SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant | |
Check the appropriate box:
|X| Preliminary Proxy Statement | | Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
| | Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Monroc, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| | No fee required.
|X| Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, $.01 par value.
(2) Aggregate number of securities to which transaction applies: 4,514,200
shares of Common Stock and options and warrants to acquire an additional
1,916,850 shares of Common Stock.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined): $10.771 per share and for each
option or warrant, 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 per share of such option or warrant.
(4) Proposed maximum aggregate value of transaction: $57,600,000
(5) Total fee paid: $11,520.00
| | Fee paid previously with preliminary materials:
| | Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
MONROC, INC.
1730 North Beck Street
Salt Lake City, Utah 84116
__________ ___, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Monroc, Inc., a Delaware corporation ("Monroc"), to be
held on __________ ___, 1998, at 10:00 a.m., local time, at the Little America
Hotel, 500 South Main Street, Salt Lake City, Utah.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt 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") among Monroc, U.S. Aggregates, Inc., a Delaware
corporation ("USAI"), and Western Acquisition, Inc., a Delaware corporation and
a subsidiary of USAI ("Sub"), which provides for the merger (the "Merger") of
Sub with and into Monroc, with Monroc continuing as the surviving corporation
and a subsidiary of USAI. Under the terms of the Merger Agreement, if the Monroc
stockholders approve the Merger (i) each outstanding share of common stock, par
value $.01 per share, of Monroc (the "Common Stock") will be converted into the
right to receive $10.771 in cash and (ii) 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. A copy of
the Merger Agreement is attached as Appendix A to the accompanying Proxy
Statement.
The Merger Agreement and the Merger are more fully described in the
accompanying Proxy Statement, including factors which should be considered in
connection with your vote on the Merger. Please review this information
carefully.
After careful consideration, the Monroc Board of Directors has unanimously
determined that the terms of the proposed Merger are fair to, and in the best
interests of, Monroc and its stockholders. In reaching its determination, the
Board of Directors considered, among other things, the opinion of SBC Warburg
Dillon Read Inc., Monroc's financial advisor, as to the fairness of the
consideration to be received by the holders of Common Stock in the Merger from a
financial point of view. Accordingly, the Board of Directors has unanimously
approved the Merger Agreement and the transactions contemplated thereby and
recommends that you vote FOR approval and adoption of the Merger Agreement and
the transactions contemplated thereby.
Approval and adoption of the Merger Agreement requires the affirmative vote
of a majority of the outstanding shares of Common Stock of the Company. As of
________, 1998 (the record date for the Special Meeting), BCCP I, L.P., a
California limited partnership ("BCCP I"), owned 1,650,000 shares of Common
Stock (representing approximately 36.6% of the outstanding shares of Common
Stock). Pursuant to a separate voting agreement, BCCP I has agreed to vote in
favor of approval and adoption of the Merger Agreement and the transactions
contemplated thereby. Holders of Common Stock will be entitled to appraisal
rights under Delaware law in connection with the Merger as described in the
accompanying Proxy Statement.
Your participation in the Special Meeting, whether by person or by proxy,
is important. To ensure your shares are represented at the Special Meeting,
please complete, sign and date the accompanying proxy card and promptly return
it in the enclosed prepaid envelope, whether or not you plan to attend the
Special Meeting. If you are present at the meeting you may, if you wish,
withdraw your proxy and vote in person.
Sincerely,
RONALD D. DAVIS
President and Chief Executive Officer
MONROC, INC.
1730 North Beck Street
Salt Lake City, Utah 84116
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on ___________ ___, 1998
To the Stockholders of MONROC, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of Monroc, Inc., a Delaware corporation ("Monroc"), will be held at
the Little America Hotel, 500 South Main Street, Salt Lake City, Utah at 10:00
a.m., local time, on _______ ___, 1998, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt 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")
among Monroc, U.S. Aggregates, Inc., a Delaware corporation ("USAI"), and
Western Acquisition, Inc., a Delaware corporation and a subsidiary of USAI
("Sub"), which provides for the merger (the "Merger") of Sub with and into
Monroc, with Monroc continuing as the surviving corporation and a
subsidiary of USAI. Under the terms of the Merger Agreement, if the Monroc
stockholders approve the Merger, (i) each outstanding share of common
stock, par value $.01 per share, of Monroc (the "Common Stock") will be
converted into the right to receive $10.771 in cash and (ii) 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. A copy of the Merger
Agreement is attached as Appendix A to the accompanying Proxy Statement.
2. To consider and transact such other business as may properly come
before the Special Meeting or any adjournment or postponement thereof.
The Board of Directors of Monroc has fixed the close of business on
______________, 1998 as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote at the Special
Meeting or any adjournment or postponement thereof. Only stockholders of record
at the close of business on the Record Date are entitled to notice of and to
vote at the Special Meeting and any adjournments or postponements thereof. A
list of such stockholders will be available for inspection at the offices of
Monroc located at 1730 North Beck Street, Salt Lake City, Utah, at least ten
days prior to the Special Meeting.
Approval of the Merger requires the affirmative vote of a majority of the
outstanding shares of Common Stock of the Company. THE MONROC BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. Holders of Common Stock as of the Record Date will be entitled to
appraisal rights under Delaware law in connection with the Merger as more fully
described in the accompanying Proxy Statement.
Whether or not you plan to attend the Special Meeting, please execute, date
and return promptly the enclosed form of proxy. A return envelope is enclosed
for your convenience and requires no postage for mailing in the United States.
By Order of the Board of Directors,
L. WILLIAM RANDS
Vice President--Finance, Chief Financial Officer,
Treasurer and Secretary
_______________, 1998
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND MAIL
IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
SUBJECT TO COMPLETION, dated March ___, 1998
MONROC, INC
Special Meeting of Stockholders
To Be Held on ________ ___, 1998
PROXY STATEMENT
This Prospectus is being furnished to the stockholders of Monroc, Inc., a
Delaware corporation ("Monroc" or the "Company"), in connection with the
solicitation of proxies by the Monroc Board of Directors to be used at the
Special Meeting of Stockholders of the Company (the "Special Meeting") to be
held on _________ ____, 1998, at 10:00 a.m., local time, at the Little America
Hotel, 500 South Main Street, Salt Lake City, Utah.
At the Special Meeting, the stockholders of the Company will be asked to
consider and vote upon a proposal to approve and adopt 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") among Monroc, U.S.
Aggregates, Inc., a Delaware corporation ("USAI"), and Western Acquisition,
Inc., a Delaware corporation and a subsidiary of USAI ("Sub"), which provides
for the merger (the "Merger") of Sub with and into Monroc, with Monroc
continuing as the surviving corporation and a subsidiary of USAI. Under the
terms of the Merger Agreement, (i) each outstanding share of common stock, par
value $.01 per share, of Monroc (the Common Stock") will be converted into the
right to receive $10.771 in cash (the "Merger Consideration") and (ii) 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. A copy of the Merger Agreement is attached as
Appendix A to this Proxy Statement.
After careful consideration, the Monroc Board of Directors has unanimously
determined that the terms of the proposed Merger are fair to, and in the best
interests of, Monroc and its stockholders. In reaching its determination, the
Board of Directors considered, among other things, the opinion of SBC Warburg
Dillon Read Inc. ("SBC Warburg Dillon Read"), Monroc's financial advisor, as to
the fairness of the consideration to be received by the holders of Common Stock
in the Merger from a financial point of view. ACCORDINGLY, THE BOARD OF
DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
Approval and adoption of the Merger Agreement requires the affirmative vote
of a majority of the outstanding shares of Common Stock of the Company. As of
________, 1998 (the record date for the Special Meeting), BCCP I, L.P., a
California limited partnership ("BCCP I"), owned 1,650,000 shares of Common
Stock (representing approximately 36.6% of the outstanding shares of Common
Stock). Pursuant to a separate voting agreement, BCCP I has agreed to vote in
favor of approval and adoption of the Merger Agreement and the transactions
contemplated thereby. Holders of Common Stock will be entitled to appraisal
rights under Delaware law in connection with the Merger as described in the
accompanying Proxy Statement.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 accompanies this Proxy Statement.
This Proxy Statement, the accompanying Notice of Special Meting, the
accompanying proxy and the other enclosed documents are first being mailed or
delivered to the stockholders of Monroc on or about _____________, 1998.
Stockholders of the Company are urged to consider carefully the information
contained in this Proxy Statement.
The date of this Proxy Statement is _______________, 1998.
TABLE OF CONTENTS
Page
SUMMARY.......................................................1
SELECTED FINANCIAL INFORMATION................................5
MARKET PRICES AND DIVIDENDS...................................6
THE COMPANY...................................................7
THE SPECIAL MEETING...........................................7
General................................................7
Record Date............................................8
Quorum.................................................8
Vote Required..........................................8
Appraisal Rights.......................................9
Proxies................................................9
THE MERGER....................................................9
Background of the Merger...............................9
Recommendation of the Board of Directors of
the Company; Reasons for the Merger..................14
Opinion of Monroc's Financial Advisor.................16
Certain Effects of the Merger.........................19
Interests of Certain Persons in the Merger............19
Certain Federal Income Tax Consequences...............21
Regulatory Approvals..................................23
Accounting Treatment..................................23
THE MERGER AGREEMENT.........................................23
The Merger............................................23
Conversion of Securities; Treatment of Options........24
Payment for Shares....................................24
Directors and Officers of the Company.................25
Representations and Warranties........................25
Conduct of Business; Certain Covenants................25
No Solicitation.......................................26
Proxy Statement; Special Meeting......................26
Standstill............................................26
Indemnification and Insurance.........................26
Fees and Expenses.....................................27
Conditions to the Merger..............................27
Termination...........................................28
Termination Fees......................................28
Voting Agreement......................................29
APPRAISAL RIGHTS.............................................29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF MONROC..............................32
AVAILABLE INFORMATION........................................33
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............34
INDEPENDENT PUBLIC ACCOUNTANTS...............................34
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING................34
OTHER MATTERS................................................35
APPENDIX A--Amended and Restated Agreement and Plan of Merger
APPENDIX B--Opinion of SBC Warburg Dillon Read Inc.
APPENDIX C--Section 262 of the Delaware General Corporation Law
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in this Proxy
Statement and the Appendices hereto. Stockholders are urged to read carefully
this Proxy Statement and its Appendices in their entirety before voting on the
matters discussed herein. As used herein, the terms "Monroc" or the "Company"
refer to Monroc, Inc., including, unless the context otherwise requires, its
subsidiaries, and the term "USAI" refers to U.S. Aggregates, Inc., including,
unless the context otherwise requires, its subsidiaries.
Monroc
Monroc 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 owns 38 plants in Utah,
Idaho and Wyoming, and its products are sold in Utah, Idaho, Wyoming and
adjoining states, including Colorado, Nevada, Oregon, Montana and, to a lesser
extent, Washington and California.
Monroc was incorporated in 1986 as a Delaware corporation and is the
successor to a Utah corporation organized in 1920. The principal executive
offices of the Company are located at 1730 North Beck Street, Salt Lake City,
Utah, 84116, and its phone number is (801) 359-3701.
USAI
USAI is engaged in the business of production, distribution and sale of
construction materials, including aggregates and related products such as
ready-mixed concrete, asphaltic bituminous concrete and the provision of
services such as asphalt paving and construction. The principal executive
offices of USAI are located at 400 South El Camino Real, Suite 500, San Mateo,
California 94402, and its phone number is (650) 685-4880.
The Special Meeting
The Special Meeting will be held on _________ ___, 1998, at 10:00 a.m.,
local time, at the Little America Hotel, 500 South Main Street, Salt Lake City,
Utah. At the Special Meeting, including any postponement or adjournment thereof,
stockholders of the Company will be asked to consider and vote upon (i) a
proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby and (ii) such other matters as may be properly be brought
before the Special Meeting. See "The Special Meeting--Matters to Be Considered
at the Special Meeting."
The close of business on ________________, 1998 has been fixed as the
record date (the "Record Date") for the determination of the Company
stockholders entitled to notice of and to vote at the Special Meeting. As of the
Record Date, 4,514,200 shares of Common Stock were issued and outstanding and
entitled to vote at the Special Meeting, of which approximately 43% were
beneficially owned by directors and executive officers of the Company (excluding
1,650,00 shares which may be acquired upon the exercise of options or warrants
which are exercisable within 60 days of the Record Date). The holders of a
majority of the outstanding shares of Common Stock, present either in person or
by properly executed proxies, will constitute a quorum at the Special Meeting.
See "The Special Meeting--Record Date," "--Quorum" and "--Proxies."
Each share of Common Stock is entitled to one vote with respect to all
matters presented at the Special Meeting. The affirmative vote of holders of a
majority of the outstanding shares of Common Stock is required to approve and
adopt the Merger Agreement. See "The Special Meeting--Vote Required." As of the
Record Date, BCCP I owned 1,650,000 shares (or approximately 36.6% of the
outstanding shares) of Common Stock. Pursuant to a voting agreement dated as of
January 29, 1998 between USAI and BCCP I (the"Voting Agreement"), BCCP I has
agreed to vote in favor of approval and adoption of the Merger Agreement and the
transactions contemplated thereby. See "The Merger Agreement--Voting Agreement."
The Merger
General; Effective Time. Upon consummation of the Merger, Sub will be
merged with and into the Company and the Company will continue as the surviving
corporation and a subsidiary of USAI. The Merger will become effective upon the
filing of the Certificate of Merger with the Delaware Secretary of State or at
such later time as designated in the Certificate of Merger (the "Effective
Time"). See "The Merger Agreement--The Merger."
Conversion of Securities. At the Effective Time, each share of Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares owned by the Company, USAI or any direct or indirect subsidiary of USAI
and shares as to which appraisal rights have been perfected, and not withdrawn
or otherwise lost, under the Delaware General Corporation Law (the "DGCL")) will
be converted into the right to receive $10.771 in cash without interest thereon.
See "The Merger Agreement--Conversion of Securities; Treatment of Options."
Treatment of Options. Immediately prior to the Effective Time, each stock
option (an "Option") granted under the Monroc, Inc. 1996 Stock Option Plan and
the Monroc, Inc. 1994 Stock Option Plan and each outstanding warrant of the
Company (a "Warrant"), whether or not such Option or Warrant is then
exercisable, shall be canceled, and each holder of a canceled Option or Warrant
shall be entitled to receive from the Company, in consideration for cancellation
and settlement of such Option or Warrant, a cash payment equal to the product of
(i) the aggregate number of shares of Common Stock subject to the Option or
Warrant and (ii) the excess, if any, of the Merger Consideration over the
exercise price per share of such Option or Warrant. Any amounts payable with
respect to Options or Warrants shall be subject to any required withholding of
taxes and shall be paid without interest. See "The Merger Agreement--Conversion
of Securities; Treatment of Options."
Recommendation of the Board of Directors. The Company's Board of Directors
has determined that the Merger Agreement and the Merger are fair to and in the
best interests of the Company's stockholders, and has unanimously approved the
Merger Agreement and the transactions contemplated thereby. Accordingly, the
Board of Directors unanimously recommends a vote FOR approval and adoption of
the Merger Agreement and the transactions contemplated thereby by the
stockholders of the Company. In determining to approve the Merger Agreement and
the transactions contemplated thereby and to recommend that stockholders of the
Company approve the Merger Agreement and the transactions contemplated thereby,
the Board of Directors considered a number of factors as more fully described
under "The Merger --Recommendation of the Company's Board of Directors; Reasons
for the Merger."
Opinion of Monroc's Financial Advisor. On January 29, 1998, SBC Warburg
Dillon Read, the Company's financial advisor, delivered its written opinion to
the Company's Board of Directors to the effect that, as of such date, the
consideration payable in the Merger is fair, from a financial point of view, to
the stockholders of the Company. See "The Merger--Opinion of Monroc's Financial
Advisor." The full text of the written opinion of SBC Warburg Dillon Read, which
sets forth certain assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as Appendix B and
is incorporated herein by reference. Stockholders of the Company are urged to
read the opinion of SBC Warburg Dillon Read carefully in its entirety. See "The
Merger--Opinion of Monroc's Financial Advisor."
Conditions to the Merger. The obligations of the Company and USAI to
consummate the Merger are subject to the satisfaction of certain conditions,
including, among others, (i) the approval and adoption of the Merger Agreement
by the affirmative vote of the Company stockholders, (ii) the absence of any
statute, rule, regulation, decree, order or injunction by any United States
federal or state government, governmental agency or authority or court which
prohibits, restrains, enjoins or restricts the consummation of the Merger, (iii)
any waiting period applicable to the consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act 1976, as amended (the "HSR Act"),
shall have expired or been terminated, (iv) the performance in all material
respects by the parties to the Merger Agreement of their obligations under the
Merger Agreement, (v) the respective representations and warranties of the
parties to the Merger Agreement being true and correct in all material respects
and (vi) with respect to USAI's obligations to effect the Merger, any change in
or effect on the business of the Company or any of its subsidiaries,
individually or in the aggregate, that is materially adverse to the results of
operations, properties, financial condition or prospects of the Company and its
subsidiaries taken as a whole, except for such changes or effects resulting
from, or in connection with general economic, industry-wide or financial market
conditions or discussions or efforts of the Company, USAI or USAI's affiliates
to divest certain of the Company's operations after consummation of the Merger.
See "The Merger Agreement--Conditions to the Merger."
Other Acquisition Proposals. Pursuant to the Merger Agreement, the Company
has agreed that it will not, directly or indirectly, solicit, carry on
discussions with or enter into any agreement with any corporation, partnership,
person or other entity or group (other than USAI or an affiliate or an associate
of USAI) concerning any merger, acquisition or similar transaction involving, or
the sale of all or substantially all of the assets or equity securities of, the
Company or any of its subsidiaries or divisions (other than with respect to
certain of the Company's operations) (an "Acquisition Proposal").
Notwithstanding the foregoing, the Company may (i) directly or indirectly,
furnish information to or enter into discussions and negotiations with any
person, entity or group that makes an unsolicited Acquisition Proposal if the
Board of Directors of the Company determines in good faith (after consultation
with and advice from outside legal counsel) that such action is required for the
Board of Directors to comply with its fiduciary duties under applicable law, and
(ii) to the extent applicable, comply with Rule 14e-2 and 14d-9 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
regard to an Acquisition Proposal. See "The Merger Agreement--No Solicitation."
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, (i) by mutual written consent
duly authorized by the Boards of Directors of the Company, USAI and Sub, (ii) by
USAI or the Company if (A) the Merger is not consummated on or before August 31,
1998, (B) the approval of the Company's stockholders has not been obtained by
August 31, 1998 or (C) any United States federal or state government,
governmental agency or authority or court shall have issued an order, decree or
ruling, or taken any other action, permanently restraining, enjoining or
otherwise prohibiting the Merger (which the party seeking to terminate the
Merger Agreement shall have used its best efforts to have lifted or reversed)
and such order, decree, ruling or other action shall have become final and
non-appealable, (iii) by the Company if an Acquisition Proposal has been made
and the Company's Board of Directors determines, in the exercise of its good
faith judgment that such termination is required for the Board of Directors to
comply with its fiduciary duties under applicable law, or (iv) by USAI if the
Company's Board of Directors withdraws or modifies in a manner adverse to USAI
or Sub its determination to recommend that the stockholders of the Company
approve the Merger Agreement and the transactions contemplated thereby. See "The
Merger Agreement--Termination." Under certain circumstances, USAI may be
entitled to receive a termination fee or reimbursement of its expenses or a
termination fee upon termination of the Merger Agreement. See "The Merger
Agreement--Termination Fees."
Payment for Shares. Promptly after the Effective Time, ________________, as
the payment agent (the "Payment Agent"), will mail and/or make available to each
person who was, at the Effective Time, a holder of record of shares of Common
Stock, a notice and letter of transmittal and instructions for use in effecting
the surrender of the certificates representing shares of Common Stock
("Certificates") in exchange for the Merger Consideration. STOCKHOLDERS OF THE
COMPANY SHOULD NOT FORWARD THEIR CERTIFICATES TO THE PAYMENT AGENT WITHOUT A
LETTER OF TRANSMITTAL, AND SHOULD NOT RETURN THEIR CERTIFICATES WITH THE
ENCLOSED PROXY.
Upon surrender to the Payment Agent of a Certificate, together with such
letter of transmittal duly executed and completed in accordance with the
instructions thereon, the holder of such Certificate will be paid the Merger
Consideration applicable to the Certificate and such Certificate shall be
canceled. No interest will be paid or accrued in respect of the Merger
Consideration. See "The Merger Agreement--Payment for Shares."
Interests of Certain Persons in the Merger. In considering the
recommendation of the Company's Board of Directors with respect to the Merger
Agreement and the transactions contemplated thereby, stockholders should be
aware that certain members of the Board of Directors and the management of
Monroc may have interests in the Merger that are in addition to the interests of
stockholders of the Company generally. The Company's Board of Directors was
aware of these interests and considered them, among other factors, in approving
the Merger Agreement and the transactions contemplated thereby. See "The
Merger--Interests of Certain Persons in the Merger."
Certain Effects of the Merger. Following the Merger, USAI will be the
beneficiary of any future earnings and growth of the Company. By contrast,
stockholders of the Company will cease to have any ownership interest in the
Company or other rights as stockholders. Instead, each such stockholder will
receive the Merger Consideration in exchange for each share of Common Stock
owned immediately prior to the Effective Time. See "The Merger--Certain Effects
of the Merger."
As a result of the Merger, the Company will be privately held and there
will be no market for its Common Stock. Upon consummation of the Merger, the
Common Stock will cease to be listed on the Nasdaq Stock Market's National
Market and the registration of the Common Stock under the Exchange Act will be
terminated. See "The Merger--Certain Effects of the Merger."
Certain Federal Income Tax Consequences. The Merger will be a taxable
transaction to stockholders of the Company for U.S. federal income tax purposes
and may also be a taxable transaction under applicable state, local, foreign
income or other tax laws as well. Generally, stockholders will recognize gain or
loss in the Merger in an amount determined by the difference between the
consideration received in the Merger and their tax basis in the Common Stock
exchanged therefore. STOCKHOLDERS OF THE COMPANY SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, AS
WELL AS ANY TAX CONSEQUENCES UNDER THE LAW OF ANY STATE OR JURISDICTION. See
"The Merger--Certain Federal Income Tax Consequences."
Regulatory Approvals. The Company and USAI each have filed pre-merger
notification forms with the Federal Trade Commission and the Department of
Justice under the HSR Act, and the required waiting period will expire on March
27, 1998 unless terminated at an earlier date or unless a request for additional
information is received. No other material federal or state regulatory approvals
must be obtained in order to consummate the Merger. See "The Merger--Regulatory
Approvals."
