcontractor shall furnish all copies of approved and corrected
submittals required for distribution. Approval of the same does not relieve
Subcontractor of responsibility for compliance with all requirements of the
Contract and this Subcontract.
V. (a) Subcontractor shall submit in writing to Contractor a complete and
accurate schedule of values of the various parts of the Work, aggregating the
total sum of this Subcontract, itemized and detailed as required by Contractor
and supported by such evidence as to its completeness and correctness as
Contractor may require. This schedule when approved by Contractor shall be used
as the basis for making payments hereunder unless it is found to be in error or
in conflict with the procedures or determinations of Owner regarding progress
payments to Contractor. This requirement to submit a schedule of values to
Contractor shall be in addition to any submittals required by the Contract or
Owner.
(b) Subcontractor further agrees that no payment, whether progress or final
payment, made under this Subcontract, or certificate thereof, shall operate as
approval or acceptance of Work furnished hereunder or be evidence of performance
by Subcontractor hereunder, either wholly or in part, and that no payment or
certificate therefor shall be construed to be an acceptance of defective or
improper materials, equipment or workmanship or any element of Subcontractor's
performance determined to be at variance with this Subcontract or the Contract.
No payment or certificate therefor shall constitute a waiver by Contractor of
any right to require fulfillment of all the terms, covenants and conditions of
this Subcontract not shall such payment or certificate alter the effectiveness
of any warranties, implied or expressed, which attach to any work performed by
Subcontractor, or to any equipment or materials furnished by Subcontractor.
VI. (a) Subcontractor shall commence the Work upon receipt of Contractor's
notice to proceed and shall diligently prosecute the same and perform
progressively as, when and in such order as directed by Contractor. If
Contractor provides Subcontractor with a progress schedule, Subcontractor shall
follow such schedule which may be changed by Contractor from time to time for
any reason. Subcontractor shall perform in accordance with such modified
schedule(s). Subcontractor shall not be entitled to any claim for damages for
performing in accordance with such modified schedules nor shall Subcontractor be
entitled to any claim for damages on account of hindrances, interferences,
disruptions or delays from any cause whatsoever.
(b) Should Subcontractor be hindered or delayed by an act or omission on
the part of Contractor or those in privity of contract with Contractor, such
act, hindrance or delay may entitle Subcontractor only to an extension of time
in which to complete the work and Subcontractor expressly agrees that such
extension of time, if any, shall constitute Subcontractor's sole and exclusive
remedy. Subcontractor shall notify Contractor in writing by certified mail of
the cause of such act, hindrance or delay within five (5) days after its
occurrence and agrees that failure to give such written notice shall constitute
a waiver by Subcontractor to any extension of time. Such time extension, if any,
is to be determined by Contractor whose decision shall be final and binding
unless Contractor's decision is submitted to arbitration in accordance with
Section XVII(d) below.
(c) In the event Subcontractor is hindered or delayed by an act or omission
on part of Owner or its representatives, such act, hindrance or delay may
entitle Subcontractor to a claim which shall be controlled and disposed of as
set forth in Section XVII below. Provided, however, Subcontractor shall not be
entitled to such claim unless it gives notice in writing to Contractor of the
cause of such act, hindrance or delay within five (5) days after its occurrence.
VII. Should Subcontractor fail in any respect to prosecute the Work with
promptness and diligence and is such manner as not to delay Contractor or
progress of the Project, or if the progress of the Work is such that in
Contractor's sole opinion the completion of the Work or any part thereof within
the time specified is doubtful and Contractor gives Subcontractor written notice
thereof, Subcontractor agrees to take all action necessary to ensure the
completion of the Work or any part thereof within the time specified, including
but not limited to any or all of the following: increase construction manpower
in critical quantities and crafts, increase the number of working hours per
shift, increase the number of shifts per working day, increase the number of
working days per week, increase the amount of construction equipment, or perform
any combination of the foregoing actions. Subcontractor agrees that it shall
have no claim for any adjustment in the Subcontract price or reimbursement
because of extra expenses occasioned by compliance with this section. compliance
with this section shall not release or relieve Subcontractor from any other
obligation or liability assumed under this Subcontract, not shall such
compliance prevent or estop Contractor from enforcing any other right or
collecting any damages or costs to which it is entitled under this Subcontract.
VIII. Before proceeding with any item of Work, Subcontractor shall accurately
inspect and check all previously completed and surrounding work done by
Contractor or others. Failure of Subcontractor to detect and report in writing
to Contractor any defects or discrepancies shall be an admission by
Subcontractor that the previously completed and surrounding work has been done
in a proper manner. Subcontractor, however, will not be responsible for talent
defects which could not have been discovered by such inspection.
IX. Subcontractor will employ no person whose employment on or in
connection with this Subcontract may be objectionable to Contractor, and
Subcontractor will discharge any such person when objected to by Contractor. At
all times when its Work is being performed on the job site, Subcontractor shall
assign to and keep on the Project a competent superintendent who shall have full
authority to act for Subcontractor in all matters pertaining to this
Subcontract.
X. (a) Subcontractor specifically agrees that it is responsible for the
protection of its Work until final completion and acceptance thereof by Owner
and that it will make good or replace, at no expense to Contractor, any damage
to its Work which occurs prior to said final acceptance.
(b) Subcontractor will accept responsibility for all damage caused by
Subcontractor which shall be deemed to include, without limiting the generality
of the foregoing, cleaning up of rubbish and debris resulting from
Subcontractor's Work and removal of same from the Project and cleaning f walls,
floors and other surfaces soiled by Subcontractor; provided, however, that
Subcontractor will not be responsible for any damage existing at the time
Subcontractor begins work of which Subcontractor notifies Contractor in writing
prior to commencing work hereunder.
(c) Any damage to Subcontractor's Work inflicted by another Subcontractor
shall be repaired by Subcontractor and be billed by Subcontractor to the
Subcontractor responsible therefor. Subcontractor will give written notice to
Contractor and the party responsible for the damage before making repairs. If
any dispute arises between Subcontractor and another Subcontractor as to which
is responsible for any item of damage, the dispute shall be submitted to
Contractor for decision and its determination as to responsibility shall be
final and binding on Subcontractor, unless Contractor's decision is submitted to
arbitration in accordance with Section XVII(d) below.
XI. Subcontractor shall take all reasonable safety precautions pertaining
to its Work and the conduct thereof. Without limiting the generality of the
foregoing, it shall comply in all applicable laws, ordinances, rules,
regulations and orders issued by a public authority, whether Federal, state,
local or otherwise, including, but not limited to, the Federal Occupational
Safety and Health Act, and shall hold Contractor harmless form all suits,
citations, penalties, losses, damage, costs (including attorney's fees) arising
in whole or in part from any alleged safety violation.
XII. Subcontractor expressly agrees that as a part of its obligations under
this Subcontract, it shall pay all bills for labor, materials, supplies,
equipment and Subcontract work in connection with the Work. In order to protect
the Project, Owner and Contractor from all claims, liens and encumbrances of any
nature, it is expressly agreed that payment of money otherwise due Subcontractor
need not be made by Contractor until all labor, material, tools, equipment,
fees, permits, taxes and other charges in connection with the Work have been
fully paid. If required by Contractor, receipted bills and releases therefor
showing payment in full shall be furnished by Subcontractor to Contractor prior
to contractor's payment of any and all sums to Subcontractor. Subcontractor
shall deliver its work free from all claims, encumbrances or liens and
Subcontractor expressly agrees that monies received for the performance of this
Subcontract shall be held in trust by Subcontractor and first used for labor,
material and equipment entering into or used in connection with the Work and
said monies shall not be diverted to apply to obligations of Subcontractor on
other projects or for other purposes. Should Subcontractor fail or refuse to
remove any liens or encumbrances, Contractor shall have the right to take
whatever action is deemed necessary for their removal, including but not limited
to obtaining a lien bond and Subcontractor expressly agrees to reimburse
Contractor for all costs and expenses (including attorney's fees) so incurred.
Subcontractor further agrees to defend and hold Contractor harmless form all
claims, encumbrances and liens growing out of the performance of this
Subcontract and Subcontractor agrees that it will at its own cost and expense
(including attorney's fees) remove all liens or encumbrances which attach to any
part of the project and which arise in any way out of the performance of this
Subcontract.
XIII. Subcontractor agrees to fully comply with all Federal, state and
local laws, ordinances, codes, rulings and regulations and expressly agrees to
hold Contractor harmless form any and all liability with respect thereto.
Subcontractor shall pay all taxes, contributions to trust funds, licenses and
fees of every nature imposed or charged by any governmental authority or labor
agreement upon the labor, material or other things used int e performance of the
Work or upon the transaction between Contractor and Subcontractor. In the event
Contractor is held liable to pay any such charges, Subcontractor agrees to
supply Contractor with all records necessary to compute the same and to fully
reimburse Contractor upon demand for the amount (including penalties and
interest) paid by Contractor.
XIV. Subcontractor agrees to pay all royalties and license fees, to defend
all suits or claims for infringement of any patent rights involved int he Work
under this Subcontract; and to save Contractor harmless form all loss, cost or
expense on account of such use or infringement by Subcontractor.
XV. (a) Contractor may at any time by written order of contractor's
authorized representative, and without notice to Subcontractor's sureties, and
without invalidating this Subcontract, order extra work or make changes in,
additions to and omissions from the Work to be performed under this Subcontract,
and Subcontractor shall promptly proceed with the performance of this
Subcontract as so changed. Such changes to the Subcontract and appropriate
increases or decreases int he Subcontract price will be made by the issuance of
a written Subcontract Modification executed by the Contractor. If Subcontractor
objects to or otherwise disagrees with such Subcontract Modification,
Subcontractor shall no notify Contractor in writing within ten (10) days of the
date such change is ordered, submitting with such notification a claim for
equitable adjustment. If Subcontractor fails to so notify the Contractor, such
modification becomes final and accepted by Subcontractor and becomes part of the
Subcontract between the parties.
(b) It is expressly agreed that except in an emergence endangering life or
property, no additions or changes to the Work shall be made except upon
Contractor's written order and Contractor shall not be liable to Subcontractor
for any extra labor, materials or equipment furnished without such written
order. No officer, employee or agent of Contractor is presently authorized or
will hereafter be authorized to direct any extra or changed work by oral order.
