U.S. Concrete provides ready-mixed concrete and related products and
services to the construction industry in several major markets in the United
States. As of March 15, 2001, we have 73 operating plants producing over 5.6
million cubic yards of ready-mixed concrete annually. Our operations consist
principally of formulating, preparing, delivering and placing ready-mixed
concrete at the job sites of our customers. We provide services intended to
reduce our customers' overall construction costs by lowering the installed, or
"in-place," cost of concrete. These services include the formulation of new
mixtures for specific design uses, on-site and lab-based product quality control
and delivery programs we configure to meet our customers' needs.
We completed our initial public offering in May 1999. At the same time, we
acquired six ready-mixed concrete and related businesses and began operating 26
concrete plants in three major markets in the United States. Since our IPO and
through March 15, 2001, we have acquired an additional 16 ready-mixed concrete
and related businesses, and are operating an additional 47 concrete plants, in
five additional major markets in the United States.
To increase our geographic diversification and expand the scope of our
operations, we seek to acquire businesses operating under quality management
teams in growing markets. Our acquisition strategy has two primary objectives.
In a new market, we target one or more companies that can serve as platform
businesses into which we can integrate other concrete operations. In markets
where we have existing operations and seek to increase our market penetration,
we pursue tuck-in acquisitions.
Industry Overview
Annual usage of ready-mixed concrete in the United States remains at record
levels. According to information available from the National Ready Mixed
Concrete Association and F.W. Dodge, total sales from production and delivery of
ready-mixed concrete in the United States grew over the past three years as
follows:
Year Sales
---- ---------
($ in millions)
1998................................................. $ 23,672
1999................................................. $ 25,812
2000................................................. $ 26,835
According to National Ready Mixed Concrete Association data, the four major
segments of the construction industry accounted for the following approximate
percentages of total sales of ready-mixed concrete in the United States in 2000:
Residential construction ............................... 27%
Commercial and industrial construction ................. 23%
Street and highway construction and paving ............. 31%
Other public works and infrastructure construction ..... 19%
----
Total ......................................... 100%
1
Ready-mixed concrete is a versatile, low-cost manufactured material the
construction industry uses in substantially all its projects. It is a stone-like
compound that results from combining coarse and fine aggregates, such as gravel,
crushed stone and sand, with water, various admixtures and cement. Ready-mixed
concrete can be manufactured in thousands of variations which in each instance
may reflect a specific design use. Manufacturers of ready-mixed concrete
generally maintain less than one day's requirements of raw materials and must
coordinate their daily material purchases with the time-sensitive delivery
requirements of their customers.
Ready-mixed concrete begins a chemical reaction when mixed and begins to
harden and generally becomes difficult to place within 90 minutes after mixing.
This characteristic generally limits the market for a permanently installed
plant to an area within a 25-mile radius of its location. Concrete manufacturers
produce ready-mixed concrete in batches at their plants and use mixer and other
trucks to distribute and place it at the job sites of their customers. These
manufacturers generally do not provide paving or other finishing services
construction contractors or subcontractors typically perform.
Concrete manufacturers generally obtain contracts through local sales and
marketing efforts they direct at general contractors, developers and home
builders. As a result, local relationships are very important.
On the basis of information the National Ready-Mixed Concrete Association
has provided to us, we estimate that, in addition to vertically integrated
manufacturers of cement and ready-mixed concrete, more than 3,500 independent
concrete producers currently operate a total of approximately 5,300 plants in
the United States. Larger markets generally have numerous producers competing
for business on the basis of price, timing of delivery and reputation for
quality and service. We believe, on the basis of available market information,
that the typical ready-mixed concrete company is family-owned and has limited
access to capital, limited financial and technical expertise and limited exit
strategies for its owners. Given these operating constraints, we believe many
ready-mixed concrete companies are finding it difficult to both grow their
businesses and compete effectively against larger, more cost-efficient and
technically capable competitors. We believe these characteristics in our highly
fragmented industry present growth opportunities for a company with a focused
acquisition program and access to capital.
Barriers to the start-up of a new ready-mixed concrete manufacturing
operation historically have been low. In recent years, however, public concerns
about the dust, noise and heavy mixer and other truck traffic associated with
the operation of ready-mixed concrete plants and their general appearance have
made obtaining the permits and licenses required for new plants more difficult.
Delays in the regulatory process, coupled with the substantial capital
investment start-up operations entail, have raised the barriers to entry for
those operations.
Significant Factors Impacting the Market for Ready-Mixed Concrete
On the basis of available industry information, we believe that between
1996 and 2000, ready-mixed concrete sales as a percentage of total construction
expenditures in the United States increased 6.1%. In addition to favorable
trends in the overall economy of the United States during much of this period,
we believe three significant factors have contributed to expansion of the market
for ready-mixed concrete in particular:
. the increased level of industry-wide promotional and marketing
activities;
. the development of new and innovative uses for ready-mixed concrete;
and
. the enactment of the federal legislation commonly called TEA-21.
Industry-wide Promotional and Marketing Activities. We believe industry
participants have only in recent years focused on and benefited from promotional
activities to increase the industry's share of street and highway and
residential construction expenditures. Many of these promotional efforts
resulted from an industry-wide initiative called RMC 2000, a program established
in 1993 under the leadership of our chief executive officer, Eugene P.
Martineau. The National Ready Mixed Concrete Association, the industry's largest
trade organization, has adopted this program. Its principal goals have been to
(1) promote ready-mixed concrete as a building and paving material and (2)
improve the overall image of the ready-mixed concrete industry. We believe RMC
2000 has been a catalyst for increased investment in the promotion of concrete.
2
Development of New and Innovative Ready-mixed Concrete Products.
Ready-mixed concrete has many attributes that make it a highly versatile
construction material. In recent years, industry participants have developed
various product innovations, including:
. concrete housing;
. pre-cast modular paving stones;
. pre-stressed concrete railroad ties to replace wood ties;
. continuous-slab rail-support systems for rapid transit and heavy-
traffic intricate rail lines; and
. concrete bridges, tunnels and other structures for rapid transit
systems.
Other examples of successful innovations that have opened new markets for
ready-mixed concrete include:
. highway median barriers;
. highway sound barriers;
. paved shoulders to replace less permanent and increasingly costly
asphalt shoulders;
. parking lots providing a long-lasting and aesthetically pleasing urban
environment; and
. colored pavements to mark entrance and exit ramps and lanes of
expressways.
Impact of TEA-21. The Federal Transportation Equity Act for the 21st
Century, commonly called TEA-21, is the largest public works funding bill in the
history of the United States. It became effective in June 1998 and provides a
$218 billion budget for federal highway, transit and safety spending for the
six-year period from 1998 through 2003. This represents a 43% increase over the
funding levels similar federal funding programs authorized for the 1992-1997
period. Although road and highway construction and paving accounted for only 12%
of our 2000 sales, we believe we should benefit from the impact we expect TEA-21
will have on the overall demand for ready-mixed concrete in the United States.
Our Business Strategy
Our objective is to continue expanding the geographic scope of our
operations and become the leading value-added provider of ready-mixed concrete
and related products and services in each of our markets. We plan to achieve
this objective by (1) continuing to make acquisitions and (2) continuing to
implement our national operating strategy aimed at increasing revenue growth and
market share, achieving cost efficiencies and enhancing profitability.
Growth Through Acquisitions. The significant costs and regulatory
requirements involved in building new plants make acquisitions an important
element of our growth strategy. Our acquisition program targets opportunities
for (1) expansion in our existing markets and (2) entering new geographic
markets in the United States.
. Expanding in Existing Markets. We seek to continue acquiring other
well-established companies operating in our existing markets in order
to expand our market penetration. We have acquired operating companies
in Northern California, Michigan, North Texas, Memphis/Northern
Mississippi, Northern New Jersey/Southern New York and the Washington,
D.C. area following our initial entry into these markets. By expanding
in existing markets through acquisitions, we expect to continue
realizing various operating synergies, including:
. increased market coverage;
. improved utilization and range of mixer trucks because of access
to additional plants;
. customer cross-selling opportunities; and
. reduced operating and overhead costs.
3
. Entering New Geographic Markets. We seek to continue entering new
geographic markets that have a balanced mix of residential,
commercial, industrial and public sector concrete consumption and have
demonstrated adequate sustainable demand and prospects for growth. In
each new market we enter, we target for acquisition one or more
leading local or regional ready-mixed concrete companies that can
serve as platform businesses into which we can consolidate other
ready-mixed concrete operations. Important criteria for these
acquisition candidates include historically successful operating
results, established customer relationships and superior operational
management personnel, whom we generally will seek to retain. Since our
formation in May 1999 and through March 15, 2001, we have entered into
new geographic markets in San Diego, North Texas/Southwest Oklahoma,
Memphis/Northern Mississippi, Knoxville and Michigan.
Implementation of National Operating Strategy. We designed our national
operating strategy (1) to increase revenues and market share through improved
marketing and sales initiatives and enhanced operations and (2) to achieve cost
efficiencies.
. Improving Marketing and Sales Initiatives and Enhancing Operations.
Our basic operating strategy emphasizes the sale of value-added
product to customers who are more focused on reducing their installed,
or in-place, concrete costs than on the price per cubic yard of the
ready-mixed concrete they purchase. Key elements of our service-
oriented strategy include:
. providing corporate-level marketing and sales expertise;
. establishing and implementing company-wide quality control
improvements;
. continuing to develop and implement training programs that
emphasize successful marketing, sales and training techniques and
the sale of high-margin concrete mix designs; and
. investing in computer and communications technology at each of
our locations to improve communications, purchasing, accounting,
load dispatch, delivery efficiency, reliability, truck tracking
and customer relations.
. Achieving Cost Efficiencies. We strive over time to reduce the total
operating expenses of the businesses we acquire by eliminating or
consolidating some of the functions each business performed separately
prior to its acquisition. In addition, we believe that, as we continue
to increase in size on both a local market and national level, we
should experience reduced costs as a percentage of net sales compared
to those of the individual businesses we acquire in such areas as:
. materials procurement;
. purchases of mixer trucks and other equipment, spare parts and tools;
. vehicle and equipment maintenance;
. employee benefit plans; and
. insurance and other risk management programs.
Products and Services
Ready-Mixed Concrete. Our ready-mixed concrete products consist of
proportioned mixes we prepare and deliver in unhardened plastic states for
placement and shaping into their designed forms. Selecting the optimum mix for a
job entails determining not only the ingredients that will produce the desired
permeability, strength, appearance and other properties of the concrete after it
has hardened and cured, but also the ingredients necessary to achieve a workable
consistency considering the weather and other conditions at the job site. We
believe we can achieve product differentiation for the mixes we offer because of
the variety of mixes we can produce, our volume production capacity and our
scheduling, delivery and placement reliability. We also believe we distinguish
ourselves with our value-added service approach that emphasizes reducing our
customers' overall construction costs by lowering the installed, or in-place,
cost of concrete and the time required for construction.
4
From a contractor's perspective, the in-place cost of concrete includes
both the amount paid to the ready-mixed concrete manufacturer and the internal
costs associated with the labor and equipment the contractor provides. A
contractor's unit cost of concrete is often only a small component of the total
in-place cost that takes into account all the labor and equipment costs required
to place and finish the ready-mixed concrete, including the cost of additional
labor and time lost as a result of substandard products or delivery delays not
covered by warranty or insurance. By carefully designing proper mixes and using
advances in mixing technology, we can assist our customers in reducing the
amount of reinforcing steel and labor they will require in various applications.
We provide a variety of services in connection with our sale of ready-mixed
concrete which can help reduce our customers' in-place cost of concrete. These
services include:
. production of new formulations and alternative product recommendations
that reduce labor and materials costs;
. quality control, through automated production and laboratory testing,
that ensures consistent results and minimizes the need to correct
completed work; and
. automated scheduling and tracking systems that ensure timely delivery
and reduce the downtime incurred by the customer's finishing crew.
We produce ready-mixed concrete by combining the desired type of cement,
sand, gravel and crushed stone with water and typically one or more admixtures.
These admixtures, such as chemicals, minerals and fibers, determine the
usefulness of the product for particular applications.
We use a variety of chemical admixtures to achieve one or more of five
basic purposes:
. relieve internal pressure and increase resistance to cracking in
subfreezing weather;
. retard the hardening process to make concrete more workable in hot
weather;
. strengthen concrete by reducing its water content;
. accelerate the hardening process and reduce the time required for
curing; and
. facilitate the placement of concrete having a low water content.
We frequently use various mineral admixtures as supplementary cementing
materials to alter the permeability, strength and other properties of concrete.
These materials include fly ash, ground granulated blast-furnace slag and silica
fume.
We also use fibers, such as steel, glass and synthetic and carbon
filaments, as an additive in various formulations of concrete. Fibers help to
control shrinkage cracking, thus reducing permeability and improving abrasion
resistance. In many applications, fibers replace welded steel wire and
reinforcing bars. Relative to the other components of ready-mixed concrete,
these additives generate comparatively high margins.
Our ready-mixed concrete operations comprised 89.2% of our pro forma 2000
revenues.
Pre-Cast Concrete. We produce pre-cast concrete products at six of our
Northern California plants and at our San Diego California plant. Our pre-cast
concrete products consist of ready-mixed concrete we produce and then pour into
molds at our plant sites. These operations produce a wide variety of specialized
finished products, including specialty engineered structures, custom signage and
curb inlets. After the concrete sets, we strip the molds from the products and
ship the finished product to our customers. Because these products are not
perishable, pre-cast concrete plants can serve a much larger market than
ready-mixed concrete plants.
Our pre-cast operations comprised 7.8% of our pro forma 2000 revenues.
5
Building Materials (Including Concrete Masonry). Our building materials
operations supply various materials, products and tools contractors use in the
concrete construction industry. These materials include rebar, wire mesh, color
additives, curing compounds, grouts, wooden forms, hard hats, rubber boots,
gloves, trowels, lime slurry used to stabilize foundations and numerous other
items. We also produce concrete masonry at our Auburn Hills, Michigan plant. Our
building materials operations are generally located near our ready-mixed
concrete operations.
Our building materials operations comprised 3.0% of our pro forma 2000
revenues.
Operations
The businesses we have acquired have made substantial capital investments
in equipment, systems and personnel at their respective plants to facilitate
continuous multi-customer deliveries of highly perishable products. In any given
market, we may maintain a number of plants whose production we centrally
coordinate to meet customer production requirements. We must be able to adapt
constantly to continually changing delivery schedules.
Our ready-mixed concrete plants consist of permanent and mobile facilities
that produce ready-mixed concrete in wet or dry batches. Our 73 fixed-plant
facilities produce ready-mixed concrete that we transport to job sites by mixer
trucks. Our on-site mobile plant operations deploy our nine mobile-plant
facilities to produce ready-mixed concrete at the job site that we direct into
place using a series of conveyor belts or a mixer truck. Several factors govern
the choice of plant type, including:
. capital availability;
. production consistency requirements;
. daily production capacity requirements; and
. job-site location.
A wet batch plant generally costs more, but yields greater consistency in
the concrete produced and has greater daily production capacity, than a dry
batch plant. We believe that a wet batch plant having an hourly capacity of 250
cubic yards currently would cost approximately $1.5 million, while a dry batch
plant having the same capacity currently would cost approximately $0.7 million.
At March 15, 2001, we operated 13 wet batch plants and 60 dry batch plants.
The market primarily will drive our future plant decisions. The relevant
market factors include:
. the expected production demand for the plant;
. the expected types of projects the plant will service; and
. the desired location of the plant.
Generally, plants intended primarily to serve high-volume, commercial or
public works projects will be wet batch plants, while plants intended primarily
to serve low-volume, residential construction projects will be dry batch plants.
From time to time, we also may use portable plants, which include both wet batch
and dry batch facilities, to service large, long-term jobs and jobs in remote
locations.
The batch operator in a dry batch plant simultaneously loads the dry
components of stone, sand and cement with water and admixtures in a mixer truck
that begins the mixing process during loading and completes that process while
driving to the job site. In a wet batch plant, the batch operator blends the dry
components and water in a plant mixer from which he loads the already mixed
concrete into the mixer truck, which leaves for the job site promptly after
loading.
Mixer trucks slowly rotate their loads on route to job sites in order to
maintain product consistency. A mixer truck typically has a load capacity of
nine cubic yards, or approximately 18 tons, and a useful life of 12 years.
Depending on the type of batch plant from which the mixer trucks generally are
loaded, some components of the mixer trucks will require refurbishment after
three to nine years. A new truck of this size currently costs approximately
$125,000. At March 15, 2001, we operated a fleet of approximately 960 mixer
trucks.
6
In our manufacture and delivery of ready-mixed concrete, we emphasize
quality control, pre-job planning, customer service and coordination of supplies
and delivery. We often obtain purchase orders for ready-mixed concrete months in
advance of actual delivery to a job site. A typical order contains various
specifications the contractor requires the concrete to meet. After receiving the
specifications for a particular job, we use computer modeling, industry
information and information from previous similar jobs to formulate a variety of
mixtures of cement, aggregates, water and admixtures which meet or exceed the
contractor's specifications. We perform testing to determine which mix design is
most appropriate to meet the required specifications. The test results enable us
to select the mixture that has the lowest cost and meets or exceeds the job
specifications. The testing center creates and maintains a project file that
details the mixture we will use when we produce the concrete for the job. For
quality control purposes, the testing center also is responsible for maintaining
batch samples of concrete we have delivered to a job site.
We use computer modeling to prepare bids for particular jobs based on the
size of the job, location, desired margin, cost of raw materials and the design
mixture identified in our testing process. If the job is large enough, we obtain
quotes from our suppliers as to the cost of raw materials we use in preparing
the bid. Once we obtain a quotation from our suppliers, the price of the raw
materials for the specified job is informally established. Several months may
elapse from the time a contractor has accepted our bid until actual delivery of
the ready-mixed concrete begins. During this time, we maintain regular
communication with the contractor concerning the status of the job and any
changes in the job's specifications in order to coordinate the multi-sourced
purchases of cement and other materials we will need to fill the job order and
meet the contractor's delivery requirements. We confirm that our customers are
ready to take delivery of manufactured product throughout the placement process.
On any given day, a particular plant may have production orders for dozens of
customers at various locations throughout its area of operation. To fill an
order:
. the customer service office coordinates the timing and delivery of the
concrete to the job site;
. a load operator supervises and coordinates the receipt of the
necessary raw materials and operates the hopper that dispenses those
materials into the appropriate storage bins;
. a batch operator, using a computerized batch panel, prepares the
specified mixture from the order and oversees the loading of the mixer
truck with either dry ingredients and water in a dry batch plant or
the already-mixed concrete in a wet batch plant; and
. the driver of the mixer truck delivers the load to the job site,
discharges the load and, after washing the truck, departs at the
direction of the dispatch office.
The central dispatch system tracks the status of each mixer truck as to
whether a particular truck is:
. loading concrete;
. in route to a particular job site;
. on the job site;
. discharging concrete;
. being washed; or
. in route to a particular plant.
The system is updated continuously via signals received from the individual
truck operators as to their status. In this manner, the dispatcher can determine
the optimal routing and timing of subsequent deliveries by each mixer truck and
monitor the performance of each driver.
7
A plant manager oversees the operation of each plant. Our employees also
include:
. maintenance personnel who perform routine maintenance work throughout
our plants;
. a full-time staff of mechanics who perform substantially all the
maintenance and repair work on our vehicles;
. testing center staff who prepare mixtures for particular job
specifications and maintain quality control;
. various clerical personnel who perform administrative tasks; and
. sales personnel who are responsible for identifying potential
customers and maintaining existing customer relationships.
We generally operate on a single shift with some overtime operation during the
construction season. On occasion, however, we may have projects that require
deliveries around the clock.
Cement and Raw Materials
We obtain most of the materials necessary to manufacture ready-mixed
concrete at each of our facilities on a daily basis. These raw materials include
cement, which is a manufactured product, stone, gravel and sand. Each plant
typically maintains an inventory level of these materials sufficient to satisfy
its operating needs for one day or less. Cement represents the highest cost
material used in manufacturing a cubic yard of ready-mixed concrete, while the
combined cost of the stone, gravel and sand used is slightly less than the
cement cost. In each of our markets, we purchase each of these materials from
several suppliers.
Sales and Marketing
General contractors typically select their suppliers of ready-mixed
concrete. In large, complex projects, an engineering firm or division within a
state transportation or public works department may influence the purchasing
decision, particularly if the concrete has complicated design specifications. In
those projects and in government-funded projects generally, the general
contractor or project engineer usually awards supply orders on the basis of
either direct negotiation or competitive bidding. We believe the purchasing
decision in many cases ultimately is relationship-based. Our marketing efforts
target general contractors, design engineers and architects whose focus extends
beyond the price of ready-mixed concrete to product quality and consistency and
reducing their in-place cost of concrete.
Customers
Of our 2000 sales, we made approximately 51% to commercial and industrial
construction contractors, approximately 32% to residential construction
contractors, approximately 12% to street and highway construction contractors
and approximately 5% to other public works and infrastructure contractors. In
2000, no single customer or project accounted for more than 5% of our total
sales.
We rely heavily on repeat customers. Our management and dedicated sales
personnel are responsible for developing and maintaining successful long-term
relationships with key customers. We believe that by expanding our operations
into more geographic markets, we will be in a better position to market to and
service large nationwide and regional contractors.
Training and Safety
Our future success will depend, in part, on the extent to which we can
attract, retain and motivate qualified employees. We believe that our ability to
do so will depend on the quality of our recruiting, training, compensation and
benefits, the opportunities we afford for advancement and our safety record.
Historically, we have supported and funded continuing education programs for our
employees. We intend to continue and expand these programs. We require all field
employees to attend periodic safety training meetings and all drivers to
participate in training seminars followed by certification testing. The
responsibilities of our national safety director include managing and executing
a unified, company-wide safety program.
8
Competition
The ready-mixed concrete industry is highly competitive. Our competitive
position in a market depends largely on the location and operating costs of our
ready-mixed concrete plants and prevailing prices in that market. Price is the
primary competitive factor among suppliers for small or simple jobs, principally
in residential construction, while timeliness of delivery and consistency of
quality and service as well as price are the principal competitive factors among
suppliers for large or complex jobs. Our competitors range from small,
owner-operated private companies to subsidiaries or operating units of large,
vertically integrated cement manufacturing and concrete products companies.
Competitors having lower operating costs than we do or having the financial
resources to enable them to accept lower margins than we do have a competitive
advantage over us for jobs that are particularly price-sensitive. Competitors
having greater financial resources to build plants in new areas or pay for
acquisitions also have competitive advantages over us.
Employees
At March 15, 2001, we had approximately 375 salaried employees, including
executive officers, management personnel, sales personnel, technical personnel,
administrative staff and clerical personnel, and approximately 1,522 hourly
personnel generally employed on an as-needed basis, including 1,032 truck
drivers. The number of employees fluctuates depending on the number and size of
projects ongoing at any particular time, which may be impacted by variations in
weather conditions throughout the year.
At March 15, 2001, approximately 996 of our employees were represented by
labor unions having collective bargaining agreements with us. Generally, these
agreements have multi-year terms and expire on a staggered basis. Under these
agreements, we pay specified wages to covered employees, observe designated
workplace rules and make payments to multi-employer pension plans and employee
benefit trusts rather than administering the funds on behalf of these employees.
None of the businesses we have acquired has experienced any strikes or
significant work stoppages in the past five years. We believe our relationships
with our employees and union representatives are satisfactory.
Facilities and Equipment
At March 15, 2001, we operated a fleet of approximately 960 owned and
leased mixer trucks and 509 other vehicles. Our own mechanics service most of
the fleet. We believe these vehicles generally are well maintained and adequate
for our operations. The average age of the mixer trucks is approximately 5.3
years.
We operated 73 fixed-plant facilities and nine onsite mobile-plant
facilities that produce ready-mixed concrete at March 15, 2001. We believe that
these facilities are sufficient for our immediate needs. The table below
summarizes operations at our fixed-plant facilities at March 15, 2001. The
ready-mixed volumes in the table represent the pro forma 2000 volumes produced
by each location.
The information above includes the following locations we purchased between
January 1 and March 15, 2001:
Building Ready-Mixed
Materials/ Volume
Concrete (in thousands
Location Ready-Mixed Pre-Cast Masonry of cubic yards)
--------------------------------------------------------------------- ----------- -------- --------- ---------------
Northern New Jersey/Southern New York................................ 12 -- -- 678
Northern California.................................................. -- 1 -- --
----- ----- ----- -----
12 1 -- 678
===== ===== ===== =====
Governmental Regulation and Environmental Matters
A wide range of federal, state and local laws apply to our operations,
including such matters as:
. land usage;
. street and highway usage;
. noise levels; and
. health, safety and environmental matters.
In many instances, we must have certificates, permits or licenses to
conduct our business. Failure to maintain required certificates, permits or
licenses or to comply with applicable laws could result in substantial fines or
possible revocation of our authority to conduct some of our operations. Delays
in obtaining approvals for the transfer or grant of certificates, permits or
licenses, or failures to obtain new certificates, permits or licenses, could
impede the implementation of our acquisition program.
Environmental laws that impact our operations include those relating to air
quality, solid waste management and water quality. Environmental laws are
complex and subject to frequent change. These laws impose strict liability in
some cases without regard to negligence or fault. Sanctions for noncompliance
may include revocation of permits, corrective action orders, administrative or
civil penalties and criminal prosecution. Some environmental laws provide for
joint and several strict liability for remediation of spills and releases of
hazardous substances. In addition, businesses may be subject to claims alleging
personal injury or property damage as a result of alleged exposure to hazardous
substances, as well as damage to natural resources. These laws also may expose
us to liability for the conduct of or conditions caused by others, or for acts
which complied with all applicable laws when performed. We have conducted Phase
I investigations to assess environmental conditions on substantially all the
real properties we own or lease and have engaged independent environmental
consulting firms in that connection. We have not identified any environmental
concerns we believe are likely to have a material adverse effect on our
business, financial condition or results of operations, but you have no
assurance material liabilities will not occur. You also have no assurance our
compliance with amended, new or more stringent laws, stricter interpretations of
existing laws or the future discovery of environmental conditions will not
require additional, material expenditures. OSHA regulations establish
requirements our training programs must meet.
We have all material permits and licenses we need to conduct our operations
and are in substantial compliance with applicable regulatory requirements
relating to our operations. Our capital expenditures relating to environmental
matters were not material on a pro forma combined basis in 2000. We currently do
not anticipate any material adverse effect on our business or financial position
as a result of our future compliance with existing environmental laws
controlling the discharge of materials into the environment.
Product Warranties
Our operations involve providing ready-mixed concrete formulations that
must meet building code or other regulatory requirements and contractual
specifications for durability, stress-level capacity, weight-bearing capacity
and other characteristics. If we fail or are unable to provide product meeting
these requirements and specifications, material claims may arise against us and
our reputation could be damaged.
10
We are currently in discussions with a customer and developer regarding a
product warranty claim. The claim relates to a large, single-family home
tract-construction project in Northern California for which we produced and
supplied a different batch mix for a short period of time that was used in 72
foundation slabs on grade. The developer asserts that it is entitled to be made
whole for all expenses it incurred in demolishing the homes on those slabs, for
all costs of rebuilding the homes to their state prior to demolition and for all
related costs. While we believe we have valid defenses to this claim based on,
among other things, failure to mitigate damages, we are unable to quantify a
range of loss or predict with certainty the outcome of this matter at this time.
Insurance
Our employees perform a significant portion of their work moving and
storing large quantities of heavy raw materials, driving large mixer trucks in
heavy traffic conditions or placing concrete at construction sites or in other
areas that may be hazardous. These operating hazards can cause personal injury
and loss of life, damage to or destruction of property and equipment and
environmental damage. We maintain insurance coverage in amounts and against the
risks we believe accord with industry practice, but this insurance may not be
adequate to cover all losses or liabilities we may incur in our operations, and
we may be unable to maintain insurance of the types or at levels we deem
necessary or adequate or at rates we consider reasonable.
We are including the following discussion to inform our existing and
potential security holders generally of some of the risks and uncertainties that
can affect our company and to take advantage of the "safe harbor" protection for
forward-looking statements that applicable federal securities law affords.
From time to time, our management or persons acting on our behalf make
forward-looking statements to inform existing and potential security holders
about our company. These statements may include projections and estimates
concerning the timing of pending acquisitions and the success of our acquisition
program, revenues, income and capital spending. Forward-looking statements
generally use words such as "estimate," "project," "predict," "believe,"
"expect," "anticipate," "plan," "goal" or other words that convey the
uncertainty of future events or outcomes. In addition, sometimes we will
specifically describe a statement as being a forward-looking statement and refer
to this cautionary statement.
In addition, various statements this report contains, including those that
express a belief, expectation or intention, as well as those that are not
statements of historical fact, are forward-looking statements. Those
forward-looking statements appear in Items 1 and 2--"Business and Properties"
and Item 3--"Legal Proceedings" in Part I of this report and in Item
7--"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in the notes to our consolidated financial statements in Item 8
of Part II of this report and elsewhere in this report. These forward-looking
statements speak only as of the date of this report, we disclaim any obligation
to update these statements and we caution you not to rely unduly on them. We
have based these forward-looking statements on our current expectations and
assumptions about future events. While our management considers these
expectations and assumptions to be reasonable, they are inherently subject to
significant business, economic, competitive, regulatory and other risks,
contingencies and uncertainties, most of which are difficult to predict and many
of which are beyond our control. These risks, contingencies and uncertainties
relate to, among other matters, the following:
. our acquisition and national operating strategies;
. our ability to integrate the businesses we acquire;
. our ability to obtain the capital necessary to finance our growth
strategies;
. the availability of qualified personnel;
. the trends we anticipate in the ready-mixed concrete industry;
. the level of activity in the construction industry generally and in our
local markets for ready-mixed concrete;
11
. the highly competitive nature of our business;
. changes in, or our ability to comply with, governmental regulations,
including those relating to the environment;
. our labor relations and those of our suppliers of cement and aggregates;
. the level of funding allocated by the United States Government for
federal highway, transit and safety spending;
. power outages and other unexpected events that delay or adversely affect
our ability to deliver concrete according to our customers'
requirements;
. our ability to control costs and maintain quality; and
. our exposure to warranty claims from developers and other customers.
We believe the items we have outlined above are important factors that
could cause our actual results to differ materially from those expressed in a
forward-looking statement made in this report or elsewhere by us or on our
behalf. We have discussed most of these factors in more detail elsewhere in this
report. These factors are not necessarily all the important factors that could
affect us. Unpredictable or unknown factors we have not discussed in this report
could also have material adverse effects on actual results of matters that are
the subject of our forward-looking statements. We do not intend to update our
description of important factors each time a potential important factor arises.
We advise our existing and potential security holders that they should (1) be
aware that important factors to which we do not refer above could affect the
accuracy of our forward-looking statements and (2) use caution and common sense
when considering our forward-looking statements.
Item 3. Legal Proceedings
Bay-Crete Transportation & Materials, LLC alleges in a lawsuit it filed on
July 11, 2000 in California Superior Court in San Mateo County, against our
subsidiary, Central, and us that it possesses beneficiary rights under a 1983
contract to purchase annually up to 200,000 cubic yards of ready-mixed concrete
from Central until March 30, 2082. Under that contract, the purchase price would
consist of Central's direct materials costs and an overhead fee. Bay-Crete
alleges that we breached that contract by refusing to acknowledge Bay-Crete's
rights as a beneficiary of that contract. It is seeking damages of $500 million
of lost profits spread over the next 82 years. Central and we each filed an
answer and cross-complaint in August 2000 which seeks declaratory relief for a
determination that Bay-Crete is not entitled to use the contract. In addition,
the cross-complaints seek damages for improper conduct by Bay-Crete, the general
manager of Bay-Crete and a member of Bay-Crete for making demands under the
contract in violation of an order of the United States Bankruptcy Court for the
Northern District of California, San Francisco Division. A predecessor to
Central previously prevailed in the defense of a similar action brought by the
general manager of Bay-Crete under a related agreement, and Central and we
believe we have meritorious defenses to Bay-Crete's claim and intend to
vigorously defend this suit.
From time to time, and currently, we are subject to various other claims
and litigation brought by employees, customers and other third parties for,
among other matters, personal injuries, property damages, product defects and
delay damages that have, or allegedly have, resulted from the conduct of our
operations.
We believe that the resolution of all litigation currently pending or
threatened against us or any of our subsidiaries (including the dispute with
Bay-Crete we describe above) will not have a material adverse effect on our
business or financial condition; however, because of the inherent uncertainty of
litigation, we cannot assure you that the resolution of any particular claim or
proceeding to which we are a party will not have a material adverse effect on
our results of operations for the fiscal period in which that resolution occurs.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the our security holders during the
fourth quarter of 2000.
12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Our common stock began trading on The Nasdaq Stock Market in May 1999 under
the symbol "RMIX." As of March 15, 2001, 22.6 million shares of our common stock
were outstanding, held by approximately 721 stockholders of record. The number
of record holders does not necessarily bear any relationship to the number of
beneficial owners of our common stock.
The following table sets forth the range of high and low bid prices for our
common stock on The Nasdaq Stock Market for the periods indicated:
The last reported bid price for our common stock on The Nasdaq Stock Market
on March 15, 2001 was $6 15/16 per share.
We have not paid or declared any dividends since our formation and
currently intend to retain earnings to fund our working capital. Any future
dividends will be at the discretion of our board of directors after taking into
account various factors it deems relevant, including our financial condition and
performance, cash needs, income tax consequences and the restrictions Delaware
and other applicable laws and our credit facilities then impose. Our credit
facility prohibits the payment of cash dividends on our common stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" in Item 7 of this Report and Note 6
of our Notes to Consolidated Financial Statements in Item 8 of this Report.
Recent Sales of Unregistered Securities
On November 10, 2000, we issued and sold for cash $95 million aggregate
principal amount of our 12.00% senior subordinated notes due November 10, 2010.
We used the net proceeds from this sale to reduce amounts outstanding under our
secured revolving credit facility. We sold the notes to a small number of
accredited institutional investors without registration under the Securities Act
in reliance on the exemption Section 4(2) of the Securities Act provides for
transactions not involving any public offering.
13
Item 6. Selected Financial Data
We acquired six businesses in 2000 and 14 in 1999 (including our initial
six acquisitions), all of which we have accounted for under the purchase method
of accounting (see Note 3 "Business Combinations" under Item 8). Our financial
statements present Central Concrete Supply Co., Inc., one of our initial six
acquisitions, as the acquirer of the other 19 businesses and U.S. Concrete. The
following historical financial information is of Central prior to June 1, 1999
and of U.S. Concrete and its consolidated subsidiaries after that date. The
historical financial information for Central as of December 31, 1998 and 1997,
and for the years ended December 31, 1998, 1997 and 1996, derives from the
audited financial statements of Central. See the historical financial statements
and related notes this document contains.
Year Ended December 31
----------------------------------------------------------
2000 1999 1998 1997 1996
---------- --------- --------- --------- ----------
(in thousands)
Statement of Operations Information:
Sales.................................................... $ 394,636 $ 167,912 $ 66,499 $ 53,631 $ 39,204
Cost of goods sold....................................... 314,297 135,195 53,974 43,794 33,402
--------- --------- -------- -------- --------
Gross profit........................................... 80,339 32,717 12,525 9,837 5,802
Selling, general and administrative expenses............. 27,741 9,491 4,712 4,265 3,644
Stock compensation charge................................ -- 2,880 -- -- --
Depreciation and amortization............................ 11,212 3,453 930 1,330 1,203
--------- --------- -------- -------- --------
Income from operations................................. 41,386 16,893 6,883 4,242 955
Interest expense, net.................................... 14,095 1,708 165 226 188
Other income, net ....................................... 1,319 663 36 26 --
--------- --------- -------- -------- --------
Income before income tax provision..................... 28,610 15,848 6,754 4,042 767
Income tax provision (benefit)........................... 11,750 7,658 100 (457) 303
--------- --------- -------- -------- --------
Net income............................................. $ 16,860 $ 8,190 $ 6,654 $ 4,499 $ 464
========= ========= ======== ======== ========
----------------------------------------------------------
2000 1999 1998 1997 1996
---------- --------- --------- --------- ----------
(in thousands)
Balance Sheet Information:
Working capital........................................ $41,532 $14,578 $ 7,431 $4,899 $1,363
Total assets........................................... 355,837 212,734 26,640 19,837 13,603
Long-term debt, including current maturities........... 157,134 57,375 3,530 2,660 1,730
Total stockholders' equity............................. 150,555 110,793 15,154 10,731 6,472
Item 7. Management's Discussion and Analysis of Financial Condition and Results
Of Operations
Statements we make in the following discussion which express a belief,
expectation or intention, as well as those that are not historical fact, are
forward-looking statements that are subject to risks, uncertainties and
assumptions. Our actual results, performance or achievements, or industry
results, could differ materially from those we express in the following
discussion as a result of a variety of factors, including the risks and
uncertainties we have referred to under the heading "Cautionary Statement
Concerning Forward-Looking Statements" following Items 1 and 2 of Part I of this
report and under the heading "Factors That May Affect Our Future Operating
Results" below.
Overview
We derive substantially all our revenues from the sale of ready-mixed
concrete, other concrete products and related construction materials to the
construction industry in the United States. We serve substantially all segments
of the construction industry, and our customers include contractors for
commercial, industrial, residential and public works and infrastructure
construction. We typically sell ready-mixed concrete under daily purchase orders
that require us to formulate, prepare and deliver ready-mixed concrete to the
job sites of our customers. We recognize our sales from these orders when we
deliver the ordered products.
14
Our cost of goods sold consists principally of the costs we incur in
obtaining the cement, aggregates and admixtures we combine to produce
ready-mixed concrete and other concrete products in various formulations. We
obtain all these materials from third parties and generally have only one day's
supply at each of our concrete plants. Our cost of goods sold also includes
labor costs and the operating, maintenance and rental expenses we incur in
operating our concrete plants and mixer trucks and other vehicles.
Our selling expenses include the salary and incentive compensation we pay
our sales force, the salaries and incentive compensation of our sales managers
and travel, entertainment and other promotional expenses. Our general and
administrative expenses include the salaries and benefits we pay to our
executive officers, the senior managers of our local and regional operations,
plant managers and administrative staff. These expenses also include office rent
and utilities, communications expenses and professional fees.
We purchased six operating businesses in 2000 and 14 operating businesses
in 1999, all of which we have accounted for in accordance with the purchase
method of accounting. Our financial statements present Central Concrete Supply
Co., Inc., one of our initial six acquisitions, as the acquirer of the other 19
businesses and U.S. Concrete. These financial statements are those of Central
prior to June 1, 1999 and of U.S. Concrete and its consolidated subsidiaries
after that date.
Factors That May Affect Our Future Operating Results
Reflecting the levels of construction activity, the demand for ready-mixed
concrete is highly seasonal. We believe that this demand may be as much as three
times greater in a prime summer month than in a slow winter month and that the
six-month period of May through October is the peak demand period. Consequently,
we expect that our sales generally will be materially lower in the first and
fourth calendar quarters. Because we incur fixed costs, such as wages, rent,
depreciation and other selling, general and administrative expenses, throughout
the year, we expect our gross profit margins will be disproportionately lower
than our sales in these quarters. Even during traditional peak periods,
sustained periods of inclement weather and other extreme weather conditions can
slow or delay construction and thus slow or delay our sales.
You should not rely on (1) quarterly comparisons of our revenues and
operating results as indicators of our future performance or (2) the results of
any quarterly period during a year as an indicator of results you may expect for
that entire year.
Demand for ready-mixed concrete and other concrete products depends on the
level of activity in the construction industry. That industry is cyclical in
nature, and the general condition of the economy and a variety of other factors
beyond our control affect its level of activity. These factors include, among
others:
. the availability of funds for public or infrastructure construction;
. commercial and residential vacancy levels;
. changes in interest rates;
. the availability of short- and long-term financing;
. inflation;
. consumer spending habits; and
. employment levels.
We may incur material costs and losses as a result of claims that our
products do not meet regulatory requirements or contractual specifications.
The construction industry can exhibit substantial variations in activity
across the country as a result of these factors impacting regional and local
economies differently.
Markets for ready-mixed concrete generally are local. Our results of
operations are susceptible to swings in the level of construction activity which
may occur in our markets.
15
Ready-mixed concrete is highly price-sensitive. Our prices are subject to
changes in response to relatively minor fluctuations in supply and demand,
general economic conditions and market conditions, all of which are beyond our
control. Because of the fixed-cost nature of our business, our overall
profitability is sensitive to minor variations in sales volumes and small shifts
in the balance between supply and demand.
Competitive conditions in our industry also may affect our future operating
results.
When we acquire a business, we record an asset called "goodwill" equal to
the excess amount we pay for the business, including liabilities we assume, over
the fair value of the assets of the business we acquire. Under generally
accepted accounting principles, we amortize goodwill over periods up to 40 years
following the acquisition, which directly affects our earnings in those years.
Should we be required to accelerate the amortization of goodwill or write it off
completely because of impairments or changes in generally accepted accounting
principles, our results of operations may be materially and adversely affected.
As we acquire additional businesses in the future for which we will account
in accordance with the purchase method of accounting, we will include the
operating results of those businesses in our consolidated operating results from
their respective acquisition dates and begin writing off any purchased goodwill
resulting from those acquisitions on those same dates. Consequently, the
magnitude and timing of our future acquisitions will affect our operating
results.