Appraisal Rights. Under the DGCL, stockholders of the Company who properly
demand appraisal prior to the stockholder vote on the Merger Agreement, do not
vote in favor of approval of the Merger Agreement and otherwise comply with all
of the requirements of DGCL Section 262 will be entitled to statutory appraisal
rights. See "Appraisal Rights" and Section 262 of the DGCL attached hereto as
Appendix C.
SELECTED FINANCIAL INFORMATION
The following selected financial information is derived from the historical
consolidated financial statements of Monroc. The financial information set forth
below should be read in conjunction with Monroc's consolidated financial
statements, related notes and other financial information incorporated by
reference in this Proxy Statement.
<TABLE>
<CAPTION>
Monroc, Inc.
(In thousands, except per share amounts
and ratios)
Nine Months Ended
Fiscal Year Ended December 31, September 30,
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenue...................... $33,237 $34,547 $41,156 $48,302 $70,401 $50,866 $47,458
ESOP contribution............ 1,125 938 800 800 800 600 600
Operating profit (loss)...... 393 937 1,160 2,512 (885) (487) 2,237
Net earnings (loss).......... ($ 441) $ 764 $ 284 $1,356 ($1,368) ($ 926) $1,822
======= ===== ===== ====== ======== ======= ======
Net earnings (loss) per share ($0.19) $0.34 $0.11 $ 0.48 ($ 0.31) ($0.21) $ 0.34
======= ===== ===== ====== ======== ======= ======
Weighted average
common shares............. 2,290 2,236 2,612 2,835 4,467 4,467 5,684
As of
As of December 31, September 30,
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---------- ----
(Unaudited)
Consolidated Balance Sheet Data:
Total assets................. $19,903 $20,008 $26,578 $35,608 $40,638 $41,735 $41,034
Long-term debt (net of current
maturities)............... 7,137 6,772 9,031 6,591 5,161 5,014 5,222
Stockholders' equity......... 3,389 4,923 8,306 19,238 18,671 18,912 21,086
</TABLE>
MARKET PRICES AND DIVIDENDS
The Common Stock is quoted on Nasdaq under the symbol "MROC." The table
below sets forth, for the quarterly periods indicated, the high and low sale
prices per share quoted on Nasdaq for the Common Stock. The information with
respect to Nasdaq quotations reflects interdealer prices, without retail markup,
markdown or commissions and may not represent actual transactions.
Monroc
Common Stock
High Low
1996:
First Quarter.................. $ 55/8 $ 41/8
Second Quarter................. 53/8 4 1/2
Third Quarter.................. 6 1/4 45/8
Fourth Quarter................. 63/8 4 1/2
1997:
First Quarter.................. $ 6 1/2 $ 5 1/4
Second Quarter................. 9 3/4 6 1/4
Third Quarter.................. 127/8 9 1/4
Fourth Quarter................. 121/8 97/8
1998:
First Quarter (through
March 3, 1998).............. $ 107/16 $ 97/16
The last reported sale price per share of Common Stock on January 29, 1998,
the last trading day preceding public announcement of the Merger, was $10.00. On
March 3, 1998, the closing sale price per share of Common Stock was $103/8.
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.
Stockholders are urged to obtain current market quotations for the Common
Stock.
THE COMPANY
General. The Company was organized as a Delaware corporation in 1986, and
is the successor to a Utah corporation incorporated in 1920. The Company was
incorporated in Delaware in 1986 to purchase the assets of the predecessor
corporation through a leveraged employee stock ownership plan.
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 owns 38 plants in
Utah, Idaho and Wyoming, and its 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's products fall into three principal categories: ready-mix
concrete; prestressed and precast concrete products; and sand and gravel
aggregates. Ready-mix concrete, a basic building material used to some degree in
almost all construction projects, is produced by combining rock, sand, cement
and water with certain chemical additives in the Company's "batch plants." The
mixture is then put into the Company's mixer trucks where it is mixed thoroughly
and delivered to construction sites. The Company has 21 ready-mix batch plants
located throughout Utah, Idaho and Wyoming.
The Company produces prestressed and precast concrete building components
that are primarily used in constructing buildings or highway structures.
Prestressed concrete products are manufactured by stressing or stretching steel
cables, incasing them in concrete and then releasing the cables after the
concrete has hardened. The contraction of the cables compresses the concrete,
increasing its strength. Precast products are manufactured by a similar process
but do not contain stretched steel cables. The Company manufactures prestressed
and precast products in Salt Lake City, Utah, Boise, Idaho, and Idaho Falls,
Idaho. From these locations, the products are hauled to construction sites by
the Company's fleet of tractors and trailers.
The Company also produces sand and gravel aggregates by crushing and
screening material that has been dug from a bank or quarried from a solid
deposit by blasting or bulldozing. These sand and gravel aggregates are used by
customers to produce concrete and asphalt and as road base and foundation
material, and are also used as raw materials in the Company's own concrete
operations. The Company owns or leases various properties in Utah and Idaho and,
to a lesser extent, in Wyoming that contain sand and gravel aggregate reserves.
The principal executive offices of the Company are located at 1730 North
Beck Street, Salt Lake City, Utah, 84116, and its phone number is (801)
359-3701.
Recent Developments. On January 6, 1998, the Company acquired all the
outstanding capital stock of privately held Treasure Valley Concrete, Inc., an
Idaho corporation ("Treasure Valley Concrete"), for approximately $3.35 million.
At the close of the transaction, Treasure Valley Concrete became a wholly owned
subsidiary of the Company. Treasure Valley Concrete is a producer of ready-mix
concrete in the greater Boise, Idaho area.
THE SPECIAL MEETING
General
This Proxy Statement is being furnished to the holders of Common Stock in
connection with the solicitation of proxies by the Board of Directors of the
Company for use at the Special Meeting to be held on ____________ ___, 1998, at
10:00 a.m., local time, at the Little America Hotel, 500 South Main Street, Salt
Lake City, Utah and any adjournment or postponement thereof. At the Special
Meeting, including any adjournment or postponement thereof, holders of Common
Stock will be asked to consider and vote upon (i) a proposal to approve and
adopt the Merger Agreement and the transactions contemplated thereby and (ii)
such other business as may properly come before the Special Meeting.
The Monroc Board of Directors has unanimously approved the Merger Agreement
and the transactions contemplated thereby, and unanimously recommends that the
holders of Common Stock vote FOR approval and adoption of the Merger Agreement
and the transactions contemplated thereby.
This Proxy Statement, the attached Notice of Meeting and the accompanying
form of proxy are first being mailed to stockholders of the Company on or about
_____________, 1998.
Record Date
The Company's Board of Directors has fixed the close of business on
_________________, 1998 as the Record Date for the determination of stockholders
entitled to notice of and to vote at the Special Meeting. Only holders of record
of Common Stock at the close of business on the Record Date are entitled to
notice of and to vote at the Special Meeting. As of the Record Date, 4,514,200
shares of Common Stock were outstanding and held of record by approximately ____
stockholders.
Quorum
The presence, either in person or by properly executed proxies, of the
holders of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Special Meeting. Under the Company's bylaws and the
DGCL, shares represented by proxies that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee which are represented at
the Special Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal) will be counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum.
Vote Required
Stockholders of the Company are entitled to one vote at the Special Meeting
for each share of Common Stock held of record by them on the Record Date. The
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby. Abstentions will have the same effect as
votes against such approval. Broker non-votes, however, will be treated as
unvoted for purposes of determining approval of the Merger Agreement and will
not be counted as votes for or against such approval.
As of the Record Date, the Company's directors and executive officers as a
group may be deemed to be beneficial owners of approximately 43% of the
outstanding shares of Common Stock (excluding 1,650,000 shares which may be
acquired upon the exercise of options or warrants exercisable within 60 days of
the Record Date). To the knowledge of the Company, each of the directors and
executive officers intends to vote in favor of approval and adoption of the
Merger Agreement. In addition, pursuant to the Voting Agreement, BCCP I has
agreed to vote the 1,650,000 shares of Common Stock owned by it as of the Record
Date (representing approximately 36.6% of the outstanding shares of Common Stock
as of the Record Date) in favor of approval and adoption of the Merger
Agreement.
If fewer shares of Common Stock are voted in favor of approval and adoption
of the Merger Agreement than the number required for approval, it is expected
that the Special Meeting will be postponed or adjourned for the purpose of
allowing additional time for soliciting and obtaining additional proxies or
votes, and at any subsequent reconvening of the Special Meeting, all proxies
will be voted in the same manner as such proxies would have been voted at the
original convening of the Special Meeting, except for any proxies which have
theretofore been effectively withdrawn or revoked.
STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD ANY COMMON STOCK
CERTIFICATES WITH THEIR PROXY CARDS. IF THE MERGER IS CONSUMMATED, STOCK
CERTIFICATES SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A
LETTER OF TRANSMITTAL WHICH WILL BE SENT TO STOCKHOLDERS BY THE PAYMENT AGENT
PROMPTLY AFTER THE EFFECTIVE TIME.
Appraisal Rights
Record holders of Common Stock who properly demand appraisal prior to the
stockholder vote on the Merger Agreement, do not vote in favor of approval and
adoption of the Merger Agreement and otherwise comply with the requirements of
Section 262 of the DGCL will be entitled to statutory appraisal rights. See
"Appraisal Rights."
Proxies
When a proxy card is returned, properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. If a stockholder does not attend the Special Meeting and does not
return the signed proxy card, such stockholder's shares will not be voted. If a
stockholder returns a signed proxy card but does not indicate how his or her
shares are to be voted, such shares will be voted FOR approval of the Merger
Agreement. As of the date of this Proxy Statement, the Board of Directors does
not know of any matters other than those set forth in the Notice of Special
Meeting that may be presented at the Special Meeting. If any other matters are
properly presented at the Special Meeting for consideration, including a motion
to adjourn the Special Meeting for the purpose of, among other things,
soliciting additional proxies, the persons named in the enclosed form of proxy
and acting thereunder will have discretion to vote on such matters in accordance
with their best judgment; provided, however, that no proxy that is voted against
the Merger Agreement will be voted for any adjournment or postponement of the
Special Meeting for the purpose of soliciting additional proxies.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares of
Common Stock and delivering it to the Secretary of Monroc before the taking of
the vote at the Special Meeting or (iii) attending the Special Meeting and
voting in person (although attendance at the Special Meeting will not in and of
itself constitute a revocation of a proxy). In addition, brokers who hold shares
of Common Stock as nominees will not have discretionary authorization to vote
such shares on any of the matters to be voted thereon in the absence of
instructions from the beneficial owners. Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Monroc, Inc., P.O. Box
537, 1730 North Beck Street, Salt Lake City, Utah 84110, Attention: Corporate
Secretary, or hand delivered to the Secretary of the Company at or before the
taking of the vote at the Special Meeting.
The Company will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of the Company in person or by
telephone or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses incurred in connection with such solicitation.
Arrangements also will be made with custodians, nominees and fiduciaries for the
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such custodians, nominees and fiduciaries, and the Company will
reimburse such custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith.
THE MERGER
Background of the Merger
As part of its ongoing efforts to maximize stockholder value, the Board of
Directors of the Company continually evaluates strategic alternatives, including
strategic acquisitions, alliances and possible business combinations, and the
undertaking of operating, administrative and financial measures. In late 1996,
the Company began preliminary discussions to sell all of the assets of its
precast/prestressed concrete division (the "Precast Division") to a potential
buyer (the "Potential Precast Buyer"). These preliminary discussions continued
over the course of the next several months. Similarly, in early 1997, the
Company also began exploring the possibility of selling its ready-mix and other
operations located in Wyoming.
In April 1997, representatives of certain significant stockholders of the
Company held discussions with senior members of the Company's management
concerning the possibility of a merger, business combination, strategic alliance
or other value-building strategic action. In furtherance of these discussions,
the Company contacted SBC Warburg Dillon Read to assist the Company in
evaluating various strategies to enhance stockholder value, including possible
business combinations involving the Company.
On May 14, 1997, SBC Warburg Dillon Read submitted to the Company a
two-phase proposal. In the first phase, SBC Warburg Dillon Read would evaluate
various alternatives for enhancing stockholder value, including the possibility
of a business combination involving the Company. In the second phase, if the
Board of Directors elected to explore a potential sale of the Company, SBC
Warburg Dillon Read would assist the Company in identifying, and soliciting
offers from, potential buyers.
At a previously scheduled meeting of the Board of Directors held on May 21,
1997, the Board of Directors discussed alternatives for maximizing stockholder
value and SBC Warburg Dillon Read's proposal. After extensive discussion, the
Board of Directors agreed to retain SBC Warburg Dillon Read as financial advisor
to the Company and to perform the first phase services described in its
proposal. Over the course of the following several weeks, representatives of SBC
Warburg Dillon Read conducted site due diligence of the Company and had
discussions with the Company's management.
On July 16, 1997, the Board of Directors held a meeting via telephone
conference at which SBC Warburg Dillon Read presented initial findings and
answered questions from members of the Board of Directors. The Board of
Directors also reviewed and discussed certain information concerning the
business, operations and prospects of the Company provided by senior management
of the Company and which had ben previously presented to SBC Warburg Dillon Read
for use in determining the value of the Company. Over the next week, members of
the Executive Committee of the Board of Directors, which works closely with
Company management to develop programs and plans governing the future of the
Company, met with members of the Company's senior management to review
management's information concerning the business, operations and prospects of
the Company.
On July 28, 1997, the Board of Directors held a meeting in Boise, Idaho in
which SBC Warburg Dillon Read presented findings regarding the Company's
strategic alternatives, including a possible business combination. SBC Warburg
Dillon Read further suggested that, if the Board decided to pursue a possible
business combination, an auction approach would serve as the means of soliciting
offers that would potentially elicit the most attractive price for the Company.
After discussing potential courses of action, the Board of Directors authorized
SBC Warburg Dillon Read to explore a possible business combination involving the
Company using an auction format. Thereafter, on August 12, 1997, the Company
announced that it had engaged SBC Warburg Dillon Read to explore strategic
alternatives including a possible business combination involving the Company.
In the following weeks SBC Warburg Dillon Read and the Company compiled a
list of prospective strategic and financial buyers to be contacted directly
regarding their potential interest in a possible transaction with the Company.
SBC Warburg Dillon Read also assisted the Company in preparing a confidential
memorandum describing the Company for use in discussions with potential buyers
(the "Confidential Memorandum"). As the Company was engaged in continued
negotiations concerning the sale of its Precast Division and was still seeking
to sell its Wyoming operations, the description of the Company in the
Confidential Memorandum did not include information regarding either its Precast
Division or Wyoming operations.
As part of its ongoing efforts to maximize stockholder value, in August
1997 the Company entered into negotiations to acquire all of the outstanding
capital stock of Treasure Valley Concrete, which produces and sells aggregates
products and ready-mix concrete in Idaho. These negotiations continued through
the remainder of 1997.
In the latter part of September 1997, the Company and SBC Warburg Dillon
Read began contacting the potential buyers of the Company previously identified.
Initial contacts made with 53 potential buyers consisted of a brief discussion
of the Company's possible interest in engaging in a business combination and an
inquiry as to whether the potential buyer would be interested in receiving
further information. SBC Warburg Dillon Read negotiated confidentiality
agreements with each potential buyer that expressed interest in pursuing a
possible transaction and, upon execution of the confidentiality agreements, sent
such potential buyers the Confidential Memorandum. In total, 38 Confidential
Memoranda were distributed to potential strategic and financial buyers. SBC
Warburg Dillon Read requested that the potential buyers submit written
preliminary indications of interest in purchasing the Company by October 17,
1997.
On September 25, 1997, the Company announced that it had agreed in
principle to sell its Precast Division to the Potential Precast Buyer, subject
to, among other things, the negotiation and execution of a definitive agreement
by the parties. The parties continued, throughout the remainder of 1997, to
review and discuss various significant issues regarding the possible transaction
and attempted to negotiate a definitive agreement.
On October 22, 1997, the Board of Directors met to discuss the status of
SBC Warburg Dillon Read's efforts and activities regarding a possible business
combination involving the Company. At the meeting, counsel to the Company
briefed the members of the Board regarding their fiduciary obligations
associated with evaluating and considering the transactions contemplated by a
possible business combination involving the Company. SBC Warburg Dillon Read
reviewed its efforts and activities in connection with the auction of the
Company and also suggested that the date by which preliminary indications of
interest were to be submitted by potential buyers should be extended to October
31, 1997. The Board authorized the extension of that date to October 31, 1997.
By October 31, 1997, six potential buyers submitted preliminary indications
of interest to SBC Warburg Dillon Read. The six potential buyers were each
invited to engage in an "in-depth" review of the Company. Between November 11,
1997 and November 25, 1997, each of the potential buyers received presentations
by Company management, was allowed to tour the Company's facilities in Utah and
Idaho and had access to the Company's data room located at its corporate offices
in Salt Lake City, Utah. Additionally, the Company delivered to the potential
buyers the Company's proposed form of merger agreement and instructed them to
submit comments thereon with their final offers to purchase the Company. The
Company's proposed merger agreement structured the potential transaction as an
initial cash tender offer by the prospective buyer to be followed by a merger.
Potential buyers were directed to submit final offers to SBC Warburg Dillon
Read in early December. On December 5, 1997, the Company received correspondence
from a potential buyer; however, the Board of Directors did not consider this
correspondence to be a final offer but rather a further preliminary indication
of interest. On December 9, 1997, USAI provided to SBC Warburg Dillon Read its
formal written proposal (the "USAI Proposal") to enter into a merger transaction
with the Company pursuant to which USAI would acquire all of the outstanding
capital stock, options and warrants of the Company for $58.0 million in the
aggregate, subject to the completion of additional due diligence of the Company,
the negotiation and execution of a definitive merger agreement with the Company
and the receipt of a firm commitment by USAI's lender to provide all of the
required debt financing. The USAI Proposal also provided for a cash-out merger
transaction rather than the tender offer structure contemplated by the Company.
In addition, the USAI Proposal stated that it would expire on December 19, 1997
and that continued negotiations after the Company's acceptance of the proposal
would be conditioned upon the Company agreeing to proceed with USAI on an
exclusive basis.
On December 16, 1997, the Board of Directors, together with Company counsel
and, by telephone, representatives of SBC Warburg Dillon Read, met to review the
two final offers or indications of interest that had been received in connection
with the auction process. After being briefed again by counsel to the Company
regarding its fiduciary responsibilities with respect to considering and
evaluating such offers, the Board of Directors discussed the two offers at
length. The Board of Directors was of the view that the offer from the other
potential buyer was inadequate in terms of price, specificity and other terms.
After extensive discussions, the Board of Directors determined to postpone final
discussions and recommendation of any specific offer pending further analysis of
the offers and the development of a more definitive agreement with a potential
buyer. The Board of Directors also discussed in detail the option of not selling
the Company, but rather continuing to operate the Company and reexamining
possible business combination opportunities in the future. The Board of
Directors instructed the Company's senior management and representatives and
advisors to pursue further negotiations with the remaining potential buyers and
requested senior management to develop additional analyses concerning the
alternative possibility of continuing to operate the Company and not pursuing a
sale of the Company.
During the last two weeks of December 1997 and the first week of January
1998, members of the Executive Committee and senior management of the Company,
together with the Company's representatives and advisors, continued to discuss
the possible business combinations with potential buyers. During this period,
senior management and representatives of USAI visited the Company's facilities
and continued discussions with the Company and its representatives concerning
the possible terms on which a business combination of the Company and USAI could
be consummated. During these visits and discussions, USAI expressed its desire
to conduct additional in-depth due diligence of the Company and requested that
any definitive agreement between the parties contain a closing condition that
would require USAI to be satisfied with the results of its additional due
diligence investigation. USAI believed that entering into a definitive agreement
containing such a closing condition would allow USAI to terminate the definitive
agreement if at anytime it was unsatisfied with its due diligence of the
Company. The Board of Directors and senior management of the Company, however,
believed that any definitive agreement containing such a closing condition would
reduce the certainty of actually closing the transaction and that terminating
the auction process by entering into such an agreement would not be in the best
interests of the stockholders of the Company.
On January 6, 1998, the Company completed its negotiations with Treasure
Valley Concrete, reaching a definitive agreement to acquire all of Treasure
Valley Concrete's outstanding capital stock. After the close of the transaction,
Treasure Valley Concrete became a wholly owned subsidiary of the Company.
During the same week, the Company's Executive Committee, senior management
and representatives and advisors held meetings and telephone conferences with
USAI and its representatives discussing a number of significant issues that had
been identified during preliminary discussions concerning the draft merger
agreement. In these discussions, the Company again proposed that the transaction
be structured as a two-step tender offer/merger rather than a cash-out merger;
however, USAI again stated that it would not consider pursuing a transaction
with such a structure. USAI further stated that it would need to conduct
additional due diligence prior to entering into a definitive agreement and that,
in light of the on-going auction process being conducted by SBC Warburg Dillon
Read, USAI would not proceed with its additional due diligence and incur the
associated costs and expenses of that due diligence unless USAI was given an
exclusive period of time to conduct such due diligence. As a result of the
discussions and negotiations between the Company and USAI, the parties agreed
that USAI would proceed with conducting additional due diligence of the Company,
that until January 26, 1998 the Company would not solicit or enter into an
agreement with any party other than USAI regarding a merger, acquisition or
similar transaction and that if the Company solicited or entered into any
agreement with any such other party prior to January 26, 1998, the Company would
pay for USAI's costs and expenses incurred in investigating and analyzing the
Company. On January 9, 1998, the Company sent a letter to USAI confirming the
understanding of the parties, which letter was acknowledged by USAI.
In connection with its further review and analysis of the Company, USAI
informed the Company that any possible transaction between the parties would
need to include all of the land located at the Company's Salt Lake City Beck
Street facilities, a portion of which was subject to ongoing discussions
regarding the potential sale of the Company's Precast Division. As the Company's
Board of Directors believed that the possible sale of the Company to USAI would
maximize stockholder value more than the strategic disposition of the Company's
Precast Division, the Company informed the Potential Precast Buyer that
negotiations and discussions regarding such a transaction would need to be
temporarily suspended pending the resolution of the merger discussions with
USAI.
Throughout the remainder of January until January 26, 1998, USAI and its
representatives conducted extensive due diligence of the business and operations
of the Company. During the same period, the parties and their respective
representatives also held various meetings and telephone conferences to
negotiate the terms of the draft merger agreement and to resolve open issues
arising from USAI's further due diligence investigations.