XVI. Subcontractor shall guarantee its Work to the same extent that
contractor is obligated to guarantee its work under the Contract, and to such
greater extent as required by law, but in any event shall guarantee its Work
against all defects in materials or workmanship for a period of one year form
the date of final acceptance of the Project by Owner. Subcontractor agrees to
provide such further guarantees, warranties, bonds and assurances as required by
the Contract or as customary int he type on construction called for on the
Project. Nothing herein shall relieve Subcontractor of liability for direct and
consequential damages arising from any failure to perform the obligations of
this Subcontract.
XVII. (a) Should Owner file a claim, counterclaim or cross claim against
Contractor relating to, or arising out of, in whole or part, performance of
Subcontractor's Work, Subcontractor and its surety agree to be bound to
Contractor to the same extent that Contractor is bound to Owner by the terms of
the Contract and shall likewise be bound by all rulings, decisions or
determinations made pursuant tot he Contract including but not limited to the
final decision of an appeal board, arbitration or court of competent
jurisdiction whether or not Subcontractor or its surety is a party to such
proceeding. If called for by Contractor, Subcontractor shall defend at no cost
to Contractor all claims, or that portion thereof, relating to or arising out of
the performance of Subcontractor's Work, and shall become a party to such
proceeding or determination.
(b) As to any claim by Subcontractor on account of acts or omissions of
Owner, or its representatives, Contractor agrees to present to Owner, in
contractor's name, all of Subcontractor's claims for extras and equitable
adjustments and to further invoke on behalf of Subcontractor those provisions of
the contract for determining disputes. Subcontractor shall have full
responsibility for preparation and presentation of such claims and shall bear
all expenses thereof, including attorney's fees. Subcontractor agrees to be
bound by the procedure and final determinations as specified in the Contract and
agrees that it will not take any other action with respect to any such claims
and will pursue no independent litigation with respect thereto or any disputes
resolution procedures. Subcontractor shall not be entitled to receive any
greater amount from Contractor. Subcontractor shall accept such amount, if any
as full discharge of all such claims. With respect to such claims, Subcontractor
shall give written notice to Contractor within sufficient time to permit
Contractor to give notice to Owner within the time allowed by the Contract.
Failure to give such notice shall constitute a waiver of such claim.
(c) Notwithstanding paragraph (b) of this Section, Contractor shall have
the right, at any time, to settle or otherwise dispose of any claim by
Subcontractor on account of acts or omissions of Owner or its representatives.
Should Contractor exercise this right, Contractor shall determine the amount, if
any to be paid to Subcontractor on account of such claim. Such decision shall be
final and binding unless Contractor's decision is submitted to arbitration in
accordance with paragraph (d) of this Section.
(d) Should a dispute arise which is not controlled or determined by the
above paragraphs of this Section r other provisions of this Subcontract, then
said dispute shall be settled by Contractor's written decision with respect to
such dispute. Such written decision shall be conclusive and shall be final and
binding on Subcontractor and its surety unless Subcontractor within thirty (30)
days following the receipt of such written decision, shall file a demand for
arbitration in accordance with the then current rules of the Construction
Industry Arbitration Rules of the American Arbitration Association, unless the
parties mutually agree otherwise. If such demand is filed, then the dispute
shall be decided by arbitration in accordance with such Rules, before three (3)
neutral arbitrators. This agreement to arbitrate shall be specifically
enforceable and the arbitration decision shall be final and binding as between
Contractor and Subcontractor and its surety. If arbitration is conducted
involving Owner, Contractor or any other party concerning then in any of these
vents, Subcontractor expressly agrees to a consolidated or joint arbitration, if
and as called for by Contractor.
(e) Subcontractor shall proceed diligently with the Work pending final
determination of any dispute or claim.
(f) The provisions of this Section shall survive the completion or
termination of this Subcontract.
(g) Subcontractor covenants and expressly agrees that if for any reason the
Subcontract is not completed as contemplated herein or if any dispute shall
arise over the entitlement or the rights of Subcontractor, Subcontractor's sole
recourse shall be an action as provided herein to enforce the several terms and
provisions of this Subcontract, and no action shall lie in favor of
Subcontractor in the nature of quantum meruit, quantum valebant, quasi-contract,
or any other theory of law or equity.
XVIII. If at any time Subcontractor shall: (a) become insolvent or be
unable to pay its debts as they mature or commit any act of bankruptcy or have
filed or suffered to be filed a petition of bankruptcy against Subcontractor or
have a receiver or trustee appointed or suffered the appointment of a receiver
or trustee to take charge of its property or to be adjudicated bankrupt, or (b)
fail to pay promptly when due all bill and charges for labor, materials,
equipment and services used in the performance of this Subcontract or required
to be paid by this Subcontract, or (c) fail or refuse to proceed with or to
properly perform its Work as directed by contractor, or (d) fail or refuse to
properly perform or abide by any term or condition of this Subcontract; then
Subcontractor shall be deemed in default and Contractor may give Subcontractor
written notice of such default. If Contractor determines that Subcontractor has
not remedied such default within five (5) days after the date of Contractor's
notice, Contractor, by Subcontract or otherwise, at its option may, without
prejudice to any other right or remedy, take over the Work or any part thereof
and complete the same at the expense of Subcontractor, or without taking over
the Work, may furnish the necessary equipment, materials and workmen to remedy
the situation at the expense of Subcontractor. If Contractor takes over the Work
pursuant to this Section it is specifically agreed that contractor may take
possession of the premises and all materials, tools, equipment, drawings and
appliances of Subcontractor at the site for the purpose of completing the Work
covered by this Subcontract. Subcontractor shall pay to Contractor a sum equal
to Contractor's total cost, including but not limited to all monies expended and
all costs, losses, damages and extra expense, including all management,
administrative and other direct and indirect expenses, plus attorneys' fees,
assumed by Contractor in good faith and under the belief that such payments or
assumptions were necessary, whether or not they were actually necessary or
required, including but not limited to payments made in settlement or compromise
of claims or payment of judgments arising out of or related to the Work.
Subcontractor agrees that should Owner terminate the Contract then
Subcontractor's remedies shall be as, and only as, provided for in the Contract
and Subcontractor shall be paid only such sums as shall be paid by Owner for the
account of Subcontractor, excluding such amounts as may be paid for Contractor's
overhead and profit, if any, Contractor's determination that Subcontractor in
default and that Subcontractor has failed to remedy such default as required
herein, made in good faith and under the belief that a default existed and that
Subcontractor failed to remedy such default, shall be conclusive as to
Contractor's right to proceed as provided herein. any action by Contractor which
is, or is subsequently determined to be, without default or sufficient default
by Subcontractor, or is otherwise determined to be, for any reason, improper,
wrongful or in breach of the terms and provisions of this Subcontract, shall be
treated, for all purposes, under Section XIX.
XIX. Contractor reserves the right, in its sole and exclusive discretion,
with or without cause, to terminate this Subcontract, as to all or any part of
the Work, for Contractor's convenience at any time prior to completion of the
Work, by written notice effective upon Subcontractor's receipt of notice or such
later time as such notice may provide. In such event, Subcontractor shall cease
performance of the Work at the time provided, shall secure and protect any
portion of the Work then performed and all materials and equipment theretofore
furnished, and shall promptly notify all its subcontractors and suppliers to the
same effect. Subcontractor, for itself and for all of its subcontractors and
suppliers, shall thereafter present to Contractor a termination inventory in
writing describing the nature, quantity, cost and location of all materials and
equipment theretofore furnished or ordered for the Work, and shall, at
Contractor's option, assign to Contractor such subcontracts and purchase orders
as Contractor may direct. Subcontractor shall take such actions as Contractor
may direct or as may be reasonable to terminate, cancel, assign, assemble,
return, sell or otherwise account for the termination inventory, and shall
thereafter account to Contractor for all cost of labor, materials, equipment and
overhead incurred by Subcontractor pursuant to this Subcontract, and all credits
realized upon termination. Such accounting shall be supported by such
documentation, and shall be subject to such verification, as Contractor shall
reasonably require. Contractor shall thereupon pay to Subcontractor the amount
of Subcontractor's net costs incurred together with an allowance of ten percent
(10%) as general overhead and profit, but in no event more than the Subcontract
price, less such amount as Subcontractor may have previously received as partial
payment upon the subcontract price. The cost principles and procedures of Part
31 of the Federal Acquisition Regulation of the United States of America in
effect on the date of this Subcontract shall govern all costs claimed, agreed to
or determined under this paragraph. subcontractor shall not be entitled to any
lost profit on uncompleted Subcontract work or any indirect costs, expenses or
damages arising out of the termination.
XX. Subcontractor agrees to reimburse Contractor for any and all liquidated
or actual damages that may be assessed against and collected from Contractor
which are attributable to or caused by Subcontractor's failure to perform the
Work required by this Subcontract within the time fixed or in the manner
provided for herein, and in addition thereto, agrees to pay to Contractor such
other or additional damages, including attorneys' fees, as Contractor may
sustain by reason of Subcontractor's delay or failure to perform in accordance
with this Subcontract.
XXI. All labor used by Subcontractor throughout the Work shall be
acceptable to Owner and Contractor and shall be of a standing or affiliation
that will permit the work of the Project to be carried on harmoniously and
without delay and will in no case or under any circumstances cause any
disturbance, interference, or delay to the progress of the Subcontractor or
other persons, Subcontractor should be persistently, repeatedly, or for a total
of five (5) consecutive days, unable to supply enough properly skilled
craftspeople/personnel/employees or proper materials to execute the Work, then
Contractor may either directly or by engaging other Subcontractors, furnish the
materials and/or employ the craftspeople/personnel/employees necessary to
continue the performance of the Work, at the expense of Subcontractor, and
Contractor shall have all rights set forth in Section XVIII for Subcontractor's
default. Notwithstanding any provision thereof, Subcontractor shall be an
independent contractor, maintaining control over its employees and operations
and neither Subcontractor nor anyone employed by Subcontractor shall be deemed
to be the servant, employee or agent of contractor or Owner.
XXII. Subcontractor shall not assign or sublet this Subcontract or any part
thereof or any of the proceeds thereof without first obtaining the written
consent of Contractor. Unless Contractor's written consent specifically provides
otherwise, Subcontractor's duties and obligations hereunder shall not be
modified by any such assignment or Subcontract.