Results of Operations
The following table sets forth for us selected historical statement of
operations information and that information as a percentage of sales for the
years indicated. These financial statements are those of Central prior to June
1, 1999 and of U.S. Concrete and its consolidated subsidiaries after that date.
Except as we note below, our acquisitions in 2000 primarily account for the
changes in 2000 from 1999. Similarly, except as we note below, the consolidation
of operating results beginning on June 1, 1999 and our subsequent acquisitions
in 1999 principally account for the changes in 1999 from 1998.
Sales. Sales increased $226.7 million, or 135.0%, from $167.9 million in 1999 to
$394.6 million in 2000.
Gross profit. Gross profit increased $47.6 million, or 145.6%, from $32.7
million in 1999 to $80.3 million in 2000. Gross margins increased from 19.5% in
1999 to 20.4% in 2000, primarily due to improved pricing terms we have
negotiated with key materials suppliers in our major ready-mixed markets.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $18.3 million, or 192.3%, from $9.5 million in
1999 to $27.7 million in 2000. The increase in selling, general and
administrative expenses as a percentage of sales is attributable to additions to
the corporate overhead infrastructure to accommodate our growth strategy, as
well as management additions in certain of our markets.
16
Stock compensation charge. The 1999 stock compensation charge represents a
noncash charge for the 400,000 shares of common stock we issued in December 1998
and March 1999 to management and nonemployee directors at a nominal cost. The
amount of this charge reflected a fair value of $7.20 per share, which
represented a 10% discount from the initial offering price to the public of
$8.00 per share in our IPO.
Depreciation and amortization. Depreciation and amortization expense increased
$7.8 million, or 224.7%, from $3.5 million in 1999 to $11.2 million in 2000.
This increase includes amortization of the goodwill attributable to our
acquisition activity. We are amortizing this goodwill over 40 years for each
acquisition. At December 31, 2000, the annualized amount of this noncash expense
was $4.9 million.
Interest expense, net. Interest expense, net, increased $12.4 million from $1.7
million in 1999 to $14.1 million in 2000. This increase was attributable
principally to borrowings we made to pay the cash portion of the purchase prices
for our acquisitions. At December 31, 2000, we had outstanding borrowings
totaling $157.1 million, at a weighted average interest cost of 10.7% per annum.
Other income, net. Other income, net increased $656,000, or 98.9%, from $663,000
in 1999 to $1.3 million in 2000. This increase is attributable to the sale of a
customer contract, a gain from the involuntary conversion of property and
numerous other items of income and expense.
Income tax provision. We provided for income taxes of $11.8 million in 2000, an
increase of $4.1 million from our provision in 1999. The increase is principally
attributable to an overall increase in taxable earnings for 2000 resulting from
our operating activities. Additionally, in the first five months of 1999,
Central operated as an S corporation and thus made no provision for income taxes
during that period. The increase in our overall income tax provision is
partially offset by a decrease in our effective income tax rate from 48.3% in
1999 to 41.1% in 2000. The higher rate in 1999 primarily resulted from the
income tax expense we recognized as a result of the conversion of Central from
an S corporation to a C corporation and a nondeductible stock compensation
charge which we recognized during that year.
1999 Compared to 1998
Sales. Sales increased $101.4 million, or 152.5%, from $66.5 million in 1998 to
$167.9 million in 1999.
Gross profit. Gross profit increased $20.2 million, or 161.2%, from $12.5
million in 1998 to $32.7 million in 1999. Gross margins increased from 18.8% in
1998 to 19.5% in 1999, primarily because increases in our product prices more
than offset increases in labor rates, additional technical personnel and
increases in our costs of raw materials.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $4.8 million, or 101.4%, from $4.7 million in
1998 to $9.5 million in 1999. The 1999 expenses include the salaries of our
executive officers and expenses we incurred in building our corporate
infrastructure.
Stock compensation charge. The 1999 stock compensation charge represents a
noncash charge for the 400,000 shares of our common stock we issued in December
1998 and March 1999 to management and nonemployee directors at a nominal cost.
Depreciation and amortization. Depreciation and amortization expense increased
$2.6 million, or 271.3%, from $0.9 million in 1998 to $3.5 million in 1999. This
increase reflects our initial amortization of the goodwill attributable to our
1999 acquisition activity. We are amortizing this goodwill over 40 years for
each acquisition. At December 31, 1999, the annualized amount of this noncash
expense was $2.7 million.
Interest expense, net. Interest expense, net, increased $1.5 million from $0.2
million in 1998 to $1.7 million in 1999. This increase was attributable
principally to borrowings we made to finance our post-IPO acquisitions in 1999
and to refinance indebtedness of our acquired businesses. At December 31, 1999,
we had borrowings totaling $57.1 million outstanding under our credit facility
at a weighted average interest cost of 7.9% per annum.
Income tax provision. We provided for income taxes of $7.7 million in 1999, an
increase of $7.6 million from our provision in 1998. This increase is
attributable to the fact that Central was an S corporation during 1998 and the
first five months of 1999 and thus made no provision for federal income taxes
during those periods.
17
Liquidity and Capital Resources
Our acquisitions since December 31, 1999 principally account for the
changes in our working capital accounts and our property, plant and equipment
account from December 31, 1999 to December 31, 2000.
During 2000, we purchased six businesses that we have accounted for in
accordance with the purchase method of accounting. The aggregate consideration
we paid in these transactions consisted of $98.9 million in cash and 3.7 million
shares of common stock.
In February 2000, we increased the size of our secured revolving credit
facility from $100 million to $200 million. We had $62.0 million of outstanding
borrowings under the facility at December 31, 2000. The facility has a term
expiring in May 2002 and a $5.0 million sublimit for letters of credit issued on
our behalf. Our borrowing availability under the facility will vary from time to
time depending on our satisfaction of several financial tests. We may use the
facility for the following purposes:
. financing acquisitions;
. funding the internal expansion of our operations;
. working capital; and
. general corporate purposes.
Our subsidiaries have guaranteed the repayment of all amounts owing under
the facility, and we secured the facility with the capital stock and assets of
our subsidiaries. The facility:
. requires the consent of the lenders for certain acquisitions;
. prohibits the payment of cash dividends on our common stock;
. limits our ability to incur additional indebtedness; and
. requires us to comply with financial covenants.
The failure to comply with these covenants and restrictions would
constitute an event of default under the facility.
On November 10, 2000, we issued and sold to institutional investors in a
private placement $95 million aggregate principal amount of our 12.00% senior
subordinated notes due November 10, 2010 for $95 million in cash. The terms of
these notes will require us to repay them in equal annual installments of
approximately $13.6 million on November 10 in each of the years 2004 through
2010. We used the net proceeds from our sale of the notes to repay borrowings
under our secured revolving credit facility. We intend to keep that facility in
place and may borrow under that facility to fund future growth opportunities and
for general corporate purposes. Our borrowing availability under that facility
will vary from time to time depending on our satisfaction of several financial
tests.
We anticipate that our consolidated cash flow from our operations will
exceed our normal working capital needs, debt service requirements and the
amount of our planned capital expenditures, excluding acquisitions, for at least
the next 12 months.
We may use funds during the next 12 months to resolve the product warranty
claim we describe under the heading "Product Warranties" in Items 1 and 2 -
"Business and Properties." We anticipate the cash flows from our operations will
provide sufficient funds for any such resolution.
The continuation of our growth strategy will require substantial capital.
We currently intend to finance future acquisitions through issuances of our
common stock or debt securities, including convertible debt securities, and
borrowings under our credit facility. Using debt to complete acquisitions could
substantially limit our operational and financial flexibility. The extent to
which we will be able or willing to use our common stock to make acquisitions
will depend on its market value from time to time and the willingness of
potential sellers to accept it as full or partial payment. Using our common
stock for this purpose may result in dilution to our then existing stockholders.
To the extent we are unable to use our common stock to make future acquisitions,
our ability to grow will be limited by the extent to which we are able to raise
capital for this purpose, as well as to expand existing operations, through debt
or additional equity financings. If we are unable to obtain additional capital
on acceptable terms, we may be required to reduce the scope of our presently
anticipated expansion, which could materially adversely affect our business and
the value of our common stock.
18
We cannot accurately predict the timing, size and success of our
acquisition efforts or our associated potential capital commitments.
Inflation
As a result of the relatively low levels of inflation during the past three
years, inflation did not significantly affect our results of operations in any
of those years.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Borrowings under our revolving credit facility expose us to certain market
risks. Outstanding borrowings under our credit facility were $62.0 million at
December 31, 2000. A change of one percent in the interest rate would cause a
change in interest expense of approximately $620,000, or $0.02 per share, on an
annual basis. We did not enter into our credit facility for trading purposes.
The credit facility carries interest at a pre-agreed percentage point spread
from either the prime interest rate, or a one, two, three or six month
Eurodollar interest rate.
19
Item 8. Financial Statements and Supplementary Data
U.S. CONCRETE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
U.S. Concrete, Inc. and Subsidiaries
Report of Independent Public Accountants................................................................. 21
Consolidated Balance Sheets at December 31, 2000 and 1999................................................ 22
Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998............... 23
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2000,
1999 and 1998......................................................................................... 24
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998............... 25
Notes to Consolidated Financial Statements............................................................... 26
20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To U.S. Concrete, Inc.:
We have audited the accompanying consolidated balance sheets of U.S. Concrete,
Inc., a Delaware corporation, and subsidiaries as of December 31, 2000 and 1999,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 2000.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of U.S.
Concrete, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ Arthur Andersen LLP
------------------------------
ARTHUR ANDERSEN LLP
Houston, Texas
March 15, 2001
21
U.S. CONCRETE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31
-----------------------------
ASSETS 2000 1999
------ ---------- ----------
Current assets:
Cash and cash equivalents................................................................. $ 711 $ 627
Trade accounts receivable, net ........................................................... 62,641 44,085
Inventories ............................................................................. 9,494 4,351
Prepaid expenses and other current assets ................................................ 5,106 3,254
---------- ----------
Total current assets ........................................................... 77,952 52,317
---------- ----------
Property, plant and equipment, net ............................................................ 82,993 53,949
Goodwill, net ................................................................................ 188,921 105,492
Other assets .................................................................................. 5,971 976
---------- ----------
Total assets.................................................................... $ 355,837 $ 212,734
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................................................... $ 107 $ 140
Accounts payable and accrued liabilities.................................................. 36,313 37,599
---------- ----------
Total current liabilities....................................................... 36,420 37,739
---------- ----------
Long-term debt, net of current maturities...................................................... 157,027 57,235
Deferred income taxes.......................................................................... 11,835 6,967
---------- ----------
Total liabilities............................................................... 205,282 101,941
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and
outstanding............................................................................ -- --
Common stock, $0.001 par value; 60,000,000 shares authorized; 22,452,036 and
18,639,228 shares issued and outstanding in 2000 and 1999, respectively................ 22 19
Additional paid-in capital................................................................ 127,170 104,271
Retained earnings......................................................................... 23,363 6,503
---------- ----------
Total stockholders' equity...................................................... 150,555 110,793
---------- ----------
Total liabilities and stockholders' equity...................................... $ 355,837 $ 212,734
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
22
U.S. CONCRETE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31
----------------------------------------
2000 1999 1998
---------- ---------- ----------
Sales.............................................................................. $ 394,636 $ 167,912 $ 66,499
Cost of goods sold.................................................................. 314,297 135,195 53,974
---------- ---------- ----------
Gross profit................................................................... 80,339 32,717 12,525
Selling, general and administrative expenses........................................ 27,741 9,491 4,712
Stock compensation charge........................................................... -- 2,880 --
Depreciation and amortization....................................................... 11,212 3,453 930
---------- ---------- ----------
Income from operations......................................................... 41,386 16,893 6,883
Interest expense, net............................................................... 14,095 1,708 165
Other income, net................................................................... 1,319 663 36
---------- ---------- ----------
Income before income tax provision ............................................ 28,610 15,848 6,754
Income tax provision ............................................................... 11,750 7,658 100
---------- ---------- ----------
Net income..................................................................... $ 16,860 $ 8,190 $ 6,654
========== ========== ==========
Earnings per share:
Basic.......................................................................... $ 0.78 $ 0.70 $ 2.13
========== ========== ==========
Diluted........................................................................ $ 0.78 $ 0.70 $ 2.13
========== ========== ==========
Number of shares used in calculating earnings per share:
Basic.......................................................................... 21,573 11,770 3,120
========== ========== ==========
Diluted........................................................................ 21,592 11,783 3,120
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
23
U.S. CONCRETE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Common Stock Additional
---------------------
Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
----------- -------- ----------- ----------- ------------
BALANCE, December 31, 1997............................. 3,120 $ 3 $ 621 $ 10,107 $ 10,731
Distributions to stockholders..................... -- -- -- (2,231) (2,231)
Net income........................................ -- -- -- 6,654 6,654
----------- -------- ----------- ----------- -----------
BALANCE, December 31, 1998............................. 3,120 3 621 14,530 15,154
Initial public offering, net of offering costs.... 4,370 4 27,668 -- 27,672
Acquisitions of founding companies................ 8,319 10 57,904 (6,064) 51,850
Acquisitions of purchased companies............... 2,430 2 15,198 -- 15,200
Distributions to stockholders..................... -- -- -- (10,153) (10,153)
Stock compensation charge......................... 400 -- 2,880 -- 2,880
Net income........................................ -- -- -- 8,190 8,190
----------- -------- ----------- ----------- -----------
BALANCE, December 31, 1999............................. 18,639 19 104,271 6,503 110,793
Acquisitions of purchased companies............... 3,710 2 22,355 -- 22,357
Stock issued pursuant to employee stock
purchase plan.................................. 103 1 544 -- 545
Net income........................................ -- -- -- 16,860 16,860
----------- -------- ----------- ----------- -----------
BALANCE, December 31, 2000............................. 22,452 $ 22 $ 127,170 $ 23,363 $ 150,555
=========== ======== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
24
U.S. CONCRETE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31
-----------------------------------
2000 1999 1998
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................... $ 16,860 $ 8,190 $ 6,654
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .................................. 11,212 3,453 930
Debt issuance cost amortization ................................ 1,099 123 --
Net gain on sale of property, plant and equipment .............. (435) (218) (36)
Deferred income tax provision .................................. 3,011 762 11
Provision for doubtful accounts ................................ 220 118 17
Stock compensation charge ...................................... -- 2,880 --
Changes in assets and liabilities, excluding effects of acquisitions:
Receivables .................................................... (4,194) (5,372) (1,697)
Prepaid expenses and other current assets ...................... (2,623) 69 (519)
Accounts payable and accrued liabilities ....................... (15,567) (959) 1,499
--------- --------- ---------
Net cash provided by operating activities ................. 9,583 9,046 6,859
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment .......................... (8,205) (7,547) (3,300)
Payments for acquisitions, net of cash received of
$3,961, $10,070, and $0 .......................................... (94,957) (68,495) --
Payment of direct costs in connection with acquisitions ............. (3,261) (8,406) --
Proceeds from disposals of property, plant and equipment ............ 2,156 1,031 52
Increase in cash surrender value of life insurance .................. -- -- (189)
--------- --------- ---------
Net cash used in investing activities ..................... (104,267) (83,417) (3,437)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings ............................................ 192,900 57,266 2,006
Repayments of borrowings ............................................ (93,141) (3,607) (1,136)
Proceeds from issuances of common stock ............................. 545 32,512 --
Cash paid related to common stock issuance costs .................... (242) (4,373) --
Debt issuance costs ................................................. (5,294) (860) --
Distributions to stockholders ....................................... -- (10,153) (2,024)
--------- --------- ---------
Net cash provided by (used in) financing activities ....... 94,768 70,785 (1,154)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................... 84 (3,586) 2,268
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......................... 627 4,213 1,945
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................... $ 711 $ 627 $ 4,213
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest .............................................. $ 12,377 $ 1,412 $ 344
Cash paid for income taxes .......................................... $ 12,340 $ 4,973 $ 78
NONCASH FINANCING ACTIVITY:
Distribution of cash surrender value of life insurance to
stockholder......................................................... $ -- $ 1,155 $ --
Distribution of note receivable to stockholder ...................... $ -- $ -- $ 207
The accompanying notes are an integral part of these consolidated financial
statements.
25
U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
U.S. Concrete, Inc., a Delaware corporation, was founded in July 1997 to
create a leading provider of ready-mixed concrete and related products and
services to the construction industry in major markets in the United States. It
did not conduct any operations prior to May 1999. On May 28, 1999, it completed
an initial public offering of its common stock and concurrently acquired six
businesses. From the date of its IPO through December 31, 2000, U.S. Concrete
acquired 14 additional businesses.
For financial statement presentation purposes, (1) Central Concrete Supply
Co., Inc., one of the acquired businesses, is presented as the acquirer of the
other acquired businesses and U.S. Concrete, (2) all acquisitions are accounted
for in accordance with the purchase method of accounting and (3) the effective
date of the initial acquisitions is May 31, 1999. These consolidated financial
statements are those of Central prior to June 1, 1999 and of U.S. Concrete and
its consolidated subsidiaries after that date. These consolidated financial
statements reflect the operations of the businesses U.S. Concrete acquired after
May 31, 1999 from their respective dates of acquisition.
U.S. Concrete's future success depends on a number of factors which include
integrating operations successfully, identifying and integrating satisfactory
acquisition candidates, obtaining acquisition financing, managing growth,
attracting and retaining qualified management and employees, complying with
government regulations and other regulatory requirements or contract
specifications, and addressing risks associated with competition, seasonality
and quarterly fluctuations.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements consist of the accounts of U.S.
Concrete and its wholly-owned subsidiaries. All significant intercompany account
balances and transactions have been eliminated.
Cash and Cash Equivalents
U.S. Concrete records as cash equivalents all highly liquid investments
having maturities of three months or less at the date of purchase.
Inventories
Inventories consist primarily of raw materials, pre-cast products, building
materials and repair parts that U.S. Concrete holds for use or sale in the
ordinary course of business. It uses the first-in, first-out method to value
inventories at the lower of cost or market. For each of the three years ended
December 31, 2000, management believes U.S. Concrete incurred no material
impairments in the carrying value of its inventories.
Prepaid Expenses
Prepaid expenses primarily include amounts U.S. Concrete has paid for
insurance, licenses, property taxes, rent and maintenance contracts. It expenses
or amortizes all prepaid amounts as used or over the period of benefit, as
applicable.
Property, Plant and Equipment, Net
U.S. Concrete states property, plant and equipment at cost, unless
impaired, and uses the straight-line method to compute depreciation of these
assets over their estimated useful lives. It capitalizes leasehold improvements
on properties it holds under operating leases and amortizes them over the lesser
of their estimated useful lives or the applicable lease term. It states
equipment it holds under capital leases at the net present value of the future
minimum lease payments at the inception of the applicable leases and amortizes
that equipment over the lesser of the life of the lease or the estimated useful
life of the asset.
26
U.S. Concrete expenses maintenance and repair costs when incurred and
capitalizes and depreciates expenditures for major renewals and betterments that
extend the useful lives of its existing assets. When U.S. Concrete retires or
disposes of property, plant or equipment, it removes the related cost and
accumulated depreciation from its accounts and reflects any resulting gain or
loss in its statements of operations.
Goodwill
Goodwill represents the amount by which the total purchase price U.S.
Concrete has paid to acquire businesses accounted for as purchases exceeds the
estimated fair value of the net assets acquired. It amortizes goodwill on a
straight-line basis over 40 years. Goodwill and other intangible assets are
evaluated for impairment based on the estimated undiscounted future cash flows
of the business unit to which these assets relate. As of December 31, 2000 and
1999, accumulated amortization was $5.4 and $1.1 million, respectively.
Debt Issue Costs
Other long-term assets include debt issue costs related to U.S. Concrete's
credit facility and subordinated debentures (see Note 6 for discussion). U.S.
Concrete amortizes these costs as interest expense over the scheduled maturity
period of the debt. As of December 31, 2000 and 1999, accumulated amortization
of debt issue costs was $1.2 million and $123,000, respectively.
Allowance for Doubtful Accounts
U.S. Concrete provides an allowance for accounts receivable it believes it
may not collect in full.
Sales and Expenses
U.S. Concrete derives its sales primarily from the production and delivery
of ready-mixed concrete and related products and materials. It recognizes sales
when products are delivered. Cost of goods sold consists primarily of product
costs and operating expenses. Operating expenses consist primarily of wages,
benefits and other expenses attributable to plant operations, repairs and
maintenance and delivery costs. Selling expenses consist primarily of sales
commissions, salaries of sales managers, travel and entertainment expenses and
trade show expenses. General and administrative expenses consist primarily of
executive and administrative compensation and benefits, office rent, utilities,
communication and technology expenses and professional fees.
Income Taxes
U.S. Concrete uses the liability method of accounting for income taxes.
Under this method, it records deferred income taxes based on temporary
differences between the financial reporting and tax bases of assets and
liabilities and uses enacted tax rates and laws that will be in effect when it
recovers those assets or settles those liabilities, as the case may be, to
measure those taxes.
U.S. Concrete files a consolidated federal income tax return, which
includes the operations of all acquired businesses for periods subsequent to
their respective acquisition dates. The acquired businesses file "short period"
federal income tax returns for the period from their last fiscal year through
their respective acquisition dates.
Fair Value of Financial Instruments
The financial instruments of U.S. Concrete consist primarily of cash and
cash equivalents, trade receivables, trade payables and long-term debt.
Management considers the book values of these items to be representative of
their respective fair values.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
27
Valuation of Long-Lived Assets
U.S. Concrete reviews its long-lived assets for impairment whenever events
or changes in circumstances indicate that their carrying amounts may not be
recoverable. If the expected future undiscounted cash flows of an asset it
intends to hold for use is less than the carrying amount of the asset, it will
recognize a loss equal to the difference between the fair value (calculated by
discounting the estimated future operating cash flows) and the carrying amount
of the asset. If it intends to dispose of an asset that is impaired, it will
recognize a loss equal to the difference between the estimated fair value of the
asset, less estimated costs to sell, and its carrying amount.
Reclassifications
Certain reclassifications have been made to amounts in prior period
financial statements to conform with current period presentation.
Earnings per Share
Since Central is presented as the acquirer of the other acquired businesses
and U.S. Concrete, U.S. Concrete uses the shares of its common stock
beneficially owned by the former owners of Central in the calculation of its
earnings per share for all periods prior to the IPO.
The following table reconciles the numerators and denominators of the basic
and diluted earnings per share for the periods shown (in thousands, except per
share amounts). Basic earnings represent earnings per weighted average
outstanding share, while diluted earnings represent those earnings as diluted by
potentially dilutive securities such as outstanding options.
Year Ended December 31
--------------------------------------
2000 1999 1998
Numerator:
Net income...................................................................... $ 16,860 $ 8,190 $ 6,654
Denominator:
Weighted average common shares outstanding-basic................................ 21,573 11,770 3,120
Effect of dilutive stock options................................................ 19 13 --
--------- --------- ---------
Weighted average common shares outstanding-diluted.............................. 21,592 11,783 3,120
========= ========= =========
Earnings per share:
Basic........................................................................... $ 0.78 $ 0.70 $ 2.13
Diluted......................................................................... $ 0.78 $ 0.70 $ 2.13
For the years ended December 31, 2000 and 1999, 2.1 million and 1.3 million
stock options, respectively, were excluded from the computation of diluted
earnings per share because their exercise prices were greater than the average
market price of the common stock.
Comprehensive Income
In the first quarter of 1999, U.S. Concrete adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which
requires the display of comprehensive income and its components in the financial
statements. Comprehensive income represents all changes in equity of an entity
during the reporting period, except those resulting from investments by and
distributions to stockholders. For each of the three years ended December 31,
2000, no material differences exist between the historical net income and
comprehensive income of U.S. Concrete.
Segment Information
U.S. Concrete has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," which establishes standards for the manner
public enterprises are to report information about operating segments in annual
financial statements and requires the reporting of selected information about
operating segments in interim financial reports issued to stockholders. All
segments that meet a threshold of 10% of revenues, reported profit or loss or
combined assets are defined as significant segments. U.S. Concrete currently
operates as one segment comprised of its ready-mixed concrete and related
products. All of its operations, sales and long-lived assets are in the United
States.
28
New Accounting Pronouncements
Beginning January 1, 2001, U.S. Concrete will apply SFAS No. 133,
"Accounting for Derivative Securities and Hedging Activities." SFAS No. 133 will
require it to recognize all derivative instruments (including some derivative
instruments embedded in other contracts) as assets or liabilities on its balance
sheet and measure them at fair value. The statement requires that changes in the
fair value of derivatives be recognized currently in earnings unless specific
hedge accounting criteria are met. U.S. Concrete is evaluating SFAS No. 133 and
its impact on existing accounting policies and financial reporting disclosures.
U.S. Concrete has not, to date, engaged in activities or entered into
arrangements associated with derivative instruments.
3. BUSINESS COMBINATIONS
U.S. Concrete completed a total of six acquisitions in 2000 and 14 in 1999
including its initial six acquisitions at the time of its IPO, all of which were
accounted for as purchases. The accompanying balance sheet at December 31, 2000
includes the preliminary allocations of the purchase prices of the 2000
acquisitions and is subject to final adjustment. The following table summarizes
the aggregate consideration U.S. Concrete paid in these transactions:
The following summarized unaudited pro forma financial information adjusts
the historical financial information by assuming that all 20 of the 1999 and
2000 acquisitions occurred on January 1, 1999:
Year Ended December 31
-------------------------
2000 1999
----------- ----------
(unaudited)
Revenues.................................................................................. $ 416,374 $ 413,193
Net income................................................................................ $ 16,460 $ 18,178
Basic earnings per share.................................................................. $ 0.74 $ 0.81
Diluted earnings per share................................................................ $ 0.74 $ 0.81
Pro forma adjustments these amounts include primarily relate to:
. contractual reductions in salaries, bonuses and benefits to former
owners of the businesses;
. elimination of legal, accounting and other professional fees incurred in
connection with the acquisitions;
. amortization of goodwill resulting from the acquisitions;
. reduction in interest expense, net of interest expense on borrowings to
fund acquisitions; and
. adjustments to the federal and state income tax provision based on pro
forma operating results.
The pro forma financial information does not purport to represent what the
combined financial results of operations of U.S. Concrete actually would have
been if these transactions and events had in fact occurred when assumed and are
not necessarily representative of its financial results of operations for any
future period.
29
In connection with the acquisitions, U.S. Concrete has determined the
resulting goodwill as follows (in thousands):
2000 1999
---------- ----------
Cash consideration........................................................................ $ 98,918 $ 78,565
Less: Cash received from acquired companies.............................................. (3,961) (10,070)
---------- ----------
Cash paid, net of cash acquired........................................................... 94,957 68,495
Fair value of common stock issued......................................................... 22,357 67,050
Direct acquisition costs incurred......................................................... 3,261 8,406
---------- ----------
Total purchase costs incurred, net of cash acquired................................... 120,575 143,951
---------- ----------
Fair value of assets acquired, net of cash................................................ 48,546 75,067
Less: Fair value of assumed liabilities.................................................. (15,700) (37,699)
---------- ----------
Fair value of net assets acquired, net of cash............................................ 32,846 37,368
---------- ----------
Costs incurred in excess of net assets acquired....................................... $ 87,729 $ 106,583
========== ==========
The amounts relating to the 2000 acquisitions are preliminary and subject
to final adjustment.
4. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment is as follows (dollars in
thousands):
Useful
Lives December 31
in --------------------
Years 2000 1999
------- --------- ---------
Land.................................................................................. -- $ 12,657 $ 12,381
Buildings and improvements............................................................ 10-40 5,395 7,225
Machinery and equipment............................................................... 10-30 35,880 14,191
Mixers, trucks and other vehicles..................................................... 6-12 45,496 29,211
Furniture and fixtures................................................................ 3-10 1,075 527
Construction in progress.............................................................. -- 1,010 2,322
-------- -------
101,513 65,857
Less: accumulated depreciation........................................................ (18,520) (11,908)
-------- -------
$ 82,993 $ 53,949
========= =========
5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
Activity in U.S. Concrete's allowance for doubtful accounts receivable
consists of the following (in thousands):
December 31
------------------------
2000 1999 1998
----- ----- ----
Balance, beginning of period.................................................................. $ 730 $ 97 $ 80
Additions from acquisitions................................................................... 1,085 686 --
Provision for uncollectible accounts.......................................................... 220 118 17
Uncollectible receivables written off, net of recoveries...................................... (408) (171) --
------ ----- ----
Balance, end of period........................................................................ $1,627 $ 730 $ 97
====== ===== =====
Inventory consists of the following (in thousands):
December 31
-------------------------
2000 1999
-------- -------
Raw materials................................................................................ $ 3,768 $ 1,905
Pre-cast products............................................................................ 3,210 993
Building materials for resale................................................................ 1,500 844
Repair parts................................................................................. 1,016 609
-------- -------
$ 9,494 $ 4,351
======== =======
30
Accounts payable and accrued liabilities consist of the following (in
thousands):
A summary of long-term debt is as follows (in thousands):
December 31
--------------------------
2000 1999
--------- ----------
Secured revolving credit facility................................................................. $ 62,000 $ 57,100
12.00% Senior Subordinated Notes.................................................................. 95,000 --
Other ............................................................................................ 134 275
--------- ---------
157,134 57,375
Less: current maturities..................................................................... (107) (140)
---------- ----------
Long-term debt, net of current maturities......................................................... $ 157,027 $ 57,235
=========- =========
U.S. Concrete has a $200 million secured revolving credit facility that
expires in May 2002. It may use this facility for working capital, to finance
acquisitions and for other general corporate purposes. Availability under the
facility is tied to various affirmative and negative financial covenants,
including a leverage ratio, an asset coverage ratio, a minimum net worth
calculation, a limitation on additional indebtedness and prohibition of
dividends on its common stock. Subsidiary guarantees and pledges of
substantially all U.S. Concrete's fixed assets and subsidiary capital stock
secure the payment of all obligations owing under the facility. Advances bear
interest at the prime rate or LIBOR, at U.S. Concrete's option, in each case
plus a margin keyed to the ratio of consolidated indebtedness to cash flow. A
commitment fee, based on the ratio of consolidated indebtedness to cash flow, is
paid on any unused borrowing capacity. At December 31, 2000 and 1999, U.S.
Concrete had borrowings totaling $62.0 million and $57.1 million, respectively,
outstanding under this facility at weighted average interest costs of 8.6% and
7.9%. At December 31, 2000, U.S. Concrete had $138 million of remaining capacity
under this facility, of which it could borrow $24.8 million based on its
leverage ratio at that date. Its ability to borrow additional amounts would
increase to the extent that the facility was utilized to fund the acquisition of
additional businesses with positive cash flow.
On November 10, 2000, U.S. Concrete issued and sold to institutional
investors in a private placement $95 million aggregate principal amount of its
12.00% senior subordinated notes due November 10, 2010 for $95 million in cash.
The terms of these notes requires repayment in equal annual installments of
approximately $13.6 million on November 10 in each of the years 2004 through
2010. These notes are subordinated in right of payment to the credit facility
and are guaranteed by the subsidiaries of U.S. Concrete. The notes require U.S.
Concrete to comply with affirmative and financial covenants generally consistent
with those required under the credit facility. U.S. Concrete used the net
proceeds from the sale of these notes to repay borrowings under the secured
revolving credit facility.
Aggregate maturities are as follows (in thousands):
Year Ending December 31
-----------------------
2001............................................................ $ 107
2002............................................................ 62,027
2003............................................................ --
2004............................................................ 13,571
2005............................................................ 13,571
Thereafter ..................................................... 67,858
--------
Total $157,134
========
31
7. STOCKHOLDERS' EQUITY
Initial Public Offering
In May 1999, U.S. Concrete completed its IPO, issuing 3.8 million shares of
its common stock to the public at a price of $8.00 per share, resulting in net
proceeds to U.S. Concrete of $23.5 million, after deducting offering costs. In
June 1999, it sold an additional 570,000 shares of common stock on the exercise
of the underwriters' over-allotment option. It realized net proceeds from this
sale of $4.2 million.
Warrants
In connection with the IPO, U.S. Concrete issued warrants to the
underwriters to purchase 200,000 shares of common stock at an exercise price of
$8.00 per share. These warrants expire in May 2002. U.S. Concrete issued
warrants to purchase an additional 100,000 shares of common stock to such
parties in May 2000 at an exercise price of $8.00 per share for advisory
services performed by them in connection with an acquisition. These warrants
expire in May 2003. At December 31, 2000 and 1999, all these warrants remained
outstanding.
Stock Options
U.S. Concrete's 1999 incentive plan enables U.S. Concrete to grant
non-qualified options, restricted stock, deferred stock, incentive stock
options, stock appreciation rights and other long-term incentive awards. Options
granted under the plan generally vest over a four year period and expire if not
exercised prior to the 10th anniversary following the grant date. The number of
shares available for issuance under the plan is limited to the greater of 2.0
million shares of common stock or 15% of the number of shares of common stock
outstanding on the last day of the preceding calendar quarter, although the
board of directors of U.S. Concrete may, in its discretion, grant additional
awards or establish other compensation plans. The number of shares available for
awards under the plan was 1.0 million and 1.3 million as of December 31, 2000
and 1999, respectively.
The following table summarizes stock option activity (in thousands, except
prices):
Weighted
Average
Exercise
Options Price
-------------------------
Options outstanding at December 31, 1998...................................................... -- $ --
Granted.................................................................................. 1,425 7.93
Exercised................................................................................ -- --
Forfeited................................................................................ (32) 8.13
---------
Options outstanding at December 31, 1999...................................................... 1,393 7.93
Granted.................................................................................. 1,205 7.52
Exercised................................................................................ -- --
Forfeited................................................................................ (198) 7.68
---------
Options outstanding at December 31, 2000...................................................... 2,400 $ 7.74
=========
Options exercisable at December 31, 2000...................................................... 389 $ 7.94
=========
Option exercise price range at December 31, 2000.............................................. $6.13-$8.75
The weighted average remaining contractual life of the options at December
31, 2000 was 8.63 years.
As allowed by SFAS No. 123, "Accounting for Stock-Based Compensation," U.S.
Concrete accounts for stock option awards in accordance with Accounting
Principles Board (APB) Opinion No. 25. The exercise prices of all options U.S.
Concrete awarded during 2000 and 1999 were at least equal to the fair market
values of the common stock on the dates of grant. As a result, under APB No. 25,
it did not recognize any compensation expense attributable to these options. Had
it determined compensation expense under the SFAS No. 123 method, its net income
and earnings per share during 2000 and 1999 would have been the following pro
forma amounts (in thousands, except per share amounts):
32
Year Ended December 31
-----------------------
Net income 2000 1999
-----------------------
As reported............................. $ 16,860 $ 8,190
======== =======
Pro forma............................... $ 16,076 $ 7,699
======== =======
Diluted earnings per share
As reported............................. $ 0.78 $ 0.70
======== =======
Pro forma............................... $ 0.74 $ 0.65
======== =======
The effects of applying SFAS No. 123 in the pro forma disclosure may not be
indicative of future amounts because U.S. Concrete expects to make additional
awards. For purposes of this disclosure, U.S. Concrete estimated the fair value
of each option grant on the date of grant using the Black-Scholes option pricing
model with the following assumptions:
Year Ended December 31
----------------------
2000 1999
----------------------
Expected dividend yield........................... 0.0 % 0.0 %
Expected stock price volatility................... 48.2 % 54.7 %
Risk-free interest rate........................... 5.0 % 6.0 %
Expected life of options.......................... 10 years 10 years
Employee Stock Purchase Plan
In May 2000, U.S. Concrete's Board of Directors adopted, and its
stockholders approved, the U.S. Concrete 2000 Employee Stock Purchase Plan (the
"ESPP"). The ESPP is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986. All U.S. Concrete
personnel that are customarily employed for at least 20 hours per week and five
months per calendar year are eligible to participate in the ESPP. Under the
ESPP, employees electing to participate are granted the right to purchase shares
of U.S. Concrete common stock at a price generally equal to 85% of the lower of
the fair market value of a share of U.S. Concrete common stock on the first or
last day of the offering period.
8. INCOME TAXES
U.S. Concrete's consolidated federal and state tax returns include the
results of operations of acquired businesses from their dates of acquisition.
The amounts of consolidated federal and state income tax provision are as
follows (in thousands):
A reconciliation of U.S. Concrete's effective income tax rate to the
amounts calculated by applying the federal statutory corporate tax rate of 35%
is as follows (in thousands):
Year Ended December 31
----------------------------------
2000 1999 1998
----------------------------------
Tax at statutory rate................................................................... $ 10,013 $ 5,547 $ --
Add (deduct):
State income taxes................................................................. 967 364 100
Nondeductible expenses............................................................. 960 405 --
Nondeductible compensation charge.................................................. -- 1,008 --
Income taxed to Central shareholders............................................... -- (590) --
Deferred tax charge for S corporation taxes........................................ -- 924
Other ............................................................................. (190) -- --
-------- -------- --------
Income tax provision.................................................................... $ 11,750 $ 7,658 $ 100
======== ======== ========
Effective income tax rate............................................................... 41.1% 48.3% 1.5%
======== ======== ========
Deferred income tax provisions result from temporary differences in the
recognition of expenses for financial reporting purposes and for tax reporting
purposes. U.S. Concrete presents the effects of those differences as deferred
income tax liabilities and assets, as follows (in thousands):
December 31
--------------------
2000 1999
-------- ------
Deferred income tax liabilities:
Property and equipment, net....................................................................... $ 10,407 $7,838
Goodwill ......................................................................................... 1,689 --
Other............................................................................................. 1,816 476
-------- -------
Total deferred income tax liabilities........................................................ 13,912 8,314
-------- -------
Deferred income tax assets:
Allowance for doubtful accounts................................................................... 433 197
Accrued expenses.................................................................................. 1,220 1,062
Other............................................................................................. 424 88
-------- --------
Total deferred income tax assets............................................................. 2,077 1,347
-------- -- -----
Net deferred income tax liabilities..................................................... $ 11,835 $6,967
======== ======
Prior to their respective acquisitions, Central and other acquired
businesses were S corporations and were not subject to federal income taxes.
Effective with their acquisition they became subject to those taxes, and U.S.
Concrete has recorded an estimated deferred tax liability to provide for its
estimated future income tax liability as a result of the difference between the
book and tax bases of the net assets of these corporations as of the dates of
their acquisitions. These consolidated financial statements reflect the federal
and state income taxes of these corporations since their dates of acquisition.
9. RELATED-PARTY TRANSACTIONS
U.S. Concrete has transactions in the normal course of business with
related parties. These transactions consist principally of operating leases
under which U.S. Concrete leases facilities from former owners of its acquired
businesses or their affiliates. These leases are for periods generally ranging
from three to five years and are on terms management believes are comparable to
unrelated party leases. Lease payments under these leases were approximately
$978,000 in 2000, $597,000 in 1999, and $144,000 in 1998. The schedule of
minimum lease payments in Note 11 includes U.S. Concrete's future commitments
under these leases.
U.S. Concrete provides advances to employees in the normal course of
business that are repaid directly or through deductions from payroll. During
2000, U.S. Concrete made non-interest bearing loans totalling $300,000 to two of
its officers. The loans to these officers are payable in full by March 1, 2005.
34
U.S. Concrete's venture capital partner, Main Street Equity Ventures II,
L.P., of which Vincent D. Foster, U.S. Concrete's chairman, is a senior managing
director, advanced funds to U.S. Concrete from August 1998 until May 1999
totaling $1.7 million to enable it to pay its expenses in connection with the
completion of its IPO and concurrent acquisitions of six operating businesses.
U.S. Concrete repaid these advances, including interest accrued at the rate of
6% per year, from the gross proceeds of its IPO. U.S. Concrete paid Main Street
$403,000 in 2000 and $180,000 in 1999 for services related to U.S. Concrete's
acquisition program.
In March 2000, U.S. Concrete modified the non-compete provisions pertaining
to Neil J. Vannucci, one of its directors, that are contained in the acquisition
agreement for the company he formerly owned. The modifications further limit Mr.
Vannucci's right to compete in exchange for three annual cash payments of
$138,000 each.
10. RISK CONCENTRATION
U.S. Concrete grants credit, generally without collateral, to its
customers, which include general contractors, municipalities and commercial
companies located solely in the United States. Consequently, it is subject to
potential credit risk related to changes in business and economic factors
throughout the United States. U.S. Concrete generally has lien rights in the
work it performs, and concentrations of credit risk are limited because of the
diversity of its customer base. Further, management believes that its contract
acceptance, billing and collection policies are adequate to minimize any
potential credit risk.
U.S. Concrete maintains cash balances at financial institutions, which may
at times be in excess of federally insured levels. It has not incurred losses
related to these balances during the three-year period ended December 31, 2000.
11. COMMITMENTS AND CONTINGENCIES
Litigation and Other Claims
Bay-Crete Transportation & Materials, LLC alleges in a lawsuit it filed on
July 11, 2000 in a California state court, against U.S. Concrete and its
subsidiary, Central, that it possesses beneficiary rights under a 1983 contract
to purchase annually up to 200,000 cubic yards of ready-mixed concrete from
Central until March 30, 2082. Under that contract, the purchase price would
consist of Central's direct materials costs and an overhead fee. Bay-Crete
alleges that U.S. Concrete breached that contract by refusing to acknowledge
Bay-Crete's rights as a beneficiary of that contract. It is seeking damages of
$500 million of lost profits spread over the next 82 years. U.S. Concrete and
Central each filed an answer and cross-complaint in August 2000 which seeks
declaratory relief for a determination that Bay-Crete is not entitled to use the
contract. In addition, the cross-complaints seek damages for improper conduct by
Bay-Crete, the general manager of Bay-Crete and a member of Bay-Crete for making
demands under the contract in violation of an order of a United States
bankruptcy court. A predecessor to Central previously prevailed in the defense
of a similar action brought by the general manager of Bay-Crete under a related
agreement, and U.S. Concrete and Central believe they have meritorious defenses
to Bay-Crete's claim and intend to vigorously defend this suit.