On January 27 and 28, 1998, senior management of the Company and USAI and
their respective representatives and advisors had several discussions to
finalize the terms of the proposed merger, including the final purchase price,
taking into account the results of the additional due diligence performed by
USAI and its representatives. On January 28, 1998, the parties agreed, subject
to approval by the Board of Directors of the Company, that the final purchase
price to be paid by USAI would be $57.6 million.
On January 28, 1998, a special meeting of the Company's Board of Directors
was held to consider the provisions of the proposed merger agreement and the
transactions contemplated thereby. Members of senior management of the Company
and representatives of SBC Warburg Dillon Read and counsel to the Company also
attended the special meeting. At the special meeting, SBC Warburg Dillon Read
updated the Board of Directors as to the efforts and negotiations which had been
undertaken by the Company and its representatives since the prior Board of
Directors meeting on December 16, 1997. Counsel to the Company then briefly
reiterated the duties of the Board of Directors in evaluating the possible sale
of the Company. Senior management of the Company and representatives of SBC
Warburg Dillon Read and counsel to the Company then explained in detail the
principal terms of the offer by USAI, the final issues and concerns of USAI
raised as a result of its further due diligence investigation and the proposed
final purchase price reduction from $58 million to $57.6 million as a result of
such issues and concerns. Members of the Board of Directors asked numerous
questions regarding the terms and structure of the proposed merger agreement,
the validity of the due diligence issues and concerns raised by USAI and the
fairness of the proposed final purchase price. Following this discussion, the
Board of Directors considered the alternatives available to the Company for
increasing stockholder value, including the prospects of the Company if it were
to remain an independent public company.
Counsel to the Company then reviewed the material terms of the proposed
merger agreement and responded to questions of the members of the Board of
Directors. SBC Warburg Dillon Read then reviewed in detail the auction process
by which it had sought and contacted potential buyers for the Company and the
results of that auction process. SBC Warburg Dillon Read then delivered its oral
opinion, to be confirmed by its written opinion to be delivered the next day, to
the effect that, subject to certain assumptions and limitations, the merger
consideration to be received by the stockholders of the Company pursuant to the
proposed merger agreement was fair, from a financial point of view, to such
stockholders. Members of senior management also made a presentation to the Board
of Directors setting forth their views as to the fairness of the proposed
transaction with USAI, including their belief that the proposal by USAI
represented the best means of increasing stockholder value for the foreseeable
future. After further deliberations and discussions, resolutions were
unanimously adopted by the Board of Directors, subject to the receipt of SBC
Warburg Dillon Read's written opinion on the next day, including among other
items, determining that the merger agreement (the "Original Merger Agreement")
and the transactions contemplated thereby are fair to and in the best interests
of the stockholders of the Company, authorizing the execution and delivery of
the Original Merger Agreement and the performance by the Company of its
obligations thereunder and the execution and delivery of all other ancillary
agreements thereto and recommending that the stockholders of the Company approve
the Original Merger Agreement and the consummation of the transactions
contemplated thereby. The Board of Directors then adjourned its meeting.
On the morning of January 29, 1998, a special meeting of the Company's
Board of Directors was convened by teleconference, which was also attended by
senior management of the Company and representatives of SBC Warburg Dillon Read
and counsel to the Company. At the special meeting, SBC Warburg Dillon Read
delivered its written opinion to the effect that, subject to certain assumptions
and limitations, as of January 29, 1998, the merger consideration to be received
by the stockholders of the Company pursuant to the Original Merger Agreement was
fair, from a financial point of view, to such stockholders. The Board of
Directors then reviewed the discussions from the special meeting held on the
previous day. Thereafter, the Board of Directors confirmed its approval of the
Original Merger Agreement and the transactions contemplated thereby and
confirmed the adoption of the resolutions approved at the special meeting on
January 28, 1998.
The Original Merger Agreement was executed by the parties as of January 29,
1998 and public announcement of the signing was made after the close of the
financial markets on that date.
Subsequent to the execution of the Original Merger Agreement, USAI informed
the Company that USAI is considering the possible sale of certain of the
Company's operations following consummation of the Merger. USAI indicated that
it desired to contact prospective strategic purchasers regarding their potential
interest in such possible transactions and to pursue negotiations with those
potential purchasers indicating interest. As a result of this information, the
parties agreed that it would be appropriate to review and discuss certain terms
of the Original Merger Agreement and determine whether any changes to such terms
would be appropriate in light of USAI's possible plans regarding certain of the
Company's operations following consummation of the Merger. As a result of these
discussions, the parties agreed to amend certain provisions of the Original
Merger Agreement to limit the ability of USAI to not effect the Merger in the
event of certain material adverse changes in or effects on the business or
operations of the Company, and to permit the Company to take certain actions in
connection with USAI's possible discussions with potential purchasers of certain
of the Company's operations. On March 4, 1998, the Board of Directors approved
the Merger Agreement and the Merger Agreement was executed by the parties as of
such date. In connection with the execution of the Merger Agreement, BCCP I
reaffirmed the applicability of the Voting Agreement to the Merger Agreement, as
amended and restated.
Recommendation of the Board of Directors of the Company; Reasons for the Merger
The Board of Directors of the Company has determined that the terms of the
Merger are fair to and in the best interests of the Company's stockholders and
has unanimously approved the Merger Agreement and the transactions contemplated
thereby. The Board of Directors recommends that the stockholders of the Company
approve the Merger Agreement and the transactions contemplated thereby. In
arriving at its decision, the Board of Directors consulted with the Company's
legal and financial advisors and gave careful consideration to a number of
factors, including among others, the following:
(1) The Company's Business, Condition and Prospects. In evaluating the
terms of the Merger, the Board of Directors of the Company considered,
among other things, information with respect to the financial condition,
results of operations and businesses of the Company, on both a historical
and a prospective basis, and current industry, economic and market
conditions. The members of the Board of Directors were generally familiar
with and knowledgeable about the Company's affairs, including the present
and possible future economic and competitive environments in which the
Company operates, and further reviewed these matters in the course of their
deliberations. In addition, the Board of Directors of the Company reviewed
presentations from, and discussed the terms and conditions of the Merger
Agreement and the Merger with, the executive officers of the Company,
representatives of its financial advisor and representatives of its legal
counsel. The Board of Directors also considered the risks facing the
Company, including the recent consolidation trend within the industry
leading to larger, financially stronger competitors, the Company's capacity
to efficiently and profitably manage its future growth and the capital
requirements that would be required to achieve future growth.
(2) Opinion of SBC Warburg Dillon Read. The Board of Directors of the
Company considered as favorable to its determination the opinion of SBC
Warburg Dillon Read delivered to the Board of Directors on January 29, 1998
that, as of such date, and based upon the assumptions made, matters
considered and limits of review set forth in such opinion, the
consideration to be received by the stockholders of the Company under the
Merger Agreement was fair to such stockholders from a financial point of
view. The Board of Directors also considered the oral and written
presentations made to it by SBC Warburg Dillon Read. See "--Opinion of
Monroc's Financial Advisor." A copy of SBC Warburg Dillon Read's opinion to
the Board of Directors is attached as Appendix B to this Proxy Statement
and is incorporated herein by reference.
(3) Alternative Transactions. As set forth in "--Background of the
Merger," the Company engaged SBC Warburg Dillon Read to explore various
strategic alternatives of capital structuring of the Company, including but
not limited to a sale of all or part of the Company, strategic alliances or
a merger with a suitable partner. At the request of the Board of Directors,
SBC Warburg Dillon Read conducted an auction of the Company by contacting
potential strategic and financial purchasers of the Company. The Board of
Directors considered as favorable to its determination and recommendation
that the broad-based search conducted by SBC Warburg Dillon Read did not
yield any proposals more attractive to the Company's stockholders from a
financial point of view than the proposal received from USAI.
(4) Historical and Recent Market Prices; Trading History of the Common
Stock. The Board of Directors of the Company reviewed the historical market
prices and recent trading activity of the Common Stock. The Board of
Directors considered as favorable to its fairness determination that the
$10.771 per share price to be paid in the Merger represents a premium of
approximately 8% over the $10 price at which the Common Stock closed on
January 29, 1998, the last trading day before public announcement of the
proposed Merger. The Board of Directors believes, however, that because of
the public announcement of the Company's engagement of SBC Warburg Dillon
Read to explore strategic alternatives of the Company, including a possible
sale of the Company, and the recent acquisition and consolidation activity
within the industry, the recent market prices of the Common Stock already
reflect a premium for the sale of the Company. Accordingly, the Board of
Directors also considered favorable the fact that the Merger Consideration
represents a premium of approximately 19% over the $9.06 average closing
price of the Common Stock for the year prior to the public announcement of
the Merger and a premium of approximately 76% over the $6.11 average
closing price of the Common Stock for the last three years. The Board also
considered that the Merger would afford the stockholders of the Company an
opportunity to liquidate their investment in the Company at fair value
without the possible diminution in value resulting from the limited trading
market in the Common Stock and without the payment of potentially
disproportionate brokerage fees.
(5) No Financing Condition; Strong Acquiror. The Board of Directors
regarded as favorable to its determination that the Merger Agreement does
not contain a financing condition, that USAI is a financially strong
enterprise, that USAI has already obtained financing commitments from Bank
of America National Trust and Savings Association and The Prudential
Insurance Company of America and that, accordingly, the Merger has a low
risk of noncompletion due to any financial inability of USAI.
(6) Merger Agreement. The Board of Directors of the Company considered
favorable to its determination and recommendation the terms and conditions
of the Merger Agreement, including the amount and form of consideration,
the nature of the parties' representations, warranties, covenants and
agreements, and the conditions to the obligations of the parties to effect
the Merger. The Board of Directors also considered that the terms and
conditions of the Merger Agreement are the result of arms' length
negotiations between the Company and USAI and their respective
representatives.
(7) Stockholder Approval Requirement; Appraisal Rights. The Board of
Directors of the Company considered the condition to the consummation of
the Merger requiring approval and adoption of the Merger Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote thereon as supporting its view that the
Merger is fair procedurally to the stockholders of the Company. In
addition, the Board of Directors considered the availability of appraisal
rights law to those stockholders who vote against approval of the Merger
Agreement and perfect such appraisal rights under the applicable provisions
of the DGCL.
(8) Support of Significant Stockholder. The Board of Directors of the
Company considered as favorable to its determination and recommendation the
willingness of BCCP I, a stockholder owning approximately 36.6% of the
outstanding shares of Common Stock, to enter into the Voting Agreement and
agree to vote in favor of the approval and adoption of the Merger
Agreement.
(9) Fiduciary Out; Reasonable Break-up Fees. The Board of Directors of
the Company considered as favorable to its fairness determination and
recommendation that the Merger Agreement permits the Board of Directors to
consider, in compliance with its fiduciary duties, other merger,
acquisition or similar transaction proposals made prior to consummation of
the Merger and that the Merger Agreement is terminable by the Company if
such a proposal is approved. The Board of Directors also believes that the
Merger Agreement provides for reasonable break-up fees or payment of USAI
expenses upon termination of the Merger Agreement in certain circumstances
and that such provisions would not have the effect of unreasonably
discouraging competing bids.
(10) No Participation in Future Growth. The Board of Directors of the
Company viewed as a negative factor that, as a result of the Merger, the
stockholders of the Company would no longer be able to participate in the
future growth and earnings of the Company.
(11) Taxable Transaction. The Board of Directors of the Company viewed
as a negative factor to its fairness determination and recommendation that,
like all cash mergers, the Merger would be a taxable transaction. However,
the Board of Directors did not believe that the Company would be able to
effect a tax-free transaction offering comparable value to the Company's
stockholders.
The foregoing description of factors considered by the Board of Directors
of the Company is not exhaustive but covers the principal matters discussed in
detail by the Board of Directors. In view of the wide variety of factors
considered in connection with its evaluation of the Merger, the Board of
Directors did not consider it practical to, nor did it attempt to, quantify or
attach any particular weight to any of the factors reviewed in reaching its
conclusion to recommend the Merger to the stockholders of the Company as being
in their best interests.
Opinion of Monroc's Financial Advisor
On January 29, 1998, SBC Warburg Dillon Read delivered its written opinion
to the effect that, and based upon and subject to the assumptions, limitations
and qualifications contained therein, as of January 29, 1998, the merger
consideration to be received by the holders of Common Stock pursuant to the
Merger Agreement was fair, from a financial point of view, to such holders. SBC
Warburg Dillon Read was retained by the Board of Directors to express an opinion
as to the fairness, from a financial point of view, to the holders of Common
Stock of the merger consideration to be received by such holders.
THE FULL TEXT OF THE OPINION OF SBC WARBURG DILLON READ WHICH SETS FORTH,
AMONG OTHER THINGS, A DESCRIPTION OF THE ASSUMPTIONS MADE, GENERAL PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY SBC WARBURG
DILLON READ, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT. HOLDERS OF THE
COMPANY'S COMMON STOCK ARE URGED TO READ THE OPINION IN ITS ENTIRETY. THE SBC
WARBURG DILLON READ OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL
POINT OF VIEW, TO THE HOLDERS OF THE COMPANY'S COMMON STOCK AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE AT THE SPECIAL MEETING. SBC Warburg Dillon Read did not address the
Company's business decision to proceed with the Merger and did not make any
recommendation to the Board of Directors or the stockholders of the Company with
respect to any approval of the Merger. The summary set forth in this Proxy
Statement of the opinion of SBC Warburg Dillon Read is qualified in its entirety
by reference to the full text of the opinion attached hereto as Appendix B.
In arriving at its opinion, SBC Warburg Dillon Read among other things: (i)
reviewed the Merger Agreement dated January 29, 1998; (ii) reviewed certain
publicly available business and financial information relating to the Company;
(iii) reviewed the historical price and trading activity for the shares of
Common Stock; (iv) reviewed certain internal financial information and other
data provided to SBC Warburg Dillon Read by the Company relating to the business
and prospects of the Company, including financial projections prepared by the
management of the Company, on a pro forma basis, for the acquisition of Treasure
Valley Concrete on January 6, 1998 (the "Projections"); (v) conducted
discussions with members of the senior management of the Company; (vi) reviewed
the financial terms, to the extent publicly available, of certain acquisition
transactions which we considered relevant; (vii) reviewed publicly available
financial and securities market data pertaining to certain publicly held
companies in lines of business which SBC Warburg Dillon Read believed to be
generally comparable to those the Company; and (viii) conducted such other
financial studies, analyses and investigations, and considered such other
information as SBC Warburg Dillon Read deemed necessary or appropriate, but none
of which was individually material. No limitations were imposed by the Company
with respect to the investigations made or the procedures followed by SBC
Warburg Dillon Read in rendering its opinion. SBC Warburg Dillon Read's opinion
was necessarily based on economic, monetary and other conditions as in effect on
and the information made available to it as of the date thereof.
In conducting its review and arriving at its opinion, as contemplated under
the terms of its engagement with the Company, SBC Warburg Dillon Read relied,
without independent investigation, upon the accuracy and completeness of all
financial and other information provided to it or publicly available, and did
not assume any responsibility in any respect for the accuracy, completeness or
reasonableness of, or any obligation to verify, the same or to conduct any
appraisal of assets. In addition, with the Company's consent, SBC Warburg Dillon
Read did not make any independent evaluation or appraisal of any of the assets
or liabilities (contingent or otherwise) of Monroc or U.S. Aggregates, Inc., nor
was it furnished with any such evaluation or appraisal. Without limiting the
generality of the foregoing, SBC Warburg Dillon Read, with the Company's
consent, relied upon the management of the Company as to the reasonableness and
achievability of the Projections (and the assumptions and bases therefore)
provided to SBC Warburg Dillon Read, and SBC Warburg Dillon Read assumed that
such Projections reflected the best currently available estimates and judgments
of the management of the Company and that such Projections would be realized in
the amount and in the time periods estimated by the management of the Company.
In arriving at its opinion, SBC Warburg Dillon Read performed a variety of
financial analyses which are summarized below. SBC Warburg Dillon Read believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and the factors considered by it, without consideration of all
factors and analyses, could create a misleading view of the analyses and the
processes underlying SBC Warburg Dillon Read's opinion. SBC Warburg Dillon Read
arrived at its opinion based on the results of all the analyses it undertook
assessed as a whole, and it did not draw conclusions from or with regard to any
one method of analysis. None of the analyses performed by SBC Warburg Dillon
Read were assigned a greater significance by SBC Warburg Dillon Read than any
other. With respect to the comparable company analysis and comparable
transaction analysis summarized below, no public company utilized as a
comparison is identical to the Company, and such analyses necessarily involve
complex considerations and judgments concerning the differences in financial and
operating characteristics of the companies and other factors that could effect
the acquisition or public trading values of the companies concerned. The
Projections furnished by management of the Company contained in or underlying
SBC Warburg Dillon Read's analyses are not necessarily indicative of future
results or values, which may be significantly more or less favorable than such
Projections. The Projections were based on numerous variables and assumptions
that are inherently uncertain, including without limitation, factors related to
general economic and competitive conditions. Estimates of values of companies or
assets do not purport to be appraisals or necessarily reflect the prices at
which companies or their securities actually may be sold.
In connection with rendering its opinion, SBC Warburg Dillon Read employed
a variety of valuation methods. The material methods are summarized below.
Summary Analysis of Offer. SBC Warburg Dillon Read noted that the U.S.
Aggregates, Inc. offer was $10.771 per share of Common Stock, and that USAI
proposed to acquire all outstanding shares for cash, indicating a total offer
for equity (equity value) of $57.6 million. Pursuant to the Merger Agreement,
and based upon the Company's estimated December 31, 1997 balance sheet, pro
forma for its acquisition of Treasure Valley Concrete, USAI also will assume
approximately $17.7 million of the Company indebtedness which, after giving
effect to approximately $800,000 of cash to be acquired in the Merger, indicated
an offer for net assets (unlevered value) of $75.3 million.
Summary of Pro forma Financial Analysis. SBC Warburg Dillon Read summarized
various analyses by noting that the purchase price of $10.771 per share
indicated: a multiple of net asset value to revenue of 1.0x for the pro forma 12
months ended September 30, 1997, pro forma for the acquisition of Treasury
Valley Concrete and 1.1x for the pro forma 12 months ending December 31, 1997,
pro forma for the acquisition of Treasury Valley Concrete and as estimated by
Company management; a multiple of unlevered value to earnings before interest,
taxes, depreciation and amortization ("EBITDA") of 14.2x for the pro forma 12
months ended September 30, 1997 and 13.0x for the pro forma 12 months ending
December 31, 1997, as estimated by Company management; a multiple of unlevered
value to earnings before interest and taxes ("EBIT") of 26.0x for the pro forma
12 months ended September 30, 1997 and 23.5x for the pro forma 12 months ending
December 31, 1997, as estimated by Company management; a multiple of equity
value to earnings per share of 33.1x for the pro forma 12 months ended September
30, 1997 and 35.7x for the pro forma 12 months ending December 31, 1997, as
estimated by Company management; and a multiple of equity value to book value of
2.8x at the pro forma December 31, 1997, as estimated by Company management.
Finally, SBC Warburg Dillon Read noted that the purchase price of $10.771 per
share represented an acquisition premium of 10.5% over the Company's unaffected
stock price of $9.75 on January 22, 1998.
Analysis of Selected Publicly Traded Comparable Companies. Using publicly
available information, SBC Warburg Dillon Read reviewed the stock prices and
market multiples of common stocks of the following companies in the cement and
aggregates industries: Centex Construction Products, Inc.; Giant Cement Holding,
Inc.; Lafarge Corporation; Lone Star Industries, Inc.; Medusa Corporation;
Southdown, Inc.; Texas Industries, Inc.; CalMat Co.; Florida Rock Industries,
Inc.; Martin Marietta Materials, Inc.; and Vulcan Materials Company. SBC Warburg
Dillon Read believes these companies are engaged in lines of business that are
generally comparable to those of Monroc. SBC Warburg Dillon Read determined the
equity value and derived the unlevered value for each of these comparable
companies. SBC Warburg Dillon Read calculated a range of each unlevered values
as a multiple of the last 12 months ended September 30, 1997 of revenues,
EBITDA, EBIT, and to latest net assets. Unlevered value as a multiple of the
last 12 months revenues averaged 1.8x and ranged from 0.9x to 2.4x for these
comparable companies. Unlevered value as a multiple of the last 12 months EBITDA
averaged 7.0x and ranged from 4.6x to 11.2x. Unlevered value as a multiple of
the last 12 months EBIT averaged 10.2x and ranged from 7.1x to 24.0x. Unlevered
value as a multiple of the latest net assets averaged 2.4x and ranged from 1.5x
to 3.4x. SBC Warburg Dillon Read noted the implied unlevered value for Monroc in
the Merger based upon the cash purchase price of $10.771 per share and pro forma
for the Treasury Valley Concrete acquisition at September 30, 1997 represents
1.0x revenues, 14.2x EBITDA, 26.0x EBIT and 2.1x net assets, within or above the
range for these comparable companies for revenues, EBITDA, EBIT and net assets.
SBC Warburg Dillon Read also determined the equity value of the comparable
companies as multiple of 1998 net income as estimated by Institutional Broker
Estimate System ("I/B/E/S") and as a multiple of book value of equity. For 1998
estimated net income, based on projections provided by Monroc's management, the
multiples averaged 13.1x and ranged from 9.4x to 25.1x. SBC Warburg Dillon Read
noted that the implied equity value for Monroc in the Merger represents 8.8x
1998 estimated net income, based on projections provided by Monroc's management,
below the range for comparable companies. For book value of equity, the multiple
averaged 2.1x and ranged from 1.5x to 3.8x. SBC Warburg Dillon Read noted the
implied equity value for Monroc in the Merger represented 2.8x book value,
within the range for the comparable companies.
Summary of Selected Acquisition Transactions. Using publicly available
information, SBC Warburg Dillon Read reviewed the purchase prices and multiples
paid in selected mergers and acquisitions involving cement and aggregates
companies which SBC Warburg Dillon Read deemed relevant in evaluating the
Merger. SBC Warburg Dillon Read reviewed the acquisition of Fiberite, Inc. by
Hexcel Corporation; the acquisition of Blue Circle America, Inc. by St. Mary's
Cement Corporation; the acquisition of American Aggregates Corporation by Martin
Marietta Materials, Inc.; the acquisition of John Iafolla Company by CRH plc;
the acquisition of Wilton Assets, Inc. by Titan Resources, Inc.; the acquisition
of E.L. Gardner, Inc. by Bardon Group plc; the acquisition of Colony Materials,
Inc. by Western Mobile, Inc.; the acquisition of Tilcon, Inc. by CRH plc; the
acquisition of Mid-State Construction & Materials, Inc. by Langenfelder Group;
the acquisition of Boral Resources, Inc. by Cornerstone Construction Materials,
Inc.; the acquisition of Dravo Basic Materials Company, Inc. by Martin Marietta
Materials, Inc.; the acquisition of Balf Company/Savin Brothers/Capital Pipe by
CRH plc; the acquisition of Kost Brothers, Inc. by English China Clays plc; the
acquisition of J.L. Shiely, Inc. by English China Clays plc; the acquisition of
Riffe Petroleum Company by Elf Aquitaine Asphalt, Inc.; and the acquisition of
American Aggregates Corporation by ARC America Corporation.