XXIII. Subcontractor agrees to comply with the terms, covenants,
conditions, and provisions of the Contract and shall complete the Work in strict
accordance with the plan, specification, schedules, drawings and the like and
further agrees not to violate any term, covenant, condition or provision of the
Contract. Any enumeration herein of any specific items of work, materials or
equipment shall not be construed to exclude other items. If any provision herein
is inconsistent with Contractor's Contract with Owner, or with the drawings or
specifications, the specific provision herein shall govern.
XXIV. The parties hereto intend for the terms, covenants, conditions and
provisions of the Subcontract to be divisible so that should any provision or
term of this Subcontract now or at any time during their term hereof be in
conflict with any Federal, state or municipal law, regulation or the like, or
any applicable judicial or arbitration decision, then such provision shall
continue in full effect only to the extent permitted. In the event any provision
of this agreement is thus held inoperative, the
remaining provisions of this agreement, shall nonetheless remain in full force
and effect as if the invalidated portion did not appear when this Subcontract
was executed.
XXV. A waiver by Contractor of any breach or violation by Subcontractor of
any provision hereof or of the contract shall not constitute a waiver of any
further or additional breach of such provision or of any other provision. No
provision of this Subcontract, including these Subcontract General Provisions,
may be waived by Contractor except in writing and this Subcontract may only be
amended by written agreement of Contractor and Subcontractor.
XXVI. Subcontractor enters into this Subcontract based upon its own
investigation of all relevant matters and is in no way relying upon any opinions
or representations of Contractor. Any failure by Subcontractor to gain all
necessary knowledge and familiarize himself with the available information will
not relieve Subcontractor from responsibility for estimating properly the
difficulty or cost of successfully performing the Work nor from the satisfactory
performance thereof. Contractor assumes no responsibility for any
interpretations or conclusions made by Subcontractor on the basis of information
made available by Owner, Contractor or others. This Subcontract shall constitute
the entire understanding of the parties and is the complete and exclusive
statement of all the terms and conditions of the agreement between contractor
and Subcontractor and all the representations of the parties and supersedes all
prior oral or written agreements or representations. This Subcontract shall not
be varied, supplemented, qualified or interpreted by any prior course of dealing
between the parties or by any usage or trade, except as otherwise provided
herein.
XXVII. Subject to the other provisions hereof, this Subcontract shall be
binding upon and shall inure to the benefit of the successors and assigns of the
parties hereto.
HOFFMAN CONSTRUCTION COMPANY
OF OREGON
PAYMENT BOND
KNOW ALL MEN BY THESE PRESENTS:
That we Monroc, Inc. as Principal, hereinafter called Subcontractor, and
_____________________ as Surety, are held and firmly bound unto HOFFMAN
CONSTRUCTION COMPANY of OREGON as Obligee, hereinafter called Contractor, in the
sum of Fifteen Million, Nine Hundred Thirty Six Thousand and 00/100 Dollars
($15,936,000.00) for the payment of which we jointly and severally bind
ourselves, our heirs, executors, administrators, successors and assigns firmly
by these presents.
THE CONDITION of this obligation is such that, whereas the Subcontractor
has entered into a certain Subcontract, dated December 13, 1995, to Furnish and
Install Precast Insulated Concrete as set forth in said Subcontract, and being a
part of the work covered by the Contract dated 7/17/95 between Oregon Department
of Corrections and said Contractor to perform certain work at Snake River
Correctional Institution, Phase II, Ontario, Oregon.
NOW, THEREFORE, if Subcontractor shall promptly make payment in full to all
persons, firms, partnerships, corporations, or others, supplying labor,
material, services, utilities, or equipment int he prosecution of the work
provided for in the Subcontract and any and all modifications, additions or
alteration of said Subcontract that may hereafter be made, it may suffer by
reason of failure to do so and shall fully reimburse and repay Contractor all
outlay and expense (including attorney's fees) which Contractor may incur in
making good such failure, then this obligation shall be void; otherwise to
remain in full force and effect.
Contractor may, at its option and without notice to the surety, pay
Subcontractor any sums earned under said Subcontract, including any retained
percentage thereon, prior to final approval and acceptance of Subcontractor's
Work by Owner. Additionally, Contractor shall have the option, without notice to
Surety, to make advance payments or prepayments to Subcontractor prior to
performance.
Surety and Subcontractor further agree that any modifications, additions or
alterations which may be made in terms of the Subcontract or in the work to be
done thereunder, or any waivers or extensions of the provisions of the
Subcontract, or other forbearance on the part of either Contractor of
Subcontractor to the other, shall not in any way release Subcontractor and
Surety, or either of them, their heirs, assigns, executors, administrators and
successors, form their liability hereunder, notice to Surety of any such
modifications, additions, waivers, extensions, or forbearance being hereby
expressly waived.
The sum of this Payment Bond is in addition to the sum of the Performance
bond being executed concurrently herewith.
IN WITNESS WHEREOF, the above parties have executed this instrument this
____ day of _________________, _________.
_________________________________ _________________________________
Subcontractor Corporate Surety
_________________________________ _________________________________
Business Address Business Address
By_______________________________ By*______________________________
Title____________________________
______________
* A properly notarized power of attorney must be attached hereto.
HOFFMAN CONSTRUCTION COMPANY
OF OREGON
PERFORMANCE BOND
KNOW ALL MEN BY THESE PRESENTS:
That we Monroc, Inc. as Principal, hereinafter called Subcontractor, and
________________________ as Surety, are held and firmly bound unto HOFFMAN
CONSTRUCTION COMPANY of OREGON as Obligee, hereinafter called Contractor, in the
sum of Fifteen Million, Nine Hundred Thirty Six Thousand and 00/100 Dollars
($15,936,000.00) for the payment of which we jointly and severally bind
ourselves, our heirs, executors, administrators, successors and assigns firmly
by these presents.
THE CONDITION of this obligation is such that, whereas the Subcontractor
has entered into a certain Subcontract, dated December 14, 1995, to Furnish and
Install Precast Insulated Concrete as set forth in said Subcontract, and being a
part of the work covered by the Contract dated 7/17/95 between Oregon Department
of Corrections and said Contractor to perform certain work at Snake River
Correctional Institution, Phase II, Ontario, Oregon.
NOW, THEREFORE, if Subcontractor shall well and truly perform and fulfill
all the undertakings, covenants, terms, conditions, and agreements of said
Subcontract and any extensions thereof that may be granted by Contractor and
during the term of any guaranty required under said Subcontract and agreements
of any and all modifications, additions, or alterations of the Subcontract that
may hereafter be made, and shall also fully indemnify and hold harmless
Contractor from all cost and damage which it may suffer by reason of failure to
do so and shall fully reimburse and repay contractor all outlay and expense
(including attorney's fees) which Contractor may incur in making good such
failure, then this obligation shall be void; otherwise to remain in full force
and effect.
In the event of any claim by or against Subcontractor or in the event of
any dispute arising under said Subcontract, the Surety agrees that any finding,
ruling, determination or decision made in accordance with said Subcontract shall
be final and binding on the Surety to the same extent that such is final and
binding on Subcontractor even though Surety is not a party to such a finding,
ruling, determination or decision.
Contractor may, at it option and without notice to the Surety, pay
Subcontractor any sums earned under said Subcontract, including any retained
percentage thereon, prior to final approval and acceptance of Subcontractor's
Work by Owner. Additionally, contractor shall have the option, without notice to
Surety, to make advance payments or prepayments to Subcontractor prior to
performance.
Surety and Subcontractor further agree that any modifications, additions or
alterations which may be made in the terms of the Subcontract or in the work to
be done thereunder, or any waivers or extensions of the provisions of the
Subcontract, or other forbearance on the part of either contractor or
Subcontractor to the other, shall not in any way release Subcontractor and
Surety, or either of them, their heirs, assigns, executors, administrators and
successors, from their liability hereunder, notice to Surety of any such
modifications, additions, waivers, extensions or forbearance being hereby
expressly waived.
The sum of this Performance Bond is in addition to the sum of the Payment
Bond being executed concurrently herewith.
IN WITNESS WHEREOF, the above parties have executed this instrument this
____ day of _________________, _________.
_________________________________ _________________________________
Subcontractor Corporate Surety
_________________________________ _________________________________
Business Address Business Address
By_______________________________ By*______________________________
Title____________________________
______________
* A properly notarized power of attorney must be attached hereto.
STATE OF WYOMING
BOARD OF LAND COMMISSIONERS
SAND AND GRAVEL LEASE
1. THIS MEMORANDUM OF AGREEMENT, is entered into this 1st day of May 1996 by
and between the State of Wyoming, Board of Land Commissioners, as LESSOR,
and Big Horn Redi Mix as LESSEE.
2. The LESSOR hereby grants unto LESSEE, its successors, or assigns, authority
to explore for, extract, and remove sand and gravel from the following
described land, to-wit:
40 Acres in E1/2E1/2NW1/4NE1/4: W1/2NW1/4SE1/4NE1/4: W1/2W1/2E1/2NE1/4NE1/4
Section 16-T53N- R101W 6th P.M. Park County, Wyoming
3. The term of this lease shall be two (2) years, commencing on the 5th day of
May 1996.
4. In consideration for the grant of this lease, LESSEE agrees to pay the
LESSOR royalties at the rate of fifty cents (50(cent)) per ton for all sand
and gravel removed by LESSEE under the terms of this lease. LESSOR reserves
the right to increase the royalty rate during the term of this lease.
5. LESSEE shall have the right to enter upon and use so much of the surface of
lease premises as is necessary and incidental to the exploration,
extraction, and removal performed by LESSEE under this lease, provided that
the LESSEE shall fully protect the rights of all lessees under agricultural
or grazing leases, which are in effect, or shall be hereafter granted by
LESSOR, for the same land as is the subject of this lease. LESSEE further
agrees to:
a. Fence the pit from which the sand and gravel is removed, erect and
keep closed gates in all fences in which openings may be made, close
and keep covered all holes or open cuts for the protection of stock
grazing on the premises;
b. Avoid and prevent the contamination of any living water upon the land;
c. Fully indemnify any tenant, lessee, purchaser, or other person holding
under the LESSOR, should LESSEE or any person holding from, by, or
under the LESSEE destroy or injure any crop, building, or other
property or improvement on lease premises, in a sum as may be mutually
agreed upon by the parties, or if agreement is not reached, by the
LESSOR;
d. Comply fully with the Wyoming Weed and Pest Act, W.S. 11-5-102
et.seq., in regard to control of noxious weeds.
e. Hold the LESSOR harmless from any responsibility for any and all
claims for damages whatsoever which may be incurred by reason of the
action of the LESSOR in the granting of this lease.