From time to time, and currently, U.S. Concrete is subject to various other
claims and litigation brought by employees, customers and other third parties
for, among other matters, personal injuries, property damages, product defects
and delay damages that have, or allegedly have, resulted from the conduct of its
operations.
U.S. Concrete is currently in discussions with a customer and developer
regarding a product warranty claim. The claim relates to a large, single-family
home tract-construction project in Northern California for which U.S. Concrete
produced and supplied a different batch mix for a short period of time that was
used in 72 foundation slabs on grade. The developer asserts that it is entitled
to be made whole for all expenses it incurred in demolishing the homes on those
slabs, for all costs of rebuilding the homes to their state prior to demolition
and for all related costs. Although management believes U.S. Concrete has valid
defenses to this claim based on, among other things, failure to mitigate
damages, management is unable to quantify a range of loss or to predict with
certainty the outcome of this matter at this time.
U.S. Concrete believes that the resolution of all claims or litigation
currently pending or threatened against U.S. Concrete or any of its subsidiaries
(including the dispute with Bay-Crete and the product warranty claim described
above) will not have a material adverse effect on its business or financial
condition; however, because of the inherent uncertainty of resolving claims and
litigation, U.S. Concrete cannot assure that the resolution of any particular
claim or proceeding to which it is a party will not have a material adverse
effect on its results of operations for the fiscal period in which that
resolution occurs.
35
Lease Payments
U.S. Concrete leases tracts of land, facilities and equipment it uses in
its operations. Rental expense under operating leases was $4.4 million, $2.0
million, and $322,000 in 2000, 1999 and 1998, respectively. Minimum future
annual lease payments under these leases are as follows (in thousands):
U.S. Concrete maintains third-party insurance coverage in amounts and
against the risks it believes accord with industry practice. Under certain
components of its insurance program, U.S. Concrete shares the risk of loss with
its insurance underwriters by maintaining high deductibles subject to aggregate
annual loss limitations. U.S. Concrete funds these deductibles and records an
expense for expected losses under the programs. The expected losses are
determined using actuarial assumptions followed by the insurance industry and
U.S. Concrete's historical loss experience.
12. SIGNIFICANT CUSTOMERS
Significant customers represented sales (as a percentage of total sales) as
follows:
Year Ended
December 31
---------------------
2000 1999 1998
---------------------
Customer A................................. 5 % 8 % 16 %
Customer B (related party)................. 4 8 22
13. SIGNIFICANT SUPPLIERS
Significant suppliers represented purchases (as a percentage of total
purchases) as follows:
In February 2000, U.S. Concrete established a defined contribution 401(k)
profit sharing plan for employees meeting various employment requirements.
Eligible employees may contribute amounts up to the lesser of 15% of their
annual compensation or the maximum amount permitted under IRS regulations. U.S.
Concrete matches 100% of employee contributions up to a maximum of 5% of their
compensation. U.S. Concrete paid matching contributions of $865,000 during 2000.
U.S. Concrete maintains defined contribution profit-sharing and money
purchase pension plans for its non-union employees. Contributions were not made
to these plans in 2000, but were approximately $816,000 in 1999, and $404,000 in
1998.
36
U.S. Concrete's subsidiaries are parties to various collective bargaining
agreements with labor unions having multi-year terms that expire on a staggered
basis. Under these agreements, U.S. Concrete pays specified wages to covered
employees, observes designated workplace rules and makes payments to
multi-employer pension plans and employee benefit trusts rather than
administering the funds on behalf of these employees.
In connection with its collective bargaining agreements U.S. Concrete
participates with other companies in the unions' multi-employer pension plans.
These plans cover substantially all of U.S. Concrete's employees who are members
of such unions. The Employee Retirement Income Security Act of 1974, as amended
by the Multi-Employer Pension Plan Amendments Act of 1980, imposes liabilities
on employers who are contributors to a multi-employer plan in the event of the
employer's withdrawal from, or on termination of that plan. U.S. Concrete has no
plans to withdraw from these plans. These plans do not maintain information on
net assets and actuarial present value of the accumulated share of the plans'
unfunded vested benefits allocable to U.S. Concrete, and amounts, if any, for
which U.S. Concrete may be contingently liable are not ascertainable at this
time. U.S. Concrete made contributions to these plans of $9.0 million in 2000,
$4.2 million in 1999 and $2.3 million in 1998.
15. SELECTED QUARTERLY FINANCIAL INFORMATION (unaudited; in thousands, except
per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- --------- ---------
2000
Sales................................................................ $ 67,990 $106,486 $116,590 $103,570
Income from operations............................................... 4,553 13,991 15,203 7,639
Net income........................................................... 1,516 6,666 6,732 1,946
Basic earnings per share............................................. 0.08 0.31 0.31 0.09
Diluted earnings per share........................................... 0.08 0.31 0.31 0.09
1999
Sales................................................................ $ 12,956 $ 27,648 $ 59,803 $ 67,505
Income (loss) from operations........................................ 716 (182) 8,296 8,063
Net income (loss).................................................... 926 (1,979) 4,913 4,330
Basic earnings (loss) per share...................................... 0.30 (0.23) 0.30 0.24
Diluted earnings (loss) per share.................................... 0.30 (0.23) 0.30 0.24
In the second quarter of 1999, in connection with the IPO, U.S. Concrete
recorded a noncash compensation charge of $2.9 million for 400,000 shares of
common stock issued to management at a nominal cost. The compensation charge was
calculated using a fair value of $7.20 per share, which reflects a 10% discount
from the IPO price of $8.00 per share because of restrictions on the sale and
transferability of the shares issued.
Also in the second quarter of 1999, an additional tax provision of $924,000
was recorded with the conversion of Central from S-corporation status to
C-corporation status. Central had made no provision for federal income taxes for
the first five months of 1999.
16. SUBSEQUENT EVENTS
Acquisitions
From January 1 through March 15, 2001, U.S. Concrete acquired two
businesses. The aggregate consideration it paid in these transactions, both of
which it accounted for as purchases, consisted of $23.5 million in cash and 0.2
million shares of common stock. The cash component of consideration paid was
funded by U.S. Concrete's senior revolving credit facility.
37
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
In Items 10, 11, 12 and 13 below, we are incorporating by reference the
information we refer to in those Items from the definitive proxy statement for
our 2001 Annual Meeting of Stockholders. We intend to file that definitive proxy
statement with the SEC by April 30, 2001.
Item 10. Directors and Executive Officers of the Registrant
Please see the information appearing under the headings "Proposal No.
1--Election of Directors" and "Executive Officers" in the definitive proxy
statement for our 2001 Annual Meeting of Stockholders for the information this
Item 10 requires.
Item 11. Executive Compensation
Please see the information appearing under the heading "Executive
Compensation and Other Matters" in the definitive proxy statement for our 2001
Annual Meeting of Stockholders for the information this Item 11 requires.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Please see the information appearing under the heading "Security Ownership
of Certain Beneficial Owners and Management" in the definitive proxy statement
for our 2001 Annual Meeting of Stockholders for the information this Item 12
requires.
Item 13. Certain Relationships and Related Transactions
Please see the information appearing under the heading "Certain
Transactions" in the definitive proxy statement for our 2001 Annual Meeting of
Stockholders for the information this Item 13 requires.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements.
See Index to Consolidated Financial Statements on page19.
(2) Financial Statement Schedules.
All financial statement schedules are omitted because they are not required
or the required information is shown in our consolidated financial statements or
the notes thereto.
(3) Exhibits.
Exhibit
Number Description
---------- -----------
2.1*--Agreement and Plan of Reorganization dated as of March 22, 1999 by
and among U.S. Concrete, OCC Acquisition Inc., Opportunity Concrete
Corporation and the stockholders named therein (Form S-1 (Reg. No.
333-74855), Exhibit 2.1).
2.2*--Agreement and Plan of Reorganization dated as of March 22, 1999 by
and among U.S. Concrete, Walker's Acquisition Inc., Walker's
Concrete, Inc. and the stockholders named therein (Form S-1 (Reg.
No. 333-74855), Exhibit 2.2).
38
Exhibit
Number Description
-------- -----------
2.3*--Agreement and Plan of Reorganization dated as of March 22, 1999 by
and among U.S. Concrete, Central Concrete Acquisitions Inc., Central
Concrete Supply Co., Inc. and the stockholders named therein (Form
S-1 (Reg. No. 333-74855), Exhibit 2.3).
2.4*--Agreement and Plan of Reorganization dated as of March 22, 1999 by
and among U.S. Concrete, Bay Cities Acquisition Inc., Bay Cities
Building Materials Co., Inc. and the stockholders named therein (Form
S-1 (Reg. No. 333-74855), Exhibit 2.4).
2.5*--Agreement and Plan of Reorganization dated as of March 22, 1999 by
and among U.S. Concrete, Baer Acquisition Inc., Baer Concrete,
Incorporated and the stockholders named therein (Form S-1 (Reg. No.
333-74855), Exhibit 2.5).
2.6*--Agreement and Plan of Reorganization dated as of March 22, 1999 by
and among U.S. Concrete, Santa Rosa Acquisition, Inc., R.G.
Evans/Associates d/b/a Santa Rosa Cast Products Co.) and the
stockholders named therein (Form S-1 (Reg. No. 333-74855), Exhibit
2.6).
2.7*--Uniform Provisions for the Acquisitions (incorporated into the
agreements filed as Exhibits 2.1 through 2.6 hereto) (Form S-1 (Reg.
No. 333-74855), Exhibit 2.7).
2.8*--Acquisition Agreement and Plan of Reorganization dated as of
September 14, 1999 by and among U.S. Concrete, Inc., Concrete XI
Acquisition, Inc., Carrier Excavation and Foundation Company, John F.
Carrier, William Henry Carrier, Michael K. Carrier, Mary G. Carrier,
Trustee for Anne Carrier (TN UGMA), William Henry Carrier, Trustee
for William Henry Carrier, Jr. (TN UGMA), and Mary G. Carrier (Form
10-K for the year ended December 31, 1999 (File No. 000-26025),
Exhibit 2.8).
2.9*--Stock Purchase Agreement dated as of November 5, 1999 by and among U.
S. Concrete, Inc., B. Thomas Stover, as Trustee under Trust Agreement
dated February 20, 1986 for B. Thomas Stover, Sarah M. Stover, as
Trustee under Trust Agreement dated February 27, 1990 for Sarah M.
Stover, B. Andrew Stover, B. Thomas Stover, Custodian under Michigan
Uniform Gifts to Minors Act for the benefit of Carolyn A. Stover,
Jeffery D. Spahr, Jeffrey T. Stover, and Bradley C. Stover (Form 10-K
for the year ended December 31, 1999 (File No. 000-26025), Exhibit
2.9).
2.10*--Stock Purchase Agreement dated as of January 20, 2000 by and among
Robert S. Beall, Chase Bank of Texas, National Association, in its
capacity as Trustee for Allison Beall 1999 Trust, Logan Beall 1999
Trust, Allison Beall Descendants' Trust and Logan Beall Descendants'
Trust and U.S. Concrete, Inc. (Form 8-K dated February 23, 2000,
(File No. 000-26025), Exhibit 2.1).
2.11*--Amendment No. 1 to Stock Purchase Agreement dated January 28, 2000
by and among Robert S. Beall, Chase Bank of Texas, National
Association, in its capacity as Trustee for Allison Beall 1999 Trust,
Logan Beall 1999 Trust, Allison Beall Descendants' Trust and Logan
Beall Descendants' Trust and U.S. Concrete, Inc. (Form 8-K dated
February 23, 2000, (File No. 000-26025), Exhibit 2.2).
2.12*--Stock Purchase Agreement dated as of January 24, 2000 by and among
Fallis Arch Beall, Nola Sue Beall, Robert S. Beall, Leigh Ann
Gathright, Doris W. Stokes and Fallis Arch Beall, in his capacity as
Trustee for the R. E. Stokes Trust and U. S. Concrete, Inc. (Form 8-K
dated February 23, 2000, (File No. 000-26025), Exhibit 2.3).
2.13*--Acquisition Agreement and Plan of Reorganization dated as of
February 8, 2000 by and among U. S. Concrete, Inc., Concrete XIX
Acquisition, Inc., Cornillie Fuel & Supply, Inc., Richard A. Deneweth
and Joseph C. Cornillie, Trustee URTA of Joseph C. Cornillie (Form
10-K for the year ended December 31, 1999 (File No. 000-26025),
Exhibit 2.13).
2.14*--Stock Purchase Agreement dated as of February 8, 2000 by and among
U. S. Concrete, Inc., Cornillie Fuel & Supply, Inc., Dencor, Inc.
Richard A. Deneweth and Joseph C. Cornillie, Trustee URTA of Joseph
C. Cornillie (Form 10-K for the year ended December 31, 1999 (File
No. 000-26025), Exhibit 2.14).
2.15*--Acquisition Agreement and Plan of Reorganization dated as of
February 8, 2000 by and among U. S. Concrete, Inc., Concrete XVIII
Acquisition, Inc., Cornillie Leasing, Inc., Richard A. Deneweth, and
Joseph C. Cornillie, Trustee URTA of Joseph C. Cornillie(Form 10-K
for the year ended December 31, 1999 (File No. 000-26025), Exhibit
2.15).
2.16*--Acquisition Agreement and Plan of Reorganization dated as of March
2, 2000 by and among U. S. Concrete, Inc., Concrete XXIV Acquisition,
Inc., Stancon Inc. and Donald S. Butler and John Grace (Form 10-K for
the year ended December 31, 1999 (File No. 000-26025), Exhibit 2.16).
3.1*--Restated Certificate of Incorporation of U.S. Concrete (Form S-1
(Reg. No. 333-74855), Exhibit 3.1).
3.2*--Bylaws of U.S. Concrete (Form 10-Q for the quarter ended September
30, 2000 (File No. 000-26025), Exhibit 3.2).
39
Exhibit
Number Description
-------- -----------
3.3*--Certificate of Designation of Junior Participating Preferred Stock
(Form 10-Q for the quarter ended June 30, 2000 (File No. 000-26025,
Exhibit 3.3).
4.1*--Amended and Restated Credit Agreement dated as of February 9, 2000,
among U.S. Concrete, the Guarantors named therein, the Lenders named
therein, Bankers Trust Company, as syndication agent, First Union
National Bank, as documentation agent, Bank One, Texas, NA, Branch
Banking & Trust Company, Credit Lyonnais New York Branch and The Bank
of Nova Scotia, as co-managing agents and Chase Bank of Texas, N.A.,
as the Administrative Agent, and Chase Securities, Inc., as sole book
manager and lead arranger (Form 10-K for the year ended December 31,
1999 (File No. 000-26025), Exhibit 4.6).
4.2--First Amendment to Amended and Restated Credit Agreement, dated July
7, 2000, among U.S. Concrete, the Guarantors named therein, the
Lenders named therein, Bankers Trust Company, as syndication agent,
First Union National Bank, as documentation agent, Bank One, Texas,
NA, Branch Banking & Trust Company, Credit Lyonnais New York Branch
and The Bank of Nova Scotia, as co-managing agents and Chase Bank of
Texas, N.A., as the Administrative Agent, and Chase Securities, Inc.,
as sole book manager and lead arranger.
4.3--Second Amendment to Amended and Restated Credit Agreement, dated
September 30, 2000, among U.S. Concrete, the Guarantors named
therein, the Lenders named therein, Bankers Trust Company, as
syndication agent, First Union National Bank, as documentation agent,
Bank One, Texas, NA, Branch Banking & Trust Company, Credit Lyonnais
New York Branch and The Bank of Nova Scotia, as co-managing agents
and Chase Bank of Texas, N.A., as the Administrative Agent, and Chase
Securities, Inc., as sole book manager and lead arranger.
4.4--Note Purchase Agreement, dated November 10, 2000, among U.S.
Concrete, Inc., The Prudential Insurance Company of America,
Metropolitan Life Insurance Company, Teachers Insurance & Annuity
Association, Connecticutt General Life Insurance Company, Allstate
Life Insurance Company, Allstate Life Insurance Company of New York
and Southern Farm Bureau Life Insurance Company.
U.S. Concrete and some of its subsidiaries are parties to debt
instruments under which the total amount of securities authorized
does not exceed 10% of the total assets of U.S. Concrete and its
subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)
(A) of Item 601(b) of Regulation S-K, U.S. Concrete agrees to
furnish a copy of those instruments to the SEC on request.
10.1*+--1999 Incentive Plan of U.S. Concrete (Form S-1 (Reg. No. 333-74855),
Exhibit 10.1).
10.2*+--Employment Agreement between U.S. Concrete and William T. Albanese
(Form S-1 (Reg. No. 333-74855), Exhibit 10.2).
10.3*+--Form of Employment Agreement between U.S. Concrete and Michael W.
Harlan (Form S-1 (Reg. No. 333-74855), Exhibit 10.3).
10.4*+--Form of Employment Agreement between U.S. Concrete and Eugene P.
Martineau (Form S-1 (Reg. No. 333-74855), Exhibit 10.4).
10.5*+--Employment Agreement between U.S. Concrete and Michael D. Mitschele
(Form S-1 (Reg. No. 333-74855), Exhibit 10.5).
10.6*+--Employment Agreement between U.S. Concrete and Charles W. Sommer
(Form S-1 (Reg. No. 333-74855), Exhibit 10.6).
10.7*+--Employment Agreement between U.S. Concrete and Neil J. Vannucci
(Form S-1 (Reg. No. 333-74855), Exhibit 10.7).
10.8*+--Employment Agreement between U.S. Concrete and Robert S. Walker
(Form S-1 (Reg. No. 333-74855), Exhibit 10.8).
10.9*+--Form of Indemnification Agreement between U.S. Concrete and each of
its directors and officers (Form S-1 (Reg. No. 333-74855), Exhibit
10.9).
10.10*+--Form of Employment Agreement between U.S. Concrete and Terry Green
(Form S-1 (Reg. No. 333-74855), Exhibit 10.10).
10.11*+--Employment Agreement between U.S. Concrete and Donald C. Wayne
(Form 10-K for the year ended December 31, 1999 (File No. 000-
26025), Exhibit 10.11).
10.12*+--Amended and Restated Indemnification Agreements dated August 17,
2000 between U.S. Concrete and each of its directors and officers
(Form 10-Q for the quarter ended September 30, 2000 (File No.
000-26025, Exhibit 10.1).
10.13*+--Indemnification Agreement dated August 17, 2000 between U.S.
Concrete and Raymond C. Turpin (Form 10-Q for the quarter ended
September 30, 2000 (File No. 000-26025, Exhibit 10.2).
40
Exhibit
Number Description
-------- -----------
10.14--Promissory Note, dated March 2, 2000, issued by Michael W. Harlan to
U.S. Concrete, Inc.
10.15--Promissory Note, dated March 2, 2000, issued by Eugene P. Martineau
to U.S. Concrete, Inc.
10.16--Agreement, dated March 15, 2000, between U.S. Concrete, Inc. and
Neil J. Vannucci.
21--Subsidiaries
23--Consent of independent public accountants.
* Incorporated by reference to the filing indicated.
+ Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
None
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
U.S. CONCRETE, INC.
Date: March 15, 2001
By: /s/ Eugene P. Martineau
-------------------------------------
Eugene P. Martineau
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 15, 2001.
Signature Title
--------------------- -------------------------------
/s/ Eugene P. Martineau President and Chief Executive Officer and
----------------------------- Director (Principal Executive Officer)
Eugene P. Martineau
/s/ Michael W. Harlan Chief Financial Officer and Director
----------------------------- (Principal Financial Officer)
Michael W. Harlan
/s/ Charles W. Sommer Vice President and Controller
----------------------------- (Principal Accounting Officer)
Charles W. Sommer
/s/ Vincent D. Foster Director
-----------------------------
Vincent D. Foster
/s/ John R. Colson Director
-----------------------------
John R. Colson
/s/ Peter T. Dameris Director
--------------------------------
Peter T. Dameris
/s/ William T. Albanese Director
--------------------------------
William T. Albanese
/s/ Michael D. Mitschele Director
-----------------------------
Michael D. Mitschele
/s/ Murray S. Simpson Director
-----------------------------
Murray S. Simpson
/s/ Neil J. Vannucci Director
-----------------------------
Neil J. Vannucci
/s/ Robert S. Walker Director
-------------------------------
Robert S. Walker
42
EXHIBIT 4.2
First Amendment to
Amended and Restated Credit Agreement
This First Amendment to Amended and Restated Credit Agreement (the
"First Amendment" or this "Amendment"), effective as of July 7, 2000 is entered
into by and among U.S. Concrete, Inc., a Delaware corporation, (the "Company"),
the Guarantors signatory hereto under the caption "Guarantors" (together with
each other Person who becomes a Guarantor, collectively, the "Guarantors"), the
Lenders signatory hereto under the caption "Lenders" (together with each other
Person who becomes a Lender, collectively, the "Lenders") and Chase Bank of
Texas, National Association, a national banking association, as administrative
agent for the other Lenders (in such capacity, together with any other Person
who becomes the administrative agent, the "Administrative Agent"), Bankers Trust
Company, as syndication agent, First Union National Bank, as documentation
agent, and Bank One, Texas, NA, Branch Banking & Trust Company, Credit Lyonnais
New York Branch and The Bank of Nova Scotia, collectively as co-managing agents
for the Lenders.
Preliminary Statement
Whereas, the Company, the Guarantors, the Lenders, the Administrative
Agent, the syndication agent, the documentation agent and the co-managing agents
have entered into that certain Amended and Restated Credit Agreement dated as of
February 9, 2000 (said Credit Agreement, as amended and as may be further
amended, extended, supplemented or restated from time to time, the "Credit
Agreement") under the terms of which the Lenders agreed to make Revolving Credit
Loans to the Company in an amount not exceeding $200,000,000.00; and
Whereas, the Company has requested the Lenders and the Administrative
Agent to amend certain terms of the Credit Agreement; and
Whereas, the Lenders and the Administrative Agent have agreed to do so
to the extent reflected in this Amendment, provided that each of the Company and
the Guarantors ratifies and confirms all of its respective obligations under the
Credit Agreement and the Loan Documents.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration and the mutual benefits, covenants and agreements
herein expressed, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
1. Defined Terms. (a) All capitalized terms used in this Amendment
and not otherwise defined herein shall have the meanings ascribed to such terms
in the Credit Agreement.
(b) Amendment to Section 1.01. Section 1.01 of the Credit
Agreement is hereby amended by restating subsection (e) of the definition
of Permitted Investments in its entirety to read as follows (the remainder
of the definition of Permitted Investments is unchanged):
"(e) other advances and loans to officers and employees of the
Borrower or any Subsidiary, so long as the aggregate principal
amount of such advances and loans does not exceed $500,000 at any
one time outstanding;".
(c) Amendment to Section 1.01. Section 1.01 of the Credit
Agreement is further amended by adding a new definition, "Bankruptcy Code"
to read in its entirety as follows:
"Bankruptcy Code" means Title 11 of the United States Code, as
amended and in effect from time to time.".
2. Ratification. Each of the Company, as to itself and each
Guarantor, and each Guarantor, as to itself, hereby ratifies all of its
respective obligations under the Credit Agreement (including the Guaranty
contained in Article X thereof) and each of the Loan Documents to which it is a
party, and agrees and acknowledges that the Credit Agreement and each of the
Loan Documents to which it is a party remains in full force and effect and shall
continue in full force and effect as amended and modified by this Amendment.
Nothing in this Amendment extinguishes, novates or releases any right, claim,
lien, security interest or entitlement of any of the Lenders or the
Administrative Agent created by or contained in any of such documents nor is the
Company or any Guarantor released from any covenant, warranty or obligation
created by or contained therein or herein.
2. Representations and Warranties. Each of the Company, as to itself
and each Guarantor, and each Guarantor, as to itself, hereby represents and
warrants to the Administrative Agent and the Lenders that (a) this Amendment has
been duly executed and delivered on behalf of the Company and such Guarantor,
subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law, (b) this Amendment constitutes a valid and
legally binding agreement enforceable against the Company or such Guarantor, as
the case may be, in accordance with its terms, (c) the representations and
warranties contained in the Credit Agreement and the Loan Documents are true and
correct on and as of the date hereof in all material respects as though made as
of the date hereof, except as heretofore otherwise disclosed in writing to the
Administrative Agent, (d) no Default exists under the Credit Agreement or under
any other Loan Document and (e) the execution, delivery and performance of this
Amendment has been duly authorized by the Company and each Guarantor.
3. Conditions to Effectiveness. This Amendment shall be effective
upon the execution and delivery hereof by all parties to the Administrative
Agent and receipt by the Administrative Agent of this Amendment.
4. Counterparts. This Amendment may be signed in any number of
counterparts, which may be delivered in original or facsimile form each of which
shall be construed as an original, but all of which together shall constitute
one and the same instrument.
5. Governing Law. This Agreement, all Notes, the other Loan
Documents and all other documents executed in connection herewith shall be
deemed to be contracts and agreements under the laws of the State of Texas and
of the United States of America and for all purposes shall be construed in
accordance with, and governed by, the laws of Texas and of the United States.
6. Final Agreement of the Parties. THIS AMENDMENT AND THE CREDIT
AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
[Remainder of Page Intentionally Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
Company:
U.S. CONCRETE
By: /s/ Michael W. Harlan
---------------------
Michael W. Harlan
Senior Vice President
Guarantors:
AFTM Corporation, a Michigan corporation
Atlas Concrete, Inc., an Oklahoma corporation
Atlas-Tuck Concrete, Inc., an Oklahoma corporation
B.W.B., Inc. of Michigan, a Delaware corporation
Baer Concrete, Inc., a New Jersey corporation
Beall Concrete Enterprises, Ltd., a Texas limited
partnership
Beall Industries, Inc., a Texas corporation
Beall Management, Inc., a Texas corporation
Beall Trucking, Inc., an Oklahoma corporation
Carrier Excavation and Foundation Company, a Delaware
corporation
Central Concrete Supply Co., Inc., a California
corporation
Concrete XX Acquisition, Inc., a Delaware corporation
Corden, Inc., a Michigan corporation
Cornillie Fuel & Supply, Inc., a Michigan corporation
Cornillie Leasing, Inc., a Michigan corporation
Dencor, Inc., a Michigan corporation
DYNA, Inc., a Delaware corporation
E.B. Metzen, Inc., a Michigan corporation
Fendt Transit Mix, Inc., a Michigan corporation
Hunter Equipment Company, a Michigan corporation
Olive Branch Ready Mix, Inc., a Delaware corporation
Opportunity Concrete Corporation, a District of
Columbia corporation
Premix Concrete Corp., a Delaware corporation
R.G. Evans/Associates d/b/a/ Santa Rosa Cast Products
Co., a California corporation
Ready Mix Concrete Company of Knoxville, a Delaware
corporation
San Diego Precast Concrete, Inc., a Delaware
corporation
Stokes Transit Mix, Inc., an Oklahoma corporation
Superior Materials Company, Inc., a Delaware
corporation
Superior Redi-Mix, Inc., a Michigan corporation
USC GP, Inc., a Delaware corporation
USC Management Co., LP, a Texas limited partnership
Western Concrete Products, Inc., a Delaware corporation
By: /s/ Michael W. Harlan
------------------------------------------------
Michael W. Harlan
Vice President
Administrative Agent/Lender:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By: /s/ James R. Dolphin
------------------------------------
James R. Dolphin
Senior Vice President
By: /s/ Mark B. Grover
-------------------------------------
Name: Mark B. Grover
Title: First Vice President
EXHIBIT 4.3
Second Amendment to
Amended and Restated Credit Agreement
This Second Amendment to Amended and Restated Credit Agreement (this
"Second Amendment"), effective as of September 30, 2000, is entered into by and
among U.S. Concrete, Inc., a Delaware corporation, (the "Company"), the
Guarantors signatory hereto under the caption "Guarantors" (together with each
other Person who becomes a Guarantor, collectively, the "Guarantors"), the
Lenders signatory hereto under the caption "Lenders" (together with each other
Person who becomes a Lender, collectively, the "Lenders") and The Chase
Manhattan Bank, a New York banking corporation, successor-in-interest by merger
to Chase Bank of Texas, National Association, as administrative agent for the
other Lenders (in such capacity, together with any other Person who becomes the
administrative agent, the "Administrative Agent"), Bankers Trust Company, as
syndication agent, First Union National Bank, as documentation agent, and Bank
One, Texas, NA, Branch Banking & Trust Company, Credit Lyonnais New York Branch
and The Bank of Nova Scotia, collectively as co-managing agents for the Lenders.
Preliminary Statement
Whereas, the Company, the Guarantors, the Lenders, the Administrative
Agent, the syndication agent, the documentation agent and the co-managing agents
have entered into that certain Amended and Restated Credit Agreement dated as of
February 9, 2000 (the "Original Credit Agreement") under the terms of which the
Lenders agreed to make Revolving Credit Loans to the Company in an amount not
exceeding $200,000,000.00; and
Whereas, the Company, the Guarantors, the Lenders, the Administrative
Agent, the syndication agent, the documentation agent and the co-managing agents
have amended the Original Credit Agreement pursuant to that certain First
Amendment to Amended and Restated Credit Agreement dated as of July 7, 2000 (the
"First Amendment")(the Original Credit Agreement, as amended by the First
Amendment and as may be further amended, extended, supplemented or restated from
time to time, the "Credit Agreement"); and
Whereas, the Company has requested the Lenders and the Administrative
Agent to further amend certain terms of the Credit Agreement; and
Whereas, the Lenders and the Administrative Agent have agreed to do so
to the extent reflected in this Second Amendment, provided that each of the
Company and the Guarantors ratifies and confirms all of its respective
obligations under the Credit Agreement and the Loan Documents.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration and the mutual benefits, covenants and agreements
herein expressed, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
1. Defined Terms. All capitalized terms used in this Second
Amendment and not otherwise defined herein shall have the meanings ascribed to
such terms in the Credit Agreement.
2. Amendment to Section 1.01. Section 1.01 of the Credit Agreement
is hereby amended as follows:
(a) The definition of "Capital Markets Event" in Section 1.01 of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
""Capital Markets Event" means the first issuance after the Effective
Date by the Borrower or any Subsidiary of (i) Subordinated Debt, (ii)
preferred stock on terms reasonably satisfactory to the Administrative
Agent and the Lenders or (iii) common equity of the Borrower, from
which the gross proceeds, when added to the aggregate gross proceeds
of any other previous issuance after the Effective Date by the
Borrower or any Subsidiary of (i) Subordinated Debt, (ii) preferred
stock on terms reasonably satisfactory to the Administrative Agent and
the Lenders and (iii) common equity of the Borrower, equals an
aggregate principal amount of not less than $75,000,000.".
(b) The definition of "Applicable Margin" in Section 1.01 of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
""Applicable Margin" means, for any day during any period between two
successive Financial Statement Delivery Dates commencing on the first
Financial Statement Delivery Date in such period and ending on the day
before the following Financial Statement Delivery Date, with respect
to any ABR Loan, Eurodollar Revolving Loan, or with respect to the
commitment fees payable hereunder, as the case may be, the applicable
margin per annum set forth in the appropriate column below under the
caption "ABR Spread Before Capital Markets Event", "Eurodollar Spread
Before Capital Markets Event" or "Commitment Fee Rate", as the case
may be, for the ratio of Funded Debt to EBITDA for the fiscal period
for which such financial statements were delivered as of the Financial
Statement Delivery Date; provided that, upon the occurrence of any
Capital Markets Event, the columns under the captions "ABR Spread
After Capital Markets Event" and "Eurodollar Spread After Capital
Markets Event" shall be used to determine the applicable margin with
respect to any ABR Loan or Eurodollar Revolving Loan, as the case may
be. The applicable margin for all of the rows of such table under the
caption "Commitment Fee" shall remain unchanged:
ABR Eurodollar ABR Eurodollar
Spread Spread Spread Spread
Before Before After After
Capital Capital Capital Capital
Ratio of Funded Debt Markets Markets Markets Markets Commitment
To EBITDA Event Event Event Event Fee Rate
--------- -------- -------- ----------- -------- -----------
* 3.0 to 1.0 2.00% 3.00% 1.75% 2.75% .50%
* 2.5 to 1.0 but ** 3.0 to 1.0 1.75% 2.75% 1.50% 2.50% .50%
* 2.0 to 1.0 but ** 2.5 to 1.0 1.50% 2.50% 1.25% 2.25% .50%
* 1.5 to 1.0 but ** 2.0 to 1.0 1.00% 2.00% 1.00% 2.00% .50%
* 1.0 to 1.0 but ** 1.5 to 1.0 .75% 1.75% .75% 1.75% .375%
* .5 to 1.0 but ** 1.0 to 1.0 .50% 1.50% .50% 1.50% .375%
** .5 to 1.0 .25% 1.25% .25% 1.25% .250%
For purposes of the foregoing, (a) if sufficient information
does not exist to calculate the Applicable Margin, or the Borrower has
not delivered such information to the Administrative Agent in a timely
manner, Eurodollar Loans shall not be available to the Borrower and
the Applicable Margin for ABR Loans shall be 2.00% per annum and for
the commitment fee shall be .50% per annum; and (b) if (i) the Ratio
of Funded Debt to EBITDA shall change upon delivery of any financial
statement required under Section 5.01 or (ii) a Capital Markets Event
shall have occurred, such change in the Applicable Margin shall be
effective as of the date on which any such financial statement is
delivered or on the date of the Capital Markets Event shall have
occurred, as the case may be, irrespective of whether it is in the
middle of an Interest Period or when notice of such change shall have
been furnished by the Borrower to the Administrative Agent and the
Lenders pursuant to Section 5.01(c) hereof or otherwise. Each change
in the Applicable Margin shall apply during the period commencing on
the effective date of such change and ending on the date immediately
preceding the effective date of the next such change.".
(c) The definition of "Commitment" in Section 1.01 of the Credit
Agreement is hereby deleted in its entirety and replaced by the following:
""Commitment" means (a) with respect to each Lender, the commitment of
such Lender to make Revolving Loans and to acquire participations in
Letters of Credit and Swingline Loans hereunder, expressed as an
amount representing the maximum aggregate amount of such Lender's
Revolving Credit Exposure hereunder, as such commitment may be (i)
reduced from time to time pursuant to Section 2.08 and/or (ii) reduced
or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04 and (b) with respect to the Swingline
Lender, its commitment to make Swingline Loans. The initial amount of
each Lender's Commitment is set forth on Schedule 2.01 under the
caption "Initial Commitment", or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Commitment, as
applicable. The aggregate amount of the Lenders' total Commitments is
$200,000,000.00, unless reduced pursuant to Section 2.08.".
* more than or equal to
** less than
(d) The definition of "Restricted Payment" in Section 1.01 of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
""Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property, except distributions
payable in capital stock) with respect to any shares of any class of
capital stock of the Borrower or any Subsidiary (other than
distributions to the Borrower or any Subsidiary), any payment (whether
in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares of capital
stock of the Borrower, any option, warrant or other right to acquire
any such shares of capital stock of the Borrower or any voluntary
prepayment, purchase, redemption, retirement or acquisition of any
debt of the Borrower subordinated to the Obligations which is made at
the option of the Borrower.".
(e) The definition of "Subordinated Debt" in Section 1.01 of the
Credit Agreement is hereby deleted in its entirety and replaced by the
following:
""Subordinated Debt" means any Indebtedness of the Borrower or any
Subsidiary permitted hereunder that is (i) subordinated to the
Indebtedness incurred under this Agreement on terms substantially in
form and substance to those contained in Exhibit 1.01C to the Credit
Agreement, and (ii) incurred pursuant to the terms and conditions
contained in the Summary of Principal Terms attached as Exhibit A to
the Second Amendment to Amended and Restated Credit Agreement, or
(iii) otherwise approved by the Required Lenders, including such
Indebtedness incurred in connection with a Capital Markets Event, and,
upon obtaining the consent of the Required Lenders, any renewals, or
extensions thereof, amendments thereto, substitutions therefor or
restatements and refinancing thereof.".
3. Amendment to Section 2.08(b). Section 2.08(b) of the Credit
Agreement is hereby deleted in its entirety and is replaced by the following:
"(b) Intentionally Deleted.".
4. Amendment to Section 2.09(b). Section 2.09(b) of the Credit
Agreement is hereby deleted in its entirety and is replaced by the following:
"(b) Intentionally Deleted.".
5. Amendment to Section 5.01. Section 5.01 of the Credit Agreement
is hereby amended by adding a new subsection 5.01(j) to read in its entirety as
follows:
"(j) on or before November 15, 2000 the Company shall provide to the
Administrative Agent and the Lenders an officer's certificate executed by a
Financial Officer of the
Company, which certificate shall contain, and shall certify as correct,
recalculations made by the Company as of October 31, 2000 of the
calculations set forth in the certificate most recently delivered pursuant
to Section 5.01(c), evidencing the Company's compliance as of October 31,
2000 with the covenants contained in Section 6.08 through 6.10, inclusive.
In the event a Capital Markets Event has not occurred on or before October
31, 2000, the certificate described in the immediately preceding sentence
shall also include pro forma calculations showing the effect that a Capital
Markets Event would have on the Company's compliance as of October 31, 2000
with the covenants contained in Section 6.08 through 6.10, inclusive.
6. Amendment to Section 6.08(b). Section 6.08(b) of the Credit
Agreement is hereby deleted in its entirety and replaced by the following:
"(b) Asset Coverage Ratio. The Borrower will not at any time permit the
ratio of: (a) (i) accounts receivable plus (ii) inventory plus (iii) the
net book value of all property, plant and equipment in each case as
reflected on the financial statements delivered pursuant to Section 5.01,
to (b) Funded Debt minus Subordinated Debt, to be less than (i) 1.0 to 1.0
for the period from the Effective Date through November 15, 2000 and (ii)
1.25 to 1.0 for the period from November 16, 2000 and thereafter. For the
purposes of calculating this Asset Coverage Ratio, the Borrower may use (i)
the book value of such assets as recorded on the financials delivered under
Section 5.01 hereof or (ii) the fair market value of such assets, as such
fair market value is determined by a third party approved by the
Administrative Agent in its sole discretion; provided, that in the event
any fair market valuation has been determined which for any asset is less
that its book value, such fair market valuation must be used in the
calculation of this Asset Coverage Ratio.".
7. Amendment to Section 6.08(c). Section 6.08(c) of the Credit
Agreement is hereby deleted in its entirety and replaced by the following:
"(c) Senior Debt Leverage Ratio. The Borrower will not at any time permit
the ratio of (i) Funded Debt minus Subordinated Debt to (ii) EBITDA
calculated on a rolling four (4) quarter basis, to be greater than (i) 2.75
to 1.0 for the period from the Effective Date through June 29, 2000, (ii)
2.50 to 1.0 for the period from June 30, 2000 through November 15, 2000 and
(iii) 2.25 to 1.0 for the period from November 16, 2000 and thereafter;
provided, that upon the occurrence of a Capital Markets Event, such ratio
will not be greater than 2.25 to 1.0 for the period from the date of
occurrence of the Capital Markets Event and thereafter.".
8. Amendment to Section 6.11(vi). Section 6.11(vi) of the Credit
Agreement is hereby deleted in its entirety and replaced by the following:
"(vi) at any time prior to the occurrence of a Capital Markets Event,
concurrently with the delivery of the Permitted Acquisition Notice, the
Borrower shall have provided to the Administrative Agent and the Lenders a
calculation by the Borrower of the ratio of pro forma Funded Debt minus
Subordinated Debt (after giving effect to the proposed
Acquisition) to pro forma EBITDA (after giving effect to the proposed
Acquisition) showing that such ratio will not at any time be greater than
(A) 2.50 to 1.0 for the period from the Effective Date through June 29,
2000, (B) 2.25 to 1.0 for the period from June 30, 2000 through November
15, 2000 and (C) 2.00 to 1.0 for the period from November 16, 2000 and
thereafter."
9. Amendment to Exhibit 1.01C. Exhibit 1.01C to the Credit
Agreement is hereby amended by deleting in its entirety the last sentence on the
second page of such Exhibit which reads "If a payment or distribution is made to
holders of the Notes that, due to the subordination provisions, should not have
been made to them, such holders are required to hold it in trust for the holders
of Senior Indebtedness and pay the payment or distribution over to holders of
Senior Indebtedness as their interests may appear" and replacing such sentence
by the following:
"If a payment or distribution is made to holders of the Notes that, due to
the subordination provisions, should not have been made to them, such
holders are required to hold it in trust for the holders of Senior
Indebtedness and pay the payment or distribution over to holders of Senior
Indebtedness as their interests may appear; provided, however, that
distributions of securities of U.S. Concrete to the holders of the Notes,
the payment of which securities is subordinate to the Senior Indebtedness,
may be made to and retained by the holders of the Notes."
10. Amendment to Schedule 2.01. The column in Schedule 2.01 to the
Credit Agreement captioned "Commitment Subsequent to Capital Markets Event" is
hereby deleted in its entirety.