Multiples of unlevered value of the transactions (consideration offered for
the equity plus book value of debt less cash and cash equivalents) to the
revenues of the acquired businesses for the 12 months preceding the acquisition
announcement averaged 1.3x and ranged from 0.5x to 2.4x. The multiples of EBITDA
for the 12 months preceding the acquisition announcement averaged 8.1x and
ranged from 7.9x to 8.2x. The multiples of EBIT for the 12 months preceding the
acquisition announcement averaged 8.9x and ranged from 6.7x to 12.8x. The
multiple of latest net assets averaged 1.5x and ranged from 1.0x to 2.3x. SBC
Warburg Dillon Read noted that the implied unlevered value for Monroc in the
Merger represented 1.0x revenues, 14.2x EBITDA, 26.0x EBIT, and 2.1x net assets,
all within or above the range for the transactions considered.
No company, transaction or business used in the analysis described under
"--Analysis of Selected Publicly Traded Comparable Companies" or "-- Summary of
Selected Acquisition Transactions" is identical to Monroc, U.S. Aggregates, Inc.
or the Merger. Accordingly, an analysis of the results thereof necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors than could affect the
transaction or the public trading or other values of the company or companies to
which they are being compared. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using comparable
acquisitions or company data.
Discounted Cash Flow Analysis. SBC Warburg Dillon Read performed a
discounted cash flow analysis using a set of underlying operating projections
which were based upon forecasts provided by management of Monroc. Utilizing
management's projections, SBC Warburg Dillon Read calculated the theoretical
unlevered discounted present value for Monroc by adding together the present
value of (i) the projected stream of unlevered free cash flow through the year
2002 for Monroc and (ii) the projected terminal value of Monroc at the end of
the year 2002. For purposes of this analysis, SBC Warburg Dillon Read utilized
discount rates ranging from 12% to 14% and terminal value multiple ranging from
5.0x to 6.0x to apply to projected EBITDA for 2002. This analysis indicated a
range of values from $8.80 to $11.28 per share, compared to the Merger price of
$10.771 per share. SBC Warburg Dillon Read also performed an analysis where the
Monroc's terminal value was calculated based on a perpetuity growth rate ranging
from 2.5% to 4.5%, and utilizing the same discount rates of 12% to 14%. This
analysis indicated a range of values from $7.28 to $11.62 per share, compared to
the Merger price of $10.771 per share.
SBC Warburg Dillon Read is an internationally recognized investment banking
firm which, as a part of its investment banking business, regularly is engaged
in the evaluation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The Monroc Board selected
SBC Warburg Dillon Read on the basis of its experience and independence. In the
ordinary course of business, SBC Warburg Dillon Read may trade the equity
securities of Monroc for its own account and the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Pursuant to an engagement letter dated May 14, 1997 between Monroc and SBC
Warburg Dillon Read, Monroc has agreed to pay SBC Warburg Dillon Read contingent
upon consummation of the Merger the sum of (i) $500,000 and (ii) 1.25% of the
aggregate amount of consideration paid (total offer for net assets) less $15.0
million, net of a $100,000 fee previously paid to SBC Warburg Dillon Read with
respect to financial advisory services. Monroc has also agreed to reimburse SBC
Warburg Dillon Read for the expenses reasonably incurred by it in connection
with its engagement (including reasonable counsel fees) and to indemnify SBC
Warburg Dillon Read and its officers, directors, employees, agents and
controlling persons against certain expenses, losses, claims, damages or
liabilities in connection with its services, including those arising under the
federal securities laws.
Certain Effects of the Merger
Upon consummation of the Merger, the stockholders of the Company will cease
to have any ownership interest in the Company or other rights as stockholders of
the Company. Instead, each such stockholder (other than stockholders who
properly perfect appraisal rights in accordance with Section 262 of the DGCL)
will receive, upon surrender of the certificate or certificates representing
shares of Common Stock, the Merger Consideration in exchange for each share of
Common Stock owned immediately prior to the Effective Time. Following the
Merger, USAI will be the beneficiary of any future earnings and growth of the
Surviving Corporation, and will have the ability to benefit from any
divestitures, strategic acquisitions or other corporate opportunities that may
be pursued by the Surviving Corporation in the future.
As a result of the Merger, the Company will be privately held and there
will be no market for its Common Stock. Upon consummation of the Merger, the
Common Stock will cease to be listed on the Nasdaq Stock Market's National
Market and registration of the Common Stock under the Exchange Act will be
terminated.
Interests of Certain Persons in the Merger
In considering the recommendations of the Board of Directors of the Company
with respect to the Merger, stockholders should be aware that certain members of
the Board of Directors and management of the Company have certain interests in
the Merger that are in addition to the interests of the stockholders of the
Company generally. The Board of Directors of the Company was aware of these
interests and considered them, among other factors, in approving the Merger.
Officers of the Company; Employment Agreements; Bonuses. Pursuant to the
Merger Agreement, the officers of the Company initially will continue as the
officers of the Surviving Corporation. Ronald D. Davis, the Company's President
and Chief Executive Officer, and L. William Rands, the Company's Vice
President--Finance, Chief Financial Officer, Treasurer and Secretary, currently
have employment agreements with the Company providing for their employment as
officers of the Company through June 2, 1999 and July 31, 1998, respectively.
These employment agreements will continue to be in full force and effect
following consummation of the Merger.
Under the terms of his employment agreement, Mr. Davis was granted options
to acquire 200,000 shares of Common Stock, of which 40,000 have an exercise
price of $5.125 per share and vested on July 1, 1996, 40,000 have an exercise
price of $5.75 per share and vested on July 1, 1997, 40,000 have an exercise
price of $6.60 per share and are scheduled to vest on July 1, 1998, 40,000 have
an exercise price of $7.60 per share and are scheduled to vest on July 1, 1999
and 40,000 have an exercise price of $8.75 per share and are scheduled to vest
on July 1, 2000. The employment agreement further provides that upon any change
of control of the Company, such as a merger, all unvested options shall vest and
become immediately exercisable at the exercise price for the most recently
vested options. Accordingly, in connection with the Merger, Mr. Davis' unvested
options to purchase 120,000 shares will become vested and exercisable at the
price of $5.75 per share, the exercise price of the options that vested on July
1, 1997.
Pursuant to an agreement dated as of June 23, 1997 between the Company and
L. Williams 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.
Stock Options and Warrants. The Merger Agreement provides that, immediately
prior to the Effective Time, each outstanding Option and Warrant, whether or not
such Option or Warrant is then exercisable, shall 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 per share of such option or warrant, less any applicable tax
withholdings.
BCCP I, the principal shareholder of the Company, holds a warrant to
purchase 1,500,000 shares of Common Stock at an exercise price of $6.25 per
share. Marc T. Scholvinck is a director of the Company and is also a Managing
Director and the Chief Financial Officer of Richard C. Blum & Associates, L.P.
("Blum & Associates"), the general partner of Building and Construction Capital
Partners, L.P. ("BCCP"), which is the general partner of BCCP I. Robert L.
Miller, also a director of the Company, is a limited partner of BCCP and
controls a family trust that is a limited partner of BCCP I.
The following table sets forth, with respect to those directors and
executive officers holding outstanding Options, (i) the number of shares of
Common Stock subject to Options that were vested as of February 15, 1998, (ii)
the number of shares of Common Stock subject to Options that were unvested as of
February 15, 1998 and (iii) the weighted average exercise price per share of the
vested and unvested Options.
<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Common Stock Weighted Average
Subject to Subject to Exercise Price
Name and Title Vested Options Unvested Options Per Share
- -------------- -------------- ---------------- ----------
<S> <C> <C> <C>
Ronald D. Davis.................... 80,000 120,000 $5.63
President, Chief Executive
Officer and Director
L. William Rands................... 29,000 -- 5.10
Vice President--Finance, Chief
Financial Officer, Treasurer
and Secretary
James E. Dahl ..................... 13,000 -- 6.54
Director
William T. Lightcap ............... 5,000 -- 5.00
Director
Jules Ross ........................ 10,000 -- 5.00
Director
Delbert Tanner .................... 13,000 -- 6.68
Director
</TABLE>
Employee Stock Ownership Plan. Under the terms of the Monroc, Inc. Employee
Stock Ownership Plan, as amended (the "ESOP"), the Merger Consideration (i) with
respect to allocated shares of Common Stock under the ESOP will be allocated to
the participant accounts from which the allocated shares were taken and (ii)
with respect to unallocated shares of Common Stock under the ESOP will first be
used to repay the remaining balance of outstanding ESOP loans secured by such
shares and the balance will be allocated proportionately to the participants as
earnings of the ESOP. The payments under the ESOP to Messrs. Davis and Rands are
expected to be approximately $8,600 and $167,000, respectively.
Indemnification and Insurance. The Merger Agreement provides that, for a
period of not less than six years from the Effective Time, the Surviving
Corporation shall indemnify and hold harmless each present and former employee,
agent, director or officer of the Company and its subsidiaries from and against
any and all claims arising out of or in connection with activities, including
without limitation, the transactions contemplated by this Agreement, in such
capacity, or on behalf of, or at the request of the Company, its subsidiaries or
affiliates, to the fullest extent permitted under Delaware law and, in addition,
to the fullest extent provided in their respective charters or bylaws or any
contract or other arrangement in effect at the date hereof which obligations
shall survive the Merger. For a period of six years after the Effective Time,
the Surviving Corporation is obligated to maintain in effect certain policies of
directors' and officers' liability insurance that are substantially no less
advantageous to the directors and officers than the policies currently covering
such individuals. See "The Merger Agreement--Indemnification and Insurance."
Certain Federal Income Tax Consequences
The following summary discusses the material federal income tax
consequences of the Merger to stockholders of the Company. The summary is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), applicable
Treasury Regulations thereunder and administrative rulings and judicial
authority as of the date hereof, including modifications made by the Taxpayer
Relief Act of 1997. All of the foregoing are subject to change, and any such
change could affect the continuing validity of the discussion. The discussion
assumes that holders of shares of Common Stock hold such shares as a "capital
asset" within the meaning of Section 1221 of the Code and does not address the
tax consequences that may be relevant to a particular stockholder subject to
special treatment under certain federal income tax laws, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, corporate
stockholders which are collapsible corporations, non-United States persons and
stockholders who acquired shares of Common Stock pursuant to the exercise of
options or otherwise as compensation or through a tax-qualified retirement plan,
nor any consequences arising under the laws of any state, locality or foreign
jurisdiction.
The following discussion is limited to the United States federal income tax
consequences relevant to a holder of securities that is a citizen or resident of
the United States, or any state thereof, or a corporation or other entity
created or organized under the laws of the United States, or any political
subdivision thereof, or an estate the income of which is subject to United
States federal income tax regardless of its source or a trust whose
administration is subject to the primary supervision of a United States court
and which has one or more United States persons who have the authority to
control all substantial decisions of the trust.
No ruling from the Internal Revenue Service (the "IRS") concerning the
federal income tax consequences of the purchase, ownership, and disposition of
the securities will be requested. The consequences set forth in this discussion
are not binding on the IRS or the courts and no assurance can be given that
contrary positions will not be successfully asserted by the IRS or adopted by a
court if the issues are litigated. The Company has not sought and will not seek
any rulings from the IRS with respect to the positions of the Company discussed
herein, and there can be no assurance that the IRS will not take a different
position concerning the tax consequences of the purchase, ownership or
disposition of the securities.
General. The receipt of cash by a Monroc stockholder in the Merger or
pursuant to the exercise of dissenters' appraisal rights will be a taxable
transaction for federal income tax purposes under the Code and may also be a
taxable transaction under applicable state, local, foreign income or other tax
laws. Generally, a stockholder will recognize gain or loss in an amount equal to
the difference between the cash received by the stockholder pursuant to the
Merger and the stockholder's adjusted tax basis in the Common Stock purchased
pursuant to the Merger. For federal income tax purposes, such gain or loss will
be a capital gain or loss if the shares are a capital asset in the hands of the
stockholder, and a long-term capital gain or loss if the stockholder meets one
of the holding periods set forth below as of the Effective Time. There are
significant limitations on the deductibility of capital losses by individuals or
corporations. Capital losses can offset capital gains on a dollar-for-dollar
basis and, in the case of an individual stockholder, capital losses in excess of
capital gains can be deducted to the extent of $3,000 annually. An individual
can carry forward unused capital losses indefinitely. A corporation can utilize
capital losses only to offset capital gain income. Generally, a corporation's
unused capital losses can be carried back three years and forward five years.
Long-term capital gains recognized after July 28, 1997, on marketable
securities such as the shares of Common Stock will be taxable at a maximum rate
of 20% for individuals if the individual's holding period is more than 18 months
and 28% if the holding period is more than one year but not more than 18 months,
and 35% for corporations. Ordinary income is taxable at a maximum rate of 39.6%
for individuals and 35% for corporations.
The ESOP. The receipt of cash by the ESOP in the Merger will not be a
taxable transaction for the ESOP or any of the individual ESOP participants,
unless a participant chooses to withdraw any of such cash proceeds allocated to
his or her account. The cash received in the Merger for the shares of Common
Stock held by the ESOP will be allocated to the participants' accounts from
which those shares were taken. Cash proceeds from unallocated ESOP shares will
be allocated under the provisions of the ESOP, which requires that such cash
proceeds first be used to retire unpaid debt of the ESOP and then be allocated
to the participants' accounts as earnings of the ESOP.
Information Reporting and Backup Withholding. A holder of Common Stock may
be subject to backup withholding at the rate of 31% with respect to "reportable
payments," which may include payments of dividends and the gross proceeds of a
sale of the Common Stock. The payor will be required to deduct and withhold the
prescribed amounts unless such holder (i) is a corporation or comes within other
exempt categories and, when required, demonstrates this fact or (ii) provides a
correct taxpayer identification number, certifies as to no loss to exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A holder of Common Stock who does not provide the
Company with his or her correct taxpayer identification number may be subject to
penalties imposed by the IRS. Amounts paid as backup withholding do not
constitute an additional tax and will be credited against the holder's federal
income tax liabilities, so long as the required information is provided to the
IRS. The Company will report to the IRS the amount of any "reportable payments"
for each calendar year and the amount of tax withheld, if any, with respect to
payment on the Common Stock.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. THUS,
COMPANY STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER
APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
Regulatory Approvals
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
specified waiting period requirements have been satisfied. Monroc and USAI filed
premerger notification and report forms with the FTC and the Antitrust Division
on February 25, 1998.
The waiting period under the HSR Act for Monroc and USAI will expire on
March 27, 1998 (30 days after the date of filing), unless the period is
terminated sooner pursuant to Monroc's and USAI's request for early termination
of the waiting period. If Monroc or USAI receives a request for additional
information from the FTC or the Antitrust Division prior to the expiration of
the waiting period, the period will terminate twenty days after Monroc and USAI
have substantially complied with the request.
At any time before or after the Effective Time, the Justice Department, the
FTC or a private person or entity could seek under the antitrust laws, among
other things, to enjoin the Merger. There can be no assurance that a challenge
to the Merger will not be made or that, if such a challenge is made, the parties
to the Merger will prevail. The obligations of Monroc, USAI and Sub to
consummate the Merger are subject to the condition that there be no temporary
restraining order, preliminary or permanent injunction or other order by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger. Each party has agreed to use its best
efforts to have any such injunction or order lifted. See "The Merger Agreement--
Conditions to the Merger" and "--Termination."
Monroc, USAI and Sub are not aware of any license or regulatory permit
which is material to the businesses of Monroc, USAI and Sub and which is likely
to be adversely affected by consummation of the Merger or of any approval or
other action by any state, federal or foreign government or governmental agency
(other than routine re-licensing procedures) that would be required prior to the
Merger.
Accounting Treatment
For accounting and financial reporting purposes, the Merger is intended to
be accounted for using the purchase method under generally accepted accounting
principles.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is attached hereto as Appendix A and is incorporated herein by
reference. All references to and summaries of the Merger Agreement in this Proxy
Statement are qualified in their entirety by, and made subject to, the more
complete information contained in the Merger Agreement. Stockholders are urged
to read carefully the Merger Agreement in its entirety.
The Merger
Subject to the terms and conditions of the Merger Agreement, Sub will be
merged with and into the Company, whereupon the separate corporate existence of
Sub will cease and the Company will continue as the surviving corporation in the
Merger (the "Surviving Corporation"). The Merger will have the effects specified
in the DGCL.
Upon the satisfaction or waiver of all conditions to the Merger, USAI and
the Company will cause a Certificate of Merger to be executed and filed with the
Secretary of State of the State of Delaware. The Merger will become effective
upon the filing of the Certificate of Merger or at such later time as designated
in the Certificate of Merger (the "Effective Time").
Conversion of Securities; Treatment of Options
At the Effective Time, each share of Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares owned by or held in
treasury by the Company, shares owned by USAI or any direct or indirect
subsidiary of USAI and shares as to which appraisal rights have been perfected,
and not withdrawn or otherwise lost, under the DGCL) will be converted into the
right to receive $10.771 in cash without interest thereon.
Immediately prior to the Effective Time, each Option granted under the
Monroc, Inc. 1996 Stock Option Plan and the Monroc, Inc. 1994 Stock Option Plan
(collectively, the "Stock Option Plans") and each outstanding Warrant of the
Company, whether or not such Option or Warrant is then exercisable, shall be
canceled, and each holder of a canceled Option or Warrant shall be entitled to
receive from the Company, in consideration for cancellation and settlement of
such Option or Warrant, a cash payment equal to the product of (i) the aggregate
number of shares of Common Stock subject to the Option or Warrant and (ii) the
excess, if any, of the Merger Consideration over the exercise price per Share of
such Option or Warrant. Prior to the Closing, the Company will make any
amendments to the Stock Option Plans, the Warrants and any agreements related
thereto, and will obtain any consents or releases, necessary to effect the
transactions contemplated by the Merger Agreement. Any amounts payable with
respect to Options or Warrants shall be subject to any required withholding of
taxes and shall be paid without interest.
All shares of Common Stock converted in the Merger will no longer be
outstanding and will automatically, by virtue of the Merger and without any
action on the part of any holder thereof, be canceled and retired and will cease
to exist, and each holder of a certificate representing any such shares will
cease to have any rights with respect thereto, except the right to receive,
without interest, the Merger Consideration into which such shares have been
converted.
Each share of Common Stock owned by or held in treasury by the Company and
shares owned by USAI or any direct or indirect subsidiary of USAI immediately
prior to the Effective Time will be automatically canceled and extinguished at
the Effective Time and no payment or consideration will be issued with respect
thereto.
Payment for Shares
At or prior to the Effective Time, USAI will deposit, or cause to be
deposited, in trust with the Payment Agent, for the benefit of the holders of
shares of Common Stock, immediately available funds in an amount sufficient to
make all payments of the aggregate Merger Consideration on a timely basis (the
"Exchange Fund"). The Payment Agent will, pursuant to irrevocable instructions,
make payments out of the Exchange Fund to holders of record of shares of Common
Stock immediately prior to the Effective Time.
Promptly after the Effective Time, the Payment Agent will mail and/or make
available to each person who was, at the Effective Time, a holder of record of
shares of Common Stock, a notice and letter of transmittal and instructions for
use in effecting the surrender of the Certificates representing shares of Common
Stock in exchange for the Merger Consideration. STOCKHOLDERS OF THE COMPANY
SHOULD NOT FORWARD THEIR CERTIFICATES TO THE PAYMENT AGENT WITHOUT A LETTER OF
TRANSMITTAL, AND SHOULD NOT RETURN THEIR CERTIFICATES WITH THE ENCLOSED PROXY.
Upon surrender to the Payment Agent of a Certificate, together with such
letter of transmittal duly executed and completed in accordance with the
instructions thereon, the holder of such Certificate will be paid the Merger
Consideration applicable to the Certificate and such Certificate shall be
canceled. No interest will be paid or accrued in respect of the Merger
Consideration.
No transfer of shares of Common Stock outstanding immediately prior to the
Effective Time will be made on the stock transfer books of the Surviving
Corporation after the Effective Time. Any portion of the Exchange Fund which
remains unclaimed by the stockholders of the Company on the date six months
after the Effective Time will be repaid to the Surviving Corporation, upon
demand, and any stockholder of the Company will thereafter look only to the
Surviving Corporation for payment of such stockholder's claim for the Merger
Consideration, without any interest thereon.
Directors and Officers of the Company
The Merger Agreement provides that the directors of Sub at the Effective
Time will be the directors of the Surviving Corporation and the officers of the
Company at the Effective Time will be the officers of the Surviving Corporation,
in each case until their respective successors are duly elected (or appointed in
the case of officers) and qualified.
Representations and Warranties
The Merger Agreement contains various representations and warranties by
each of the Company, USAI and Sub, including representations and warranties of
the Company relating to, among other things, (i) organization and similar
corporate matters, (ii) capital structure, (iii) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement, (iv) absence
of certain material changes, (v) documents filed by the Company with the
Commission, the accuracy of information contained therein and the absence of
undisclosed liabilities, (vi) the absence of conflicts with governing documents,
the violations of certain laws or instruments, and required consents and
approvals, (vii) litigation, (viii) compliance with material laws and permits,
(ix) certain employee and labor matters, (x) the absence of defaults under
material contracts, (xi) tax matters, (xii) broker's fees with respect to the
Merger, (xiii) the accuracy of information supplied by the Company in connection
with this Proxy Statement, (xiv) employee benefit plans, (xv) receipt of an
opinion of the Company's financial advisor, (xvi) the vote required to approve
the Merger, (xvii) intellectual property matters, (xviii) environmental matters,
(xix) title and rights to owned and leased real property, (xx) the
recommendation of the board of directors of the Company with respect to the
Merger and (xxi) certain indebtedness for borrowed money of the Company.