6. LESSEE further covenants and agrees to submit quarterly reports verified
under oath showing the number of tons of sand and gravel removed during
each three month period which reports the LESSEE agrees to render and
transmit to the State Land & Farm Loan Office, Cheyenne, Wyoming, on or
before the twentieth (20th) day of each month following the period covered,
such reports to be rendered whether or not there was any borrow material
removed from the land.
7. LESSEE further covenants and agrees that it will fully pay, when they fall
due, all bills for machinery, lumber, timber and other materials, all wages
for labor, and all other demands caused by its operations hereunder on said
described land, so that no laborers' or other mechanics' liens,
attachments, or liens of any character shall arise against said land.
8. It is expressly understood and agreed by and between the signatory parties,
their successors or assigns, that if default shall be made in any of the
covenants and agreements herein contained, to be kept and performed by
LESSEE, its successors or assigns, the LESSOR shall serve notice in writing
on the LESSEE, either by personal service or by registered mail of such
default, and if the said LESSEE shall fail to perform the covenants and
agreements of this lease so defaulted in within thirty days from the date
said notice is served personally, or from the date said notice is mailed by
registered mail, then the LESSOR may declare this lease canceled and
re-enter into the premises or any part thereof; and in case of default in
and of any of the covenants or agreements herein contained, by the LESSEE,
upon thirty days notice by the LESSOR to the LESSEE that this lease has
been declared canceled, the LESSEE hereby agrees to surrender the peaceful
and uninterrupted possession of the premises to the LESSOR; and that
neither the LESSEE nor its legal representatives, nor assigns will permit
any loss, or permit or cause to be permitted any waste or destruction in,
to or upon said premises or any part thereof, nor remove any improvements
placed thereon without the consent of the LESSOR.
9. It is expressly understood and agreed by and between the signatory parties,
their successors or assigns that the lease premises shall be maintained in
a condition acceptable to the LESSOR at all time, and further, the LESSEE
agrees to comply fully with the Wyoming Environmental Quality Act, W.S. 35-
11-101 et.seq., and that the obligation for reclamation to a condition
acceptable under said act, and to the LESSOR for any land disturbance by
the LESSEE, will be the sole responsibility of the LESSEE. LESSEE agrees to
indemnify the LESSOR for any costs arising out of a default by the LESSEE
under this paragraph.
10. It is expressly understood and agreed by and between the signatory parties
hereto that no assignment of this lease shall be made by the LESSEE except
with the consent and approval of the LESSOR.
11. It is expressly understood and agreed by and between the signatory parties,
their successors or assigns that this lease is to be construed under the
provisions of the laws of the State of Wyoming; and at the expiration of
this lease by limitation, forfeiture or otherwise, the LESSEE agrees to
remove all improvements from the land described herein without cost to the
LESSOR.
12. It is further understood that this lease is issued subject to rescindment
and termination at the option of LESSOR if the lease premises are offered
for sale.
STATE OF WYOMING
Board of Land Commissioners
---------------------------------------
Director, State Land & Farm Loan Office
Secretary for the Board
LESSEE: BIG HORN REDI MIX
- --------------------------------- ---------------------------------------
Witness By
EXAMINED:
Approved by Board:
SAND AND GRAVEL LEASE
THIS AGREEMENT is made and entered into this 25th day of October, 1996, by
and between LLK, INC., a Utah corporation, hereinafter referred to as "Lessor,"
and MONROC, INC., a corporation, hereinafter referred to as "Lessee," for and in
consideration of Ten Dollars and other valuable consideration paid by Lessee to
Lessor, the receipt and sufficiency of which are hereby acknowledged, WITNESSETH
THAT:
1. RIGHTS GRANTED AND PROPERTY DESCRIPTION.
a. Subject to the following terms and conditions of this Agreement,
Lessor hereby grants to Lessee an exclusive lease to explore for, develop,
excavate, process, stockpile, remove and sell, sand and gravel on and from the
property situated in Salt Lake County, State of Utah, which is generally
described on Attachment A hereto (the "Leased Premises"). Within thirty (30)
days of the date hereof, Lessee may cause a survey to be made of the Leased
Premises and a legal description and map thereof to be prepared by a registered
land surveyor acceptable to Lessor, the cost of which will be paid by Lessee. At
that time Lessor shall, if requested by Lessee, execute a mutually acceptable
Memorandum of Lease, to be recorded by Lessee in Salt Lake County, Utah, using
the legal description prepared by the surveyor, and Attachment A hereto shall be
amended, if necessary, to use that description.
b. Lessee shall have the right to construct such buildings,
excavations, openings, stockpiles, dumps, ditches, ponds, drains, roads, a
concrete batch plant, and other structures and improvements upon the Leased
Premises, and to place machinery and equipment thereon, as Lessee may deem
appropriate for prospecting for, excavating, processing, preparing, and removing
sand and gravel. Lessee shall remove all such property at any time or within
sixty (60) days after termination of this Agreement.
2. TITLE EXAMINATION.
a. Lessor warrants that Lessor owns good and marketable title to the
surface and mineral estates, including sand and gravel, in the Leased Premises
free of liens, claims, and encumbrances, and Lessor agrees to defend said title
against any person claiming an interest therein.
b. Within fifteen (15) days after the date of this Agreement, Lessor
shall furnish Lessee with a Commitment of Title Insurance from a title company
acceptable to Lessee, and at Lessee's cost expense, together with copies of all
documents referred to in the exceptions in such Commitment, and together with
copies of the latest tax receipts. Lessee shall have fifteen (15) days from the
date of delivery of the Commitment in which to notify Lessor in writing that
said title is acceptable to Lessee (using its reasonable business judgment) or
to identify title defects as to which Lessee may reasonably object, in which
case Lessor shall use all reasonable means to correct such defects. If Lessor is
unable to correct such defects to the reasonable satisfaction of Lessee, Lessee
may, by written notice to Lessor, terminate this Agreement, in which case the
payment made pursuant to paragraph 3(b) will be returned to Lessee.
3. TERM OF THIS AGREEMENT.
a. The term of this Agreement shall be five (5) years from December
1, 1996, and continuing for so long after the expiration of such term as Lessee
continues to pay Lessor advance royalties pursuant to paragraph 7 below.
b. Upon execution of this Lease, Lessee shall pay Lessor Seven
Thousand Five Hundred Dollars ($7,500) in cash, which shall be applied as
advance royalty as provided below. The failure of Lessee to pay such amount
shall result in termination of this Agreement and all of Lessee's rights
hereunder.
4. MINE PLAN, RECLAMATION PLAN, ZONING AND PERMITS.
a. Within sixty (60) days of the date hereof, Lessee shall present
Lessor with maps indicating Lessee's mine plan and proposed locations of plant
and equipment. Lessee shall also present Lessor with a plan for reclamation of
the Leased Premises affected by Lessee's operations. All such plans, and any
amendments or revisions thereto, must be acceptable to both Lessor and Lessee
before submission to applicable authorities and before the commencement of any
operations hereunder; provided, however, that Lessor will not unreasonably
withhold or delay its approval of such plans, amendments, or revisions, and that
Lessee will not unreasonably withhold consent to Lessor's reasonable proposed
amendments to such plans. If agreement cannot be reached regarding these plans,
this Agreement shall terminate and any amounts paid to Lessor hereunder shall be
retained by Lessor.
b. It is understood by both parties that it may be necessary for
Lessee to obtain zoning, air quality, and other permits and approvals (the
"Permits") from state and local governments before starting mining operations on
the Leased Premises. Lessee shall diligently seek to obtain any necessary
Permits. Lessor agrees to cooperate with and to join Lessee in applying for the
Permits, and Lessee shall reimburse Lessor for all costs and expenses reasonably
incurred in connection therewith.
c. If all required Permits have not been obtained by the first
anniversary of the date of this Agreement, either Lessor or Lessee may, by
written notice, terminate this Agreement.
d. The first day of the month following the month in which Lessee
has obtained all required Permits is referred to herein as the "Effective Date."
Lessee shall pay Lessor Thirty Thousand Dollars ($30,000) within ten (10) days
after the Effective Date, which shall operate as rental for the one-year period
starting December 1, 1996. Before commencing actual mining operations on the
Leased Premises, Lessee shall provide Lessor with a reclamation bond in the
amount of Fifty Thousand Dollars ($50,000) which is the amount required by the
Utah Division of Oil, Gas and Mining, and which amount is expected to be
adequate to reclaim the Leased Premises, especially with contemporaneous
reclamation.
e. If for any reason Lessee elects not to proceed with a sand and
gravel operation on the Leased Premises, Lessee shall provide Lessor with copies
of all exploration data including maps of drill hole locations, drill hole
profiles, results of gradation tests and all other physical tests performed on
the material samples, and Lessee shall leave the Leased Premises in as good as a
condition as it is now in, to the reasonable satisfaction of Lessor.
f. Lessee will provide Lessor with copies of all Permits as they are
obtained. Should Lessee need to modify any permit conditions during the term of
this Agreement, Lessee will notify Lessor of the changes being sought and obtain
Lessor's approval, not to be unreasonably withheld or delayed. Further, Lessee
will provide Lessor with copies of all required annual reports as they are
submitted to the appropriate governmental agencies.
5. OPERATIONS.
a. Lessee agrees to explore, mine, operate, work, and reclaim the
Leased Premises in accordance with good and accepted mining practices and in
compliance with all applicable federal, state, and local laws, rules and
regulations.
b. Lessee agrees to remove and sell sand and gravel from the Leased
Premises in accordance with good and accepted commercial practices.
6. OVERBURDEN AND TOPSOIL.
Lessee may remove and/sell overburden and topsoil from the Leased Premises
as Lessee deems appropriate. Lessee will pay the production royalty provided in
paragraph 7(b) on any topsoil removed from the Leased Premises. Lessee may also
utilize as much of the overburden and topsoil as Lessee deems appropriate to
accomplish reclamation of the Leased Premises.