11. Ratification. Each of the Company, as to itself and each
Guarantor, and each Guarantor, as to itself, hereby ratifies all of its
respective obligations under the Credit Agreement (including the Guaranty
contained in Article X thereof) and each of the Loan Documents to which it is a
party, and agrees and acknowledges that the Credit Agreement and each of the
Loan Documents to which it is a party remains in full force and effect and shall
continue in full force and effect as amended and modified by this Second
Amendment. Nothing in this Second Amendment extinguishes, novates or releases
any right, claim, lien, security interest or entitlement of any of the Lenders
or the Administrative Agent created by or contained in any of such documents nor
is the Company or any Guarantor released from any covenant, warranty or
obligation created by or contained therein or herein.
12. Representations and Warranties. Each of the Company, as to
itself and each Guarantor, and each Guarantor, as to itself, hereby represents
and warrants to the Administrative Agent and the Lenders that (a) this Second
Amendment has been duly executed and delivered on behalf of the Company and such
Guarantor, subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law, (b) this Second Amendment constitutes a valid
and legally binding agreement enforceable against the Company or such Guarantor,
as the case may be, in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
laws
affecting creditors' rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law,
(c) the representations and warranties contained in the Credit Agreement and the
Loan Documents shall be true and correct on and as of the date of each Borrowing
and the date of issuance, amendment, renewal or extension of each Letter of
Credit, as applicable, except to the extent such representations and warranties
relate to a prior date or, after prior notice to the Administrative Agent, are
untrue or incorrect as a result of transactions permitted by the Loan Documents,
(d) no Default exists under the Credit Agreement or under any other Loan
Document and (e) the execution, delivery and performance of this Second
Amendment has been duly authorized by the Company and each Guarantor.
13. Conditions to Effectiveness. This Second Amendment shall be
effective upon (i) the execution and delivery hereof by all parties to the
Administrative Agent and receipt by the Administrative Agent of this Second
Amendment, and (ii) receipt by the Administrative Agent of an amendment fee due
and payable by the Company to the Administrative Agent for the pro rata benefit
of the Lenders of .075% of the total Commitments.
14. Counterparts. This Second Amendment may be signed in any number
of counterparts, which may be delivered in original or facsimile form each of
which shall be construed as an original, but all of which together shall
constitute one and the same instrument.
15. Governing Law. This Second Amendment, the Credit Agreement, all
Notes, the other Loan Documents and all other documents executed in connection
herewith shall be deemed to be contracts and agreements under the laws of the
State of Texas and of the United States of America and for all purposes shall be
construed in accordance with, and governed by, the laws of Texas and of the
United States.
16. Final Agreement of the Parties. THIS SECOND AMENDMENT AND THE
CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Remainder of Page Intentionally Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective officers thereunto duly authorized
as of the date first above written.
Company:
U.S. CONCRETE
By: /s/ Michael W. Harlan
---------------------
Michael W. Harlan
Senior Vice President
Guarantors:
AFTM Corporation, a Michigan corporation
Atlas Concrete, Inc., an Oklahoma corporation
Atlas-Tuck Concrete, Inc., an Oklahoma corporation
B.W.B., Inc. of Michigan, a Delaware corporation
Baer Concrete, Inc., a New Jersey corporation
Beall Concrete Enterprises, Ltd., a Texas limited partnership
Beall Industries, Inc., a Texas corporation
Beall Management, Inc., a Texas corporation
Beall Trucking, Inc., an Oklahoma corporation
Carrier Excavation and Foundation Company, a Delaware corporation
Central Concrete Supply Co., Inc., a California corporation
Concrete XX Acquisition, Inc., a Delaware corporation
Corden, Inc., a Michigan corporation
Cornillie Fuel & Supply, Inc., a Michigan corporation
Cornillie Leasing, Inc., a Michigan corporation
Dencor, Inc., a Michigan corporation
DYNA, Inc., a Delaware corporation
E.B. Metzen, Inc., a Michigan corporation
Fendt Transit Mix, Inc., a Michigan corporation
Hunter Equipment Company, a Michigan corporation
Olive Branch Ready Mix, Inc., a Delaware corporation
Opportunity Concrete Corporation, a District of Columbia corporation
Premix Concrete Corp., a Delaware corporation
R.G. Evans/Associates d/b/a/ Santa Rosa Cast Products Co., a California
corporation
Ready Mix Concrete Company of Knoxville, a Delaware corporation
San Diego Precast Concrete, Inc., a Delaware corporation
Stokes Transit Mix, Inc., an Oklahoma corporation
Superior Materials Company, Inc., a Delaware corporation
Superior Redi-Mix, Inc., a Michigan corporation
USC GP, Inc., a Delaware corporation
USC Management Co., LP, a Texas limited partnership
Western Concrete Products, Inc., a Delaware corporation
By: /s/ Michael W. Harlan
------------------------------------------
Michael W. Harlan
Vice President
Administrative Agent/Lender:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By: /s/ James R. Dolphin
-------------------------
James R. Dolphin
Senior Vice President
By: /s/ Mark B. Grover
------------------
Name: Mark B. Grover
Title: First Vice President
EXHIBIT A
Summary of Principal Terms of Subordinated Debt
----------------------
Issue Senior Subordinated Notes (the "Notes").
----------------------
Issuer U.S. Concrete, Inc. (the "Company").
----------------------
Guarantors The Notes shall be unconditionally guaranteed, on a
subordinated basis, as to the payment of principal,
interest and premium, if any, by each Material
Subsidiary.
----------------------
Principal Amount Approximately $75,000,000
----------------------
Noteholders Accredited institutional investors
----------------------
Final Maturity Ten years from the date of takedown.
----------------------
Amortization Seven equal annual principal repayments beginning on
the fourth anniversary of the issuance of the Notes
resulting in an average life of seven years.
----------------------
Interest Rate 12%. Interest will be payable quarterly in arrears.
----------------------
Price 100% of Principal Amount
----------------------
Takedown Immediately following completion of documentation.
----------------------
Use of Proceeds General corporate purposes of the Company including the
repayment of debt.
----------------------
Ranking The Notes shall be subordinated to the Company's Senior
Indebtedness.
----------------------
Optional Redemption The Issuer may redeem the Notes, in whole or pro rata
in part, at any time. In the event of prepayment, the
Issuer will pay an amount equal to par plus accrued
interest plus a "Make Whole Premium", as defined
herein.
----------------------
Make Whole Premium Make Whole Premium shall be defined as the difference
(not to be less than zero) between (a) the present
value of the expected future cash flows from the Notes
(minus any accrued Interest) discounted at a rate equal
to the then-current Treasury Note yield corresponding
closest to
EXHIBIT A - Page 1
the remaining weighted average life on the Notes
calculated at the time of the prepayment plus 150
basis points, and (b) the Principal Amount
outstanding.
---------------------------
Change of Control In the event that one person or a group of related
persons (other than the existing management group)
acquires more than 50% of the voting shares of the
Company, a Change of Control will be deemed to
have occurred. In the event of a Change of
Control, the Noteholders individually will have
the right, but not the obligation, to put their
Notes back to the Company at an amount equal to
par plus accrued interest plus the Modified Make
Whole Premium, if any.
---------------------------
Modified Make Whole Premium Shall mean the Make Whole Premium computed as if
the phrase "150 basis points" read "250 basis
points."
---------------------------
Financial Covenants
Total Debt Leverage Ratio The Company will maintain the ratio of
Consolidated Total Debt to EBITDA at no greater
than 3.25 to 1.0. This ratio will be calculated at
the end of each fiscal quarter based on the
previous four fiscal quarters.
Senior Debt Leverage Ratio The Company will maintain the ratio of
Consolidated Senior Debt to EBITDA at no greater
than 2.25 to 1.0. This ratio will be calculated at
the end of each fiscal quarter based on the
previous four fiscal quarters. In the event that
the covenants pertaining to Consolidated Senior
Debt in the Company's principal bank lending
agreement shall allow a greater amount of
Consolidated Senior Debt than is otherwise
permitted herein, then such greater amount shall
be the maximum allowable amount of Consolidated
Senior Debt; provided that, in any event, The
Company will maintain the ratio of Consolidated
Senior Debt to EBITDA at no greater than 2.50 to
1.0.
Fixed Charge Coverage Ratio The Company will not permit the ratio of (i)
EBITDA less cash taxes plus rent payments under
operating leases to (ii) the sum of (a) cash
interest plus (b) rent payments under operating
leases plus (c) maintenance capital expenditures
(defined as depreciation for the same period) to
be less than 1.0 to 1.0. This ratio will be
calculated at the end of each fiscal quarter based
on the previous four fiscal quarters.
Mergers and Consolidations The Company will not merge into or consolidate
with (or sell or convey all or substantially all
of its assets to) any other person unless (a) the
Company is the surviving entity or the surviving
entity expressly assumes the punctual payment and
observance of all obligations under the Notes, (b)
the surviving entity shall not immediately after
such merger or sale of assets be in default on the
Notes, and (c) the surviving entity shall be
organized in the United States; except that any
Subsidiary may merge with the Company (provided
that the Company shall be the surviving entity) or
with any one or more other Subsidiary.
EXHIBIT A - Page 2
Sale of Assets The Company will not sell, lease or transfer or
otherwise dispose of all or a substantial part of its
assets (defined to be in excess of 15% of Consolidated
Total Assets at the time of the sale), other than in
the ordinary course of business in any given fiscal
year and provided that such sale of substantial assets
on a cumulative basis shall not exceed 35% of
Consolidated Total Assets at the time of the sale,
except that: (x) any Subsidiary, other than the
Company, may sell, lease, transfer or otherwise dispose
of its assets to the Company or any other Subsidiary;
and (y) the Company may sell, lease, transfer or
otherwise dispose of its assets in excess of the
limitations set forth above if the proceeds of such
sales are used within one year of such sale (i) to
purchase other property useful in the business of the
Company or any Subsidiary and/or (ii) to repay Senior
Indebtedness.
Restricted Payments The Company's Restricted Payments and those of its
Subsidiaries will be limited to the amount in the pool
(the "Pool"). The following amounts will be included in
the Pool: (1) 25% (or minus 100% in the case of a
deficit) of Consolidated Net Earnings for each
quarterly period subsequent to June 30, 2000, and (2)
all proceeds from the issuance or sale of shares of any
class of stock for the period. The Restricted Payments
for each quarterly period will be subtracted from the
Pool and the outstanding balance in the Pool will be
carried over to the next period.
Other Covenants The Issuer and Company will agree to observe certain
covenants including covenants as to transactions with
affiliates, payment of taxes, maintenance of business
lines, compliance with laws, maintenance of properties,
and delivery of financial statements.
-----------------------
Subordination The Notes shall rank pari passu with the Company's
other senior subordinated obligations but shall be
subordinated and junior in right of payment to all
Senior Indebtedness. Furthermore, the Company agrees
not to create any class of obligations which is senior
to the Notes but expressly subordinated to the
Company's Senior Indebtedness.
If (i) the Company shall default in the payment of
principal, interest, or premium, if any, on any Senior
Indebtedness, or (ii) an event of default occurs which
shall permit the holders of Senior Indebtedness to
accelerate the maturity thereof, then:
(a) during any period in which the holders of Senior
Indebtedness shall have accelerated the payment
thereof and shall be pursuing the remedies
available to them, or if the Company shall default
in the payment of interest, principal or premium,
if any, on any Senior Indebtedness, unless and
until such default in payment or event of default
shall have been cured or waived or shall cease to
exist, no payment shall be made on account of the
Notes; and
(b) during any period not described in clause (a)
above, the holders of a majority of the unpaid
principal balance of Senior Indebtedness
EXHIBIT A - Page 3
may block payments of principal and interest to
the holders of the Notes for a period not to
exceed 179 days. Unless and until the earliest to
occur of (x) such default in payment or event of
default being cured, waived, or ceasing to exist,
or (y) the commencement of the 179/th/ consecutive
day of payment blockage pursuant to the provisions
of this clause (b), no payment shall be made on
the Notes; provided, however, that (i) no more
than one blockage period under this clause (b) may
occur during any period of 360 consecutive days.
In the event of bankruptcy or insolvency of the
Company, all Senior Indebtedness shall be paid in full
before any payment shall be made on account of the
Notes. In any such bankruptcy event, any payment or
distribution which would otherwise be payable to the
holders of the Notes shall be paid or delivered
directly to the holders of Senior Indebtedness until
Senior Indebtedness has been paid in full.
Nothing contained in these provisions is intended to
affect the relative rights of the holders of the Notes
and other creditors of the Company (other than holders
of Senior Indebtedness) nor shall any of these
provisions prevent any holder of the Notes from
exercising all remedies otherwise permitted by
applicable law upon the occurrence of an event of
default under this agreement.
Events of Default Events of Default will include the following:
i) default in the payment of interest on the
Notes for more than five business days;
ii) default in the payment of principal or Make-
Whole Premium on the Notes when due;
iii) default in the observance of any financial
covenant;
iv) default in the observance of any non-
financial covenant which continues unremedied
for 30 days;
v) any representations or warranties shall be
false or misleading in any material respect;
vi) cross acceleration on other indebtedness of
the Company or any Subsidiary in excess of
$5,000,000; and
vii) certain events involving bankruptcy of the
Company.
Noteholders' Rights upon
Event of Default Upon the occurrence of any Event of Default described
in paragraph 1 or 2 above, any Noteholder may declare
its Notes immediately due and payable in an amount
equal to par plus accrued interest plus the Make-Whole
Premium, if any. Upon the occurrence of any Event of
Default described in paragraphs 3-6 above, the holder
or holders of a majority of the aggregate unpaid
principal amount may declare all of the Notes to be
immediately due and payable in an amount equal to par
plus accrued interest plus the Make-Whole Premium, if
any. Upon the occurrence of
EXHIBIT A - Page 4
any Event of Default described in paragraph 7
above, all the Notes shall be immediately due and
payable in an amount equal to the outstanding
principal amount plus any interest accrued
thereon, plus the Make Whole Premium, if any (to
the full extent permitted by applicable law). The
holders of a majority of the aggregate unpaid
principal amount may rescind acceleration any time
within 90 days of the date thereof in the event
the Company shall have cured.
---------------------------
Governing Law The Notes will be governed by, and construed in
accordance with the laws of the State of New York.
---------------------------
Amendments Any provisions of the Notes may be amended or
waived with the written consent of the holders of
a majority of the aggregate principal amount of
Notes outstanding except that each Noteholder must
consent in writing to any amendment or waiver
which adversely affects the interest rate,
maturity, prepayment or redemption provisions, or
the percentage required to amend the Notes.
---------------------------
Expenses The Company will pay reasonable legal fees of
Investor's Counsel, whether or not the transaction
closes.
---------------------------
Definitions
Capital Lease Shall mean any lease of property which in
accordance with GAAP would be capitalized as a
liability on the lessee's balance sheet or for
which the amount of the asset and liability
thereunder as if so capitalized should be
disclosed in a note to such balance sheet.
Consolidated Net Earnings Shall mean the net earnings of the Company and its
Subsidiaries in accordance with GAAP, excluding
(i) extraordinary items and (ii) any equity
interest of the Company on the unremitted earnings
of any corporation not a Subsidiary.
Consolidated Total Assets Shall mean the total assets of the Company and its
Subsidiaries, determined on a consolidated basis
in accordance with GAAP.
Consolidated Senior Debt Shall mean, at any time, the sum of all Senior
Indebtedness of the Company and all of its
Subsidiaries outstanding at such time determined
on a consolidated basis.
Consolidated Total Debt Shall mean, at any time, the sum of all
Indebtedness of the Company and all of its
Subsidiaries outstanding at such time determined
on a consolidated basis.
EXHIBIT A - Page 5
EBITDA Shall mean, for the most recently ended
period of four full fiscal quarters of
the Company, the sum of:
a) Consolidated Net Earnings plus the
aggregate amount which was deducted for
such period for federal, state and local
income and franchise taxes, interest
expense, depreciation expense, and
amortization expense; and
b) Without duplication, Pro Forma Operating
Income, if any, for such period. Pro
Forma Operating Income shall mean, for
any date of determination, Consolidated
Net Earnings with respect to each company
acquired by the Company during the four
quarters preceding the date as of which
EBITDA is calculated plus the aggregate
amount which was deducted for such period
for federal, state and local income and
franchise taxes, interest expense,
depreciation expense, and amortization
expense, in each case limited to amounts
reported by the Company on Form 8-K to
the Securities and Exchange Commission.
GAAP Shall mean generally accepted accounting
principles as in effect from time to time
in the United States of America.
Indebtedness Shall mean all liabilities for borrowed
money which, in accordance with GAAP,
would be included in determining total
liabilities, obligations in respect of
any Capital Lease, and any guarantee of
the foregoing, but shall exclude such
liabilities, obligations and guarantees
if owed or guaranteed by a Subsidiary to
the Company or another Subsidiary or by
the Company to a Subsidiary.
Material Subsidiary Any Subsidiary comprising more than 5% of
Consolidated Total Assets and any other
Subsidiary that provides a guarantee to
any Senior Indebtedness.
Restricted Payments Shall mean any of the following: (1)
payment or declaration of any dividend or
any other distribution on account of any
class of its stock (except dividends or
stock splits payable solely in common
stock of the Company), (2) redemptions,
purchases, or other acquisitions (direct
or indirect) of shares of the Company's
stock, and (3) any optional prepayment of
any Indebtedness of the Company or any
Subsidiary ranking junior to the Notes.
Senior Indebtedness Shall mean any Indebtedness which is not
expressly subordinated to other
Indebtedness of the Company provided such
Indebtedness is incurred in compliance
with the Senior Debt Leverage Ratio.
Senior Subordinated Indebtedness Shall mean the Notes and any other
Indebtedness which, by its terms, shall
be subordinated to any Senior
Indebtedness.
EXHIBIT A - Page 6
Subsidiary Shall mean any corporation of which such
first mentioned corporation at the time
owns, directly or through any intervening
medium, that number of shares of voting
stock which has the power to elect a
majority of the board of directors.
EXHIBIT A - Page 7
EXHIBIT 4.4
EXECUTION COPY
U.S. CONCRETE, INC.
$95,000,000
12.00% SENIOR SUBORDINATED NOTES DUE NOVEMBER 10, 2010
NOTE AGREEMENT
Dated as of November 10, 2000
TABLE OF CONTENTS
(Not Part of Agreement)
Page
----
1. AUTHORIZATION OF ISSUE OF SUBORDINATED NOTES........................................ 1
2. PURCHASE AND SALE OF SUBORDINATED NOTES............................................. 1
3. CONDITIONS OF CLOSING............................................................... 2
3A. Documents................................................................. 2
3B. Opinion of Purchasers' Special Counsel.................................... 3
3C. Opinion of Company's and Guarantors' Counsel.............................. 3
3D. Representations and Warranties; No Default; Satisfaction of Conditions.... 3
3E. Purchase Permitted By Applicable Laws; Credit Agreement Amendment and Other
Approvals................................................................. 4
3F. Material Adverse Change................................................... 4
3G. Fees and Expenses......................................................... 4
3H. Private Placement Number.................................................. 5
3I. Proceedings............................................................... 5
3J. Sale of Subordinated Notes to Other Purchasers............................ 5
4. PREPAYMENTS...................................................................... 5
4A. Required Prepayments...................................................... 5
4B. Optional Prepayment With Yield-Maintenance Amount......................... 5
4C. Notice of Optional Prepayment............................................. 5
4D. Partial Payments Pro Rata................................................. 6
4E. Offer to Prepay Subordinated Notes in the Event of a Change of Control.... 6
4F. Retirement of Subordinated Notes.......................................... 7
5. AFFIRMATIVE COVENANTS............................................................ 8
5A. Financial Statements...................................................... 8
5B. Information Required by Rule 144A......................................... 10
5C. Inspection of Property.................................................... 10
5D. Covenant to Secure Subordinated Note Equally.............................. 11
5E. Compliance with Law....................................................... 11
5F. Insurance................................................................. 11
5G. Maintenance of Properties................................................. 11
5H. Payment of Taxes.......................................................... 12
5I. Existence, etc............................................................ 12
5J. Lines of Business......................................................... 12
5K. Subsequent Guarantors..................................................... 12
i
6. NEGATIVE COVENANTS............................................................... 13
6A. Financial Covenants....................................................... 13
6B. Liens..................................................................... 14
6C. Mergers and Consolidations................................................ 14
6D. Sale of Assets............................................................ 15
6E. Sale of Stock or other Equity of Subsidiaries............................. 16
6F. Restricted Payments....................................................... 16
6G. Transactions with Affiliates.............................................. 17
6H. Subsidiary Restrictions................................................... 17
6I. Subsidiary Preferred Stock................................................ 18
6J. Limitations on Issuance of Other Subordinated Indebtedness................ 18
6K. Payment Limitations....................................................... 18
6L. Hedging Agreement......................................................... 18
6M. Sale and Leaseback........................................................ 18
7. EVENTS OF DEFAULT................................................................ 19
7A. Acceleration.............................................................. 19
7B. Rescission of Acceleration................................................ 22
7C. Notice of Acceleration or Rescission...................................... 22
7D. Other Remedies............................................................ 22
8. REPRESENTATIONS, COVENANTS AND WARRANTIES........................................ 23
8A(1). Organization.............................................................. 23
8A(2). Power and Authority....................................................... 23
8A(3). Execution and Delivery of Transaction Documents........................... 23
8B. Financial Statements...................................................... 23
8C. Actions Pending........................................................... 24
8D. Outstanding Indebtedness.................................................. 24
8E. Title to Properties....................................................... 24
8F. Taxes..................................................................... 24
8G. Conflicting Agreements and Other Matters.................................. 25
8H. Offering of Subordinated Notes............................................ 25
8I. Use of Proceeds........................................................... 25
8J. ERISA..................................................................... 26
8K. Governmental Consent...................................................... 26
8L. Compliance with Environmental and Other Laws.............................. 26
8M. Regulatory Status......................................................... 27
8N. Permits and Other Operating Rights........................................ 27
8O. Rule 144A................................................................. 27
8P. Disclosure................................................................ 27
9. REPRESENTATIONS OF EACH PURCHASER................................................ 28
9A. Nature of Purchase........................................................ 28
ii
9B. Source of Funds........................................................... 28
10. SUBORDINATION OF SUBORDINATED NOTES.............................................. 29
10A. Payment Default or Acceleration........................................... 29
10B. Non-Payment Default....................................................... 30
10C. Insolvency; Bankruptcy; etc............................................... 30
10D. No Impairment............................................................. 31
10E. Defines Rights of Creditors; Subrogation.................................. 31
10F. Payments on Senior Indebtedness........................................... 31
10G. Notice Upon Acceleration.................................................. 32
10H. Reinstatement............................................................. 32
10I. No Waiver................................................................. 32
10J. Amendments................................................................ 33
11. DEFINITIONS; ACCOUNTING MATTERS.................................................. 33
11A. Yield-Maintenance Terms................................................... 33
11B. Other Terms............................................................... 35
11C. Accounting and Legal Principles, Terms and Determinations................. 47
12. MISCELLANEOUS.................................................................... 48
12A. Subordinated Note Payments............................................... 48
12B. Expenses................................................................. 48
12C(1). Consent to Amendments.................................................... 49
12C(2). Solicitation............................................................. 49
12C(3). Payment.................................................................. 50
12D. Form, Registration, Transfer and Exchange of Subordinated Notes; Lost
Subordinated Notes....................................................... 50
12E. Persons Deemed Owners; Participations.................................... 51
12F. Survival of Representations and Warranties; Entire Agreement............. 51
12G. Successors and Assigns................................................... 51
12H. Independence of Covenants................................................ 51
12I. Notices.................................................................. 51
12J. Payments Due on Non-Business Days........................................ 52
12K. Satisfaction Requirement................................................. 52
12L. GOVERNING LAW............................................................ 52
12M. SUBMISSION TO JURISDICTION............................................... 52
12N. Severability............................................................. 53
12O. Descriptive Headings; Advice of Counsel; Interpretation.................. 53
12P. Counterparts............................................................. 53
12Q. Severalty of Obligations................................................. 53
12R. Maximum Interest Payable................................................. 54
12S. Disclosure to Other Persons; Confidentiality............................. 54
iii
PURCHASER SCHEDULE
SCHEDULE 6B - EXISTING LIENS
SCHEDULE 8A(1) - SUBSIDIARIES
SCHEDULE 8D - OUTSTANDING INDEBTEDNESS
SCHEDULE 8G - LIST OF AGREEMENTS RESTRICTING INDEBTEDNESS
SCHEDULE 11B(1) - EXISTING MANAGEMENT SHAREHOLDERS
EXHIBIT A - FORM OF SUBORDINATED NOTE
EXHIBIT B - FORM OF DISBURSEMENT DIRECTION LETTER
EXHIBIT C - FORM OF GUARANTY AGREEMENT
EXHIBIT D-1 - FORM OF OPINION OF PURCHASERS' SPECIAL COUNSEL
EXHIBIT D-2 - FORM OF OPINION OF COMPANY'S AND GUARANTORS' GENERAL
COUNSEL
EXHIBIT D-3 - FORM OF OPINION OF COMPANY'S AND GUARANTORS'
SPECIAL COUNSEL
iv
U.S. CONCRETE, INC.
1300 Post Oak Blvd.
Suite 1220
Houston, Texas 77056
As of November 10, 2000
To Each of the Purchasers Named in the
Purchaser Schedule Attached Hereto
Ladies and Gentlemen:
The undersigned, U.S. Concrete, Inc., a Delaware corporation (herein called
the "Company"), hereby agrees with the purchasers named in the Purchaser
Schedule attached hereto (herein called the "Purchasers") as set forth below.
Reference is made to paragraph 11 hereof for definitions of capitalized terms
used herein and not otherwise defined herein.
1. AUTHORIZATION OF ISSUE OF SUBORDINATED NOTES. The Company will
authorize the issue of its senior subordinated promissory notes in the aggregate
principal amount of $95,000,000, to be dated the date of issue thereof, to
mature November 10, 2010, to bear interest on the unpaid balance thereof from
the date thereof until the principal thereof shall have become due and payable
at the rate of 12.00% per annum (provided that any payment of principal of,
interest on or Yield-Maintenance Amount or Adjusted Yield-Maintenance Amount, if
any, with respect to any Subordinated Note that is not paid when due shall bear
interest from and after the date due until the date paid at the Default Rate),
and to be substantially in the form of Exhibit A attached hereto. The term
"Subordinated Notes" as used herein shall include each such senior subordinated
promissory note delivered pursuant to any provision of this Agreement and each
such senior subordinated promissory note delivered in substitution or exchange
for any other Subordinated Note pursuant to any such provision.
2. PURCHASE AND SALE OF SUBORDINATED NOTES. The Company hereby agrees to
sell to each Purchaser and, subject to the terms and conditions herein set
forth, each Purchaser agrees to purchase from the Company the aggregate
principal amount of Subordinated Notes set forth opposite such Purchaser's name
in the Purchaser Schedule attached hereto at 100% of such aggregate principal
amount. The Company will deliver to each Purchaser, at the offices of Schiff
Hardin & Waite at 6600 Sears Tower, Chicago, Illinois 60606, one or more
Subordinated Notes registered in such Purchaser's name or in the name of its
nominee, if specified in the Purchaser Schedule, evidencing the aggregate
principal amount of Subordinated Notes to be purchased by such Purchaser and in
the denomination or denominations specified with respect to such Purchaser in
the Purchaser Schedule against payment of the purchase price thereof by transfer
of immediately available funds on the date of closing, which shall be November
10, 2000 or any other date on or before November 15, 2000 upon which the Company
and the Purchasers may mutually agree (herein
called the "closing" or the "date of closing"), for credit to the account or
accounts as shall be specified in a letter on the Company's letterhead, in
substantially the form of Exhibit B attached hereto, from the Company to the
Purchasers delivered prior to the date of closing.
3. CONDITIONS OF CLOSING. Each Purchaser's obligation to purchase and
pay for the Subordinated Notes to be purchased by such Purchaser hereunder is
subject to the satisfaction or waiver in writing by such Purchaser, on or before
the date of closing, of the following conditions:
3A. Documents. Such Purchaser shall have received original counterparts
or, if satisfactory to such Purchaser, certified or other copies of all of the
following, each duly executed and delivered by the party or parties thereto, in
form and substance satisfactory to such Purchaser, dated the date of closing
unless otherwise indicated, and, on the date of closing, in full force and
effect with no event having occurred and being then continuing that would
constitute a default thereunder or constitute or provide the basis for the
termination thereof:
(i) the Subordinated Note or Subordinated Notes to be purchased by
such Purchaser in the form of Exhibit A attached hereto;
(ii) a Guaranty Agreement made by each Guarantor in favor of the
holders of the Subordinated Notes in the form of Exhibit C hereto (together
with any other guaranty pursuant to which the Subordinated Notes are
guarantied and which is entered into as contemplated hereby, as the same
may be amended, modified or supplemented from time to time in accordance
with the provisions thereof, collectively called the "Guaranty Agreements"
and individually called a "Guaranty Agreement");
(iii) a certificate signed by the Secretary or Assistant Secretary
and one other officer of the Company and each Guarantor certifying, among
other things (a) as to the names, titles and true signatures of the
officers or other authorized representatives of the Company and each
Guarantor, respectively, authorized to sign this Agreement, the
Subordinated Notes or the Guaranty Agreement, as the case may be, and the
other documents to be delivered in connection with this Agreement, (b) that
attached thereto is a true, accurate and complete copy of the Articles or
Certificate of Incorporation or other organizational documents of the
Company and each Guarantor, as the case may be, (and in the case of the
Company, Central Concrete Supply Co. Inc. and Beall Concrete Enterprises
Ltd., certified by the Secretary of State of the state of organization of
the Company or such Guarantor, as the case may be, as of a recent date),
(c) that attached thereto is a true, accurate and complete copy of the By-
laws or other organizational documents of the Company and each Guarantor,
as the case may be, which were duly adopted and are in effect as of the
date of closing and have been in effect immediately prior to and at all
times since the adoption of the resolutions (or other similar document)
referred to in clause (d) below, (d) that attached thereto is a true,
accurate and complete copy of the resolutions (or other similar document)
of the Board of Directors or other managing body of Person(s) of the
Company and each Guarantor, as the case may be, duly adopted at a meeting
or by unanimous written consent of such Board of
2
Directors or other managing body of Person(s), authorizing the execution,
delivery and performance of this Agreement, the Subordinated Notes or the
Guaranty Agreement, as the case may be, and the other documents to be
delivered in connection with this Agreement, and that such resolutions have
not been amended, modified, revoked or rescinded, are in full force and
effect and are the only resolutions of the shareholders or other owners of
equity of the Company or such Guarantor, as the case may be, or of any such
Board of Directors or any committee thereof relating to the subject matter
thereof, and (e) that this Agreement, the Subordinated Notes or the
Guaranty Agreement, as the case may be, and the other documents executed
and delivered to such Purchaser by the Company or such Guarantor, as the
case may be, are in the form approved by its Board of Directors in the
resolutions referred to in clause (d), above;
(iv) a certificate of good standing for the Company, Central Concrete
Supply Co. Inc. and Beall Concrete Enterprises Ltd. from the Secretary of
State of the state of organization of the Company, Central Concrete Supply
Co. Inc., and Beall Concrete Enterprises Ltd. and of each state in which
the Company or any such Subsidiary is required to be qualified to transact
business as a foreign corporation, in each case dated as of a recent date;
and
(v) such other certificates, documents and agreements as such
Purchaser may reasonably request.
3B. Opinion of Purchasers' Special Counsel. Such Purchaser shall have
received from Schiff Hardin & Waite, who are acting as special counsel for the
Purchasers in connection with this transaction, a favorable opinion satisfactory
to such Purchaser substantially in the form of Exhibit D-1 attached hereto.
3C. Opinion of Company's and Guarantors' Counsel. Such Purchaser shall
have received from Donald Wayne, General Counsel of the Company and the
Guarantors, and BakerBotts L.L.P., special counsel for the Company and the
Guarantors, a favorable opinion satisfactory to such Purchaser and substantially
in the form of Exhibits D-2 and D-3 attached hereto, respectively, and the
Company, by its execution hereof, hereby requests and authorizes such general
counsel and such special counsel to render such opinions.
3D. Representations and Warranties; No Default; Satisfaction of
Conditions. The representations and warranties contained in paragraph 8 and in
the Guaranty Agreement shall be true on and as of the date of closing, both
before and immediately after giving effect to the issuance of the Subordinated
Notes on the date of closing; there shall exist on the date of closing no Event
of Default or Default, both before and immediately after giving effect to the
issuance of the Subordinated Notes on the date of closing; the Company and each
Guarantor shall have performed all agreements and satisfied all conditions
required under this Agreement or the Guaranty Agreement to be performed or
satisfied on or before the date of closing; and the Company and each Guarantor
3
shall have delivered to such Purchaser an Officer's Certificate, dated the date
of closing, to each such effect.
3E. Purchase Permitted By Applicable Laws; Credit Agreement Amendment and
Other Approvals. The purchase of and payment for the Subordinated Notes to be
purchased by such Purchaser on the date of closing on the terms and conditions
herein provided (including the use of the proceeds of such Subordinated Notes by
the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, section 5 of the Securities Act or Regulation T,
U or X of the Board of Governors of the Federal Reserve System), without resort
to provisions (such as Section 1405(a)(8) of the New York Insurance Law)
permitting limited investments by insurance companies without restriction as to
the character of the particular investment, and shall not subject such Purchaser
to any tax, penalty, liability or other onerous condition under or pursuant to
any applicable law or governmental regulation, and such Purchaser shall have
received such certificates or other evidence as it may request to establish
compliance with this condition. All necessary authorizations, consents,
approvals, exceptions or other actions by or notices to or filings with any
court or administrative or governmental body or other Person required in
connection with the execution, delivery and performance of this Agreement, the
Subordinated Notes and the Guaranty Agreement or the consummation of the
transactions contemplated hereby or thereby, including an amendment to the
Amended and Restated Credit Agreement, dated February 9, 2000, among the
Company, the Guarantors, the lenders party thereto, Chase Bank of Texas,
National Association, as Administrative Agent, and the syndication agent,
documentation agent, co-managing agents, book manager and lead arranger named
therein, so as to permit the Company to execute, deliver and perform this
Agreement and to issue the Subordinated Notes notwithstanding the provisions of
Sections 6.01(e), 6.04 (e) and 6.07 thereof, to approve the terms of the
Subordinated Notes, including the subordination provisions contained in
paragraph 10 hereof, and to amend the definition of "Restricted Payments"
contained therein so as to include as Restricted Payments, with respect to the
Subordinated Notes, only prepayments of the Subordinated Notes made at the
option of the Company, shall have been issued or made, shall be final and in
full force and effect and shall be in form and substance satisfactory to such
Purchaser.
3F. Material Adverse Change; Updated Projections. Except as disclosed in
the Company's press release dated October 9, 2000, no material adverse change in
the business, condition (financial or otherwise), operations or prospects of the
Company and its Subsidiaries, taken as a whole, since December 31, 1999 shall
have occurred or be threatened, as determined by such Purchaser in its sole
judgment. The Company shall have delivered to such Purchaser updated projections
of the results of operations of the Company and its Subsidiaries for the fiscal
years ending December 31, 2000 to 2003.
3G. Fees and Expenses. Without limiting the provisions of paragraph 12B
hereof, the Company shall have paid the reasonable fees, charges and
disbursements of special counsel to the Purchasers referred to in paragraph 3B
hereof.
4
3H. Private Placement Number. A private placement number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuations Office of the National Association of Insurance Commissioners) shall
have been obtained for the Subordinated Notes.
3I. Proceedings. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to such Purchaser,
and such Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
3J. Sale of Subordinated Notes to Other Purchasers. The Company shall have
sold to the other Purchasers the Subordinated Notes to be purchased by them at
the closing and shall have received payment in full therefor.
4. PREPAYMENTS. The Subordinated Notes shall be subject to prepayment
with respect only to the required prepayments specified in paragraphs 4A and 4E
and the optional prepayments permitted by paragraph 4B.
4A. Required Prepayments. Until the Subordinated Notes shall be paid in
full, the Company shall apply to the prepayment of the Subordinated Notes,
without premium, the sum of $13,571,429.00 on November 10 in each of the years
2004 to 2009, inclusive, and such principal amounts of the Subordinated Notes,
together with interest thereon to the prepayment dates, shall become due on such
prepayment dates. The remaining outstanding principal amount of the Subordinated
Notes, together with any accrued and unpaid interest thereon, shall become due
on November 10, 2010, the maturity date of the Subordinated Notes.
4B. Optional Prepayment With Yield-Maintenance Amount. The Subordinated
Notes shall be subject to prepayment, in whole at any time or from time to time
in part (in aggregate integral multiples of $1,000,000 and a minimum of
$5,000,000 on any one occurrence), at the option of the Company, at 100% of the
principal amount so prepaid plus interest thereon to the prepayment date and the
Yield-Maintenance Amount, if any, with respect to each Subordinated Note. Any
partial prepayment of the Subordinated Notes pursuant to this paragraph 4B shall
be applied in satisfaction of required payments of principal thereof (including
the required payment of principal due upon the maturity thereof) in inverse
order of their scheduled due dates.
4C. Notice of Optional Prepayment. The Company shall give the holder of
each Subordinated Note irrevocable written notice of any prepayment pursuant to
paragraph 4B not less than 15 Business Days prior to the prepayment date,
specifying such prepayment date and the aggregate principal amount of the
Subordinated Notes, and of the Subordinated Notes held by such holder, to be
prepaid on such date and stating that such prepayment is to be made pursuant to
paragraph 4B. Each such notice of any prepayment shall be accompanied by a
certificate of the chief financial officer of the Company as to the estimated
Yield-Maintenance Amount which will be due in connection with such prepayment
(calculated as if the date of such notice were the date of prepayment), setting
forth the details of the computation thereof, but no such computation shall be
5
binding upon any holder of a Subordinated Note. On the Business Day prior to any
such prepayment, the Company shall deliver to each holder of a Subordinated Note
a certificate of such chief financial officer specifying the calculation of the
Yield-Maintenance Amount as of the prepayment date, but no such calculation
shall be binding on any holder of a Subordinated Note. Notice of prepayment
having been given as aforesaid, the principal amount of the Subordinated Notes
specified in such notice, together with interest thereon to the prepayment date
and together with the Yield-Maintenance Amount, if any, with respect thereto,
shall become due and payable on such prepayment date. The Company shall, on or
before the day on which it gives written notice of any prepayment pursuant to
paragraph 4B, give telephonic notice of the principal amount of the Subordinated
Notes to be prepaid and the prepayment date to each Significant Holder which
shall have designated a recipient of such notices in the Purchaser Schedule
attached hereto or by notice in writing to the Company.
4D. Partial Payments Pro Rata. Upon any partial prepayment of the
Subordinated Notes pursuant to paragraph 4A or 4B, the principal amount so
prepaid shall be allocated to all Subordinated Notes at the time outstanding
(including, for the purpose of this paragraph 4D only, all Subordinated Notes
prepaid or otherwise retired or purchased or otherwise acquired by the Company
or any of its Subsidiaries or Affiliates (including pursuant to paragraph 4E or
4F hereof) other than by prepayment pursuant to paragraph 4A or 4B) in
proportion to the respective outstanding principal amounts thereof.
4E. Offer to Prepay Subordinated Notes in the Event of a Change of
Control.
4E(1) Notice of Change of Control. The Company will, subject to any
prohibition to making such a disclosure under any applicable law, within
two Business Days after any Responsible Officer has knowledge of any
Potential Change of Control, give written notice of such Potential Change
of Control to each holder of the Subordinated Notes. The Company will
promptly and in any event within two Business Days after any Responsible
Officer has knowledge of a Change of Control, give written notice to each
holder of the Subordinated Notes of such Change of Control ("Change of
Control Notice"). The Company shall, on or before the date upon which it
gives a Change of Control Notice pursuant to this paragraph 4E(1), give
telephonic notice of such Change of Control to each Significant Holder
which shall have designated a recipient of such notices in the Purchaser
Schedule attached hereto or by notice in writing to the Company. Such
Change of Control Notice shall contain and constitute an offer to prepay
the Subordinated Notes as described in paragraph 4E(3) and shall be
accompanied by the certificate described in paragraph 4E(6).
4E(2) Notice of Acceptance or Rejection of Offer under Paragraph
4E(1). If the Company shall at any time receive a written acceptance to or
rejection of an offer to prepay Subordinated Notes under paragraph 4E(1)
from some, but not all of, the holders of the Subordinated Notes, then the
Company will, within two Business Days after the receipt of such acceptance
or rejection, give written notice of such acceptance or rejection to each
other holder of the Subordinated Notes.
6
4E(3) Offer to Prepay Subordinated Notes. The offer to prepay
Subordinated Notes contemplated by paragraph 4E(1) shall be an offer to
prepay, in accordance with and subject to this paragraph 4E, all, but not
less than all, of the Subordinated Notes held by each holder (in this case
only, "holder" in respect of any Subordinated Note registered in the name
of a nominee for a disclosed beneficial owner shall mean such beneficial
owner) on a date specified in the Change of Control Notice (the "Proposed
Prepayment Date"). Such Change of Control Notice shall make reference to
this paragraph 4E(3) and that any failure to so reply shall be deemed an
acceptance of such offer. The Proposed Prepayment Date shall be not less
than 15 days and not more than 30 days after the date of such Change of
Control (if the Proposed Prepayment Date shall not be specified in the
Change of Control Notice, the Proposed Prepayment Date shall be the 30th
day after the date of Change of Control).