Conduct of Business; Certain Covenants
During the period from the date of the Merger Agreement and continuing
until the Effective Time, the Company has agreed that it will in all material
respects conduct its operations according to its ordinary and usual course of
business and consistent with past practice and will use commercially reasonable
efforts to preserve intact in all material respects the business organization of
the Company, keep available the services of its current officers and key
employees and preserve in all material respects the good will of those having
advantageous business relationships with it and its subsidiaries. In addition,
the Company has agreed that, without the prior written consent of USAI, it will
not (i) issue, sell or pledge any additional shares of its capital stock or
securities convertible into any such shares, or any rights, warrants or options
to acquire any such shares or other convertible securities, (ii) split, combine,
subdivide, reclassify or redeem, or purchase or otherwise acquire, or propose to
do any of the foregoing with respect to, any of its outstanding securities,
(iii) declare or pay any dividend or distribution on shares of Common Stock,
(iv) subject to the fiduciary duties of the Board of Directors of the Company
(after consultation with and advice from outside legal counsel) and except
pursuant to agreements or arrangements in effect on the date hereof, purchase or
otherwise acquire, sell or otherwise dispose of or encumber (or enter into any
agreement to so purchase or otherwise acquire, sell or otherwise dispose of or
encumber) material properties or material assets except in the ordinary course
of business, (v) subject to the rights of the stockholders of the Company under
applicable law, adopt any amendments to the charter documents of the Company,
(vi) increase the compensation of any of its directors, officers or key
employees, except in the ordinary course of business and consistent with past
practice or pursuant to the terms of agreements or plans currently in effect in
amounts material to the Company and its subsidiaries taken as a whole, (vii) pay
or agree to pay any pension, retirement allowance or other employee benefit not
required or permitted by any existing plan, agreement or arrangement to any
director, officers or key employee in amounts material to the Company and its
subsidiaries taken as a whole, (viii) commit itself (other than pursuant to any
collective bargaining agreement) to any additional pension, profit-sharing,
bonus, extra compensation, incentive, deferred compensation, stock purchaser,
stock option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or to any
employment or consulting agreement with or for the benefit of any director,
officer or key employee, whether past or present in amounts material to the
Company and its subsidiaries taken as a whole, (ix) except as required by
applicable law, amend in any material respect any such plan, agreement or
arrangement or (x) except in the ordinary course of business and consistent with
past practice (A) incur any material amount of long-term indebtedness for
borrowed money or issue any material amount of debt securities or assume,
guarantee or endorse the obligations of any other person except for obligations
of wholly owned subsidiaries of the Company, (B) make any material loans,
advances or capital contributions to, or investments in, any other person (other
than to wholly owned subsidiaries of the Company or customary loans or advances
to employees in amounts not material to the maker of such loan or advance), (C)
pledge or otherwise encumber shares of capital stock of the Company or a
material portion of the capital stock of any if its subsidiaries or (D) mortgage
or pledge any of its material assets, tangible or intangible, or create or
suffer to exist any material lien thereupon.
No Solicitation
Pursuant to the Merger Agreement, the Company has agreed that it will not,
directly or indirectly, solicit, carry on discussions with or enter into any
agreement with any corporation, partnership, person or other entity or group
(other than USAI or an affiliate or an associate of USAI) concerning any merger,
acquisition or similar transaction involving, or the sale of all or
substantially all of the assets or equity securities of, the Company or any of
its subsidiaries or divisions (other than with respect to certain of the
Company's operations) (an "Acquisition Proposal"). Notwithstanding the
foregoing, the Company may (i) directly or indirectly, furnish information to or
enter into discussions and negotiations with any person, entity or group that
makes an unsolicited Acquisition Proposal if the Board of Directors of the
Company determines in good faith (after consultation with and advice from
outside legal counsel) that such action is required for the Board of Directors
to comply with its fiduciary duties under applicable law, and (ii) to the extent
applicable, comply with Rule 14e-2 and 14d-9 promulgated under the Exchange Act
with regard to an Acquisition Proposal.
Proxy Statement; Special Meeting
Pursuant to the Merger Agreement, the Company has agreed to use its
commercially reasonable efforts to file this Proxy Statement with the
Commission, respond as promptly as is reasonably practicable to any comments
made by the Commission with respect to this Proxy Statement and cause this Proxy
Statement to be mailed to the stockholders of the Company at the earliest
practicable time following the date of the Merger Agreement. The Company has
also agreed to duly call and hold the Special Meeting as soon as practicable to
consider and vote upon approval of the Merger Agreement and the transactions
contemplated thereby.
Standstill
Pursuant to the Merger Agreement, USAI has agreed that in the event of the
termination of the Merger Agreement, neither USAI nor its subsidiaries,
employees, officers or affiliates will, for a period of three years from the
date of the Merger Agreement, directly or indirectly (unless USA has received
the prior written invitation or approval of a majority of the Board of Directors
of the Company) solicit, seek or offer to effect, or make any written or oral
statement, proposal or announcement with respect to, certain transactions or
events with respect to the Company, including, among other things, a business
combination, merger, tender or exchange offer, restructuring, recapitalization,
purchase of securities or assets or similar transaction with respect to the
Company or any affiliate thereof.
Indemnification and Insurance
The Merger Agreement provides that the Company will indemnify and hold
harmless, and after the Effective Time the Surviving Corporation will indemnify
and hold harmless, each present and former employee, agent, director or officer
of the Company and its subsidiaries (the "Indemnified Parties") from and against
any and all claims arising out of or in connection with activities, including
without limitation, the transactions contemplated by the Merger Agreement, in
such capacity, or on behalf of, or at the request of the Company, its
subsidiaries or affiliates, to the fullest extent permitted under Delaware law
(subject to applicable limitations thereunder) and, in addition, to the fullest
extend provided in their respective charters or bylaws (subject to applicable
limitations thereunder) or any contract or other arrangement in effect at the
date of the Merger Agreement, which obligations will survive the Merger and will
continue in full force and effect for a period of not less than six years from
the Effective Time. The Company, and after the Effective Time the Surviving
Corporation, will advance expenses incurred with respect to the foregoing, as
they are incurred, to the fullest extent permitted under applicable law,
provided that the person on whose behalf the expenses are advanced provides and
undertakes (which need not be secured) to repay such advances if it is
ultimately determined that such person is not entitled to indemnification.
The Surviving Corporation will use its best efforts to cause to be
maintained in effect for not less than six years from the Effective Time the
current policies of directors, and officers, liability insurance maintained by
the Company and its subsidiaries (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous so long as no lapse in coverage occurs
as a result of such substitution) with respect to all matters, including the
transactions contemplated by the Merger Agreement, occurring prior to and
including the Effective Time; provided, however, that the Surviving Corporation
will not be required to pay annual premiums in excess of 200% of the Company's
total current annual premiums for such insurance and if the Surviving
Corporation is unable to obtain the requisite insurance it will obtain as much
comparable insurance as can be obtained for an annual premium equal to such
maximum amount.
Fees and Expenses
Each party will bear its own expenses in connection with the Merger
Agreement and the transactions contemplated thereby; provided, however, that if
the Merger is consummated, the Surviving Corporation will assume responsibility
for the payment of all Company expenses in connection with the Merger Agreement
and the transactions contemplated thereby. In certain circumstances upon
termination of the Merger Agreement, the Company may be obligated to pay certain
fees to, or certain expenses of, USAI. See "--Termination Fees."
Conditions to the Merger
The obligations of the Company, USAI and Sub to effect the Merger are
subject to the satisfaction or waiver, at or prior to the Effective Time, of the
following conditions: (i) the approval and adoption of the Merger Agreement by
the affirmative vote of the stockholders of the Company; (ii) the absence of any
statute, rule, regulation, decree, order or injunction by any United States
federal or state government, governmental agency or authority or court which
prohibits, restrains, enjoins or restricts the consummation of the Merger; and
(iii) any waiting period applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
The obligations of USAI and Sub to effect the Merger are subject to the
satisfaction, at or prior to the Effective Time, of each of the following
conditions: (i) the representations and warranties of the Company contained in
the Merger Agreement shall be true and correct in all material respects (except
as to the extent such representations and warranties are qualified as to
materiality, in which case such representations and warranties shall be true and
correct in all respects) at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date), except as and to
the extent that the facts and conditions upon which such representations and
warranties are based are expressly required or permitted to be changed by the
terms thereof; (ii) the Company shall have performed in all material respects
all agreements and covenants required by the Merger Agreement to be performed by
it prior to or at the Effective Time; provided, however, that neither USAI nor
Sub shall be entitled to refuse to consummate the Merger in reliance upon its
own breach or failure to perform; (iii) from the date of the Merger Agreement
through the Effective Time, there shall not have occurred any change in or
effect on the business of the Company or any of its subsidiaries, individually
or in the aggregate, that is materially adverse to the results of operations,
properties, financial condition or prospects of the Company and its subsidiaries
taken as a whole, except for such changes or effects resulting from, or in
connection with, general economic, industry-wide or financial market conditions
or resulting from discussions or efforts of the Company, USAI or USAI's
affiliates to divest certain of the Company's operations after consummation of
the Merger; and (iv) USAI shall have received a certificate executed on behalf
of the Company by an executive officer of the Company to the effect set forth in
clauses (i) through (iii).
The obligations of the Company to effect the Merger are subject to the
satisfaction, at or prior to the Effective Time, of each of the following
conditions: (i) the representations and warranties of USAI and Sub contained in
the Merger Agreement shall be true and correct in all material respects (except
as to the extent such representations and warranties are qualified as to
materiality, in which case such representations and warranties shall be true and
correct in all respects) at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date), except as and to
the extent that the facts and conditions upon which such representations and
warranties are based are expressly required or permitted to be changed by the
terms thereof; (ii) USAI and Sub shall have performed in all material respects
all agreements and covenants required by the Merger Agreement to be performed by
them prior to or at the Effective Time; provided, however, that the Company
shall not be entitled to refuse to consummate the transaction in reliance upon
its own breach or failure to perform; and (iii) the Company shall have received
a certificate executed on behalf of USAI and Sub by an executive officer of USAI
to the effect set forth in clauses (i) and (ii).
Termination
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time: (i) by mutual written consent duly
authorized by the Boards of Directors of the Company, USAI and Sub; (ii) by USAI
or the Company if (A) the Effective Time shall not have occurred on or before
August 31, 1998 (provided that the right to terminate the Merger Agreement under
clause (ii) shall not be available to any party whose failure to fulfill any
obligations under the Merger Agreement has been the cause of or resulted in the
failure of the Effective Time to occur on or before such date), (B) the approval
of the Company's stockholders has not been obtained by August 31, 1998 at a
meeting duly convened therefor or at any adjournment thereof or (C) any United
States federal or state government, governmental agency or authority or court
shall have issued an order, decree or ruling, or taken any other action,
permanently restraining, enjoining or otherwise prohibiting the Merger (which
the party seeking to terminate the Merger Agreement shall have used its best
efforts to have lifted or reversed) and such order, decree, ruling or other
action shall have become final and non-appealable; (iii) by the Company if an
Acquisition Proposal has been made and the Board of Directors of the Company
determines, in the exercise of its good faith judgment (after consultation with
and advice from outside legal counsel) that such termination is required for the
Board of Directors to comply with its fiduciary duties under applicable law; or
(iv) by USAI if the Board of Directors of the Company withdraws or modifies in a
manner adverse to USAI or Sub its determination to recommend that the
stockholders of the Company approve the Merger Agreement and the transactions
contemplated thereby.
Termination Fees
If (i) the Company terminates the Merger Agreement pursuant to clause (iii)
under the caption "--Termination" above or USAI terminates the Merger Agreement
pursuant to clause (iv) under the caption "--Termination" above following
receipt by the Company of an Acquisition Proposal and (ii) the Acquisition
Proposal which gave rise to such termination (or any revised transaction based
upon such Acquisition Proposal) is consummated within six months of such
termination, then the Company (or any successor thereto) will pay to USAI a fee
of $2.0 million (the "Termination Fee") in immediately available funds within
five business days following such termination. Only one Termination Fee shall be
payable pursuant the Merger Agreement. If the Company has paid any amounts to
USAI as described in the following paragraph, such amounts shall be deducted
from any Termination Fee owed to USAI so that in no event shall the aggregate
payments made by the Company to USAI with respect to the termination of the
Merger Agreement exceed $2.0 million.
If (i) the Company terminates the Merger Agreement pursuant to clause (iii)
under the caption "--Termination" above or USAI terminates the Merger Agreement
pursuant to clause (iv) under the caption "--Termination" above following
receipt by the Company of an Acquisition Proposal and (ii) the Company enters
into a definitive agreement with respect to the Acquisition Proposal which gave
rise to such termination (or any revised transaction based upon such Acquisition
Proposal) within six months of such termination, then the Company (or any
successor thereto) will pay to USAI the out-of-pocket fees and expenses incurred
or paid by or on behalf of USAI or Sub in connection with the transactions
contemplated by this Agreement, including all fees and expenses of counsel,
commercial banks, accountants, experts and consultants to USAI and Sub.
Voting Agreement
Pursuant to the Merger Agreement, USAI and BCCP I entered into a Voting
Agreement dated as January 29, 1998, which provides that BCCP I, which owned
1,650,000 shares (or approximately 36.6% of the outstanding shares) of Common
Stock as of the Record Date, has agreed to vote its shares of Common Stock in
favor of approval and adoption of the Merger Agreement. Under the terms of the
Voting Agreement, BCCP I has granted a proxy to USAI to vote BCCP I's shares of
Common Stock in favor of approval and adoption of the Merger Agreement at the
Special Meeting, subject to certain conditions and restrictions.
APPRAISAL RIGHTS
Under the DGCL, record holders of shares of Common Stock who follow the
procedures set forth in Section 262 and who have not voted in favor of the
Merger Agreement will be entitled to have their shares of Common Stock appraised
by the Delaware Court of Chancery and to receive payment of the "fair value" of
such shares, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, as
determined by such court. The following is a summary of certain of the
provisions of Section 262 of the DGCL and is qualified in its entirety by
reference to the full text of such Section, which is attached hereto as Appendix
C and is incorporated herein by reference.
Under Section 262, where a merger agreement is to be submitted for approval
and adoption at a meeting of stockholders, as in the case of the Special
Meeting, not less than 20 calendar days prior to the meeting, the Company must
notify each of the holders of Common Stock at the close of business on the
Record Date that such appraisal rights are available and include in each such
notice a copy of Section 262. This Proxy Statement constitutes such notice. Any
stockholder who wishes to exercise appraisal rights should review the following
discussion and Appendix C carefully because failure to timely and properly
comply with the procedures specified in Section 262 will result in the loss of
appraisal rights under the DGCL.
A holder of shares of Common Stock wishing to exercise appraisal rights
must deliver to the Company, before the vote on the approval and adoption of the
Merger Agreement at the Special Meeting, a written demand for appraisal of such
holder's shares of Common Stock. Such demand will be sufficient if it reasonably
informs the Company of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote against
the Merger Agreement will not constitute such a demand. In addition, a holder of
shares of Common Stock wishing to exercise appraisal rights must hold of record
such shares on the date the written demand for appraisal is made and must
continue to hold such shares through the Effective Time.
Only a holder of record of shares of Common Stock is entitled to assert
appraisal rights for the shares of Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record fully and correctly, as the holder's name appears on the stock
certificates. Holders of Common Stock who hold their shares in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such nominee. All written demands for
appraisal of Common Stock should be sent or delivered to the Corporate
Secretary, Monroc, Inc., P.O. Box 537, 1730 North Beck Street, Salt Lake City,
Utah, 84110, so as to be received before the vote on the approval and adoption
of the Merger Agreement at the Special Meeting.
If the shares of Common Stock are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of the demand should be
made in that capacity, and if the shares of Common Stock are owned of record by
more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is agent for such owner or owners. A record holder such as a broker who holds
Common Stock as nominee for several beneficial owners may exercise appraisal
rights with respect to the Common Stock held for one or more beneficial owners
while not exercising such rights with respect to the Common Stock held for other
beneficial owners; in such case, the written demand should set forth the number
of shares as to which appraisal is sought and where no number of shares is
expressly mentioned the demand will be presumed to cover all Common Stock held
in the name of the record owner.
Within ten calendar days after the Effective Time, the Company, as the
surviving corporation in the Merger, must send a notice as to the effectiveness
of the Merger to each person who has satisfied the appropriate provisions of
Section 262 and who has not voted in favor of the Merger Agreement. Within 120
calendar days after the Effective Time, the Company, or any stockholder entitled
to appraisal rights under Section 262 and who has complied with the foregoing
procedures, may file a petition in the Delaware Court of Chancery demanding a
determination of the fair value of the shares of all such stockholders. The
Company is not under any obligation, and has no present intention, to file a
petition with respect to the appraisal of the fair value of the shares of Common
Stock. Accordingly, it is the obligation of the stockholders to initiate all
necessary action to perfect their appraisal rights within the time prescribed in
Section 262.
Within 120 calendar days after the Effective Time, any stockholder of
record who has complied with the requirements for exercise of appraisal rights
will be entitled, upon written request, to receive from the Company a statement
setting forth the aggregate number of shares of Common Stock with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such statements must be mailed within ten calendar days
after a written request therefor has been received by the Company.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the "fair value" of the shares of
Common Stock, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. Holders considering
seeking appraisal should be aware that the fair value of their shares of Common
Stock as determined under Section 262 could be more than, the same as or less
than the $10.771 per share that they would otherwise receive if they did not
seek appraisal of their shares of Common Stock. The Delaware Supreme Court has
stated that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered in the appraisal proceedings. In addition, Delaware
courts have decided that the statutory appraisal remedy, depending on factual
circumstances, may or may not be a dissenter's exclusive remedy. The Court will
also determine the amount of interest, if any, to be paid upon the amounts to be
received by persons whose shares of Common Stock have been appraised. The costs
of the action may be determined by the Court and taxed upon the parties as the
Court deems equitable. The Court may also order that all or a portion of the
expenses incurred by any holder of shares of Common Stock in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all of the shares of Common Stock entitled to
appraisal.
The Court may require stockholders who have demanded an appraisal and who
hold Common Stock represented by certificates to submit their certificates of
Common Stock to the Court for notation thereon of the pendency of the appraisal
proceedings. If any stockholder fails to comply with such direction, the Court
may dismiss the proceedings as to such stockholder.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
of Common Stock subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of shares of Common Stock as of
a date prior to the Effective Time).
If any stockholder who demands appraisal of shares under Section 262 fails
to perfect, or effectively withdraws or loses, the right to appraisal, as
provided in the DGCL, the shares of Common Stock of such holder will be
converted into the right to receive $10.771 per share in accordance with the
Merger Agreement, without interest. A stockholder will fail to perfect, or
effectively lose, the right to appraisal if no petition for appraisal is filed
within 120 calendar days after the Effective Time. A stockholder may withdraw a
demand for appraisal by delivering to the Company a written withdrawal of the
demand for appraisal and acceptance of the Merger, except that any such attempt
to withdraw made more than 60 calendar days after the Effective Time will
require the written approval of the Company. Once a petition for appraisal has
been filed, such appraisal proceeding may not be dismissed as to any stockholder
without the approval of the Court.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF MONROC
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of the Record Date 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.
Number of Shares
Beneficially Percent
Name and Address of Beneficial Owner Owned(1) of Class
BCCP I, L.P.(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 3,907,901 63.4
(14 persons).....................................
* 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.
(2) Includes 1,650,000 shares held beneficially and of record and 1,500,000
shares subject to an unexercised warrant 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. Also includes 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 BCCP's
nominees for directors until the end of the year 2000. Also includes
243,506 unallocated shares owned by the ESOP. Under the terms of the ESOP,
unallocated shares owned by the ESOP are voted by management in accordance
with the determination of the Board of Directors of the Company. A majority
of the Board of Directors of the Company has been nominated by BCCP, which
is the general partner of BCCP I.
(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.
Pursuant to the Merger Agreement, the Company has agreed to vote any such
shares in favor of approval and adoption of the Merger Agreement.
(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.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith file reports, proxy statements and other
information with the Commission. Copies of the reports, proxy statements and
other information filed by the Company with the Commission, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such materials can be obtained from the Commission at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a web
site at http://www.sec.gov which contains reports and other information
regarding registrants that file electronically with the Commission. In addition,
the material filed by the Company can be inspected at the offices of the Nasdaq
Stock Market's National Market, 1735 K Street N.W., Washington, D.C. 20006.
USAI is not subject to the informational requirements of the Exchange Act.
All information concerning the Company contained in this Proxy Statement
has been furnished by the Company and all information concerning USAI or Sub
contained in this Proxy Statement has been furnished by USAI. No person is
authorized to make any representation with respect to the matters described in
this Proxy Statement other than those contained herein and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company, USAI or any other person. This Proxy Statement does
not constitute an offer to sell, or a solicitation of any offer to purchase, any
securities, or make a solicitation of a proxy, in any jurisdiction in which, or
to or from any person to or from whom, it is unlawful to make such an offer or
solicitation. The delivery of this Proxy Statement shall not under any
circumstances be deemed to imply that there has been no change in the assets,
properties or affairs of the Company or USAI since the date hereof or that the
information set forth herein is correct as of any time subsequent to the date
hereof.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
000-23880) are incorporated by reference in this Proxy Statement:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) The Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1997, June 30, 1997 and September 30, 1997;
(3) The Company's Quarterly Report on form 10-QA for the period ended June
30, 1997; and
(4) The Company's Current Reports on Form 8-K dated April 14, 1997,
September 26, 1997, January 15, 1998 and February 3, 1998.
All documents and reports filed by the Company with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof
and prior to the date of the Special Meeting shall be deemed to be incorporated
by reference herein and shall be part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement in this
Proxy Statement or in any other subsequently filed document which is deemed to
be incorporated by reference modifies or supersedes such statement. Any such
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement.
This Proxy Statement incorporates by reference documents relating to the
Company which are not presented herein or delivered herewith. These documents
relating to the Company (other than exhibits to such documents unless such
exhibits are specifically incorporated by reference) are available without
charge to any person, including any beneficial owner, to whom this Proxy
Statement is delivered, upon written or oral request from Monroc, Inc., 1730
North Beck Street, P.O. Box 537, Salt Lake City, Utah 84110, Attention: Bill
Rands. To ensure timely delivery of the documents prior to the Special Meeting,
requests should be received by ______________, 1998.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche L.L.P. serves as the Company's independent certified
public accountants. Representatives of Deloitte & Touche L.L.P. are currently
expected to be at the Special Meeting to answer questions by stockholders and
will have the opportunity to make a statement, if so desired.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
The Company's 1998 Annual Meeting of Stockholders has been postponed
pending the results of the Special Meeting, and will only be held if the Merger
is not consummated. Stockholder proposals intended to be presented at the 1998
Annual Meeting of Stockholders should have been received by the Secretary of the
Company prior to the date of this Proxy Statement to be considered for possible
inclusion in the proxy statement and form of proxy used in connection with such
meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other matters which may be presented for consideration at the Annual Meeting.