7. ROYALTY ON SAND AND GRAVEL
a. Lessee shall pay Lessor an advance royalty of Three Thousand One
Hundred Fifty Dollars ($3,150) per month, commencing December 1997. The advance
royalty for each month shall be paid on or before the 15th day of the following
month.
b. Lessee shall pay Lessor a production royalty per ton of sand and
gravel removed from the Leased Premises and sold. The amount of the production
royalty shall be as follows:
If removal occurs: Royalty/Ton
12/1/96 - 11/30/97 $0.25
12/1/97 - 11/30/98 0.26
12/1/98 - 11/30/99 0.27
12/1/99 - 11/30/00 0.29
12/1/00 - 0.31
Lessee shall pay such royalty on or before the 15th day of the month following
the month of sale. Lessee shall be entitled to credit all advance royalties
against production royalties, and if the advance royalty for any month exceeds
the production royalty for that month, such excess shall be carried forward to
be credited against future production royalties. Lessee shall also be entitled
to credit the rental payments made pursuant to paragraphs 3(b) and 4(d) above
against production royalties.
c. On or before the 15th day of each month, Lessee shall provide
Lessor with a report setting out the amount of material removed from the Leased
Premises and sold during the prior month, the amount of production royalties
offset by advance royalties, if any, and any other information necessary to
calculate the amount of royalty due and payable.
d. Lessee shall not be required to pay a production royalty to
Lessor with respect to material from the Leased Premises used for development of
the Leased Premises in connection with Lessee's operations thereon or in
connection with reclamation of the Leased Premises.
8. RECORDS AND RIGHT OF INSPECTION.
a. Lessee shall keep accurate records of the amounts of sand and
gravel removed from the Leased Premises and sold.
b. Lessor and its agents, at their sole risk and expense, shall have
the right at any time during normal business hours, and upon reasonable notice
to Lessee, to inspect Lessee's operations on the Leased Premises.
9. WATER RIGHTS.
Lessee, at its expense, shall have the right to use all water rights
appurtenant to the Leased Premises, to use the existing well on the Leased
Premises, and to drill one or more wells on the Leased Premises. Lessor shall
sign such change and other applications as Lessee may reasonably request. Lessee
shall seek to change the point of diversion of other water rights owned by
Lessee, in such quantities as Lessee deems necessary, and subject to approval of
the State Engineer, to a well or wells on the Leased Premises. Upon the
expiration or termination of this Agreement any wells drilled by Lessee on the
Leased Premises and any water rights transferred to the Leased Premises by
Lessee shall become the property of Lessor.
10. ENVIRONMENTAL PROTECTION.
a. Lessor represents and warrants to Lessee that, to the best of
Lessor's knowledge, no hazardous wastes, toxic materials, leaking underground
storage tanks, or other conditions that are in violation of any federal, state
or local law, rule or regulation, currently exist on the Leased Premises. Lessor
grants to Lessee the right to conduct an environmental audit of the Leased
Premises, at Lessee's sole cost and expense, at any time from the date of this
Agreement to December 1, 1996. Should Lessee, during the course of the
environmental audit, discover any hazardous wastes, toxic materials, leaking
underground storage tanks, or other material environmental problem, Lessee shall
immediately notify Lessor and Lessor shall be responsible for the removal of the
same to bring the Leased Premises in conformance with applicable laws, rules and
regulations. If Lessor fails to do so, Lessee may, by written notice, terminate
this Agreement, in which case the payment made pursuant to paragraph 3(b) shall
be returned to Lessee. Once Lessee occupies the Leased Premises, Lessee will be
responsible for any contamination of the Leased Premises in violation of
applicable laws, rules, or regulations caused by Lessee's operations, and Lessee
shall hold Lessor harmless from any costs associated with any such
contamination.
b. Lessee shall not introduce to the Leased Premises any hazardous
wastes or toxic materials or place any underground storage tanks in violation of
any federal, state, or local laws, rules or regulations. Lessee's facilities for
storage of fuels, oils, other wastes and toxic materials, and disposal of same,
shall be carried out by Lessee in conformance with applicable laws, rules and
regulations.
11. ACCESS.
a. Lessor grants to Lessee the right to develop roads Lessee
reasonably believes are necessary and shall cooperate with Lessee in obtaining
any needed access permits.
b. Lessor grants Lessee the right to build and maintain any internal
access and haul roads deemed necessary by Lessee (using reasonable business
judgment) for the efficient operation of the Leased Premises.
c. Lessee shall have the right to drill and otherwise explore the
Leased Premises prior to the Effective Date.
12. INSURANCE AND OTHER OBLIGATIONS OF LESSEE.
a. At its sole expense, Lessee shall maintain at all times,
statutory Workmen's Compensation and Occupational Disease Disability Insurance
coverage as required under the laws and regulations of the State of Utah for
every workman or employee who performs work for Lessee hereunder.
b. At its sole expense, Lessee shall purchase and shall maintain at
all times, the following insurance protection in connection with all activities
conducted pursuant to this Agreement:
(1) Comprehensive General Liability and Property Damage Insurance
in the amount of One Million Dollars ($1,000,000) single limit;
(2) Employer's Liability Insurance in the amount of One Million
Dollars ($1,000,000) each occurrence;
(3) Adequate and reasonable insurance against the risk of fire
and other risks ordinarily insured against in similar operations. Lessee agrees
that any independent contractor working in connection with the Leased Premises
shall have similar and adequate insurance in full force and effect.
c. Lessee shall provide proof of insurance to Lessor in the form of
a statement from Lessee's insurance carrier and Lessor shall be notified
immediately of any changes in the coverage required by this Agreement.
13. INDEMNITY.
Lessee shall indemnify Lessor against any liability for injuries or death
or any damage to or destruction of property resulting from Lessee's occupation
and use of the Leased Premises.
14. MUTUAL RIGHT TO PAY LIENS.
a. If any indebtedness of Lessor, including real property taxes,
which may become a lien against the Leased Premises during the term of this
Agreement should not be paid when due, Lessee, at its option, may pay the same
if necessary to protect its rights hereunder. For all payments so made, Lessee
shall be reimbursed by Lessor on demand or Lessee may elect to deduct such
amounts from advance or production royalties due to Lessor.
b. If Lessee fails to pay or satisfy and discharge any tax, mortgage
or lien chargeable to Lessee, or permits any lien or encumbrance to be imposed
on the Leased Premises as a result of its operations thereon, or its performance
of the covenants and agreements contained herein, Lessor may, at its option, pay
and discharge any such tax, mortgage, or lien. Lessor shall, to the extent of
any payment so made and without further action on its part, have a lien against
the assets, equipment and property of Lessee located on the Leased Premises. The
rights of Lessor under this paragraph shall survive the termination of
expiration of this Agreement. Lessee shall have the right to contest any tax or
lien by appropriate proceedings.
15. TERMINATION.
a. Lessee shall not be required to continue operations if it
reasonably determines, in good faith, that the Leased Premises cannot be
profitably worked, and in case such a determination is made, Lessee may, by
ninety (90) days written notice to Lessor, terminate this Agreement.
b. If Lessee fails to pay when due any amounts payable hereunder,
Lessor shall give Lessee written notice of such failure and Lessee shall have
ten (10) days in which to pay amounts owing to Lessor. If Lessee fails to pay
the amounts owing to Lessor within that period, Lessor may, at its option,
declare Lessee in default and terminate this Agreement.
c. If Lessee defaults in the performance of any obligation hereunder
other than the obligation to pay money when due, Lessor shall give written
notice of such default to Lessee and Lessee shall have sixty (60) days, or such
longer period as may reasonably be required under the circumstances, to cure
such default. If Lessee shall fail to cure such default within the applicable
period, then Lessor may, at its option, terminate this Agreement, in addition to
such other remedies it may have at law or equity; provided, however, that if any
default of minor importance occurs hereunder which otherwise could constitute a
cause for cancellation or forfeiture of Lessee's rights hereunder, and if such
default can be fully compensated for in damages, and is so compensated for
within sixty (60) days after demand by Lessor, then such default shall not be
basis for cancellation or forfeiture of this Agreement or any of Lessee's rights
hereunder. In the event Lessee becomes insolvent, becomes the subject of a
proceeding under the Bankruptcy Act, or assigns of any of its assets for the
benefit of creditors, such occurrence shall be considered a default hereunder.
d. Upon termination of this Agreement, Lessee shall continue to be
liable for the payment of royalties which accrued prior to termination, and for
the completion of reclamation in accordance with applicable laws, rules, and
regulations.
e. Upon termination of this Agreement with respect to all or any
part of the Leased Premises, Lessee agrees to furnish Lessor with a document
satisfactory to Lessor verifying such termination, and agrees to sign and record
a mutually acceptable release of any Memorandum of Lease.
16. REMOVAL OF FIXTURES AND EQUIPMENT.
Within ninety (90) days after an event of surrender or a termination of
this Agreement, Lessee shall in accordance with all applicable Permits, laws and
regulations and without necessary waste or injury to the Leased Premises, remove
from the Leased Premises all of Lessee's property.
17. ASSIGNMENT AND SUBLEASE.
This provision of this Agreement shall extend to and be binding upon the
successors and assigns of Lessor and Lessee. The rights and obligations of the
Lessee hereunder may not be assigned or sublet without the prior written consent
of Lessor, which consent may be withheld only for good and valid reasons (such
as the credit-worthiness of the assignee). Lessor's consent to a proposed
assignment or sublease shall not operate to waive Lessor's right to disapprove
any further assignment or sublease. Lessee shall have the right to subcontract
with others for the performance of exploration, development and mining work
hereunder, subject to all terms of this Agreement, but no such subcontract shall
relieve Lessee of its obligations to Lessor hereunder.
18. RIGHT OF FIRST REFUSAL.
If Lessor makes an offer to sell the Leased Premises, or if Lessor receives
an offer to buy the Leased Premises which is acceptable to Lessor, Lessor, in
either case, shall give written notice of such fact to Lessee describing all of
the terms of the offer. Lessee shall have a period of thirty (30) days from
receipt of such notice in which to elect, by written notice to Lessor, to
purchase the Leased Premises on the terms described in such offer.
19. RECORDATION.
Neither Lessee nor Lessor shall record this Agreement.
20. PROPERTY TAXES.
Lessee agrees to pay all personal property taxes related to the equipment
and/or fixtures located on the Leased Premises as may be assessed by the state
or any local governing agencies. Lessee shall also pay the full amount of real
property taxes, including, without limitation, any "green belt" roll back taxes,
related to the Leased Premises during its occupancy thereof, within thirty (30)
days of billing and in any event on or before the date that the same are due to
the county assessor.
21. FARMING.
Lessor shall have the right to farm any portion of the Leased Premises not
used by Lessee.