4E(4) Rejection; Acceptance. A holder of Subordinated Notes may
accept or reject the offer to prepay made pursuant to this paragraph 4E by
causing a written notice of such acceptance or rejection to be delivered to
the Company prior to the Proposed Prepayment Date.
4E(5) Prepayment. Prepayment of the Subordinated Notes to be prepaid
pursuant to this paragraph 4E shall be at 100% of the principal amount of
such Subordinated Notes, together with interest on such Subordinated Notes
accrued to the date of prepayment and the Adjusted Yield-Maintenance
Amount, if any, with respect thereto. The prepayment shall be made on the
Proposed Prepayment Date. On the Business Day prior to the Proposed
Prepayment Date, the Company shall deliver to each holder of a Subordinated
Note a certificate of the chief financial officer of the Company specifying
the calculation of the Adjusted Yield-Maintenance Amount as of the Proposed
Prepayment Date, but no such calculation shall be binding on any holder of
a Subordinated Note.
4E(6) Officer's Certificate. Each Change Of Control Notice pursuant
to this paragraph 4E shall be accompanied by a certificate, executed by a
Responsible Officer of the Company and dated the date of such offer,
specifying (i) the Proposed Prepayment Date, (ii) that such offer is made
pursuant to this paragraph 4E, (iii) the principal amount of each
Subordinated Note offered to be prepaid, (iv) the interest that would be
due on each Subordinated Note offered to be prepaid, accrued to the
Proposed Prepayment Date, (v) the estimated Adjusted Yield-Maintenance
Amount which will be due in connection with such prepayment (calculated as
if the date of such notice were the date of prepayment), setting forth the
details of the computation thereof, but no such computation shall be
binding upon any holder of a Subordinated Note, (vi) that the conditions of
this paragraph 4E have been fulfilled, and (vii) in reasonable detail, the
nature and date of the Change of Control.
4F. Retirement of Subordinated Notes. The Company shall not, and shall
not permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire
in whole or in part prior to their stated final maturity (other than by
prepayment pursuant to paragraph 4A, 4B or 4E or upon
7
acceleration of such final maturity pursuant to paragraph 7A), or purchase or
otherwise acquire, directly or indirectly, Subordinated Notes held by any holder
unless the Company or such Subsidiary or Affiliate shall have offered to prepay
or otherwise retire or purchase or otherwise acquire, as the case may be, the
same proportion of the aggregate principal amount of Subordinated Notes held by
each other holder of Subordinated Notes at the time outstanding upon the same
terms and conditions. Any Subordinated Notes so prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates shall not be deemed to be outstanding for any purpose under this
Agreement, except as provided in paragraph 4D.
5. AFFIRMATIVE COVENANTS.
5A. Financial Statements. The Company covenants that it will deliver to
each Significant Holder in duplicate:
(i) as soon as practicable after the filing of its Quarterly Report
on Form 10-Q for the quarterly period, and in any event within 45 days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year (or, if such 45th day is not a Business Day,
the next succeeding Business Day), consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for
such quarterly period and for the period from the beginning of the current
fiscal year to the end of such quarterly period, and a consolidated balance
sheet of the Company and its Subsidiaries as at the end of such quarterly
period, setting forth in each case in comparative form figures for the
corresponding periods in the preceding fiscal year, all in reasonable
detail and prepared in accordance with generally accepted accounting
principles applicable to quarterly financial statements and certified by an
authorized financial officer of the Company as fairly presenting in
accordance with generally accepted accounting principles, in all material
respects, the financial position of the Company and its Subsidiaries and
their results of operations and cash flows, subject to changes resulting
from year-end adjustments and the exclusion of detailed footnotes;
provided, however, that delivery pursuant to clause (iii) below of copies
of the Quarterly Report on Form 10-Q of the Company for such quarterly
period (including all financial statement exhibits and all financial
statements incorporated by reference therein) prepared in compliance with
the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this clause (i);
(ii) as soon as practicable after the filing of its Annual Report on
Form 10-K for the fiscal year, and in any event within 90 days after the
end of each fiscal year (or, if such 90th day is not a Business Day, the
next succeeding Business Day, consolidated statements of income and cash
flows and a consolidated statement of stockholders' equity of the Company
and its Subsidiaries for such year, and a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year, setting forth in
each case in comparative form corresponding consolidated figures from the
preceding annual audit, all in reasonable detail and prepared in accordance
with generally accepted accounting principles and accompanied by an opinion
thereon of independent public accountants of
8
recognized national standing selected by the Company which opinion shall
state that such financial statements present fairly, in all material
respects, the financial position of the Company and its Subsidiaries and
the results of their operations and cash flows and have been prepared in
accordance with generally accepted accounting principles, that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards, and that such audit provides a reasonable basis for such opinion
in such circumstances, and shall be without limitation as to the scope of
the audit; provided, however, that delivery pursuant to clause (iii) below
of copies of the Annual Report on Form 10-K of the Company for such fiscal
year (including all financial statement exhibits and all financial
statements incorporated by reference therein) prepared in compliance with
the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this clause (ii);
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits, but excluding reports relating to registration
statements for employee benefit plans (S-8), shelf registration statements
(Rule 415) and annual reports for employee benefit plans (Form 11-K)) and
all other reports which it files with the Securities and Exchange
Commission (or any governmental body or agency succeeding to the functions
of the Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of any management report
or letter submitted to the Company or any Subsidiary by independent
accountants in connection with any annual, interim or special audit made by
them of the books of the Company or any Subsidiary;
(v) as soon as available and in any event within sixty (60) days
after the end of each fiscal year of the Company, the annual financial
projections and budgets of the Company and its Subsidiaries;
(vi) promptly after a Responsible Officer becomes aware thereof,
notice of any development that results in, or would reasonably be expected
to result in, a Material Adverse Effect;
(vii) concurrently with the sending thereof to any holder of Senior
Indebtedness, a copy of any material notice or report sent to any holder of
any Senior Indebtedness (or any agent or representative of such holder)
given under any agreement under which such Senior Indebtedness was issued
or is outstanding or any other agreement relating to such Senior
Indebtedness (unless such notice or report was given to the holders of the
Subordinated Notes pursuant to another provision of this Agreement and
excluding routine periodic reports and notices sent pursuant to the
requirements of any such agreement);
9
(viii) promptly upon, and in any event not later than the next
Business Day after, receipt thereof, a copy of any notice received from any
holder of Senior Indebtedness (or any agent or representative of such
holder) that any default or event of default under any agreement under
which such Senior Indebtedness is outstanding has occurred or any notice of
any acceleration of any Senior Indebtedness; and
(ix) with reasonable promptness, such other information as such
Significant Holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company and its Subsidiaries with the provisions of paragraphs 6A(1), 6A(2),
6A(3), 6D, 6E and 6F and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature
and period of existence thereof and what action the Company proposes to take
with respect thereto. Together with each delivery of financial statements
required by clause (ii) above, the Company will deliver to each Significant
Holder a certificate of such accountants stating that, in making the audit
necessary for their report on such financial statements, they have obtained no
knowledge of any Event of Default or Default, or, if they have obtained
knowledge of any Event of Default or Default, specifying the nature and period
of existence thereof. Such accountants, however, shall not be liable to anyone
by reason of their failure to obtain knowledge of any Event of Default or
Default which would not be disclosed in the course of an audit conducted in
accordance with generally accepted auditing standards. The Company also
covenants that immediately after any Responsible Officer obtains knowledge of an
Event of Default or Default, it will deliver to each Significant Holder an
Officer's Certificate specifying the nature and period of existence thereof and
what action the Company proposes to take with respect thereto.
5B. Information Required by Rule 144A. The Company covenants that it will,
upon the request of the holder of any Subordinated Note, provide such holder,
and any qualified institutional buyer designated by such holder, such financial
and other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Subordinated Notes, except
at such times as the Company is subject to the reporting requirements of section
13 or 15(d) of the Exchange Act. For the purpose of this paragraph 5B, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act.
5C. Inspection of Property. The Company covenants that it will permit any
Person designated by any Significant Holder in writing, at such Significant
Holder's expense if no Default or Event of Default exists and at the Company's
expense if a Default or an Event of Default exists, to visit and inspect any of
the properties of the Company and its Subsidiaries, to examine the corporate
books and financial records of the Company and its Subsidiaries and make copies
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of any of such corporations with the principal officers of the Company and its
independent public accountants, all at such
10
reasonable times and without materially disrupting the operations of the Company
and its Subsidiaries and as often as such Significant Holder may reasonably
request. Anything in this paragraph 5C to the contrary notwithstanding, the
Company shall not be required to disclose, discuss or permit the inspection or
examination of any information with respect to which the Company has, within
five (5) Business Days after any Significant Holder's request hereunder,
delivered an Officer's Certificate of a Responsible Officer to such Significant
Holder to the effect that, after consulting with legal counsel, disclosure of
such information to such Holder is prohibited by legal requirements applicable
to the Company.
5D. Covenant to Secure Subordinated Note Equally. The Company covenants
that if it or any Subsidiary shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other than Liens
permitted by the provisions of paragraph 6B (unless prior written consent to the
creation or assumption thereof shall have been obtained pursuant to paragraph
12C(1)), it will make or cause to be made effective provision whereby the
Subordinated Notes will be secured by such Lien equally and ratably with any and
all other Indebtedness thereby secured so long as any such other Indebtedness
shall be so secured; provided that the creation and maintenance of such equal
and ratable Lien shall not in any way limit or modify the right of the holders
of the Subordinated Notes to enforce the provisions of paragraph 6B.
5E. Compliance with Law. The Company covenants that it will, and will
cause each of its Subsidiaries to, comply with all laws, ordinances or
governmental rules or regulations to which each of them is subject, including,
without limitation, environmental laws, and will obtain and maintain in effect
all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, except to the extent that the Company or such Subsidiary is
actively contesting the applicability or validity thereon on a timely basis in
good faith by appropriate proceedings, and the Company or such Subsidiary has
established adequate reserves therefor in accordance with generally accepted
accounting principles on the books of the Company or such Subsidiary.
5F. Insurance. The Company covenants that it will, and will cause each of
its Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts as is customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated.
5G. Maintenance of Properties. The Company covenants that it will, and
will cause each of its Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective properties in good repair, working order
and condition (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times, provided that
11
(i) this paragraph shall not prevent the Company or any Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and such
discontinuance would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect and (ii) the Company shall not be
considered to be in violation of this paragraph 5G if it is delayed in repairing
or replacing any property due to causes beyond the reasonable control of the
Company and its Subsidiaries.
5H. Payment of Taxes. The Company covenants that it will, and will cause
each of its Subsidiaries to, file all income tax or similar tax returns required
to be filed in any jurisdiction and to pay and discharge all taxes shown to be
due and payable on such returns and all other taxes, assessments, governmental
charges or levies payable by any of them, and to pay and discharge all amounts
payable for work, labor and materials, in each case to the extent such taxes,
assessments, charges, levies and amounts payable have become due and payable and
before they have become delinquent, provided that neither the Company nor any
Subsidiary need pay any such tax, assessment, charge, levy or amount payable if
(i) the amount, applicability or validity thereof is being actively contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or such Subsidiary has established
adequate reserves therefor in accordance with generally accepted accounting
principles on the books of the Company or such Subsidiary or (ii) the nonpayment
of all such taxes, assessments, charges, levies and amounts payable in the
aggregate would not reasonably be expected to have a Material Adverse Effect.
5I. Existence, etc. Subject to paragraph 6C, the Company will at all
times preserve and keep in full force and effect its corporate existence and the
legal existence of each of its Subsidiaries. The Company and its Subsidiaries
will at all times preserve and keep in full force and effect all certificates of
convenience and necessity, rights and franchises, licenses, permits, operating
rights and other authorizations from federal, state, foreign, regional,
municipal and other local regulatory bodies or administrative agencies or
governmental bodies having jurisdiction over the Company and its Subsidiaries or
any of their respective properties as are necessary for the ownership, operation
and maintenance of their respective businesses and properties, unless the
termination of or failure to preserve and keep in full force and effect such
right, certificate or franchise, license, permit, operating right or other
authorization would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
5J. Lines of Business. The Company covenants that it will not, and it
will not permit any Subsidiary of the Company to, engage in any business if, as
a result thereof, the general nature of the businesses of the Company and its
Subsidiaries, taken as a whole, would be substantially changed from the
Permitted Businesses.
5K. Subsequent Guarantors.
(i) The Company covenants that if at any time any Person, which is not a
Material Subsidiary as of the date hereof, shall become a Material Subsidiary,
the Company will cause such Person (1) if such Material Subsidiary owns assets
constituting more than 10% of Consolidated Total
12
Assets at such time or has or would have, on a pro forma basis, contributed more
than 10% of consolidated revenues of the Company and the Subsidiaries over the
past twelve months, within 10 days after it becomes a Material Subsidiary (but
in no event later than the date upon which such Material Subsidiary has
Guaranteed other Indebtedness), or (2) for any other Material Subsidiary, within
30 days after the end of the fiscal quarter in which it becomes a Material
Subsidiary (but in no event later than the date upon which such Material
Subsidiary has Guaranteed any other Indebtedness), to execute and deliver to the
holders of the Subordinated Notes a Guaranty Agreement substantially in the form
of Exhibit C hereto, a certificate in the form specified in paragraph 3A(iii)
with respect to such Person and such Guaranty Agreement, and an opinion of
counsel for such Person with respect to such Person and such Guaranty Agreement
in the form as specified in paragraph 3C; provided, however, in the case such
Material Subsidiary is organized under the law of any jurisdiction other than
any of the United States or its territories, such Material Subsidiary shall not
be required to Guarantee the Subordinated Notes in excess of the extent to which
such Guarantee would cause the Company to be deemed to have received a taxable
dividend for United States income tax purposes.
(ii) Each holder of a Subordinated Note, by its acceptance of a
Subordinated Note, agrees that in the case of (A) a sale, transfer or other
disposition (whether in a single transaction or a series of related transactions
and whether by merger, consolidation or otherwise) permitted by this Agreement
of all of the issued and outstanding capital stock of any Subsidiary to any
Person that is not, at the time of such sale, transfer or other disposition, the
Company or a Subsidiary; or (B) the dissolution of any Subsidiary permitted by
this Agreement; then automatically and without further action: (1) the Guaranty
Agreement of such Subsidiary (each such Subsidiary a "Released Subsidiary")
shall be deemed terminated and of no further force and effect; and (2) no holder
of any Subordinated Notes shall have any claim against such Released Subsidiary
under such Guaranty Agreement.
(iii) Each holder of a Subordinated Note, by its acceptance of a
Subordinated Note, agrees that the Company may, on behalf of any Released
Subsidiary, request such holder of a Subordinated Note, at the expense of the
Company, to execute and deliver to the Company, for the benefit of any Person, a
written release, disclaimer, termination or quitclaim, and such other release
documents as the Company may reasonably request, in form reasonably satisfactory
to such holder, to evidence such termination under clause (iii) of this
paragraph 5K.
6. NEGATIVE COVENANTS.
6A. Financial Covenants.
6A(1). Total Debt Leverage Ratio. The Company covenants that it will
not at any time permit the ratio of (i) the outstanding amount of all Funded
Debt (including all Subordinated Debt) to (ii) EBITDA for the four consecutive
fiscal quarters then ended to be greater than 3.25 to 1.0.
13
6A(2). Senior Debt Leverage Ratio. The Company covenants that it will
not permit at any time the ratio of (i) the outstanding amount of all Senior
Funded Debt to (ii) EBITDA for the four consecutive fiscal quarters then ended
to be greater than the Maximum Senior Debt Leverage Ratio.
6A(3). Fixed Charge Coverage Ratio. The Company covenants that it
will not at any time permit the ratio of (i) (a) EBITDA for any period of four
consecutive fiscal quarters (excluding any amount of EBITDA for such period
included in the calculation of such EBITDA as a result of clause (ii) of the
definition of EBITDA) minus (b) cash federal, state and local income and
franchise taxes actually paid by the Company and its Subsidiaries during such
period, plus (c) to the extent deducted in determining EBITDA for such period,
cash Rentals actually paid by the Company and its Subsidiaries under Operating
Leases during such period, to (ii) (a) cash interest expense actually paid by
the Company and its Subsidiaries during such period (including the interest
expense portion of any payments on Capitalized Lease Obligations), plus (b)
Maintenance Capital Expenditures of the Company and its Subsidiaries for such
period, plus (c) cash Rentals actually paid by the Company and its Subsidiaries
under Operating Leases during such period, to be less than 1.00 to 1.0.
6B. Liens. The Company covenants that it will not, and will not permit
any Subsidiary to, create, incur, assume or permit to exist any Lien on any
property now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(i) Permitted Encumbrances;
(ii) Any Lien securing Senior Indebtedness;
(iii) Renewals and extensions of the above on similar terms and
conditions; and
(iv) the sale or assignment of any income or revenues (including
accounts receivable) or rights in respect of any thereof of any Subsidiary
or division of the Company in connection with the sale of such Subsidiary
or division as an entirety, provided that such sale is permitted under the
other provisions of this Agreement
6C. Mergers and Consolidations. The Company covenants that it will not,
and will not permit any Subsidiary to, directly or indirectly, merge or
consolidate with or into any other Person, or Transfer all or substantially all
of its property (in a single transaction or a series of related transactions) to
any Person, except that:
(i) the Company may merge or consolidate with any other Person or
Transfer all of its property to any other Person, provided that (a) the
Person formed by such consolidation or the survivor of such merger or the
Person acquiring such property (as the case may be, the "Successor Person")
shall be a solvent Person, organized and existing under the laws of the
14
United States of America, any State thereof or the District of Columbia,
(b) if the Successor Person is not the Company (1) the Successor Person
assumes unconditionally in writing (which writing shall be satisfactory in
form and substance to the Required Holder(s)) the due and punctual payment
and performance of all obligations of the Company under this Agreement and
the Subordinated Notes and any other agreement or instrument executed in
connection therewith, (2) the holders of the Subordinated Notes shall have
received an opinion from nationally recognized independent counsel, or
other counsel reasonably satisfactory to the Required Holder(s), to the
effect that such assumption agreement is enforceable and as to such other
matters incident thereto as the Required Holder(s) may reasonably request,
and (3) each Guarantor shall have delivered to the holders of the
Subordinated Notes a written confirmation (which written confirmation shall
be satisfactory in form and substance to the Required Holder(s)) that its
obligations under the Guaranty Agreement to which it is a party continue in
full force and effect notwithstanding such merger, consolidation or
Transfer and such Guaranty Agreement is applicable to the obligations
assumed by the Successor Person under such written assumption, and (c) both
before and immediately after such merger, consolidation or Transfer no
Default or Event of Default shall exist; and
(ii) any Subsidiary may merge with the Company (provided that the
Company is the surviving entity) or another Subsidiary (provided that the
surviving entity is a Wholly-Owned Subsidiary).
No such Transfer of all of the property of the Company shall have the effect of
releasing the Company or any Successor Person that shall theretofore have become
such in the manner prescribed in this paragraph 6C from its liability under this
Agreement or the Subordinated Notes.
6D. Sale of Assets. The Company covenants that it will not, and will not
permit any Subsidiary to, directly or indirectly, Transfer any property other
than (i) Transfers of inventory, obsolete equipment and rolling stock no longer
needed or worn out, and the granting of easements constituting Permitted
Encumbrances, in each case in the ordinary course of business, (ii) other
Transfers of property, provided that (a) in the good faith opinion of the
Company, such Transfer is for fair market value, (b) immediately after giving
effect to Transfer, no Default or Event of Default would exist, and (c)
immediately after giving effect to such Transfer (1) the aggregate book value of
all property Transferred pursuant to this clause (ii) during any fiscal year
(including property of any Subsidiary Transferred as provided in paragraph 6E)
would not exceed 15% of Consolidated Total Assets as of the date of such
Transfer, and (2) the aggregate book value of all property Transferred pursuant
to this clause (ii) on or after the date of this Agreement (including property
of any Subsidiary Transferred as provided in paragraph 6E) would not exceed 35%
of Consolidated Total Assets as at the date of such Transfer, except that (x)
any Subsidiary may Transfer property to the Company or any other Wholly-Owned
Subsidiary, or (y) the Company or any Subsidiary may Transfer property in excess
of the foregoing limitations so long as the net proceeds resulting from such
Transfer are either: (A) reinvested by the Company or any Subsidiary within one
year after the date of such Transfer in property used in the businesses of the
Company or such Subsidiary (and
15
pending such reinvestment, are invested in Permitted Investments) or (B) applied
to pay Senior Indebtedness (other than Indebtedness owed to the Company or
another Subsidiary) or to make an optional prepayment of the Subordinated Notes
pursuant to paragraph 4B hereof, or (iii) Restricted Payments permitted under
paragraph 6F.
6E. Sale of Stock or other Equity of Subsidiaries. The Company covenants
(i) that it will not permit any Subsidiary to, directly or indirectly, issue,
sell or otherwise dispose of any shares of any class of its capital stock or
other ownership interests (other than preferred stock which is not participating
preferred and is permitted to be issued pursuant to paragraph 6I hereof) except
to the Company or another Wholly-Owned Subsidiary, and (ii) that it will not,
and will not permit any Subsidiary to, directly or indirectly, Transfer, or part
with control of, any shares of capital stock or other ownership interests of any
Subsidiary; provided, however, that the Company or any Subsidiary may sell
shares of the capital stock or other ownership interests of a Subsidiary
provided that, at the time of such sale (a) such Subsidiary shall not own,
directly or indirectly, any shares of stock or other ownership interests or
Indebtedness of any other Subsidiary or any Indebtedness of the Company, and (b)
such sale would be permitted as the sale of the same proportion of all the
property of such Subsidiary under paragraph 6D as the proportion that such
shares of capital stock or other ownership interests being sold is of all of the
outstanding capital stock or other ownership interests of such Subsidiary (and,
for the purposes of paragraph 6D, any sale by the Company or any Subsidiary of
shares of the capital stock or other ownership interests of a Subsidiary shall
be considered to be the sale of such proportion of all of the property of such
Subsidiary).
6F. Restricted Payments. The Company covenants that it will not, and will
not permit any of its Subsidiaries to, at any time, declare or make, or incur
any liability to declare or make, any Restricted Payment unless at the time of
such action and immediately after giving effect to such action: (i) the
aggregate amount of all Restricted Payments of the Company and its Subsidiaries
declared or made during the period commencing on July 1, 2000 and ending on the
date such Restricted Payment is declared or made, inclusive, would not exceed
the sum of (a) 25% of Consolidated Net Earnings of the Company for each full
fiscal quarter completed after June 30, 2000 and prior to the date such
Restricted Payment is declared or made (or minus 100% of Consolidated Net
Earnings of the Company for any such fiscal quarter if Consolidated Net Earnings
of the Company for such fiscal quarter is a loss), plus (b) the aggregate amount
of Net Proceeds of Capital Stock received by the Company in each such fiscal
quarter, and (ii) no Default or Event of Default would exist. The foregoing
provisions will not prevent (w) the payment of any dividend on capital stock or
other ownership interest or of any class within 60 days after the date of its
declaration if at the date of such declaration such payment would have been
permitted by this Agreement, (x) any redemption of capital stock or other
ownership interest or Subordinated Debt of the Company or any Subsidiary made by
exchange for capital stock or other ownership interest (which is not Redeemable
capital stock) of the Company or any Subsidiary, (y) any repurchase or
redemption of Subordinated Debt of the Company which is pari passu with the
Subordinated Notes made by exchange for or out of the net cash proceeds from the
substantially concurrent issuance or sale of other Subordinated Debt of the
Company or a Subsidiary which is pari passu with or subordinated to the
Subordinated Notes and which is otherwise permitted under this Agreement or (z)
any repurchase or redemption
16
of Subordinated Debt of the Company which is subordinated to the Subordinated
Notes made by exchange for or out of the net cash proceeds from the
substantially concurrent issuance or sale of other Subordinated Debt of the
Company or a Subsidiary which is subordinated to the Subordinated Notes and is
otherwise permitted under this Agreement. Restricted Payments permitted to be
made as described in the preceding sentence will be excluded in calculating the
amount of Restricted Payments thereafter.
6G. Transactions with Affiliates. The Company will not, and will not
permit any of its Subsidiaries to, sell, lease or otherwise transfer any
property to, or purchase, lease or otherwise acquire any property from, or
otherwise engage in any other transactions with, any of its Affiliates, except
(i) in the ordinary course of business at prices and on terms and conditions not
less favorable to the Company or such Subsidiary than could be obtained on an
arm's-length basis from unrelated third parties, (ii) transactions between or
among the Company and its Wholly-Owned Subsidiaries not involving any other
Affiliate, provided no transfer of property may be made to any Material
Subsidiary that is not a party to a Guaranty Agreement, (iii) any Restricted
Payment permitted by paragraph 6F, (iv) compensation and other benefits paid to
officers, directors and employees, and (v) transactions in connection with the
acquisition of any Qualified Company.
6H. Subsidiary Restrictions. The Company covenants that it will not, and
will not permit any Subsidiary to, enter into, or be otherwise subject to, any
contract or agreement (including its certificate of incorporation) which limits
the amount of or otherwise imposes restrictions on (i) the payment of dividends
or distributions by any Subsidiary to the Company or any other Wholly-Owned
Subsidiary, (ii) the payment by any Subsidiary of any indebtedness owed to the
Company or any other Wholly-Owned Subsidiary, (iii) the making of loans or
advances by any Subsidiary to the Company or any other Wholly-Owned Subsidiary,
(iv) the transfer by any Subsidiary of its property to the Company or any other
Wholly-Owned Subsidiary, (v) the merger or consolidation of any Subsidiary with
or into the Company or any other Wholly-Owned Subsidiary, or (vi) the guaranty
by any Subsidiary of the Company's indebtedness hereunder; provided that (a) the
foregoing shall not apply to restrictions and conditions imposed by law or by
this Agreement, (b) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder, (c) clause
(iv) of the foregoing shall not apply to customary provisions in leases and
other contracts restricting the assignment thereof, (d) the foregoing shall not
apply to existing restrictions and conditions existing on the date of closing in
the Existing Credit Agreement, (e) the foregoing shall not apply to restrictions
relating to any assets of any Subsidiary acquired after the date of closing
existing at the date on which such Subsidiary was acquired, so long as such
restriction relates only to the assets so acquired and was not created in
connection with or in contemplation of such acquisition, (f) the foregoing shall
not apply to restrictions relating to any Indebtedness of any Subsidiary
acquired after the date of closing, existing at the date on which such
Subsidiary was acquired by the Company or any Subsidiary, so long as such
Indebtedness and restrictions were not created in connection with or in
contemplation of such acquisition, (g) the foregoing shall not apply to
restrictions on the sale or other disposition of any property securing
Indebtedness or any other obligation as a result of a
17
Permitted Encumbrance on such property, and (h) the foregoing shall not apply to
customary restrictions on cash, deposits and other assets imposed by customers
under contracts entered into in the ordinary course of business and not relating
to an incurrence of Indebtedness.
6I. Subsidiary Preferred Stock. The Company covenants that it will not
permit any Subsidiary which is not a Guarantor to issue or permit to be
outstanding any class of capital stock which has priority over any other class
of capital stock of such Subsidiary as to dividends or in liquidation, except
for shares of such capital stock held by the Company or any Wholly-Owned
Subsidiary.
6J. Limitations on Issuance of Other Subordinated Indebtedness. The
Company shall not, and the Company shall not permit any Subsidiary to, create,
incur, assume, permit to exist, Guarantee, or in any other manner become liable
with respect to any Indebtedness that is contractually subordinate in right of
payment to any Senior Indebtedness unless such Indebtedness (i) is otherwise
permitted by the terms hereof and is Indebtedness that is pari passu with, or
subordinate pursuant to provisions approved, which approval will not be
unreasonably withheld, by the Required Holder(s) in right of payment to, the
Subordinated Notes, (ii) does not have any date for any scheduled payment of
principal prior to the maturity date of the Subordinated Notes and (iii) does
not have any date for any scheduled payment of interest prior to the maturity
date of the Subordinated Notes which is not the same date as a date for a
scheduled payment of interest on the Subordinated Notes. In addition, the
Company shall not, and the Company shall not permit any Subsidiary to, create,
incur, permit to exist, Guarantee, or in any manner become liable with respect
to any Subordinated Debt issued (x) in connection with the Acquisition of any
Person and (y) to such Person or any owner, or any Affiliate of any owner, of
such Person or of any securities of or ownership interests in such Person,
unless (a) such Subordinated Debt is subordinated in right of payment to the
Subordinated Notes pursuant to provisions approved by the Required Holder(s), or
(b)(x) such Subordinated Debt is pari passu with the Subordinated Notes as
required above, (y) such Subordinated Debt does not have the benefit of any
negative covenant of the nature of paragraphs 6A through 6F or related event of
default that is more favorable to the holders thereof than such covenants or
events of default, and (z) the aggregate principal amount of all such
Subordinated Debt outstanding under this clause (b) shall not exceed the greater
of (i) $25,000,000 or (ii) 5% of Consolidated Total Assets at the time of any
incurrence thereof.
6K. Payment Limitations. The Company covenants that it will not enter
into or become subject to any restriction on the payment of any Subordinated
Obligations other than the provisions of paragraph 10 hereof.
6L. Hedging Agreement. The Company covenants that it will not, and will
not permit any Subsidiary to, enter into any Hedging Agreement for speculative
purposes.
6M. Sale and Leaseback. The Company covenants that it will not, and will
not permit any Subsidiary to, directly or indirectly enter into any agreement or
arrangement providing for the sale or transfer by it of any property (now owned
or hereafter acquired) to a Person and the
18
subsequent lease or rental of such property or similar property from such Person
unless such sale or transfer and subsequent lease or rental is not in violation
of any other provision of this Agreement.
7. EVENTS OF DEFAULT.
7A. Acceleration. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or
Yield-Maintenance Amount payable with respect to any Subordinated Note when
the same shall become due, either by the terms thereof or otherwise as
herein provided; or
(ii) the Company defaults in the payment of any interest on any
Subordinated Note for more than 5 Business Days after the date due; or
(iii) the Company or any Subsidiary defaults (whether as primary
obligor or as guarantor or other surety) in any payment of principal of or
interest on any Indebtedness beyond any period of grace provided with
respect thereto, or the Company or any Subsidiary fails to perform or
observe any other agreement, term or condition contained in any agreement
under which any such Indebtedness is created (or if any other event
thereunder or under any such agreement shall occur and be continuing), and
the holder or holders of such Indebtedness (or a trustee on behalf of such
holder or holders) have caused such Indebtedness to become due (or to be
repurchased by the Company or any Subsidiary) prior to the stated maturity
thereof, provided that the aggregate amount of all Indebtedness which has
become due (or is required to be repurchased by the Company or any
Subsidiary) exceeds $5,000,000; or
(iv) any representation or warranty made by the Company or any
Guarantor herein or in any Guaranty Agreement or by the Company or any
Guarantor or any of its officers in any writing furnished in connection
with or pursuant to this Agreement or any Guaranty Agreement shall be false
in any material respect on the date as of which made; or
(v) the Company fails to perform or observe any agreement contained
in paragraph 4E or paragraph 6 (other than paragraphs 6B, 6G, 6H, or 6L,
clause (ii)(y) of paragraph 6D, or paragraphs 6E or 6M, in each case to the
extent paragraphs 6E or 6M relates to clause (ii)(y) of paragraph 6D, which
paragraphs and clauses are subject to clause (vi) of this paragraph 7A); or
(vi) the Company fails to perform or observe any other agreement,
term or condition contained herein and such failure shall not be remedied
within 30 days after any Responsible Officer obtains actual knowledge
thereof, or any Guarantor fails to perform or observe any agreement
contained in any Guaranty Agreement and such failure shall not be
19
remedied within the grace period, if any, provided therefor in such
Guaranty Agreement (or, if no grace period is provided therefor in such
Guaranty Agreement, within 30 days after any Responsible Officer obtains
actual knowledge thereof); or
(vii) the Company or any Significant Subsidiary makes an assignment
for the benefit of creditors or is generally not paying its debts as such
debts become due; or
(viii) any decree or order for relief in respect of the Company or
any Significant Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect (herein
called the "Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or any Significant Subsidiary petitions or applies
to any tribunal for, or consents to, the appointment of, or taking
possession by, a trustee, receiver, custodian, liquidator or similar
official of the Company or any Significant Subsidiary, or of any
substantial part of the assets of the Company or any Significant
Subsidiary, or commences a voluntary case under the Bankruptcy Law of the
United States or any proceedings (other than proceedings for the voluntary
liquidation and dissolution of a Significant Subsidiary) relating to the
Company or any Significant Subsidiary under the Bankruptcy Law of any other
jurisdiction; or
(x) any such petition or application described in clause (ix) of
this paragraph 7A is filed, or any such case or proceedings described in
clause (ix) of this paragraph 7A are commenced, against the Company or any
Significant Subsidiary and the Company or such Significant Subsidiary by
any act indicates its approval thereof, consent thereto or acquiescence
therein, or an order, judgment or decree is entered appointing any such
trustee, receiver, custodian, liquidator or similar official, or approving
the petition in any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Significant Subsidiary decreeing a split-up of
the Company or such Significant Subsidiary which requires the divestiture
of assets representing a substantial part, or the divestiture of the stock
of a Significant Subsidiary whose assets represent a substantial part, of
the consolidated assets of the Company and its Subsidiaries (determined in
accordance with generally accepted accounting principles) or which requires
the divestiture of assets, or stock of a Significant Subsidiary, which
shall have contributed a substantial part of the consolidated net income of
the Company and its Subsidiaries (determined in accordance with generally
accepted accounting principles) for any of the three fiscal years
20
then most recently ended, and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(xiii) one or more final judgments in an aggregate amount (net of any
insurance if the insurer has acknowledged its obligation to pay such
insurance and is not in default of such obligation) in excess of $5,000,000
are rendered against the Company or any Significant Subsidiary and either
(a) enforcement proceedings have been commenced by any creditor upon any
such judgment or (b) within 60 days after entry thereof, any such judgment
is not discharged or execution thereof stayed pending appeal, or within 60
days after the expiration of any such stay, such judgment is not
discharged; or
(xiv) (a) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code and any such failure, waiver or
failure to obtain such waiver would reasonably be expected to have a
Material Adverse Effect, (b) a notice of intent to terminate any Plan shall
have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified
the Company or any ERISA Affiliate that a Plan may become a subject of such
proceedings and any such event would reasonably be expected to result in a
liability to the Company or an ERISA Affiliate in excess of $5,000,000, (c)
the aggregate "amount of unfunded benefit liabilities" (within the meaning
of section 4001(a)(18) of ERISA) under all Plans, determined in accordance
with Title IV of ERISA, shall exceed $5,000,000, (d) the Company or any
ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans that would
reasonably be expected to have a Material Adverse Effect, (e) the Company
or any ERISA Affiliate withdraws from any Multiemployer Plan resulting in
the incurrence by such withdrawing employer of a withdrawal liability in an
amount exceeding $5,000,000, or (f) the Company or any Subsidiary
establishes or amends any employee welfare benefit plan that provides post-
employment welfare benefits in a manner that would increase the liability
of the Company or any Subsidiary thereunder to the extent that would
reasonably be expected to have a Material Adverse Effect; or
(xv) other than in accordance with its terms, any Guaranty
Agreement of a Material Subsidiary shall cease to be in full force and
effect, or any Guarantor that is a Material Subsidiary shall contest or
deny the validity or enforceability of, or deny that it has any liability
or obligations under, any Guaranty Agreement;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, the holder of any Subordinated Note (other than the Company
or any of its Subsidiaries or Affiliates) may at its option, by notice in
writing to the Company, declare such Subordinated Note to be, and such
Subordinated Note shall thereupon be and become, immediately due and payable at
par together
21
with interest accrued thereon and together with the Yield-Maintenance Amount, if
any, with respect to such Subordinated Note, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Company, (b) if such event is an Event of Default specified in clause (viii),
(ix) or (x) of this paragraph 7A with respect to the Company, all of the
Subordinated Notes at the time outstanding shall automatically become
immediately due and payable together with interest accrued thereon and together
with the Yield-Maintenance Amount, if any, with respect to each Subordinated
Note, without presentment, demand, protest or notice of any kind, all of which
are hereby waived by the Company, and (c) if such event is not an Event of
Default specified in clause (viii), (ix) or (x) of this paragraph 7A with
respect to the Company, the Required Holder(s) may at its or their option, by
notice in writing to the Company, declare all of the Subordinated Notes to be,
and all of the Subordinated Notes shall thereupon be and become, immediately due
and payable together with interest accrued thereon and together with the Yield-
Maintenance Amount, if any, with respect to each Subordinated Note, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company. The Company acknowledges, and the parties hereto
agree, that each holder of a Subordinated Note has the right to maintain its
investment in the Subordinated Notes free from repayment by the Company (except
as herein specifically provided for) and that the provision for payment of
Yield-Maintenance Amount by the Company in the event the Subordinated Notes are
prepaid or are accelerated as a result of an Event of Default is intended to
provide compensation for the deprivation of such right under such circumstances.
7B. Rescission of Acceleration. At any time within 90 days after any or
all of the Subordinated Notes shall have been declared immediately due and
payable pursuant to paragraph 7A, the Required Holder(s) may, by notice in
writing to the Company, rescind and annul such declaration and its consequences
if (i) the Company shall have paid all overdue interest on the Subordinated
Notes, the principal of and Yield-Maintenance Amount, if any, payable with
respect to any Subordinated Notes which have become due otherwise than by reason
of such declaration, and interest on such overdue interest and overdue principal
and Yield-Maintenance Amount at the rate specified in the Subordinated Notes,
(ii) the Company shall not have paid any amounts which have become due solely by
reason of such declaration, (iii) all Events of Default and Defaults, other than
non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to paragraph 12C(1), and
(iv) no judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Subordinated Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. Notice of Acceleration or Rescission. Whenever any Subordinated Note
shall be declared immediately due and payable pursuant to paragraph 7A or any
such declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each
Subordinated Note at the time outstanding.
7D. Other Remedies. If any Event of Default or Default shall occur and be
continuing, the holder of any Subordinated Note may proceed to protect and
enforce its rights under this Agreement and such Subordinated Note by exercising
such remedies as are available to such holder
22
in respect thereof under applicable law, either by suit in equity or by action
at law, or both, whether for specific performance of any covenant or other
agreement contained in this Agreement or in aid of the exercise of any power
granted in this Agreement. No remedy conferred in this Agreement upon the holder
of any Subordinated Note is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to every
other remedy conferred herein or now or hereafter existing at law or in equity
or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
8A(1). Organization. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Delaware and each
Subsidiary is duly organized and existing in good standing under the laws of the
jurisdiction in which it is organized. The Company and each of its Subsidiaries
have duly qualified or been duly licensed, and are authorized to do business and
are in good standing, in each jurisdiction in which the ownership of their
respective properties or the nature of their respective businesses makes such
qualification or licensing necessary and in which the failure to be so qualified
or licensed would be reasonably likely to have a Material Adverse Effect.
Schedule 8A(1) hereto sets forth, as of the date hereof, a correct list of each
Subsidiary, its jurisdiction of organization, its ownership and whether or not
such Subsidiary is a Material Subsidiary.
8A(2). Power and Authority. The Company and each Subsidiary has all
requisite corporate, limited liability company, or partnership, as applicable,
power to own or hold under lease and operate their respective properties which
it purports to own or hold under lease and to conduct its business as currently
conducted and as currently proposed to be conducted.
8A(3). Execution and Delivery of Transaction Documents. The Company and
each Guarantor has all requisite corporate, limited liability company, or
partnership, as applicable, power to execute, deliver and perform its
obligations under this Agreement, the Subordinated Notes and the Guaranty
Agreement, as the case may be. The execution, delivery and performance of this
Agreement, the Subordinated Notes and the Guaranty Agreement has been duly
authorized by all requisite corporate, limited liability company, or
partnership, as applicable, action, and this Agreement, the Subordinated Notes
and the Guaranty Agreement have been duly executed and delivered by authorized
officers of the Company and each Guarantor, as the case may be, and are valid
obligations of the Company and each Guarantor, as the case may be, legally
binding upon and enforceable against the Company and each Guarantor, as the case
may be, in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
8B. Financial Statements. The Company has furnished each Purchaser
with the following financial statements, identified by a principal financial
officer of the Company: (i) a consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1999, and
23
consolidated statements of income, stockholders' equity and cash flows of the
Company and its Subsidiaries for such year, all reported on by Arthur Andersen
LLP, and (ii) a consolidated balance sheet of the Company and its Subsidiaries
as at June 30 in each of the years 1999 and 2000 and consolidated statements of
income, stockholders' equity and cash flows for the six-month period ended on
each such date, prepared by the Company. Such financial statements (including
any related schedules and/or notes) are true and correct in all material
respects (subject, as to interim statements, to changes resulting from audits
and year-end adjustments), have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
involved and show all liabilities, direct and contingent, of the Company and its
Subsidiaries required to be shown in accordance with such principles. The
balance sheets fairly present the condition of the Company and its Subsidiaries
as at the dates thereof, and the statements of income, stockholders' equity and
cash flows fairly present the results of the operations of the Company and its
Subsidiaries and their cash flows for the periods indicated in accordance with
generally accepted accounting principles. Except as disclosed in the Company's
press release dated October 9, 2000, there has been no material adverse change
in the business, condition (financial or otherwise) or operations of the Company
and its Subsidiaries, taken as a whole, since December 31, 1999.