However, if any other matter is presented properly for consideration and action
at the Annual Meeting, or any adjournment or postponement thereof, it is
intended that the proxies will be voted with respect thereto in accordance with
the best judgment and in the discretion of the proxy holders.
By Order of the Board of Directors,
RONALD D. DAVIS
President and Chief Executive Officer
Appendix A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (this "Agreement")
is dated as of January 29, 1998 and amended and restated as of March 4, 1998, by
and among U.S. Aggregates, Inc., a Delaware corporation ("Purchaser"), Western
Acquisition, Inc., a Delaware corporation and a wholly-owned indirect subsidiary
of Purchaser ("Sub"), and Monroc, Inc., a Delaware corporation (the "Company").
RECITALS
A. The Boards of Directors of Purchaser, Sub and the Company each have
determined that the merger of Sub with and into the Company, upon the terms and
subject to the conditions set forth herein, is fair to, and in the best
interests of, their respective corporations and stockholders.
B. Concurrently with the execution of the amendment and restatement of this
Agreement, a significant stockholder of the Company has reconfirmed the Voting
Agreement attached hereto as Exhibit A (the "Voting Agreement") which provides
that such stockholders will vote their shares of common stock of the Company in
favor of this Agreement.
C. Purchaser, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with, and to establish
various conditions precedent to, the merger provided for herein.
ARTICLE 1
THE MERGER
1.1. Merger. At the Effective Time, upon the terms and subject to the
conditions hereof, and in accordance with the provisions of the Delaware General
Corporation Law (the "DGCL") and the Certificate of Incorporation and Bylaws of
the Company, Sub shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation") under the name Monroc, Inc. and shall continue its
existence under the laws of the State of Delaware, and the separate corporate
existence of Sub shall cease.
1.2. Consummation of the Merger. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article 6, the parties
hereto will cause a duly executed and acknowledged certificate of merger, or
certificate of ownership and merger if permitted by the DGCL of the State of
(the "Merger Certificate"), to be filed with the Secretary of State of Delaware,
and the parties hereto shall take all such other and further actions as may be
required by law to make the Merger effective. The Merger shall become effective
on the date on which the Merger Certificate has been duly filed with the
Secretary of State of the State of Delaware (such time is hereinafter referred
to as the "Effective Time"). The closing of the Merger will take place at 10:00
a.m. on a date to be specified by the Purchaser or Sub, but shall be no later
than the third business day after satisfaction or waiver of the conditions to
closing set forth in Article 6 (the "Closing Date"), at the offices of LeBoeuf,
Lamb, Greene & MacRae, L.L.P., 1000 Kearns Building, 136 South Main Street, Salt
Lake City, Utah 84101, unless another date or place is agreed to in writing by
the parties hereto.
1.3 Effects of the Merger. The Merger shall have the effects set forth in
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the properties, rights, privileges, powers and
franchises of the Company and Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and Sub shall become the debts,
liabilities and duties of the Surviving Corporation. As of the Effective Time,
the Company shall be a wholly owned subsidiary of Purchaser.
1.4 Certificate of Incorporation and Bylaws. Subject to Section 5.11
(indemnification), the Certificate of Incorporation and the Bylaws of Sub in
effect at the Effective Time shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation until amended in accordance with applicable
law; provided that Article I of the Certificate of Incorporation of Sub shall be
Amended as of the Effective Time to read "The name of the corporation is Monroc,
Inc."
1.5 Directors and Officers. The directors of Sub at the Effective Time
shall be the directors of the Surviving Corporation and the officers of the
Company at the Effective Time shall be the officers of the Surviving
Corporation, in each case until their respective successors are duly elected (or
appointed in the case of officers) and qualified.
ARTICLE 2
CONVERSION OF SECURITIES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Purchaser, Sub, the Company or the
holders of any of the following securities:
2.1.1 Each share of common stock, par value $.01 per share, of the Company
issued and outstanding immediately prior to the Effective Time (the "Shares"),
other than Shares to be canceled pursuant to Section 2.1.2 and Dissenting Shares
(as hereinafter defined), shall by virtue of the Merger and without any action
on the part of the holder thereof be canceled and extinguished and be converted
into the right to receive $10.771 without interest thereon (the "Merger
Consideration").
2.1.2 Each Share which is issued and outstanding immediately prior to the
Effective Time and held by Purchaser or Sub or any direct or indirect subsidiary
of Purchaser or Sub, or which is held in the treasury of the Company or any of
its subsidiaries, shall be canceled and retired and no payment shall be made
with respect thereto.
2.1.3 Each share of common stock, par value $.01 per share, of Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share (or such other value as may be determined by
Sub), of the Surviving Corporation.
2.2 Employee Stock Options; Outstanding Warrants. Immediately prior to the
Effective Time, each stock option (an "Option") granted under the Monroc, Inc.
1996 Stock Option Plan and the Monroc, Inc. 1994 Stock Option Plan
(collectively, the "Stock Option Plans") and each outstanding warrant of the
Company (a "Warrant"), whether or not such Option or Warrant is then
exercisable, shall be canceled and each holder of a canceled Option or Warrant
shall be entitled to receive from the Company, in consideration for cancellation
and settlement of such Option or Warrant, a cash payment equal to the product of
(i) the aggregate number of Shares subject to the Option or Warrant and (ii) the
excess, if any, of the Merger Consideration over the exercise price per Share of
such Option or Warrant as set forth in Schedule 3.2 (the "Option
Consideration"). Prior to the Closing, the Company will make any amendments to
the Stock Option Plans, the Warrants and any agreements related thereto, and
will obtain any consents or releases, necessary to effect the transactions
contemplated by this Section 2.2. Any amounts payable pursuant to this Section
2.2 shall be subject to any required withholding of taxes and shall be paid
without interest.
2.3 Dissenting Shares; Payment For Shares. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by holders who did not vote in favor of the Merger and who comply
with all of the relevant provisions of Section 262 of the DGCL (the "Dissenting
Shares") shall not be converted into the right to receive the Merger
Consideration, and the holders of such Dissenting Shares shall be entitled to
receive payment of the appraised value of such Shares in accordance with the
provisions of Section 262 unless and until such holders shall have failed to
perfect or shall have effectively withdrawn or lost their rights to appraisal.
If, after the Effective Time, any such holder fails to perfect or shall have
effectively withdrawn or otherwise lost such right, each of such holder's Shares
shall thereupon be deemed to have been converted into the right to receive, as
of the Effective Time, the Merger Consideration without any interest thereon.
The Company shall give Sub prompt notice of any demands received by the Company
for appraisal of Shares, and, prior to the Effective Time, Sub shall have the
right to participate in all negotiations and proceedings with respect to such
demands. Prior to the Effective Time, the Company shall not, except with the
prior written consent of Sub, make any payment with respect to, or settle or
offer to settle, any such demands.
2.4 Payment For Shares. Prior to the Effective Time, Purchaser shall
designate a United States bank or trust company reasonably satisfactory to the
Company to act as Payment Agent in the Merger (the "Payment Agent"). At or prior
to the Effective Time, Purchaser or Sub shall deposit, or cause to be deposited,
in trust with the Payment Agent immediately available funds in an amount
sufficient to make the payments contemplated by Section 2.1.1 on a timely basis
(the "Exchange Fund"). The Payment Agent shall, pursuant to irrevocable
instructions and subject to Section 2.4.3, make payments out of the Exchange
Fund to holders of record who hold Shares immediately prior to the Effective
Time and the Exchange Fund shall not be used for any other purpose. The Exchange
Fund may, as directed by the Surviving Corporation (so long as such directions
do not impair the rights of holders of Shares to receive the Merger
Consideration promptly upon the surrender of their shares in accordance with
this agreement), be invested by the Payment Agent in direct obligations of the
United States of America, obligations for which o the full faith and credit of
the United States of America is pledged to provide for the payment of principal
and interest, commercial paper rated of the highest quality by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, or certificates of deposit
issued by a commercial bank having at least $1,000,000,000 in assets. Deposit of
funds pursuant hereto shall not relieve Purchaser or the Surviving Corporation
of their obligations to make payments in respect of Shares and Purchaser hereby
guarantees the Surviving Corporation's obligations in respect thereof.
2.4.1 Promptly after the Effective Time, Purchaser and the Surviving
Corporation shall cause the Payment Agent to mail and/or make available to each
record holder, as of the Effective Time, of a certificate or certificates (the
"Certificates") which immediately prior to the Effective Time represented Shares
(other than those cancelled pursuant to Section 2.1.2), a notice and letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Payment Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. As
promptly as practicable after surrender to the Payment Agent of a Certificate,
together with such letter of transmittal duly executed and completed in
accordance with the instructions thereon, the holder of such Certificate shall
be paid in exchange therefor cash in an amount equal to the product of the
number of Shares represented by such Certificate multiplied by the Merger
Consideration, and such Certificate shall be canceled. No interest shall be paid
or accrued in respect of the Merger Consideration. If payment is to be made to a
person other than the person in whose name the certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the surrendered Certificate or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 2.4, each
Certificate (other than Certificates cancelled pursuant to Section 2.1.2 and
Dissenting Shares) shall represent for all purposes solely the right to receive
the Merger Consideration, without any interest thereon.
2.4.2 After the Effective Time, there shall be no transfers of Shares on
the stock transfer books of the Surviving Corporation. If, after the Effective
Time, Certificates are presented to the Payment Agent or the Surviving
Corporation, they shall be canceled and exchanged for cash as provided in this
Section 2.4, subject to applicable law in the case of Dissenting Shares.
2.4.3 Any portion of the Exchange Fund which remains unclaimed by the
stockholders of the Company on the date six months after the Effective Time
shall be repaid to the Surviving Corporation, upon demand, and any stockholder
of the Company who has not theretofore complied with Section 2.4 shall
thereafter look only to the Surviving Corporation for payment of such
stockholder's claim for the Merger Consideration, without any interest thereon.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser and Sub as follows:
3.1 Organization and Qualification. The Company and each subsidiary of the
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified to do business as a
foreign corporation and in good standing in each jurisdiction in which the
character of its properties or the nature of its business makes such
qualification necessary, except where the failure to be so organized, existing,
qualified or in good standing or have such power and authority would not have a
Material Adverse Effect (as defined in Section 8.12). The Company has delivered
or made available to Purchaser complete and correct copies of its and its
subsidiaries' respective certificates of incorporation and bylaws. All
subsidiaries of the Company and their respective jurisdictions of incorporation
or organization are identified on Schedule 3.1.
3.2 Capitalization. The authorized capital stock of the Company consists of
20,000,000 Shares and 1,000,000 shares of Preferred Stock, par value $.01 per
share ("Preferred Shares"). No Preferred Shares are outstanding. All of the
outstanding Shares have been duly authorized and validly issued and are fully
paid and nonassessable and free of preemptive rights. As of the date hereof, (i)
4,514,200 Shares were issued and outstanding, (ii) 52 Shares were held in the
Company's treasury, (iii) 415,600 Shares were reserved for issuance pursuant to
outstanding Options and (iv) 1,501,250 Shares were reserved for issuance upon
the exercise of outstanding Warrants. Except for the rights as set forth in this
Section 3.2, there are not as of the date hereof any outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments or any other
agreements of any character obligating the Company or any of its subsidiaries to
issue any additional Shares or any other shares of capital stock of the Company
or any other securities convertible into or evidencing the right to subscribe
for any Shares. The exercise prices of the outstanding Options and Warrants are
set forth on Schedule 3.2. Except as provided in Section 2.2 or as set forth on
Schedule 3.2, there are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of their respective
equity securities. Each of the outstanding shares of capital stock of each of
the Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by the Company. The Shares
which are the subject of the Voting Agreement represent approximately 36.6% of
the total Shares outstanding as of the date hereof.
3.3 Authority Relative to this Agreement. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and subject
to the terms and conditions hereof, to consummate the transactions contemplated
hereby (other than, with respect to the Merger, the approval and adoption of
this Agreement and the transactions contemplated hereby by the stockholders of
the Company in accordance with the applicable provisions of the DGCL). The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of the Company in accordance with the applicable provisions
of the DGCL). This Agreement has been duly and validly executed and delivered by
the Company and, assuming this Agreement constitutes a valid and binding
obligation of each of Purchaser and Sub, this Agreement constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.4 Absence of Certain Changes. Except as disclosed in the Company Filings
(as defined in Section 3.5) or as set forth on Schedule 3.4, since November 30,
1997 (a) the Company and its subsidiaries have not suffered any Material Adverse
Effect, (b) the Company has not issued any shares of its capital stock or
granted any rights to purchase its capital stock or securities convertible into
or exchangeable for its capital stock or (c) the Company has not declared, set
aside or made any payments of a dividend or other distribution in respect of any
of its capital stock and has not, directly or indirectly, redeemed, purchased or
otherwise acquired any of its capital stock.
3.5 Reports; Financial Statements. Since December 31, 1994, the Company has
filed all required forms, reports and documents with the Securities and Exchange
Commission (the "SEC") required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder (the "Company
Filings"), all of which have been delivered or made available to Purchaser and
all of which have complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations promulgated thereunder. None of the Company Filings,
including without limitation any financial statements or schedules included
therein, at the time filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The audited and unaudited consolidated financial
statements of the Company included in such reports have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as stated in such financial statements) and fairly present the
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the results of their operations and changes in financial
position for the periods then ended, subject, in the case of the unaudited
financial statements, to normal year-end audit adjustments. Except as reflected,
reserved against or otherwise disclosed in the financial statements of the
Company included in the Company Filings, as otherwise disclosed in the Company
Filings or as disclosed on Schedule 3.5, neither the Company nor any of its
subsidiaries has any material liabilities or obligations (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on, or
reserved against in, the financial statements of the Company or in the notes
thereto, prepared in accordance with generally accepted accounting principles
consistently applied, except liabilities arising in the ordinary course of
business since November 30, 1997.
3.6 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the Company of
the transactions contemplated hereby will (except as disclosed by the Company on
Schedule 3.6):
3.6.1 subject to the obtaining of any requisite approval of the Company's
stockholders, conflict with any provision of the Certificate of Incorporation or
Bylaws of the Company or the charter documents of the Company's subsidiaries;
3.6.2 require any consent, approval, authorization or permit of, or filing
with or notification to, any court, administrative agency or commission or other
governmental authority domestic or foreign (a "Governmental Entity"), except (i)
in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) pursuant to the Exchange Act and the rules and
regulations thereunder, (iii) pursuant to state laws relating to takeovers and
state securities laws, (iv) the filing of the Merger Certificate pursuant to the
DGCL, or (v) where the failures to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
in the aggregate have a Material Adverse Effect;
3.6.3 violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or its subsidiaries, except for violations
which, in the aggregate, would not have a Material Adverse Effect; or
3.6.4 result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, lease, mortgage, license, agreement, permit or other instrument or
obligations to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective assets
may be bound, except for such defaults (or rights of termination, cancellation
or acceleration) as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not have a Material Adverse Effect.
3.7 Litigation. Except as set forth on Schedule 3.7 or as disclosed in the
Company Filings filed prior to the date of this Agreement, there are no actions,
suits or proceedings pending or, to the knowledge of the Executive Officers of
the Company, threatened against the Company or any of its subsidiaries which
would have a Material Adverse Effect.
3.8 Compliance with Laws. To the best knowledge of the Executive Officers
of the Company, except as disclosed in the Company Filings or as set forth on
Schedule 3.8, the Company and its subsidiaries have conducted their businesses
in accordance with applicable federal, state and local laws, rules and
regulations, except where the failure to so conduct their businesses would not
in the aggregate have a Material Adverse Effect. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the conduct
of their respective businesses as presently conducted, except where the failure
to so hold would not have a Material Adverse Effect (the "Company Permits"). The
Company and its subsidiaries are in compliance with the terms of the Company
Permits, except where the failure to so comply would not have a Material Adverse
Effect.
3.9 Employee Matters. Except as set forth on Schedule 3.9, none of the
Company or any of its subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization. There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of the Executive Officers of
the Company, threatened against the Company or any of its subsidiaries, except
for any such proceedings which would not in the aggregate have a Material
Adverse Effect.
3.10 Material Contracts. The Company has delivered or made available to
Purchaser true and complete copies of all written, and written descriptions of
all oral, contracts, agreements, commitments, leases (including with respect to
personal property) and other arrangements to which it or any of its subsidiaries
is a party or by which it or any of its subsidiaries are bound which require
payments to be made in excess of $250,000 per year, other than agreements listed
in any of the other schedules attached hereto (the "Material Contracts"). Each
of the Material Contracts is listed on Schedule 3.10. Each of the Material
Contracts is valid and in full force and effect except to the extent it has
previously expired in accordance with its terms. Neither the Company nor any of
its subsidiaries is in violation of or in default under (nor does any
circumstance exist which, with notice of the lapse of time or both, would result
in such a violation of or default under) any Material Contract, other than such
violations or defaults which would not have a Material Adverse Effect. To the
knowledge of the Executive Officers of the Company, none of the other parties to
the Material Contracts are in violation of or in default under (nor does any
circumstance exist which, with notice of the lapse of time or both, would result
in such a violation of or default under) any Material Contract, other than such
violations or defaults which would not have a Material Adverse Effect.
3.11 Taxes.
3.11.1 Each of the Company and its Subsidiaries (as defined below for
purposes of this Section 3.11) has timely filed all material federal, state,
local and foreign Tax Returns (as defined below) required to be filed by it for
tax years prior to the date of this Agreement or has timely requested extensions
and any such request has been granted and has not expired. Except as set forth
on Schedule 3.11, no agreement or arrangement extending the period for
assessment or collection of Taxes of the Company or any of its Subsidiaries is
in effect as of the date hereof. Each of such Tax Returns is complete and
accurate in all material respects. All Taxes (as defined below) owed by the
Company or any of its Subsidiaries on any such Tax Return have been paid or
accrued, except for Taxes being contested in good faith and for which adequate
reserves have been taken. The Company and each of its Subsidiaries have properly
accrued for all Taxes for such periods subsequent to the periods covered by such
Tax Returns. For purposes of this Section 3.11, the term "Subsidiary" of an
entity shall mean any corporation, 80% of the voting power and 80% of the total
value of all of the outstanding capital stock of which are owned directly by
such entity.
3.11.2 Except as set forth on Schedule 3.11, there are no pending or, to
the knowledge of the Executive Officers of the Company, threatened audits or
other proceedings by any court, governmental or regulatory authority or similar
person in respect of Taxes or Tax Returns relating to the Company or any of its
Subsidiaries which, if determined adversely to the Company or any of its
Subsidiaries, could reasonably be expected to have a Material Adverse Effect.
3.11.3 No election under Section 338 of the Internal Revenue Code of 1986,
as amended (the "Code"), has been made or filed by or with respect to the
Company or any of its Subsidiaries. None of the Company or any of its
Subsidiaries has agreed to make any adjustment pursuant to Section 481(a) of the
Code by reason of any change in any accounting method, and there is no
application pending with any Taxing Authority (as defined below) requesting
permission for any changes in any accounting method of the Company or any of its
Subsidiaries. None of the assets of the Company or any of its Subsidiaries is or
will be required to be treated as being owned by any person (other than the
Company or its Subsidiaries) pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately before
the enactment of the Tax Reform Act of 1986.
3.11.4 Except as set forth on Schedule 3.11, none of the Company or any of
its Subsidiaries is party to, is bound by, or has any obligation under, any Tax
sharing or allocation agreement or similar contract.
3.11.5 Except as set forth on Schedule 3.11, none of the Company or any of
its Subsidiaries is a party to any contract, agreement, plan or arrangement that
could reasonably be expected to result in the payment of any amount that would
not be deductible by the Company or any of its Subsidiaries by reason of Section
280G of the Code.
3.11.6 Schedule 3.11 accurately set forth (i) the amount of all deferred
intercompany gains for purposes of Treasury Regulation section 1.1502-13
(including any predecessor regulation) with respect to the Company and its
Subsidiaries and (ii) the amount of any excess loss account with respect to the
stock of each of the Subsidiaries for purposes of Treasury Regulation section
1.1502-19 (including any predecessor regulation).
3.11.7 For purposes of this Agreement, the term "Taxes" shall mean all
taxes, charges, fees, levies or other similar assessments or liabilities,
including (i) income, gross receipts , ad valorem, premium, excise, real
property, personal property, sales, use, transfer, withholding, employment,
payroll and franchise taxes imposed by the United States or by any state, local
or foreign government or any subdivision, agency or similar organization
thereof, and (ii) any interest, fines, penalties, assessments and additions in
connection therewith. For purposes of this Agreement, the term "Tax Returns"
shall mean any report, return or statement required to be supplied to a Taxing
Authority in connection with Taxes. For purposes of this Agreement, the term
"Taxing Authority" means the Internal Revenue Service (the "IRS") or any
domestic or foreign Governmental Entity responsible for the administration of
Taxes.
3.12 Brokerage Fees and Commissions. Except for those fees and expenses
payable to SBC Warburg Dillon Read Inc. (the "Company Financial Advisor") (a
true and complete copy of whose engagement agreement has been provided to
Purchaser), no person or entity is entitled to receive from the Company any
investment banking, brokerage or finder's fee in connection with this Agreement
or the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company.
3.13 Proxy Statement. None of the information supplied or to be supplied by
the Company for inclusion or incorporation by reference in the Proxy Statement
(as defined herein) will, on the date it is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting (as defined herein),
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary, in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied in writing by Purchaser or Sub specifically for inclusion therein. The
Proxy Statement, insofar as it relates to the Company or its subsidiaries, will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations promulgated thereunder.
3.14 Employee Benefit Plans; ERISA.
3.14.1 Schedule 3.14.1 sets forth a complete and accurate list of (i) all
"employee benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (collectively, "Benefit
Plans"), and (ii) all employment and consulting agreements and all bonus,
incentive compensation, deferred compensation, disability, severance, stock
bonus, stock option, stock purchase or vacation pay agreements, policies or
arrangements which the Company or any of its subsidiaries maintains or has any
liability in respect of and each of which has a cost to the Company or any of
its subsidiaries in excess of $25,000 for any year (collectively, the "Employee
Arrangements").
3.14.2 With respect to each Benefit Plan and Employee Arrangement, a
complete and correct copy of each of the following documents (if applicable) has
been delivered or made available to Purchaser or its representatives (i) the
most recent plan and related trust documents, (ii) the most recent summary plan
description, (iii) the most recent form 5500, (iv) the most recent determination
letter issued by the IRS and (v) the most recent actuarial report.