22. COMMISSION.
Lessor shall pay and shall save Lessee harmless from any commissions owed
to Mansell Realty with respect to this Lease.
23. CURRENT LEASE.
Attached hereto is a copy of the current lease for the Leased Premises.
Lessor represents and warrants that Lessor has the right to terminate and will
terminate such lease effective before December 1, 1996. Lessee acknowledges that
the Leased Premises are occupied by the current Lessee and that the current
Lessee may not have removed all of its equipment and rock piles prior to
December 1, 1996. Lessor and Lessee shall jointly inventory such equipment and
rock piles on the Leased Premises on December 1, 1996. Lessor shall take such
steps as are necessary to ensure that the current Lessee's equipment and rock
piles do not interfere with Lessee's occupancy or operations on the Leased
Premises, and that such equipment and rock piles are removed from the Leased
Premises within a reasonable period but in any event prior to March 1, 1997.
Lessee shall have no obligations with respect to the current Lessee's equipment
or rock piles, except the obligation to pay production royalty on any sand and
gravel stockpiled by the current Lessee which is acquired by Lessee and sold.
24. BINDING ARBITRATION.
In the event a dispute of any kind or nature arises under this Agreement,
Lessor and Lessee shall negotiate in good faith in an effort to resolve the
dispute. If the dispute is not resolved following good faith negotiations, the
parties shall select a mutually agreeable arbitrator and submit the dispute to
such arbitrator for binding arbitration under the Commercial Arbitration Rules
of the American Arbitration Association. In the event the parties are unable to
agree upon an arbitrator, an arbitrator shall be appointed in accordance with
the rules and procedures of the American Arbitration Association. The cost of
any arbitration proceeding shall be paid by the non-prevailing party, as
determined by the arbitrator, who shall also award reasonable attorney's fees to
the prevailing party. The award of the arbitrator may be enforced in a court of
competent jurisdiction.
25. NOTICES.
Any notice of default, cancellation, termination, or any other notices of
demand in writing required or that may be given hereunder shall be forwarded by
Certified Mail, Return Receipt Requested, addressed to:
If to Lessor: LLK, Inc.
7162 South 2340 East
Salt Lake City, Utah 84121
If to Lessee: Mr. Gary Nolan
c/o Monroc, Inc.
P.O. Box 537
Salt Lake City, Utah 84110
Notice shall be effective upon receipt.
IN WITNESS WHEREOF, the parties hereto have duly executed this indenture as
of the day and year first written above.
LLK, INC.,
a Utah corporation
By:_____________________________________
Its: _________________________________
MONROC, INC.,
a corporation
By:______________________________________
Its:__________________________________
SAND AND GRAVEL LEASE
THIS AGREEMENT is made and entered into this 29th day of May, 1997 by and
between ALMA LAURENCE RUSHTON, et al., identifies on the signature page below,
hereinafter collectively referred to as "Lessor," and MONROC, INC., a Delaware
corporation hereinafter referred to as "Lessee."
In consideration of the mutual promises and covenants setfourth below, and
for other good and valuable consideration paid by Lessee to Lessor, the receipt
and sufficiency of which are hereby acknowledged, Lessor and Lessee agree as
follows:
1. RIGHTS GRANTED AND PROPERTY DESCRIPTION.
a. Lessor hereby grants to Lessee an exclusive lease to explore for,
develop, excavate, process, stockpile, remove and sell, sand and gravel on and
from the property situated in Salt Lake County, State of Utah, which is
generally described on Attachment A hereto (the "Leased Premises").
b. Before commencing operations for the removal of sand and gravel from the
Leased Premises, Lessee, at its expense, shall cause a survey to be made of the
Leased Premises and a legal description and map thereof to be prepared by a
registered land surveyor acceptable to Lessor. At that time Lessor shall execute
a Memorandum of Lease, to be recorded by Lessee in Salt Lake County, Utah, using
the legal description prepared by the surveyor, and Attachment A hereto shall be
amended to use that description.
c. Lessee shall have the right to construct such buildings, excavations,
openings, stockpiles, dumps, ditches, ponds, drains, roads, and other structures
and improvements upon the Leased Premises, and to place machinery and equipment
thereon, as Lessee deems appropriate. Lessee shall have the right to remove all
such structures, improvements, machinery, and equipment at any time during the
term of this Agreement, or within ninety (90) days after the termination or
expiration of this Agreement.
2. TITLE EXAMINATION AND INSPECTION OF PREMISES.
a. Within thirty (30) days after the date of this Agreement, Lessor, at
Lessee's expense, shall furnish Lessee with a Commitment of Title Insurance from
a title company acceptable to Lessee, together with copies of all documents
referred to in the exceptions in such Commitment. Lessee shall have fifteen (15)
days from the receipt of the Commitment in which to notify Lessor in writing of
any title defects as to which Lessee reasonably objects. Lessor shall have
fifteen (15) days from receipt of such notice in which to correct title defects
identified in such notice, but Lessor shall not be obligated to correct such
defects. If Lessor fails or is unable to correct such defects to the reasonable
satisfaction of Lessee, Lessee may, by written notice to Lessor, terminate this
Agreement.
b. Lessee shall have thirty (30) days from the date of this Agreement in
which to enter upon the Leased Premises, at Lessee's expense and at Lessee's
risk, to conduct such environmental and other inspections and investigations as
Lessee deems appropriate, and to notify Lessor in writing of any environmental
or other conditions as to which Lessee reasonably objects. Lessor shall have
fifteen (15) days from receipt of such notice in which to correct conditions
identifies, in such notice, but Lessor shall not be obligated to correct such
conditions. If Lessor fails or is unable to correct such conditions to the
reasonable satisfaction of Lessee, Lessee may, by written notice to Lessor,
terminate this Agreement.
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<PAGE>
3. TERM OF THIS AGREEMENT.
This Agreement shall have a term of five (5) years commencing January 1,
1998. Lessee shall have the right to renew this Agreement for an additional
period of five (5) years by giving Lessor written notice of Lessee's election to
renew, which notice shall be given not less than ninety (90) days prior to the
expiration of the original five-year term of this Agreement.
4. MINE PLAN, RECLAMATION PLAN, ZONING AND PERMITS.
a. Within sixty (60) days of the date hereof, Lessee shall present Lessor
with maps indicating Lessee's mining plan and proposed locations of plant and
equipment on the Leased Premises, Lessee shall also present Lessor with a plan
for reclamation of the Leased Premises affected by Lessee's operations. All such
plans, and any amendments or revisions thereto, must be acceptable to both
Lessor and Lessee before submission to applicable authorities and before the
commencement of any mining operations hereunder, provided, however, that Lessor
will not unreasonably withhold or delay its approval of such plans, amendments,
or revisions.
b. Lessor acknowledges that it will be necessary for Lessee to obtain
zoning, air quality, and other permits and approvals (the "Permits") from state
and local governments before starting mining operations on the Leased Premises.
Lessee shall diligently seek to obtain the Permits. Lessor agrees to cooperate
with and to join Lessee in applying for the Permits, and Lessee shall pay all
costs and expenses reasonably incurred by Lessor in connection therewith.
c. If and when Lessee obtains all necessary Permits, Lessee shall promptly
notify Lessor in writing. If any sand or gravel is mined and removed in the year
1997, all payments will be made to Lessor at the amounts listed on this
Agreement. Any and all minimum dollars and tonage requirements are to commence
effective January 1, 1998.
d. Lessee, at its expense, shall prepare and furnish to Lessor a
topographical map of the Leased Premises prior to the commencement of mining
operations.
e. If for any reason Lessee elects not to proceed with a sand and gravel
operation on the Leased Premises, Lessee may, by written notice to Lessor,
terminate this Agreement, in which case Lessee shall provide Lessor with copies
of all exploration data including maps of drill hole profiles, results of
gradation tests and all other physical tests performed on the material samples,
and Lessee shall leave the Leased Premises in as good a condition as it is now
in.
f. Lessee will provide Lessor with copies of all Permits as they are
obtained. Should Lessee desire to modify any permit conditions during the term
of this Agreement, Lessee will notify Lessor of the changes being sought and
obtain Lessor's approval, not to be unreasonably withheld or delayed. Further,
Lessee will provide Lessor with copies of all required annual reports as they
are submitted to the appropriate governmental agencies.
g. Lessee agrees to plan pasture grasses (such as crested wheat), as part
of the reclamation plan.
5. OPERATIONS.
a. Lessee agrees to explore, mine, operate, work, and reclaim the Leased
Premises in accordance with good and accepted mining practices in the sand and
gravel industry and in compliance with
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<PAGE>
all applicable federal, state, and local laws, rules and regulations including,
without limitation, environmental laws, rules, and regulations.
b. Lessee agrees to remove and sell sand and gravel from the Leased
Premises in accordance with good and accepted commercial practices.
6. OVERBURDEN AND TOPSOIL.
a. Lessee shall stockpile topsoil removed in the course of mining
operations so that such topsoil will be used for reclamation. Lessee may remove
and sell overburden from the Leased Premises as Lessee deems appropriate.
b. Lessee shall stockpile all large surface rocks for the Lessors benefit.
7. RENT AND ROYALTIES ON SAND AND GRAVEL.
a. Unless Lessee gives Lessor written notice of termination as provided in
Section 2 (a) or Section 2(b) above, Lessee shall pay Lessor Five Thousand
Dollars ($5,000) in cash within thirty (30) days of the signing of this
Agreement, as rent for the Leased Premises for the period from the date hereof
to the date mining operations begin. If Lessee fails to make such payment,
Lessor may, by written notice to Lessee, terminate this Agreement. This payment
shall not be refundable.
b. Lessee shall pay Lessor, as advance royalty, the sum of Ten Thousand
Eight Hundred Dollars ($10,800) per month, commencing with a payment on or
before the 15th day of January 1998, and continuing on or before the 15th day of
each month thereafter. The monthly advance royalty payment shall increase by Six
Hundred Seventy-Five Dollars ($675) on January 1, 1999, and on each January 1
thereafter. By way of illustration, the advance royalty for the one-year period
commencing on January 1, 1999, shall be Eleven Thousand Four Hundred
Seventy-Five Dollars ($11,475) per month. These commitments are based on the
Lessee's taking and paying for Two Hundred Seventy Thousand (270,000 tons
minimum per year. Any advanced royalty is non refundable.
c. Lessee shall pay Lessor a production royalty of Forty-Four Cents ($0.44)
per ton of sand and gravel removed from the Leased Premises. The production
royalty on sand and gravel removed during any month shall be paid within
forty-five (45) days after the last day of that month. Lessee shall be entitled
to credit all advance royalties against production royalties, and if the advance
royalty for any month exceeds the production royalty for that month, such excess
shall be carried forward to be credited against future production royalties. The
production royalty shall increase by Four Cents ($0.04) per ton on January 1,
1998, and by Three Cents ($0.03) per ton each January 1 thereafter. By way of
illustration, the production royalty on sand and gravel removed from the Leased
Premises during the one-year period commencing January 1, 1998, shall be
Forty-Eight Cents ($0.48) per ton, and the production royalty on sand and gavel
removed from the Leased Premises during the one-year period commencing January
1, 1999, shall be Fifty- One Cents ($0.51) per ton.
d. All rental and royalty payments shall be made payable to Alma Laurence
Rushton at the address specified in Section 21. Lessee shall have no obligations
or liabilities with respect to the distribution of such payments as among the
individual Lessors.
e. Lessee shall maintain a set of scales on the Premises and shall weigh
all sand and gravel removed from the Premises and shall maintain accurate
records as to dates, tonnage, and vehicles used to remove such sand and gravel.