8C. Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which, individually or in the aggregate, would reasonably
be expected to result in any Material Adverse Effect.
8D. Outstanding Indebtedness. Neither the Company nor any of its
Subsidiaries has outstanding any Indebtedness except as permitted by paragraphs
6A(1) and 6A(2). Schedule 8D hereto sets forth a complete and correct list of
all outstanding Indebtedness of the Company and its Subsidiaries as of the date
of closing outstanding in an amount in excess of $50,000. There exists no
default under the provisions of any instrument evidencing such Indebtedness or
of any agreement relating thereto.
8E. Title to Properties. The Company has and each of its Subsidiaries has
good and sufficient title to its respective properties and assets (other than
properties which it leases) that individually or in the aggregate are material
to the Company and its Subsidiaries, including the properties and assets
reflected in the balance sheet as at December 31, 1999 referred to in paragraph
8B (other than properties and assets disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens permitted by paragraph
6B. All leases necessary in any material respect for the conduct of the
respective businesses of the Company and its Subsidiaries taken as a whole are
valid and subsisting and are in full force and effect.
8F. Taxes. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being actively
contested in good
24
faith by appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting principles, the
amount of which individually or in the aggregate is not material to the Company
and its Subsidiaries, taken as a whole.
8G. Conflicting Agreements and Other Matters. Neither the Company nor any
of its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and adversely affects
its business, property or assets, or financial condition. Neither the execution
nor delivery of this Agreement, the Subordinated Notes or the Guaranty
Agreement, nor the offering, issuance and sale of the Subordinated Notes, nor
fulfillment of nor compliance with the terms and provisions hereof, of the
Subordinated Notes, and of the Guaranty Agreement will conflict with, or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, or result in any violation of, or result in the creation of any Lien upon
any of the properties or assets of the Company or any of its Subsidiaries
pursuant to, the organizational documents of the Company or any of its
Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Company or any of its Subsidiaries is subject.
Neither the Company nor any of its Subsidiaries is a party to, or otherwise
subject to any provision contained in, any instrument evidencing Indebtedness of
the Company or such Subsidiary, any agreement relating thereto or any other
contract or agreement (including its charter) which limits the amount of, or
otherwise imposes restrictions on the incurring of, Indebtedness of the Company
of the type to be evidenced by the Subordinated Notes or Indebtedness of any
Guarantor of the type to be evidenced by the Guaranty Agreement except as set
forth in the agreements listed in Schedule 8G attached hereto.
8H. Offering of Subordinated Notes. Neither the Company nor any agent
acting on its behalf has, directly or indirectly, offered the Subordinated Notes
or any similar security of the Company for sale to, or solicited any offers to
buy the Subordinated Notes or any similar security of the Company from, or
otherwise approached or negotiated with respect thereto with, any Person other
than institutional investors, and neither the Company nor any agent acting on
its behalf has taken or will take any action which would subject the issuance or
sale of the Subordinated Notes to the provisions of section 5 of the Securities
Act or to the provisions of any securities or Blue Sky law of any applicable
jurisdiction.
8I. Use of Proceeds. Neither the Company nor any Subsidiary owns or has
any present intention of acquiring any "margin stock" as defined in Regulation U
(12 CFR Part 221) of the Board of Governors of the Federal Reserve System
(herein called "margin stock"). The proceeds of sale of the Subordinated Notes
will be used for general corporate purposes of the Company including the
repayment of Senior Indebtedness and Acquisitions. None of such proceeds will
be used, directly or indirectly, for the purpose, whether immediate, incidental
or ultimate, of purchasing or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any Indebtedness which was originally incurred
to purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U. The Company is not engaged principally, or as one
of its important activities, in the
25
business of extending credit for the purpose of purchasing or carrying margin
stock. Neither the Company nor any agent acting on its behalf has taken or will
take any action which might cause this Agreement or the Subordinated Notes to
violate Regulation T, Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Exchange Act, in each
case as in effect now or as the same may hereafter be in effect.
8J. ERISA. Other than deficiencies disclosed in the financial statements
referred to in paragraph 8B hereof, which deficiencies would not be reasonably
expected to have a Material Adverse Effect, no accumulated funding deficiency
(as defined in section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Plan (other than a Multiemployer Plan). No
liability to the PBGC (other than for premiums not overdue) has been or is
expected by the Company or any ERISA Affiliate to be incurred with respect to
any Plan (other than a Multiemployer Plan) by the Company , any Subsidiary or
any ERISA Affiliate which is or would be materially adverse to the business,
condition (financial or otherwise) or operations of the Company and its
Subsidiaries taken as a whole. Neither the Company , any Subsidiary nor any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to the business, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole.
The execution and delivery of this Agreement and the Guaranty Agreement and
issuance and sale of the Subordinated Notes will be exempt from, or will not
involve any transaction which is subject to, the prohibitions of section 406 of
ERISA and will not involve any transaction in connection with which a penalty
could be imposed under section 502(i) of ERISA or a tax would be imposed
pursuant to section 4975 of the Code. The representation by the Company in the
next preceding sentence is made in reliance upon and subject to the accuracy of
each Purchaser's representation in paragraph 9B.
8K. Governmental Consent. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Subordinated Notes is such as to require any authorization, consent, approval,
exemption or other action by or notice to or filing with any court or
administrative or governmental body (other than routine filings after the date
of closing with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of this Agreement and
the Guaranty Agreement, the offering, issuance, sale or delivery of the
Subordinated Notes or fulfillment of or compliance with the terms and provisions
hereof, of the Subordinated Notes or of the Guaranty Agreement. The
representation by the Company in this paragraph 8K is made in reliance upon and
subject to the accuracy of each Purchaser's representation in paragraph 9.
8L. Compliance with Environmental and Other Laws. The Company and its
Subsidiaries and all of their respective properties and facilities have complied
at all times and in all respects with all federal, state, local, foreign and
regional statutes, laws, ordinances and judicial or administrative orders,
judgments, rulings and regulations, including, without limitation, those
relating to protection of the environment except, in any such case, where
failure to comply,
26
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect.
8M. Regulatory Status. Neither the Company nor any of its Subsidiaries is
(i) an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or an
"investment adviser" within the meaning of the Investment Advisers Act of 1940,
as amended, (ii) a "holding company" of a "public utility company" or a
"subsidiary company" or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) a "public utility"
within the meaning of the Federal Power Act, as amended.
8N. Permits and Other Operating Rights. The Company and each Subsidiary
has all such valid and sufficient certificates of convenience and necessity,
franchises, licenses, permits, operating rights and other authorizations from
federal, state, foreign, regional, municipal and other local regulatory bodies
or administrative agencies or other governmental bodies having jurisdiction over
the Company or any Subsidiary or any of its properties, as are necessary for the
ownership, operation and maintenance of its businesses and properties, as
presently conducted and, as far as the Company can reasonably foresee, as
proposed to be conducted while the Subordinated Notes are outstanding, subject
to exceptions and deficiencies which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect, and such
certificates of convenience and necessity, franchises, licenses, permits,
operating rights and other authorizations from federal, state, foreign,
regional, municipal and other local regulatory bodies or administrative agencies
or other governmental bodies having jurisdiction over the Company, any
Subsidiary or any of its properties are free from restrictions or conditions
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, and neither the Company nor any Subsidiary is in
violation of any thereof in any respect that would be reasonably expected to
have a Material Adverse Effect.
8O. Rule 144A. The Subordinated Notes are not of the same class as
securities of the Company, if any, listed on a national securities exchange,
registered under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system.
8P. Disclosure. Neither this Agreement, the Guaranty Agreement nor any
other document, certificate or statement furnished to any Purchaser by or on
behalf of the Company or any Guarantor in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not misleading in
light of the circumstances under which they were provided. There is no fact or
facts peculiar to the Company or any of its Subsidiaries which materially
adversely affects or in the future may (so far as the Company can now reasonably
foresee), individually or in the aggregate, reasonably be expected to
materially adversely affect the business, property or assets, or financial
condition of the Company or any of its Subsidiaries and which has not been set
forth in this Agreement or in the other documents, certificates and statements
furnished to each Purchaser by or on behalf of the Company
27
prior to the date hereof in connection with the transactions contemplated
hereby. The financial projections contained in the Memorandum, as updated by the
financial projections delivered pursuant to paragraph 3F hereof, are reasonable
based on the assumptions stated therein and the best information available to
the officers of the Company at the time and under the circumstances under which
such projections and assumptions were provided. It is understood and
acknowledged by the holders of the Subordinated Notes that the assumptions and
the projections involve inherent uncertainties about many matters, many of which
are beyond the control of the Company and the Subsidiaries, and that actual
results may not match the projections for any number of reasons.
9. REPRESENTATIONS OF EACH PURCHASER. Each Purchaser represents as
follows:
9A. Nature of Purchase. Such Purchaser is not acquiring the Subordinated
Notes to be purchased by it hereunder with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act, provided
that the disposition of such Purchaser's property shall at all times be and
remain within its control.
9B. Source of Funds. At least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
such Purchaser to pay the purchase price of the Subordinated Notes to be
purchased by it hereunder: (i) the Source is the "insurance company general
account" of such Purchaser (as such term is defined under Section V of the
United States Department of Labor's Prohibited Transaction Class Exemption
("PTCE") 95-60), and as of the date of the purchase of the Subordinated Notes
such Purchaser satisfies all of the applicable requirements for relief under
Sections I and IV of PTCE 95-60; (ii) the Source is a separate account
maintained by such Purchaser in which no employee benefit plan, other than
employee benefit plans identified on a written list which has been furnished by
such Purchaser to the Company, participates to the extent of 10% or more; (iii)
the Source constitutes assets of an "investment fund" (within the meaning of
Part V of the QPAM Exemption) managed by a "qualified professional asset
manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no
employee benefit plan's assets that are included in such investment fund, when
combined with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part 1(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (a) the identity of
such QPAM and (b) the names of all employee benefit plan whose assets are
included in such investment fund have been disclosed to the Company in writing
pursuant to this clause (iii); (iv) the Source is a governmental plan; (v) the
Source is one or more employee benefit plans, or a separate account or trust
fund comprised of one or more employee benefit plans, each of which has been
identified to the Company in writing pursuant to this clause (v); or (vi) the
Source does not include assets of any employee benefit plan, other than a plan
exempt from the coverage of ERISA. For the purpose of this paragraph 9B, the
terms "separate account",
28
"governmental plan", and "employee benefit plan" shall have the respective
meanings specified in section 3 of ERISA.
10. SUBORDINATION OF SUBORDINATED NOTES. Anything in this Agreement or
the Subordinated Notes to the contrary notwithstanding, each Purchaser and each
Transferee of a Subordinated Note by its acceptance of a Subordinated Note
covenants and agrees that the payment of the principal of, interest on, and
Yield-Maintenance Amount or Adjusted Yield-Maintenance Amount, if any, with
respect to, the Subordinated Notes and any guarantee of payment with respect to
any of the foregoing (all of the foregoing, the "Subordinated Obligations")
shall, to the extent set forth in this paragraph 10, be subordinate and junior
and subject in right of payment to the prior payment in full of all Senior
Indebtedness.
10A. Payment Default or Acceleration. Except under circumstances when
the terms of paragraph 10C are applicable, if (i) a Payment Default or Senior
Indebtedness Acceleration shall have occurred and be continuing, and (ii) the
holders of the Subordinated Notes shall have received a Payment Default Notice,
then no holder of the Subordinated Notes shall accept or receive any direct or
indirect payment (in cash, other property, by setoff, or otherwise) on account
of the Subordinated Obligations during the Payment Blockage Period; provided,
however, that in the case of any payment on or in respect of any Subordinated
Obligation that would (in the absence of any such Payment Default Notice) have
been due and payable on any date (a "Scheduled Payment Date") during such
Payment Blockage Period pursuant to the terms of this Agreement as in effect on
the date hereof or as amended consistent with the provisions of paragraph 10J
hereof, the provisions of this paragraph 10A shall not prevent the making and
acceptance of such payment (a "Scheduled Payment"), together with any additional
default interest as is provided in this Agreement or the Subordinated Notes, on
or after the date immediately following the termination of such Payment Blockage
Period, provided, further, that if the holders of the Subordinated Notes shall
have received any payment thereon and, within 5 days after the date such payment
was made, shall receive a Payment Default Notice referencing a Payment Default
or a Senior Indebtedness Acceleration, in either case which had occurred and was
continuing on the date of such payment, then the payment so received shall be
subject to the provisions of the next succeeding paragraph and shall be paid
over immediately to the holders of the Senior Indebtedness.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to any holder of the Subordinated Notes prohibited by the foregoing
provisions of this paragraph 10A, then and in such event such payment shall be
segregated by such holder and held in trust for the benefit of and immediately
shall be paid over to the holders of the Senior Indebtedness for application
against the Senior Indebtedness remaining unpaid until such Senior Indebtedness
is paid in full. Any Payment Default Notice shall be deemed received by the
holders of the Subordinated Notes upon the date of actual receipt by the holders
of the Subordinated Notes of such Payment Default Notice in writing.
10B. Non-Payment Default. Except under circumstances when the terms of
paragraphs 10A or 10C are applicable, if (i) a Non-Payment Default shall have
occurred and be continuing, (ii)
29
the holders of the Subordinated Notes shall have received a Non-Payment Default
Notice, and (iii) no Non-Payment Default Notice shall have been given within the
360-day period immediately preceding the giving of such Non-Payment Default
Notice, then no holder of the Subordinated Notes shall accept or receive any
direct or indirect payment (in cash, other property, by setoff, or otherwise) on
account of the Subordinated Obligations during the Non-Payment Blockage Period;
provided, however, that in the case of any Scheduled Payment on or in respect
of any Subordinated Obligation that would (in the absence of any such Non-
Payment Default Notice) have been due and payable on any Scheduled Payment Date
during such Non-Payment Blockage Period pursuant to the terms of this Agreement
as in effect on the date hereof or as amended consistent with the requirements
of paragraph 10J hereof, the provisions of this paragraph 10B shall not prevent
the making and acceptance of such Scheduled Payment, together with any
additional default interest as is provided in this Agreement or the Subordinated
Notes, on or after the date immediately following the termination of such Non-
Payment Blockage Period.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to any holder of the Subordinated Notes prohibited by the foregoing
provisions of this paragraph 10B, then and in such event such payment shall be
segregated by such holder and held in trust for the benefit of and immediately
shall be paid over to the holders of the Senior Indebtedness for application
against the Senior Indebtedness remaining unpaid until such Senior Indebtedness
is paid in full. Any Non-Payment Default Notice shall be deemed received by the
holders of the Subordinated Notes upon the date of actual receipt by the holders
of the Subordinated Notes of such Non-Payment Default Notice in writing.
10C. Insolvency; Bankruptcy; etc. In the event of the institution of
any Insolvency Proceeding relative to the Company, then any payment or
distribution of any kind or character, whether in cash, property or securities,
by setoff or otherwise, which may be payable or deliverable in such proceedings
in respect of the Subordinated Obligations shall be paid or delivered by the
Person making such payment or distribution, whether a trustee in bankruptcy, a
receiver, a liquidating trustee, or otherwise, directly to the holders of the
Senior Indebtedness to the extent necessary to make payment in full of all
Senior Indebtedness remaining unpaid; provided, however, that no such delivery
of any Reorganization Securities shall be made to holders of the Senior
Indebtedness. In the event that, notwithstanding the foregoing provisions of
this paragraph 10C, the holders of the Subordinated Notes shall have received
any such payment or distribution of any kind or character, whether in cash,
property or securities, by setoff or otherwise, before all Senior Indebtedness
is paid in full, which is to be paid to the holders of the Senior Indebtedness
under the foregoing provisions of this paragraph 10C, then and in such event
such payment or distribution shall be segregated and held in trust for the
benefit of and immediately shall be paid over to the holders of the Senior
Indebtedness for application to the payment of all Senior Indebtedness remaining
unpaid until all such Senior Indebtedness shall have been paid in full.
10D. No Impairment. No right of any present or future holder of Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any non-compliance by the Company with
30
the terms, provisions, and covenants of this Agreement or the Subordinated
Notes, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
10E. Defines Rights of Creditors; Subrogation. The provisions of this
paragraph 10 are for the purpose of defining the relative rights of the holders
of Senior Indebtedness on the one hand, and the holders of the Subordinated
Notes on the other hand, and nothing herein shall impair, as between the Company
and the holders of the Subordinated Notes, the obligation of the Company, which
is unconditional and absolute, to pay to the holders thereof the principal
thereof and Yield-Maintenance Amount or Adjusted Yield-Maintenance Amount, if
any, and interest thereon in accordance with their terms and the provisions
hereof, nor shall anything herein prevent the holders of the Subordinated Notes
from exercising all remedies otherwise permitted by applicable law or hereunder
upon default hereunder or under the Subordinated Notes (including the right to
demand payment and sue for performance hereof and of the Subordinated Notes and
to accelerate the maturity thereof as provided in paragraph 7 hereof), subject
to the rights of holders of Senior Indebtedness under this paragraph 10,
provided, no holder of a Subordinated Note and no agent or representative
thereof shall exercise any remedies against, or attempt to foreclose upon,
garnish, sequester or execute upon, any property known to it as constituting
collateral for the Senior Indebtedness (other than to file or record any
judgment liens it may have obtained against such collateral) during any period
in which the holders of the Senior Indebtedness have commenced and are pursuing
with reasonable diligence a judicial proceeding to obtain a judgment against the
Company in respect of the Senior Indebtedness or to effect a sale of the
collateral for the Senior Indebtedness or non-judicial remedies to effect a sale
of the collateral for the Senior Indebtedness. Upon payment in full of the
Senior Indebtedness, the holders of the Subordinated Notes shall, to the extent
of any payments or distributions paid or delivered to the holders of the Senior
Indebtedness or otherwise applied to the Senior Indebtedness pursuant to the
provisions of this paragraph 10, be subrogated to the rights of the holders of
the Senior Indebtedness to receive payments or distributions of assets of the
Company made on Senior Indebtedness (and any security therefor) until the
Subordinated Obligations shall be paid in full (and, for this purpose, no such
payments or distributions paid or delivered to the holders of the Senior
Indebtedness or otherwise applied to the Senior Indebtedness shall be deemed to
have discharged the Subordinated Obligations), and, for the purposes of such
subrogation, no payments to the holders of Senior Indebtedness of any cash,
assets, stock, or obligations to which the holders of the Subordinated Notes
would be entitled except for the provisions of this paragraph 10 shall, as
between the Company, its creditors (other than the holders of the Senior
Indebtedness), and the holders of the Subordinated Notes, be deemed to be a
payment by the Company to or on account of Senior Indebtedness. The fact that
failure to make any payment on account of the Subordinated Obligations is caused
by reason of the operation of any provision of this paragraph 10 shall not be
construed as preventing the occurrence of an Event of Default.
10F. Payments on Senior Indebtedness. In the event that any holder of
a Subordinated Note determines in good faith that evidence is required with
respect to the right of any holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this paragraph 10 or the amount of such
participation, such holder of a Subordinated Note may request such Person to
furnish evidence to the reasonable satisfaction of such holder of a Subordinated
Note as to the
31
amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this paragraph 10, and if
such evidence is not furnished such holder of a Subordinated Note may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment; provided that, upon the written request of such
Person to such holder, such payment shall be made to the court having
jurisdiction over such judicial determination or to another Person mutually
satisfactory to such Person and such holder, as escrowee, to be held and
invested pending such judicial determination in accordance with such
instructions as shall be mutually satisfactory to such Person and such holder
and upon such judicial determination becoming final and nonappealable to be
distributed in accordance therewith to the Person entitled thereto.
10G. Notice Upon Acceleration. If payment of the Subordinated Notes is
accelerated because of an Event of Default, the Company will promptly notify the
Senior Indebtedness Representative of such acceleration. The Company may not pay
the Subordinated Notes until ten Business Days after the Senior Indebtedness
Representative receives notice of such acceleration from the Company or any
holder of any Subordinated Notes and, after that ten business day period, may
pay the Subordinated Notes only if the provisions of this paragraph 10 do not
prohibit such payment at that time.
10H. Reinstatement. To the extent any payment of or distribution in
respect of the Senior Indebtedness (whether by or on behalf of the Company, as
proceeds of security or enforcement of any right of set off or otherwise) is
declared to be fraudulent or preferential, set aside or required to be paid to
any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
person under any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then if such payment or distribution is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar person, the Senior Indebtedness or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
has not occurred and the provisions of this paragraph 10 shall continue to be
applicable in respect of said reinstated Senior Indebtedness.
10I. No Waiver. Any renewal or extension of the time of payment of any
Senior Indebtedness or the exercise by the holders of Senior Indebtedness of any
of their rights under any instrument creating or evidencing Senior Indebtedness,
including, without limitation, the waiver of default thereunder, may be made or
done all without notice to or assent from the holders of the Subordinated Notes
and shall not affect the provisions or efficacy of this paragraph 10. No
compromise, alteration, amendment, modification, extension, renewal or other
change of, or waiver, consent or other action in respect of, any liability or
obligation under or in respect of, or of any of the terms, covenants or
conditions of any agreement, indenture or other instrument under which any
Senior Indebtedness is outstanding or of such Senior Indebtedness, shall in any
way alter or affect any of the provisions of this paragraph 10 or of the
Subordinated Notes relating to the subordination thereof. The foregoing
provisions are not intended to permit a change to the definition of "Senior
Indebtedness" contained in this Agreement.
32
10J. Amendments. No amendment of this paragraph 10, or the definitions
used in this paragraph 10, or any amendment of paragraph 4A of this Agreement
which would have the effect of accelerating the date for, or increasing the
amount of, any scheduled prepayment of principal of the Subordinated Notes, or
of any section that would have the effect of modifying this paragraph 10, or the
definitions used in this paragraph 10, or so amending paragraph 4A, shall be
made without the prior written consent of the Senior Indebtedness
Representative.
11. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this Agreement,
the terms defined in paragraphs 11A and 11B (or within the text of any other
paragraph) shall have the respective meanings specified therein and all
accounting matters shall be subject to determination as provided in paragraph
11C.
11A. Yield-Maintenance Terms.
"Adjusted Discounted Value" shall mean with respect to the Called
Principal of any Subordinated Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to such
Called Principal, in accordance with accepted financial practice and at a
discount factor (as converted to reflect the same periodic basis on which
interest on the Subordinated Notes is payable, if interest on the Subordinated
Notes is payable other than on a semi-annual basis) equal to the Reinvestment
Yield with respect to such Called Principal plus 1.00%.
"Adjusted Yield-Maintenance Amount" shall mean, with respect to any
Subordinated Note, an amount equal to the excess, if any, of the Adjusted
Discounted Value of the Called Principal of such Subordinated Note over the sum
of (i) such Called Principal plus (ii) interest accrued thereon as of (including
interest due on) the Settlement Date with respect to such Called Principal. The
Adjusted Yield-Maintenance Amount shall in no event be less than zero.
"Called Principal" shall mean, with respect to any Subordinated
Note, the principal of such Subordinated Note that is to be prepaid pursuant to
paragraph 4B or paragraph 4E or is declared to be or becomes immediately due and
payable pursuant to paragraph 7A, as the context requires.
"Discounted Value" shall mean, with respect to the Called Principal
of any Subordinated Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a discount
factor (as converted to reflect the same periodic basis on which interest on the
Subordinated Notes is payable, if interest on the Subordinated Notes is payable
other than on a semi-annual basis) equal to the Reinvestment Yield with respect
to such Called Principal.
"Reinvestment Yield" shall mean, with respect to the Called
Principal of any Subordinated Note, 1.50% over the yield to maturity implied by
(i) the yields reported, as of 10:00
33
a.m. (New York City time) on the Business Day next preceding the Settlement Date
with respect to such Called Principal, on the display designated as "Page 678"
on the Bridge Telerate Services (Telerate) (or such other display as may replace
Page 678 on the Bridge Telerate Services (Telerate)) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between yields reported for various maturities. The Reinvestment Yield
will be rounded to that number of decimal places as appears in the coupon for
the Subordinated Notes.
"Remaining Average Life" shall mean, with respect to the Called
Principal of any Subordinated Note, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such Called Principal into
(ii) the sum of the products obtained by multiplying (a) each Remaining
Scheduled Payment of such Called Principal (but not of interest thereon) by (b)
the number of years (calculated to the nearest one-twelfth year) which will
elapse between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the Called
Principal of any Subordinated Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with respect
to such Called Principal if no payment of such Called Principal were made prior
to its scheduled due date.
"Settlement Date" shall mean, with respect to the Called Principal of
any Subordinated Note, the date on which such Called Principal is to be prepaid
pursuant to paragraph 4B or paragraph 4E or is declared to be or becomes
immediately due and payable pursuant to paragraph 7A, as the context requires.
"Yield-Maintenance Amount" shall mean, with respect to any
Subordinated Note, an amount equal to the excess, if any, of the Discounted
Value of the Called Principal of such Subordinated Note over the sum of (i) such
Called Principal plus (ii) interest accrued thereon as of (including interest
due on) the Settlement Date with respect to such Called Principal. The Yield-
Maintenance Amount shall in no event be less than zero.
34
11B. Other Terms.
"Acquisition" means any transaction, or any series of related
transactions, by which the Company or any of its Subsidiaries (i) acquires all
or substantially all of the assets of any Person, or division thereof, whether
through purchase of assets, merger or otherwise or (ii) directly or indirectly
acquires all of the securities of or outstanding ownership interests or control
of any Person.
"Add-Back Adjustments" shall mean the pro forma adjustments of the
types referred to in 17 CFR 210.11-02(b)(6).
"Affiliate" of any Person shall mean (i) any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such first Person, and (ii) with respect to any Purchaser, any
investment fund or vehicle for which such Purchaser or any Affiliate of such
Purchaser acts as investment advisor or portfolio manager. A Person shall be
deemed to control a corporation or other entity if (a) such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation or entity, whether through the
ownership of voting securities, by contract or otherwise, or (b) if such Person
owns, directly or indirectly, 10% or more of the total combined voting power of
all voting securities of such corporation or entity.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as
codified under Title 11 of the United States Code, and the Bankruptcy Rules
promulgated thereunder, as the same may be in effect from time to time.
"Bankruptcy Law" shall have the meaning specified in clause (viii)
of paragraph 7A.
"Business Day" shall mean any day other than a Saturday, a Sunday or
a day on which commercial banks in Houston, Texas or New York City are required
or authorized to be closed.
"Capitalized Lease" shall mean any lease the obligations of the
lessee under which constitute Capitalized Lease Obligations.
"Capitalized Lease Obligation" shall mean any rental obligation
which, under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"Change of Control" shall mean (a) occupation of a majority of the
seats (other than vacant seats) on the board of directors of the Company by
Persons who were neither (i) nominated by the board of directors of the Company
nor (ii) appointed by directors so nominated; or (b) the acquisition of direct
or indirect Control of the Company by any Person or any group other than a
35
group containing only one or more of the shareholders of the Company listed on
Schedule 11B(1) hereto.
"closing" or "date of closing" shall have the meaning given in
paragraph 2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consolidated Net Earnings" of any Person for any period shall mean
the net income (or loss) of such Person and its Subsidiaries for such period,
excluding (i) any extraordinary items, and (ii) any equity interest of such
Person in the unremitted earnings of any Person which is not a Subsidiary of
such Person, as determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Consolidated Total Assets" shall mean as of any date the total assets
of the Company and its Subsidiaries on such date as determined on a consolidated
basis in accordance with generally accepted accounting principles.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Default" shall mean any of the events specified in paragraph 7A,
whether or not any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further condition, event
or act for such event to become an Event of Default has been satisfied.
"Default Rate" shall mean a rate per annum from time to time equal to
the lesser of (i) the greater of (a) 14.00%, or (b) 2.00% over the rate of
interest publicly announced by The Bank of New York from time to time in New
York City as its Prime Rate or (ii) the maximum rate permitted by applicable
law.
"EBITDA" shall mean, for any period, the sum of:
(i) the Consolidated Net Earnings of the Company for such
period, plus (to the extent deducted in determining Consolidated Net
Earnings of the Company for such period) the aggregate amount of federal,
state and local income and franchise taxes, interest expense, depreciation
expense and amortization expense for such period; and
(ii) to the extent not included in determining the amount in
clause (i), above, for such period, Pro Forma Operating Income.
36
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"Event of Default" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Existing Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, dated February 9, 2000, among the Company as
borrower, the Subsidiaries of the Company named therein as guarantors, The Chase
Manhattan Bank f/k/a Chase Bank of Texas, National Association, as
Administrative Agent, Bankers Trust Company as Syndication Agent, First Union
National Bank as Documentation Agent, and the co-agents and lenders named
therein, as said document may be amended, restated, renewed, modified or
extended from time to time.
"Funded Debt" shall mean, without duplication of amounts, all
Indebtedness of the Company and its Subsidiaries for borrowed money, all
Capitalized Lease Obligations of the Company or its Subsidiaries, the aggregate
LC Exposure and all Indebtedness of the Company or its Subsidiaries evidenced by
any Guarantee of Indebtedness, other than the Guarantee of the Indebtedness of
the Company and its Subsidiaries which Indebtedness is otherwise permitted
hereunder, determined on a consolidated basis.
"Guarantee" of or by any Person (the "guarantor") shall mean any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Guarantee shall be equal to the outstanding principal amount of
the obligation guaranteed or such lesser amount to which the maximum exposure of
the guarantor shall have been specifically limited.
37
"Guarantor" shall mean each Material Subsidiary of the Company in
existence as of the date of closing and each other Person which may from time to
time execute a Guaranty Agreement.
"Guaranty Agreement" and "Guaranty Agreements" shall have the meaning
given in paragraph 3A(ii) hereof.
"Hedging Agreement" means any foreign currency exchange agreement,
commodity price protection agreement or other currency exchange rate or
commodity price hedging arrangement, or any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar interest
rate hedging agreement.
"including" shall mean, unless the context clearly requires otherwise,
"including without limitation", whether or not so stated.
"Indebtedness" of any Person shall mean, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (iii) all
obligations of such Person upon which interest charges are customarily paid,
(iv) all obligations of such Person under conditional sale or other title
retention agreements relating to property acquired by such Person (excluding
accounts payable and accrued liabilities incurred in the ordinary course of
business), (v) all obligations of such Person in respect of the deferred
purchase price of property or services (excluding accounts payable and accrued
liabilities incurred in the ordinary course of business, including retainages
and post-closing adjustments), (vi) all Indebtedness of others secured by any
Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (vii) all Guarantees by such
Person of Indebtedness of others, (viii) all Capitalized Lease Obligations of
such Person, (ix) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit, letters of guaranty supporting
Indebtedness and the net amount under any Interest Rate Risk Indebtedness, and
(x) all obligations, contingent or otherwise, of such Person in respect of
bankers' acceptances. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.
"Insolvency Proceeding" shall mean (i) any case, action, or proceeding
before any court or other governmental authority having jurisdiction over the
applicable Person or its assets relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up, or relief of
debtors, or (ii) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors, or other similar arrangement in
respect of its creditors generally or any substantial portion of its creditors;
in each case whether undertaken under U.S. Federal (including the Bankruptcy
Code), State, or foreign law.
38
"Interest Rate Risk Agreement" shall mean the program, and all
documents related thereto, for the hedging of interest rate risk provided for in
any interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement or similar arrangement entered into by the Company or any of
its Subsidiaries for the purpose of reducing its exposure to interest rate
fluctuations in connection with Funded Debt of the Company or any of its
Subsidiaries and not for speculative purposes.
"Interest Rate Risk Indebtedness" shall mean all obligations and
Indebtedness of the Company or any of its Subsidiaries with respect to any
program for the hedging of interest rate risk provided for in any Interest Rate
Risk Agreement.
"LC Disbursement" shall mean a payment made by the issuer of a letter
of credit issued for the account of the Company or any Subsidiary pursuant to
such letter of credit.
"LC Exposure" shall mean, at any time, the sum of (i) the aggregate
undrawn amount of all outstanding letters of credit issued for the account of
the Company or any Subsidiary at such time plus (ii) the aggregate amount of all
LC Disbursements that have not yet been reimbursed by or on behalf of the
Company or its Subsidiaries at such time.
"Lien" shall mean, with respect to any asset, (i) any mortgage, deed
of trust, lien, pledge, hypothecation, encumbrance, charge or security interest
in, on or of such asset, (ii) the interest of a vendor or lessor under any
conditional sale agreement, Capitalized Lease or title retention agreement
relating to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
"Maintenance Capital Expenditure" of any Person for any period shall
mean the actual depreciation expense required to be classified and accounted for
as depreciation expense on a consolidated income statement of such Person for
such period under generally accepted accounting principles.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, assets, operations, prospects, or condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole, (ii) the
ability of the Company and its Subsidiaries taken as a whole, to perform any of
its obligations under this Agreement, the Subordinated Notes or any Guaranty
Agreement or (iii) the material rights of or benefits available to the holders
of the Subordinated Notes under this Agreement, the Subordinated Notes or any
Guaranty Agreement to enforce collection of the obligations due under this
Agreement, the Subordinated Notes or any Guaranty Agreement.
"Material Subsidiary" shall mean (i) any Significant Subsidiary, or
(ii) any Subsidiary which is liable under a Guarantee with respect to any Senior
Funded Debt.
39
"Maximum Senior Debt Leverage Ratio" shall mean 2.25 to 1.00;
provided, however, if as of any date upon which compliance with the provisions
of paragraph 6A(2) hereof is to be determined the Company is a party to a
Principal Bank Lending Agreement which requires the Company to maintain a
maximum ratio of the outstanding amount of all Senior Funded Debt to EBITDA for
the four consecutive fiscal quarters ending on such date of greater than 2.25 to
1.00 as of such date, then the "Maximum Senior Debt Leverage Ratio" shall mean
the maximum ratio of the outstanding amount of all Senior Funded Debt to EBITDA
for the four consecutive fiscal quarters ending on such date which the Company
is required to maintain under the Principal Bank Lending Agreement as of such
date, but in no event shall the Maximum Senior Debt Leverage Ratio as of any
date be greater than 2.50 to 1.00.
"Memorandum" shall mean the Company's "Private Placement Memorandum,"
dated September 2000, relating to the Subordinated Notes, provided by or on
behalf of the Company to the Purchasers.
"Multiemployer Plan" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"Net Proceeds of Capital Stock" shall mean, with respect to any
period, cash proceeds (net of all costs and out-of-pocket expenses in connection
therewith, including, without limitation, placement, underwriting and brokerage
fees and expenses), received by the Company from the sale of its capital stock
(other than Redeemable capital stock).
"Non-Payment Blockage Period" shall mean, with respect to any Non-
Payment Default, the period from and including the date of receipt by the
holders of the Subordinated Notes of a Non-Payment Default Notice relating
thereto until the first to occur of (a) the date upon which the Senior
Indebtedness has been paid in full, (b) the 179th day after receipt of such Non-
Payment Default Notice, (c) the date on which the Non-Payment Default which is
the subject of such Non-Payment Default Notice has been waived in writing by the
applicable holder or holders of the Senior Indebtedness or an agent or
representative on their behalf, cured, or ceased to exist, or (d) the date upon
which the Person(s) giving such Non-Payment Default Notice notify the holders of
the Subordinated Notes of the termination of such Non-Payment Blockage Period.
"Non-Payment Default' shall mean the occurrence of any event under any
agreement under which any Senior Indebtedness in an aggregate amount of at least
$1,000,000 is outstanding, not constituting a Payment Default, which gives the
holder of such Senior Indebtedness, or an agent or representative acting on
behalf of such holder, the right to cause the maturity of such Senior
Indebtedness to be accelerated immediately without any further notice (except
such notice as may be required to effect such acceleration) or the expiration of
any applicable grace period.
"Non-Payment Default Notice" shall mean a written notice from or on
behalf of the Senior Indebtedness Representative that a Non-Payment Default with
respect to at least a majority of the outstanding principal amount of all Senior
Indebtedness then outstanding has occurred and
40
is continuing which identifies such Non-Payment Default and specifically
designates such notice as a "Non-Payment Default Notice".
"Officer's Certificate" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents or its Treasurer.
"Operating Lease" shall mean any lease of real or personal property
which is not a Capitalized Lease.
"Payment Blockage Period" shall mean, with respect to any Payment
Default or Senior Indebtedness Acceleration, the period from and including the
date of receipt by the holders of the Subordinated Notes of a Payment Default
Notice relating thereto until the first to occur of (a) the date upon which the
Senior Indebtedness has been paid in full, (b) if such Payment Default Notice
relates to a Payment Default, the date on which the Payment Default which is the
subject of such Payment Default Notice has been waived in writing by the
applicable holder or holders of the Senior Indebtedness or an agent or
representative on their behalf, cured or ceased to exist, or if such Payment
Default Notice relates to a Senior Indebtedness Acceleration, the date on which
such acceleration is rescinded, annulled or ceased to exist, or (c) the day upon
which the Person(s) giving such Payment Default Notice notify the holders of the
Subordinated Notes of the termination of such Payment Blockage Period.
"Payment Default" shall mean a default by the Company in any payment
on the portion of Senior Indebtedness consisting of principal, interest or
premium in an aggregate amount of at least $1,000,000 when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment or by
declaration or acceleration or otherwise.
"Payment Default Notice" shall mean a written notice from or on behalf
of any holder of any Senior Indebtedness that either (i) a Payment Default with
respect to such Senior Indebtedness has occurred and is continuing, or (ii) a
Senior Indebtedness Acceleration with respect to such Senior Indebtedness has
occurred and is continuing.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor or replacement entity thereto under ERISA.
"Permitted Businesses" shall mean any business that involves the
production, distribution or sale of ready-mixed concrete (including truck-mixed
concrete) and other cement mixtures; precast concrete products; slag products;
retail sales of concrete products, equipment, tools and accessories; aggregate
production, storage and sales and any logical extension of or business activity
reasonably related to or in furtherance of any of the foregoing.
41
"Permitted Encumbrances" shall mean:
(i) Liens for taxes (including ad valorem and property taxes) and
assessments or governmental charges or levies not yet due or which are
being actively contested in good faith by appropriate proceedings in
compliance with, or otherwise permitted to be incurred pursuant to,
paragraph 5H;
(ii) Liens existing as of the date hereof specified on Schedule 6B;
(iii) other Liens incidental to the conduct of the business
of the Company and its Subsidiaries or the maintenance, operation,
construction or ownership of its property and assets (including pledges or
deposits in connection with workers' compensation and social security
taxes, assessments and charges, and landlord's, mechanic's and
materialmen's Liens and survey exceptions or encumbrances, easements or
reservations, rights-of-way, or zoning restrictions) provided that (A) such
Liens were not incurred in connection with the incurrence of Indebtedness ,
and (B) the existence of such Liens does not materially detract from the
value of such property or assets to the Company or any Subsidiary or
unreasonably interfere with the ordinary conduct of business;
(iv) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or another Subsidiary;
(v) Liens incurred or deposits made in the ordinary course of
business to secure (or to obtain letters of credit that secure) the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, performance bonds, purchase, construction or sales contracts
and other similar obligations, in each case not incurred or made in
connection with the incurrence of Indebtedness;
(vi) any Lien renewing, extending or refunding any Lien permitted by
clause (ii) so long as the principal amount of Indebtedness secured by such
Lien immediately prior thereto is not increased or the maturity thereof
reduced, such Indebtedness is permitted to be outstanding hereunder and
such Lien is not extended to other property;
(vii) (A) any right of setoff or banker's lien (whether by common
law, statute, contract or otherwise) or (B) any other setoff right in favor
of any other Person arising under common law or statute, in either case not
relating to Indebtedness; and
(viii) Liens created by, resulting from or arising in connection with
any litigation or legal proceeding involving the Company or any Subsidiary,
excluding any judgment Liens or Liens in the form of attachments in aid of
execution on a judgment to the extent the aggregate amount of all such
judgments would cause a Default or an Event of Default to occur in respect
to paragraph 7A(xiii).
42
"Permitted Investments" shall mean:
(i) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(ii) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from Standard & Poor's Ratings
Services, a division of The McGraw Hill Companies, Inc., or from Moody's
Investors Service, Inc.; and
(iii) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of
not less than $500,000,000.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof.
"Plan" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
"Potential Change of Control" shall mean (i) the execution by the
Company or any of its Subsidiaries or Affiliates of any agreement or letter of
intent with respect to any proposed transaction, or event or series of
transactions or events which, individually or in the aggregate, would, if
consummated as therein contemplated, result in a Change in Control, (ii) the
execution by the Company or any of its Subsidiaries of any written agreement
which, when fully performed by the parties thereto, would result in a Change in
Control, or (iii) the making of any written offer by any person (as such term is
used in Section 13(d) and Section 14(d)(2) of the Exchange Act as in effect on
the date of the Closing) or related persons constituting a group (as such term
is used in Rule 13d-5 under the Exchange Act as in effect on the date of the
Closing) to the holders of the common stock of the Company, which offer, if
accepted by the requisite number of holders, would result in a Change in
Control.