3.14.3 Except as set forth on Schedule 3.14, the Company and its
subsidiaries have not during the preceding six years had any obligation or
liability with respect to a multi-employer plan within the meaning of Section
3(37) of ERISA.
3.14.4 Each of the Benefit Plans intended to be qualified under Section
401(a) of the Code is so qualified.
3.14.5 All contributions or other payments required to have been made or
accrued by the Company or any of its subsidiaries under the terms of any of
Benefit Plan or Employee Arrangement have been made or accrued, except for those
contributions or payments the failure of which to make or accrue would not have
a Material Adverse Effect.
3.14.6 The Benefit Plans and Employee Arrangements have been maintained and
administered in all material respects in accordance with their terms and
applicable laws.
3.14.7 Except as disclosed in the Company Filings or in Schedule 3.14,
there are no pending or, to the knowledge of the Executive Officers of the
Company, threatened actions, claims or proceedings (other than routine claims
for benefits) against or involving any Benefit Plan or Employee Arrangement,
except for any of the foregoing which would not have a Material Adverse Effect.
3.14.8 Except as disclosed in the Company Filings or in Schedule 3.14, the
Company or any subsidiary does not maintain or have an obligation to contribute
to retiree life or retiree health plans which provide for continuing benefits or
coverage for current or former officers, directors and employees of the Company
or any of its subsidiaries, except (i) as may be required under Part 6 of Title
I of ERISA or (ii) a medical expenses reimbursement account plan pursuant to
Section 125 of the Code.
3.14.9 Except as disclosed in Schedule 3.14 or in connection with equity
compensation or except as discussed in this Agreement, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment becoming due to any employee of the
Company or any of its subsidiaries, (ii) increase in any benefits under any
Benefit Plan or Employee Arrangement or (iii) result in the acceleration of the
time of payment of, vesting or other rights with respect to any benefits under
any Benefit Plan or Employee Arrangement.
3.14.10 The Company and its subsidiaries have no liability under Section
4069 of ERISA by reason of a transfer of an under funded pension plan.
3.14.11 The Company's liability under any multi-employer plan, if the
Company withdrew in part or in whole on the date hereof, would not exceed
$150,000.
3.15 Opinion of Financial Advisor. The Company has received the opinion of
the Company Financial Advisor to the effect that, as of the date hereof, the
Merger Consideration is fair to the holders of Shares from a financial point of
view, a copy of which has been provided to Purchaser.
3.16 Vote Required. The affirmative vote of the holders of a majority of
the outstanding Shares is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
3.17 Intellectual Property. Except as set forth on Schedule 3.17, the
Company and its subsidiaries possess or have adequate rights to use all material
trademark, trade name, patent, service mark, brand mark, brand names, industrial
designs and copyrights necessary for the operation of their businesses as
currently being conducted, except where the failure to so possess or have
adequate rights would not result in a Material Adverse Effect (collectively, the
"Company Intellectual Property"). To the knowledge of the Executive Officers of
the Company, the use of Company Intellectual Property by the Company or its
subsidiaries does not conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill, including
any trademark, trade name, patent, service mark, brand mark, brand name,
computer program, database, industrial design or copyright of any other person,
except for any such conflict, infringement, violation, interference, claim,
invalidity, abandonment, cancellation or unenforceability that would not have a
Material Adverse Effect.
3.18 Environmental Matters.
3.18.1 For purposes of this Agreement:
(i) "Environmental Law" means any applicable law regulating or
prohibiting releases of Hazardous Materials into any part of the natural
environment, or pertaining to the protection of natural resources, the
environment and public and employee health and safety from Hazardous
Materials including the Comprehensive Environmental Response, Compensation,
and Liability Act ("CERCLA") (42 U.S.C. ss.9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water
Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (33 U.S.C. ss. 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. ss. 7401 et seq.), the
Federal Insecticide Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et
seq.) ("OSHA") and the regulations promulgated pursuant thereto, and any
such applicable state or local statutes and the regulations promulgated
pursuant thereto, as such laws have been and may be amended or supplemented
through the Closing Date;
(ii) "Hazardous Material" means any substance, material or waste which
is regulated by any public or governmental authority in the jurisdictions
in which the applicable party or its subsidiaries conducts business, or the
United States, including any material or substance which is defined as a
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste" or "restricted hazardous waste," "contaminant," "toxic
waste" or "toxic substance" under any provision of Environmental Law and
shall also include petroleum, petroleum products, asbestos, polychlorinated
biphenyls and radioactive materials;
(iii) "Release" means any release spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the environment, or into or out of any property; and
(iv) "Remedial Action" means all actions, including any expenditures,
required by a governmental entity or defined under any Environmental Law,
or voluntarily undertaken to (a) clean up, remove, treat, or in any other
way ameliorate or address any Hazardous Materials or other substance in the
environment; (b) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not endanger or
threaten to endanger the public health or welfare or the environment; (c)
perform pre-remedial studies and investigations or post-remedial monitoring
and care pertaining or relating to a Release; or (d) bring the applicable
party into compliance with any Environmental Law.
3.18.2 Except as set forth on Schedule 3.18, the operations of the Company
and its subsidiaries are in compliance with all Environmental Laws, except where
the failure to so comply would not reasonably be expected to have a Material
Adverse Effect.
3.18.3 Except as set forth on Schedule 3.18, the Company and its
subsidiaries have obtained and maintained all permits required under applicable
Environmental Laws for the continued operations of their respective business,
except such permits the lack of which would not reasonably be expected to have a
Material Adverse Effect.
3.18.4 Except as set forth on Schedule 3.18, the Company and its
subsidiaries (i) are not subject to any material written consent decree,
compliance order or administrative order from any Governmental Entity or other
person respecting any Environmental Law, Remedial Action or any Release of a
Hazardous Material, (ii) have not received written notice under the citizen suit
provision of any Environmental Law or (iii) have not received any written
request for information, notice, demand letter, administrative inquiry or
complaint with respect to any Environmental Law, remedial Action or Release of a
Hazardous Material, except for with respect to (ii) and (iii) those written
notices, requests or other documents the subject matter of which would
reasonably be expected to have a Material Adverse Effect.
3.18.5 Except as set forth on Schedule 3.18, the Company and its
subsidiaries have not received any written communication alleging, with respect
to any such party, the violation of or liability under any Environmental Law,
which violation or liability is outstanding and would reasonably be expected to
have a Material Adverse Effect.
3.18.6 Except as set forth on Schedule 3.18, neither the Company nor any of
its subsidiaries has any contingent liability in connection with the Release of
any Hazardous Material which would reasonably be expected to have a Material
Adverse Effect.
3.18.7 Except as set forth on Schedule 3.18, the operations of the Company
or its subsidiaries involving the transportation, treatment, storage or disposal
of hazardous waste, as defined and regulated under 40 C.F.R. Parts 260-270 (in
effect as of the date of this Agreement) or any state equivalent are in
compliance with all Environmental Laws, except where the failure to so comply
would not reasonably be expected to have a Material Adverse Effect.
3.18.8 Except as set forth on Schedule 3.18, to the knowledge of the
Company, there is not now nor has there been in the past, on or in any owned
property of the Company or its subsidiaries any of the following: (i) any
underground storage tanks or surface impoundments, (i) any asbestos-containing
materials in friable form or (iii) any polychlorinated biphenyls, any of which
((i), (ii) or (iii) preceding) could reasonably be expected to have a Material
Adverse Effect.
3.18.9 Except as set forth on Schedule 3.18, no judicial or administrative
proceedings or governmental investigations are pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries alleging
the violation of or seeking to impose liability pursuant to any Environmental
Law.
3.19 Title to Real Property; Leases. Schedule 3.19 sets forth a list of (a)
all real property currently owned by the Company and its subsidiaries and (b)
all leases with respect to real property to which the Company or any of its
subsidiaries is a party (collectively, the "Real Property Leases"). Except as
set forth on Schedule 3.19, each of the Company and its subsidiaries has good
and marketable title, or valid leasehold rights in the case of leased property,
to the real property owned or leased by it, including, without limitation, all
sand, gravel, rock and similar mineral rights (and rights of access thereto)
with respect to mineral producing properties, free and clear of any mortgages,
pledges, liens, encumbrances and security interests (collectively,
"Encumbrances"), except for (i) those Encumbrances reflected or reserved against
in the Company's Quarterly Report on Form 10-Q for the Quarter Ended September
30, 1997, (ii) Encumbrances for taxes, levies, imposts, assessments or
governmental charges of any kind which are not yet delinquent or which are being
contested in good faith by appropriate proceedings, (iii) liens for mechanics,
materialmen, laborers, employees, suppliers or other liens arising by operation
of law for which amounts which are not yet delinquent or which are being
contested in good faith by appropriate proceedings, (iv) as to leased property,
interests of lessors and Encumbrances affecting the interests of lessors, (v)
deposits made in the ordinary course of business to secure contractual or other
obligations of the Company or any of its subsidiaries, if the underlying
obligation is not yet delinquent, and (vi) liens or defects in title or
leasehold rights that, individually or in the aggregate, would not have a
Material Adverse Effect. Each of the Real Property Leases is valid and in full
force and effect, except to the extent it has previously expired in accordance
with its terms. Neither the Company nor any of its subsidiaries is in violation
of or in default under any Real Property Lease, other than such violations or
defaults which would not have a Material Adverse Effect. Notwithstanding
anything in Schedule 3.19 to the contrary, the Company represents and warrants
that there are no exceptions to the Company's title to its aggregate properties
(as such properties are identified as aggregate properties on Schedule 3.19)
either noted on Schedule B to any of the title policies attached to Schedule
3.19 with respect to such aggregate properties or otherwise, that would, in any
material way, interfere with the Company's title to its aggregate properties,
its right to access such aggregate properties, or the Company's right to extract
and remove aggregates from such properties in the ordinary course of the
Company's business.
3.20 Board Recommendation. The Board of Directors of the Company, at a
meeting duly called and held, has by the vote of those directors participating
(a) determined that this Agreement and the transaction contemplated hereby are
fair to and in the best interests of the stockholders of the Company and
approved the same by at least a majority vote and (b) resolved to recommend that
the holders of the Shares approve this Agreement and the transactions
contemplated hereby.
3.21 Indebtedness. Except as set forth on Schedule 3.21 or as otherwise
disclosed in the financial statements and notes thereto set forth in the Company
Filings, the Company has no outstanding indebtedness for borrowed money and is
not a party to any agreement providing for the creation, incurrence or
assumption thereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB
Purchaser and Sub represent and warrant to the Company as follows:
4.1 Organization. Each of Purchaser and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power to carry
on its business as it is now being conducted except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not in the aggregate have a material adverse effect on the results of
operations, properties or financial condition of Purchaser and its subsidiaries
taken as a whole or on the ability of Purchaser or Sub to fully perform their
obligations hereunder. Each of Purchaser and Sub has heretofore made available
to the Company an accurate and complete copy of its respective certificate of
incorporation and Bylaws, as currently in effect.
4.2 Authority Relative to This Agreement. Each of Purchaser and Sub has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the respective Boards of
Directors of Purchaser and Sub, and the stockholder of Sub, and no other
corporate proceedings on the part of Purchaser or Sub are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by each of Purchaser
and Sub and, assuming this Agreement constitutes a valid and binding obligation
of the Company, this Agreement constitutes a valid and binding agreement of each
of Purchaser and Sub, enforceable against each of Purchaser and Sub in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.3 Consent and Approvals; No Violation. Neither the execution and delivery
of this Agreement by Purchaser and Sub nor the consummation by Purchaser and Sub
of the transactions contemplated hereby will:
4.3.1 conflict with any provision of the respective Certificates of
Incorporation or Bylaws (or other similar governing documents) of Purchaser or
Sub;
4.3.2 require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity, except (i) in connection with
the HSR Act, (ii) pursuant to the Exchange Act and the rules and regulations
thereunder, (iii) pursuant to state laws relating to takeovers and state
securities laws, if any are applicable, (iv) the filing of the Merger
Certificate pursuant to the applicable law or (v) where the failures to obtain
such consents' approvals, authorizations or permits, or to make such filings or
notifications, would not in the aggregate have any material adverse effect on
the results of operations, properties or financial condition of Purchaser and
its subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully
perform their obligations hereunder;
4.3.3 result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, lease, mortgage, license, agreement or other instrument or
obligations to which Purchaser or any of its subsidiaries is a party or by which
Purchaser or any of its subsidiaries or any of their respective assets may be
bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not have any material adverse effect on the
financial condition, business or results of operations of Purchaser and its
subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully
perform their obligations thereunder; or
4.3.4 violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Purchaser or any of its subsidiaries, except for
violations which would not have in the aggregate any material adverse effect on
the financial condition, business or results of operations of Purchaser and its
subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully
perform their obligations hereunder.
4.4 Financing. Purchaser has received binding written commitments from
financially responsible financial institutions to obtain, funds necessary to
consummate this Agreement and the transactions contemplated thereby, and to pay
related fees and expenses, and will make such funds available to Sub. Purchaser
has provided the Company with true and complete copies of all commitments and
agreements from third parties to provide such financing to Purchaser or to Sub.
4.5 Brokerage Fees and Commissions. No person or entity is entitled to
receive from Purchaser or Sub any investment banking, brokerage or finder's fee
in connection with this Agreement or the transactions contemplated hereby based
upon arrangements made by or on behalf of Purchaser or Sub.
ARTICLE 5
COVENANTS
5.1 Conduct of Business of the Company. Except as contemplated by this
Agreement or as set forth on Schedule 5.1, during the period from the date of
this Agreement to the Effective Time, the Company and its subsidiaries shall in
all material respects conduct its operations according to its ordinary and usual
course of business and consistent with past practice and the Company shall use
commercially reasonable efforts to preserve intact in all material respects the
business organization of the Company, keep available the services of its current
officers and key employees, and preserve in all material respects the good will
of those having advantageous business relationships with it and its
subsidiaries. Without limiting the generality of the foregoing, and except as
contemplated by this Agreement, as set forth on Schedule 5.1 or as disclosed in
writing to Purchaser on or prior to the date hereof, prior to the Effective
Time, neither the Company nor any of its subsidiaries, as the case may be, will,
without the prior written consent of Purchaser:
5.1.1 issue, sell or pledge, or authorize or propose the issuance, sale or
pledge of, additional shares of its capital stock or securities convertible into
any such shares, or any rights, warrants or options to acquire any such shares
or other convertible securities, other than Shares, preferred stock, treasury
shares, rights, warrants or options, each as issuable pursuant to the Options
and Warrants;
5.1.2 split, combine, subdivide, reclassify or redeem, or purchase or
otherwise acquire, or propose to do any of the foregoing with respect to, any of
its outstanding securities;
5.1.3 declare or pay any dividend or distribution on the Shares;
5.1.4 subject to the fiduciary duties of the Board of Directors of the
Company (after consultation with and advice from outside legal counsel) and
except pursuant to agreements or arrangements in effect on the date hereof,
purchase or otherwise acquire, sell or otherwise dispose of or encumber (or
enter into any agreement to so purchase or otherwise acquire, sell or otherwise
dispose of or encumber) material properties or material assets except in the
ordinary course of business;
5.1.5 subject to the rights of the stockholders of the Company under
applicable law, adopt any amendments to the Certificate of Incorporation or
Bylaws of the Company;
5.1.6 except as provided in Section 5.12, (i) increase the compensation of
any of its directors, officers or key employees, except pursuant to the terms of
agreements or plans currently in effect in amounts material to the Company and
its subsidiaries taken as a whole; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required or permitted by any
existing plan, agreement or arrangement to any director, officers or key
employee in amounts material to the Company and its subsidiaries taken as a
whole; (iii) commit itself (other than pursuant to any collective bargaining
agreement) to any additional pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, stock purchaser, stock option, stock
appreciation right, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or to any employment or consulting
agreement with or for the benefit of any director, officer or key employee,
whether past or present in amounts material to the Company and its subsidiaries
taken as a whole; or (iv) except as required by applicable law, amend in any
material respect any such plan, agreement or arrangement; or
5.1.7 except in the ordinary course of business and consistent with past
practice, (i) incur any material amount of long-term indebtedness for borrowed
money or issue any material amount of debt securities or assume, guarantee or
endorse the obligations of any other person except for obligations of wholly
owned subsidiaries of the Company; (ii) make any material loans, advances or
capital contributions to, or investments in, any other person (other than to
wholly owned subsidiaries of the Company or customary loans or advances to
employees in amounts not material to the maker of such loan or advance); (iii)
pledge or otherwise encumber shares of capital stock of the Company or a
material portion of the capital stock of any if its subsidiaries, or (iv)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material lien thereupon;
5.2 Acquisition Proposals. The Company shall not, directly or indirectly,
solicit, carry on discussions with or enter into any agreement with any
corporation, partnership, person or other entity or group (other than Purchaser
or an affiliate or an associate of Purchaser) concerning any merger, acquisition
or similar transaction involving, or the sale of all or substantially all of the
assets or equity securities of, the Company or any of its subsidiaries or
divisions (other than with respect to the Company's ready-mix operations,
precast/prestressed concrete operations or Wyoming operations) (an "Acquisition
Proposal"). Notwithstanding the foregoing, the Company may (i) directly or
indirectly, furnish information to or enter into discussions and negotiations
with any person, entity or group that makes an unsolicited Acquisition Proposal
if the Board of Directors of the Company determines in good faith (after
consultation with and advice from outside legal counsel) that such action is
required for the Board of Directors to comply with its fiduciary duties under
applicable law, and (ii) to the extent applicable, comply with Rule 14e-2 and
14d-9 promulgated under the Exchange Act with regard to an Acquisition Proposal.
The Company will promptly communicate to Purchaser the terms of any proposal or
inquiry which it may receive in respect of any Acquisition Proposal by any
person (other than Purchaser or any affiliate of Purchaser or their respective
directors, officers, employees, representatives and agents).
5.3. Access to Information.
5.3.1 Subject to applicable law and the agreements set forth in Section
5.3.2, between the date of this Agreement and the Effective time, the Company
will (i) give Purchaser and its authorized representatives reasonable access,
during regular business hours upon reasonable notice, to all of its facilities,
books and records and key employees, (ii) permit Purchaser to make such
reasonable inspections as it may be required, and (iii) cause its officers and
those of its subsidiaries to furnish Purchaser with such financial and operating
data and other information with respect to the business and assets of the
Company and its subsidiaries as Purchaser may from time to time reasonably
request.
5.3.2 Information obtained by Purchaser pursuant to this Section 5.3 shall
be subject to the provisions of the confidentiality agreement between Purchaser
and the Company dated September 26, 1997 (the "Confidentiality Agreement"),
which agreement remains in full force and effect; except insofar as such
provisions would expressly prohibit Purchaser or Sub from taking any of the
actions contemplated by this Agreement.
5.4 Best Efforts. Subject to the fiduciary duties of the Board of Directors
of the Company under applicable law as advised by legal counsel, each of the
parties hereto agrees to use its best efforts to take, or cause to be taken, all
necessary or appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations or
otherwise to consummate and make effective the transactions contemplated by this
Agreement including, without limitation, the execution of any additional
instruments necessary to consummate the transactions contemplated hereby and
seeking to lift or reverse any legal restraint imposed on the consummation of
the transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party
hereto shall take all such necessary action.
5.5 Stockholders' Meeting. The Company, acting through its Board of
Directors, shall in accordance with applicable law, its Certificate of
Incorporation and Bylaws duly call, give notice of, convene and hold an annual
or special meeting (the "Stockholders Meeting") of its stockholders as soon as
practicable to consider and vote upon approval of this Agreement and the
transactions contemplated hereby. Subject to its fiduciary duties under
applicable laws as advised by legal counsel, the Company will include in the
proxy statement (such proxy statement as amended or supplemented from time to
time being referred to herein as the "Proxy Statement") to be sent to the
Company's stockholders with respect to the Stockholders Meeting the
recommendation of its Board of Directors that its stockholders vote in favor of
the approval and adoption of this Agreement and the transactions contemplated
hereby. At the Stockholders Meeting, all of the Shares beneficially owned by
Purchaser or its affiliates, if any, shall be voted in favor of approval and
adoption of this Agreement and the transactions contemplated hereby.
5.6 Proxy Statement. The Company will use its commercially reasonable
efforts (i) to obtain and furnish the information required to be included by it
in the Proxy Statement, (ii) to file the Proxy Statement with the SEC, (iii)
after consultation with the other parties hereto, respond as promptly as is
reasonably practicable to any comments made by the SEC with respect to the Proxy
Statement and any preliminary version thereof, and (iv) cause the Proxy
Statement to be mailed to its stockholders at the earliest practicable time
following the date of this Agreement. The information provided and to be
provided by the Company, Purchaser and Sub for use in the Proxy Statement shall,
as of the date of mailing of the Proxy Statement and as of the date of the
Stockholders Meeting, not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
5.7 Voting Agreement. Concurrently with the execution of this Agreement,
Building and Construction Capital Partners I, L.P. and Purchaser shall enter
into the Voting Agreement set forth as Exhibit A hereto.
5.8 Fees and Expenses. Each party shall bear its own expenses in connection
with this Agreement and the transactions contemplated hereby; provided, however,
that if the Merger is consummated, the Surviving Corporation shall assume
responsibility for the payment of all Company expenses in connection with this
Agreement and the transactions contemplated hereby.
5.9 Standstill. In the event of the termination of this Agreement, neither
Purchaser nor its subsidiaries, employees, officers or affiliates shall, for a
period of three years from the date of this Agreement, directly or indirectly
(unless and until Purchaser shall have received the prior written invitation or
approval of a majority of the Board of Directors of the Company):
5.9.1 solicit, seek or offer to effect, or effect;
5.9.2 negotiate with or provide any information to the Board of Directors
of the Company, any director or officer of the Company, any stockholder of the
Company, any employee or union or other labor organization representing
employees of the Company or any other person with respect to;
5.9.3 make any statement or proposal, whether written or oral, either alone
or in concert with others, to the Board of Directors of the Company, any
director or officer of the Company or any stockholder of the Company, any union
or other labor organization representing employees of the Company or any other
person with respect to; or
5.9.4 make any public announcement (except as required by law) or proposal
or offer whatsoever (including, but not limited to, any "solicitation" of
"proxies" as such terms are defined or used in Regulation 14A of the Exchange
Act) with respect to:
(a) any form of business combination or transaction involving the Company
or any affiliate thereof, including, without limitation, a merger, tender or
exchange offer or liquidation of the Company's assets;
(b) any form of restructuring, recapitalization or similar transaction with
respect to the Company or any affiliate thereof;
(c) any purchase of any securities or assets, or rights or options to
acquire any securities or assets (through purchase, exchange, conversion or
otherwise), of the Company or any affiliate thereof;
(d) any proposal to seek representation on the Board of Directors of the
Company or otherwise to seek to control or influence the management, Board of
Directors or policies of the Company or any affiliate thereof;
(e) any request or proposal to waive, terminate or amend the provisions of
this Section 5.9; or
(f) any proposal or other statement inconsistent with the terms of this
Section 5.9. or instigate, encourage, joint, act in concert with or assist
(including, but not limited to, providing or assisting in any way in the
obtaining of financing for or acting as a joint bidder or co-bidder for the
Company with) any third party to do any of the foregoing.