Each payment of production royalty shall be accompanied by a report setting
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<PAGE>
forth the amount of sand and gravel removed from the Leased Premises during the
month for which payment is made, the amount of advance royalty, if any, credited
against the production royalty on that sand and gravel, and any other
information necessary to calculate the amount of royalty due and payable to
Lessor.
f. Any advance royalty or production royalty that is not paid when due
shall bear interest at the rate of eighteen percent (18%) from the date due
until paid.
g. Lessee shall not be required to pay a production royalty to Lessor with
respect to sand and gravel used for construction on or otherwise in the
development of the Leased Premises by Lessee.
8. RECORDS AND RIGHT OF INSPECTION.
Lessor and its agents, at their sole risk and expense, shall have the right
at any time during normal business hours, and upon reasonable notice to Lessee,
to inspect Lessee's operations on the Leased Premises and Lessee's records of
the amounts of sand and gravel removed from the Leased Premises.
9. ACCESS.
a. There is now a road on the Leased Premises which provides access to two
radio towers. Lessee shall have the right to relocate such road, at Lessee's
expense, so that it will not interfere with Lessee's operations on the Leased
Premises.
b. Lessor grants Lessee the right to build and maintain any internal access
and haul roads deemed necessary by Lessee for the efficient operation of the
Leased Premises.
c. Lessee shall have the right to drill and otherwise explore the Leased
Premises prior to January 1, 1998.
d. Lessee shall keep all gates locked when not on the Leased Premises.
10. INSURANCE AND OTHER OBLIGATIONS OF LESSEE.
a. Lessee, at its expense, shall maintain statutory Workmen's Compensation
and Occupational Disease Disability Insurance coverage as required under the
laws and regulations of the State of Utah.
b. Lessee, at its expense, shall maintain the following insurance
protection in connection with all activities conducted pursuant to this
Agreement.
(1) Comprehensive General Liability and Property Damage Insurance in
the amount of One Million Dollars ($1,000,000) single limit;
(2) Employer's Liability Insurance in the amount of One Million
Dollars (($1,000,000) for each occurrence; and
(3) Adequate and reasonable insurance against the risk of fire and
other risks ordinarily insured against in similar operations.
Lessee agrees that any independent contractor working on the Leased Premises
shall have similar and adequate insurance in full force and effect.
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<PAGE>
c. Lessee shall provide proof of insurance to Lessor in the form of a
statement from Lessee's insurance carrier and Lessor shall be notified
immediately of any changes in the coverage required by this Agreement.
11. INDEMNITY.
Lessee shall indemnify Lessor against any liability for injuries or death
or any damage to or destruction of property resulting from Lessee's occupation
and use of the Leased Premises.
12. PROPERTY TAXES.
a. Lessee shall pay all real property taxes assessed against the Leased
Premises during the term of this Agreement or any renewal thereof, including
roll-back taxes under the Utah Farmland Assessment Act; provided; however, that
real property taxes for 1997 shall be prorated as of the date of this Agreement.
b. Lessee agrees to pay the full property tax due with respect to the
Leased Premises for the year in which final reclamation occurs and this
Agreement expires or terminates and for the following two (2) years. By way of
illustration, if Lessee completed reclamation and terminated this Agreement in
July 2007, Lessee will pay all property taxes on the Leased Premises for 2007,
2008, and 2009. Lessee agrees to post a bond to cover the payment of property
taxes for the said three (3) years on completion of reclamation.
13. MUTUAL RIGHT TO PAY LIENS.
a. If Lessor fails to pay an indebtedness which may become a lien against
the Leased Premises during the term of this Agreement, Lessee, at its option,
may pay the same if necessary to protect its rights hereunder. Lessor shall
reimburse Lessee on demand for any such payments made by Lessee; or Lessee may
elect to deduct such amounts from advance or production royalties due to Lessor.
b. If Lessee fails to pay or satisfy and discharge any tax, mortgage or
lien chargeable to Lessee, or permits any lien or encumbrance to be imposed on
the Leased Premises as a result of its operations thereon, Lessor may, at its
option, pay and discharge any such tax, mortgage, or lien. Lessor shall, to the
extent of any payment so made and without further action on its part have a lien
against the assets, equipment and property of Lessee located on the Leased
Premises. The rights of Lessor under this Section shall survive the termination
or expiration of this Agreement. Lessee shall have the right to contest any tax
or lien by appropriate proceedings.
14. TERMINATION.
a. Lessee shall not be required to continue operations if it determines, in
good faith, that the Leased Premises cannot be profitably worked, and in case
such a determination is made, Lessee may, by ninety (90) days written notice to
Lessor, terminate this Agreement.
b. If Lessee fails to pay when due any amounts payable to Lessor hereunder,
Lessor shall give Lessee written notice of such failure and Lessee shall have
ten (10) days in which to pay amounts owing to Lessor. If Lessee fails to pay
the amounts owing to Lessor within that period, Lessor may, at its option,
declare Lessee in default and terminate this Agreement.
c. If Lessee defaults in the performance of any obligation hereunder other
than the obligation to pay Lessor money when due, Lessor shall give Lessee
written notice of such default and Lessee
-5-
<PAGE>
shall have ninety (90) days, or such longer period as may reasonably be required
under the circumstances, to cure such default. If Lessee fails to cure such
default within the applicable period, then Lessor may, at its option, terminate
this Agreement, which right shall be in addition to such other remedies as
Lessor may have at law or equity; provided, however, that if any default of
minor importance occurs hereunder which otherwise could constitute a cause for
cancellation or forfeiture of Lessee's rights hereunder, and if such default can
be fully compensated for in damages, and is so compensated for within ninety
(90) days after demand by Lessor, then such default shall not be the basis for
cancellation or forfeiture of this Agreement or any of Lessee's rights
hereunder.
d. Upon the termination or expiration of this Agreement, Lessee shall
continue to be liable for the payment of rents and royalties which accrued prior
to termination or expiration, and for the completion of reclamation in
accordance with applicable laws, rules, and regulations.
e. Upon the termination or expiration of this Agreement, Lessee shall
provide Lessor with a quit claim deed covering the Leased Premises.
15. ASSIGNMENT AND SUBLEASE.
This Agreement shall extend to and be binding upon the successors and
assigns of Lessor and Lessee. The rights and obligations of the Lessee hereunder
may not be assigned or sublet without the prior written consent of Lessor, not
to be unreasonably withheld or delayed. Lessor's consent to proposed assignment
or sublease shall not operate to waive Lessor's right to disapprove any further
assignment or sublease. Lessee shall have the right to subcontract with others
for the performance of exploration, development, mining and other operations,
but no such subcontract shall relieve Lessee of its obligations to Lessor
hereunder.
16. RECORDATION.
Neither Lessee nor Lessor shall record this Agreement. However, Lessor
agrees to execute a Memorandum of Agreement as provided in Section 1(b).
17. BINDING ARBITRATION.
In the event a dispute of any kind or nature arises under this Agreement,
Lessor and Lessee shall negotiate in good faith in an effort to resolve the
dispute. If the dispute is not resolved following good faith negotiations, the
parties shall select a mutually agreeable arbitrator and submit the dispute to
such arbitrator for binding arbitration under the Commercial Arbitration Rules
of the American Arbitration Association. In the event the parties are unable to
agree upon an arbitrator, an arbitrator shall be appointed in accordance with
the rules and procedures of the American Arbitration Association. The cost of
any arbitration proceeding shall be paid by the non-prevailing party, as
determined by the arbitrator, who shall also award reasonable attorney's fees to
the prevailing party. The award of the arbitrator may be enforced in a court of
competent jurisdiction.
18. DEFINITION OF SAND AND GRAVEL.
All references to sand and gravel in this Agreement shall mean sand,
gravel, rock, dirt, silt, and any and all earth materials removed from the
Leased Premises.
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<PAGE>
19. DAMAGES TO WHEAT CROP.
Lessee agrees to pay to Don R. Rushton the following amount for any damage
to wheat crops caused by Lessee's sand and gravel operation; damages based on
thirty (30) bushels of wheat per acre at the going rate per bushel. By way of
illustration, if two (2) acres are damaged, and the going rate per bushel were
Four Dollars ($4.00), the payment would be Two Hundred Forty Dollars ($240.00).
20. LAND USE.
Lessee agrees not to bring in or store equipment or any materials not used
in Lessee's or normal standard sand and gravel operations. Materials such as the
following, but not limited to the following, shall not be brought in, deposited
or buried on the Leased Premises; toxic or hazardous materials, waste concrete,
asphalt, construction material, yard waste, backfill, garbage, etc. Lessee
agrees to keep the Premises in good order.
21. NOTICES.
Any notice given hereunder shall be personally delivered or forwarded by
Certified Mail, Return Receipt Requested, addressed to:
If to Lessor: Brent L. Rushton
Alma Laurence Rushton et. al.
5491 West 4100 South
West Valley City, Utah 84120
If to Lessee: Mr. Gary Nolan
c/o Monroc, Inc.
P.O. Box 537
Salt Lake City, Utah 84110
Notice shall be effective upon receipt.
Executed as of the day and year first written above.
ALMA LAURENCE RUSHTON et. al.