"Principal Bank Lending Agreement" shall mean at any time the
agreement then in effect under which the Company may borrow or has outstanding
Senior Funded Debt used to meet the working capital needs of the Company and its
Subsidiaries. If at any time there is more than one such agreement in effect,
then the "Principal Bank Lending Agreement" shall mean the one of such
43
agreements under which the commitment to loan Senior Funded Debt to the Company
or its Subsidiaries is the greatest.
"Pro Forma Operating Income" shall mean for each Qualified Company
whose Acquisition by the Company occurs during the four consecutive fiscal
quarter period preceding the date as of which EBITDA is being calculated and
with respect to the period beginning four fiscal quarters prior to the
calculation of EBITDA through the date of such Acquisition, the sum of
Consolidated Net Earnings of such Qualified Company for such period, plus (to
the extent deducted in determining Consolidated Net Earnings of such Qualified
Company for such period) the aggregate amount of federal, state and local income
and franchise taxes, interest expense, depreciation expense and amortization
expense for such period, plus or minus, as applicable, Add-Back Adjustments with
respect to such Qualified Company, in the case of each such item equal to the
amount of such item as set forth in the pro forma presentation of the results of
such Acquisition contained in the applicable form filed or to be filed by the
Company with the Securities and Exchange Commission reporting such Acquisition.
"property" or "properties" shall mean any real or personal property of
any kind, tangible or intangible, choate or inchoate.
"Proposed Prepayment Date" shall have the meaning given in paragraph
4E(3) hereof.
"Purchasers" shall have the meaning given in the introductory
paragraph hereof.
"QPAM Exemption" shall mean Prohibited Transaction Class Exemption 84-
14 issued by the United States Department of Labor.
"Qualified Company" means any provider of ready-mixed concrete,
concrete products or related products and services to the construction industry.
"Redeemable" shall mean, with respect to the capital stock of any
Person, each share of such Person's capital stock that, at any time before two
years after the maturity date of the Subordinated Notes, is (i) redeemable,
payable or required to be purchased or otherwise returned or extinguished, or
convertible into or exchanged for any Indebtedness of such Person or any of its
Subsidiaries, (a) at a fixed or determinable date, whether by operation of a
sinking fund or otherwise, (b) at the option of any Person other than such
Person, or (c) upon the occurrence of a condition not solely within the control
of such Person, or (ii) convertible into or exchangeable for any other
Redeemable capital stock of such Person or any of its Subsidiaries.
"Rentals" shall mean all rental and other obligations paid by the
Company or any Subsidiary as lessee under any Operating Lease.
44
"Reorganization Securities" shall mean (i) debt securities that are
issued pursuant to an Insolvency Proceeding the payment of which is subordinate
and junior at least to the extent provided in paragraph 10 of this Agreement to
the payment of all Senior Indebtedness outstanding at the time of the issuance
thereof and to the payment of all debt securities issued in exchange for such
Senior Indebtedness in such Insolvency Proceeding (whether such subordination is
effected by the terms of such securities, an order or decree issued in such
Insolvency Proceeding, by agreement of the holders of the Subordinated Notes or
otherwise), or (ii) equity securities that are issued pursuant to an Insolvency
Proceeding; provided, in either case, that such securities are authorized by an
order or decree made by a court of competent jurisdiction in such Insolvency
Proceeding.
"Required Holder(s)" shall mean the holder or holders of more than 50%
of the aggregate principal amount of the Subordinated Notes from time to time
outstanding (exclusive of any Subordinated Note then owned by the Company or any
of its Subsidiaries or Affiliates).
"Responsible Officer" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company or any other officer of the Company involved principally in its
financial administration or its controllership function.
"Restricted Payment" shall mean (i) any dividend or other distribution
(whether in cash, securities or other property, except distributions payable in
capital stock which is not Redeemable capital stock) with respect to any shares
of any class of capital stock of or other ownership interests in the Company or
any Subsidiary (other than distributions paid to the Company or any Wholly-Owned
Subsidiary), or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
shares of capital stock of the Company or any Subsidiary, any option, warrant or
other right to acquire any such shares of capital stock of or other ownership
interests in the Company or any Subsidiary or any debt of the Company or any
Subsidiary which is subordinated to the Subordinated Obligations, in each case
other than paid to the Company or any Wholly-Owned Subsidiary, and (ii) any
voluntary prepayments of principal of, or any voluntary purchase, redemption,
retirement, acquisition, cancellation or termination prior to the date when due
of, any principal of any Subordinated Debt which is pari passu with the
Subordinated Obligations; provided Restricted Payment shall not include any
scheduled interest payment made on Subordinated Debt which is otherwise
permitted pursuant to the terms hereof.
"Scheduled Payment" shall have the meaning given in paragraph 10A.
"Scheduled Payment Date" shall have the meaning given in paragraph
10A.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Indebtedness" shall mean the principal amount of all Funded
Debt which is not Subordinated Debt, provided that such Funded Debt is permitted
to be outstanding under the provisions of paragraph 6A(2) hereof, together with
any accrued and unpaid interest thereon or
45
premium with respect thereto. For the purpose of determining whether any Funded
Debt was permitted to be outstanding under the provisions of paragraph 6A(2)
hereof in order to determine whether such Funded Debt constitutes "Senior
Indebtedness" hereunder, but for no other purpose, any Funded Debt with respect
to which the lender thereof relied, at the time such Funded Debt was incurred,
upon a certificate of a Responsible Officer which may be contained in, or be a
part of a Borrowing Request (as said term is defined in the Existing Credit
Agreement) showing that the ratio of (i) the outstanding amount of all Senior
Funded Debt on such date of incurrence, after giving effect to the incurrence of
such Funded Debt, to (ii) EBITDA for the four consecutive fiscal quarters most
recently ended prior to such date of incurrence for which financial statements
were available, was less than or equal to the Maximum Senior Debt Leverage
Ratio, shall be conclusively deemed to be "Senior Indebtedness".
"Senior Indebtedness Acceleration" shall mean with respect to any
Senior Indebtedness that the holder or holders of such Senior Indebtedness, or
an agent or representative on behalf of such holder or holders, have caused the
maturity of such Senior Indebtedness in an aggregate amount of at least
$1,000,000 to be accelerated.
"Senior Indebtedness Representative" shall mean (i) initially, The
Chase Manhattan Bank, or (ii) such other Person selected by the holders of a
majority of the Senior Indebtedness to replace the then Senior Indebtedness
Representative, notice of the name of, and address for notices hereunder for
which, has been given to the holders of the Subordinated Notes by the then
Senior Indebtedness Representative being replaced. The address for notices
hereunder to The Chase Manhattan Bank shall be 712 Main Street, Houston, Texas
77002, Attn: James R. Dolphin, Fax (713) 216-6004 or such other address as the
Senior Indebtedness Representative may specify by notice to holders of the
Subordinated Notes.
"Senior Funded Debt" shall mean all Funded Debt which is not
Subordinated Debt.
"Significant Subsidiary" shall mean any Subsidiary the net book value
of whose assets are equal to or greater than 5% of the Consolidated Total Assets
or whose gross revenues are equal to or greater than 5% of the consolidated
revenues of the Company and its Subsidiaries, in each case measured by the most
recent financial statements delivered under paragraph 5A(i) or 5A(ii) at the
time of determination (or, if no financial statements have yet been delivered
under paragraph 5A(i) or 5A(ii) at the time of determination, the most recent
financial statements referred to in paragraph 8B hereof).
"Significant Holder" shall mean (i) each Purchaser, so long as such
Purchaser shall hold (or be committed under this Agreement to purchase) any
Subordinated Note, or (ii) any other holder of at least 5% of the aggregate
principal amount of the Subordinated Notes from time to time outstanding.
"Subordinated Debt" shall mean the Subordinated Notes and any other
Funded Debt of the Company or its Subsidiaries which, by its terms, is
subordinated to the Senior Indebtedness
46
at least to the extent that the Subordinated Obligations are subordinated to the
Senior Indebtedness under the provisions of paragraph 10 hereof.
"Subordinated Notes" shall have the meaning given in paragraph 1
hereof.
"Subordinated Obligations" shall have the meaning given in paragraph
10 hereof.
"Subsidiary" of any Person shall mean, with respect to any Person
(the "parent") at any date, any corporation, limited liability company,
partnership, association or other entity the accounts of which would be
consolidated with those of the parent in the parent's consolidated financial
statements if such financial statements were prepared in accordance with
generally accepted accounting principles as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
of which securities or other ownership interests representing more than 50% of
the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held by the parent. Unless the context otherwise
clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary
of the Company.
"Transfer" shall mean any sale, lease, transfer or other disposition
of any property or asset or interest in any property.
"Transferee" shall mean any direct or indirect transferee of all or
any part of any Subordinated Note purchased by any Purchaser under this
Agreement.
"Voting Stock" shall mean, with respect to any corporation, any
shares of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
"Wholly-Owned Subsidiary" shall mean any Subsidiary of the Company
all of the outstanding capital stock of every class of which is owned by the
Company or another Wholly-Owned Subsidiary of the Company.
11C. Accounting and Legal Principles, Terms and Determinations. All
references in this Agreement to "generally accepted accounting principles" shall
be deemed to refer to generally accepted accounting principles in effect in the
United States at the time of application thereof. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all unaudited financial statements and certificates and reports as to financial
matters required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles, applied on a basis consistent with the
most recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no such
statements have been so delivered, the most recent audited financial statements
referred to in clause (i) of paragraph 8B. Any reference
47
herein to any specific citation, section or form of law, statute, rule or
regulation shall refer to such new, replacement or analogous citation, section
or form should such citation, section or form be modified, amended or replaced.
12. MISCELLANEOUS.
12A. Subordinated Note Payments. The Company agrees that, so long as
any Purchaser shall hold any Subordinated Note, it will make payments of
principal of, interest on and any Yield-Maintenance Amount or Adjusted Yield-
Maintenance Amount payable with respect to such Subordinated Note, which comply
with the terms of this Agreement, by wire transfer of immediately available
funds for credit (not later than 12:00 noon, New York City time, on the date
due) to such Purchaser's account or accounts as specified in the Purchaser
Schedule attached hereto, or such other account or accounts in the United States
as such Purchaser may designate in writing, notwithstanding any contrary
provision herein or in any Subordinated Note with respect to the place of
payment. Each Purchaser agrees that, before disposing of any Subordinated Note,
such Purchaser will make a notation thereon (or on a schedule attached thereto)
of all principal payments previously made thereon and of the date to which
interest thereon has been paid. The Company agrees to afford the benefits of
this paragraph 12A to any Transferee which shall have made the same agreement as
each Purchaser has made in this paragraph 12A.
12B. Expenses. Whether or not the transactions contemplated hereby
shall be consummated, the Company shall pay, and save each Purchaser and any
Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including:
(i) (a) all stamp and documentary taxes and similar charges, (b)
costs of obtaining a private placement number from Standard and Poor's
Ratings Group for the Subordinated Notes and (c) fees and expenses of
brokers, agents, dealers, investment banks or other intermediaries or
placement agents, in each case as a result of the execution and delivery of
this Agreement or the Guaranty Agreement or the issuance of the
Subordinated Notes;
(ii) document production and duplication charges and the reasonable
fees and expenses of any special counsel engaged by such Purchaser or such
Transferee in connection with (a) this Agreement, the Guaranty Agreement
and the transactions contemplated hereby or thereby and (b) any subsequent
proposed waiver, amendment or modification of, or proposed consent
requested by the Company under, this Agreement or the Guaranty Agreement,
whether or not such proposed action shall be effected or granted;
(iii) the costs and expenses, including attorneys' and financial
advisory fees, incurred by such Purchaser or such Transferee in enforcing
(or determining whether or how to enforce) any rights under this Agreement,
the Subordinated Notes or the Guaranty Agreement or in responding to any
subpoena or other legal process or informal investigative
48
demand issued in connection with this Agreement or the Guaranty Agreement
or the transactions contemplated hereby or by reason of your or such
Transferee's having acquired any Subordinated Note, including without
limitation costs and expenses incurred in any workout, restructuring or
renegotiation proceeding or bankruptcy case; and
(iv) any judgment, liability, claim, order, decree, cost, fee,
expense, action or obligation resulting from the consummation of the
transactions contemplated hereby, including the use of the proceeds of the
Subordinated Notes by the Company.
The obligations of the Company under this paragraph 12B shall survive the
transfer of any Subordinated Note or portion thereof or interest therein by any
Purchaser or Transferee and the payment of any Subordinated Note.
12C(1). Consent to Amendments. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holder(s) except
that, without the written consent of the holder or holders of all Subordinated
Notes at the time outstanding, no amendment to this Agreement shall change the
maturity of any Subordinated Note, or change the principal of, or the rate or
time of payment of interest on or any Yield-Maintenance Amount or Adjusted
Yield-Maintenance Amount payable with respect to any Subordinated Note, or
affect the time, amount or allocation of any prepayments, or change the
proportion of the principal amount of the Subordinated Notes required with
respect to any consent, amendment, waiver or declaration. Each holder of any
Subordinated Note at the time or thereafter outstanding shall be bound by any
consent authorized by this paragraph 12C(1), whether or not such Subordinated
Note shall have been marked to indicate such consent, but any Subordinated Notes
issued thereafter may bear a notation referring to any such consent. No course
of dealing between the Company and the holder of any Subordinated Note nor any
delay in exercising any rights hereunder or under any Subordinated Note shall
operate as a waiver of any rights of any holder of such Subordinated Note. As
used herein and in the Subordinated Notes, the term "this Agreement" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
12C(2). Solicitation. The Company will provide each holder of the
Subordinated Notes (irrespective of the amount of Subordinated Notes then owned
by it) with sufficient information, sufficiently far in advance of the date a
decision is required, to enable such holder to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in respect of
any of the provisions hereof or of the Subordinated Notes. The Company will
deliver executed or true and correct copies of each amendment, waiver or consent
effected pursuant to the provisions of paragraph 12C(1) to each holder of
outstanding Subordinated Notes promptly following the date on which it is
executed and delivered by, or receives the consent or approval of, the requisite
holders of the Subordinated Notes.
49
12C(3). Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Subordinated
Notes as consideration for or as an inducement to the entering into by any
holder of Subordinated Notes of any waiver or amendment of any of the terms and
provisions hereof unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of the
Subordinated Notes then outstanding even if such holder did not consent to such
waiver or amendment.
12D. Form, Registration, Transfer and Exchange of Subordinated Notes;
Lost Subordinated Notes. The Subordinated Notes are issuable as registered
notes without coupons in denominations of at least $100,000, except as may be
necessary to (i) reflect any principal amount not evenly divisible by $100,000
or (ii) enable the registration of transfer by a holder of its entire holding of
Subordinated Notes; provided, however, that no such minimum denomination shall
apply to Subordinated Notes issued upon transfer by any holder of the
Subordinated Notes to any Purchaser or any of such Purchaser's Affiliates or to
any other entity or group of Affiliates with respect to which the Subordinated
Notes so issued or transferred shall be managed by a single entity. The Company
shall keep at its principal office a register in which the Company shall provide
for the registration of Subordinated Notes and of transfers of Subordinated
Notes. Upon surrender for registration of transfer of any Subordinated Note at
the principal office of the Company, the Company shall, at its expense, execute
and deliver one or more new Subordinated Notes of like tenor and of a like
aggregate principal amount, registered in the name of such transferee or
transferees. Each Transferee of any Subordinated Note shall be deemed at the
time of the transfer of such Subordinated Note to such Transferee to have made
the representations set forth in paragraph 9. At the option of the holder of
any Subordinated Note, such Subordinated Note may be exchanged for other
Subordinated Notes of like tenor and of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Subordinated Note to be
exchanged at the principal office of the Company. Whenever any Subordinated
Notes are so surrendered for exchange, the Company shall, at its expense,
execute and deliver the Subordinated Notes which the holder making the exchange
is entitled to receive. Every Subordinated Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Subordinated Note or
such holder's attorney duly authorized in writing. Any Subordinated Note or
Subordinated Notes issued in exchange for any Subordinated Note or upon transfer
thereof shall carry the rights to unpaid interest and interest to accrue which
were carried by the Subordinated Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Subordinated
Note of the loss, theft, destruction or mutilation of such Subordinated Note
and, in the case of any such loss, theft or destruction, upon receipt of such
holder's reasonable indemnity agreement (provided that if such holder of such
Subordinated Note is, or is a nominee for or an Affiliate of, an original
Purchaser, or is another holder of a Subordinated Note which is a qualified
institutional buyer (as defined in Securities and Exchange Commission Rule144A),
then such holder's unsecured indemnity agreement shall be satisfactory), or in
the case of any such mutilation upon surrender and cancellation of such
Subordinated Note, the Company will make and
50
deliver a new Subordinated Note, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Subordinated Note.
12E. Persons Deemed Owners; Participations. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name any
Subordinated Note is registered as the owner and holder of such Subordinated
Note for the purpose of receiving payment of principal of, interest on and any
Yield-Maintenance Amount or Adjusted Yield-Maintenance Amount payable with
respect to such Subordinated Note and for all other purposes whatsoever, whether
or not such Subordinated Note shall be overdue, and the Company shall not be
affected by notice to the contrary. Subject to the preceding sentence, the
holder of any Subordinated Note may from time to time grant participations in
such Subordinated Note to any Person on such terms and conditions as may be
determined by such holder in its sole and absolute discretion, provided that any
such participation shall be in a principal amount of at least $100,000.
12F. Survival of Representations and Warranties; Entire Agreement.
All representations and warranties contained herein or made in writing by or on
behalf of the Company or any Guarantor in connection herewith shall survive the
execution and delivery of this Agreement, the Subordinated Notes and the
Guaranty Agreement, the transfer by any Purchaser of any Subordinated Note or
portion thereof or interest therein and the payment of any Subordinated Note,
and may be relied upon by any Transferee, regardless of any investigation made
at any time by or on behalf of any Purchaser or any Transferee. Subject to the
preceding sentence, this Agreement and, the Subordinated Notes and the Guaranty
Agreement embody the entire agreement and understanding between the Purchasers
and the Company and supersede all prior agreements and understandings relating
to the subject matter hereof.
12G. Successors and Assigns. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
12H. Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is
prohibited by any one of such covenants, the fact that it would be permitted by
an exception to, or otherwise be in compliance within the limitations of,
another covenant shall not (i) avoid the occurrence of a Default or Event of
Default if such action is taken or such condition exists or (ii) in any way
prejudice an attempt by the holder of any Subordinated Note to prohibit through
equitable action or otherwise the taking of any action by the Company or any
Subsidiary which would result in a Default or Event of Default.
12I. Notices. All written communications provided for hereunder shall
be sent by first class mail or nationwide overnight delivery service (with
charges prepaid) and (i) if to any Purchaser, addressed to such Purchaser at the
address specified for such communications in the Purchaser Schedule attached
hereto, or at such other address as such Purchaser shall have specified to the
Company in writing, (ii) if to any other holder of any Subordinated Note,
addressed to such other
51
holder at such address as such other holder shall have specified to the Company
in writing or, if any such other holder shall not have so specified an address
to the Company, then addressed to such other holder in care of the last holder
of such Subordinated Note which shall have so specified an address to the
Company, and (iii) if to the Company, addressed to it at 1300 Post Oak Blvd.,
Suite 1220, Houston, Texas 77056, Attention: Chief Financial Officer, or at such
other address as the Company shall have specified to the holder of each
Subordinated Note in writing; provided, however, that any such communication to
the Company may also, at the option of the holder of any Subordinated Note, be
delivered by any other means either to the Company at its address specified
above or to any officer of the Company. Notices under this paragraph 12I will be
deemed given only when actually received.
12J. Payments Due on Non-Business Days. Anything in this Agreement or
the Subordinated Notes to the contrary notwithstanding, any payment of principal
of, Yield-Maintenance Amount or Adjusted Yield-Maintenance Amount with respect
to, or interest on any Subordinated Note that is due on a date other than a
Business Day shall be made on the next succeeding Business Day without including
the additional days elapsed in the computation of the interest payable on such
next succeeding Business Day.
12K. Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to any Purchaser or to the Required Holder(s), the
determination of such satisfaction shall, except as otherwise expressly provided
herein, be made by such Purchaser or the Required Holder(s), as the case may be,
in the sole and exclusive judgment (exercised in good faith) of the Person or
Persons making such determination.
12L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD
OTHERWISE CAUSE THIS AGREEMENT TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH,
OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER
JURISDICTION).
12M. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR THE SUBORDINATED NOTES MAY BE BROUGHT IN ANY NEW
YORK STATE COURT SITTING IN NEW YORK CITY OR THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS, UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR
PROCEEDING. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
52
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
IT AT ITS ADDRESS PROVIDED IN PARAGRAPH 12I, SUCH SERVICE TO BECOME EFFECTIVE
UPON RECEIPT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A
SUBORDINATED NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN ANY
OF THE AFORESAID COURTS AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
12N. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12O. Descriptive Headings; Advice of Counsel; Interpretation. The
descriptive headings of the several paragraphs of this Agreement are inserted
for convenience only and do not constitute a part of this Agreement. Each party
to this Agreement represents to the other parties to this Agreement that such
party has been represented by counsel in connection with this Agreement, the
Subordinated Notes and the Guaranty Agreement, that such party has discussed
this Agreement, the Subordinated Notes and the Guaranty Agreement with its
counsel and that any and all issues with respect to this Agreement, the
Subordinated Notes and the Guaranty Agreement have been resolved as set forth
herein. No provision of this Agreement, the Subordinated Notes or the Guaranty
Agreement shall be construed against or interpreted to the disadvantage of any
party hereto by any court or other governmental or judicial authority by reason
of such party having or being deemed to have structured, drafted or dictated
such provision.
12P. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
12Q. Severalty of Obligations. The sales of Subordinated Notes to the
Purchasers are to be several sales, and the obligations of the Purchasers under
this Agreement are several obligations. Except as provided in paragraph 3J, no
failure by any Purchaser to perform its obligations under this Agreement shall
relieve any other Purchaser or the Company of any of its obligations hereunder,
and no Purchaser shall be responsible for the obligations of, or any action
taken or omitted by, any other Purchaser hereunder.
53
12R. Maximum Interest Payable. The Company, you and any other holders of
the Subordinated Notes specifically intend and agree to limit contractually the
amount of interest payable under this Agreement, the Subordinated Notes, any
Guaranty Agreement and all other instruments and agreements related hereto and
thereto to the maximum amount of interest lawfully permitted to be charged under
applicable law. Therefore, none of the terms of this Agreement, the Subordinated
Notes, any Guaranty Agreement or any instrument pertaining to or relating to
this Agreement or the Subordinated Notes shall ever be construed to create a
contract to pay interest at a rate in excess of the maximum rate permitted to be
charged under applicable law, and neither the Company, any Guarantor nor any
other party liable or to become liable hereunder, under the Subordinated Notes,
any Guaranty Agreement or under any other instruments and agreements related
hereto and thereto shall ever be liable for interest in excess of the amount
determined at such maximum rate, and the provisions of this paragraph 12R shall
control over all other provisions of this Agreement, any Subordinated Notes, any
Guaranty Agreement or any other instrument pertaining to or relating to the
transactions herein contemplated. If any amount of interest taken or received by
any holder of a Subordinated Note shall constitute unearned interest or shall be
in excess of said maximum amount of interest which, under applicable law, could
lawfully have been collected by such holder incident to such transactions, then
such excess shall be deemed to have been the result of a mathematical error by
all parties hereto and shall be refunded promptly by the Person receiving such
amount to the party paying such amount, or, at the option of the recipient,
credited ratably against the unpaid principal amount of the Subordinated Note
held by such holder. All amounts paid or agreed to be paid in connection with
such transactions which would under applicable law be deemed "interest" shall,
to the extent permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the stated term of this Agreement and the
Subordinated Notes. "Applicable law" as used in this paragraph means that law in
effect from time to time which permits the charging and collection of the
highest permissible lawful, nonusurious rate of interest on the transactions
herein contemplated including laws of the State of New York and of the United
Sates of America, and "maximum rate" as used in this paragraph means, with
respect to each of the Subordinated Notes, the maximum lawful, nonusurious rates
of interest (if any) which under applicable law may be charged to the Company
from time to time with respect to such Subordinated Notes.
12S. Disclosure to Other Persons; Confidentiality. For purposes of
this paragraph 12S, "Confidential Information" means information delivered to
the holders of the Subordinated Notes by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
holders of the Subordinated Notes as being confidential information of the
Company or such Subsidiary, provided that such term does not include information
that (a) was publicly known or otherwise known to such holders of the
Subordinated Notes prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by such holders of the
Subordinated Notes or any person acting on behalf of such holders of the
Subordinated Notes, (c) otherwise becomes known to such holders of the
Subordinated Notes other than through disclosure by or on behalf of the Company
or any Subsidiary or (d) constitutes financial statements delivered to such
holders of the Subordinated Notes under paragraph 5A that are otherwise publicly
made available. Such holders of the Subordinated Notes
54
will maintain the confidentiality of such Confidential Information in accordance
with procedures adopted by such holders of the Subordinated Notes in good faith
to protect confidential information of third parties delivered to such holders
of the Subordinated Notes, provided that such holders of the Subordinated Notes,
may deliver or disclose Confidential Information to
(i) such holder's directors, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates
to the administration of the investment represented by the holder's
Subordinated Notes);
(ii) such holder's financial advisors and other professional
advisors who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this paragraph 12S;
(iii) any other holder of any Subordinated Note;
(iv) any institutional investor to which such holders of the
Subordinated Notes sell or offer to sell such Subordinated Note or any part
thereof or any participation therein (if such Person has agreed in writing
prior to receipt of such Confidential Information to be bound by the
provisions of this paragraph 12S);
(v) any Person from which such holder offers to purchase any
security of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of
this paragraph 12S);
(vi) any federal or state regulatory authority having jurisdiction
over such holders of the Subordinated Notes;
(vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that
requires access to information about such holder's investment portfolio; or
(viii) any other Person to which such delivery or disclosure may be
necessary or appropriate (w) to effect compliance with any law, rule,
regulation or order applicable to such holder, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to
which such holder is a party, or (z) if an Event of Default has occurred
and is continuing, to the extent any holder may reasonably determine such
delivery and disclosure to be necessary or appropriate in the enforcement
or for the protection of the rights and remedies under such holder's
Subordinated Notes and this Agreement.
On reasonable request by the Company in connection with the delivery to any
holder of a Subordinated Note of information required to be delivered to such
holder under this Agreement or requested by such holder (other than a holder
that is a party to this Agreement or its nominee), such
55
holder will enter into an agreement with the Company embodying the provisions of
this paragraph 12S.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
SIGNATURES ON THE FOLLOWING PAGE.]
56
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterparts of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement among the
Company and the Purchasers.
Very truly yours,
U.S. CONCRETE, INC.
By: /s/ Michael W. Harlan
-------------------------------
Title: Senior Vice President
------------------------
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Chris Bruce
-----------------------------------
Vice President
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Claudia Cromie
-----------------------------------
Title: Director
-----------------------------
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Diane Hom
-----------------------------------
Title: Director-Private Placements
-----------------------------
57
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA Investments, Inc. (authorized agent)
By: /s/ Debra J. Height
------------------------------
Title: Managing Director
---------------------------
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Jerry D. Zinkula
--------------------------------------
Name: Jerry D. Zinkula
---------------------------------
By: /s/ Patricia W. Wilson
--------------------------------------
Name: Patricia W. Wilson
---------------------------------
Authorized Signatories
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Jerry D. Zinkula
--------------------------------------
Name: Jerry D. Zinkula
---------------------------------
By: /s/ Patricia W. Wilson
--------------------------------------
Name: Patricia W. Wilson
---------------------------------
Authorized Signatories
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
By: /s/ Carol Robertson, CFA
----------------------------------------
Title: Portfolia Manager - Fixed Income
----------------------------------
58
PURCHASER SCHEDULE
Aggregate
Principal
Amount of
Subordinated Subordinated
Notes to be Note Denom-
Purchased ination(s)
------------ ------------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA $25,000,000 $25,000,000
(1) All payments on account of Subordinated Notes held by such Purchaser shall
be made by wire transfer of immediately available funds for credit to:
Account No. 890-0304-391
The Bank of New York
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name of the Company, a
reference to "12.00% Senior Subordinated Notes due November 10, 2010,
Security No. !INV7261!" PPN 90333L A*3, and the due date and application
(as among principal, interest and Yield-Maintenance Amount or Adjusted
Yield-Maintenance Amount) of the payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company
of America
c/o Investment Operations Group
Gateway Center Four, 10th Floor
100 Mulberry Street
Newark, New Jersey 07102-4077
Attention: Manager
(3) Address for all other communications and notices:
The Prudential Insurance Company
of America
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, Texas 75201
Attention: Managing Director
Telephone: (214) 720-6200
Telecopier: (214) 720-6299
(4) Recipient of telephonic prepayment notices and telephonic notices of a
Change of Control:
Manager, Trade Management Group
Telephone: (973) 367-3141
Telecopier: (973) 802-4925
(5) Tax Identification No.: 22-1211670
Aggregate
Principal
Amount of
Subordinated Subordinated
Notes to be Note Denom-
Purchased ination(s)
------------ ------------
METROPOLITAN LIFE INSURANCE COMPANY $20,000,000 $20,000,000
(1) All payments on account of Subordinated Notes held by such Purchaser shall
be made by wire transfer of immediately available funds for credit to:
The Chase Manhattan Bank
ABA No. 021000021
Account Name: Metropolitan Life Insurance Company
Acct. No. 002-2-410591
With sufficient information to identify the source and application of such
funds, including a reference to "U.S. Concrete, Inc., 12% Senior
Subordinated Notes due November 10, 2010, PPN 90333L A*3"
(2) Address for all communications and notices:
Metropolitan Life Insurance Company
334 Madison Avenue
P.O. Box 633
Convent Station, NJ 07961
Attention: Private Placement Unit
Telecopy No.: (973) 254-3032
(3) Recipient of telephonic prepayment notices and telephonic notices of a
Change of Control:
(973) 254-3373, Director, Private Placement Unit
(4) Tax Identification No.: 13-5581829
Aggregate
Principal
Amount of
Subordinated Subordinated
Notes to be Note Denom-
Purchased ination(s)
------------ ------------
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA $20,000,000 $20,000,000
(1) All payments on account of Subordinated Notes held by such Purchaser shall
be made by wire transfer of immediately available funds for credit to:
Account No. Chase Manhattan Bank
ABA No. 021-000-021
Account of: Teachers Insurance and Annuity Association of America
Account No. 900-9-000200
For further Credit to the TIAA Account Number: G07040
Each such wire transfer shall set forth the name of the Company, a
reference to "12.00% Senior Subordinated Notes due November 10, 2010," PPN
90333L A*3, and the due date and application (as among principal, interest
and Yield-Maintenance Amount or Adjusted Yield-Maintenance Amount) of the
payment being made.
(2) Contemporaneous with the above electronic funds transfer, advice setting
forth (1) the full name, private placement number and interest rate of the
Subordinated Note, (2) allocation of payment between principal, interest,
Yield-Maintenance Amount, Adjusted Yield-Maintenance Amount and any special
payment; and (3) name and address of Bank (or Trustee) from which wire
transfer was sent, shall be delivered, mailed or faxed to:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017-3206
Attention: Securities Accounting Division
Telephone: (212) 916-6004
Fax: (212) 916-6955
(3) Address for all other communications and notices:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017-3206
Attention: Securities Division
Telephone: (212) 916-6748 (Diane Hom)
(212) 490-90000 (General Number)
Fax: (212) 916-6582 (Team Fax Number)
(4) Recipient of telephonic prepayment notices and telephonic notices of a
Change of Control:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017-3206
Attention: Securities Division
Telephone: (212) 916-6748 (Diane Hom)
(212) 490-90000 (General Number)
Fax: (212) 916-6582 (Team Fax Number)
(5) Tax Identification No.: 13-1624203
Aggregate
Principal
Amount of
Subordinated Subordinated
Notes to be Note Denom-
Purchased ination(s)
------------ ------------
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY $15,000,000 $15,000,000
(1) Subordinated Notes to be registered in the nominee name:
CIG & Co.
(2) All payments on account of Subordinated Notes held by such Purchaser shall
be made by federal funds wire transfer of immediately available funds for
credit to:
Each such wire transfer shall be accompanied by the following information:
OBI=U.S. Concrete, Inc.; 12.00% Senior Subordinated Notes due November 10,
2010; PPN 90333L A*3; due date and application (as among principal, Yield-
Maintenance Amount, Adjusted Yield-Maintenance Amount and interest of the
payment being made); contact name and phone.
(3) Address for all notices relating to payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
(4) Address for all other communications and notices:
Aggregate
Principal
Amount of
Subordinated Subordinated
Notes to be Note Denom-
Purchased inations
------------- ------------
ALLSTATE LIFE INSURANCE COMPANY
$7,000,000 $2,000,000
$3,000,000
$2,000,000
(1) All payments by Fedwire transfer of
immediately available funds, identifying
the name of the Issuer, the Private
Placement Number preceded by "DPP" and
the payment as principal, interest, Yield-
Maintenance Amount or Adjusted Yield-
Maintenance Amount in the format as
follows:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-117-0
ORG = U.S. Concrete, Inc.
OBI = DPP - 90333L A*3
Payment Due Date (MM/DD/YY)
P_____ (Enter "P" and amount of
principal being remitted, for
example, P5000000.00)
I______(Enter "I" and amount of
interest being remitted, for
example, I225000.00)
(2) All notices of scheduled payments and
written confirmations of such wire
transfer to be sent to:
Allstate Insurance Company
Investment Operations - Private Placements
3075 Sanders Road, STE G4A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-2769
Telecopier: (847) 326-5040
(3) All financial reports, compliance
certificates and all other written
communications, including notice of
prepayments, to be sent to:
Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, STE G3A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-8922
Telecopier: (847) 402-3092
(4) Tax Identification No.: 36-2554642
Aggregate
Principal
Amount of
Subordinated Subordinated
Notes to be Note Denom-
Purchased ination(s)
----------- ---------------
ALLSTATE LIFE INSURANCE COMPANY
OF NEW YORK $3,000,000 $3,000,000
(1) All payments by Fedwire transfer of
immediately available funds, identifying
the name of the Issuer, the Private
Placement Number preceded by "DPP" and
the payment as principal, interest, Yield-
Maintenance Amount or Adjusted Yield-
Maintenance Amount in the format as
follows:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-120-4
ORG = U.S. Concrete, Inc.
OBI = DPP - 90333L A*3
Payment Due Date (MM/DD/YY)
P_____ (Enter "P" and amount of
principal being remitted, for
example, P5000000.00)
I______(Enter "I" and amount of
interest being remitted, for
example, I225000.00)
(2) All notices of scheduled payments and
written confirmations of such wire
transfer to be sent to:
Allstate Insurance Company
Investment Operations - Private Placements
3075 Sanders Road, STE G4A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-2769
Telecopier: (847) 326-5040
(3) All financial reports, compliance
certificates and all other written
communications, including notice of
prepayments, to be sent to:
Allstate Insurance Company
Private Placements Department
3075 Sanders Road, STE G3A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-8922
Telecopier: (847) 402-3092
(4) Tax Identification No.: 36-2608394
Aggregate
Principal
Amount of
Subordinated Subordinated
Notes to be Note Denom-
Purchased ination(s)
----------- ---------------
SOUTHERN FARM BUREAU LIFE
INSURANCE COMPANY $5,000,000 $5,000,000
(1) All payments on account of Subordinated
Notes held by such Purchaser shall be
made by wire transfer of immediately
available funds for credit to:
State Street Bank and Trust Company
Boston, MA 02101
ABA #0110000028
For further credit to:
Southern Farm Bureau Life Insurance Company
DDA #59848127
Account #EQ83
Each such wire transfer shall set forth
the name of the Company, a reference to
"12.00% Senior Subordinated Notes due
November 10, 2010, PPN 90333L A*3, and
the due date and application (as among
principal, interest and Yield-Maintenance
Amount or Adjusted Yield-Maintenance
Amount) of the payment being made.
(2) Address for all communications and notices:
Southern Farm Bureau Life Insurance Company
P.O. Box 78
Jackson, MS 39205
Attn: Investment Department
or by overnight delivery to:
1401 Livingston Lane
Jackson, MS 39213
Contact Person:
Carol Robertson, CFA
Telephone: (601) 981-7422 ext. 1506
Telecopier: (601) 981-3605
(3) Tax Identification No.: 64-0283583
EXHIBIT A
[FORM OF SUBORDINATED NOTE]
U.S. CONCRETE, INC.
12.00% SENIOR SUBORDINATED NOTE DUE NOVEMBER 10, 2010
No. _____ [Date]
$________ PPN 90333L A*3
FOR VALUE RECEIVED, the undersigned, U.S. Concrete, Inc., a corporation
organized and existing under the laws of the State of Delaware (herein called
the "Company"), hereby promises to pay to ____________________________
___________________________, or registered assigns, on November 10, 2010,
_________________________ DOLLARS ($_____________), with interest (computed on
the basis of a 360-day year--30-day month) payable (a) quarterly on the 10th day
of February, May, August and November in each year, commencing with the February
10, May 10, August 10 or November 10 next succeeding the date hereof, until the
principal hereof shall have become due and payable on the unpaid balance hereof
at the rate per annum of 12.00% and (b) on any overdue payment or prepayment of
principal, interest, Yield-Maintenance Amount or Adjusted Yield-Maintenance
Amount payable quarterly as aforesaid (or, at the option of the registered
holder hereof, on demand) at the Default Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount or
Adjusted Yield-Maintenance Amount payable with respect to this Subordinated Note
are to be made at the main office of The Bank of New York in New York City or at
such other place as the holder hereof shall designate to the Company in writing,
in lawful money of the United States of America.
This Subordinated Note is one of a series of Senior Subordinated Notes
(herein called the "Subordinated Notes") issued pursuant to a Note Agreement,
dated as of November 10, 2000 (herein called the "Agreement"), among the Company
and the original purchasers of the Subordinated Notes named in the Purchaser
Schedule attached thereto and is entitled to the benefits thereof.
This Subordinated Note is a registered Subordinated Note and, as provided
in the Agreement, upon surrender of this Subordinated Note for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Subordinated Note for a like principal amount will
be issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Subordinated Note is registered as
A-1
the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
The Company agrees to make required prepayments of principal on the dates
and in the amounts specified in the Agreement. This Subordinated Note is also
subject to optional prepayment, in whole or from time to time in part, on the
terms specified in the Agreement.
This Subordinated Note is guaranteed pursuant to one or more Guaranty
Agreements executed by certain guarantors. Reference is made to such Guaranty
Agreements for a statement concerning the terms and conditions governing such
guarantee of the obligations of the Company hereunder.
The Company and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
notice of intent to accelerate, notice of acceleration (to the extent set forth
in the Agreement), protest and diligence in collecting.
Should any indebtedness represented by this Subordinated Note be collected
at law or in equity, or in bankruptcy or other proceedings, or should this
Subordinated Note be placed in the hands of attorneys for collection , the
Company agrees to pay, in addition to the principal, interest and Yield-
Maintenance Amount, if any, and Adjusted Yield-Maintenance Amount, if any, due
and payable hereon, all costs of collecting or attempting to collect this
Subordinated Note, including attorney's fees and expenses (including those
incurred in connection with any appeal).
The Company, the purchaser and the registered holder of this Subordinated
Note specifically intend and agree to limit contractually the amount of interest
payable under this Subordinated Note to the maximum amount of interest lawfully
permitted to be charged under applicable law. Therefore, none of the terms of
this Subordinated Note shall ever be construed to create a contract to pay
interest at a rate in excess of the maximum rate permitted to be charged under
applicable law, and neither the Company nor any other party liable or to become
liable hereunder shall ever be liable for interest in excess of the amount
determined at such maximum rate, and the provisions of paragraph 12R of the
Agreement shall control over any contrary provision of this Subordinated Note.
In case an Event of Default shall occur and be continuing, the principal of
this Subordinated Note may be declared or otherwise become due and payable in
the manner and with the effect provided in the Agreement.
Capitalized terms used and not otherwise defined in this Subordinated Note
which are defined in the Agreement shall have the meanings as provided in the
Agreement.
THIS SUBORDINATED NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE
(EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS
SUBORDINATED NOTE TO
A-2
BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH THE LAWS OF ANY OTHER JURISDICTION).
To: The Purchasers Listed on Exhibit A
Attached Hereto
Re: 12.00% Senior Subordinated Notes due November 10, 2010
(the "Subordinated Notes")
Ladies and Gentlemen:
Reference is made to that certain Note Agreement (the "Note
Agreement"), dated November 10, 2000, between U.S. Concrete, Inc., a Delaware
corporation (the "Company"), and you. Capitalized terms used herein shall have
the meanings assigned to such terms in the Note Agreement.
You are hereby irrevocably authorized and directed to disburse the
$95,000,000 purchase price of the Subordinated Notes by wire transfer of
immediately available funds to [bank name and address], ABA #______________, for
credit to the account of the Company, account no. _____________.
Disbursement when so made shall constitute payment in full of the
purchase price of the Subordinated Notes and shall be without liability of any
kind whatsoever to you.
The Prudential Insurance Company of America
Metropolitan Life Insurance Company
Teachers Insurance and Annuity Association of America
Connecticut General Life Insurance Company
Allstate Life Insurance Company
Allstate Life Insurance Company of New York
Southern Farm Bureau Life Insurance Company
B-2
EXHIBIT C
[FORM OF GUARANTY AGREEMENT]
GUARANTY AGREEMENT
This Guaranty Agreement (this "Guaranty"), dated as of November 10,
2000, is made by [Name of Guarantor #1], a[n] _________ corporation ("[Name of
Guarantor #1]"), and [Name of Guarantor #2], a[n] _________ corporation ("[Name
of Guarantor #2]"; [Name of Guarantor #1] and [Name of Guarantor #2] are
referred to herein, individually, as a "Guarantor" and, collectively, as the
"Guarantors"), and in favor of each Holder.