5.10 Public Announcements. Purchaser and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
5.11 Indemnification And Insurance.
5.11.1 The Company shall indemnify and hold harmless, and after the
Effective Time the Surviving Corporation shall indemnify and hold harmless, each
present and former employee, agent, director or officer of the Company and its
subsidiaries (the "Indemnified Parties") from and against any and all claims
arising out of or in connection with activities, including without limitation,
the transactions contemplated by this Agreement, in such capacity, or on behalf
of, or at the request of the Company, its subsidiaries or affiliates, to the
fullest extent permitted under Delaware law (subject to applicable limitations
thereunder) and in addition, to the fullest extent provided in their respective
charters or Bylaws (subject to applicable limitations thereunder) or any
contract or other arrangement in effect at the date hereof which obligations
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time; provided, however,
that if any claim or claims (a "Claim or Claims") are asserted or made within
such six year period, all rights to indemnification in respect of any such Claim
or Claims shall continue until disposition of any and all such Claims. Without
limiting the foregoing, the Company, and after the Effective Time the Surviving
Corporation, shall advance expenses incurred with respect to the foregoing, as
they are incurred, to the fullest extent permitted under applicable law,
provided that the person on whose behalf the expenses are advanced provides and
undertakes (which need not be secured) to repay such advances if it is
ultimately determined that such person is not entitled to indemnification.
5.11.2 The Surviving Corporation shall use its best efforts to cause to be
maintained in effect for not less than six years from the Effective Time the
current policies of directors, and officers, liability insurance maintained by
the Company and its subsidiaries (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous so long as no lapse in coverage occurs
as a result of such substitution) with respect to all matters, including the
transactions contemplated hereby, occurring prior to and including the Effective
Time; provided that, in the event that any Claim or Claims are asserted or made
within such six-year period, such insurance shall be continued in respect of any
such Claim or Claims until final disposition of any and all such Claims;
provided further that the Surviving Corporation shall not be required to pay
annual premiums in excess of 200% of the Company's total current annual premiums
for such insurance and if the Surviving Corporation is unable to obtain the
insurance required by this Section 5.11 it shall obtain as much comparable
insurance as can be obtained for an annual premium equal to such maximum amount.
5.12 Employee Benefit Plans.
5.12.1 The Purchaser and the Surviving Corporation agree that all employees
of the Company and its subsidiaries which are offered employment after the
Effective Date shall be entitled to the same employee benefits, plans, programs,
arrangements and policies as are available to the employees of Purchaser and its
subsidiaries.
5.12.2 From and after the Effective Time, the Purchaser and the Surviving
Corporation shall assume and honor in accordance with their terms all existing
employment and severance agreements and arrangements set forth on Schedule 5.12.
5.12.3 If any employee of the Company or any of its subsidiaries becomes a
participant in any employee benefit plan, program or policy of the Purchaser or
the Surviving Corporation, such employee shall be given credit for purposes of
eligibility and vesting under such plan for all service prior to the Effective
Time with the Company and its subsidiaries, or any predecessor employer (to the
extent such credit was given by the Company).
5.12.4 The Surviving Corporation shall provide professional out placement
services for all officers and salaried employees of the Company or any
subsidiaries employed at the Effective Time and who are terminated within one
year after the Effective Time.
5.12.5 The Purchaser shall reimburse (or cause the Surviving Corporation to
reimburse) any director, officer or employee (or former director, officer or
director) of the Company or any of its subsidiaries for all costs and expenses,
including attorneys' fees, incurred by such person in successfully enforcing the
provisions of this Section 5.
5.13 Real Estate Gains Tax and New Real Property Transfer Tax. The
Purchaser shall pay any State Tax on Gains Derived from Certain Real Property
Transfers and Real Property Transfer Tax and any similar tax in any other
jurisdiction (and any penalties or interest with respect to such taxes) payable
in connection with the Merger or the acquisition of a controlling interest in
the Company by Purchaser or Sub, and the Purchaser shall indemnify and hold
harmless the stockholders of the Company from and against any liability with
respect to such taxes (including any penalties, interest and professional fees).
The Purchaser shall file any returns with respect to such taxes.
5.14 Employee Stock Ownership Plan. The Company agrees that, in accordance
with its rights under the Monroc, Inc. Employee Stock Ownership Plan (the
"ESOP"), the Company will direct the voting in favor of approval and adoption of
the Merger Agreement of any Shares held in the ESOP with respect to which any
ESOP participant has failed to give the ESOP trustee timely instructions as to
how to vote such Shares.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
6.1.1 This Agreement shall have been approved and adopted by the
affirmative vote of the stockholders of the Company to the extent required by
applicable law and the Certificate of Incorporation of the Company.
6.1.2 No statute, rule, regulation, decree, order or injunction shall have
been promulgated, enacted, entered or enforced by any United States federal or
state government, governmental agency or authority or court which remains in
effect and prohibits, restrains, enjoins or restricts the consummation of the
Merger.
6.1.3 Any waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
6.2 Conditions to Obligations of Purchaser and Sub to Effect the Merger.
Unless waived by Purchaser in writing, the obligations of Purchaser and Sub to
effect the Merger provided for hereby shall be subject to the satisfaction, at
or prior to the Effective Time, of each of the following conditions:
6.2.1 The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects (except as to the
extent such representations and warranties are qualified as to materiality, in
which case such representations and warranties shall be true and correct in all
respects) at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date (other than representations
and warranties which address matters only as of a certain date which shall be
true and correct as of such certain date), except as and to the extent that the
facts and conditions upon which such representations and warranties are based
are expressly required or permitted to be changed by the terms thereof.
6.2.2 The Company shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Effective Time; provided, however, that neither Purchaser nor Sub shall be
entitled to refuse to consummate the transaction in reliance upon its own breach
or failure to perform.
6.2.3 From the date of this Agreement through the Effective Time, there
shall not have occurred any change in or effect on the business of the Company
or any of its subsidiaries, individually or in the aggregate, that is materially
adverse to the results of operations, properties, financial condition or
prospects of the Company and its subsidiaries taken as a whole, except for such
changes or effects resulting from, or in connection with general economic,
industry-wide or financial market conditions; provided, however, that
notwithstanding the occurrence of any change in or effect on the business of the
Company or any of its subsidiaries, individually or in the aggregate, that is
materially adverse to the results of operations, properties, financial condition
or prospects of the Company and its subsidiaries taken as a whole, Purchaser and
Sub shall still be obligated to effect the Merger if such change in or effect on
the business of the Company or any of its subsidiaries, individually or in the
aggregate, results from discussions or efforts of the Company, Purchaser or
Purchaser's affiliates to divest any of the ready-mix operations,
precast/prestressed concrete operations or Wyoming operations of the Company or
its subsidiaries.
6.2.4 Purchaser shall have received a certificate executed on behalf of the
Company by an executive officer of the Company to the effect set forth in
clauses 6.2.1 through 6.2.3.
6.3 Conditions to Obligation of the Company to Effect the Merger. Unless
waived by the Company in writing, the obligations of the Company to effect the
Merger provided for hereby shall be subject to the satisfaction, at or prior to
the Effective Time, of each of the following conditions:
6.3.1 The representations and warranties of Purchaser and Sub contained in
this Agreement shall be true and correct in all material respects (except as to
the extent such representations and warranties are qualified as to materiality,
in which case such representations and warranties shall be true and correct in
all respects) at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date (other than representations
and warranties which address matters only as of a certain date which shall be
true and correct as of such certain date), except as and to the extent that the
facts and conditions upon which such representations and warranties are based
are expressly required or permitted to be changed by the terms thereof.
6.3.2 Purchaser and Sub shall have performed in all material respects all
agreements and covenants required hereby to be performed by them prior to or at
the Effective Time; provided, however, that the Company shall not be entitled to
refuse to consummate the transaction in reliance upon its own breach or failure
to perform.
6.3.3 The Company shall have received a certificate executed on behalf of
Purchaser and Sub by an executive officer of Purchaser to the effect set forth
in clauses 6.3.1 and 6.3.2.
ARTICLE 7
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time notwithstanding approval thereof by the stockholders of
the Company (except as otherwise set forth in this Section 7.1), but prior to
the Effective Time:
7.1.1 by mutual written consent duly authorized by the Boards of Directors
of the Company, Purchaser and Sub;
7.1.2 by Purchaser or the Company if (i) the Effective Time shall not have
occurred on or before August 31, 1998 (provided that the right to terminate this
Agreement under this Section 7.1.2 shall not be available to any party whose
failure to fulfill any obligations under this Agreement has been the cause of or
resulted in the failure of the Effective Time to occur on or before such date),
(ii) the approval of the Company's stockholders required by Section 6.1.1 shall
not have been obtained by August 31, 1998 at a meeting duly convened therefor or
at any adjournment thereof or (iii) any United States federal or state
government, governmental agency or authority or court shall have issued an
order, decree or ruling, or taken any other action, permanently restraining,
enjoining or otherwise prohibiting the Merger (which the party seeking to
terminate this Agreement shall have used its best efforts to have lifted or
reversed) and such order, decree, ruling or other action shall have become final
and non-appealable;
7.1.3 by the Company if an Acquisition Proposal has been made and the Board
of Directors of the Company determines, in the exercise of its good faith
judgment (after consultation with and advice from outside legal counsel) that
such termination is required for the Board of Directors to comply with its
fiduciary duties under applicable law; or
7.1.4 by Purchaser if the Board of Directors of the Company withdraws or
modifies in a manner adverse to Purchaser or Sub its determination to recommend
that the stockholders of the Company approve this Agreement and the transactions
contemplated hereby.
7.2 Effect of Termination.
7.2.1 In the event of the termination of this Agreement pursuant to Section
7 hereof, this Agreement, except for the provisions of Section 5.3.2
(confidentiality), Section 5.11 (indemnity), Section 5.8 (fees and expenses),
Section 5.9 (standstill) and this Section 7.2, shall forthwith become void and
have no effect, without any liability on the part of any party or its
affiliates, directors, officers or stockholders. Nothing in this Section 7.2 or
in Section 8.3 shall relieve any party to this Agreement of liability for breach
of this Agreement on or prior to the date of termination.
7.2.2 If (i) the Company terminates this Agreement pursuant to Section
7.1.3, Purchaser terminates this Agreement pursuant to Section 7.1.4 following
receipt by the Company of an Acquisition Proposal or either the Company or
Purchaser terminates this Agreement pursuant to clause (ii) of Section 7.1.2 and
immediately prior to any such meeting of the Company's stockholders an
Acquisition Proposal was pending, and (ii) the Acquisition Proposal which gave
rise to such termination (or any revised transaction based upon such Acquisition
Proposal) is consummated within nine months of such termination, then the
Company (or any successor thereto) shall pay to Purchaser a fee of $2.0 million
(the "Termination Fee") in immediately available funds within five business days
following such termination. Only one Termination Fee shall be payable pursuant
to this Section 7.2.2. If the Company has paid any amounts to Purchaser pursuant
to Section 7.2.3, such amounts shall be deducted from any Termination Fee owed
to Purchaser so that in no event shall the aggregate payments made by the
Company to Purchaser pursuant to Sections 7.2.2 and 7.2.3 exceed $2.0 million.
7.2.3 If (i) the Company terminates this Agreement pursuant to Section
7.1.3, Purchaser terminates this Agreement pursuant to Section 7.1.4 following
receipt by the Company of an Acquisition Proposal or either the Company or
Purchaser terminates this Agreement pursuant to clause (ii) of Section 7.1.2 and
immediately prior to any such meeting of the Company's stockholders an
Acquisition Proposal was pending, then the Company (or any successor thereto)
shall pay to Purchaser the out-of-pocket fees and expenses incurred or paid by
or on behalf of Purchaser or Sub in connection with the transactions
contemplated by this Agreement, including all fees and expenses of counsel,
commercial banks, accountants, experts and consultants to Parent and Sub.
Payment of Purchaser's expenses pursuant to this Section 7.2.3 shall be made no
later than five business days after delivery to the Company of notice of demand
for payment and a written itemization setting forth in reasonable detail all of
Purchaser's expenses. Notwithstanding the foregoing, if the Company pays to
Purchaser the Termination Fee pursuant to Section 7.2.2, no amounts shall be
owed to Purchaser by the Company pursuant to this Section 7.2.3.
ARTICLE 8
MISCELLANEOUS
8.1 Amendment. To the extent permitted by applicable law, this Agreement
may be amended by action taken by or on behalf of the respective Boards of
Directors of the Company, Purchaser and Sub at any time before or after adoption
of this Agreement by the stockholders of the Company (if required by applicable
law) but, after any such stockholder approval, no amendment shall be made which
decreases the Merger Consideration or changes the form thereof or which
adversely affects the rights of the Company's stockholders hereunder without the
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.
8.2 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken by or on behalf of the respective Boards of Directors of
the Company, Purchaser or Sub, may,
8.2.1 extend the time for the performance of any of the obligations or
other acts of the other parties hereto;
8.2.2 waive any inaccuracies in the representations and warranties of any
other party contained herein or in any document, certificate or writing
delivered pursuant hereto by any other party; or
8.2.3 waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to assert any of its rights hereunder shall
not constituent a waiver of such rights.
8.3 Nonsurvival of Representations and Warranties. The representations and
warranties made in Articles 3 and 4 shall not survive beyond the Effective Time
or the termination of this Agreement. This Section 8.3 shall not limit any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Effective Time.
8.4 Entire Agreement; Assignment. This Agreement, together with the
Schedules hereto, (i) constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, other than the Confidentiality
Agreement, among the parties or any of them with respect to the subject matter
hereof and (ii) shall not be assigned by operation of law or otherwise, provided
that Purchaser or Sub may assign any of their rights and obligations to any
wholly owned, direct or indirect subsidiary of Purchaser, but no such assignment
shall relieve Purchaser or Sub of its obligations hereunder.
8.5 Enforcement of the Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties and other persons entitled
to enforce this Agreement pursuant to this Section 8.5 shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in Delaware (as to which the parties agree to submit to jurisdiction for
the purposes of such action), this being in addition to any other remedy to
which they are entitled at law or in equity.
8.6 Validity. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid or unenforceable, the
remainder of this Agreement, and the application of such provision to other
persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.
8.7 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have teen duly given upon receipt) by delivery in person, by cable,
telegram, telex or telecopies, or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as follows:
If to Purchaser or Sub: U.S. Aggregates, Inc.
400 South El Camino Real
Suite 500
San Mateo, California 94402
Attn: Michael J. Stone
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: John A. Schoenfeld, Esq.
If to the Company: Monroc, Inc.
1730 Beck Street
P.O. Box 537
Salt Lake City, Utah 84110
Attn: Ronald D. Davis
with copies to: LeBoeuf, Lamb, Greene & MacRae, L.L.P.
136 South Main Street
1000 Kearns Building
Salt Lake City, Utah 84101
Attn: Nolan S. Taylor, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Delaware regardless of the laws that might otherwise
govern under principles of conflicts of laws applicable thereto.
8.9 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
8.10 Parties In Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reasons of this Agreement except
for the holders of Employee Options with respect to Section 2.2, the holders of
Shares with respect to Articles 1 and 2 and Sections 5.9 and 8.4 (which are
intended to be for the benefit of the persons provided for therein, and may be
enforced by such persons).
8.11 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
8.12 Certain Definitions. As used in this Agreement:
"Affiliate" or "Associate" of a person shall have the meaning ascribed
thereto in Rule 1 2b-2 under the Exchange Act.
"Beneficial Ownership" shall have the meaning as used in Rule 13d under the
Exchange Act.
"Executive Officers" means Ronald D. Davis and L. William Rands.
"Group" shall have the meaning as used in Rule 13d-5(b) under the Exchange
Act.
"Person" means any individual, corporation, company, group, partnership.
association, governmental body or other entity.
"Subsidiary" of an entity shall means any corporation, a majority of the
outstanding voting securities of which are owned directly or indirectly by such
entity.
"Material Adverse Effect" shall mean any change in or effect on the
business of the Company or any of its subsidiaries that is materially adverse to
the results of operations, properties or financial condition of the Company and
its subsidiaries taken as a whole, except for such changes or effects resulting
from, or in connection with general economic, industry-wide or financial market
conditions.
8.13 Performance By Sub. Purchaser hereby agrees to cause Sub to comply
with its obligations hereunder and to cause Sub to consummate the Merger as
contemplated herein.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
PURCHASER
U.S. AGGREGATES, INC.
/s/ Michael J. Stone
Michael J. Stone
Its: Executive Vice President
SUB
WESTERN ACQUISITION, INC.
/s/ Michael J. Stone
Michael J. Stone
Its: Vice President
COMPANY
MONROC, INC.
/s/ Ronald D. Davis
Ronald D. Davis
Its: President and Chief Executive Officer
Appendix B
[SBC WARBURG DILLON READ, INC. LETTERHEAD]
January 29, 1998
The Board of Directors
Monroc, Inc.
1730 Beck Street
Salt Lake City, UT 84116
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, of the per share cash consideration to be paid to the holders (the
"Shareholders") of shares of common stock, $0.01 par value per share (the
"Common Stock"), of Monroc, Inc. (the "Company"), in connection with the
proposed acquisition (the "Acquisition") of the Company by U.S. Aggregates, Inc.
We have assumed that the terms of the Acquisition are as set forth in the
Agreement and Plan of Merger dated as of January 29, 1998 (the "Agreement")
among U.S. Aggregates, Inc., its acquisition subsidiary (the "Acquisition
Subsidiary") and the Company. We understand that each share of Common Stock will
have the right to receive $10.771 in cash upon consummation of the merger of the
Acquisition Subsidiary with and into the Company.
In arriving at our opinion, we have, among other things: (i) reviewed certain
publicly available business and financial information relating to the Company;
(ii) reviewed the historical price and trading activity for the shares of Common
stock; (iii) reviewed certain internal financial information and other data
provided to us by the Company relating to the business and prospects of the
Company, including financial projections prepared by the management of the
Company, on a pro forma basis for the acquisition of Treasure Valley Concrete,
Inc. on January 6, 1998; (iv) conducted discussions with members of the senior
management of the Company; (v) reviewed the financial terms, to the extent
publicly available, of certain acquisition transactions which we considered
relevant; (vi) reviewed publicly available financial and securities market data
pertaining to certain publicly held companies in lines of business which we
believed to be generally comparable to those of the Company; and (vii) conducted
such other financial studies, analyses and investigations, and considered such
other information as we deemed necessary or appropriate.
In connection with our view, with your consent, we have not assumed any
responsibility for independent verification of any of the foregoing information
and have relied upon its being complete and accurate in all material respects.
We have not been requested to and have not made an independent evaluation or
appraisal of any assets or liabilities (contingent or otherwise) of the Company
or any of its subsidiaries, nor have we been furnished with any such evaluation
or appraisal. Further, we have assumed, with your consent, that all of the
information, including the projections provided to us by the Company's
management, was prepared in good faith and on a basis reasonably reflecting the
best currently available estimates and judgments of the Company's management as
to the future financial performance of the Company, and was based upon the
historical performance and certain estimates and assumptions which were
reasonable at the time made. In addition, our opinion is based on economic,
monetary and market conditions existing on the date hereof.
We are acting as financial advisor to the Company and its Board of Directors in
connection with the Acquisition and will receive a fee from the Company for our
services. In the ordinary course of its business, SBC Warburg Dillon Read Inc.
may trade the securities of the Company for its own account or for the accounts
of customers, and it may at any time hold a long or short position in such
securities.
It is understood that our advisory services and the opinion expressed herein are
provided for the information of the Board of Directors in their evaluation of
the Acquisition, and our opinion is not intended to be and does not constitute a
recommendation as to whether or not any Shareholder should approve the
transaction or tender shares of Common Stock.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the per share consideration to be offered to the Shareholders in
connection with the Acquisition is fair, from a financial point of view, to such
Shareholders.
Very truly yours,
SBC WARBURG DILLON READ INC.
Appendix C
DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
stockholders; and further provided that no appraisal rights shall be available
for any shares of stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to secs. 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares described in the foregoing subparagraphs a., b. and c.
of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
MONROC, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON __________ ___, 1998
The undersigned hereby appoints Ronald D. Davis and L. William Rands, and
each of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes either of them to act and to vote, as designated below, all
shares of Common Stock of Monroc, Inc. (the "Company") the undersigned is
entitled to vote at the Special Meeting of Stockholders of the Company to be
held at the Little America Hotel, 500 South Main Street, Salt Lake City, Utah,
on __________ ___, 1998, at 10:00 a.m., local time, and at any adjournments or
postponements thereof, upon all matters referred to on this proxy card and
described in the Proxy Statement for the Special Meeting, and, in their
discretion, upon any other matters which may properly come before the meeting.
Proposal to approve and adopt the Amended and Restated Agreement and Plan
of Merger, dated as of January 29, 1998 and amended and restated as of
March 4, 1998, among the Company, U.S. Aggregates Inc. ("USAI") and Western
Acquisition, Inc., a subsidiary of USAI, and the transactions contemplated
thereby as more fully described in the accompanying Proxy Statement.
| | FOR | | AGAINST | | ABSTAIN
(Continued and to be signed and dated on the reverse side)
The Board of Directors recommends a vote FOR this proposal. Shares
represented by all properly executed proxies will be voted in accordance with
instructions appearing on this proxy card and in the discretion of the proxy
holders as to any other matter that may properly come before the meeting. IN THE
ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR THIS PROPOSAL.
Dated: , 1998 (SEAL)
------------------- ------------------------------------
(Signature)
(SEAL)
(Signature)
Please sign as name(s) appears on
this proxy card, and date this proxy
card. If a joint account, each joint
owner must sign. If signing for a
corporation or partnership as agent,
attorney or fiduciary, indicate the
capacity in which you are signing.