By: _____________________________________
Alma E. & Ethel B. Rushton
Family Partnership
General Partner - Don R. Rushton
By: _____________________________________
Rushton Family Partnership
General Partner - Don R. Rushton
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<PAGE>
By: _____________________________________
A. Laurence & Elva J. Rushton
Family Partnership
General Partner - Elva J. Rushton
By: _____________________________________
Norma E. Earl Trust
Norma B. Earl
By: _____________________________________
Floyd S. Rushton
By: _____________________________________
Brett L. Rushton
By: _____________________________________
Debra J. Dangerfield
By: _____________________________________
Jill A. Hoth
MONROC, INC.
By: _____________________________________
Its: _____________________________________
-8-
MEMORANDUM OF AGREEMENT
THIS MEMORANDUM AGREEMENT is made and entered into this ______ day of
September, 1997, by and between KENNETH DUNN, a married man dealing with his
sole and separate property ("Seller") and MONROC, INC., a Delaware corporation
("Buyer"):
RECITALS:
Monroc desires to purchase from Dunn and Dunn desires to sell to Monroc
certain real property owned by Dunn located in Middleton, Canyon County, Idaho,
consisting of two parcels containing approximately 73 total acres of land
(generally shown on Exhibit "A" attached hereto as "Parcel Dunn-1" and "Parcel
Dunn-2"), including an area now subject to a railroad right-of-way, and
including all rights, interests and claims of Seller to an additional four acres
adjoining Parcel Dunn-1 in an area bounding the Boise River, together with all
improvements, water, mining and mineral rights, beneficial easements and other
appurtenances owned by Seller (collectively the "Property").
The property is located in the East half of the Southeast quarter and Lot 3
of Section 17, township 4 North, Range 2 West of the Boise Meridian, Canyon
County, Idaho, excepting therefrom: the East 25 feet of said East half of the
Southeast quarter of said Lot 3. Prior to closing, the Property will be more
particularly described by metes and bounds on a mutually approved survey at
Buyer's expense; at such time as the descriptions are available and will be
attached hereto as Exhibit "B" and shall be the descriptions for the purpose of
completing this transaction.
NOW, THEREFORE, for valuable consideration, the receipt and legal
sufficiency of which is hereby acknowledged, the parties covenant and agree as
follows:
1. PURCHASE PRICE: The price to be paid for the property will be Seven
Hundred Fifty Thousand and no/100ths ($750,000.00) ("Purchase Price") payable in
the following manner:
(a) Thirty-five Thousand and no/100ths Dollars ($35,000.00) earnest money
("Earnest Money Deposit") payable upon the parties' execution of this Agreement,
which shall become non-refundable to Buyer upon expiration of the Review Period
as hereinafter set forth, excepting only Seller's inability to deliver good and
marketable title to the Property at closing or other failure to close which is
not the fault of the Buyer. The Earnest Money Deposit shall be credited against
the Purchase Price at closing.
(b) Twenty-five percent (25%) of the Purchase Price shall be payable in
cash at closing, less the Earnest Money Deposit. The balance shall be payable to
Seller under the terms of a promissory note secured by a first mortgage on the
Property, together with interest thereon at the rate of nine percent (9%) per
annum, principal and interest payable monthly fully amortized over ten (10)
years.
(c) If on or before December 31, 1997, Buyer has not obtained necessary
governmental approvals for its anticipated uses of the Property, Buyer at its
option may terminate this Agreement and, excepting Seller's retention of the
Earnest Money Deposit, the parties shall have no further obligation or liability
to each other.
2. REVIEW PERIOD/EARNEST MONEY: The parties agree that Buyer will have a
thirty (30) day period following the execution of this Agreement ("Review
Period") to enter upon the Property and to conduct such inspection,
environmental and geological testing as it deems appropriate, including the
drilling of test holes. Test holes will be limited to pasture or areas deemed
suitable by Seller, and if for any reason the Buyer does not complete the
purchase as provided herein Buyer shall immediately refill all test holes in a
manner acceptable to Seller. Buyer will also review and approve or state any
objections to a preliminary title commitment. If these conditions are not met to
Buyer's satisfaction by the expiration of the Review Period, Buyer shall be
entitled to receive the refund of the Earnest Money Deposit, this Agreement will
terminate, and the parties will have no further obligation or liability to each
other except for Buyer's cleanup if the same has not already been completed.
3. BUYER'S BOARD APPROVAL: It shall be a condition to closing that Buyer's
Board of Directors give its approval for the purchase of the Property by the
expiration of the review period. In the event Buyer satisfactorily completes its
review within the Review Period but does not receive the approval of its Board
of Directors, then Buyer shall forfeit its Earnest Money Deposit.
4. USE OF THE PROPERTY: The parties acknowledge that Buyer's intended use
of the Property is for construction of a ready-mix concrete plant, gravel
mining, production of pre-stress and pre-cast concrete products, construction of
roads, and ancillary uses, and will include noise, dust and trafficking of heavy
equipment. Seller will reasonably cooperate in obtaining the necessary zoning
approvals for this intended use.
5. RAILROAD RIGHT OF WAY: It shall be a condition of closing that the
portion of the property in Parcel Dunn-2 now subject to a railroad right-of-way
shall be deeded to Buyer free and clear of any interest by the railroad or any
third party. It shall be the responsibility of Seller at his expense prior to
closing to obtain necessary documentation from the railroad releasing and/or
vacating the right-of-way for the benefit of Monroc.
6. BUILDING PERMITS: Buyer acknowledges that Seller has been granted three
building permits for the Property by the Canyon County Planning and Zoning
Department, and the parties agree that such building permits shall remain in the
name of the Seller. Buyer agrees to cooperate with Seller in having the building
permits transferred from the Property to other real property owned by Seller.
7. CLOSING/TITLE:
(a) The closing of the purchase of the Property will occur on the earlier
of 30 days following final governmental approvals or December 31, 1997, or on
such other date as the parties shall mutually agree. The Property will be
conveyed by general warranty deed at closing, free and clear of all
indebtedness, liens, claims and encumbrances, including the railroad
right-of-way, excepting, however, easements, restrictions and reservations as
approved by Buyer. In the event that there are any unpaid liens on the date of
closing, Buyer may cause any such indebtedness to be paid and credited against
the price.
(b) Seller will at its cost provide a title insurance policy insuring the
interest of Monroc in the amount of the Purchase Price an showing that the
Property is free and clear of all indebtedness, liens and encumbrances excepting
only those matters which Buyer has approved following its review of the title
commitment.
(c) Closing will occur at the offices of Pioneer Title Company in Caldwell,
Idaho, who will also provide the preliminary title commitment and title policy.
Except for the cost of title insurance, which is Seller's responsibility, the
parties will slit the closing costs 50-50 and pro-rate the taxes as of the date
of closing. Each party will be responsible for his or its own legal cost.
8. BROKER/REAL ESTATE FEES: The parties acknowledge that no realtors,
brokers or any person claiming a finder's fee are involved in this transaction.
9. RECORDING: Neither this Agreement nor any copy hereof shall be recorded
without the prior written consent of both parties having been obtained.
10. FURTHER ASSURANCES: The parties acknowledge that Buyer will be
incurring expenses to inspect, test and survey the Property, to seek Zoning
approvals and other preparatory activities in reliance on this Agreement. The
parties agree to execute any other documents necessary or appropriate to
effectuate the intention of the parties as expressed herein.
11. BINDING AGREEMENT: Upon Seller's execution of this Agreement it will
become a fully binding agreement between the parties, their heirs, successors
and assigns, and may only be modified by further written agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
_______________________________
Kenneth Dunn
MONROC, INC.
By ____________________________
Its
STATE OF IDAHO )
)ss.
County of Ada )
On this _______ day of September, 1997, before me, the undersigned, a
Notary Public in and for said State, personally appeared KENNETH DUNN, known or
identified to me to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_______________________________
Notary Public for Idaho
Residing at Boise, Idaho
My commission expires:
STATE OF IDAHO )
)ss.
County of Ada )
On this ___ day of September, 1997, before me, the undersigned, a Notary
Public in and for said State, personally appeared , known or identified to me to
be the of MONROC, INC., the corporation that executed the within instrument or
the person who executed the instrument on behalf of said corporation, and
acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_______________________________
Notary Public for Idaho
Residing at Boise, Idaho
My commission expires:
EXHIBIT 21
SUBSIDIARIES OF MONROC, INC.
<TABLE>
<CAPTION>
Percentage of Outstanding
Name of Subsidiary Place of Incorporation Stock Held by the Registrant
- ------------------ ---------------------- ----------------------------
<S> <C> <C>
Big Horn Redi Mix Inc. Wyoming 100%
Treasure Valley Concrete, Inc. Idaho 100%
</TABLE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
Nos.333-37543 and 333-37549 of Monroc, Inc. on Forms S-8 of our reports dated
March 31, 1998, appearing in this Annual Report on Form 10-K of Monroc, Inc. for
the year ended December 31, 1997.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
April 14, 1998
EXHIBIT 23.2
CONSENT
We have issued our report dated February 11, 1997, accompanying the 1996 and
1995 financial statements of Monroc, Inc., incorporated by reference or included
in the Annual Report of Monroc, Inc., on Form 10-K for the year ended December
31, 1997. We hereby consent to the incorporation by reference of said report in
the Registration Statement of Monroc, Inc., on Form S-8 (File No. 333-37549
filed June 15, 1994 and File No. 333- 37543 filed October 9, 1997).
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Salt Lake City, Utah
April 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 752,280
<SECURITIES> 0
<RECEIVABLES> 9,320,158
<ALLOWANCES> (263,165)
<INVENTORY> 4,684,107
<CURRENT-ASSETS> 16,137,287
<PP&E> 30,021,473
<DEPRECIATION> (12,363,433)
<TOTAL-ASSETS> 42,515,723
<CURRENT-LIABILITIES> 14,426,130
<BONDS> 6,826,736
0
0
<COMMON> 45,142
<OTHER-SE> 19,961,589
<TOTAL-LIABILITY-AND-EQUITY> 42,515,723
<SALES> 61,383,362
<TOTAL-REVENUES> 61,383,362
<CGS> 52,584,214
<TOTAL-COSTS> 60,309,338
<OTHER-EXPENSES> (16,029)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,013,246)
<INCOME-PRETAX> 44,749
<INCOME-TAX> (194,370)
<INCOME-CONTINUING> 239,119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 239,119
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