RECITALS:
WHEREAS, U.S. Concrete, Inc., a Delaware corporation (the "Company"),
is the direct or indirect owner of all or a majority of the outstanding capital
stock of each Guarantor; and
WHEREAS, the Company and the Purchasers named in the Purchaser
Schedule attached thereto (the "Purchasers") have or are about to enter into a
Note Agreement (as such agreement is amended, modified, supplemented or restated
from time to time, the "Note Agreement"), dated as of November 10, 2000, under
which, subject to the terms and conditions thereof, the Purchasers will purchase
$95,000,000 in aggregate principal amount of the Company's 12.00% Senior
Subordinated Notes due November 10, 2010 (as such notes may be amended,
modified, supplemented or restated from time to time, the "Subordinated Notes");
and
WHEREAS, under the terms of the Note Agreement the Company has agreed
to cause each of its Material Subsidiaries to guaranty the Company's obligations
under the Note Agreement and the Subordinated Notes; and
WHEREAS, all parties acknowledge that the indebtedness and obligations
contemplated by the Note Agreement are being incurred for and will inure, in
part, to the benefit of the Guarantors; and
WHEREAS, it is desirable and in the interests of each Guarantor to
execute and deliver this Guaranty.
NOW THEREFORE, for value received, to satisfy one of the conditions
precedent to the purchase of the Subordinated Notes, to induce the Purchasers to
purchase the Subordinated Notes, to induce any other Holder to accept the
transfer of all or any part of any Subordinated Note and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantors agree as follows:
1. DEFINITIONS.
1A. Terms Defined in this Guaranty. As used in this Guaranty, the
following terms shall have the following meanings:
"Guarantied Obligations" shall mean all of the indebtedness,
obligations and liabilities existing on the date hereof or arising from time to
time hereafter, whether direct or indirect, joint or several, actual, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, of the Company to
the Holders under or in respect of the Note Agreement or the Subordinated Notes,
including, without limitation, the principal of and interest (including, without
limitation, interest accruing before, during or after any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, liquidation or
dissolution proceeding, and, if interest ceases to accrue by operation of law by
reason of any such proceeding, interest which otherwise would have accrued in
the absence of such proceeding) and Yield Maintenance Amount, if any, and
Adjusted Yield Maintenance Amount, if any, on the Subordinated Notes.
"Holders" and "Holder" shall mean the Purchasers and any other holder
of a Subordinated Note, including, without limitation, any Transferee.
1B. Other Definitions. Terms that are used in this Guaranty and defined
in the Note Agreement and are not otherwise defined in this Guaranty shall have
the meaning ascribed to them in the Note Agreement.
2. THE GUARANTY.
2A. Guaranty of Payment and Performance of Obligations. Each Guarantor,
jointly and severally, absolutely, unconditionally and irrevocably guaranties
the full and punctual payment in United States currency when due (whether at
maturity, at a stated prepayment date or earlier by reason of acceleration or
otherwise) and at all times thereafter, and the due and punctual performance, of
all Guarantied Obligations; provided, however, that the liability of any
Guarantor with respect to its guaranty of the Guarantied Obligations shall not
exceed the maximum amount which such Guarantor can guaranty without violating,
or causing this Guaranty or such Guarantor's obligations under this Guaranty to
be void, voidable or otherwise rendered unenforceable under, any fraudulent
conveyance or fraudulent transfer law, including Section 548(a)(2) of the
Bankruptcy Code. Each Guarantor hereby agrees to pay and to indemnify and save
each Holder harmless from and against any damage, loss, cost or expense
(including attorneys' fees) which such Holder may incur or be subject to as a
consequence, direct or indirect, of endeavoring to enforce this Guaranty or to
collect all or any part of the Guarantied Obligations from, or in pursuing any
action against, the Company or any Guarantor or enforcing any rights of any
Holder in any security for the Guarantied Obligations or the liabilities of any
Guarantor hereunder, and any taxes, fees or penalties which may be paid or
payable in connection therewith. This is a continuing guaranty of payment and
C-2
performance and not of collection. Notwithstanding any provision of this
Guaranty, all covenants, obligations, waivers and agreements of the Guarantors
under this Guaranty shall be joint and several.
Upon the occurrence and during the continuation of an Event of
Default, any Holder may, at its sole election and without notice, proceed
directly and at once against any Guarantor to seek and enforce performance of,
and to collect and recover, the Guarantied Obligations, or any portion thereof,
without first proceeding against the Company, any other Guarantor, any other
guarantor of the Guarantied Obligations or any other Person, or any security for
the Guarantied Obligations or for the liability of any such other Person or any
Guarantor hereunder. The Holders shall have the exclusive right to determine the
application of payments and credits, if any, from any Guarantor, the Company or
from any other Person on account of the Guarantied Obligations or otherwise.
This Guaranty and all covenants and agreements of each Guarantor contained
herein shall continue in full force and effect and shall not be discharged until
such a time as all of the Guarantied Obligations shall be indefeasibly paid in
full in cash and no Holder shall have any commitment under the Note Agreement.
2B. Obligations Unconditional. The obligations of each Guarantor under
this Guaranty shall be continuing, absolute and unconditional, irrespective of
(i) the invalidity or unenforceability of the Note Agreement, any Subordinated
Note or any provision thereof; (ii) the absence of any attempt by any Holder to
collect the Guarantied Obligations or any portion thereof from the Company, any
other Guarantor, any other guarantor of all or any portion of the Guarantied
Obligations or any other Person or other action to enforce the same; (iii) any
action taken by any Holder that is authorized by this Guaranty; (iv) any failure
by any Holder to acquire, perfect or maintain any security interest or lien in,
or take any steps to preserve its rights to, any security for the Guarantied
Obligations or any portion thereof or for the liability of any Guarantor
hereunder or the liability of any other guarantor of any or all of the
Guarantied Obligations; (v) any defense arising by reason of any disability or
other defense (other than a defense of payment, unless the payment on which such
defense is based was or is subsequently invalidated, declared to be fraudulent
or preferential, otherwise avoided and/or required to be repaid to the Company
or any Guarantor, as the case may be, or the estate of any such party, a
trustee, receiver or any other Person under any bankruptcy law, state or federal
law, common law or equitable cause, in which case there shall be no defense of
payment with respect to such payment) of the Company or any other Person liable
on the Guarantied Obligations or any portion thereof; (vi) a Holder's election,
in any proceeding instituted under Chapter 11 of Title 11 of the Federal
Bankruptcy Code (11 U.S.C. (S)101 et seq.) (the "Bankruptcy Code"), of the
application of Section 1111(b)(2) of the Bankruptcy Code; (vii) any borrowing or
grant of a security interest to any Holder by the Company as debtor-in-
possession, or extension of credit, under Section 364 of the Bankruptcy Code;
(viii) the disallowance or avoidance of all or any portion of any Holder's
claim(s) for repayment of the Guarantied Obligations under the Bankruptcy Code
or any similar state law or the avoidance, invalidity or unenforceability of any
Lien securing the Guarantied Obligations or the liability of any Guarantor
hereunder or of any other guarantor of all or any part of the Guarantied
Obligations; (ix) any amendment to, waiver or modification of, or consent,
extension, indulgence or other action or inaction under or in respect of the
Subordinated Notes or the Note Agreement; (x) any change in any provision of any
applicable
C-3
law or regulation; (xi) any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign, binding on or
affecting any Guarantor or the Company or any of their assets; (xii) the charter
or certificate of limited partnership (as the case may be), by-laws or
partnership agreement (as the case may be) of any Guarantor or the Company;
(xiii) any mortgage, indenture, lease, contract, or other agreement (including
without limitation any agreement with stockholders), instrument or undertaking
to which any Guarantor or the Company is a party or which purports to be binding
on or affect any such Person or any of its assets; (xiv) any bankruptcy,
insolvency, readjustment, composition, liquidation or similar proceeding with
respect to the Company, any Guarantor or any other guarantor of all or any
portion of any Guarantied Obligations or any such Persons's property and any
failure by any Holder to file or enforce a claim against the Company or any such
other Person in any such proceeding; (xv) any failure on the part of the Company
for any reason to comply with or perform any of the terms of any other agreement
with any Guarantor; or (xvi) any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
2C. Obligations Unimpaired. Each Holder is authorized, without demand or
notice, which demand and notice are hereby waived, and without discharging or
otherwise affecting the obligations of any Guarantor hereunder (which shall
remain absolute and unconditional notwithstanding any such action or omission to
act), from time to time to (i) renew, extend, accelerate or otherwise change the
time for payment of, or other terms relating to, the Guarantied Obligations or
any portion thereof, or otherwise modify, amend or change the terms of the Note
Agreement or any of the Subordinated Notes; (ii) accept partial payments on the
Guarantied Obligations; (iii) take and hold security for the Guarantied
Obligations or any portion thereof or any other liabilities of the Company, the
obligations of any Guarantor under this Guaranty and the obligations under any
other guaranties and sureties of all or any of the Guarantied Obligations, and
exchange, enforce, waive, release, sell, transfer, assign, abandon, fail to
perfect, subordinate or otherwise deal with any such security; (iv) apply such
security and direct the order or manner of sale thereof as such Holder may
determine in its sole discretion; (v) settle, release, compromise, collect or
otherwise liquidate the Guarantied Obligations or any portion thereof and any
security therefor or guaranty thereof in any manner; (vi) extend additional
loans, credit and financial accommodations to the Company and otherwise create
additional Guarantied Obligations; (vii) waive strict compliance with the terms
of the Note Agreement or the Subordinated Notes and otherwise forbear from
asserting such Holder's rights and remedies thereunder; (viii) take and hold
additional guaranties or sureties and enforce or forbear from enforcing any
guaranty or surety of any other guarantor or surety of the Guarantied
Obligations or any portion thereof or release or otherwise take any action with
respect to any such guarantor or surety; (ix) assign this Guaranty in part or in
whole in connection with any assignment of the Guarantied Obligations or any
portion thereof; (x) exercise or refrain from exercising any rights against the
Company or any Guarantor; and (xi) apply any sums, by whomsoever paid or however
realized, to the payment of the Guarantied Obligations as such Holder in its
sole discretion may determine.
2D. Waivers of Guarantor. Each Guarantor waives for the benefit of each
Holder:
C-4
(i) any right to require any Holder, as a condition of payment or
performance by such Guarantor or otherwise to (a) proceed against the Company,
any other Guarantor or any other guarantor of the Guarantied Obligations or any
other Person, (b) proceed against or exhaust any security given to or held by
any Holder in connection with the Guarantied Obligations or any other guaranty,
or (c) pursue any other remedy available to any Holder whatsoever;
(ii) any defense arising by reason of (a) the incapacity, lack of
authority or any disability or other defense of the Company, including, without
limitation, any defense based on or arising out of the lack of validity or the
unenforceability of the Guarantied Obligations or any agreement or instrument
relating thereto, (b) the cessation of the liability of the Company from any
cause other than indefeasible payment in full of the Guarantied Obligations in
cash or (c) any act or omission of any Holder or any other Person which directly
or indirectly, by operation of law or otherwise, results in or aids the
discharge or release of the Company or any security given to or held by any
Holder in connection with the Guarantied Obligations or any other guaranty;
(iii) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;
(iv) any defense based upon any Holder's errors or omissions in the
administration of the Guarantied Obligations;
(v) (a) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any legal
or equitable discharge of such Guarantor's or any other Guarantor's obligations
hereunder, (b) the benefit of any statute of limitations affecting the
Guarantied Obligations or such Guarantor's or any other Guarantor's liability
hereunder or the enforcement hereof, (c) any rights to set-offs, recoupments and
counterclaims, and (d) promptness, diligence and any requirement that any Holder
protect, maintain, secure, perfect or insure any Lien or any property subject
thereto;
(vi) notices (a) of nonperformance or dishonor, (b) of acceptance of this
Guaranty by any Holder or by such Guarantor or any other Guarantor; (c) of
default in respect of the Guarantied Obligations or any other guaranty, (d) of
the existence, creation or incurrence of new or additional indebtedness, arising
either from additional loans extended to the Company or otherwise, (e) that the
principal amount, or any portion thereof, and/or any interest or Yield
Maintenance Amount or Adjusted Yield Maintenance Amount on any document or
instrument evidencing all or any part of the Guarantied Obligations is due, (f)
of any and all proceedings to collect from the Company, any Guarantor or any
guarantor of all or any part of the Guarantied Obligations, or from anyone else,
(g) of exchange, sale, surrender or other handling of any security or collateral
given to any Holder to secure payment of the Guarantied Obligations or any
guaranty therefor, (h) of renewal, extension or modification of any of the
Guarantied Obligations, (i) of assignment, sale or other transfer of any
Subordinated Note to a Transferee, (j) of any of the matters referred to in
paragraph 2B and any right to consent to any thereof;
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(vii) acceptance of this Guaranty by any Holder, presentment, demand for
payment or performance and protest and notice of protest with respect to the
Guarantied Obligations or any guaranty with respect thereto; and
(viii) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or which
may conflict with the terms of this Guaranty.
Each Guarantor agrees that no Holder shall be under any obligation
to marshall any assets in favor of any Guarantor or against or in payment of any
or all of the Guarantied Obligations.
No Guarantor will exercise any rights which it may have acquired by
way of subrogation under this Guaranty, by any payment made hereunder or
otherwise, or accept any payment on account of such subrogation rights, or any
rights of reimbursement or indemnity or any rights or recourse to any security
for the Guarantied Obligations or this Guaranty unless at the time of such
Guarantor's exercise of any such right there shall have been performed and
indefeasibly paid in full in cash all of the Guarantied Obligations and no
Holder shall have any commitment under the Note Agreement.
2E. Revival. Each Guarantor agrees that, if any payment made by the
Company or any other Person is applied to the Guarantied Obligations and is at
any time annulled, set aside, rescinded, invalidated, declared to be fraudulent
or preferential or otherwise required to be refunded or repaid, or the proceeds
of any security are required to be returned by any Holder to the Company, its
estate, trustee, receiver or any other Person, including, without limitation,
any Guarantor, under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or repayment, such
Guarantor's liability hereunder (and any lien, security interest or other
collateral securing such liability) shall be and remain in full force and
effect, as fully as if such payment had never been made, or, if prior thereto
this Guaranty shall have been canceled or surrendered (and if any lien, security
interest or other collateral securing such Guarantor's liability hereunder shall
have been released or terminated by virtue of such cancellation or surrender),
this Guaranty (and such lien, security interest or other collateral) shall be
reinstated and returned in full force and effect, and such prior cancellation or
surrender shall not diminish, release, discharge, impair or otherwise affect the
obligations of any Guarantor in respect of the amount of such payment (or any
lien, security interest or other collateral securing such obligation).
2F. Obligation to Keep Informed. Each Guarantor shall be responsible for
keeping itself informed of the financial condition of the Company and any other
Persons primarily or secondarily liable on the Guarantied Obligations or any
portion thereof, and of all other circumstances bearing upon the risk of
nonpayment of the Guarantied Obligations or any portion thereof, and each
Guarantor agrees that no Holder shall have a duty to advise such Guarantor of
information known to such Holder regarding such condition or any such
circumstance. If any Holder, in its discretion, undertakes at any time or from
time to time to provide any such information to any Guarantor, such Holder shall
not be under any obligation (i) to undertake any investigation, whether or not a
part of its regular business routine, (ii) to disclose any information which
such
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Holder wishes to maintain confidential, or (iii) to make any other or future
disclosures of such information or any other information to such or any other
Guarantor.
2G. Bankruptcy. If any Event of Default specified in clauses (viii),
(ix) or (x) of paragraph 7A of the Note Agreement shall occur and be continuing,
then, subject to the proviso contained in the first sentence of paragraph 2A of
this Guaranty, each Guarantor agrees to immediately pay to the Holders the full
outstanding amount of the Guarantied Obligations without notice.
2H. Subordination. Notwithstanding any provision in this Guaranty, the
obligations of each Guarantor under this Guaranty shall constitute "Subordinated
Obligations" under the Note Agreement and shall be subject to the provisions of
paragraph 10 of the Note Agreement.
3. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents, covenants
and warrants as follows:
3A. Organization, Power and Authority.
3A(1). Organization. Each Guarantor is a corporation duly organized and
existing in good standing under the laws of the state of its organization.
3A(2). Power and Authority. Each Guarantor has all requisite power to
execute, deliver and perform its obligations under this Guaranty. The execution,
delivery and performance of this Guaranty have been duly authorized by all
requisite action and this Guaranty has been duly executed and delivered by
authorized officers of such Guarantor and is a valid obligation of such
Guarantor, legally binding upon and enforceable against such Guarantor in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3B. Conflicting Agreements and Other Matters. Neither the execution nor
delivery of this Guaranty, nor the offering, issuance and sale of the
Subordinated Notes, nor fulfillment of nor compliance with the terms and
provisions hereof, will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the properties
or assets of such Guarantor or any of its Subsidiaries pursuant to, the charter
or certificate of limited partnership (as the case may be), by-laws or
partnership agreement (as the case may be) of such Guarantor or any of its
Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders or holders of partnership interests (as the case may
be) of such Guarantor or Persons with direct or indirect ownership interests in
stockholders or holders of partnership interests (as the case may be) of such
Guarantor), instrument, order, judgment, decree, statute, law, rule or
regulation to which such Guarantor or any of its Subsidiaries is subject.
Neither such Guarantor nor any of its Subsidiaries is a party to, or otherwise
subject to any provision contained in, any instrument evidencing any
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Indebtedness of such Guarantor or such Subsidiary, any agreement relating
thereto or any other contract or agreement (including its charter) which limits
the amount of, or otherwise imposes restrictions on the incurring of,
obligations of such Guarantor of the type to be evidenced by this Guaranty
except as set forth in the agreements listed on Schedule 3B hereto.
3C. ERISA. The execution and delivery of this Guaranty will be exempt
from, or will not involve any transaction which is subject to, the prohibitions
of section 406 of ERISA and will not involve any transaction in connection with
which a penalty could be imposed under section 502(i) of ERISA or a tax could be
imposed pursuant to section 4975 of the Code. The representation of each
Guarantor in this paragraph 3C is made in reliance upon and subject to the
accuracy of each Purchaser's representation in paragraph 9B of the Note
Agreement.
3D. Governmental Consent. Neither the nature of such Guarantor or of any
Subsidiary of such Guarantor nor any of their respective businesses or
properties, nor any relationship between such Guarantor or any Subsidiary of
such Guarantor and any other Person, nor any circumstance in connection with the
execution, delivery and performance of this Guaranty or the offering, issuance,
sale or delivery of the Subordinated Notes, is such as to require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court or administrative or governmental body (including, without
limitation, notifications required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, but excluding routine filings after the date of
closing with the Securities and Exchange Commission and/or state Blue Sky
authorities). The representation by each Guarantor in this paragraph 3D is made
in reliance upon and subject to the accuracy of each Purchaser's representation
in paragraph 9 of the Note Agreement.
3E. Regulatory Status. No Guarantor nor any Subsidiary of any Guarantor
is (i) an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
(ii) a "holding company" or a "subsidiary company" or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii)
a "public utility" within the meaning of the Federal Power Act, as amended.
4. MISCELLANEOUS
4A. Successors, Assigns and Participants. This Guaranty shall be binding
upon each Guarantor and its successors and assigns and shall inure to the
benefit of each Holder and its successors, transferees and assigns; all
references herein to a Guarantor shall be deemed to include its successors and
assigns, and all references herein to a Holder shall be deemed to include its
successors and assigns. This Guaranty shall be enforceable by the Holders and
any of a Holder's successors, assigns and participants, and any such successors
and assigns shall have the same rights and benefits with respect to each
Guarantor under this Guaranty as the Holder hereunder.
4B. Consent to Amendments. This Guaranty may be amended, and any
Guarantor may take any action herein prohibited, or omit to perform any act
herein required to be performed by it,
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if such Guarantor shall obtain the written consent to such amendment, action or
omission to act, of the Required Holder(s) except that, without the written
consent of the holder or holders of all Subordinated Notes at the time
outstanding, (i) no amendment to or waiver of the provisions of this Guaranty
shall change or affect the provisions of this paragraph 4B insofar as such
provisions relate to proportions of the principal amount of the Subordinated
Notes, or the rights of any individual Holder, required with respect to any
consent, (ii) no Guarantor will be released from this Guaranty, and (iii) no
amendment, consent or waiver with respect to paragraph 2A or the definition of
"Guarantied Obligations" (except to add additional obligations of the Company)
shall be effective. Each Holder of any Subordinated Note at the time or
thereafter outstanding shall be bound by any consent authorized by this
paragraph 4B, whether or not the Subordinated Note held by such Holder shall
have been marked to indicate such consent, but any Subordinated Notes issued
thereafter may bear a notation referring to any such consent. No course of
dealing between any Guarantor and any Holder nor any delay in exercising any
rights hereunder or under any Subordinated Note shall operate as a waiver of any
rights of any Holder. As used herein, the term "this Guaranty" and references
thereto shall mean this Guaranty as it may from time to time be amended or
supplemented.
4C. Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained herein or made in writing by or on
behalf of each Guarantor in connection herewith shall survive the execution and
delivery of this Guaranty, the transfer by any Holder of any Subordinated Note
or portion thereof or interest therein and the payment of any Subordinated Note,
and may be relied upon by any Transferee, regardless of any investigation made
at any time by or on behalf of any Holder or any Transferee. Subject to the two
preceding sentences, this Guaranty embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof.
4D. Notices. All written communications provided for hereunder shall be
sent by first class mail or telegraphic notice or nationwide overnight delivery
service (with charges prepaid) or by hand delivery or telecopy and (i) if to a
Holder, addressed as specified for such communications to such Holder under the
Note Agreement, and (ii) if to any Guarantor, addressed to it at the address set
forth for such Guarantor under its signature hereto, or at such other address as
such Guarantor shall have specified to the holder of each Subordinated Note in
writing. Notices under this paragraph 4D will be deemed given only when
actually received.
4E. Opinion of Guarantors' Counsel. Each Guarantor, by its execution
hereof, hereby requests and authorizes its counsel identified in paragraph 3C of
the Note Agreement to render the opinion referred to in such paragraph 3C.
4F. Descriptive Headings. The descriptive headings of the several
paragraphs of this Guaranty are inserted for convenience only and do not
constitute a part of this Guaranty. Each Guarantor represents to the Holders
that such Guarantor has been represented by counsel in connection with this
Guaranty, that such Guarantor has discussed this Guaranty with its counsel and
C-9
that any and all issues with respect to this Guaranty have been resolved as set
forth herein. No provision of this Guaranty shall be construed against or
interpreted to the disadvantage of any Holder by any court or other governmental
or judicial authority by reason of such Holder having or being deemed to have
structured, drafted or dictated such provision.
4G. Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Guaranty
required to be satisfactory to any Holder or the Required Holder(s), the
determination of such satisfaction shall, except as otherwise expressly provided
herein, be made by such Holder or the Required Holder(s), as the case may be, in
the sole and exclusive judgment (exercised in good faith) of the Person or
Persons making such determination.
4H. Governing Law. THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD
OTHERWISE CAUSE THIS AGREEMENT TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH,
OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER
JURISDICTION).
4I. Counterparts. This Guaranty may be executed simultaneously in two or
more counterparts, each of which shall be an original and constitute one and the
same agreement. It shall not be necessary in making proof of this Guaranty to
produce or account for more than one such counterpart.
4J. Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is prohibited by
any one of such covenants, the fact that it would be permitted by an exception
to, or otherwise be in compliance within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or such condition exists.
4K. Binding Guaranty; Release of Guarantor. When this Guaranty is
executed and delivered by a Guarantor, it shall become a binding agreement by
such Guarantor in favor of the Holders. Notwithstanding anything to the contrary
in this Guaranty, the obligations of each Guarantor under this Guaranty are
subject to release of such Guarantor as provided in paragraph 5K(ii) of the Note
Agreement.
4L. Severability. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
C-10
4M. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS GUARANTY MAY BE BROUGHT IN ANY NEW YORK STATE COURT SITTING IN
NEW YORK CITY OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS GUARANTY, EACH GUARANTOR HEREBY
IRREVOCABLY ACCEPTS, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS
WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. EACH GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN
PARAGRAPH 4D, SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANY GUARANTOR IN ANY OTHER JURISDICTION. EACH GUARANTOR HEREBY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS BROUGHT IN ANY OF THE
AFORESAID COURTS AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
[signature pages to follow]
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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed as of the date first above written.
FORM OF OPINION OF COMPANY'S AND GUARANTORS' COUNSEL
See attached.
EXHIBIT D-3
FORM OF OPINION OF PURCHASERS' SPECIAL COUNSEL
See attached.
EXHIBIT 10.14
PROMISSORY NOTE
Date: March 2, 2000
Maker: Michael W. Harlan
Maker's Mailing Address: c/o U.S. Concrete, Inc.
1300 Post Oak Blvd., Suite 1220
Houston, Texas 77056
Payee: USC Management Co., L.P.,
a Texas limited partnership
Place for Payment: 1300 Post Oak Blvd., Suite 1220
Houston, Texas 77056
Principal Amount: $125,000.00, or such lesser amount as has been
advanced by Payee to Maker and is outstanding
from time to time.
Terms of Payment: This is a non-interest bearing promissory note.
Principal shall be payable from time to time prior
to March 1, 2005 within 10 business days of receipt
by Maker of any Net Cash Proceeds (as defined
herein), until the principal amount is paid in
full. The outstanding principal amount shall be due
and payable in full on or before March 1, 2005.
Security for Payment: This note is secured by any and all cash proceeds
received by Maker (net of any broker's fee or other
reasonable and customary transaction expenses and
of amounts reasonably estimated to be necessary to
pay income or capital gains taxes resulting from
receipt of such proceeds) during the period
beginning March 2, 2000 and ending upon the earlier
of payment in full of this note or March 1, 2005
from (a) the sale by Maker of all shares of common
stock, $.001 par value ("Common Stock"), of U.S.
Concrete, Inc., a Delaware corporation ("USC"),
acquired by Maker through the exercise of any
option to purchase Common Stock and (b) the payment
to Maker by USC or Payee of such portion of any
bonuses as may be mutually agreed upon by Maker and
Payee (any such net cash proceeds described in
subparts (a) and (b) shall be referred to herein as
"Net Cash Proceeds").
FOR VALUE RECEIVED, Maker promises to pay to the order of Payee at the
place for payment and according to the terms of payment (in funds available for
immediate use) the principal amount. All unpaid amounts shall be due by the
final scheduled payment date.
If Maker defaults in the payment of this note or in the performance of any
obligation securing or collateral to it, and the default continues after Payee
gives Maker notice of the default and the time within which it must be cured, as
may be required by Payee, then Payee may declare the unpaid balance on this note
immediately due. Maker and each surety, endorser and guarantor waive all
demands for payment, presentations for payment, notices of intention to
accelerate maturity, notices of acceleration of maturity, protests and notices
of protest, to the extent permitted by law.
If this note is given to an attorney for collection, or if suit is brought
for collection, or if it is collected through probate, bankruptcy, or other
judicial proceeding, then Maker shall pay Payee all costs of collection,
including reasonable attorney's fees and court costs, in addition to other
amounts due.
Neither a delay on the part of Payee in the exercise of any power or right
under this note, nor a single or partial exercise of any such power or right,
shall operate as a waiver thereof. Enforcement by Payee of any of its rights
hereunder shall not constitute an election by it of remedies so as to preclude
the exercise of any other remedy available to it.
Unless this note is paid at its maturity, or when otherwise due, as herein
provided, any money, securities or property on deposit with, in possession or
under the control of, or held by USC or Payee, for any purpose whatsoever,
including, without limitation, for payment of salary or bonuses to Maker, or in
transit to or from Payee by mail or carrier to the credit or for the account of
Maker, or any of them, may, at the option of Payee, be applied to the payment of
this note or any other debt, liability or obligation, direct or contingent, due
or to become due, by Maker to Payee or USC.
This note may be prepaid in whole or in part at any time, without penalty.
THIS NOTE IS DELIVERED AND IS INTENDED TO BE PAID AND PERFORMED IN THE
STATE OF TEXAS, AND THE LAWS OF SUCH STATE SHALL GOVERN THE CONSTRUCTION,
VALIDITY, ENFORCEMENT, AND INTERPRETATION HEREOF.
All of the covenants, stipulations, promises, and agreements contained in
this note made by or on behalf of Maker shall bind its successors and assigns,
whether so expressed or not; provided, however, that Maker may not, without
prior written consent of the holder hereof, assign any rights, duties, or
obligations under this note.
Each Maker is responsible for all obligations represented by this note.
When the context requires, the terms Maker and Payee, and other singular
nouns and pronouns include the plural.
MAKER
/s/ Michael W. Harlan
---------------------
Michael W. Harlan
EXHIBIT 10.15
PROMISSORY NOTE
Date: March 2, 2000
Maker: Eugene P. Martineau
Maker's Mailing Address: c/o U.S. Concrete, Inc.
1300 Post Oak Blvd., Suite 1220
Houston, Texas 77056
Payee: USC Management Co., L.P.,
a Texas limited partnership
Place for Payment: 1300 Post Oak Blvd., Suite 1220
Houston, Texas 77056
Principal Amount: $175,000.00, or such lesser amount as has been advanced
by Payee to Maker and is outstanding from time to time.
Terms of Payment: This is a non-interest bearing promissory note.
Principal shall be payable from time to time prior to
March 1, 2005 within 10 business days of receipt by
Maker of any Net Cash Proceeds (as defined herein),
until the principal amount is paid in full. The
outstanding principal amount shall be due and payable
in full on or before March 1, 2005.
Security for Payment: This note is secured by any and all cash proceeds
received by Maker (net of any broker's fee or other
reasonable and customary transaction expenses and of
amounts reasonably estimated to be necessary to pay
income or capital gains taxes resulting from receipt of
such proceeds) during the period beginning March 2,
2000 and ending upon the earlier of payment in full of
this note or March 1, 2005 from (a) the sale by Maker
of all shares of common stock, $.001 par value ("Common
Stock"), of U.S. Concrete, Inc., a Delaware corporation
("USC"), acquired by Maker through the exercise of any
option to purchase Common Stock and (b) the payment to
Maker by USC or Payee of such portion of any bonuses as
may be mutually agreed upon by Maker and Payee (any
such net cash proceeds described in subparts (a) and
(b) shall be referred to herein as "Net Cash
Proceeds").
FOR VALUE RECEIVED, Maker promises to pay to the order of Payee at the
place for payment and according to the terms of payment (in funds available for
immediate use) the principal amount. All unpaid amounts shall be due by the
final scheduled payment date.
If Maker defaults in the payment of this note or in the performance of any
obligation securing or collateral to it, and the default continues after Payee
gives Maker notice of the default and the time within which it must be cured, as
may be required by Payee, then Payee may declare the unpaid balance on this note
immediately due. Maker and each surety, endorser and guarantor waive all
demands for payment, presentations for payment, notices of intention to
accelerate maturity, notices of acceleration of maturity, protests and notices
of protest, to the extent permitted by law.
If this note is given to an attorney for collection, or if suit is brought
for collection, or if it is collected through probate, bankruptcy, or other
judicial proceeding, then Maker shall pay Payee all costs of collection,
including reasonable attorney's fees and court costs, in addition to other
amounts due.
Neither a delay on the part of Payee in the exercise of any power or right
under this note, nor a single or partial exercise of any such power or right,
shall operate as a waiver thereof. Enforcement by Payee of any of its rights
hereunder shall not constitute an election by it of remedies so as to preclude
the exercise of any other remedy available to it.
Unless this note is paid at its maturity, or when otherwise due, as herein
provided, any money, securities or property on deposit with, in possession or
under the control of, or held by USC or Payee, for any purpose whatsoever,
including, without limitation, for payment of salary or bonuses to Maker, or in
transit to or from Payee by mail or carrier to the credit or for the account of
Maker, or any of them, may, at the option of Payee, be applied to the payment of
this note or any other debt, liability or obligation, direct or contingent, due
or to become due, by Maker to Payee or USC.
This note may be prepaid in whole or in part at any time, without penalty.
THIS NOTE IS DELIVERED AND IS INTENDED TO BE PAID AND PERFORMED IN THE
STATE OF TEXAS, AND THE LAWS OF SUCH STATE SHALL GOVERN THE CONSTRUCTION,
VALIDITY, ENFORCEMENT, AND INTERPRETATION HEREOF.
All of the covenants, stipulations, promises, and agreements contained in
this note made by or on behalf of Maker shall bind its successors and assigns,
whether so expressed or not; provided, however, that Maker may not, without
prior written consent of the holder hereof, assign any rights, duties, or
obligations under this note.
Each Maker is responsible for all obligations represented by this note.
When the context requires, the terms Maker and Payee, and other singular
nouns and pronouns include the plural.
MAKER
/s/ Eugene P. Martineau
-----------------------
Eugene P. Martineau
EXHIBIT 10.16
AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into effective as of March 13,
2001, by and between U.S. Concrete, Inc., a Delaware corporation ("USC"), and
Neil J. Vannucci ("Vannucci").
RECITALS
WHEREAS, USC, Bay Cities Acquisition Inc., a Delaware corporation and
wholly owned subsidiary of USC, Bay Cities Building Materials Co., Inc., a
California corporation ("Bay Cities"), Vannucci and other former stockholders of
Bay Cities entered into that certain Agreement and Plan of Reorganization
Agreement, dated as of March 22, 1999 and as amended by the Amendment to
Agreement and Plan of Reorganization among the same parties dated as of May 25,
1999, (as amended, the "Acquisition Agreement"); and
WHEREAS, pursuant to the terms of the Acquisition Agreement, Vannucci
agreed to be bound by the noncompetition provisions contained in Article VIII
thereof; provided, however, that Paragraph 4(C) of the Acquisition Agreement
specified certain activities that the provisions of Article VIII thereof would
not prohibit Vanucci from engaging in (the provisions of Paragraph 4(C) of the
Acquisition Agreement being hereinafter referred to as the "Exception
Provisions"); and
WHEREAS, USC desires that Vannucci agree not conduct any activities that
would be permitted under the Exception Provisions and Vanucci is willing to (i)
refrain from engaging in any of those activities and (ii) agree to the other
restrictions on his activities and commit to take the actions specified herein,
all on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual provisions
contained herein, and for other good and valuable consideration, the parties
hereto agree with each other as follows:
1. Payment Option and Restricted Activities.
(a) USC shall have the option to make payments to Vannucci in the
aggregate amount of $138,000.00 during each of the 12-month periods beginning
April 1, 2001, 2002 and 2003 and ending March 31, 2002, 2003 and 2004,
respectively (each, an "Option Period" and each aggregate payment of $138,000.00
made by USC during an Option Period, an "Option Period Payment"). In
consideration of the foregoing, during the Restricted Term (as defined herein)
the Exception Provisions shall not be applicable and, without limiting the
generality of the foregoing and notwithstanding anything to the contrary
contained in the Acquisition Agreement, Vannucci shall not, during the
Restricted Term, directly or indirectly, for himself or on behalf of or in
conjunction with
1
any other person, company, partnership, corporation or business or other entity
of whatever nature, engage, as an officer, director, shareholder, owner,
investor, partner, joint venturer, or in any managerial or advisory capacity,
whether as an employee, independent contractor, consultant or advisor, or as a
sales representative, dealer or distributor, in any Restricted Activities (as
defined herein) within any State of the United States where USC or any of its
subsidiaries then conducts business.
(b) For purposes of this Agreement "Restricted Activities" means the
import, storage or sale of cement and/or aggregates, including, without
limitation, the development, ownership and/or operation of any import terminal
or other facility used or intended to be used, in whole or in part, for the
import, storage or sale of cement and/or aggregates.
(c) For purposes of this Agreement "Restricted Term" means the period
beginning on the date hereof and continuing through: (i) March 31, 2002, if USC
fails to make the first Option Period Payment in full by that date; (ii) March
31, 2003, if USC makes the first Option Period Payment in full by March 31, 2002
but does not make the second Option Period Payment in full by March 31, 2003;
(iii) March 31, 2004, if USC satisfies the condition of subpart (ii) of this
Section 1(c) and makes the second Option Period Payment in full by March 31,
2003 but does not make the third Option Period Payment in full by March 31,
2004; and (iv) March 31, 2005, if USC satisfies the conditions of subparts (ii)
and (iii) of this Section 1(c) and makes the third Option Period Payment in full
by March 31, 2004.
(d) The Option Period Payment USC may make during any Option Period shall
be in three cash installments of $46,000.00 each, payable on such dates during
such Option Period as USC may determine, in each case to such account or
accounts as Vannucci shall specify to USC in writing.
(e) Without limiting the generality of the restrictive covenants set forth
in Section 1 herein, Vannucci specifically agrees not to pursue or lend
assistance to any person or entity in obtaining any permits or authorizations he
may have applied for or otherwise sought (whether in his name individually or on
behalf of any entity in which he is or was a stockholder, member or partner) in
connection with the development or operation of a cement and/or aggregates
import terminal in or near the San Francisco Bay Area and shall use reasonable
efforts to withdraw such permits or, if any such permits were applied for
jointly with another person or entity, have his name and/or the name of any such
entity in which he is or was a stockholder, member or partner removed from such
permits or authorizations.
(f) In the event of any breach or threatened breach by Vannucci of any
provision of this Agreement, USC will be entitled, in addition to any other
remedies that it may have at law or in equity, to injunctive relief or an order
of specific performance. No failure or delay by USC in exercising any right,
power or privilege hereunder will operate as a waiver thereof, nor will any
single or partial exercise thereof preclude any
2
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
2. No Prior Agreements. Vannucci represents and warrants to USC
that neither the execution and delivery of this Agreement by Vannucci nor his
compliance with the restrictions and other provisions contained herein will
violate, breach or conflict with any agreement, arrangement or understanding
with any other person or entity. Further, Vannucci agrees to indemnify USC from
and against any claim, liability, loss, cost or expense, including but not
limited to attorneys' fees and expenses of investigation, arising out of or
resulting from any claim by any third party to the effect that this Agreement
violates, breaches or conflicts in any way with any other agreement to which
Vanucci or any of his affiliates is a party or is bound.
3. Reaffirmation of Limitations on Competition. Vannucci hereby ratifies
and affirms his obligations under Article VIII of the Acquisition Agreement
(Limitations on Competition) and all other provisions of the Acquisition
Agreement that continue to survive in accordance with their terms.
4. General. This Agreement may be amended only by the written agreement
of each party hereto. Each party hereto agrees to perform any further acts and
to execute and deliver any further documents which may be reasonably necessary
to carry out the provisions of this Agreement. This Agreement shall be binding
on and inure to the benefit of each party hereto, and such party's successors,
personal representatives and assigns. This Agreement sets forth the entire
understanding between the parties hereto concerning the subject matter of this
Agreement. In the event that any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth in Section
1 of this Agreement are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and this Agreement shall be reformed in accordance therewith. This
Agreement shall be governed by the laws of the State of Texas. This Agreement
may be executed in one or more counterparts, any of which shall be deemed to be
an original, all of which taken together shall constitute one and the same
instrument. Facsimile transmission of any signed original document and/or
retransmission of any signed facsimile transmission will be deemed the same as
delivery of an original. At the request of any party, the parties will confirm
facsimile transmission by signing a duplicate original document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
U.S. CONCRETE, INC.
By: /s/ Eugene P. Martineau
--------------------------
Eugene P. Martineau, President
/s/ Neil J. Vannucci
------------------------------
Neil J. Vannucci
3
EXHIBIT 21
Subsidiaries of U.S. Concrete, Inc.
AFTM Corporation
American Concrete Products, Inc.
Atlas-Tuck Concrete, Inc.
B.W.B., Inc. of Michigan
Baer Concrete, Incorporated
Beall Concrete Enterprises, Ltd.
Beall Industries, Inc.
Beall Investment Corporation, Inc.
Beall Management Inc.
Carrier Excavation and Foundation Company
Central Concrete Supply Co., Inc.
Central Precast Concrete, Inc.
Concrete XX Acquisition, Inc.
Corden, Inc.
Cornillie Fuel & Supply, Inc.
Cornillie Leasing, Inc.
Dencor, Inc.
DYNA, Inc.
Eastern Concrete Materials, Inc.
E.B. Metzen, Inc.
Fendt Transit Mix, Inc.
Hunter Equipment Company
Olive Branch Ready Mix, Inc.
Opportunity Concrete Corporation
Premix Concrete Corp.
R.G. Evans/Associates d/b/a Santa Rosa Cast Products Co.
Ready Mix Concrete Company of Knoxville
San Diego Precast Concrete, Inc.
Sierra Precast, Inc.
Superior Materials Company, Inc.
Superior Redi-Mix, Inc.
USC GP, Inc.
USC LP, Inc.
USC Management Co., L.P.
USC Midsouth, Inc.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into the Company's previously filed
Registration Statement on Form S-8 on July 20, 1999 File No. 333-83273, the
Company's previously filed Registration Statement on Form S-3 on August 21, 2000
File No. 333-42850, and the Company's previously filed Registration Statement on
Form S-8 on December 29, 2000 File No. 333-52980.
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